Inflammation and stories on trade

American ExportsThroughout the past several decades, nations in Southeast Asia have seen significant declines in extreme poverty rates. As poverty has fallen and these nations have developed economically, the Association of Southeast Asian Nations has become the United States’ fourth-largest trading partner. While the United States does rely heavily on this region for imports, trade with ASEAN also supports American exports and bolsters nearly 346,000 American jobs. The following five countries in Southeast Asia are critical trading partners and demonstrate the economic benefits that can coincide with a decrease in extreme poverty:

1. Malaysia

Malaysia has been extremely successful in reducing poverty throughout the past several decades. According to the United Nations, “… in 1970, 49.3% of Malaysian households were below the poverty line.” As of 2015, the figure had fallen to 0.4%. As poverty has fallen, Malaysia has also grown economically, developing profitable manufacturing, petroleum and natural gas industries.

As the country has reduced poverty and developed economically, it has become an important trading partner to the United States. The United States imports electrical machinery, tropical oils and rubber from Malaysia. It also exports soybeans, cotton and aircraft to the nation. In total, the trade between the two nations totals around $57.8 billion each year and supports nearly 73,000 American jobs.

2. Thailand

Thailand is another country that has seen impressive levels of poverty reduction in recent decades. According to The World Bank, poverty rates fell from around 65% in 1988 to under 10% in 2018. The nation has also evolved economically, developing large automotive and tourism industries as poverty rates have fallen.

Trade between the United States and Thailand has steadily grown, totaling $48.9 billion in 2018. When analyzing imports, the United States relied on Thailand for machinery, rice and precious metals. In terms of exports, the United States provided the nation with electrical machinery, mineral fuels and soybeans. In total, the exports to the nation supported nearly 72,000 American jobs. Additionally, exports to Thailand have been increasing in recent years, growing nearly 14.5% from 2017 to 2018.

3. Vietnam

Vietnam is perhaps one of the most astounding examples of poverty reduction and economic development. The World Bank reports that “the poverty headcount in Vietnam fell from nearly 60% to 20.7% in the past 20 years.” As it has done so, the nation developed one of the most rapidly growing middle classes in Southeast Asia, became a center for foreign investment and developed key industries in electronics, footwear and textiles.

While the United States has come to heavily rely on Vietnamese imports, Vietnam is also a rapidly growing market for American exports. In fact, American exports of goods to Vietnam increased by 246.9%, and American exports of services to the nation increased 110% since 2008. According to the Office of the United States Trade Representative, “U.S. exports of Goods and Services to Vietnam supported an estimated 54,000 American jobs in 2015.”

4. Indonesia

Though the nation still has significant progress to make, Indonesia is another nation that has seen a reduction in extreme poverty rates. Since 1990, the nation has managed to half its poverty rate and make significant economic advancements. Currently the largest economy in Southeast Asia, the nation has developed notable industries in petroleum, natural gas, textiles and mining.

Trade with the nation totaled around $32.9 billion in 2019. While the United States imported apparel and footwear from the nation, it also exported soybeans, aircraft and fuels to Indonesia. In total, American exports to Indonesia are growing, increasing 19.1% from 2017 to 2018 and supporting nearly 56,000 American jobs.

5. Philippines

While poverty is still an issue in the Philippines, it has seen significant declines in recent years. According to the World Bank, poverty fell from 26.6% to 21.6% from 2006 to 2015. The nation has also made significant improvements in developing industries outside of agriculture. While agriculture composed nearly one-third of the nation’s GDP in the 1970s, it currently represents 9.3%, split between an emerging industrial and service sector.

Trade with the nation currently provides $29.6 billion each year, and exports to the Philippines grew 3% from 2017 to 2018. Mainly, the Philippines relies on American exports for electrical machinery, soybean meal, and wheat. Overall, exports to the Philippines support an estimated 58,000 American jobs.

Affecting nearly one in five American jobs, international trade is a critical part of the American economy. As demonstrated by Southeast Asia, a reduction in global poverty rates not only contributes to global economic development but also supports the export industry and American jobs.

– Michael Messina
Photo: Pexels

African Continental Free Trade Agreement Increases Economic Growth

Uniting 54 countries in the African Union, The African Continental Free Trade Agreement (AfCFTA) will create the largest free trade area in the world since the World Trade Organization formed in 1994. The implementation of the treaty was originally supposed to occur on July 1, 2020, but was postponed due to COVID-19 restrictions. Over 1.3 billion people with a cumulative GDP of $3.4 trillion will come together to further economic expansion. This effort will push Africa into a competitive spot in the global economy. The treaty outlines a reduction of tariff restrictions and of non-tariff barriers (NTBs) as well as a trade facilitation agreement (TFA). The AfCFTA will make vast improvements in catching intra-African trade up with the numbers of the rest of the world. 

