In order to participate in this e-Discussion, you need to create a profile on this platform. Please contact aida.balamaci@unossc.org to assist you in setting up your profile. 

Welcome to the South-South Global Thinkers e-discussion focusing on " The Role of South-South Cooperation in Promoting and Deepening Trade and Investment in Africa " to be held from 23 October to 8 November 2019.

The African Continental Free Trade Agreement (AfCFTA) which entered into force on 30 May 2019, represents a milestone achievement in Africa’s rich history of regional integration, continental unity, and deepening of economic ties. Additionally, the AfCFTA has been touted as a catalyst for the region’s industrial development, as it will provide business opportunities in line with the African Union’s Agenda 2063.

The promotion of South-South Cooperation (SSC), especially South-South investments and trade, appears critical for countries in Africa and other developing countries of the Global South to seize the opportunities laid out in the AfCFTA. If effectively implemented, the AfCFTA could increase intra-African trade by 52 percent by 2022, thereby ensuring better harmonization and trade liberalization across the region. With that, Africa should be more competitive internationally.  However, there will be anticipated constraints and challenges to its implementation. For instance, there are fears that the benefits will not be evenly distributed as stronger economies will benefit more than weaker counterparts. 

Against this backdrop, the United Nations Office for South-South Cooperation (UNOSSC) in partnership with the African Union Commission are organizing a workshop entitled “The Role of South-South Cooperation in Promoting and Deepening Trade and Investment in Africa- Promoting Conducive Policy and Legal Environments in Africa” on 5 November 2019, ahead of the 11th African Private Sector Forum in Antananarivo, Madagascar. Please access thefull background note below.

The outcomes of the workshop aims to engage discussions on the relevance, the need for the adaptation of the existing instruments for investment in the context of AfCFTA; scope the contributions of South-South investments in the SDGs in the region; identify the opportunities and challenges of the AfCFTA and other regional policy and legal frameworks that can facilitate greater South-South investments in Africa; and identify funding mechanisms and frameworks that can facilitate better South-South investments for the achievement of the SDGs.  The outcome of the workshop would feed into the development of a research report that aims to inform better policy-making to promote and strengthen trade and investment policies, specifically South-South investments.

This e-discussion, seeks to engage, ahead of the workshop, Southern-based think tanks to contribute with insights and expertise and help shape the discussions of the  workshop. The initial outcomes of the e-discussion will be presented during the workshop through a background paper.  The e-Discussion will remain open during and shortly after the workshop, so that participants have the opportunity to share their experiences and recommend follow-up actions which will eventually feed into a comprehensive research study which UNOSSC aims to develop by September 2020.  

The e-discussion will focus on the following questions:

1. What are some of the policy, regulatory and legal issues that are enabling or hindering South-South Cooperation within the region?

2. Africa just signed the largest (outside the World Trade Organization) and most ambitious regional trade agreement in the world. It is aimed at the structural transformation of the continent’s consumer market of 1.2 billion people. How can South-South Cooperation contribute to the achievement of the lofty objectives of the AfCFTA?

 

3. How can the private sector in the Global South be mobilized and leveraged to effectively contribute towards the growth of the digital economy, within the AfCFTA, for broad-based sustainable socio-economic development on the African continent?

 

The e-discussion will be moderated by Hany Besada, Senior Research and Programme Advisor, UNOSSC / NY. The facilitation will be coordinated by UNOSSC. 

We look forward to your active participation and contribution to the e-discussion!

Files

Comments (23)

Hany Besada Moderator

[~102] 
Thank you so much for your continued engagement and insights aimed at enriching this e-discussions. I would like to take this opportunity to add a few additional ideas to what you have shared with us.


When it comes to unequal partnerships in trade and development, the EU and Africa’s relationship is consistently at the center of attention. The significant policies referred to are usually the EU’s Economic Partnership Agreements (EPA) with the EU that was established to create FTA’s between the two regions. EPA’s were initially established to counter the growing concerns of Preferential Trade Agreements favoring Western states. African stakeholders have been faced with unfair competition creating challenges for many growing industries due to the unintended consequences of this agreement. As well, the purpose of the EPA’s is to fulfill the criteria set out by the WTO for fair trading practices and so the EU is only encouraged to meet the bare minimum criteria without actually developing the policies further to support African countries. The significance of this example is to examine the impact of trying to generate more equal trade partnerships between developed and developing countries who have always experienced unbalanced trade. The lack of genuine policies that could shift and balance out the scale will only continue to make the Western countries appear to be doing their part in legal terms without any positive impact on African counterparts. Many studies have attempted to assess the implementation of programs seeking to reform trade institutions to better incorporate developing countries, however, the initiatives continue to lack consideration by Western states. Many times representatives from African countries negotiating the terms of these agreements are overpowered by the more prominent institutions that support preferential trade in favor of developed countries.[1]

Another example related to the EU’s trade policies in African countries is the implications of South Africa’s EU-SA FTA. Negotiations for the EU-SA FTA were successfully completed in the early 2000s launching a trade agreement set to increase duty-free agricultural and industrial products trade between South Africa and the EU. The asymmetrical agreement allows Europe 10 years to implement the deal but gives SA 12 years due to the economic gap between the two members. The goal was to have 86 percent of the EU’s industrial products imported into South Africa’s market completely duty-free. Gradually, other products within each industry would be added to the list of duty-free imports to allow the economies reasonable time for adjustment. There were many concerns regarding the time frame given to South Africa since the EU was expected to drop its trade barriers in a shorter amount of time. Over time this became a larger issue as members saw a sharp contrast in their individual economic policies. For instance, although South African farmers were offering products at the best prices they could afford, European farmers had almost 50% of their produce subsidized by the government, allowing them to sell at prices significantly below the market price. Such concerns were not only affecting South Africa, but also its fellow SADC member states. The EU-SA FTA was diverting trade away from the regional states because the EU saw South Africa as the better alternative.[2]  This has not been a critical issue because the shifts have been minor, but it did create subsequent tensions in the SADC. For this reason, it's important to consider the impact of bilateral trade relations between Western countries and African countries on the greater AfCFTA to better prevent the spillover of trade complications in the region.

In terms of establishing stronger value chains in the global South, there is a demand for policies that encourage greater international value chains to support regional economic development. Many policies have targeted FDI and developing markets in the South in order to engage a focus on smaller enterprises in domestic markets. In the developing South, it’s important to drive an approach that increases South-South trade and investment to facilitate effective development. A recent publication by the International Trade Centre and the Research and Information System for Developing Countries described a set of strategies that can support this initiative. One of the most significant suggestions in relation to developing strong value chains would be targeting complementary opportunities available in the Global North and the Global South.[3] It’s difficult to enhance the development of South-South Cooperation without consideration of the existing dominant institutions that govern international trade relations. Although reform may stand out as a path to restructuring existing ideologies and building pro-South institutions, it can be unrealistic to change Western-influenced institutions in the short term. Utilizing the existing institutions in so far as they benefit the overall agenda pushing for South development.


   [1] Langan, Mark. “Why Europe Urgently Needs to Rethink Its Unfair Trade Deals with Africa.” DOC Research Institute, DOC Research Institute, 5 Apr. 2019, https://doc-research.org/2019/04/europe-trade-africa/

[2] Assarson, J. (2005). The Impacts of the European Union - South Africa Free Trade Agreement (Rep.). Retrieved December 10, 2018, from Uppsala University website: https://www.diva-portal.org/smash/get/diva2:130505/FULLTEXT01.pdf

[3] Mohanty, S. K., Franssen, L., Saha, S. (2019). The Power of International Value Chains in the Global South. International Trade Centre, Geneva, Switzerland.

Hany Besada Moderator

[~240] 
Many thanks for your very pertinent comments. I would like to offer the following input to what you have indicated below. 

It’s important to keep in mind the way in which the AfCFTA combines three existing FTA’s, the East African Community (EAC), the South African Development Community (SADC), and the Common Market for Eastern and Southern Africa (COMESA). To note, the goals established in the beginning stages of these agreements were not quite met and for this reason, expectations of the development of the AfCFTA may also lack the required cooperation. For instance, COMESA  has shown great promise since its initial establishment and has increased intraregional trade of member states to 12 percent. However, the lack of development and awareness generated regarding the COMESA legal institutions have hindered its success and generated several clashes between member states. A notable instance regards the proposed Visa Protocol encouraging free movement to citizens across member state borders. The challenges in the implementation process overlapped with the push back from local citizens prevented the negotiations from progressing very far. Without strong recognition of the legal instruments in the trade agreement, it becomes difficult to mobilize and implement such transformations that impact diverse stakeholders. In this case, the necessary approach will need to be applied with caution to refrain from having countries start to doubt the trade agreement as a whole. This example of the existing challenges in FTA’s is provided to give a comprehensive understanding of how these challenges may be magnified in the AfCFTA if not properly addressed. Although regional integration as a development policy has been generally more accepted in recent years, it will be difficult to establish confidence in the success of the AfCFTA due to past objectives that were left unmet in trading blocs. Layering REC’s to reach a greater common market may be an appropriate way to ease into the AfCFTA but it requires great efforts to ensure that any hurdles are addressed in the smaller regional agreements so that they do not transfer and intensify in the greater continental trade area.

