World Bank Assistance

Over the last three decades, Africa has become marginalized from world trade.

Africa's share of world exports has dropped by nearly 60 percent—from 3.5 percent in 1970 to 1.5 percent in 1999. This dramatic decline in Africa's export market share represents a staggering income loss of $70 billion annually, an amount equivalent to 21 percent of the region's GDP and to more than five times the $13 billion in annual aid flows to Africa. Poor export and trade performance has been closely linked to the low growth of per capita incomes in the region.

If African economies are to grow, then export expansion and diversification are essential.

World Bank Objectives

The Africa Region of the Bank is working to support the integration of African countries into regional and world economies, to improve their trade performance and to strengthen its linkages to accelerated growth and poverty reduction. The Bank is doing this through an appropriate mix of activities at the country, regional, continental, and global levels.

Global issues

In order to increase Africa's export opportunities and provide incentives for domestic reforms, reforms in the world trading system are essential for accelerating growth and reducing poverty. Particularly important for Africa are:

	Reducing tariffs and tariff escalation on agricultural products and labor intensive manufactures;
	Eliminating trade-distorting agricultural subsidies;
	Preferential market access for African exports;
	Access to affordable imported medicines;
	Reasonable international product standards; and
	Restraints on monopolies/cartels in international air and maritime services.

Country/regional issues

A. An unsupportive investment climate, including unsatisfactory legal, regulatory, and tax framework for business; weak governance and accompanying corruption and inefficiencies that undermine confidence; inadequate infrastructure of all types; and poor transport, telecommunication, and financial services that facilitate trade.

B. Unfinished liberalization. Despite the significant progress made in liberalizing trade in the 1990s, liberalization is incomplete. African countries still maintain high levels of nominal and effective protection for import-competing industries; anti-export bias is strong.

C. Behind-the-border, trade-related reforms. Two particular trade-related behind-the-border issues stand out: custom reform and trade facilitation. Nearly every country needs a major institution-building effort to reform and improve customs administration so that customs facilitates, rather than obstructs, trade. Also needed are improvements in trade-related infrastructure and provision of efficient, competitive trade-related services.

D. Regional integration. Currently, there is much more political enthusiasm for regional integration than for unilateral trade liberalization. Most African countries belong to various Regional Trade Agreements (RTAs) intended to promote trade among themselves. There are three functioning customs unions in Africa, with nineteen member countries: the Southern African Customs Union (SACU); the Central African Economic and Monetary Community (CAEMC); and the West African Economic and Monetary Union (WAEMU). But most of the other arrangements are preferential or free trade agreements that have thus far had limited impact. There are large gaps between the intentions of the agreements and actual implementation; and policy, institutional, and infrastructural constraints to intra-African trade are still large. The New Partnership for Africa's Development (NEPAD) has recently called for expeditious implementation of existing RTAs and the elimination of all internal trade barriers as a step toward integration into the global economy.

E. Distributional impact of trade. Because of the low average incomes and high poverty levels in Africa, accelerated growth is essential. Improved trade performance is therefore critical for accelerating growth and a key element of broad-based poverty reduction. In-depth analytical work and capacity building on trade and poverty reduction is planned for four western and central African countries (Benin, Burkina Faso, Senegal, and Cameron).

World Bank support for trade

The World Bank uses the whole range of analytical, advisory, and operational instruments to help improve trade-performance in Africa at the country and regional levels. Program priorities are determined primarily at the country level, although in some cases regional or global considerations are also important.

A. Analytical and advisory activities. Bank analytical and advisory work is meant to help client countries better understand the links between trade, growth and poverty reduction, and to identify priority areas for trade-related reforms and programs in their development strategies. The Bank supported Integrated Framework (IF) for trade-related assistance for the least developed countries (LDCs) is a major regional, as well as institutional, initiative: Three-quarters of the world's LDCs are in Sub-Saharan Africa, and these thirty-three countries account for three-quarters of the Africa Region's member countries. The Africa Region, in partnership with the Trade Department of the Bank's Central Network, carries out 4-5 diagnostic trade integration studies per year. This program is the largest single component of the Africa Region's current analytical work on trade, and each study includes an analysis on distributional impact of trade reforms.

B. Strategy work. The main instrument for operationalizing the trade agenda is mainstreaming the findings of the analytical work into the development strategies of the client country and into the Bank's own country and regional assistance strategies.

C. Lending operations. Trade-related operations and components are important in countries where expanding and diversifying trade is a government priority. Adjustment operations and private sector development projects are the primary means for addressing trade issues. For example, a significant trade liberalization component under Uganda's adjustment operation is simplifing its tariff structure and reduce its tariff protection. Regarding private sector development operations, Gateway Projects in Ghana and Gambia have focused on institutional changes and physical investments that facilitate cross-border trade. Two investment projects in Senegal and Burkina Faso are supporting measures to promote non-traditional exports, including physical plants.

Regional trade areas significant to the World Bank's program

Three regional trade areas have special significance for the World Bank's program: West Africa (ECOWAS/WAEMU); the Central African Economic and Monetary Community (CAEMC); and Eastern and Southern Africa (COMESA/EAC/SADC). As noted earlier, regional integration assistance strategies have already been approved for West and Central Africa. Economic and sector work (ESW) and technical assistance (TA) for trade issues and trade facilitation projects figure prominently in the assistance strategies for both sub-regions. The dialogue on trade issues is equally active in Eastern and Southern Africa, but the regional integration problems there are more difficult because of the inconsistent and overlapping RTAs.

Lending operations: sub-regional level. The few World Bank sub-regional lending operations in Africa have tended to focus on trade-related issues. For ten eastern and southern African countries, the World Bank is financing a regional trade facilitation project that supports a credible export insurance mechanism; and the Bank has financed operations to facilitate cross-border payments in UEMOA and CEMAC. The World Bank is now preparing three operations on trade and transport facilitation in West, Central, and Southern/Eastern Africa to improve regional infrastructure and support physical integration in the sub-regions (mostly comprising transport components but also transit systems and customs procedures).

Constraints

There are two primary interrelated constraints to moving more rapidly on the trade agenda in Africa, and the trade reform process has to be seen as a long-term one requiring sustained effort.

First, the lack of progress on the Doha development agenda creates a negative environment for discussing trade liberalization and spreads skepticism in Africa about the potential gains from domestic reforms. Early action on the trade issues most important to Africa would likely help trade liberalization efforts in Africa.

Second, African countries ultimately decide on their own development priorities. Ownership of the trade liberalization program by the country is the only way to ensure that a country is committed to reform and to guarantee follow-up and continuity,in the reform process. Furthermore, in Africa, trade policies and investment climate reforms compete for policy makers' attention with other concerns-such as HIV/AIDS, excessive debt burdens and continuing fiscal crises, and governance problems-all within the context of limited institutional capacities. Mainstreaming improvements in the trade and investment climate in the PRSPs and CASs of countries not now interested in these issues is likely to take time.