The writer, John Maré, is a former South African diplomat and Deputy Ambassador to the European Union and advises on international trade, public affairs and diplomacy. This article first appeared in the Business Day newspaper.
The challenges to improve African trade, critically important for economic growth, are already considerable and overcoming them remains a priority for the continent. Unfortunately despite many successes in improving conditions the obstacles continue to appear inter alia with a decline in the rules-based system of the World Trade Organization (WTO), and new regulations being imposed by key trading partners with extraterritorial impact.
The general international push for green economies has in particular often been accompanied by trade-related response measures as applied by the European Union (EU), USA, UK, Australia, Canada, Japan and others. The EU, a leading economic player for much of Africa and South Africa’s leading overall economic partner, has been a global leader for creating and imposing new trade-related policies which threaten African trade although they are supposedly intended to strengthen actions supportive of environmental well being along with the European Green Deal (EGD), and counter climate change.
One of the most challenging new EU policies impacting African trade is the Carbon Border Adjustment Mechanism (CBAM) now being implemented. This is the world’s first carbon border tax, being aimed at embedded greenhouse gas (GHG) emissions of carbon-intensive products imported into the EU. In aiming to reduce carbon emissions it is a key policy facet in the context of the European Green Deal (EGD) and related in turn to combating climate change.
The CBAM as well as yet other new EU requirements including various new due diligence procedures being imposed on many imported products, all impose substantial hurdles for African trade. Their linkages to environmental concerns make them especially relevant and potential harmful for African bio-economies, something of growing relevance and potential for South Africa and Africa, as the successes inter alia already being achieved by the South African commercial forestry sector illustrate. Other threats to African exporters, again with particular relevance to the bio-economy, are the new EU Deforestation Regulation and upcoming US Forest Act in the USA.Many see most of these non-tariff barriers (NTBs) as protectionist actions whether by intent or unintentionally.
African exporters face great challenges to comply with these regulations, usually requiring considerable funding and other resources often not possible to meet. When they are complied with the African exporters are still at a particular disadvantage due to the higher tariffs or penalties often imposed by the EU, undermining African economic growth while discouraging trade and related interaction with the EU.
Apart from inhibiting factors from outside Africa the supportive infrastructure within African countries also continues to need improvement especially given the need to move towards the full implementation of the African Continental Free Trade Area (AfCFTA). Improved intra-African transport infrastructure is a priority which can facilitate growth in intra-African trade as well as the integrated diversified regional economies seen as essential for improving African economic growth, and the benefits of the AfCFTA, yet
less than 20% of Africa’s trade is currently intra-regional. Improved logistics are also critically important for building the Global Value Chains (GVCs) that are much needed in Africa.
Both Africa’s physical and regulatory infrastructure need improvement with the latter including policies, institutions, procedures to support trade as well as legal systems with these being closely linked to needed good governance. Harmonizing and coordinating regional as well as national legal systems remains a key challenge but essential for intra-African trade and AfCFTA implementation. In addition trying to meet the new external regulatory challenges for trade only adds to the complexity of all internal regulatory needs inside African exporting countries
As with legal matters there are many peculiarities unique to Africa relating to finance, a critical factor for African trade. The dimensions and complications regarding African trade finance which can often arise when international dimensions are also present are many and again unfortunately the African input into the relevant systems is too weak for African circumstances to be taken into account.
It would seem imperative for diplomatic dialogue between the EU and affected African countries including South Africa to take place as soon as possible in order to find options for overcoming the problems especially matters needing urgent attention such as CBAM. Possible options need to be found which take into account the interconnections of supply chains and the global impact of market-driven decisions.
At a recent Round Table of the Africa Europe Centre for Investment & Trade (AECIT) held at the South African campus of Henley Business School suggestions included that regulations should be coupled with appropriate technical assistance and capacity-building programmes for African exporters while stakeholders in markets should incentivize sustainable suppliers. The global transition to sustainable development now underway has numerous impacts on trade and must be addressed in a holistic manner as it takes place holistically, cutting across all spheres of government and policy. Africa has to address the reality that it is subject to economic coercion wielded by the dominant trading powers in the international community.
As South Africa is the only African country which is a formal strategic partner of the EU this could be an opportunity for South African leadership on behalf of many African economic interests to help improve the situation. The timing of the next high-level EU-South African summit nevertheless still seems uncertain with media recently carrying allegations that South Africa has ignored EU requests for a new summit for more than a year, something subsequently denied by both sides.
Unfortunately the concerns of African exporters, especially those linked to SMEs, are usually not known in Brussels or Washington among others where decision makers often don’t fully comprehend the impact of what they are doing on sustainable development in Africa. The need was stressed at the AECIT event for a stronger African voice in the capitals of major trading partners. A variety of African experts and stakeholders must engage EU and other non-African decision makers with the Private Sector playing a key role and strengthened Public-Private Sector coordination being imperative.
The need for improved intra-African dialogue nationally, regionally and on a continental basis is also very relevant. The South African Government, as with many others in Africa, must understand the dire need for improved infrastructure and procedures. Innovative options for improving trade conditions, especially beneficial for the bio-economy, must be found and consideration of such models as that between business and government in Sweden must be explored for local implementation.
Dr John Maré is a former South African diplomat now an adviser on international public affairs and diplomacy.