Furthermore, in the existing FTA’s the regions provide an opportunity for countries to leverage their strengths in order to negotiate better trade deals. Due to the region's ability to compile data and get a sense of neighboring countries’ trade strengths, they can then structure their markets to better position themselves in more favorable negotiations. In a trade bloc seeking to unify the continent into a single market, it can be difficult for countries to differentiate themselves amongst their neighbors who share similar resources and who have a greater capacity to compete. Smaller countries could face greater challenges in keeping up with the regional trading partners if they do not find ways to quickly assess the markets and trade strategically. These smaller landlocked countries did not have the capacity to develop their trade infrastructure due to varying political and economic circumstances but must now adapt to the competitive scope of the new agreement. The one suggestion experts have discussed is utilizing resources that have a high demand from larger countries in the manufacturing industry. As larger countries open up their markets they will need to focus on their competitive advantage and source inputs from smaller countries to build the value of the products they are exporting. This provides an opportunity for smaller countries to structure their markets in a competitive manner. [1] The implementation process of the AfCFTA will heavily depend on the ability of countries, specifically ones in a disadvantageous position to restructure and diversify their markets to meet the demands of the regional competitive scope going forward.


[1] Ighobor, Kingsley. “Africa Set for a Massive Free Trade Area.” Africa Renewal, vol. 32, no. 2, Aug. 2018, pp. 3–5., doi:10.18356/62af7ff2-en.

Hany Besada Moderator

[~355] 
 Many thanks for your wonderful and important input into this e-discussion. I am particularly happy you highlighted the critical issue of gender equality in the framework of the African Continental Free Trade Area Agreement. I would like to highlight the following complementary points aimed at ensuring a gender-responsive agreement.

Indeed, gender equality is critical if not essential for the implementation and success of the African Continental Free Trade Area Agreement on the continent over the coming years. Tackling the bottlenecks and lifting the barriers that have long divided the continent for decades is now accompanied by high expectations and promises that can only be fulfilled if the dividends from trade and investment expansion ensure that no Africans are left behind and is inclusive.  Throughout the continent, women and girls continue to face enormous barriers. Girls and women carry the majority of the care and domestic burden in every country on the continent, are less likely to be employed in the formal sector (and where they are employed, earn lower wages), make up the majority employed in the informal sector with very little security, experience high levels of violence and are less likely to be able to influence government policy.

Recognizing the fundamental role gender plays to ensuring sustainable inclusive development, the African Union has identified full gender equality in all spheres of life a priority goal for the continent and member states. Although the African Continental Free Trade Area Agreement has not incorporated a separate chapter on gender and trade, the preamble of the agreement makes specific reference to the significance of gender equality for the development of international trade and economic cooperation. Meanwhile, article 3(e) places importance on the promotion of gender equality as one of the key objectives of the Agreement.

Women are not a homogenous group and but are rather uniquely and differentially impact by trade depending on a variety of factors, including race, income, education level and age as well as on their position in the economy (whether formal or informal). Acknowledging the gender-differentiated effects of trade liberalization and market harmonization and the accompanying impact on gender equality has prompted the United Nations Economic Commission for Africa’s African Trade Policy Centre to promote gender mainstreaming in the development of national African Continental Free Trade Area Agreement plans and approaches aimed at ensuring gender equality is firmly embedded in the agreement.

Without a doubt, the African Continental Free Trade Area Agreement will generate new opportunities in several economic sectors where women are largely concentrated, particularly service trade, agriculture, and agro-processing as well as light manufacturing. However, the benefits for women are not automatic and require concerted efforts by governments and the private sector in ensuring women equally benefit from trade opportunities under the agreement. This would require measures aimed at designing and implementing gender-specific policies and targeted complementary policies.  

Sectoral initiatives that strengthen the participation of women in employment-creating sectors, particularly agro-packing and processing as well as agricultural regional value chains would need to be promoted, alongside targeted interventions aimed at prioritizing female farmers. In the areas of manufacturing, African states would need to place greater prioritization and emphasis on promoting women's active participation in industries, including export-oriented manufacturing which is thought to benefit particularly from external trade.

It is important for the African Continental Free Trade Area Agreement to consider the following policy interventions at sector-specific levels, including 1) implementing industrialization strategies that promote horizontal and vertical mobility of women into medium and high-skilled manufacturing jobs; 2) mechanisms that ensure women successfully operate SMEs through access to finance and supportive business development resources based on their industry-specific requirements and respective needs; 3) ensuring women are integrated into agricultural regional value chains by simple value-added agro-processing and partnering with larger domestic and larger private sector companies from elsewhere on the continent which would provide access to outlets/markets for products as well as quality inputs, skills development, and technology; 4) policies designed for informal cross border traders that provide women with opportunities to formalize and expand their businesses. 
 
 

Hany Besada Moderator

[~346] 
Thank you very much for your very insightful and important comments. 

The uncertainty that follows an unprecedented structural transformation such as the AfCFTA will require intensive research into the specific implications of integration on each country. The complexity of each country’s economy can be easily lost in the midst of such a significant agreement and this could cause further complications in the implementation process. For instance, a study done by the South African University of Pretoria, looked at the impact of trade liberalization following apartheid and found that from 1992 to 2005 there was a dramatic increase in trade in response to the reintegration into the global economy[1]. As well, the exports were primarily dominated by resources-based commodities while the imports were dominated by higher value-added goods. The paper goes on to explain the initial impacts of complete trade liberalization on South Africa’s economy by looking at macroeconomic effects and sectoral effects from 2008-2020. 

The results found that the macroeconomic effects were insignificant in the short run due to the increased investment being location-based. However, in the long run, the decrease of domestic import prices and a fall in the consumer price index as a result of reduced production costs would cause an increase in imports and therefore a positive response in the economy. Similarly, a report released by the International Trade Centre specifically analyzing the impact of the AfCFTA on businesses stated the concerns of the way this integration may limit the private sectors’ opportunities if not approached cautiously. In order to promote cohesive intergovernmental relations, South Africa needs to consult its private-sector agencies and intermediary bodies and facilitate correspondence between the two.  In essence, each country shares the commonality of having layered historical underpinnings to its economy that shaped their current trade policy. This has resulted in the significance of certain sectors, the diversity of the economy, and the strength of varying policies governing their structure. This portrays the importance of assigning policy-based research both domestically and/or externally to SSC focused think-tanks to better understand the possible implications and avoid previous trade hurdles.

The other portion of ensuring the successful outcomes expected of the AfCFTA, is the role that governments play in providing the proper legal and political infrastructures in supporting the economic strategy. The strong correlation between the quality of a country’s infrastructure and its governance standards proves that effective government capacity is key to sustainable trade policies that push regional integration. This takes on different forms as you examine countries across the continent that vary in geographic position, population size, and economic strength. Smaller countries have the ability to push through domestic hurdles while larger ones struggle with issues of diverse groups with varying interests, and resource management. For decades the path to development for the continent has been debated between reform through liberalization and other forms of protectionist policies. 

However, when it comes to the AfCFTA there is a required set of policy issues that should be addressed by domestic governance to refrain from falling into a disadvantageous position in regional agreements. For instance, countries need to find ways to brace for short term adjustment costs that come with the significant responsibility of opening up their economies to regional exposure. This pressure lies upon governing bodies that must prioritize policies regarding the protection of local businesses from the vulnerable position and to provide the necessary resources to stimulate the local economy. Some African governments have seen success in the reform of certain commodity industries however, the lack of proper incentive structures can quickly hinder the ability to keep a cohesive political environment. For this reason, it's essential that countries begin building the foundational institutional frameworks politically, that will set the conditions for success in the multilateral agreement. Low levels of productivity in the continent have consistently hindered consensus on economic development initiatives and this opportunity provides a chance to prevent such failed outcomes. Domestic reform can be the most difficult preliminary step to reaping the benefits of trade, but poorly implemented strategies can make the journey significantly slower and more painful.


[1] Fadeyi, O. (2013, January). Assessing The Impacts Of Sadc Free Trade Agreements (Sadc Fta) On South African Agricultural Trade (Rep.). Retrieved November 6, 2019 from http://scholar.ufs.ac.za:8080/xmlui/bitstream/handle/11660/818/FadeyiOA…

Lidija Bubanja

Dear Colleagues, I am Lidija Bubanja, a Policy Specialist at UNOSSC. I apologize for this late contribution to the important issue of the role of South-South cooperation in promoting and strengthening trade and investment in Africa.

Every free trade agreement has advantages and disadvantages. Countries entering free trade agreements must protect their people and resources against the negative effects, and trade protectionism is rarely the most effective solution.

