Monday, 6 March 2017

Empire 2.0 - another daft idea

According to The Times, Britain will seek to boost trade links with African Commonwealth nations this week in a move described by Whitehall officials as “empire 2.0”. Liam Fox, the international trade secretary, will promise to build better links with the 52-member organisation when ministers from each country meet in London on Thursday and Friday.

"Britain plans to promise all developing nations that their trading relationships with the UK will stay the same or improve after Brexit, guaranteeing that they will not get worse. Ministers want to go further with African nations, however, and start talks to allow Britain to work more closely with an African free trade zone."

"Under one plan discussed in Whitehall work on trade relations with African nations could continue until next year when Britain hosts the Commonwealth heads of government meeting in the spring. A deal could then be signed. Whitehall sources say that they also hope to have the outline of deals with Australia, New Zealand and possibly Canada by this stage."

Says The Times "Trade specialists dismiss the notion that Britain could strike a free-trade deal with the Commonwealth in its entirety because of the number and diversity of the countries involved. Most already have some preferential access to the EU or are negotiating a free-trade deal. Experts urged the government to use the Commonwealth trade talks to discuss the extension of existing deals, like that with South Africa and the recent agreement with Canada".

This is typical Brexiteer fare, much like Andrew Lilico's CANZUK fantasy. They are scenarios dreamed up without any reference to the world as it is now, assuming the rest of the world went into stasis when we joined the EU. Africa already has the Tripartite Free Trade Area (TFTA) signed in June 2015 combining three largest trading blocs: The East African Community (EAC), the Common Market for Eastern and Southern Africa (COMESA) and the Southern Africa Development Community (SADC).

Effectively we are seeing the emergence of an African single market which intersects and replaces the Commonwealth which is now more of a cultural legacy. The bottom line is there is no gap in the market for a new big idea. Africa has ideas of its own with UNCTAD driving major trade facilitation initiatives - exemplified recently by Uganda's implementation of the Regional Electronic Cargo Tracking System Center.

RECTS improves the efficiency of customs processing resulting in higher revenue collections and a decrease in average time to clear customs consignments. These results will contribute to a reduction in transport costs and time in East Africa

According to the Uganda Revenue Authority, it costs transporters $200-250 per day when trucks are delayed along the transit routes. Part or all of this cost is passed on to the owner of goods. As a result, the cost of transport tends to increase the further inland the destination of cargo, not only because of distance but also the number of stoppages along the routes. The major transit delays in the region include roadblocks by police and customs authorities, weighbridges, physical escorts and border clearance, and they vary from country to country. 

In Uganda, the major delays arise from physical escorts, which are considered a major non-tariff barrier in the region. URA further indicates that physical escorts in Uganda have the effect of increasing the transit period from 1 day to 3-4 days, effectively resulting into an estimated increase in transport costs of about $400-$500, the additional cost paid as a result of the increase in transit period.

Ridding Africa of these barriers is the kind of initiative that far outweighs any reduction in tariffs and is the focus of all major trade initiatives at the moment. We are seeing moves toward a global Single Window system to this very end. 

Tucked in at the bottom of The Times report, we see that ministers will also discuss implementing the World Trade Organisation’s recent trade facilitation agreement. My view is that this is the only avenue the UK has. It can no longer be at the centre of the trade universe but it can be a valued global citizen, contributing knowledge and expertise to the foundation of trade facilitation systems. We are, after all, about to get a crash course into how and why these systems work. 

In a way I suppose it is encouraging to see that Africa will will a top concern but we will have to deal with Africa as it is, not how we left it. We are entering an already crowded field where other influences are ahead of the game. If Britain wants to lead then it must lead by example by being a committed advocate of trade facilitation and a champion of the WTO. We are seeing the emergence of a global rules based trading system where regional partitions are increasingly redundant. If we are setting about building a worldwide free trade area then why should it not be global in its ambitions? The WTO has established the system. All we have to do is build on it. 

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