|  | tralac Newsletter • Issue 51 • April 11, 2023 | Welcome to the tralac Newsletter
As the threat of dangerous levels of global warming becomes more severe, a hodgepodge of national policies to curb carbon emissions is cropping up globally, having significant impacts on production processes, consumer demand, and trade flows. This creates a range of challenges and opportunities for foreign producers who must comply with the wide range of domestic regulations in export markets. The challenges loom large for firms in developing countries that may lack the data, capacities, and technologies to measure and verify the environmental impacts of their products. As a result of these interventions becoming more widespread, ambitious, and varied, the trade-environment space is a rapidly evolving one that demands close attention. We outline the notable recent developments which are shaping the trade-climate landscape.
Among these developments is the European Union’s political agreement on multiple regulations under the European Green Deal (EGD), the EU’s roadmap for transforming into a climate-neutral and resource-efficient economy by 2050. Two regulations that are particularly relevant to African exporters are the Carbon Border Adjustment Mechanism, and the Regulation on deforestation-free supply chains. The most important features of these regulations are broken down in two infographics (here and here). An important development in the region relates to the Southern African Development Community’s negotiations on trade in services. The second round of negotiations is currently underway and due for completion in October 2023. It covers a range of sectors remaining from round one of negotiations, including environmental services. We look at some of the key issues related to negotiations on environmental services and notable developments in the WTO.
The global water crisis made a much-needed return to the international agenda when the UN opened its first water conference in a generation on World Water Day, the 22nd of March. We discuss some of the findings of the recent UN World Water Development Report relating to Africa’s water security and highlight the importance of inter-state cooperation in managing transboundary water resources.
We look forward to hearing from you.
Best wishes from the tralac Team. | | Upcoming training and events
Save the Date!
The 2023 tralac Annual Conference will take place on 18-19 May in Kigali, Rwanda. More info coming soon.
Training
Reading and Interpreting International Trade Agreements: Case study of the AfCFTA (13-14 and 20-21 April 2023)
Data Science Week (17-21 April 2023)
First module of the tralac Certificate Course (24-28 April 2023) | |  | tralac Blog
Can the private sector save South Africa’s Transnet? South African president, Cyril Ramaphosa, met with board members of state logistics company, Transnet, in late March. According to a press release from his office, the president ‘has directed Transnet to implement reforms swiftly and completely to turn around the crisis is South Africa’s logistics system’. The problem with this directive is that it makes the cause of the problem – Transnet itself – largely responsible for the solution. But the parastatal has a poor recent track record in this regard.
Water Cooperation Essential as Africa’s Water Crisis Intensifies There is a growing global water crisis, driven by climate change, population growth, increased water-intensive production, and the neglect of water infrastructure. The latest edition of the UN World Water Development Report states that globally, 2 billion people (26% of the population) do not have safe drinking water and 3.6 billion (46%) lack access to safely managed sanitation.
A Closer look at Trade in Environmental Services as SADC Prepares for Negotiations The global drive towards reducing greenhouse gas emissions, the increased availability of green finance, and the associated ambitions of firms and governments to improve their environmental performance are boosting the demand for quality environmental goods and services. While it is desirable from a production efficiency and environmental perspective to keep the cost of environmental services low, this objective is impeded by significant trade barriers that remain.
Is the national electricity state of disaster the answer for South Africa? On 1 March 2023, South Africa’s state-owned power utility Eskom reached the 100-year mark. Instead of celebrations, the day passed under the dark cloud of measures published a few days earlier following the Government’s sudden awareness that the people of South Africa were fed-up with its complacency about electricity shortages and rolling blackouts, quaintly termed ‘load shedding’, and their devastating reach into every nook and cranny of society.
Can reducing Non-Tariff Trade Costs in Africa be the gamechanger for the African Continental Free Trade Area The African Continental Free Trade Area (AfCFTA) is set to be the largest free trade area (FTA) in the world with 54 of the 55 members of the Africa Union being signatories to the Agreement. Currently, countries are not trading under the AfCFTA trading regime, however, Phases I and Phase II negotiations have been completed albeit tariff concessions and rules of origin (RoO) negotiations for some products are still underway.
