Discussion
Protectionist trade policies to address the declining labour share of national income?
Willemien Viljoen, tralac Researcher, discusses the need for improved domestic policymaking rather than the use of restrictive trade policies to redress the declining labour share of income
The labour share of national income; the share of national income paid in wages (including benefits) to workers has been on a global downward trajectory since the 1980s for many advanced economies and since the 1990s for many emerging and developing economies. The declining labour share suggests that product wages grow more slowly than average labour productivity. In many countries the decline is due to the inability of product wage growth to keep up with weak productivity growth. At the global level a decline in labour share of income reflects the trend in advanced economies; the sharpest decline is in manufacturing and transportation while the share of labour income has increased in sectors like food, accommodation and agriculture. In emerging and developing economies labour’s share of income declined mainly in agriculture and increased in manufacturing, health services and construction.
According to the World Economic Outlook (WEO) April 2017 various factors contribute to the declining labour share of income; these include technological advancement; global integration (overall trade, participation in global value chains, and financial integration) and domestic policies, regulation and institutions. According to the WEO, both technological advancement and participation in global value chains have lowered the income share of middle-skilled workers. In the case of advanced economies the rapid advance of information and communication technology (and associated automation of routine tasks) has been the main contributing factor to the decline in the labour share of income. The participation in global value chains (as an increase in the importation of components for assembly and re-exportation) has had the most notable negative impact on labour’s share of income for emerging and developing economies (overall trade in goods and services has a negligible impact on the labour share), while financial integration has offset some of these negative effects. Due to a decline in middle-skill occupations and an increase in the share of income accruing to capital at the top end of the income distribution, the decline in labour’s share of income has also exacerbated income inequality. The decline in the labour share of income is not just associated with income inequality, but can also harm economic growth prospects, lead to resistance against economic integration and favour inward-looking policies. This is precisely the type of argument we are currently seeing in many countries across the world: buy local and protectionist policies to limit imports to protect domestic industries from a loss of employment. An increasing inward-looking focus has recently seen policy changes in countries including the United States, South Africa, Nigeria and Zimbabwe.
It is often easier to restrict trade than to improve domestic policy; however, restrictive trade policies can be very costly in the long-run – raising trade costs can lead to a reduction in aggregate output, increase prices, increased fragmentation of production processes, reduction in the purchasing power of lower-income groups and harm supply-side potential by reducing productivity growth. An increase in trade costs can also reduce expectation of future earnings and hamper investment and the creation of employment opportunities. The most effective way to address the declining share of labour in income is not through reducing trade, but rather by preserving the gains from trade while enabling domestic policy change to redistribute the benefits of trade (and subsequent economic growth) and to make these benefits more inclusive through active labour market policies and complementary policies in the areas of trade, education, housing and credit.
Protectionist trade policies (for possible short term gains) should not be used as a substitute for addressing structural challenges (like youth unemployment, rigid labour market conditions, skills shortages and quality of education, long-term unemployment, inequality, social exclusion and poverty) in the labour market. The focus should be on labour market policies supported by good governance, structural reform and underlying monetary, fiscal and financial sector policies and regulations to improve productivity; investment in skills development and availability (in the short term improve the supply of needed highly skilled workers through the movement of persons and in the long-term investment in upgrading and deepening the existing skills); labour mobility and the adaptability of the workforce; the quality of education and the overall reallocation of resources. There is a need for appropriate domestic adjustment policies (labour market policies and macroeconomic policies), not for closing markets. The degree of factor market flexibility, access to education and access to financial, credit and insurance markets should all be considered in policy design. Labour market polices which are better suited to address current challenges in changing economic conditions include training programs to address the skills gap, job search assistance (like access to information), the elimination of labour market distortions (rigidity, mismatch of skills, rural-urban wage difference and labour mobility) and the improvement of technical, cognitive and non-cognitive skills.
Click here to read this Discussion and its sources on tralac’s website...
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Special Features
Featured Publications
Working Paper: Côte d’Ivoire: economic and trade profile and performance
By Ron Sandrey, tralac Associate: This paper examines the economic and trade profile and performance of Côte d’Ivoire since 1960, focusing on trends over the past 15 years. In 2015, Côte d’Ivoire recorded exports of $11,158 million and imports of $9,915 million, contributing to a current account balance of 2.0% of GDP. The main agricultural exports are mostly related to cocoa, while cereals dominate agricultural imports. Oil products and gold are the main non-agricultural exports, and petroleum products dominate non-agricultural imports. Read more and download the working paper on tralac’s website...