Currently, continental exports across Africa clock in at about 19% of total exports, comparatively lower to intra-Asian and intra-Europe exports which make up around 60% of their total exports. AfCFTA looks to encourage a higher level of intra-African trade by cutting all tariffs between countries in the zone by 2035, expected to increase intracontinental exports by more than 81%, as stated by the World Trade Organization in its 2020 report.  According to CNBC, this could mean a $2.8 billion per year rise in net income in the area.

Overall, the UN Economic Commission for Africa expects African trade to increase from 15% to 25% by 2040, translating to a GDP growth of over $2 trillion. Expectations also determine that intra-African trade will encourage globalization and technology advances. Africa’s adoption of e-commerce and other electronic advantages into its economy will further those goals.

Poverty Reduction Effects

AfCFTA projects that an additional 30 million people will emerge out of extreme poverty, reducing the headcount ratio without the deal from 10.9% to 9.3% with it. The World Trade Organization also expects that 67.9 million will rise out of moderate poverty by 2035. The largest change in income will be for unskilled workers and women. Still, most social groups will see a 10% increase in income.

A key factor in poverty reduction is the growth of industries, which creates new jobs. Energy-intensive manufacturing will grow as African trade and other markets develop. Total exports related to the manufacturing industry should rise by 110% in intra-African trade and by 46% worldwide. The production of the manufacturing industry will see a $56 billion increase. As a result, a number of countries are looking to provide larger foreign direct investments to the continent. 

Growth in the agricultural sector will work alongside manufacturing to pull people out of poverty. The AfCFTA will cause the industry to see a loss of $8 billion. However, agricultural employment will see a rise in 60% of the countries involved in the deal. Expectations determine that agricultural exports (only second to manufacturing) will grow 49% in intracontinental trade and 10% in worldwide trade.

Overall income will also grow as a result of the AfCFTA. A higher quality of life will close the gender gap and the gap between skilled and unskilled workers. The full implementation of AfCFTA could cause a 7% growth in real income ($450 billion) by 2035. Still, it is important to note that this growth will not occur equally over all the countries involved.

Mitigation of COVID-19 Economic Effects

Due to COVID-19, the implementation of the AfCFTA terms is on hold indefinitely. Officials expect to start again Jan 1, 2021 but are unable to continue negotiations at this time. Poor internet connections and language barriers amongst different officials also pose challenges. Nevertheless, the AfCFTA will act as a stimulus plan for countries in the region that lack economic or fiscal means to distribute a large relief package.

While economic growth has been steadily increasing at about 2.4% in 2019, the World Bank expects it to drop from anywhere between -2.1% to -5.1% in 2020. This means a loss of between $37 billion to $79 billion during 2020. The economic drops could cause less food security as food prices rise in many areas.

The losses come from a combination of sources. Shutdowns reduced exports and imports, and many African countries are reluctant to open borders. The shutdowns caused welfare losses of up to 14%. In addition, reduced tourism and commodity prices have taken their toll.

Connecting Countries

The AfCFTA will look to open up borders between African countries in order to encourage free trade once again. As a larger market, African countries can obtain necessary medical instruments and food resources at a cheaper price. The agreement will double or triple exports in Cameroon, the Arab Republic of Egypt, Ghana, Morocco and Tunisia. The countries will see the largest benefits, although almost all of the other countries will see growth.

The introduction of AfCFTA will shift the global marketplace significantly. China has been the center of manufacturing in recent years, but there may be a shift to Africa, as China’s investment in the signing of the AfCFTA has shown. Major powers, such as the U.S., European Union and India, have shown an increased interest in African foreign development as they see the rise in this cohesive market. Although COVID has taken its hit on the world, the AfCFTA might encourage a quick bounce back, lifting millions out of poverty and increasing jobs for many.

– Nitya Marimuthu
Photo: Flickr

illicit trade in kenyaKenya’s 48.5 million people have chronically suffered poverty because of rampant unemployment, crime and drought. Among other factors, illicit trade in Kenya has contributed to these stressors in a damaging way. Here are five things to know about the illicit trade in Kenya.

