President Girma Wolde-Giorgis
Heads of State and Government
Chairperson of the African Union Jean Ping
Distinguished Ministers, Ladies and Gentlemen

It is a pleasure to address you all today on the subject of ‘boosting intra-African trade’.  It will surprise no one when I say that as we enter 2012, the global economy remains steeped in uncertainty and very much in a state of low growth. We are on a pervasive path of recession. This will last for several years in developed economies and despite growth in some emerging regions, such as in parts of Asia, Latin America and Africa, the interconnectivity of markets suggests that the risk of contagion and unforeseen impacts are credible.

In a world still steeped in crisis and deep unemployment, external demand for goods and services will continue to be anaemic. Last year the WTO revised its forecast for global export growth to 5.8% and for 2012 we expect little improvement on this. The threat of increased protectionism is also cause for concern and I stand firmly by the view that any move to protectionist postures will further stall the global recovery we are all working towards.

An analysis by the WTO unveiled an even more worrying statistic. If all WTO members were to use the existing ’water’ in their tariffs between their bound and applied rates, it would negatively affect international trade and commerce upwards of US 900 M. This is but one of the many reasons why a conclusion to the rules and regulations we have been negotiating under the Doha Development Agenda should be expedited.

All of this means that Africa can no longer just depend on external demand for its goods and services to support its growth. This must be complemented by robust domestic and regional demand. One of the clear strategies to promote this is through accelerating regional integration and supporting greater intra-regional trade. A policy focussed on this will help to mitigate the reduction in global demand by creating new poles of growth, and markets at the regional level. Global supply networks are the prevailing production frameworks of this new century and are fundamentally supported by open and transparent regional supply networks. Creating a platform premised on a continental area free of restrictive trade barriers can create an environment receptive to the growth of these regional and global supply networks in Africa.

Despite this potential the statistics on intra-African trade illustrate pervasive underdevelopment and under exploitation of the opportunities which intra-trade can provide. At a figure of 10%, which if the important informal sector is included could theoretically rise to 20%, intra-African trade is still substantially lower than the 60% in Europe, the 40% in North America and the 30% in ASEAN.  There are a number of reasons behind this- many of which are reflected in the Action Plan for Boosting Intra-African Trade. I will briefly focus on some.

In a majority of cases, tariffs are the barriers of the last decade. What needs to be addressed are the hidden hurdles which producers have to scale if they are to get their products and services within and across states. These non-tariff barriers are becoming increasingly sophisticated but those related to trade facilitation, customs and border procedures, excessive fees and red tape and overlapping legal and regulatory requirements, can be addressed. In fact, they can be addressed much more rapidly than many may think.  The WTO Trade Facilitation negotiations, for example, have the potential to unlock millions of dollars in foregone revenue, while simultaneously addressing corruption, and unpredictable procedures at the border. And this is already happening.

The Doing Business 2011 Report confirms that the movers and shakers on the continent have been those that, in addition to focusing on export led-growth and addressing complementary domestic policies, have invested in trade facilitation procedures that have made them not only more attractive to foreign investment, but have allowed their domestic private sector to take advantage of the opportunities presented.

Infrastructure remains a pervasive problem. This is especially true for the landlocked countries whose investment in modern and efficient roads, bridges and facilities can be made virtually obsolete if their neighbours — the pathways to the ports — do not make similar investments. Without effective transportation, storage, irrigation systems and energy generation it is highly unlikely that regulatory reforms — the soft infrastructure — will have an effect. Investments in hard and soft infrastructure must occur in tandem.

Africa has a long and complex relationship with regional integration. Substantial progress has been made in recent years, such as the on-going tripartite discussions and the expansion of intra-regional trade as a result of liberalization measures adopted by various Regional Economic Commisions (RECs).   For example, intra-COMESA trade increased to US $17.4 billion by the end of 2010, from US $12.7 billion in 2009 and from US $3.1 billion in 2000. In the East African Community, there has been a 49% increase in EAC intra-regional trade since the launch of the EAC customs union.  

The vast human resource potential which Africa offers — both as a producer and consumer — provides it with a key comparative advantage in today’s reality of trade — that of trade in tasks. But the potential for tapping into this network of tasks and of regional demand and supply of goods and services which can create product and supply value chains across the continent has not yet been even remotely unlocked. Before I conclude, allow me to emphasise four key issues which can go some way to unlocking this potential.

First, there is absolutely no contradiction between accelerating regional integration and deepening the multilateral trading system. In fact, there is an urgency to ensure that the global regulatory environment is not worsening and that protectionism is not deepening. Both elements can severely undermine the benefits which boosting intra-African trade can offer. Use multilateral trade negotiations and the WTO system as impetus for greater regional integration.

Second, removing the barriers to intra-regional trade can ignite the interest of business and lead to investments and partnerships. Business will respond to actions that make trading easier. The Aid for Trade initiative is an excellent platform to focus on removing these barriers and investing in soft and hard infrastructure that make trade easier.

Third, the private sector is a critical actor in this discourse and efforts should continue to be made to include them as you move forward. They will be the primary users of the facilities that greater regional integration will offer.  Building strong indigenous business communities creates domestic demand and investment partners for the future.  PAFTRAC, launched at the AU Ministerial in Ghana in November 2011, can be one of the important interlocutors in using business as a partner in driving the intra-African trade process.

Fourth and finally, the importance of strong, consistent and sustained leadership on deepening intra-African trade is needed. Africa has placed this issue on its own agenda and I am certain that the leaders gathered here will continue to assess how this mandate is being operationalized and take remedial measures when required to further strengthen the integration process.

The future roadmap on boosting intra-African trade must accomplish its purpose of securing Africa’s role as the growth success story of the century, creating opportunities for its people and allowing trade to be the engine of growth, development and poverty reduction. The WTO stands ready to assist, as and when necessary.

I Thank You