Africa and jobs: creating jobs through trade and value addition

1. Africa and jobs:creating jobs through trade and value addition Will EPAs foster dynamism or kick away the ladder? WTO Public Forum Kenya Human Rights Commission Session Isabelle Ramdoo, Deputy Head, Economic Transformation and Trade Programme 1st October, 2014 Geneva, Switzerland

2. Purpose of this presentation is to see to what extent trade policies – both within the continent and with external partners – can • Contribute (or not) to stimulate economic transformation, create jobs and improve productivity and; • Enhance countries’/ regions’ performance in linking up to regional/ global value chains ECDPM

3. 1. Few initial remarks • African countries and regions are insufficiently integrated among themselves and in global value chains and when they are, they are often trapped at the lower rung of the value ladder (i.e produce stuffs (essentially commodities) with low VA); • A wide range of complementary policies are necessary (trade, industrial, labour market, fiscal etc). I will focus mostly on trade • …And mostly on Economic Partnership Agreements (EPA): Today is the D-Day – it marks the definitive swing towards first-ever FTAs that ACP countries will have with a developed partner and the end of ‘provisional’ full duty-free-quota-free market access for non-LDCs that have not taken steps to implement the EPAs. ECDPM

4. Africa’s trading landscape 1. Intra-Africa Trade, 2013 ECDPM

5. 2. Africa and its main trading partners, 2013 Source, JeuneAfrique, September 2014 ECDPM

6. 2. Five key messages on EPAs: 1. Trade is not an end in itself and EPAs are not a panacea: A tool, which can be a friend or a foe, depending how you handle it. To be beneficial, trade provisions should be activated together with other policies: domestic reforms; support to private sector; accompanying measures for losers, effective implementation of commitments on both sides; 2. Successful outcome of negotiations, in particular to address ‘hard cookies’, require leadership and political will. 3. Our multipolar world is flat and is evolving faster than ever – no country can grow sustainably in autarky. What matters is how you connect with the world, not whether you should connect or not. 4. Are EPAs good or bad? Neither naysayers nor advocates are totally right: the truth is somewhere in the middle (and will be in the eating) 5. And Yes, there is a life after EPAs… intra-Africa trade, China, US, TTP, TTIP… ECDPM

7. 3. Reality check on EPAs: 1. Process: 14 years of long, difficult and tiresome negotiations; 2. Balance of power: • Strongly tilted in favour of EU – 1 voice, 1 position, highly experienced in FTAs (common market, numerous FTAs..), with some ‘strong sticks’ sometimes used to arm-twist reluctant negotiators (MAR deadline; GSP reform removing UMICs; EPA-related aid package etc); Although it costs them 4 Commissioners, to finally obtain shallow agreement with barely half of the continent) • African countries: heterogeneous (in levels of development, ambitions); took time to find common positions; no experience with big partners (regional dynamics not the same); but managed to maintain regional unity in the end; 3. In the end, the mountain gave birth to a mouse. It stabilized trade relationship between EU and Africa, avoided trade disruption BUT even before it is implemented, already old-fashioned agreement frozen in time, partial coverage and being supplanted by mega-trade deals… 4. Trade regimes applicable: quite a mess! ECDPM

8. EPAs and trade regimes applicable beyond 1st October 2014 ECDPM

9. Latest updates: • ECOWAS and SADC EPA groups concluded a regional EPA. Market access preserved, once agreements enter into force; • Cameroun: ratified goods-only EPA. No regional agreement. CEMAC at risk; • ESA: Mauritius, Seychelles, Madagascar, Zimbabwe are implementing interim EPAs. No regional agreement. For the moment, COMESA not at risk, but if it becomes a customs union, big challenge; • EAC: so far, no regional agreement. Kenya non-LDC, therefore will be impacted by higher duties as from 1st October. Estimated loss: $140 million per year; Key sectors impacted fresh produce (40% destined to Europe), mainly fresh roses and cut flowers (5 – 8.5% duties); coffee (2.6% tariff). But regional unity preserved. ECDPM

10. 4. What can EPAs realistically achieve? • Can it help create more productive and ‘decent’ jobs? • Africa is rising. Increasing youth population have aspirations and expectations for more and better jobs. EPAs, in their current shape, will at best in the short-term, preserve existing jobs in exporting sectors (and in goods only). But agreements are partial. A missed opportunity. • Exclusion of sensitive sectors will also preserve jobs in these sectors. But this is also a short-term win. • But problems lie in (rigid) labour markets, lack of industries; skills mismatch, shortages& addressing employability: not addressed in EPAs • Not sure to what extent any good performance could be attributed to EPAs. What we see today: those doing very well (Ethiopia, Angola, Zambia, Rwanda etc) do not have an EPA and some might not even have one in a near future. ECDPM

11. 2. Can EPAs help countries integrate into GVC? • First: let’s not over-expect from EPAs. A vehicle but can do so much. Needs complementary domestic policies. There are external factors as well, which can impact on countries’ performance. Here’s the real challenge: nature of trade has changed: In 2009: > 50% non-fuel merchandise trade was in trade in intermediary goods EPAs are “old-fashioned” and partial – do not really fit with the “new global landscape”. Source: WTO ECDPM

12. Also: current production structures do not automatically lead to linking to GVC: (i) critics say that it “locks production structures (commodities) in” andperpetuatesthe dependency on traditional markets (i.e EU); (ii) most countries are closer to buyer markets, which are more difficult to integrate; or high dependency on foreign ownership of local industries, which are already integrated to the buyer markets (therefore difficult to move forward); • On positive side: some provisions provide a framework: eg. Low tariff allow access to markets; flexible rules of origin allows countries to cumulate value across borders to be able to export more transformed products to EU. • Key issues therefore: How ready are we at the regional level to use all trade tools (incl EPAs) to build solid clusters/ RVCs? At the continental level, to boost a “Made in Africa” policy? At the international level, to move up to value chain? ECDPM

13. 5. Conclusion Nothing is set in stone: economic and political leadership is key – smart industrial policies a necessity; improving business and investment climate essential; keeping pace with changing global landscape, including in trade Complementary regional (and continental) policies are essential: unity is strength; Multilateral trading system: in an increasingly complex world, we need a set of minimum but solid guidelines that will prevent the race to the bottom and ensure a fair, inclusive and equitable trading system. The current difficulties in WTO point to some challenges that are out there but that need to be addressed, if late comers want to have their place in the global system. ECDPM

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