5 Things to Know About Illicit Trade in Kenya

  1. Illicit trade in Kenya robs its economy of $900 million every year. Kenya’s largest economic sectors like food and construction frequently fall victim to piracy. Criminals steal from these industries and sell their products illegally on the black market; this causes Kenyan companies and the government to lose money they could have made conducting legal business. Firms in Kenya reportedly lose 37.69% to 42.14% of their profits to illegal trade.
  2. Illicit trade contributes to unemployment as well. Unlawful practices like piracy and the production of counterfeit products caused the loss of 7,484 jobs between 2016 and 2018. The rise of COVID-19 has already threatened the livelihood of Kenya’s 15 million informally employed laborers as people grow less comfortable doing businesses with individuals; illicit trade has only harmed Kenya’s job market further. Kenya’s unemployment has remained fairly stable over the last couple of decades, ranging from 2.6% to 2.9%. However, data has yet to be collected on unemployment in 2020 and across the globe. Unemployment rates have shot well beyond established averages as a result of the COVID-19 pandemic.
  3. Inattention to the issue may be its biggest propagator. Only 30% of the companies experiencing theft by illicit trade are even aware of the crimes against them. Due to the disproportionately high number of foreign banks and poor economic regulation in Kenya, discovering illegal trade proves difficult. The Financial Sector Deepening (FSD) Kenya conducted a study from 2015-2016 to look into complaints about Kenyan banks issuing unwarranted charges. The FSD discovered that many banks charged its customers odd quantities in an opaque manner and the surveyors had great difficulty obtaining any further information on the subject due to the industry’s opacity.
  4. Illegal trade is a global issue and Kenya has joined in the fight against it. The international trade of products like cocaine and tobacco has sparked movements across the globe. In 2020, Kenya joined The Protocol to Eliminate Illicit Trade in Tobacco Products, a treaty signed by 59 countries to universally end the illegal trade of tobacco. The Protocol will lower tobacco smuggling by an estimated 60% and Kenya has already seen success in combating the illicit tobacco market. “The Kenyan Revenue Authority estimates that the illicit cigarette trade market share declined from 15% in 2003 to 5% in 2016, a direct result of the implemented measures [taken],” reports Michal Stoklosa of the Tobacco Atlas.
  5. Kenya’s government has decided to tackle this problem head-on. Kenya’s Anti-Counterfeit Authority, established in 2008 as part of the Anti-Counterfeit Act, has declared its mission to end illicit trade in Kenya. The organization has created jobs, spread awareness of counterfeit activity and its harmful effects, and marked World Anti-Counterfeit Day this year by holding a ceremony and destroying $270,000 of counterfeit goods.

Kenya’s situation may appear difficult, particularly with the added stress of COVID-19, but its government and hardworking people have taken important steps to end illicit trade and its detrimental effects on the Kenyan economy.

– Will Sikich
Photo: Needpix

Hunger in SamoaWith a population smaller than 200,000, Samoa is a small island in the south-central Pacific Ocean. Samoans gained their independence from New Zealand and Germany in 1962, and now inhabit the westernmost islands within the archipelago. Although the United Nations has not identified Samoa as a “Least Developed Nation” since 2014, food insecurity and hunger remain in Samoa as lingering consequences of poverty, natural disasters and foreign dependency.

Lack of Resources

Samoa lacks arable land and agricultural resources; almost three decades of devastating natural disasters, including the 1990 Ofa and 1991 Val cyclones, have flooded and destroyed much of the once arable land in Samoa. Samoan hunger rates rise following such incidents. However, in 2015, despite a cyclone hitting that same year, Samoa was declared one of the 40 countries that have cut hunger rates in half within thirty years. As of 2016, 81.9% of Samoans lived in rural areas, yet only 2.8% of the country’s 1,097 square miles of land was arable. For Samoans, barren land has made agricultural innovation one of the only, yet most complex, options. In 1994, 22.1% of the Samoan GDP was derived from agricultural sales and other food production. By 2019, agricultural contribution to GDP fell to 9.8% due to a lack of farming land, knowledge and financial incentive.

Lack of Quality Food

Imported foods provide increased caloric quantity, not quality; from 1961 to 2007, the surge of imported foods made 900 extra calories available per person per day, largely curbing hunger in Samoa. Overall calorie availability nearly doubled during that time, yet dietary fat availability rose at a disproportionately fast rate of 73%. Imported foods, like meats and vegetable oils, rose from 10 calories to 117 per Samoan per day. Yet, the caloric intake of traditionally consumed and locally produced food like coconuts, starchy vegetables and fruits rose negligibly. Overconsumption of calories and high-fat foods are linked to chronic diseases such as obesity, diabetes and heart disease, all of which are on the rise in Samoa.

