At a Commonwealth Business Council event, Henry Bellingham, Foreign Office Minister for Africa, spoke about trade and prosperity in the region.
Increased prosperity for the UK is at the heart of Governments Foreign Policy objectives. Boosting trade and investment between countries and regions will be vital to getting the world economy moving again.
The Commonwealth, which includes 19 African members and more than half of SADC, is well placed to catalyse a recovery. It includes some of the world’s fastest growing economies with members sharing principles of democracy, rule of law, good governance and similar legal systems. These provide solid foundations for doing business and a platform for trade, investment, development and in turn prosperity.
My travels to Angola, Nigeria, South Africa, Ghana, Kenya, Ethiopia and several other African countries have demonstrated to me that Africa has a lot to offer the global market. The IMF forecasts that Africa will grab seven of the top ten places in the leagues tables of economic growth over the next five years.
We know of China’s massive demand for imports from Africa. Less well known is that this has been matched by an equivalent value of Chinese exports to Africa, keeping the trade largely in balance. As Standard Chartered argues, this shows the underlying strength of the African economy and its importance even to large markets like China and our own.**
Trade brings growth
Free trade can be a powerful engine of economic growth and job creation. Trade creates wealth and is, ultimately, the most effective way to pull people out of poverty sustainably. Research has shown that per capita income grew more than three times faster for those developing countries that lowered trade barriers than for other developing countries in the 1990s.
That is why the Doha Development Agenda, which would be particularly beneficial for developing countries, remains the UK’s top trade priority. A deal would remove trade distorting subsidies, improve the physical flow of trade and reduce trade bureaucracy. It would increase export opportunities for many of the poorest countries in Africa and Asia.
Regional integration will help to expand markets in Africa and allow Africa to benefit from the global trade. Africa accounts for less than 3% of global trade and only 10% of Africa’s trade is with other African countries. Similarly only 11% of SADC’s trade is with other SADC countries.
Some African countries have made more progress than others. South Africa, Mauritius and Lesotho have substantial manufacturing export sectors and the potential to expand further. Angola’s non-oil sector has been growing by 11% per year, sparking interest by foreign investors into education, construction, financial services, power and water. Zimbabwe is one example of a country with massive unlocked potential for trade. It goes without saying that the key to unlocking this potential is achieving the political stability that can only follow free and fair elections. We fully support the efforts of SADC, as guarantors of the GPA, as they work with the Zimbabwean political parties to agree a path by which this will be realised.
The scenes of upheaval in North Africa and the Arab world are a reminder. Africa’s large young population could be a force for future growth and productivity or a fuel for conflict and economic paralysis. All depends on how sufficient and evenly distributed are economic and political opportunities. Trade and regional integration is one way of unlocking growth potential, creating economic opportunity and creating incentives for co-operation to deliver political stability in the region.
Regional integration imperatives in Africa
Despite having a similar population to India’s, Africa has 54 (soon to be 55) countries with as many national frameworks, complex borders and tariff as well as non-tariff barriers. Two-fifths of SADC’s membership live in landlocked countries and depend on neighbours for access to sea ports. Of Sub-Saharan Africa’s 48 countries, 19 have fewer than 5 million people, six are island states and 15 are landlocked.
Transportation costs in sub-Saharan Arica are three to four times those of developed countries. And non-tariff barriers like border post bureaucracy and ad-hoc trade bans are a hindrance to trade. Average export costs in Africa are 78 per cent higher than in OECD countries. In Singapore it takes 5 days and costs $456 to export a standard container, compared to 52 days and $1850 in Angola.
Africa’s progress on trade integration
That is why the African Union’s ambition to create an Economic Community by 2028 is important. Free Trade Areas in each Regional Economic Community are to be building blocks for a continent wide customs union and, eventually, a Common Market. The value of the strategy is not controversial: under its FTA, intra-COMESA trade has more than quadrupled from US$ 1.6 billion to US$ 7.1 billion between 2000 and 2009.
That is why the UK is firmly behind these ambitions. The Prime Minister and President Zuma wrote in a joint articlex last year that removing barriers to trade in the region could produce an extra $62bn dollars of GDP growth per year.
UK support for SADC Regional Integration
SADC has had a Free Trade Agreement since 2009. And earlier this month it joined COMESA and EAC to launch the negotiations for a Tripartite FTA that should establish a single Free Trade Area covering half the continent.
The UK’s recent Trade White Paper details the UK’s Africa Free Trade initiative (AFTI). AFTI is a programme of investment, technical assistance and political support to promote regional integration in Africa.