Working Paper: Senegal: the trade policy and performance profile
By Ron Sandrey, tralac Associate: This paper examines the trade profile and performance of Senegal since 1960, with particular emphasis on the period since 2001. Senegal’s recent macroeconomic performance has been strong with a growth rate of 6.5% in 2015, making Senegal the second fastest-growing economy in west Africa (behind Côte d’Ivoire). The primary sector is the fastest-growing sector boosted by extractives, fishing, and agriculture, while services – which represent more than half of the total GDP – are still growing rapidly, thanks to advances in the transport and ICT sectors. Although exports have been growing rapidly, over the past 16 years, Senegal has consistently run a merchandise trade deficit. Read more and download the working paper on tralac’s website...
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Users now need to be registered in order to access all Publications and Resource documents on tralac’s website. Membership (registration) is free of charge and provides you with full access to all our research material and regional and national resources. Your secured profile information provides us with crucial analytical data and will be used for monitoring purposes only. Should you experience any difficulties with the registration process, please contact info@tralac.org.
Trade Data Analysis
Intra-Africa market access
By John Stuart, tralac Associate: This Trade Brief documents the situation with regard to market access between the countries of the African Union. The aim is to aid in understanding the accessibility of African markets to non-Free Trade Area trading partners, pursuant to the negotiations around the Continental Free Trade Area (CFTA). Therefore the data shows the extent of Most Favoured Nation (MFN, as applied) treatment by African countries using the latest available data. The analysis uses national tariff line data sourced from the International Trade Centre (ITC)’s MacMap data portal.
Click here to download the trade brief and data spreadsheet on tralac’s website.
tralac has been monitoring the trading relationships between Africa and various trade partners for several years. The following Trade Briefs, and accompanying spreadsheets, document the trading relationships between the African continent and select trading partners, as well as South Africa’s significant trading relationships, over the period 2006 to 2015:
Resources portal
tralac maintains a collection of regional and national trade-related resources including copies of the texts and annexes of regional and bilateral trade agreements; copies of various regional protocols, memoranda of understanding and tariff offers; and copies of national legislation and policy documents for the 54 African Union member states.
Resources can be found in the following regional repositories and via the new resources portal:
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Events and Training
tralac Annual Conference
6-7 April 2017
Table Bay Hotel, V&A Waterfront in Cape Town
This year’s tralac Annual Conference took place against the backdrop of a global debate challenging accepted trade policy and governance norms of recent decades. Probing questions are being asked about a system which, till recently, was viewed as the logical model for trade and investment governance in an interdependent and inter-connected world.
We were pleased to welcome H.E. Albert Mudenda Muchanga, newly-appointed Commissioner for Trade and Industry at the African Union Commission, who delivered opening remarks, as well as Honourable Rob Davies, Minster of Trade and Industry, South Africa, who delivered the keynote address. Other sessions considered Global trade policy and geopolitical developments; the Tripartite Free Trade Area and Continental FTA; a select review of regional developments in southern Africa; WTO matters; South African trade and broader political economy matters; and finally, International trade governance – where to in 2017?
Background
It is clear there are significant shifts in global political economy and power relations underway; and that these require a rethink of global trade and more generally, economic governance models. What are the implications of these developments for the multilateral trading system, as manifested in the rules-based regime of the World Trade Organisation (WTO)? What are the implications of the apparent preference of a Trump administration for bilateral trade deals? How will other WTO members respond? Could this undermine the multilateral trade governance regime, recognising that the enthusiasm for enhancing and augmenting this governance regime has for some time already been decidedly muted. How should we in African respond to these developments, and very importantly, what is influencing our own policy, political economy and governance discourse for trade and integration? What opportunities do the Continental Free Trade Area negotiations offer for taking a fresh look at the challenges around us? Our traditional approaches and designs (such as the Abuja treaty) need to the carefully appraised for their validity and appropriateness, as instruments to achieve development outcomes, given contemporary economic, political and social realities. Are policy-makers and governments asking the right questions; who is providing leadership in the African policy and governance discourse? For Africa as well as our global partners, a fundamental question is whether the answer lies in more protectionism, with policy and incentives to focus inward, rather than supporting global investment, production, consumption perspectives and decisions.