Obesity, diabetes and malnutrition coexist. In 2013, 45.8% of Samoans had diabetes, compared to 22.3% in 2002. In 2017, an estimated 89.1% of Samoan adults were overweight and 63.1% obese. Yet, an estimated 4% of children aged five or less experienced acute malnutrition or wasting, and 5% experienced stunting in that same year. Such rates are related to tariff liberalization, which continues to increase accessibility to non-perishable, mass-produced foods. Samoan’s overconsumption of processed macronutrients and sodium has led to obesity, masking the underlying micronutrient deficiencies and severe undernourishment.

Lack of Financial Equality

Education, income and access to healthy foods are interconnected. The percentage of Samoans living below the food poverty line had dropped from 10.6% of the population in 2008 to 4.3% in 2014; incidences of extreme hunger and poverty have steadily declined due to heightened caloric availability. However, Samoan financial inequality continues to climb as a result of the globalization that also has nearly eliminated extreme hunger. Samoa imports goods at a much higher rate than they export goods, leading to a lack of cash in the economy as well as a lack of job opportunities for those not directly connected to the global trade market.

Those living at or below the food poverty line typically lack formal degrees and belong to the 8.7% of Samoans who are unemployed. Cultural and historical circumstances have made imported food, regardless of their quality, more desirable than traditionally consumed foods. Wealthy and impoverished Samoans alike have developed an appetite for imported foods. The most vulnerable in the population, however, do not have a choice in what they consume.

Initiatives Tackling Food Security in Samoa

An alarming uptake in cases of overnutrition and resulting chronic diseases have occurred in Samoa. As a result, strides have been taken in addressing the root causes of food insecurity and the remaining hunger issues. An example of this is the recently launched 2019 Agriculture and Fisheries Productivity and Marketing Project. This project aims to improve food production infrastructure and implement sustainable agricultural practices over the next several years. By improving data collection of food insecurity, chronic disease and poverty rates, this project will localize Samoan food production industries. The project’s emphasis is on creating a more interconnected food landscape; this will not only continue to eliminate hunger in Samoa but will also increase cash flow and decrease chronic disease rates in the country over time.

Until then, groups like Caritas will continue to serve as a lifeline. Caritas runs two programs that prepare Samoans for natural disasters by training locals and installing emergency supplies throughout the island for distribution. The group was able to help more than 1,476 Samoans in 2012 suffering from hunger after Cyclone Evan.

Caledonia Strelow
Photo: Flickr

Salmon Farming in ChileSalmon farming in Chile has grown to become one of the nation’s top trading exports. Chilean salmon farming now produces “25% of the world’s supply” with more than 1,000 fish farms in operation. It also created 61,000 jobs. In recent years, however, the practice has come under fire due to the overuse of antibiotics and environmental damage to surrounding wild fisheries. Chile’s aquaculture has brought in much-needed revenue to the economy. However, it has also threatened many impoverished indigenous communities, such as the Kawésqar, who have lived in Patagonia for thousands of years. Chile’s fragile ecosystems and artisanal fishing culture are at risk of being degraded from the country’s poorly regulated farmed salmon industry.

Fishy Farms

Once considered a seasonal delicacy, salmon is now one of the most widely available superfoods on the market. The fatty fish is rich in omega-3 fats, selenium and several B vitamins. It has also been attributed to lowering the risk of illnesses and conditions such as heart attacks and strokes. Store-bought salmon is either wild-caught or farm-raised. The Monterey Bay Aquarium’s Seafood Watch program rates wild salmon, particularly from Washington, to be one of the best sustainable seafood options. The company suggests avoiding farmed Atlantic salmon from Chile.

One of the biggest concerns of salmon farming in Chile is the high levels of antibiotics and pesticides used to fight diseases and parasites in the net pens. In 2014, the industry used 1.2 million pounds of antibiotics in their marine enclosures. In comparison, Norway used roughly 2,142 pounds. The overuse of antibiotics like florfenicol and oxytetracycline can create antimicrobial resistance. This could lead to public health issues, as well. Since both drugs are regularly used in human medicine, more studies are needed before Chilean salmon farming companies continue to use them responsibly.

Unregulated Industry

The salmon farming industry threatens Chilean artisanal fishing, which relies on the ocean’s natural abundance for their livelihood. In 2016, massive red algae bloom toxified almost all of the wild shellfish in Southern Chile, putting enormous economic pressure on local fishing communities. Thousands of fishermen protested the lack of governmental response and aid during one of the country’s worst red tides.