It's envisioned that the free trade area will lead to increased competition, innovation and prosperity for Africa’s people in the long term. But for the AfCFTA’s gains to be realized, entrepreneurs and policy-makers must be aligned. They must engage with each other to provide structure and clarity around how goods and services will move, and around the benefits that the agreement will bring to a business. These discussions between entrepreneurs and the trade ministries of their country will also enable the review and updating of national trade policies, discussions which will benefit both the government and business communities. Solutions to African local problems should be homegrown and policies need to be accountable to stakeholders. 

The consequences of failing to address entrepreneurs’ concerns locally will result in failure to access the gains of the AfCFTA and will lead to a burgeoning informal sector. According to the International Labour Organization (ILO), it is estimated that the informal sector accounts for more than 66% of total employment in sub-Saharan Africa and 52% in North Africa. If collaboration increases between entrepreneurs and their governments, with the state and private sector supporting entrepreneurs by offering training, access to technology platforms and financing, operators in the informal sector will transition to the formal one, increasing their chances of success in the larger market. Indeed, the biggest losers will be those whose skills have a cheaper competitor in a different market and this is why free trade agreement needs to be accompanied by investment in the education sector.

African Continental Free Trade Agreement (AfCFTA) should lead to higher savings, which should provide social security and financing development without having to depend on foreign loans. AfCFTA should give African countries access to more markets in the global economy. It should help a lot of companies expand and establish their presence in Africa due to the favorable business environment, which is enhanced with the free trade agreement.

As we look at the benefits of the AfCFTA it is important that we keep gender equality in mind. Women should, therefore, play a leading role in articulating the challenges that they face, as well as the assistance that they require across the value chain, to enable them to become more efficient and prosperous in their ventures.

South-South cooperation can be certainly beneficial for African countries through mutual learning and institution-building among their countries, inclusive global relations with developed partners, and investment and trade facilitation between cooperating partners. South-South and triangular cooperation also have the potential to allow countries to share experiences, share market space and trade-oriented support and investments and people to improve existing and acquire new skills. In addition, it involves substantial financial flows in the form of grants and concessional loans, including export credits, provided by one southern country to another to finance projects, programmes, technical cooperation, debt relief and humanitarian assistance and contributions to multilateral institutions and regional development banks

A growing number of middle-income countries worldwide, including Brazil, China, India, Indonesia, and Turkey, are also taking a more proactive role in South-South and triangular cooperation in Africa. Challenges in the coordination of institutions, reporting frameworks, tracking mechanisms, and monitoring and evaluation systems are some of the variables that need to be further strengthened to support all stakeholders to join their efforts and energies to making optimal use of South-South and triangular cooperation as a strategy to support 2030. 

National policies or strategies on South-South and triangular cooperation might allow beneficiary countries and pivotal countries to identify and match development needs with the capacity to deliver technology, skills and knowledge, as required. 
 

Xiaojun Grace Wang

https://www.worldbank.org/en/news/press-release/2019/10/24/doing-busine…

Highlighting several bright spots and greatest improvements in the region, this report is a very interesting and good read on the eve of our workshop. The question is: Are the Southern investors telling a similar or different story from the report, based on their actual experiences or expectations? Are SSC principles, features and practices at play when it comes to investment, and if so, how does that impact perspectives and ideas for a more enabling policy environment? How can these ideas inform the policy frameworks of the African Continental Free Trade Area? Look forward to the rich discussion and dialogue to shed light on these questions.

Ouedraogo Sayouba

In Africa, there are policies, regulators and legal issues that promote and deepen trade and investment.  Some are specific for each country but globally we have: 
-    The weak or the lack of political will: it is one of the main obstacles to cooperation. Indeed, the different countries or leaders of the countries favor micro-states without giving priority to the economic blocks;
-    The low involvement of citizens in cooperation actions or failure to take local realities into account in cooperation agreements. At the border of different countries, citizens are more neighbors but parents with secular links and develop a system of informal exchanges. Yet the formalization of cooperation agreements takes less of these facts. There are hardly mechanisms to increase intra-Community trade;
-    The expansion of regional trade through the creation of preferential trade and the creation of regional organizations for the production or joint supply of goods and services have hampered regional cooperation in Africa;
-    Commercial organizations could not stimulate trade and promote collective self-reliance. Thus, the different citizens appear to be less integrated in their commercial organizations or do not know the rules governing these commercial organizations;
-    The weak development of trade between member countries of most sets. Yet, exchanges between each of these countries and those outside Africa are more favored. This situation is explained by the emphasis placed on the preferences granted to members of the same group, often resulting in additional protectionism from the rest of the world compared to previous levels;
-    The channeling of agriculture and mining resources, the only sector where significant trade to countries outside the region to the detriment of neighboring countries;
-    In the industrial sector, the substitution of regional productions for imports has not stimulated trade. Otherwise, internal barriers to creating intra-African competition and replacing inefficient local production with cheaper imports from other countries in the region have not been removed;
-    The significant economies of scale are to be promoted with regional integration; indeed, integration by products and companies must induce competition and increased efficiency;
-    The disparities in terms of economic weight and development exacerbate the cost and benefit inequality inherent in any preferential trade agreement.
-    The differences in macroeconomic policies imply major balance-of-payments problems which the countries of the region that cannot stabilize their economy.
-    The countries of similar climatic zones and having reached a comparable stage of development have similar industrial structures and have little to trade;
-    The insufficient infrastructure leads to high costs, especially transport; also, there is the mismanagement of often state industrial structures (overcrowded labor, overprotection local production very expensive and uncompetitive).
-    The cultural and historical difficulties also explain the obstacles to cooperation in the African region. Indeed, the colonial legacy and the different pathways chosen after independence in terms of external relations have given the region a multitude of administrative systems and legal and economic traditions, not to mention language barriers; nevertheless, technical service provision promotes cooperation between African countries like Education is a reality.
-    The financial and irregular support of the member states to the various cooperation organizations;
-    The weakness of private investments, ministries in charge of finance and donors to industrial and commercial activities; certainly because of the uncertainty of the viability of the planned activities and the difficulties of negotiating multinational loans.
-    The broad mandates of some regional organizations preclude specialization and lead to overlapping or conflicting jurisdictions.


The broad actions or activities that South-South Cooperation that contributes to the achievement of the lofty objectives of the AFCFTA are studies, building capacities, training, advocacy and have firm commitments from stakeholders (government, private sector and donors and civil society) to promote and Deeping trade for the wellbeing of the populations.  
-    Advocacy for the construction of integrated regional spaces in order to eventually achieve a real African economic community. But, it necessarily requires political will and the diversification and complementarity of the economies of the countries of the region;
-    The incentive to promote the development of production and infrastructure and basic industries;
-    The introduction and the application of a great mobility of the factors between the countries of the region; otherwise, it would require a single African currency and the removal of non-tariff barriers to trade between different countries;
-    The establishment of a watch cell to ensure coordination of policies and regulations as well as case law must be in place;
-    The assurance of good governance based on the realities of the region and not the import of democracy disinterested citizens and sometimes source of many conflicts;
-    The collaboration for the creation and establishment of strong, sanctified institutions for the conduct of development policies;
-    The improvement of financial systems, the promotion of domestic savings, the creation and the unavoidable of the financial market in the financing of public policies of development;
-    The development of intra-African trade and the transformation of agro-food products;
-    The reconciliation of economic interests and sustainable development must mainly link the social and the protection of the environment;
-    The accompaniment of countries to articulate a strong public intervention and progressive insertion in the international division of labor to draw their pin of the game;
-    The promotion of agriculture that it is the locomotive of sub-regional trade;
-    The establishment of high-level political exchanges on regional agreements;
-    The provision of information on trade, barriers and means of financing adequate;
-    The conducting studies on factor mobility, including capital movements;
-    The drafting of partial ad hoc agreements on particular problems with well-defined objectives while avoiding politicization in commercial matters;
-    The reflecting on a system of equalization better designed to increase labor flows from the poorest countries to the richest countries by providing direct transfers to the budget;
-    The support to centers of excellence for specific thinks in particular fields;
-    The promotion of cultural cooperation by educational organizations and the improvement of regional management of exchanges. 

Private sector in Global South is the one principal actor to contribute toward the growth of the digital economy for sustainable socio-economic development on the African continent. But the environment must be conducive to exploit the wealth while integrating the realities of the context for a modern development. For that, it would take several actions or strategies : 
-    The creation of a private digital fund including civil society in governance and the promotion of the provision of Digital Specialized Investment Funds;
-    To generate and support structuring projects involving more actors and institutions or institutions and have a training effect on the ecosystem;
-    The creation of digital libraries; 
-    The strengthening of skills and the development of training;
-    The creation of digital villages in the countryside and digital trade in the young people;
-    The financing of multi-partner and multi-site projects involving academic actors and socio-economic actors;
-    The financing projects with high employability of young people; also to develop intermediate jobs in technologies and localization of digital structures exploiting endogenous skills;
-    The connection of African markets through digital technology;
-    The availability of access to the secure and stable internet connection to reduce the digital divide and inequalities;
-    The financing of digital infrastructures;
-    The strengthening the mastery of digital tools and digital skills;
-    The improvement of health, education, logistics, transport, job creation, etc. by the digital.
Dr. OUEDRAOGO Sayouba
CEDRES, University Ouaga II
E-mail: sayoubaoued@yahoo.fr
 

Caihong WANG

Dear Esteemed Colleagues,

My name is Caihong Wang. I work for the UNOSSC Cities Project. Thanks for the thought-provoking discussion which I have enjoyed reading. Besides, I would like to share some of my very rudimentary thoughts on the questions of private sector mobilization for a digital economy and regulatory opportunities/constraints on SSC in the region.

