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Trade report blames non-tariff barriers, high trading costs for poor performance of African agriculture

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Dr Agnes Kalibata, Dr. Owusu Afriyie Akoto, Ghanian businesswoman and Michail Hailu of CTA

A new report points to non-tariff barriers, high trading costs and a lack of product diversification as the biggest impediments to Africa’s agricultural trade performance.

The Africa Agriculture Trade Monitor 2019 examines the effectiveness of efforts to increase regional trade integration and intra-African trade. It also evaluates the potential impact of broader integration on Africa’s trade performance in light of emerging trade protectionism in the global economy.

“At a time when the global trade system is facing new threats, we hope this report will provide policy actors with the tools they need to position Africa effectively to better engage in and benefit from agricultural trade,” said Shenggen Fan, director general of the International Food Policy Research Institute (IFPRI). “Given the push for deeper integration gaining momentum in Africa, this report is timely indeed.”

The second annual report, presented during a high-level panel on regional food trade policy at the African Green Revolution Forum (AGRF) Ghana, includes a special focus on economic integration in Eastern and Southern Africa. The 2019 report shed light on key advances and the untapped potential of agricultural trade among African countries.

Africa’s share of world agricultural trade grew only marginally between 2005 and 2017, increasing from 4.3 percent to 5.0 percent. The new report finds that Africa’s agricultural trade deficit has been on the decline since 2012, even as growth in agricultural imports has continued to outpace export growth.

While Africa’s comparative advantage in agricultural products has strengthened in recent years, that advantage has largely been limited to unprocessed and semi-processed products, and not in processed goods. The agricultural commodities most frequently identified as having the highest revealed comparative advantage are cocoa, cotton, fish and fish products, fruits, legumes, and tea.

Implementation of the African Continental Free Trade Area (AfCFTA) is expected to help diversify African agriculture toward more processed goods. The report notes that the greater regional integration envisioned under the free trade area could also strengthen Africa’s ability to take advantage of new trade opportunities while protecting the continent from external trade shocks.

“The report makes clear that the AfCFTA is central to addressing many of the policy challenges associated with economic integration and agricultural trade that African countries face today,” said

Ousmane Badiane, IFPRI’s director for Africa. “By reducing all trading costs, AfCFTA has the potential to spur growth through intraregional trade expansion, thus improving food security, diversifying the production base, and helping African producers to move up value chains”.

Closer economic integration would allow African countries to add value to products they already produce, create employment, and build on their competitive strengths. Access to a larger market could generate economies of scale for competitive African producers and increase the degree of product differentiation. It could also expand value-added chains to allow specialization in processed products and diversify exported products to reduce the impact of price volatility for the few commodities in which Africa specializes.

The report notes several reforms that are necessary if regional integration is to be strengthened. They include eliminating tariffs on all continental trade and tackling non-tariff measures, particularly customs formalities. Other necessary steps include improved transport and communications infrastructure, the determination of simple rules of origin, increased technical assistance, simplified sanitary and phyto-sanitary standards, and reduced technical barriers to trade.

The report is cautiously optimistic about the potential impact of rising trade tensions between the United States and China, suggesting that African countries could be poised to take advantage of the resulting changes in trade patterns in global agricultural markets. However, the authors warn that if other countries also adopt new tariff barriers and impose other protectionist measures, African countries would stand to lose.

“More than ever, we see strong commitment from African leaders to promote intra-regional trade opening huge opportunities for the transformation of agriculture on the continent. Reliable data and analysis are essential to support policy makers to make the right decisions and track progress.  The AATM is a key resource in this regard” says Michael Hailu, Director General for The Centre for Technical and Rural cooperation (CTA).

Africa Agriculture Trade Monitor 2019 is the result of a collaborative initiative between the International Food Policy Research Institute (IFPRI) and the Technical Centre for Agricultural and Rural Cooperation (CTA). It builds on the work of the Regional Strategic Analysis and Knowledge Support System (ReSAKSS) and the African Growth and Development Policy Modelling Consortium (AGRODEP) on trade, both facilitated by IFPRI as part of its work in support of the Comprehensive Africa Agriculture Development Programme.