Cage-Free

In southern Patagonia, local community members and campaigners celebrate a rare victory of protecting Chile’s coasts from salmon farming operations. The combined efforts prevented the raising of 1.9 million fish and construction of 18 industrial cages in the Beagle Channel. The remote untouched habitat stretches over 240 kilometers. The Channel is also home to a wide array of species, including whales, dolphins and penguins. Indigenous groups like the Kawésqar fish these waters, continuing to be a vital natural resource today. The protection of the Beagle Channel is also a victory for the region’s tourism industry. The Beagle Channel contributes $74 million annually to the local economy.

With salmon farming in Chile becoming more regulated, traditional fishing communities can continue to harvest seafood off their coastline. Local wild-caught fisheries, along with eco-tourism, are sustainable options for traditional Chilean fishermen. Historically, the indigenous people of Chile ate and dined on hundreds of different species of fish and marine life. With more government regulation and support, Chileans can continue to gain economically from the seas while also protecting them.

Henry Schrandt
Photo: Flickr

Public Health Crisis in Syria
Syria has been the target of one of the most comprehensive and far-reaching sanctions campaigns worldwide. The U.S., the EU, the U.N., the Arab League, OFAC and several other entities have all applied economic sanctions against the country. The goal is to punish Syrian President Bashar al-Assad for his brutal violence against unarmed, civilian anti-government protesters. U.S. sanctions are also in response to the Syrian government’s support for terrorist groups and its pursuit of weapons of mass destruction. Imposing these restrictive measures has been the preferred method of Western powers for decades. However, sanctions have continuously failed to stop Assad from doing business with the U.S. and hurt the Syrian public.

Sanctions’ Impact on Syria’s Economy

Sanctions have caused serious damage to Syria’s economy. These sanctions include oil embargos, restrictions on certain investments, travel bans, freezing the assets of central banks and export restrictions on equipment and technology. The country used to be primarily an exporter, but it now relies on imports, mainly from Lebanon, Iraq and China. Before the EU sanctions, 90 percent of its oil exports went to Germany, Italy and France. Since President Trump recently imposed sanctions on its ally Iran, Syria is suffering even more difficulty obtaining goods. The value of the Syrian currency has plummeted, while prices have sky-rocketed, especially because of restrictions on oil imports.

To continue prioritizing the purchase of guns and bombs from Russia, the Syrian government has simply removed the country’s safety nets. Further, the country has cut back on subsidized fuel, food and health spending. Living was less expensive for Syrians during the peak of the civil war. Technically, legitimate businesses and individuals in Syria should be able to undertake critical transactions. However, foreign suppliers are often unwilling to send anything to Syria. These suppliers do not want to risk triggering unexpected violations of the complex sanction rules.

Sanctions and the Public Health Crisis in Syria

Similarly, there are exemptions for importing pharmaceuticals and food. But in reality, health facilities are feeling the effects of sanctions just as much as the rest of Syria’s private citizens, with life-threatening consequences. The consequences of these sanctions have led to a significant public health crisis in Syria. For example, hospitals cannot import nitrous oxide necessary for anesthetics, due to the fact that others could use it to make bombs. Also, they cannot import helium for cooling MRI scanners for the same reason. The humanitarian exemption for exporting software to Syria for medical equipment requires a complicated application process. Thus, health facilities have little access to foreign life-saving machines, drugs and supplies.

Unable to obtain repairs for European dialysis machines, about 10 percent of people dependent on dialysis have died of kidney failure. Russia, China, Lebanon or Malaysia must now provide medical supplies rather than the EU. This further slows down the process and delays the treatment of those with chronic illnesses. Cancer medication, insulin and anesthetics are among the medications Syria relies on imports for. Now, there are shortages of these medicines, as well as in specific antibiotics, serums, intravenous fluids and some vaccines. This has resulted in delayed treatment for cancer and leukemia patients. The government’s health care budget cuts since the civil war began, combined with the detrimental effects of sanctions, have made most imported medicines unaffordable. Finally, only 44 percent of hospitals are now fully functioning and many of them have closed.

The Real Impact of Sanctions

Meanwhile, President Assad’s policies of violence against his people have not changed. The Syrian government, which still carries out million-dollar deals with the U.S. and other countries that applied sanctions, seems to have found ways to circumvent the sanctions and remain largely unaffected. Assad claims that the sanctions are simply creating more refugees. As the inefficiency of sanctions to reduce human rights violations and their drastic effect on public health becomes increasingly clear, Western powers should rethink their policy of sanctions on Syria.