1. South-South cooperation among cities can be effective in mobilizing the private sector for the inclusive growth of the digital economy in Africa.

1.1 This is because, first, cities are centers of business, innovation, culture, knowledge, and education. By 2030, the urban population is expected to reach 60 percent of the world population and more than 80% of them will be from developing countries (UN Habitat, 2014). Solutions to some of the greatest issues facing humans must be found in cities of the global South. Today, most of the developing countries share challenges in ICT infrastructure, logistics capacity, regulatory framework, and opportunities in the increased population of Internet users and the number of local E-commerce platforms as well as steady cooperation in financing and technologies (UNOSSC/FC-SSC, 2018). Therefore, bringing together cities from southern countries to form a partnership for SSTC in the digital economy can precipitate South-South exchanges, help build up trust in strategic partnerships, identify common challenges - such as private sector mobilization - and address them in a collaborative way.

1.2 Second, local and subnational governments hold exclusive or shared competencies, on a whole range of areas, including digital economy; sustainable urban development policies in cities and regions can contribute to many things such as eradicating extreme poverty, making public services more accessible, and increasing social inclusion (UN DESA, 2018). Cooperation among cities has been highlighted by several high-level UN policy document, such as the BAPA+40 outcome document (A/73/291) which highlighted the participation of subnational entities in SSTC and encouraged developing countries to enhance the capacity of subnational coordination mechanisms, and to further explore new sources and instruments of innovative financing for funding at, among other things, the subnational level (at paras 16&35).

1.3 Third, it is worth mentioning that the Public and Private Partnership (PPP) model has been considered capable of enhancing the use and management of assets in cities while embracing innovative businesses (World Bank, 2019). The collaboration between local governments and the private sector through a PPP can be an effective way to secure funding for infrastructure projects that bear high upfront costs  - such as the ICT infrastructures needed by developing a digital economy. This model has been proven successful in some developing countries like the Mumbai city of India (WIPO, 2019). 

2. The dispute settlement protocol under the AfCFTA agreement presents both opportunities and challenges for South-South cooperation within the African region. 

2.1 The AfCFTA Agreement’s protocol on rules and procedures on the settlement of disputes sets out the details of the Dispute Settlement Body and mechanism referred to in Article 20 of the main agreement for settlement of disputes between parties (AU, 2019). It is said to entail both opportunities and challenges to cooperation among developing countries in the region.

2.2 First, the dispute settlement protocol can provide a unique opportunity for African states to create a parallel system, where they feel more comfortable to adjudicate their trade disputes with their neighboring countries.

2.2.1 That is because, under the traditional WTO dispute settlement mechanism, developing countries have had problems instituting claims, because of the political costs involved in confronting another WTO member, especially when the other disputed party is a powerful country; developing countries also hold very little leverage to retaliate the so-called powerful states (Arie Reich, 2017). However, while there are clear economic differences amongst member states, many members of the AfCFTA agreement tend to view themselves as “peers”, the balance of the scale does not tilt as high as when they are faced with the world superpowers. This can turn out to be a favorable situation amongst members of the agreement; political fears of aid and military assistance will hardly play any roles (JMiles&Co, 2019).

2.2.2 Moreover, the Protocol provides leeway for arbitration that parties may refer their dispute to arbitration instead of the Dispute Settlement Body, by mutual agreement. (Freshfields Bruckhaus Deringer LLP, 2019). The only system that competes with the WTO Dispute Settlement system, referred to as “Jewel in the Crown”, is that of international investment arbitration (JMiles&Co, 2019) as it is a private and consensual mechanism for the settlement of disputes and it leads to a final and binding determination of the rights and obligations of the parties (UNCTAD, 2005). 

2.3 However, the caveat is that legal costs will probably remain a big impediment in LDC’s instituting claims. The legal costs associated with pursuing dispute settlement procedures can be quite expensive, and African countries need to be willing to commit their in-house legal counsels and other government officials to invest a significant amount of time and effort to work on cases together with the outside counsels (JMiles&Co, 2019). 

2.3.1 In this regard, it is advisable that member states of the agreement establish advisory centers funded by members to assist the members and to help ease the burden of the poorer states in instituting or defending claims (JMiles&Co, 2019).

Thanks for reading. I hope this will be of help. Please do not hesitate to get back to me if you are interested in the source of references (the platform doesn't seem to allow embedding hyperlinks)

Warmly,
Caihong
 

Hany Besada Moderator

Dear Caihong, many thanks for your very insightful contributions. Much appreciated. I have the following input to make.

With regards to public sector involvement in private sector growth and development, its critical to maintain resilient and sustainable infrastructure. This requires massive structural organizations that support the effective implementation and maintenance of such infrastructures. Effective PPPs maximize on the collaboration of private finance for public infrastructure, generating cost-effective and less time-consuming services available to the public. This efficient partnership reinforces the strengths of each sector and supports the economy through the development of competition and advanced technology. There are multiple concerns that follow the complex responsibilities that come with the implementation of PPPs, yet successful ones are thriving. One such example is the effect of PPPs in bridging the gap between private financing and healthcare services on the continent. There is significant potential to increase access to affordable healthcare across Africa, and setting up the proper innovative methods of delivering this service is crucial. The opportunity allows businesses to improve corporate core competencies and contribute to the healthcare sector through improved and innovative investments. For example, A PPP between the Abbott Fund and the Government of Tanzania launched in 2001 helped to reshape and facilities the improvement of the hospital and patient management in over 90 varying facilities across rural Tanzania. Along with an investment of over 50 million USD, the Fund has provided access to technical training and expertise for a lasting influence on hospital staff conduct.[1] The collaboration of domestic governments and the private sector has many benefits to the accessibility of public sector services. In terms of potential problems PPPs can face, there is a concern that government interference may come with the political pressures placed on private company projects. At times the public sector will assume a greater position in infrastructure project agreements and attempt to control activities in a way that prevents the profit-driven agenda of the private sector[2]. To an extent, it is important that the government monitor the outcomes of PPPs to ensure their success and financial backing however, a balance is required to compliment the process.

            A component of the AfCFTA that requires consideration to succeed is the dispute settlement agreement. According to varying sources, the dispute settlement process is modeled after the WTO’s institutional organization in order to constitute a strong system. However, there are some concerns that the legal constitutions won’t translate into the African economic and political scene as smoothly. For instance, Article 23 of the DS Protocol provides: Where the Panel or the AB concludes that a measure is inconsistent with the Agreement, it shall recommend that the State Party concerned to bring the measure into conformity with the Agreement. In addition to its recommendations, the Panel or the AB may suggest ways in which the State Party concerned could implement the recommendations. This means that only State Parties have access to dispute settlement under the protocol.[3] However, within Africa most trade will be facilitated by private parties which requires that their state effectively protect their rights. In the international scope, this is not as big of a challenge as governments protect their private industries, this must, however, be replicated in Africa. Therefore, effective and transparent governance is key to implementing efficient dispute settlement safeguards that prevent allow for countries and parties to trade successfully. Shifts in the culture and imagery around court proceedings within African countries are crucial to creating a cohesive legal institution that stands for and protects the interests of regional actors. Furthermore, it is inevitable that a handful of countries will dominate the playing field in the AfCFTA and this could cause further regional instability. However, with proper policies and procedures that support the equality of all countries in the eyes of the law, dispute settlement procedures can be gradually overcome. The key is to refrain from depending on the WTO’s structure as an effective example to replicate regionally. The WTO has a consistent critique with regards to the representation and support of developing countries in international disputes. If the AfCFTA does not build institutional safeguards that appeal to the cultural and political sphere of the continent, it will create and institutionalize inequality within the region.


[1] Matthews, Ian. “Healthcare and Economic Growth in Africa: Public-Private Partnerships.” GBC Health, 8 Aug. 2019, http://www.gbchealth.org/healthcare-and-economic-growth-in-africa-publi….

[2] Yescombe, E.R. (2017), Public-Private Partnerships in Sub-Saharan Africa: Case Studies for Policymakers, Dar es Salaam: UONGOZI Institute, Mkuki na Nyota Publishers.

 [3] Centre, Tralac Trade Law. “Dispute Settlement in the African Continental Free Trade Area.” Tralac, 11 July 2019, https://www.tralac.org/blog/article/14150-dispute-settlement-in-the-afr….

 

 

Hany Besada Moderator

[~329] za 

Thank you very much André for your excellent inputs and contributions. If you allow me, I would like to offer the following comments in response.

