from New Vision
By Alec Van Gelder
The recent failure of the World Trade Organisation’s Doha Round and the long-standing failure of aid need not need spell disaster for African economies. The tools for promoting growth and prosperity are in their own backyard and three of the world’s top 10 pro-growth reformers are in Africa, according to the World Bank report Doing Business 2009, released recently.
Useful reforms in Africa have increased by over 150 per cent over the past five years, helping to maintain the record six per cent a year growth of the past decade. Some countries are buoyed by high commodity prices but African economies are diversifying and expanding.
The top reformers in the whole continent, Botswana, Burkina Faso and Senegal, have focused specifically on an area of upmost importance, simplifying the procedures for trading with the rest of the world.
Redtape, logistics bottlenecks and customs corruption are trade barriers just like tariffs. “Reforms are already paying dividends for countries rich and poor but there is scope for greater improvement still,” trade analyst Daniel Ikenson of the Cato Institute says.
According to Doing Business 2009, it takes an average of 39 days before exports are allowed to leave Uganda: nine days to prepare documents, six days to clear customs and an additional six days for loading. The entire process costs exporters a tidy US$3,090—nine times the average annual Ugandan income. And most of this rigmarole applies to imports too.
In Angola it takes 68 days: the economy is booming now thanks to high prices for oil and diamonds, with annual growth over 15 per cent, but removing these trade barriers would give Angolans a better chance to prosper when those prices take a tumble.
The United Nations Conference on Trade and Development estimates that just a one per cent reduction in the cost of maritime and air transport in developing countries—easily achievable in Angola—could increase global GDP by US$7 billion.
Across Africa, a 10 per cent increase in exports to rich countries could be achieved simply by cutting export time by about four days—the regional average is a suffocating 34.7 days. Dropping these barriers would also boost the paltry level of regional trade: under 15 per cent of African trade occurs between neighbours.
So the fact that Africa’s top reformers have prioritised trade facilitation is very good news. Crucially, their reforms illustrate how any economy can move in the right direction unilaterally, without waiting for bureaucrats to agree on complicated agreements at the WTO or elsewhere.
Optimistic estimates predicted that agreement at the WTO Doha Development Round would have injected an additional US$287 billion into the global economy, half of which would have benefitted poor countries.
The proposed cuts in tariffs and subsidies would have been wonderful but the agreement was politically unachieveable.
Yet the right unilateral reforms within Africa could be even more beneficial: a recent World Bank study of 75 countries found that if below-average performers on trade obstacles, many of them in sub-Saharan Africa, could raise their scores only halfway to the average score, world trade would increase by $377b, or about nine per cent a year.
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