1. Africa Harnessing Globalization
John Hancock
Counsellor, World Trade Organization

2. Globalization has transformed the development dynamic…
“Since 1950, 13 economies have grown at an average rate of 7 per cent a year or more for 25
years or longer. At that pace of expansion, an economy almost doubles in size every decade….
Growth of 7 per cent a year, sustained over 25 years, was unheard of before the latter half of the
20th century.
It is possible only because the world economy is now more open an integrated. This allows for
fast-growth economies to import ideas, technologies, and know-how from the rest of the
world…. An open economy also offers developing countries a deep, elastic market for their
exports….
The growth of GDP may be measured up in the macroeconomic rooftops, but all the action is in
the microeconomic undergrowth, where new limbs sprout and dead wood is cleared always”
Commission on Growth and Development, 2008

3. From trade in goods to trade in tasks… The rise of
global value chains
‘Products are no longer “made in Japan” or “made in France”; they are truly “made in the world”.’
Pascal Lamy, WTO Director-General
“The integrated factory floor, which had dominated manufacturing since the 19th century, has
been replaced with a network of individual suppliers specializing in specific services or phases or
production. In this second great unbundling, production is “sliced and diced” into separate
fragments that can be spread around the globe. … The value of the entire “global value chain”
depends on the way companies are interconnected. The emergence of “Factory Asia” is one
reflection this unfolding process”.
Trade Patterns and Global Value Chains in East Asia, WTO, 2009

6. Economic growth in Africa has been robust - driven by the boom in commodity
prices, which led to very high growth in export values, especially for minerals, to new
fast-growing markets such as India and China.
For example, EAC exports to the OECD countries were over 20 times the value of
those to China in the first half of 2008 ($1.9 billion versus $88 million) but two years
later were only six times higher ($1.7 billion versus $259 million). However, most of
this new trade with China is in primary commodities, particularly precious metals,
which are low value-added and/or capital intensive.
Regional integration in Africa has not provided a springboard for new exports to the
global economy, as happened in East Asia, and cross-border trade remains primarily
informal because the costs of trading across borders in Africa remain very high.

7. A key objectives in Africa is to diversify the export base away from
dependence on commodities and implement policies that allow
more people to participate in trade.
Regional integration and the boosting of intra-regional trade can
play a critical role in achieving these objectives in Africa. Deeper
integration of regional markets can lower trade and operating
costs and relax the constraints faced by many firms in accessing
the essential services and skills that are needed to boost
productivity and diversify into higher value-added production and
trade.

8. There has been considerable success in removing tariffs on intra-regional trade,
especially in Eastern and Southern Africa where, for example, the EAC has
implemented a Customs Union and 85 per cent of intra-regional trade in SADC is
duty free.
Nevertheless, the importance of tariff preferences has diminished. In the modern
world economy the scope for tariff preferences to drive economic integration and
economic development has been very much neutered. This reflects, first, that all
countries in Africa reduced their external tariffs during the final 20 years of the
last century. This has reduced the scope for significant trade preferences in all but
a few sectors.
Second, and more important, as tariffs have come down the need to address a
range of non-tariff barriers that severely limit corss-border trade has become
apparent. At the same time, the declines in communication costs and the splitting
up of production chains to allow different tasks to be completed in different
locations have transformed the nature of global trade. This has put a high
premium of on low transaction costs for shifting goods, services, people, and
capital across borders.

9. But trade priorities have moved beyond tariffs. Old regionalism focused on
the mutual exchange of tariff preferences and trade in goods. The new
regionalism concerns a wide range of regulatory issues and is about the
"trade-investment-services nexus".
One imperative is to address the long-standing problem of overlapping trade
agreements that have different commitments. Many countries are party to
multiple agreements. This hampers trade flows by raising the costs involved
for trades in meeting multiple sets of trade rules and gives rise to
inconsistencies in the rules and procedures applied by the different trade
agreements, distorting regional markets and causing severe problems of
effective implementation.