Many scholars undertake the difficult task of examining the notion of development as the product of a Global North-South ideological battle. As historically described by philosophers and currently by political scientists, the idea of development has continuously been tied to economic and social progress through the process of liberalization and democratization. Consequently, this dominant perspective has been increasingly deteriorating to the development of the Global South and has created a competitive space in which different Western actors are constantly competing to gain from the benefits of the industry while disregarding the local impacts of their involvement. More recently, this ideological trend has received push back through the unprecedented rise of the Chinese economy and their increasingly significant global influence. China’s involvement in head spearing South-South Cooperation has provided a trail for African states to follow and a strategic pattern to replicate. However, as you examined, the interdependent nature of trade relations can threaten the possibility of regional trade in specific cases. Due to the geographic and economic similarities between neighboring states in Africa, there can tend to be a replication of output in trade. When multiplied with the traditional view of developing countries as being primary exporters, the results can hinder the acceleration of the AfCFTA. In this case, a push towards dynamic trading networks that encourage exports of technology content to tackle diversification is required. The lack of development in maintaining a diversified economy has been generally linked to a lack of expansion in the private sector which in turn has stunted trade growth. Rather than sticking to an agenda that replicates the Chinese model in boosting regional trade, a more significant perspective may be to implement local policies providing a low-cost business environment to encourage growth in the private sector.

With regard to the fast-paced technological development in the continent, an observation is that improvements in dynamic information infrastructure can significantly support socio-economic growth. Linking back to the notion of private sector development, the importance of technology and innovation in building productive capacity is essential. Access to information is at the forefront of generating an innovative and open space for communication. An increased emphasis on opportunities in trade and investment provide these essential tools and promote the development of institutional frameworks. The effects in the private sector can then be seen through stronger policies for intellectual property that will foster an entrepreneurial environment. This, in turn, enables individuals to trade and have access to information reflecting strong economic freedom. Moreover, the focus on such technological innovation will gradually reduce reliance on industry-based exports, mainly natural resources. This shift away from commodity-based economies reflects diversified and risk resilient economic conditions driven by the private sector growth. Veering away from the traditional economic patterns of Africa’s past provides significant opportunities for growth through the development of improved institutions. Of course, the concern with technological development in developing countries is the structural networks that encourage its financing, both from regional or global actors. AfCFTA can be a key aspect of tackling this issue. Relating to your above statement of AfCFTA increasing trade in the short-term, the benefits from such trade can be valuable in long-term technological investments. Once countries have developed a strong platform for innovation, they can utilize their knowledge as a competitive advantage and negotiate deals that attract increased investment. Therefore, motivating South-South Cooperation is key to engagements in ongoing technological exchange and provides the basis for building the right infrastructure to finance technological development.

In brief, the spread of technology in Africa’s political atmosphere can have significant implications for growth and development. Considerable research on the correlation between economic freedom and development suggests the advancement of technology as placing power in the hands of individuals in the developing world. The important role that technology plays in generating access to information has made it essential in creating new business opportunities and encouraging political transparency. With the use of phones in even the most remote parts of the continent, the spread of information and the flow of finances have dramatically improved. Individuals have the power to hold governments accountable for actions as soon as they have been informed and this level of transparency is essential for political mobility. As such, incremental social change has the power to drive domestic innovation. Subsequently, when supported by the necessary institutional frameworks this change allows for the disruption of development patterns, offering new avenues for sustainable economic growth. 

Prof. Milindo Chakrabarti

Hi! Milindo here! 
I have been keenly following the discussions ever since the forum began the exchange of ideas around SSC and the pan-African free trade initiative. One cannot but agree with the identification of the potentials of AfCFTA in pushing the idea of SSC in a much more vigorous manner. In tune with the ideas of "development compact". South-South Trade and investment can play a very positive role in boosting the quality of living of the communities residing in the Global South, in general and for those from Africa, in particular. The reasons put forward run mostly around the central tenets of SSC that deeply respect the spirit of "horizontality" among the SSC partners. The principles of SSC, if followed strictly in letter and spirit, would ensure that the exchanges in trade and investment among the partners would be mostly "equal" thus precluding the possibility of "unequal exchange" that is considered to be one of the basic reasons behind the North-South divide. A free trade zone involving all the African nations will definitely enhance the potentials of SSC in achieving its goals and objective. Partnership in trade and investment on an equal footing with Southern countries from other continents will add further strength to the Southern solidarity. 

However, concerns remain. Some of them have already been highlighted . I would like to add two more to that list. 
The first concern relates to the vexed issue of base erosion and profit sharing (BEPS). The present global institutional mechanisms are found to be largely imbalanced in favour of the Northern countries. A large share of the gains from trade through AfCFTA has the potential to be shifted out of the African continent if a global institutional mechanism on BEPS fails to provide ample space for capturing the concerns of the South. 

The second concern is the operationalization of a South-South value chain, against the present day dispensation of a North-North or at the most, a North-South value chain.. The later is mostly under the control of the Northern players. A true South-South value chain under true command of the African nations has to emerge out of the AfCFTA. Concerted efforts from all the members of AfCFTA in creating effective and truly South-led value chains is a necessary condition to realize the true potential of free trade across the African continent. 

Agenda 2063 and its success hinges considerably on the effective institutionalization of AfCFTA. One should note that while the first concern requires urgent attention from the respective governments, the second concern cannot be removed without the active participation of the private sector participants.

Hope the forthcoming discussions at Antananarivo will provide ample opportunities to debate and discuss these concerns. 
 

Hany Besada Moderator

[~341] 
[~343] 
Thank you very much Chahir Zaki and Serigne Bassirou for your very insightful comments and input. I would like to provide a few comments in response.

To begin, South-South Cooperation is crucial in setting the stage for improved regional infrastructure to facilitate increased trade flows. Due to the capital intensive nature of the construction of greater quality infrastructure and basic trade logistics, African countries will require external investments from partners such as China. Funding for regional infrastructure projects that range from hydroelectric dams to transnational railways is significant in addressing the lack of access to suitable trade methods. Increased regional market access resulting from lower trade barriers and price differentials will improve the competitive scope of intra-industry trade and substantially benefit further integration efforts. As well, an anticipated increase in intra-African trade will increase multilateral and bilateral trade with external countries resulting in strengthened economic infrastructure. The projected increase in Foreign Direct Investment as a result of the AfCFTA, will support the financing of infrastructure development further supporting the implementation of increased cross border trade. One of the main concerns of the private sector is regarding financial infrastructure in the continent. Access to financial means to push regional sectorial development is significant in facilitating trade. In response, greater research and education are required to support local economies in the midst of the regional transition. Although goods make up a large portion of regional trade in Africa, services are a critical component that requires independent analysis to better allow countries to utilize their comparative advantage. Therefore, in terms of infrastructure development, there are many aspects to consider for local economies that require effective policies prior to the implementation of the AfCFTA.

Furthermore, trade logistics are a key factor in the development of methods tackling non-tariff barriers. The discussion on phasing out intra-regional tariffs has been said to demand substantive reform of current customs procedures. It is possible that the increase of intra-regional trade may not surpass the existing levels of non-regional trade. The costs of intermediate imports on domestic investment and production levels is significant and require immediate removal to generate economies of scale. The overall effectiveness of tariff reduction measures can be heavily reliant on the successful implementation of policies targeting non-tariff barriers. A paper by the Regional Economic Outlook suggests the importance of tackling non-tariff bottlenecks to successfully benefit from AfCFTA (IMF, 2019). The analysis provides the Computable General Equilibrium model to be effective in diverting and creating trade in response to tariff and non-tariff shocks. It does so by exploiting country-specific comparative advantages worldwide. Such an approach that relies on partial equilibrium, allows for the implementation of policies that support intra-regional trade. The result is to suggest that the focus on tariff barriers is significant, however, it must be complemented by the tackling of non-tariff barriers to leveraging a sustainable rate of success for both large and small economies within Africa. 

To add on to the concerns regarding the AfCFTA, there is a continued need to promote South-South Cooperation to prevent the slow return of countries to the pattern of trading with familiar markets. Although this new deal may be perceived as a comprehensive new deal that holds great opportunities for the path to trade liberalization for African countries however, there are potentially adverse implications the agreement may foster. Research completed by Christopher Magee concluded that although regional trade deals may promote trade and sustainable market growth, the net effect has to be diligently steered by country-specific economic structures. Countless scholarly articles and books discuss the great effects of trade liberalization, especially in developing countries, but many fail to suggest specific paths countries should take in these deals based on economic and political characteristics. For instance, Mansfield and Reinhardt argue that there has been a recent shift of state’s trade agreements from multilateral ones to preferential ones. This is significant due to the impact it may have on the development of the AfCFTA. The authors provide evidence on how states gain bargaining leverage when trading as part of a Preferential Trade Agreement (PTA) rather than as part of the GATT/WTO. Regional agreements such as PTA’s are strategically advantageous to states and can create a way of internalizing the negative externalities of trade liberalization, increasing interdependence and economic exchange. Although the objective of a centralized multilateral system such as the WTO and the AfCFTA is to liberalize existing trade systems, the unforeseen consequence is a potential rise in PTA’s due to dispute settlement procedures (Edward D. Mansfield and Eric Reinhardt)  Therefore, the greater number of countries involved, the more each country must navigate the constant battle of fulfilling its interests and make decisions for the common good. For this reason, South-South Cooperation can be key to leveraging increased economic cooperation and allowing African countries to build their trust in multilateral agreements.