Sarah Newgarden
Photo: Flickr

Georgia's integration into the E.U.Since the end of the Russo-Georgian War in 2008, poverty reduction and higher employment have accompanied an expanding Georgian economy. However, fears of renewed conflict with Russia, Georgia’s northern-neighbor, jeopardize the progress the nation has made in curtailing poverty and handling the refugee crisis. Georgia’s integration into the E.U. will not only reap economic benefits and accelerate a decline in poverty levels, but also provide Georgia security from Russian aggression.

Georgia’s Relationship to the EU

Despite being a member of the Organization for Security and Cooperation in Europe and the Council of Europe, Georgia is not a member-state of the European Union. Since Georgia’s Rose Revolution in 2003, politicians of diverse ideologies have prioritized E.U. membership as an ultimate goal. In fact, a 2009 survey of over 2,400 Georgians found that 50 percent of the population believed that Georgia would join the E.U. within 10 years. While Georgia has yet to join the E.U. in 2019, the Georgian government continues to introduce various reforms to align the country with the tenets of E.U. institutional structures. E.U. membership would help Georgia tackle poverty and inequality.

Free Trade with Europe Increasing National Welfare

Poverty in Georgia remains at 16.3 percent and unemployment at 12.7 percent. Currently, Georgia is allowed to trade in certain industries with the E.U. as a part of the Deep and Comprehensive Free Trade Area (DCFTA). Once the E.U. admits Georgia and Georgia is able to trade freely with E.U. member-states in all industries, poverty and unemployment will likely decline.

Free trade makes a country more productive by selecting a country’s most productive industries for exporting. Import competition will replace less productive industries, but Georgians will specialize in their more productive exporting sectors and reap the benefits of specialization. Enhanced specialization from trade will raise Georgia’s gross domestic product and increase consumer welfare because Georgians will be able to purchase foreign-produced goods at cheaper prices while specializing in exporting sectors, such as copper ores and wine. Coupled with appropriate distributional policies, free trade will have a positive impact on reducing poverty and unemployment.

EU Membership Shielding Georgia from Russian Aggression

During the 2008 war, 130,000 Georgians became displaced; Action Against Hunger reports that the number of refugees has increased over time. If Russia were to invade again, there would be serious economic consequences. Furthermore, the refugee crisis would deteriorate substantially. Georgia’s integration into the E.U. provides a security agreement under the auspices of the European Defence Union; if Russia interferes with one E.U. member-country, it faces the backlash of Europe. George could reverse its progress in reducing poverty over the past decade. E.U. membership will serve as a security buffer from Russian aggression and a defender of the nation’s recent economic progress.

Because of the protection and economic boost E.U. membership would bring, many political scientists and economists agree with the 67 percent of Georgians who advocate for Georgia’s integration into the E.U.

– Grayson Cox
Photo: Flickr

The African Continental Free Trade Agreement The African Continental Free Trade Agreement is the largest free-trade agreement in the world with a 1.2 billion-person market and a combined GDP of 2.5 trillion dollars. It was signed in March of 2018 by 44 African heads of state, and following the initial signing, 5 more countries joined in July for a total of 49. The African Continental Free Trade Agreement’s primary focus is to increase intra-African trade by promoting free movement of goods and tariff-free trade. In fact, for the countries that joined, tariffs are expected to decrease by 90 percent within 5 years.

According to an article by The Economist, roughly 82 percent of African goods are exported to other countries. Due to high transport costs, poor infrastructure (e.g. in West Africa, less than one-fifth of the roads are paved) and time-consuming border procedures, it is more costly to trade within Africa than to export to foreign countries.

With the new free-trade agreement, a more competitive market will emerge that will reduce costs for consumers. Additionally, producers will have access to a larger number of potential buyers, as well as more investment opportunities from foreign countries. Strengthening intercontinental trade has the potential to protect the countries in Africa from the impact of exogenous trade shocks.

Maximizing the Impacts of AfCFTA

In order to reap the highest benefits from the new intra-continental free trade agreement, it is imperative to make adjustments to Africa’s trade structure. However, trade facilitation is not an easy task. It involves coordination between countries, transparency in policies and easing the movement of goods. Currently, intra-African trade accounts for only 16 percent of Africa’s total exports, while the bulk of its exports are to Europe (38 percent), China (19 percent), and the U.S. (15 percent). With the implementation of the African Continental Free Trade Agreement, The United Nations Economic Commission for Africa estimates that intra-African trade will see a 52 percent increase by 2022.