It was tralac’s hope, through this year’s conference, to provide an opportunity for reflection on these and related matters, and an open and robust engagement, where the right questions can be asked, and popular “explanations” and rhetoric can be recognized. Such an opportunity is not only for the sake of a necessary and stimulating debate, but because the stakes are high. The world economy, and Africa more specifically, is at a set of decision points for far-reaching transformation. This calls for cool heads, realistic expectations, honest assessments, and innovative yet pragmatic solutions, underpinned by the fundamental principles of rules-based governance.
A Conference report, interviews, and photos from the event will be available soon.
Events
Geek Week – Stellenbosch, 10-13 April 2017
tralac recently hosted a Geek Week as its offices in Stellenbosch. Geek Weeks are hands-on, practical trade data and policy analysis learning experiences. Participants work in teams on specific trade policy topics; they identify, source and examine the data required for the specific topic that they will examine. The key trade policy issues are identified and examined, and each team works on the data and policy analysis with the aim of having a draft paper by the end of the week. Daily team talks keep all informed on progress, providing opportunities for collective problem solving and particularly for the development of the important connections between technical data analysis and policy analysis.
After the Geek Week, the work of all teams is reviewed by tralac staff, overseen by Geek Week team leader, Ron Sandrey. The papers are then published on the tralac website. Participants become part of the tralac network and many return for further Geek Weeks, extending the depth of this hands-on learning experience and enhancing trade policy capacity across the region. Our aim is to make the learning experience relevant and to reflect trade policy priorities from the region.
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Publications
Trade Brief: The TFTA as a legal construct: What is it and how will it be implemented?
By Gerhard Erasmus, tralac Associate: The TFTA is not, like the regional economic communities (RECs), a legal person. It is a sui generis framework agreement for promoting trade in goods among (potentially) the 26 members of COMESA, the EAC and SADC. The TFTA was “launched” before its negotiations had been finalized. Once the negotiations are completed the Agreement still has to enter into force, before trade in goods will be conducted (for those states which have become parties) in terms of its provisions. The TFTA does not yet exist as a proper FTA; this project is work in progress. Read more and download the trade brief on tralac’s website...
Trade Brief: Are EPAs still on the African Agenda?
By Gerhard Erasmus, tralac Associate: There have been intensive negotiations by the EU with groups of African states to conclude specific EPAs, but progress has been slow and implementation has been unimpressive. Why has this been such an arduous journey? Has the time arrived for an honest re-assessment of the validity of the aims and objectives, the approach towards delivery, and the impact of global and regional developments since the original negotiations started 17 years ago? The world is a different place now. Read more and download the trade brief on tralac’s website...
Trade Brief: WTO Trade Facilitation Agreement and its implementation in southern Africa
By Elisha Tshuma, Customs and Trade Facilitation Expert: The World Trade Organisation’s (WTO) Trade Facilitation Agreement entered into force on 22 February 2017 when the required two-thirds of the WTO membership (112 out of 164 members) had notified their instruments of ratification. This Trade Brief considers some of the major challenges and inefficiencies in cross-border trade in the southern Africa region and the benefits that implementation of the TFA could bring for SADC countries. Read more and download the trade brief on tralac’s website...
Working Paper: Sustainability in Madagascar
By Ron Sandrey, tralac Associate, and James Wilson: This paper examines sustainability issues with respect to Madagascar. This seemingly uncontroversial and self-evident objective raises more questions than the paper is likely to provide answers for. The first problem is to define sustainability. From there we take a comprehensive look at the determinants of sustainability while at the same time remaining conscious of the complex inter-linkages between the ecosystem, macroeconomic growth, human welfare indicators, and public policy. Read more and download the working paper on tralac’s website...
Trade Brief: First contours of a new American-African Policy and a new Era of Trade with the North?
By Gerhard Erasmus, tralac Associate: Africa did not figure in the recent American Presidential election campaign. Neither of the two candidates offered ideas on how they would deal with Africa. Though Africa will not top the list of Washington’s policy priorities, some officials will surely have started drafting memoranda on an African policy. What could such a policy look like? This Trade Brief looks at some of the implications for Africa of Trump’s election, as well as considering broader international trade issues and the future of Africa’s trade relations with the North. Read more and download the trade brief on tralac’s website...
Working Paper: The rise of China in world trade and a crystal ball analysis for future Chinese trade
By Ron Sandrey, Hans Grinsted Jensen and Gavin van der Nest, tralac Associates: This paper considers China’s position in world trade from two perspectives. The first section details the evolution of Chinese trade over the period 2001-2013, with an update of the global trade data from 2013 through to the 2105 December year. It highlights China’s remarkable rise in global trade importance where it has overtaken the United States (US) as the world’s largest single country exporter. The second part details the application of a Global Trade Analysis Project (GTAP) model incorporating various economic variables and assumptions to project Chinese trade patterns to the year 2025. Read more and download the working paper on tralac’s website...