Anonymous

Dear Colleagues, I am Ricardo Fort, Director of Projects at the Group for the Analysis of Development, a Peruvian think tank, member of the ILAIIP network of research centers in Latinamerica (LA). It has been very stimulating to read the background paper for the workshop and your opinions in this forum, and I would like to contribute to the discussion with a couple of points derived from our experience in the region. 
The first one has to do with the importance of remembering that even though regional free trade agreements (FTA) have many positive general effects for the partner states, its also very likely that those benefits will not be equally distributed and most likely there will be some groups negatively affected. It´s not a surprise that when tariffs and subsidies start to be cut off, particularly in a region where many countries produce similar commodities, competition will force some producers or even sector in certain countries out of the market. An early and clear understanding of this possible scenarios will help to minimize social costs of the agreement, reduce potential conflicts, and thus make it more sustainable on time. Different complementary policies have been designed in LA countries to compensate these groups, with very heterogeneous results that may be worth analyzing. 
My second comment is related to objective of moving towards a structural transformation of the region with the help of the FTA, and particularly promoting more diversify economies. I would say that the experience in LA with the different “regional” FTA we have (as you may know we have groups of regional countries in different type of FTA) is that this is a process that does not happens by the force of the market and competition but requires complementary support from the governments. Studying the potential competitive advantage of each country in the global market is key for planning and designing specific policies that promote research and innovation in targeted sectors, facilitating financial instruments for start-ups and small business development. 
Very excited to continue this discussion during our workshop.
Ricardo

Mr. Rodulio Perdomo

Hola amigos: Soy Rodulio Perdomo de Honduras, Foro Social de la Deuda Externa y Docente de la Universidad Estatal. Deseo comentar la importancia de tener en cuenta una adscripcion selectiva con los paises hegemonicos de la Globalizacion.Una industrializacion sustitutiva en Africa es deseable y pertinente, pero puede adversar los grandes intereses de Varios paises desarrollados. Otro aspecto crucial es considerar fondos para corregir asimetrias. Los paises de Africa son muy heterogeneos y es necesario no profundizar las diferencias actuales. Por ultimo cabe considerar la articulacion con bloques comerciales como Mercosur, Mercado Comun Centro Americano y otros de paises del hemisferio Sur. Muchas Gracias.

Ameena Al Rasheed

Dear friends, I am Dr Ameena Alrasheed, Senior Research and Programme adviser at UNOSSC. Allow me to contribute with some critical thoughts on the intervention in Africa and the role of South-South cooperation, aiming at promoting trade and investment. South-South and triangular cooperation can be a pathway towards more inclusive and sustainable economic development, if focused on priority areas of cooperation and approaches and mechanisms used to enhance such cooperation, where all actors and beneficiaries can be meaningfully and profitably engage in credible dialogue and path ways..
Prior to the expanding of trade and products, a better understanding of the drivers/incentives, enabling conditions, challenges, and opportunities is vital and it can help explain the rationale for designing and promoting South-South cooperation.
Gaps in investors’ perception regarding markets, and perceptions and expectation of the developing country on the relative risk of investments, would limit the prospects of understanding the gaps in results and outcomes.
To overcome these gaps, a critical practical piloting of the cooperation framework, need to be in place. Comprehensive exposure of opportunities, and potential growth of the regional market are equally important, alongside testing of the institutional development capacity of the country, and may be the continent at large, this will secure credible and successful south-south relations that is built on mutual rewards for countries in question. It is vital that previous experiences been shared and thought among the countries in Africa 

In South-South cooperation’s, knowledge of how the industry or the specific institution, is developing, policy changes and knowledge of end markets, are all essential in building a promising platform for cooperation.  In all instances, such information is critical in determining the outcome and benefit that both sides can gain. Having said that, Africa presented itself as a very attractive destination for investment, due to the wealth in raw materials and opportunities as well, but Africa has to adopt the South-South Cooperation framework, in order to effectively utilize its opportunities in advancing trade and investment. To do so it is imperative that the path of development and cooperation pursued, will effectively serve the mutual interests of the countries and the continent at large. There is amble opportunities in developing and utilizing the south-south platform to enhance the cooperation and seeds the benefits of interaction and collaboration regionally and globally and between the Global South. It is critical that the path advocated by the SSC can meet the aspiration of the African nation, hence, whether SSC will act within the platforms recently developed in Africa, which is the African Continental Free Trade Agreement (AfCFTA) under which a Continental Free Trade Area is created, or not? It is yet be seen. There are still many issues that need clarity on the merits of the free trade agreement, given the fact that the continent lacks the technical capacity to measure the magnitude of creating a free trade area. On the other hand SSC framework seems to promote trade and investment between the African nations, with mutual benefit that services the mutual interests of the investors from both sides, while tools and approaches of engagement in free trade agreement, need to be verified and planned comprehensively so that the outcome will benefit the continent, I am echoing the resentment of few African states to joining the free trade agreement, and the shortcomings of the agreement in answering to questions raised about patterns of development and prospects of the free trade in Africa, and the possibilities of avoiding free trades rules that previously harmed the continent. If Africa is adopting a free trade model, it is really very crucial that we critically analyze that model, and on the light of some resentment here and there, we need to raise many questions about the proposed free trade area, I am echoing the position for example of Nigeria that categorically rejected the move at the beginning, and came lately to sign while having reservations in mind. Now the Free trade agreements are designed to cut trade tariffs between member countries, the best free trade agreement (FTA) tends to remove all border taxes or trade barriers on goods, so there is no limit to the amount of trade you can do. Eventually exports made cheaper, and market is easy to enter. Making trades among African states as liberal as possible create competition, for jobs that produce goods.
The real work of this agreement will take years to materialize, as there are numbers of barriers ahead, in transportation, borders control, assigning of import quotes for each country etc. The variation among the countries in Africa will be reflected and soon measured against which and who will bear the fruits of the agreement? Whether the free trade area is the answer for promoting trade and investment in Africa, is yet to be seen;  Has there been well established circumstances in African states that secure rewards for all countries throughout the process? What role the SSC framework can play in enhancing cooperation among African states, with or without the free trade? These are few points and thoughts, not to hide with some worries, mainly towards the proposed or adopted.. FREE TRADE agreement. thank you.
 

Hany Besada Moderator

[~13] 
Thank you, Shams, for this. Indeed, the share of the Global South in global trade and output has risen immensely, with the value of South-South trade increasingly seven-fold to over 4 trillion by 2017, up from $0.6 trillion back in 1995 according to UNCTAD.  Trade in manufactured goods has expanded and linked to the global supply chain, though value-added from export activities remains low. The total foreign direct investment (FDI) originating from developing countries accounts for almost 30% of global flows with a majority of the investment moving to other developing economies (UNCTAD, 2019). With the signing of the African Continental Free Trade Area (AfCFTA) agreement in 2018, FDI inflows to Africa are projected to increase by about 20% to US$50 billion in 2018 (World Investment Report, 2018). In Asia, FDI inflows rose by 3.9% to US$512 billion in 2018 due to ongoing efforts to improve the investment climate in the area as growth occurred mainly in China, Singapore, Indonesia, India, and Turkey (UNCTAD, 2019).

As you pointed out Shams, the question now is to what extent are these transformational changes in the structure of global trade contributing to sustainable and inclusive human development in Southern countries. In order for us to continue examining data that could help in our understanding and policy deliberations, I would like to raise a few critical issues for us to reflect on and contextualize in the broader understanding of South-South trade and investment for the attainment of the 2030 Agenda for Sustainable Development.

It appears that the acceleration in the growth of trade and output could largely be found in East Asia, with China contributing a significant portion of this.  Growth in East Asia in the form of increased demand for natural resources has largely contributed to significant increases in South-South trade and investments. However, economists would point out that in sectors that have witnessed increases in manufacturing, there appears to be a strong link to global supply chains while value addition remains limited in size and scope.  There is a continued danger that low-income countries with limited productive capacities run the risk of remaining confined in low value-adding activities at the bottom of the value chain, resulting in limited industrialization, uneven economic growth, widening income gaps and inequality. 

Given these challenges, there should be more concerted efforts to integrate trade with neighboring countries through regional value chains.  Financial instruments and mechanisms that have emerged in recent years could go a long way in strengthening productive capacities and transformation at regional levels in the Global South.  For South-South investments flows to play an instrumental role in promoting the attainment of the Sustainable Development Goals and Agenda 2030 for Sustainable Development, Southern governments need to continue providing a broad range of potential sources of management skills, capital, and technology, emphasizing a greater likelihood of technology absorption.  

