Eromosele Abiodun writes that African economies must actively engage in international trade, increase efficiency at their port and border processes, and reduce bottlenecks in import and export processes, to achieve efficient and effective trade across borders
A recent report by African Development Bank (AFDB) revealed that achieving significant decline in Africaâ€™s poverty will require the continentâ€™s gross domestic products (GDP) to grow at an overall average of seven per cent. In order to achieve this goal, experts believe it is of paramount importance that Africaâ€™s international trade must improve.
According to the Doing Business Index by the World Bank, a one per cent increase in trade is associated with more than a 0.5 percent increase in income per capita in economies with flexible entry regulations.
Experts agree that the gains of trade-enabling measures can contribute to broader objectives such as private sector development, education, foreign direct investments, market integration, economic growth and employment. To achieve this, however, all players across the value chain such as governments, shippers, customers, need to collaborate in order for the society to get the full benefit from the efforts.
Thankfully, trade between Africa and the rest of the world has increased by 200 per cent since the year 2000 but the African continent and its Regional Economic Communities (RECs) have recorded less intra-regional trade than most other regions of the world. According to data from the United Nations Conference on Trade and Development (UNCTAD), intra-African trade amounts to only about 13.8 per cent as compared to intra-regional trade among Latin America countries which is 22 per cent, Asian countries at 52 per cent and Europe at about 70 per cent. Experts believe one of the major factors behind this low level of trade integration is the poor trade facilitation implementation.
It is important to know that maritime transport is essential to the world trade. This is because over 80 per cent of the volume of world merchandise trade is carried by sea, and an even higher percentage of developing-country trade is carried in ships. Global seaborne trade has both been growing at a faster rate than global GDP since 1990 according to the UNCTAD Maritime Review of 2016.
This, analysts said, showed that the increasing importance of transportation infrastructure investment such as ports, terminals and cargo inland services to overall economic growth and rising standards of living, particularly in economically developing areas currently underserved by modern transportation networks and access.
Volumes of Traded Goods
The Country Manager of APM Terminals Nigeria, Mr. David Skov said this development has gone hand in hand with an increase in the volumes of traded goods transported by sea.
Speaking at the Association of African Maritime Administrations (AAMA) conference held in Abuja recently, he said: “In 2007, international seaborne trade was estimated at 8 billion ton of goods loaded. During the past three decades the annual average growth rate of world seaborne trade is estimated as 3.1 per cent. Dry cargo (bulk, break-bulk and containerized cargo) accounted for 66.6 per cent of the good loaded. The rest is oil and petroleum transports.â€
Seaborne trade, he added, surpassed 10 billion tons in 2015 and continues to represent the overwhelming majority of the more than 16 trillion in global merchandise trade by volume as well as value.
However, he said more than half of all seaborne trade by value move in containers, with emerging economies of Asia, Latin America, the Middle East and Africa accounting for most of current shipping market expansion.
â€œA breakdown of the group of developing countries shows that goods are predominantly loaded in Asia, which represents close to 40 per cent of the total goods loaded followed by the Americas (14.7 per cent), Africa (10.5 per cent) and Oceania (0.1 per cent). 53 per cent of the volume of world seaborne trade is unloaded in developed countries.
â€œThe development in international trade and transport has been promoted by several factors. Tariffs and other barriers to trade have decreased through multilateral negotiations in the World Trade Organisation and through regional and bilateral agreements.
â€œMaritime transport systems have also evolved to todayâ€™s container ships taking advantage of economies of scale. The costs of maritime transport have declined over time. The WTO World Trade Report 2008 cites three main technological and institutional changes as reasons for the lowering of shipping cost. First the development of open registry shipping, scale effects from increased trade and containerisation,” he said.
Scov added that openness to trade is one of several important factors to achieve economic growth stressing that countries that are open to trade have had faster economic growth than countries that have been more closed to trade.
He noted that greater openness to trade is clearly associated with faster economic growth, but it is not the only factor contributing to growth. Other factors such as technical innovation, a responsible economic policy and education are also necessary.
Positive Economic Development
Trade, Scov added, contributes to a positive economic development both by generating incomes from exports, as well as by importing products in demand.
â€œThrough trade, both the exporting and importing country can take advantage of their respective resources and relative competitive advantage in a more efficient way, and contribute to diffusion of new knowledge through technology transfer.
â€œAccess to larger and richer markets is a key factor that enables local producers to generate the level of demand required to exploit economies of scale. Through specialisation and economies of scale the production cost per unit decreases as production rise. Prices are also lowered by the competition that comes from trade. The combination of lowered prices and specialised products is beneficial for consumers, â€he said.
He added: â€œTrade creates conditions for economic growth, which in its turn, is a precondition for poverty alleviation. Developing countries are a diverse group with differing trade patterns, natural resources, factor endowments and comparative advantages. Trade has an effect on growth, employment, revenue, consumer prices and government spending in a country, which all, in turn, has an effect on the poor in a bid to alleviating poverty.
â€œIn general, there are direct and indirect effects of trade. Increased trade, as an effect of liberalisation or reduction of trade barriers, directly affects the prices in a market. How the consumers are affected by these price changes in a specific sector depends if they are net producers or net consumers. For example, fishermen in a closed market might be negatively affected by increased imports of fish and a lowering of prices, whereas the consumers in the same market will benefits from lower prices. How price changes impact the consumers also depends on the costs for distribution, the way markets are structured and domestic taxes and regulations.
â€œHowever, not all developing countries have managed to take advantage of the trade opportunities that come from globalisation and increased trade facilitation according to the United Nations Conference on Trade and Development. The economic performance for developing economies in Africa remains below that recorded by developing countries as a whole. Africaâ€™s share in the total world export was 3.1 per cent in 2007 and this share has been decreasing since the 1950s.â€
Customs, he added, plays a central role in the trade chain but in order to achieve trade facilitation, all agencies at the borders must be involved.
â€œIt is a concept directed towards reducing the complexity and cost of the trade transaction process and ensuring that all these activities take place in an efficient, transparent and predictable manner. The United National Centre for Electronic Business and Trade Facilitation (UN/CEFACT) defines trade facilitation as: â€œThe simplification, standardisation and harmonisation of procedures and associated information flows required to move goods from seller to buyer and to make paymentâ€.
â€œEfforts to achieve trade facilitation in a country are strengthened by alliances and partnerships with international and local stakeholders in both the public and the private sectors. An ordinary trade transaction involves a large number of actors, both public and private. To facilitate the trading environment it is important to involve all these actors. In addition to a close cooperation between the public and the private sector, there need to be a clear political will and commitment in order to ensure that reforms at facilitating trade are undertaken and sustained, â€œhe stated.
He added that international trade is predominately seaborne and has a direct relationship on the development and growth of any economy especially in developing economies in Africa.
Therefore, he stated that it is important that African economies actively engage in international trade, increase efficiencies of their ports and border processes and reduce bottlenecks in import and export processes to enable efficient and effective trade across borders.
â€œTrade Facilitation measures are in themselves positive steps towards human, enterprise and institutional development. They help small traders enter the formal sector, make economic activities more transparent and accountable, promote good governance, generate better quality employment, strengthen IT capabilities, and generally help modernise societies by bringing benefits in terms of administrative efficiency.
â€œMany trade facilitation reforms also have a regional dimension in their implementation. By requiring collaboration and cooperation among partner countries, their implementation itself can be a positive step towards further regional integration, â€œhe said.