10. -There is also the potential for regional production chains. In Asia,
advanced production networks have deepened regionally and underpinned
its spectacular global export growth from a poor, underdeveloped
agricultural backwater to becoming the global factory over a 50-year
period. In the 1960's, developing Asian economies lacked natural resources
and had high levels of poverty. There seemed to be little prospect of
economic advancement. However, Asian economies had ample supplies of
inexpensive, productive manpower, not unlike many African countries
today. They were also close to an expanding high-income Japan, with firms
seeking to expand to lower cost destinations. Subsequently, intra-regional
trade in Asia increased significantly, particularly in the production of parts
and components with each process relocating to the most cost-effective
destination in the region.

12. Selected intra- and inter-regional merchandise trade
(excluding intra-EU), 1990
(Billion dollars and percentage in world trade)
Central / Eastern
Europe and former
USSR  Western 25 billion $
Europe 1.1 %
178 190 120 billion $ Asia 
billion $ billion $ %
5.1 North America excl. Mexico
7.6 % 8.1 % 342 billion $
14.5 %
North America excl. Mexico 
Western Europe 9 billion $
254 billion $ 0.4 %
10.8 % 311 billion $
Latin America and the Middle EastAsia
Africa  Western Europe 13.2 %
77 billion $
Caribbean  115 billion $ 3.3 %
North America excl. Mexico 4.9 %
123 billion $ 6 billion $ Western Europe  Asia
5.2 % 0.3 % 268 billion $
20 billion $ 11.4 %
0.9 %
: regional intra-trade 12

13. Selected intra- and inter-regional merchandise trade
(excluding intra-EU), 2000
(Billion dollars and percentage in world trade)
29 billion $
CIS  Europe 0.6 %
418 482 108 billion $ Asia 
billion $ billion $ 2.3 % North America excl. Mexico
8.8 % 10.1 % 653 billion $
13.7 %
North America excl. Mexico 
Europe 23 billion $
461 billion $ 0.5 %
9.7 % 815 billion $
Africa  Europe
Middle EastAsia
Latin America and the 137 billion $ 17.1 %
176 billion $
Caribbean 2.9 %
3.7 %
North America excl. Mexico
400 billion $ 14 billion $ Europe  Asia
8.4 % 0.3 % 490 billion $
61 billion $ 10.3 %
1.3 %
: regional intra-trade 13

14. Selected intra- and inter-regional merchandise trade
(excluding intra-EU), 2009
(Billion dollars and percentage in world trade)
87 billion $
CIS  Europe 1.0 %
442 560 385 billion $ Asia 
billion $ billion $ 4.3 % North America excl. Mexico
5.0 % 6.3 % 911 billion $
10.2 %
North America excl. Mexico 
Europe 107 billion $
623 billion $ 1.2 %
7.0 % 1846 billion $
Africa  Europe
Latin America and the Middle EastAsia
311 billion $ 20.7 %
520 billion $
Caribbean  3.5 %
5.8 %
North America excl. Mexico
547 billion $ 45 billion $ Europe  Asia
6.1 % 0.5 % 1067 billion $
142 billion $ 12 %
1.6 %
: regional intra-trade 14

15. Intra-regional merchandise trade, 1990
Central / Eastern
North Europe and former
America Western 24% USSR
excluding Europe
Mexico
71%*
34% Middle
East
6%
Africa Asia
6%
Latin America and
the Caribbean 14% 42%
Legend
X% Intra trade share
Extra trade share * 29% for Western Europe excluding intra-EU 15
trade

16. Intra-regional merchandise trade, 2000
North
Commonwealth of
America Europe 20% Independent States
excluding
Mexico 73%*
34% Middle
East
9%
Africa Asia
9%
Latin America and
the Caribbean 31% 49%
Legend
X% Intra trade share
Extra trade share * 27% for Europe excluding intra-EU trade 16

17. Intra-regional merchandise trade, 2009
Commonwealth of
North Independent States
America Europe 20%
excluding
Mexico 72%*
28%
Middle
East
16%
Africa Asia
Latin America and 12%
the Caribbean 31%
52%
Legend
X% Intra trade share
Extra trade share * 29% for Europe excluding intra-EU trade 17