metadata: authors: 0: author: Amjadi, Azita
1: author: Reinke, Ulrich
2: author: Yeats, Alexander
count: Africa
docna: 0: docna: Did external barriers cause the
            marginalization of sub-Saharan Africa in world trade?
docty: Policy Research Working Paper
subtopic: Economic Theory & Research,Environmental Economics & Policies,Earth Sciences & GIS,Trade Policy,Export Competitiveness,Free Trade
teratopic: Environment,Macroeconomics and Economic Growth,International Economics and Trade,Science and Technology Development
abstracts: cdata!: OECD barriers did not play a significant
            role in sub-Saharan Africa's declining position in
            world trade over the last three decades. The detrimental
            effects of the African countries' own policies, such as
            those that influence international transport costs, were
            considerably more important. However, OECD countries have
            policy options available that could further improve the
            external environment for, and competitive position of,
            African exports. Given the dimensions of rural poverty
            throughout Africa, and the potential contribution increased
            agricultural exports could make toward its alleviation,
            initiatives relating to this sector should have the highest
            priority. The first chapter of the paper discusses trade and
            African development prospects. Chapter 2 reviews the
            destination and composition of African exports. Chapter 3
            addresses the OECD tariff barriers facing Africa and chapter
            4 the nontariff barriers. Finally, chapter 5 discusses some
            issues relating to transport costs.
repnme: repnme: Did external barriers cause the
            marginalization of sub-Saharan Africa in world trade?
display_title: Did external barriers cause the
            marginalization of sub-Saharan Africa in world trade
listing_relative_url: /research/1996/03/696699/external-barriers-cause-marginalization-sub-saharan-africa-world-trade
publishtoextweb_dt: 2010-07-01T00:00:00Z
historic_topic: Environment,Macroeconomics and Economic Growth,International Economics and Trade,Science and Technology Development
origu: International Trade Division (IECIT)
no_of_pages: 160
model_extractions: POLICY RESEARCH WORKING PAPER 1586

# Summary findings

OECD trade barriers were not a significant factor in SubSaharan Africa's declining position in world trade between the mid-1950s and 1990. Far more detrimental were the African countries' own policies, including those affecting transport costs. It is essential that African countries adopt reforms aimed at achieving cost competitiveness.

Anti-competitive cargo reservation policies in many African countries help inflate international transport costs, which eat up a disproportionate share of African countries' foreign exchange earnings. Deregulation of international shipping and the promotion of competitive shipping services, together with improvements in transport infrastructure, could significantly reduce freight costs.

But policy options available to the OECD countries could also improve the external environment for, and competitive position of, African exports. Policies involving preferences should be viewed as a step toward general trade liberalization. Highest priority should be given to policies favoring agricultural exports. Among policy options the OECD countries should consider: Regional arrangements such as the European Union and the North American Free Trade Agreement discriminate against African and other developing countries. Policy initiatives are needed to at least place them on an equal basis with OECD members in these - arrangements especially for labor-intensive products.

* African exports are concentrated in primary commodities. When further processing is suitable, OECD preferences should be extended to all stages of the processing chain.

> * Given the extreme rural poverty in Africa, measures are needed to reduce protection against African food exports. One option would be to extend (ceiling-free) generalized system of preferences for "tariffied" agricultural nontariff barriers.

* Ceilings and quotas should be eliminated from industrial-country preference schemes to be made consistent with unrestricted intra-OECD preferences extended under free trade agreements.

* OECD countries could also provide technical, finance, development, and policy analysis assistance aimed at alleviating Africa's international transport problems, especially for landlocked African countries.

This paper - a product of the International Trade Division, Policy Research Department - is part of a larger effort in the department to identify barriers to developing countries' exports and assist in their removal. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Sarah Lipscomb, room N5-056, telephone 202473-3718, fax 202-522-1159, Internet address slipscomb@worldbank.org. March 1996. (145 pages) _The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished The papers carry the names of the authors and should be used and cited accordingly. The findings, interpretations, and conclusions are the authors' oun and should not be attributed to the World Bank, its Executive Board of Directors, or any of its mntember countries._ Produced by the Policy Research Dissemination Center
# Did External Barriers Cause the Marginalization of Sub-Saharan Africa in World Trade?