Trade Brief: Issues for CFTA negotiators to consider
By Ron Sandrey, tralac Associate: This trade brief examines the modalities associated with current negotiations on the African Continental FTA. The CFTA must focus on political and African integration realities and not unrealistic and dogmatic trade and economic objectives. In order to achieve a successful outcome, it is argued that there are three crucial issues need to consider: i) that the modern free trade agreement is not overwhelmingly about comprehensive free trade or the elimination of import tariffs, but rather the reduction of tariffs over time that aim towards their elimination (mitigation) and trade facilitation; ii) several issues are at least as important as tariff elimination, such as rules of origin, NTBs, and rules-based governance; and iii) given the realities of African politics, there needs to be a recognition in Africa that not all countries are ready or able to join an FTA at this stage. Read more and download the trade brief on tralac’s website...
Working Paper: Madagascar: the trade policy and performance profile | Madagascar: La politique de commerce et profil de performance
By Ron Sandrey, tralac Associate: This paper examines the trade profile and performance of Madagascar, focusing on the period since 2001. Madagascar is slowly recovering from the sociopolitical crisis which broke out in 2009, with the upturn due to a strong performance in rice farming, the recent extraction and subsequent exportation of nickel, cobalt and titanium, and agrifood exports having become more diversified. Services exports, mostly tourism, and clothing exports have also improved. Read more on tralac’s website (English and French downloads available)...
Working Paper: A legal and economic assessment of South Sudan’s possible accession to the East African Community
By Nicholas Aris Charalambides: In April 2016, South Sudan was admitted to the EAC, despite concerns over governance and the fragility of peace. This study provides an assessment of the regulatory and economic aspects of South Sudan joining the EAC, focusing on the economic acquis communautaire. The collapse of the Unity government and the tragedy of the renewed conflict in the country means that many of the opportunities and challenges from accession identified are, at present, largely academic. But when, as so many so dearly hope, this young nation moves towards peace, the need to realise economic opportunities in the regional markets and from regional integration will be pressing. Read more and download the working paper on tralac’s website...
Trade Brief: The Blue Economy – opportunities for Africa’s sustainable development agenda
By Gavin van der Nest, tralac Associate: There has been a growing worldwide interest in the Blue Economy and how it naturally develops from the Green Economy. The Blue Economy has untapped potential and could possibly be at the forefront of African regional integration particularly due to the fact of the blessed abundance of oceans, seas and freshwater systems in the African continent. This Trade Brief introduces the Blue Economy, discusses the pitfalls, benefits, and opportunities it offers, and discusses the progress made on the African continent and ideas for future policy direction. Read more and download the trade brief on tralac’s website...
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News
tralac’s Daily News Selection – an online African trade and regional integration news and publications digest – is compiled with the assistance of Mr. Richard Humphries (@richardhumphri1 on twitter) and disseminated to enhance trade policy knowledge and debate.
Click here to view the Daily News archive. To receive the tralac Daily News Selection e-notification, please subscribe using the following link:
http://eepurl.com/bhaAmf
News
IGAD State of the Region Report 2016
IGAD is committed to the vision of an integrated region that is prosperous and peaceful for the enjoyment of its population. In 2016, IGAD launched a new generation of strategy and implementation plans for 2016-2020, providing the overall framework to guide IGAD in delivering its mandate.
The region is going through rapid and tough new challenges and obstacles including climate change, resource scarcity, economic shocks from global economic crises, security threats, and fragility, among others. To effectively respond to the challenges besieging the region, IGAD has to transform further. The State of the Region Report focuses on all the six priority sectors of IGAD, namely Agriculture, Livestock, Fisheries and Food Security; Natural Resources and Environmental Protection; Regional Economic Cooperation and Integration; Social Development; Peace and Security; and Gender Affairs.
Economic growth in Africa is on the upswing following a sharp slowdown
Economic growth in Sub-Saharan Africa is rebounding in 2017 after registering the worst decline in more than two decades in 2016, according to the new Africa’s Pulse, a bi-annual analysis of the state of African economies conducted by the World Bank. In this issue, a special section is dedicated to infrastructure in the region, a sector in which investment could become a strategic tool for poverty reduction and economic development.
