The past year has been a tumultuous one for trade policy and governance. Not only has trade policy been in the news headlines almost on a daily basis, but we have also seen reflection on, and interrogation of the very model of trade policy upon which the current global trading system is anchored. tralac’s work this year has been interesting and challenging – this is just a brief note on some of the issues that have kept us very busy, and are likely to continue to do so, in 2019.

There is now open discussion of the specific dimensions and depth of the crisis in the World Trade Organisation. The trade war between the United States and China has drawn in many other trading partners and is but one manifestation of the pervasive protectionist sentiment that now guides many trade policy decisions. We really do need to revisit the experience of the Great Depression, to appreciate the consequences of beggar-thy-neighbour policies. We also need to appraise the current and emerging landscape of the global economy, the significant industrial and broader economic reorganisation that has taken place, midst the important geo-political shifts that have not yet produced new global leadership configurations. 21st century capitalism in its many guises prompts a thorough rethink of economic policy for effective governance of the various levels of integration across the global economy. At the same time policy space for national development agendas and aspirations has to be accommodated. We need to examine the impact of digital technologies on how we work, where we work and how we connect with the global economy. How do we engineer the transformation of our education and training systems to meet the skills deficits especially among the youth in developing regions, such as Africa? There is clearly much work to be done to recalibrate global trade and broader economic governance.

Brexit continues to make headlines. Uncertainty is the nemesis of good economic decisions – to invest, to produce, to trade and to consume – and it has become the only certain feature of this complex process for the United Kingdom to decouple from the European Union. Currently in the headlines are efforts by the British government to prepare for a ‘no-Brexit’ scenario. Budget allocations to buy fridges to store medication, and many other frantic attempts to prepare for this situation are in the news. As time ticks by, the probability of a ‘no-deal’ exit rises. Brexit reminds us that undoing deeply integrated economic arrangements is complex and costly in terms of the adjustment that will ensue. It is also a reminder that access to information is key to good policy (and other) decisions. For us in Southern Africa, Brexit is material to our relationship not only with the United Kingdom, but also the European Union. The Southern African Development Community Economic Partnership Agreement (SADC EPA) was a long time in negotiation with an important investment, trade and development partner. How Brexit turns out, is very important for this region.

Brexit is also an important reminder that the Southern African Customs Union (SACU), which is also a deeply integrated region, deserves careful appraisal. Discussion about a review of SACU (or parts of the SACU Agreement) has been on the cards for some years. Careful scrutiny of what works for each of the partners, investors, producers, traders and consumers, is essential. The smaller member states have ambitions to expand and diversify their industrial structures. South Africa wants to retain policy space, especially as regards the import tariff to support its industrial development plans. All members are facing stringent fiscal challenges. The future of SACU has to be handled very carefully to retain what works, to provide policy space for all to pursue industrial development ambitions and to manage the complex country-level and regional fiscal challenges. And very importantly the tricky issue of decision making among unequal partners in such an arrangement has to be addressed.

African integration enjoyed a significant resurgence of interest and political support during 2018. The African Continental Free Trade Area (AfCFTA) was the focus of an Extraordinary Summit on 21 March in Kigali, Rwanda. The Agreement was tabled for signature on this occasion. Since then more African Union Member States have signed and twelve have now ratified the Agreement. Twenty-two ratifications are necessary for the Agreement to enter into force. At a meeting of the African Ministers of Trade (AMOT) on the sidelines of the first Intra-African Trade Fair, held in Cairo, this past week, several important decisions were taken. For the tariff concessions, negotiated market access offers are expected to be adopted by January 2020. For services, negotiated market access offers are also expected to be adopted by January 2020. Rules of origin negotiations are expected to be concluded by June 2019. Notably some inconsistencies in the legally scrubbed Annex 9 on Trade Remedies have been identified. The Technical Working Group has been directed to meet early in 2019 and provide feedback on the way forward. Phase 2 of the negotiations (investment, competition policy and intellectual property matters) are to be concluded by June 2020. It is now clear that even if (as is likely) the threshold of 22 ratifications is attained by the end of January 2019, when the African Union Assembly meets, there is still important outstanding work. An incomplete agreement may well enter into force. Keep all stakeholders informed about this process and the uncharted territory we have entered is critical. Many private sector participants are keen to benefit from enhanced market access and better trade facilitation arrangements. This is now the time to start preparations for the implementation phase so that trade under the AfCFTA can start as soon as possible after completion of the negotiations.

South Africa finds itself in a very precarious economic and political time. Economic growth remains elusive and competitiveness erosion runs deep. President Ramaphosa appears to be cautiously and mindfully negotiating his way through a very long list of important reforms and changes. We, and many others, have been taken aback by the depth and pervasive nature of state capture. It will take strong leadership and concerted effort to get government departments and other agencies working efficiently and effectively again.

Valiant efforts on the part of the President to lure investors to South Africa and to encourage domestic investors to commit to the future, are facing the challenges of economic and political realities. Without political and policy certainty (and clear policy direction) this is a herculean task. Together with the myriad challenges that bedevil the state-owned enterprises, which should be delivering quality, competitively priced and reliable infrastructure services such as energy, investment will be difficult to attract. Education must be a priority, with a focus on school-level education. Recent attempts to improve access to tertiary education, are on a shaky foundation. The real problems are to be found much earlier in the lives of our youth. Quality education – education for a 21st century digital economy – is what we need. South Africa’s already sizable budget allocation to education is a strong reminder that new approaches to the delivery of quality education are required; more spending without this, may well be wasting scare resources.

South Africa, as in the immediate period after the democratic transition, again needs a comprehensive policy overhaul. This makes the May 2019 election perhaps the most important since 1994.

On the trade policy front, a new Minister of Trade (after the May election) may well bring a new approach, including a clear strategy for trade in services, which we do not have yet. New thinking on industrial policy and development is also required; current approaches are not able to support economic transformation and reallocation of resources to new areas of industrial and broader economic development. The reality of our global trade relations is important for review of our trade and industrial policy. China became in 2017 South Africa’s most important import source and export destination (see the Overview of South Africa’s trade below). The United States is in the top three for both export destination and import source. Three African countries are among the top 10 export destinations. Two of them (Namibia and Botswana) are members of the Southern African Customs Union. This is very important for the future of SACU. And what of the future trade relation with the United States, post the Africa Growth and Opportunity Act? A trade deal with China seems very unlikely – what are the implications?

We would like to thank you for your support during 2018; it has indeed been an interesting year for trade policy matters. We wish you all the very best for a peaceful and reflective holiday season.

We look forward to meet in 2019, to continue to work on trade policy for Africa’s development.

Access a wide selection of web resources related to AGOA, including national chambers of commerce, export promotion agencies, development and finance agencies, regulatory authorities and trade resources. Click on the various section headings for specific web links.

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