View all tralac Blogs | | Infographics
The European Union’s Carbon Border Adjustment Mechanism
The Carbon Border Adjustment Mechanism (CABM) is one of the key measures envisaged by the European Green Deal (the EU’s Climate strategy for reaching net zero emissions by 2050) launched in 2019. The proposal for the CBAM was formally submitted by the European Commission in July 2021. It has since progressed to the final stages of the EU legislative process: in December 2022, the Council of the EU and EU Parliament reached a provisional agreement on the final text of the CBAM regulation.
The European Union’s Regulation on Deforestation-Free Supply Chains
Combatting deforestation and forest degradation is a part of the European Green Deal with the goal of reaching net zero emissions by 2050 and decoupling economic growth from resource use. This new regulation will build on and replace the existing EU Timber Regulation.
Intra-Africa’s Non-Tariff Trade Costs (2020)
Non-tariff trade costs (NTTC) include, among others: Transport costs; direct and indirect costs associated with differences in languages and currencies; and cumbersome import and export procedures. Over a 10-year period (2011-2020), there have been no significant changes in NTTC on intra-Africa trade. Agricultural products’ NTTC remain much higher than manufacturing products’ NTTC over the review period, although declining much faster over the last 5 years relative to manufacturing products’ NTTC. Intra-REC non-tariff trade costs are lower than between RECs (inter-REC).
View all Infographics | |  | Publications
Recent Developments Shaping the Global Trade and Climate Landscape
National approaches to regulating carbon emissions are diverging significantly, shaped by complex domestic factors. The ideal solution of globally coordinated policies that combine carbon pricing, non-discriminatory subsidies for green technologies, and transfers from high-income to lower-income countries, is looking increasingly unlikely to materialise. Instead, a patchwork of national policies is cropping up that creates a range of challenges and opportunities for foreign producers who must comply with the domestic regulations in export markets. The challenges loom large for firms in developing countries that may lack the data, capacities, and technologies to measure and verify the environmental impacts of their products. As a result of these interventions becoming more widespread, ambitious, and varied, the trade-environment space is a rapidly evolving one that demands close attention. This trade brief discusses some notable recent developments which are shaping the trade-climate landscape.
A questionable answer to South Africa’s electricity crisis: a national state of disaster?
Wednesday, 1 March 2023 marked the centenary of South Africa’s state-owned electricity utility, Eskom. There was little cause for celebration. Instead, the day was marked by a set of disaster management regulations freshly published by the same cabinet minister who oversaw the South African Government’s response to the Covid-19 pandemic.
A so-called state-owned company, with the Government as sole shareholder, and until recently burdened with a monopoly over power generation and transmission and partially over distribution, Eskom fell victim over the last 25 years to short-sighted and ill-directed decision-making, effectively disempowering the utility. Predictably, the publication of the electricity regulations was met with a flurry of comments, ranging from fears of sweeping powers for ministers and others to scepticism about the need for more powers and thus for a national state of disaster as such. Careful reading of the Act in its entirety already raises doubts about its applicability to the ongoing electricity crisis in South Africa. But even if the Act could be invoked, a superficial analysis of the regulations issued under the Act raises serious questions about their validity, as the following overview with some interspersed comments may show.
View all Publications | |  | | Latest AGOA-related News |  | | 2023 Trade Policy Agenda and 2022 Annual Report
On 1 March 2023, the USTR published its 2023 Trade Policy Agenda and 2022 Annual Report, as submitted to the US Congress pursuant to the Trade Act of 1974. It includes recently published full year trade data for 2022 (2021 for services data). The trade policy agenda focuses on a number of key pillars, namely: Advancing a worker-centered trade policy, re-aligning the US-China trade relationship, engaging with key trading partners and multilateral institutions (including the AfCFTA), promoting confidence in trade policy through enforcement, and promoting equitable, inclusive and durable trade policy and expanding stakeholder engagement.
Download the report from AGOA.info at this link. | | Key trade stats for AGOA beneficiaries combined for the year to January 2022 vs. 2023 full |  |  |  | US trade data to the end of 2022 released by the US International Trade Commission reveals that exports to the US from AGOA beneficiary countries grew by 12% between 2021 and 2022, while trade under AGOA rose by 57% and accounted for roughly one third of total exports to the US from these countries. The above table is ordered in descending order by 2022 AGOA exports. Meanwhile, most non-preferential trade takes place in categories that are duty-free on a MFN basis – in 2022, calculated duties amounted to $102m, or around 0.5% of the value of non-AGOA trade.