Infrastructure Development

Reducing non-tariff barriers, like transport time for goods, is an essential component of solidifying the new free-trade agreement. According to the International Monetary Fund, the average cost of importing a container in Africa is about $2,492, which is significantly more expensive than the cost of exporting to another continent. This helps to explain Africa’s high incentive to export the majority of its goods.

In order to aid with the implementation of infrastructure projects, the New Partnership for African Development (NEPAD) has facilitated two main systems of information. The African Infrastructure Database (AID) concerns itself mainly with data management and stores information about ongoing infrastructure development projects including the location as well as relevant financial and economic information. The Virtual PIDA Information Centre contains regional and continental infrastructure projects and promotes investment opportunities.

Clearly, higher access to information regarding infrastructure projects can help countries organize themselves around infrastructure development efficiently. This will help to reduce the intra-African costs of trade by fostering more easily navigable and cheaper transport routes between countries.

Economic Integration

It is crucial to consider that the informal trade sector contributes to a large amount of overall trade in Africa. The Africa Economic Brief is a document published by Jean-Guy Afrika and Gerald Ajumbo that discusses the specifics of informal trade in Africa. It states that the informal cross border trade sector (ICBT) represents 30-40 percent of total intra-African trade. In West and Central Africa, women make up almost 60 percent of informal traders, and 70 percent in Southern Africa.

Problems that affect the formal sector, like infrastructure and trade, have a disproportionate effect on the informal sector—especially for marginalized groups such as women and youth. It is unclear how the African Continental Free Trade Agreement will affect these groups as trade is adjusted; however, an increased focus on local trade and easier trade routes will likely facilitate trade for everyone involved. Since informal trade struggles with the same main issues as formal trade, making trade more accessible in the formal sector can create positive spillovers.

The informal trade sector is an important one to protect. Big businesses often avoid trading with rural areas due to high transportation costs, so instead these areas rely on informal trade for food, clothing and other commodities. Furthermore, ICBT provides a vital source of income to individuals who are often low-income or low-skilled. According to the Africa Economic Brief, studies estimate the average value of informal cross border trade to be 17.6 billion dollars per year in the Southern African Development Community (SADC).

In order to provide support for informal traders in Eastern and Southern Africa, the United Nations is funding a project to help decrease gender-specific obstacles in Malawi, Tanzania and Zambia. A focus on female empowerment will help maintain and improve the informal trade sector and contribute to poverty reduction.

With support from various organizations, countries in Africa are taking defining steps to reduce taxes, transport times, and an increase in market competition. Signing the African Continental Free Trade Agreement opens Africa up to free trade and, if facilitated effectively, it will have enormous positive implications for Africa’s economy.

– Tera Hofmann
Photo: Flickr

Poverty in Comoros
Comoros is a group of three volcanic islands located between Africa and Madagascar with a population of just over 800,000. Mount Karthala, which is located on the island of Ngazidja and the bigger of the two active volcanoes in Comoros, has frequent eruptions. The last largest eruption took place in 2005 and caused thousands of citizens to flee. Here are five facts about poverty in Comoros.

5 Facts About Poverty in Comoros

  1. Limited Economic and Trade Opportunities – Comoros relies heavily on its exported goods. The three main crops that are important to the country’s economy are vanilla, cloves and ylang-ylang, all of which people use for perfume essence and essential oils. Most of the earnings from these crops go towards natural disasters that occur regularly, primarily fires and severe weather.
  2. Rapid Population Growth – The population has steadily been growing since the 1970s. There are approximately four births to every one death. According to the World Population Review, the average adult woman has about 4.7 babies. The population should continue rising at an even pace.
  3. High Dropout Rates – Comoros has access to two different types of schools; the primary and secondary school system that France established and the traditional Islamic school system. Despite access to an education program, the dropout rate is continuing to steadily rise. Causes of this rate are teacher strikes from lack of proper pay, student strikes from the continuous school shutdowns and political instability. Students who do finish school and obtain a higher education typically do so in another country and do not return after.
  4. Inadequate Health Care Access – Comoros lacks a public health care system. Despite this, the country has been able to keep many of its illness rates low, including HIV and tuberculosis. Many believe that access to clean water that is available to over 90 percent of the country contributed to this. The highest cause of death in Comoros is malnutrition which caused nearly 45.1 percent of deaths between 2007 and 2017.
  5. Lack of Natural Resources – Deforestation is causing the natural forests to decrease due to the lack of re-growing trees. With the increase of population, agricultural lands have less time to regenerate and the food source to decline as a result. These factors and changing weather patterns are affecting natural resources in Comoros at a rapid pace leaving the country in a vulnerable state. Heavy rains and a decline in forest protection are causing floods and landslides, which causes more damage to already weakening agricultural fields. It also causes soil erosion to silt the coral reefs and disturbs the marine life ecosystem and the livelihood of fishing due to fish being Comoros’ main source of protein.