Indeed, technology-intensive trade between Southern regions was one of the main factors that helped accelerate South’s trade expansion in the first place and promises to be a key driver in the coming period. As evidenced by historical trends, Southern exports continue to face several important limitations and constraints.  The export structure of Southern states is largely considered and categorized as a large export basket but limited to a few products which make up the bulk of their total export earnings.  On the other hand, export diversification to a more technological content holds a great potential to increase export proceeds, modernize industry and helped lead to the creation of decent jobs and the creation and strengthening of domestic industries.

Larger Southern countries have intensified trade in medium and high-technology products. In recent years, approximately, half of India’s imports from China were medium and high-technology goods. While in South America, the Common Market of the South (Mercosur) helped reduce bilateral tariffs which promoted the proliferation and adoption of new technologies, leading to a rise of technology-intensive exports.  Indeed, energy and drive behind South-South trade could be found in the growing emphasis that is currently placed on technology in intraregional trade. In the period between 2003-2013, South-South trade of both medium and high-technology products among Southern countries increase 5-6 fold compared to 1.5 fold (UNCTAD, 2019)  in the North according to data produced by the Research and Information System for Developing Countries.  Meanwhile, for the least developed countries, intraregional exports of medium-technology goods increased by approximately 6-fold. 

Turning our attention back to Africa, a major challenge currently undermining its ability to increase the exports of medium-technology goods, hence its ability to strengthen its digital economy, and capacity to propel industrialization relates to the technology infrastructure to enhance cyber connectivity (Friedericie, Ojanpera & Graham, 2017). Not only is internet connectivity in most communities across Africa unreliable, its cost is also very high, making it inaccessible to many (Manyika et al., 2013; Siemens, 2017). Given the increasing reliance of the global economy on digitization, the availability of efficient digital systems is fundamental in development processes across the various economic sectors to facilitate the rapid exchange of information, services, and goods. This is especially essential for industrial growth, which requires the swift exchange of accurate information and data for productivity and competitive supply of finished goods to target markets. 

Digital innovation is essential not only for industrialization but also development broadly in the modern development landscape (MacLeod, 2018), which functions on digitization and automation in, among others, service delivery in various sectors, financial transactions, as well as communication. However, the poor state of Africa’s digital infrastructure and the rising cost of high-speed internet in parts of the continent and its attendant long-standing and growing digital divide undermines large segments of its productive population access to high speed internet connectivity and efficient cyber communication (Brännström, 2012; Buys et al., 2009; Fuchs & Horak, 2008; Gonçalves, Oliveira & Cruz-Jesus, 2018; Norton, 2017). This not only precludes the participation of a significant proportion of Africa’s active economic population in the global digital economy but also undermines the continents efforts and progress with respect to industrialization (Gonçalves, Oliveira & Cruz-Jesus, 2018). 

Although Africa’s development and trade partnerships have traditionally been from the North, increasingly, new actors from the Global South have become vibrant participants in national and continental development processes. Through such bilateral and multilateral engagements and increased trade and investments between Africa and other Southern regions, African states and citizens have gained access to technology markets, especially in emerging Southern economies to boost various economic activities (Yun, 2018). Furthermore, the opening provided by these platforms has facilitated private partnerships in various industrial processes, including especially in information technology for communication and financial service delivery (Yun, 2018). The increasing presence and role of especially Southern trading partners and private development agencies within the context of larger South-South cooperation is a key new trend that has significance for industrialization in Africa and its digital economy (Chidzonga, 2016; Yun, 2018). 

Studies published by UNCTAD and UNECA point out that continued industrialization and the strengthening of a digital economy in Africa would increasingly depend on expansive intra-African trade and investment flows. Currently, intra-African trade stands at a mere 13% of the continent’s total trade portfolio (Tralac, 2019), which is significantly lower than in other Southern regions. The continent’s limited internet connectivity is a significant barrier to deepening intra-regional trade and investment.  The AfCFTA aimed to address bottlenecks handicapping competitiveness at the industry and enterprise levels while and the Boosting Intra-African Trade initiative (BIAT), designed to be a useful framework for addressing connectivity issues on the continent promise to bridge the digital divide and address digital capacity constraints that have undermined intra-Africa trade and investments in the past.

Notwithstanding the challenges discussed above, the AfCFTA has the potential to reinvigorate Africa’s development at this historical juncture in the continent’s developmental process. Manufacturing export sector and industrial production is projected to be the biggest beneficiary, in line with current trade with increased intra-African trade and investments.  Agriculture will also receive a significant boost with the implementation of this monumental trade agreement. Enhanced trade in agricultural products will lead to improved prospects for agro-processing, thereby leading to increased linkages with manufacturing. 

To realize the full potential of the AfCFTA, developing regional markets is critical for trade in services and other important new issues, such as e-commerce, which are critical for the continent’s sustainable development. By cutting transaction costs, cross-border e-commerce on the continent promote increased inclusion of African economic actors in the global trading system, which would help create more opportunities for small and medium-sized enterprises. This would eventually help increase opportunities for African states to deepen technological and investment opportunities. 

The continent’s agreement also has the potential to strengthen returns on investments in trade facilitation not only by improving internet connectivity and reducing bureaucracy and improving the operating environment to do business but also by increasing imports that are vital to building productive capacity and fast-tracking productivity growth aimed at promoting industrialization and export diversification on the continent. This would require however a unified set of standards found in participating countries, a reliable infrastructure, including a digital one as well as a coherent regulatory framework.  
 

André de Mello e Souza

Thank you for your posts, Hany.  You and Shams have laid out the main issues and challenges involved in promoting African development by means of SSC and the AfCFTA.  I offer some considerations on these issues and challenges below:
- Both of you are right to point out that South-South trade today is largely concentrated in Asia. This is the case not just because of China's economic vitality, but also because of the regional value chains it put in place with neighboring countries.  The Chinese/Asian model should be studied and perhaps replicated.  However, in my view the major challenge in promoting regional trade has to do with trade complementarity, which is high in parts of Asia but low in other regions of the developing world.  Hence, if African countries produce (and have comparative advantages in) the same goods, it will be difficult to promote trade between them, and they will benefit less from trade.  In this case, it is crucial to advance economic diversification in order for regional trade to promote growth and development.  This is not meant to suggest that the AfCFTA is unimportant or bound to fail.  On the contrary, based on the experience of other trading blocs in the Global South, such as Mercosur (which you mentioned), the AfCFTA is likely to promote a significant increase in trade in the short-term.  This is caused by the effect of trade facilitation, which reduces the costs of imports/exports and thereby makes them more profitable. But such process of economic integration does not, per se, entail any economic structural transformation.  The challenge is to make this growth in intra-Africa trade sustainable in the medium and long terms.  The bright side of Mercosur is that it shows that not only trade volume matters, but also its composition.  Notably, Mercosur partners constitute Brazil's main markets for manufactured, technology-intensive goods, which is one of your concerns.
- Concerning FDI, the data you and Shams present is impressive, but probably unreliable.  Crucially, tax havens largely distort the mapping of FDI flows that we can carry out, their origins and destinations being deceitful.  Nonetheless, South-South FDI does seem to be increasing (largely due to China, as you point out), and to be increasingly confused with South-South development cooperation. 
- Regarding digital technologies, I see two good news.  First, developing and least developed countries do not need to reinvent the wheel or trail the same path as the West in technological development,  They can leapfrog and adopt the most up to date technologies.  A key example is how these countries did not need to develop fixed telephone lines after the spread of mobile phone technology.  But there are many others.  Second, digital technologies seem to become so cheap and to spread so fast, even among the poor, that they may in effect generate significant transformations in the Global South by allowing unprecedented and fast access to information and communication. For the purposes of SSC this is key, because these new technologies allow for innovations in approaches to monitoring and evaluation such as Crowdsourcing and Participatory Statistics.  In Crowdsourcing a large number of people actively report on a situation around them, frequently using mobile phone technology and open source software platforms.  It allows data collection on a scope usually not feasible through traditional evaluation methods, and also on sensitive issues that these methods would have difficulty in addressing (such as corruption).  Moreover, Crowdsourcing is able to gather massive, location-specific data in real-time with lower running costs than more traditional methods; can boost civic engagement by establishing direct channels of communication bottom-up; and, if systems are set up right, crowdsourced data tends to be more difficult to manipulate and less vulnerable to biased interpretation, therefore potentially increasing independence and credibility.  More structured, mobile data collection systems may also be put in place to run designed surveys which collect specific information from the target audience. Participatory Statistics, an approach in which local people themselves generate the data, and replicate participatory techniques (e.g. participatory mapping, ‘ten seeds technique’, pairwise ranking, proportional piling, matrix ranking) with a large number of groups to produce robust quantitative data, have the same advantages as Crowdsourcing.  The decentralization of statistical data collection empowers citizens who are most familiar with local information.  It also makes it possible to collect data on sensitive issues not captured by standard surveys.  In addition, it can produce more valid, reliable, and accurate data for evaluating SSC interventions.
 
