More integration, less poverty

2 July 2015
ITC News

Africa is the world’s least integrated region in terms of internal trade flows. Trade among African countries has for decades hovered at around 10% of the continent’s total – well below Europe’s 70%, Asia’s 50%, or even Latin America’s 20%. Research conducted by the International Trade Centre (ITC) has shown that African exports often face higher trade barriers in neighbouring countries than they do in other parts of the world.

On 10 June, however, leaders from 26 eastern and southern African countries sent a powerful signal of intent to reap the economic dividends of greater regional trade, when, in the Egyptian Red Sea resort of Sharm-el-Sheik, they inked an agreement to create a Tripartite Free Trade Area.

Together, the three regional economic communities covered by the new accord – the East African Community (EAC), the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA) – represent 58% of the continent’s GDP, and are home to more than 600 million people.

At ITC, supporting regional integration, particularly South-South trade and investment, is a key focus of work. But our experiences confirm that signing agreements is not – in and of itself – enough to ensure that intra-regional trade takes off. Even after tariffs are lowered or eliminated on paper, complicated customs procedures, infrastructure bottlenecks, and a plethora of non-tariff measures can stymie trade and discourage businesses even from trying to sell or operate across nearby borders. Often regional trade is also hampered by supply side constraints in the form of limited offer. Sometimes the problems are simpler: traders might simply not be aware that a given regional agreement exists!

ITC works with governments, the private sector, and trade and investment support institutions to ensure that businesses, especially small and medium-sized enterprises, are equipped to take advantage of trade agreements.

Our projects and programmes expand access to cutting-edge trade and market intelligence. Even before members of the World Trade Organization struck an agreement on trade facilitation in late 2013, we had been supporting countries around the world in their attempts to reform customs and border procedures to reduce costs and smooth the passage of goods and services across borders.

Non-tariff measures, which can raise trading costs by the equivalent of a 20 to 30% import duty, have in recent years been one of ITC’s biggest programmes. Through business surveys and multi-stakeholder dialogues, ITC helps identify the main obstacles to imports and exports that companies face in a given country, and puts forward recommendations for policies or mechanisms to address or eliminate these barriers. It turns out that, very often, the policies that businessmen and women identify as the principal obstacles to trading are in fact domestic, such as complicated procedures for receiving export certification. Solutions to these problems are critical for regional trade agreements to succeed. Yet they are largely to be found at home, not in a country’s trading partners.

Effective regional trade integration can drive in-country and region-wide growth and prosperity, which in turn, research suggests, contribute to peace and security. Regional trade agreements can, if well designed and implemented, also lead to better integration into global trade and international value chains. Targeted capacity building can make for competitive SMEs thriving in regional markets.

At ITC we stand ready to support the Tripartite Free Trade Area member states, and other countries and regions working towards greater regional integration, be it in Africa, Asia, Latin America or the Pacific. It is one of the best tools we have at our disposal to create better trade, prosperity, peace, and, above all, to reduce the number of people living in poverty.