_Azita Amiadi Ulrich Reinke Alexander Yeats_ Staff Members International Trade Division International Economics Department World Bank
(i) OECD trade barriers did not play a significant role in sub-Saharan Africa's declining position in world trade over the last three decades. The detrimental effects of the African countries' own policies, such as those that influence intemational transport costs, were considerably more important. However, OECD countries have policy options available that could further improve the external enviromment for, and competitive position of, African exports. Given the dimensions of rurl poverty throughout Africa, and the potential contribution incrased agricultural exports could make toward its alleviation, initiatives relating to this sector should have the highest priority.
(ii)

# Summary

From the mid-1950s to 1990 Sub-Saharan Africa's share of global exports fell from 3.1 to 1.2 percent -- a decline implying annual export earning losses of equivalent to _$65_ billion in 1990. OECD protectionism was not a significant contributing factor. Pre-Uruguay Round tariffs facing African exports to the EU, Japan and US averaged three-quarters of a percent (about 18 points lower than those the Asian NICs faced when they began their sustained export oriented industrialization drive), and preferences give Africa an edge over some competitors.

Similarly, OECD nontariff barriers do not account for Africa's poor general export performance since the share of Africa's exports subject to NTBs (11 percent) is less than half that for other developing countries. In addition, a major reduction in the importance of NTB protection facing Africa and other developing countries will occur due to the Uruguay Round. All NTBs imposed under the Multifiber Arrangement (MFA) will be phased out over ten years, most "voluntary" export restraints were eliminated, and most nontariff barriers on agricultural goods were converted to tariffs (often at very high levels) and then reduced. As a result, the NTB coverage ratio for subSaharan Africa's non-fuel exports will fall from 11 to about 3 percent.

While these developments are clearly positive for all developing countries as a group, some may incur losses as a result of them. The phase-out of the Multifiber Arrangement _will subject African exporters to aggressive international competition._ Their ability to maintain a viable textile and clothing export sector depends on a capacity to implement necessary reforms aimed at achieving cost competitiveness. Africa should also face more vigorous competition on products like footwear and ferrous metals, where exports from some other countries were formerly restrained by VERs. In other words, discriminatory OECD trade barriers against other developing countries (particularly those in East Asia) probably enhanced the pre-Uruguay external environment for African exports.

In contrast to tariffs and NTBs, international transport costs have had an important negative impact on exports and the location of manufacturing activity in Africa. African freight rates often are considerably higher than those on similar goods originating elsewhere and often conceal high rates of effective protection. African net payments for transport services are very high relative other developing countries and have increased over the last two decades. As such, a large share of foreign exchange earnings, that might have otherwise been employed in productive capacity building investments, is being utilized for payments to foreign transport services.

The anti-competitive cargo reservation policies adopted by most African governments contributes to the adverse freight rates. Recognition of the effects of these policies carries with it the prescription for corrective action -- deregulation, and more attention to improving transport infra-structure. Other regions' experience shows that deregulation, and the promotion of competition for shipping services, may reduce freight rates in the liner trades by as much as 50 percent. These points are important since they indicate more attention should focus on the negative impact of _Africa's own domestic policies_ on its exports.

OECD members have several options relating to tariffs and NTBs for further improving Africa's market access conditions. Those involving preferences should be viewed as a further step toward a general trade liberalization.

* Regional arrangements, like the EU or NAFTA, provide industrial countries trade preferences to each other's markets and _discriminate against_ African and other developing countries. Policy initiatives are needed to, at least, place the latter on an equal basis with OECD members in these arrangements. Some labor intensive products like textiles, clothing and footwear played a key role in the early stages of the newly industrialized countries' transformation, and have a similar potential for Africa. Where they are now excluded (as in United States) these goods should be incorporated into existing GSP schemes -- particularly so since intra-OECD preferences in regional FTAs may severely disadvantage these exports.
(iii)

* Since African exports are highly concentrated in primary commodities there is an strong<sup>interest in</sup> utilizing natural resource based industrialization strategies for their<sup>industrialization. Where further processing is</sup> suitable for developing countries OECD preferences should be extended to all stages<sup>of a processing chain. Also,</sup> an accelerated phase-in of OECD Uruguay Round tariff cuts should be adopted<sup>on products of export interest to</sup> Africa. This could assist Africa in gaining additional experience in potentially important<sup>markets (such as those for</sup> textiles and clothing) which will come under increased competitive pressure due to the MFA phase-out.