 

Serigne Bassirou

Thank you Hany for this relevant analysis.
I also think that we should not replicate, with South-South cooperation, the traditional cooperation model. The traditional cooperation model has not produced the expected results in Africa because of imbalances (Africa exports commodities and imports manufactured goods).  
To avoid such a situation, I think we need to develop South-South joint venture cooperation in order to exploit trade complementary in Africa. China does this in the fishing sector with a few countries such as Senegal and Mauritania. In Senegal, China National Fisheries Corporation (CNFC) has bought 2 local Senegalese companies, including Sénégal pêche, which has had a fish processing plant for export since 2008. An Indian company has also signed a joint venture contract with Nouvelles textiles du Sénégal to export to the USA. The objective of these contracts is not to supply the African market at the moment. These companies export to emerging southern countries such as China and India. 
Such initiatives must be multiplied and directed towards the development of intraCommunity trade. 

Serigne Bassirou

Dear colleagues 
I am Serigne Bassirou Lo, Professor at FASEG/Ucad and Senior Researcher,  Laboratoire d'Analyse des Politiques de Développement (LAPD). I apologize for this late contribution to the important issue of the role of South-South cooperation in promoting and strengthening trade and investment in Africa. This issue is all the more relevant as African AU member countries have given a boost to trade integration by creating AfCFTA. 

the latter aims at reducing tariffs on 90% of products and establishing a liberalised market for services between AU Member States. Thus its main objective is to develop intra-African trade. South-south cooperation can contribute to the achievement of this objective if it allows:

1. improve the productive base of African countries. Indeed, African economies are not very diversified. They are essentially based on primary specialisation. The potential for industrial processing of commodities is, in fact, largely under-exploited. Thus, South-South cooperation, through technology transfer, offers opportunities for African countries to develop regional value chains. 

2. to control commercial costs. Indeed, non-tariff barriers related to infrastructure (tangible and intangible) in areas such as transport, energy, trade logistics are more important than tariffs in intra-African trade. For example, a study I had done on Senegalese manufacturing companies showed that the quality of infrastructure, electricity costs, finance, and storage costs at port level are the main factors that reduce the probability of manufacturing companies exporting. South-south cooperation should be oriented towards reducing these trade costs that inhibit the competitiveness of companies.


 

Chahir Zaki

Thank you [~136] for the introduction. I believe two issues must be addressed, namely, infrastructure and non-tariff measures, in order to have a real integration in Africa. 

First, transport costs represent a higher trade barrier than import tariffs or other trade restrictions. Since infrastructure is deficient, transport in Africa is often unpredictable, leading to a significantly higher cost of transport and thus higher prices. Indeed, Rizet and Gwet (1998) proved that the unit costs of road transport are 40 percent–100 percent higher in Africa than in Southeast Asia. A well-developed infrastructure matters, particularly for small or landlocked countries, which is the case of most African countries. MacKellar, Wörgötter, and Wörz (2002) suggest that the costs are three to four times higher in landlocked countries than in other, non-landlocked countries. Lack of good infrastructure also keeps most of Africa out of manufacturing value chains and inhibits diversification (Storeygard, 2016). 

Second, numerous non-tariff measures are faced by exporters in most African countries. The literature on the cost of non-tariff measures shows that their cost—and especially that of sanitary and phytosanitary measures and technical barriers to trade—is much higher than that of tariffs (Gillson and Charalambides 2012), and inhibits regional trade. Using the survey of the International Trade Center (between 2010 and 2011), we can notice that several firms report that they face more NTMs in countries belonging to the same REC. For instance, firms in Guinea report that 65.9 percent of NTMs are imposed by ECOWAS countries, while only 18.3 percent are imposed by OECD countries and 15.9 percent are imposed by other developing countries. This explains why the shares of trade with these three regions are: 10.5 percent for ECOWAS, 84.5 percent for OECD, and 5 percent for developing countries. 

Hence, a better infrastructure and harmonization or mutual recognition of standards and norms as well as developing a good infrastructure are a must for an effective AfCFTA.

Shams Banihani

Thank you [~136] for the welcoming message. 

Let me start by sharing some figures on this very important topic.  As of 2017, South-South trade was valued at approximately $4.9 trillion dollars, accounting for 28% of the total global trade, however more than 75% of that South-South trade was to or from countries in Asia, reflecting a degree of global integration in the region that diverges from that of other regions. This reflects the lesser integration of other regions, the Africa region being one of them. Flows of FDI between developing countries has multiplied recently as it remains the largest external source of finance for developing economies. It makes up 39% of total incoming finance in developing economies as a group. As can be seen from those figures, that are very important components, but the question remains here, are South-South trade and investment contributing to human development and sustainable development? Are they contributing to job creation? Have they provided more opportunities for women and youth? There exists little research or evaluation on the impact of such cooperation, especially regarding its impact on the SDGs. 

The BAPA+40 Outcome document recognizes the significant contributions of South-South trade and investment and their ability to promote sustainable development and has called for their strengthening.  However, this will require the promotion of  capacity-building, strengthening of regional integration efforts and interregional linkages, infrastructure interconnectivity and the development of national productive capacities through policy coordination, exchanges of knowledge, technological innovations and technology transfer on mutually agreed terms.  All of those efforts this will require the mobilization of innovative sources and mechanisms of additional financing, and for countries to further explore new sources and instruments of innovative financing for funding the SDGs.  The private sector here has a critical role to play. 

In regards to the AfCFTA, it represents a milestone achievement in Africa's regional integration to boost trade and investment in the continent.  It is meant to promote sustainable socio-economic development throughout the continent. However, to ensure that it will, measures need to be in place to ensure that people, especially, disadvantaged groups can benefit from what it aims to achieve. 

Mithre Sandrasagra

The African Continental Free Trade Area, the largest free trade area in terms of participating countries, is expected to lead to greater exports, higher value-addition in manufacturing and services, and more diversified intra-African trade – with benefits spilling over across the continent.


Demand-driven South-South cooperation, conducted with a spirit of solidarity, in the areas of technology transfer, innovation, and infrastructure development will be critical to ensure that benefits of the AfCFTA are fully leveraged toward sustainable development impact.


I look forward to an engaging discussion!

Hany Besada Moderator

Dear Esteemed Colleagues

I am Dr. Hany Besada, Senior Research and Programme Advisor, United Nations Office for South-South Cooperation. It gives me great pleasure to moderate this very timely and important e-discussion on the subject of the role of South-South Cooperation in promoting and deepening trade and investment in Africa.”  

South-South Cooperation has been recognized as a veritable platform for collaboration among countries in the Global South in the areas of politics, economics, social relations, culture, environment, and technology. The similarity in the experiences of these countries and their locations within the structure of global economic order make such cooperation to be imperative.  In the past four decades, there has been a mixed result in the patterns and forms of growth of trade and investment within and between countries of the Global South. In this respect, there has been a dramatic increase in trade and investment among Southern countries, with China leading the pack on both scores. The structure of exports has also changed with value-adding manufacturing growing within these countries. The differences in the levels of socio-economic development of Southern countries and the interlinkages in their economies necessitate a higher level of cooperation. 

The changes in the global structure of accumulation, the return to a mercantilist economic system in which protectionism is gaining traction in industrialized economies, the retreat of globalization and the continued widening inequality gap and poverty in many countries in the Global South further make South-South Cooperation a compelling imperative. The realization of the United Nations Sustainable Development Goals and Agenda 2030 for Sustainable Development in Southern countries is contingent on South-South Cooperation. An increased flow of trade and investment between countries of the Global South will lead to increased economic growth, job creation and poverty reduction.

The continued economic rise of emerging Southern countries has given further impetus to the movement as they seek trade partnerships, new investment opportunities, and political influence abroad.  These countries have identified Africa as an important trading and investment partner and have crafted policies, programs, and initiatives targeted at wooing African governments to engage them in what they believe will bring win-win outcomes. Although data can be difficult to collect and verify, it is estimated that the financial value of South-South cooperation in 2015 alone stood at US$25.93 billion (UNDESA IATF report 2018).  This demonstrates the benefits that Southern countries stand to gain through the shift. The African Continental Free Trade Area (AfCFTA) Agreement provides a useful mechanism for reframing South-South cooperation or perhaps rethinking it in two ways: first, according to the continental scale of engagement between African countries; and second, how African countries could deepen economic engagement with the rest of the Global South and strengthen its role in an evolving global political economy.

Taking into context the above-mentioned issues and those raised in the detailed backgrounder we shared with you, I would like to invite you to ponder on the below pertinent questions as a base for our discussions. Thank you Kindly. 

1.    Africa just signed the largest (outside the World Trade Organization) and most ambitious regional trade agreement in the world. It is aimed at the structural transformation of the continent’s consumer market of 1.2 billion people. How can South-South Cooperation contribute to the achievement of the lofty objectives of the African Continental Free Trade Area Agreement?
2.    What are some of the policy, regulatory and legal issues that are enabling or hindering South-South Cooperation within the African region?
3.    How can the private sector in the Global South be mobilized and leveraged to effectively contribute towards the growth of the digital economy for broad-based sustainable socio-economic development on the continent?
 


Please log in or sign up to comment.