In studying poverty in Comoros, not everything is bad. An NGO called Dahari stemmed from the Engagement for Sustainable Development (ECDD) in 2013 and has since been working in the Comoros islands to provide sustainable agriculture, technology to farmers and increase environmental protection. It provides aid towards controlling the environmental factors and shaping landscapes for future generations and increase the economy. The organization also uses ecotourism to help manage marine life and natural terrestrial resources. Dahari works closely with local communities to achieve peaceful collaboration and help adapt locals to the new technologies and ways they can increase their agricultural development.

The Comoros government continues to work towards its country’s improvement. Despite its efforts, these five facts about poverty in Comoros show that the rapid rise in population and ecosystem decline that changing weather patterns caused continues to affect the country’s efforts to climb out of poverty. With much-needed help, Comoros can work towards rising out of poverty and work towards becoming a resilient and prosperous country.

– Chelsea Wolfe
Photo: Flickr

African Union PassportEconomic development does not occur in isolation, and neither does the end of extreme poverty. Instead of working individually, African nations are uniting to find ways to improve Africa’s economy and lower poverty rates. Their latest attempt involves the deployment of the African Union Passport, which allows African citizens to travel freely throughout the continent.

Extreme Poverty Crisis

Africa is the world’s second-fastest-growing economic region. Economic growth usually leads to higher employment levels and overall standards of living. Despite recent improvements in Africa’s economy, extreme poverty levels have not decreased as expected. Instead, they have continued to rise. With an average poverty rate of 41 percent, sub-Saharan Africa is the region suffering the most from extreme poverty. The World Bank Group concluded that most of the global poor reside in sub-Saharan Africa. This region is made up of almost all the African countries except Algeria, Egypt, Libya, Morocco and Tunisia.

Despite a growing economy, many obstacles stand in the way of reducing poverty in Africa, including conflict and war and weak institutions.

Restricted Mobility

Another problem plaguing the African continent is a lack of regional mobility. African residents face stricter restrictions to travel across the continent compared to their European counterparts. In fact, the free movement of people, as well as goods, throughout the African continent, has been virtually nonexistent. For instance, a Nigerian businessman reported that he had to apply for 38 separate visas to conduct intra-regional business.

Regional mobility is a factor that generally drives economic development. The free movement of goods can boost a country’s GDP while the free movement of people can fill gaps in the labor market. Intra-regional movement accounts for a significant portion of Europe’s economy. Around 70 percent of all trade in Europe is intra-regional. In Africa, intra-regional accounts for less than 15 percent. As a result, Africa is missing various opportunities to boost its economy and reduce extreme poverty.

The Africa Visa Openness Index

In 2016, the African Development Bank had the vision to build a global market in Africa. The group believed regional mobility and intra-regional trade created more attractive markets. As a result, the African Development Bank began to track each African country’s visa entry requirements. The group also measured how freely African citizens were able to move through the continent. The Africa Visa Openness Index reports the group’s findings.

The Index ranks each of the 55 African countries in terms of visa openness. The following factors were used to determine the rankings: visa required (low openness ranking); visa on arrival (medium openness ranking) and no visa required (high openness ranking).

The Africa Visa Openness Index has influenced several African nations to make improvements to their trade and visa policies. For example, two years after ranking 28th on the Index in 2016, Benin’s President Patrice Talon announced that the country will no longer require visas for other Africans.

The launch of the African Passport will be the final stage in facilitating the free movement of people and goods across Africa. Africa’s entire population, approximately 1.2 billion people, will have an African Union Passport. This passport will serve as the key to freely move between African nations.

The idea for the African Union Passport is not new. The concept was proposed and approved by all 55 African nations decades ago. However, the dream of regional mobility became a reality after Rwandan President Paul Kagame and Chadian President Idriss Deby unveiled the prototype of the passport in 2016.

By 2020, all Africans will have an African Union Passport. The goal of the passport is to discourage regional isolation by increasing accessibility to intra-regional travel, tourism and trade. By working as a unit, Africa has the chance to boost economic development and end extreme poverty.

– Paola Nuñez
Photo: Wikimedia