UK technical assistance will provide national and regional Governments in Africa with expertise and capacity. Coordinated investment will ease infrastructure bottlenecks. And diplomatic efforts with Governments and donors will focus on building and maintaining political support for African regional integration.
The UK is helping to speed the transit of goods from six landlocked countries - Uganda, Rwanda, Burundi, Zambia, Zimbabwe, and Malawi - to the sea.
TradeMark Southern Africa (TMSA), a £100 million, UK-funded programme over 5 years is one of the key delivery mechanisms of technical support for trade and economic integration in the region. It is working closely with the Tripartite of COMESA, EAC and SADC Tripartite to make free trade in East and Southern Africa a reality.
At the Chirundu border - along the North South transport corridor between Zimbabwe and Zambia - waiting times for commercial traffic have been reduced from 4 to 5 days to a maximum of two days, and often to a few hours.
The programme hopes to unlock the large-scale public and private finance necessary to open up transport corridors across the COMESA-EAC-SADC region.
We are also working to support Governments in their efforts to simplify and eliminate tariff and non-tariff barriers to trade.
The UK government provides other support to trade and the private sector development. For example, the CDC, the UK Government’s development finance arm will be investing £1.2bn in Africa through to 2015. The CDC’s new business plan published in May makes clear that the £2bn of new investment from 2011-2015 will be focused only on sub-Saharan Africa and South Asia.
We will honour our G20 commitment to maintain Aid for Trade spending. We will use our influence in Europe to expand the benefits of trade preference schemes and to focus them on the poorest countries. And we will push G20 countries to extend 100 per cent Duty Free Quota Free access to less-developed countries. This could remove over 3 million people from poverty in first instance, at little cost to G20 countries. In fact it is estimated that some G20 countries, such as India, would benefit overall from access to cheaper imports.
We will also work through our diplomatic channels to secure the support of other donors for trade integration in Africa. In the May G8 meetings, UK proposals led to broad support for regional integration and key trade corridors in Africa. Last year, the Prime Minister made this a priority for his agenda in the G20 Summit. The G20 multi-year action plan on development now includes measures to support regional trade integration and infrastructure in Africa.
I would like to say a few things about the potential role of the Commonwealth in this respect. A Wilton Park discussion earlier this year concluded that the Commonwealth “should be a champion of the values around trade and an advocate for free trade. It should provide intellectual leadership on the benefits of free trade and promoting openness generally”.
Trade within the Commonwealth is worth over $3 trillion every year. The Commonwealth network includes countries as dynamic and diverse as India, South Africa, Malaysia, Nigeria and Singapore. The legal, political, cultural and linguistic bonds amongst these countries mean that trade links are greater than the factors of proximity and trade regimes will suggest. There is potential to expand trade and investment further: the Commonwealth middle class has expanded by nearly one billion people in the last two decades, representing a huge and growing consumer market.
The Commonwealth network has influence in nearly every international country grouping, making it a key vehicle for promoting regional trade integration and WTO outcomes. India, South Africa, Canada, Australia and the UK have influence within the G20. The UK and Canada have influence within the G8. There is an emerging consensus that the Commonwealth, with its global membership encompassing developed and developing nations, should play a strong role in pressing for early completion of Doha round.
The UK government has rapidly upgraded its relationship with the Commonwealth and is keen to reinvigorate this organisation. As far as the UK government is concerned, the “C” is firmly back in the FCO and we are ready to take advantage of our position at the centre of this readymade network, for the good of all.
The Commonwealth has been described as the world’s best soft power network and an ideal global platform for the 21st century.
This year is an exciting and potentially transformational opportunity for the future of the Commonwealth.
Australia hosting the Commonwealth Heads of Government meeting (CHOGM) in October this year will be one of the most significant gatherings in recent years. The British Government will lend its full support to help achieve a successful CHOGM.
The Eminent Persons Group (EPG), an initiative from CHOGM 2009 in the Port of Spain, has been examining how the Commonwealth should focus its efforts in the modern world.
I welcome the recommendations emerging from the EPG on the need for the Commonwealth to focus on its brand strengths of democracy and development. Their work provides an opportunity to re-launch the Commonwealth in Perth and strengthen it as a force for democracy and prosperity and place it on a firmer footing for the future.
The Commonwealth’s connections, economic successes and commitment to free trade and democracy have the potential to contribute significantly to the prosperity of its members. We hope the Commonwealth will become a leading voice in the global economy, working to liberalise trade and break down barriers for international business. That will be good for SADC, good for Africa and good for the UK and global prosperity.