DEPUTY DIRECTOR-GENERAL ANGELA ELLARD
Ladies and gentlemen, good morning from Geneva. I would like to thank AEZO for inviting me to address you today. Due to conflicting engagements as we prepare for our Ministerial Conference in just over two weeks, I could not join the discussion in person. But I am happy to speak to you about how Africa's integration in the AfCFTA is a positive development within Africa as well as the WTO.
I will focus on three issues: (i) what are the expected benefits of the AfCFTA; (ii) how to reap those benefits; and (iii) how the WTO can help.
We see the AfCFTA as a key milestone to promote the African Economic Community and to realize the Agenda 2063 vision of a prosperous and united Africa that is an influential global player.
There is an immense value in the economic integration of the African continent. As we know, African trade in goods and services amounts to only 3 percent of global exports and imports on average. And primary commodities are Africa's main export to the rest of the world, accounting for 82 percent of total exports. Intra-African trade amounts to just 16 percent of Africa's total trade, which is significantly less than in some other regions of the world.
The AfCFTA has the potential to change those low numbers, boosting intra-African trade by removing trade barriers, lowering trade costs, and advancing industrialization across the continent. Economic projections are encouraging. The World Bank estimates that, by 2035, the AfCFTA would lift 30 million people from extreme poverty. Intracontinental exports are expected to increase by more than 81 percent, while exports to the rest of the world would rise by 19 percent. This would create new opportunities for African businesses and workers.
Moreover, a united Africa is a stronger Africa. If properly implemented, the AfCFTA will strengthen the bargaining power of Africa in international trade negotiations, something that many developing and least developed countries in the region feel they're currently lacking. A stronger Africa would result in a more inclusive process of trade liberalization.
So, how do the African countries make sure they reap these prospective benefits? Tariff reduction would be the first and relatively easy step. While some countries are concerned about potential loss of tariff revenue, reducing the cost of imports helps Africa integrate and establish economies of scale.
The more difficult part would be to address non-tariff barriers and to cut costs to trade. Non-tariff barriers are hard to tackle because often it is difficult to detect them. I'm impressed by the AfCFTA online tool launched with the help of the UNCTAD to track and address non-tariff barriers by allowing users to submit complaints.
As to reducing trade costs, trade facilitation is the best tool, particularly for the many landlocked developing countries in sub-Saharan Africa. Implementing the WTO Trade Facilitation Agreement will help African countries harmonize customs and transit procedures, cut red tape, and reduce logistics and other trade costs. Our data suggests that full implementation of the Trade Facilitation Agreement in Africa will cut trade costs by 16.5 percent on average.
The success of the AfCFTA will also depend on whether African countries focus on increasing their manufacturing capabilities in a highly competitive global landscape. As I mentioned, African countries mainly export commodities, and the volume of intra-regional trade is low, which demonstrates the potential for development of regional value chains. African countries need a robust and WTO-consistent industrial strategy that would result in increased production of value-added products and their export.
In addition to liberalising trade in goods, another area where the AfCFTA can play a role in supporting industrialisation is trade in services, including movement of people. A properly implemented framework for trade in services would contribute to the achievement of economies of scale, improve the allocation of resources, spur investment, and promote regional value chains.
Finally, a big test for the AfCFTA will be the extent to which it is inclusive. And there are two dimensions of this inclusiveness. First, the benefits of the Agreement should extend to all parties, and not only to the biggest and most economically developed ones. Second, the AfCFTA must create opportunities for women and young people. Some 80 percent of businesses in Africa are MSMEs; the informal sector accounts for about 85 percent of economic activity in Africa; and women account for almost 90 percent of the labor force in the informal sector. These businesses and entrepreneurs must have access to finance, a production network, and markets, and they must be able to access digital markets and participate in e-commerce.
The full implementation of the Agreement will be a long game, and although parts of the Agreement have started to enter into force, negotiations are still ongoing. Rules of origin, which will determine the movement of goods on a preferential basis, have been negotiated for over 86% of tariff lines. A second phase of negotiations aiming at liberalizing investment, competition policy, and intellectual property rights, among others, has also commenced. But let me stress that the prospective benefits are worth the time and effort spent.
All of this must be put in the current context dictated by the COVID-19 pandemic. Sustainable economic development will be out of reach if we don't get the vaccine policy right. The pandemic has made clear that, in a crisis, it is risky for Africa to source 99 percent of its vaccines and 90 percent of its pharmaceuticals from abroad. The AfCFTA offers strong incentives to invest in building an ecosystem of regional production capacity for vaccines, therapeutics, and diagnostics. A positive outcome on Trade and Health at WTO's upcoming twelfth Ministerial Conference would help support this.
More broadly, the COVID-19 pandemic has accentuated how important it is for AfCFTA to succeed. The disruption of global supply chains has reinforced the need for closer integration in Africa, which would help countries increase their mutual self-sufficiency and decrease dependence on external supplies.
This brings me to my last point: how can the WTO help? The WTO has undertaken various efforts to support trade development in Africa over the years. For example, the WTO has supported trade development in Africa through its Aid for Trade initiative, which focuses on economic diversification as a key to development. Since its launch in 2006, donors have disbursed US$ 451 billion in official development assistance to help developing countries build trade capacity and infrastructure. Of this amount, US$ 163 billion has gone to African countries.
Moreover, the WTO has supported different aspects of the AfCFTA negotiations and participated in capacity building meetings with different subregions — something I'm very proud of.
Let me note that all nine African countries seeking to accede to the WTO are signatories of the AfCFTA. Coherence and synergies between the WTO accession process and AfCFTA implementation are very important and have been the main focus of the WTO's technical assistance and capacity building activities.
At the WTO, we are committed to continuing to support the successful implementation of the AfCFTA through our Aid for Trade initiative, training, experience sharing, research, and other available means.
At the same time, I would like to underline the importance of transparency in the AfCTA implementation. Transparency is an important pillar of the multilateral trading system. As a rule, WTO Members notify a regional trade agreement once they have ratified it, and it is reviewed by the membership.
However, the AfCFTA has not been notified to the WTO. It is important that such notification takes place in line with standard transparency obligations. Among other things, this would help the WTO Secretariat to provide more targeted assistance and technical advice to the AfCFTA. And it would also give other trading partners an opportunity to study it and incentivize those partners to notify agreements that may be of interest to Africa.
To conclude, I would like to once again stress that, if properly implemented, the AfCFTA will be enormously beneficial for the African continent. Given the ambition of the enterprise — that is, integrating an entire continent — this has not been an easy feat. Much progress has been made, and despite delays in negotiations and other challenges, the benefits appear within reach. But to reap them fully, there is still much work to be done. And the WTO looks forward to continuing our partnership.