Data to the end of January 2023 was recently published, showing a significant overall increase in US bound exports compared to January 2022, with aggregate exports from AGOA beneficiary countries climbing by 27% to $2.37 billion, and AGOA trade jumping by 41% to $977 million. Nigeria is slightly ahead of South Africa in January trade, with most exports comprising energy-related categories. South Africa exported almost $400m worth of ‘AGOA goods’ during January, compared to $118 in January 2022, with much of the increase stemming from motor vehicles and ferroalloys. Kenya has also recorded a significant increase, mostly driven by significantly higher apparel exports, and increases also in nut and plant exports. |  |  | | New features on AGOA.info
Various content and functionality updates have been added to AGOA.info recently. For example, it is now possible to look up a product’s AGOA eligibility using a new input tool on the front page (see graphic below) – using either the HTS classification code (or part thereof), or a keyword/phrase. Not all products are explicitly described by the HTS classification system using relevant keywords and may instead be included under various ‘Other’ tariff lines, within the relevant internationally harmonized HS chapter. A new section on the HTS classification system allows users to find the relevant Chapter, and download this alongside relevant notes, relevant for classification purposes. |  | Another new section on US trade remedies meanwhile provides insight into the US trade remedies legislation, and what exporters to the US need to be aware of when selling to US buyers. The section explains the different aspects of trade remedies, such as anti-dumping (selling at below fair value) and countervailing measures (illegal subsidies in the exporting country). Quotas are likewise relevant to exporters of goods to the US market, and several tariff rate quotas (TRQs) apply, where duty-free trade outside of the TRQ falls away. See further details and resources relevant to exporters from AGOA-eligible countries here. The recently completed anti-dumping investigation by the US against lemon juice exports from South Africa (and Brazil) now includes the full report since early March 2023. Download it here.
Keep an eye on the Exporter Toolkit section (AGOA guides and Infographics), where new exporter guides on the US product classification system, Incoterms and more will be available soon. | | AGOA quotas
While AGOA offers beneficiary countries duty-free access to its market in approximately 6,500 tariff lines (the remaining tariff lines are mostly already duty-free on a MFN basis), the program is built on the US Generalized System of Preferences, which removes duties on up to 5,000 tariff lines (depending on the development status of beneficiary countries). The GSP however expired at the end of 2020 and has at this stage not yet been renewed; this has in effect significantly elevated the value of AGOA since dozens of countries around the world currently no longer enjoy US GSP privileges (GSP products are also AGOA eligible). Legislation has meanwhile been drafted that could potentially renew the US GSP. Notwithstanding tariff preferences, AGOA does not do away with quantitative restrictions, for example tariff rate quotas or tariff preference levels (such as those applicable to the apparel sector under AGOA). Exports from AGOA beneficiary countries in tariff lines that are potentially quota-constrained face import duties once the quota has been utilized – sometimes these are a global quota, other times specific to individual countries or country groups. Read more about AGOA quotas and where to look up quota fill rates on AGOA.info here. | | National AGOA Strategies
During 2021 a number of new or updated National AGOA Strategies have been published. These – and previous strategies from other AGOA beneficiaries – are available on AGOA.info in the AGOA Strategies section. The most recent publications involve Namibia’s (new) and Botswana’s (updated) AGOA Strategies, which were facilitated through the support of the USAID TradeHub.
Various AGOA-related infographic styled brochures have been updated recently in the AGOA.info Exporter Toolkit, and are available to download from AGOA.info, with more to follow. See for example Namibia, Botswana, Kenya, Nigeria, Ghana, Malawi, Angola, Ethiopia, Mozambique and Lesotho, as well as the textiles and apparel-specific sector document. |  | | AGOA Business Connector
The AGOA Business Connector is an online facility on AGOA.info to help enable trade and business connections between producers, exporters, importers, sourcing agents, trade-related service suppliers including trade finance, logistics and related services, support organisations (such as business chambers and exporter associations and others), both from within sub-Saharan African AGOA beneficiary countries and the United States. Registered users are also able to list their businesses or professional trade-related service on the platform, and to communicate with other listings through a messaging facility.
> Download the AGOA Business Connector Brochure at this link > Register on AGOA.info and list your business or service |  |  | | | | |
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