UN forum highlights importance of stronger partnerships for financing sustainable development
Underlining the importance of sustainable finance for the implementation of the 2030 Agenda for Sustainable Development, senior United Nations officials meeting at the High-level SDG Financing Lab in New York on Tuesday, called for stronger partnerships with a diverse range of stakeholders to ensure that resource requirements are met.
‘Modest recovery’ for SA economy likely
The IMF said in its latest outlook for 2017 released on Tuesday that South Africa’s gross domestic product (GDP) growth would be 0.8 percent and 1.6 percent next year as commodity prices rebound, drought conditions eased and electricity capacity expands.
MEPs in Ghana and Ivory Coast to monitor EPA implementation
MEPs from the European Parliament’s International Trade Committee are in West Africa this week, to monitor the implementation of Economic Partnership Agreements. The trip comes against a backdrop of mounting scepticism on the EPAs, with Angela Merkel’s Special Representative for Africa, Günther Nooke, last week calling them “no success story, neither for Africa nor for Europe”.
High-level B20 Statement: Digitalization for all – Towards an inclusive interconnected world
The G20 Digital Ministers’ meeting in Düsseldorf agreed on a roadmap for joint policies for a digital future. “This is a great success,” said Minister Zypries. The meeting sent out “the signal that we want to shape the digital revolution together, for the benefit of all people”. On this occasion, the B20 issued the following statement co-signed by more than 50 leading business representatives.
‘Brics Plus’ can be new model of integration
The expansion of Brics, known as “Brics Plus”, could become a new model of integration in the global economy, chief economist of the Eurasian Development Bank Yaroslav Lissovolik said on Sunday. Brics Plus is an important initiative “aimed not at expanding the very core of the association and including the largest developed countries, but at increasing its openness and accessibility to integration for the states of the developing world”, he said.
World Bank Group President outlines principles to drive private investment toward development goals
World Bank Group President Jim Yong Kim on 11 April 2017 called for a fundamental rethinking of development finance to achieve global goals and meet people’s rising aspirations, and he outlined a set of guiding principles to crowd in private investment and maximize resources for the poor.
Perception of political risk hurting FDI flow in Africa
A report by the World Bank has cited actual or perceived political risk as hindering inflow of Foreign Direct Investment (FDI) to several developing countries. The findings show that around 25 per cent of all investments in developing economies either stop increasing or totally withdraw from host countries due to political risks.
Review of the implementation of the commitments made towards Africa’s development: Stakeholders’ consultations
The Office of the Special Adviser on Africa (OSAA) has embarked in a new series of consultations in preparation of the third review of the implementation of the commitments made towards Africa’s development. The 2017 series of consultations for the third Secretary-General report of the UN Monitoring Mechanism begins with a meeting in Midrand, South Africa, on 20-21 April.
AGOA.info
New trade data for February 2017 published on AGOA.info
Monthly AGOA trade data to February has been loaded. Aggregate US exports from AGOA beneficiaries to the US were worth $3.6 billion over the January-February period, up 35% year-on-year, of which $1.6 billion was shipped under AGOA preference. Also see the new sector trade data for the
agriculture, automotive, textiles, leather and
metals sectors – with additional sector-focused data to follow.
Selected charts from the
AGOA Data Center
Video resources
View a growing selection of AGOA-related video resources at this
link. Additional resource sections to follow.
AGOA Country ProfilesBilateral trade data profiles, disaggregated by sector, are available for each AGOA beneficiary country individually and contain quarterly data. The data also includes a number of regional trade profiles, featuring the AGOA beneficiaries in
SACU,
SADC,
EAC,
COMESA and
others. The monthly data sections have been updated to January 2017. Data includes
exports by country, by
product sector, and by program.
AGOA strategies
In line with the AGOA legislation, a number of countries have developed AGOA strategies to help them better utilize the preferences offered by AGOA. See the
AGOA.info toolkit for the completed strategy documents. New AGOA strategies for Rwanda, Lesotho, Tanzania and Zambia were recently added.
Exporter Toolkit
The exporter toolkit contains sector-specific resources, and also covers key themes (SPS measures, packaging, trade shows, business planning etc.) that are of relevance to producers and traders planning to export to the US.
AGOA products database
Following revisions to the HS and a number of new product classifications, as well as certain changes to the AGOA categories, a new, updated product list covering AGOA-eligible products is available on AGOA.info. More than
6,400 tariff lines currently have AGOA status, including textiles and apparel upon meeting AGOA’s wearing apparel provisions.
From the AGOA news archive
AGOA.info on twitter
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