* Given the problem of extreme rural poverty in Africa, and<sup>the potential contribution increased</sup> agricultural exports could make toward its alleviation, measures are needed<sup>to reduce protection against African food</sup> exports. One option would be to extend (ceiling free) GSP preferences<sup>for "tariffied' agricultural NTBs.</sup>

* Ceilings and quotas should be eliminated from developed country preference schemes<sup>to be made</sup> consistent with unrestricted intra-OECD preferences extended under FTAs.<sup>Ceilings considerably reduce the</sup> potential worth of the GSP to African countries since, aside<sup>from their direct trade effects, they also introduce</sup> further uncertainty regarding the operation of the system (i.e., African<sup>exporters may not know whether a shipment</sup> will qualify for GSP treatment until its arrival in the import<sup>market). It is also been alleged that ceilings are</sup> sometimes set below minimum efficient plant size. This negates<sup>the intended trade and investment increasing</sup> incentives of the preferences.

* Until the above recommendations are fully accomplished, improved<sup>statistical information is required</sup> on constraints that Africa and other developing countries encounter<sup>in attempting to utilize preferences schemes.</sup> Details are needed on the extent to which quotas or ceilings are exceeded<sup>(with the result that additional African</sup> exports are taxed at the prevailing MFN rate) and the extent to which<sup>exports are disqualified due to existing rules</sup> of origin. Such information is central to any proper assessment of<sup>the economic impact of preferences on the</sup> receiving countries and to initiatives for improving these programs.

# Several OECD policy initiatives could help alleviate Africa's international transport<sup>problems:</sup>

i Technical assistance. International shipping has undergone a major transformation in which procedures for cargo unitization, port operations, and related logistical functions<sup>have evolved into highly complex operations</sup> requiring a considerable degree of technical expertise. Since most<sup>African countries have limited access to such</sup> expertise, technical assistance programs (such as those provided by<sup>UNCTAD and the World Bank) should be</sup> expanded and also extended to related activities (such as customs<sup>clearance procedures) that impinge on the</sup> efficiency of international transport operations.

v Finance and development. Due to insufficient attention and funds, many<sup>African countries' fleets, ports,</sup> and connecting inland transport infrastructure have deteriorated, or have<sup>become technologically outmoded. OECD</sup> countries should sponsor a comprehensive survey and report on<sup>sub-Saharan Africa's transport problems along with</sup> policy proposals for their alleviation. Given the small size of many<sup>African countries, and its influence on cargo</sup> volumes and the utilization of efficient transport technologies, further<sup>attention should be given to the development</sup> of regional ports and required inland infra-structure.

* The situation of land-locked African countries needs special attention<sup>given the major problems these</sup> countries face in transitting their neighbor's territories. A major effort<sup>should attempt to identify the special trade</sup> problems of the land-locked African countries and formulate policy<sup>suggestions for their reduction.</sup>
(iv)

***** More information is needed on the incidence of Africa's international transport costs, particularly for exports to the EU and Japan, for policy analyses and research. Customs officials in these markets should make existing information available and improve procedures for the future collection, processing, and tabulation of transport cost data.
(v)

# Table of Contents

||Pare|
|---|---|
|Chapter 1. INTRODUCTION: TRADE AND AFRICAN DEVELOPMENT PROSPECTS|1|
|Chapter 2. THE DESTINATION AND COMPOSITION OF AFRICAN EXPORTS|4|
|Chapter 3. OECD TARIFF BARRIERS FACING AFRICA|13|
|A. Tariff Protection Against African Exports|14|
|B. The Influence of Tariffs on African Commodity Processing|20|
|C. The Influence of the Uruguay Round on Tariffs|23|
|D. Regionalism and African Exports|27|
|E. Tariffs: The Potential for Positive OECD Policy Action|28|
|Chapter 4. OECD NONTARIFF BARRIERS FACING AFRICA|32|
|A. Pre-Uruguay Round NTBs Facing Africa|32|
|B. The Achievements of the Uruguay Round|42|
|C. Implications for African Exports: The Round's Effects on NTBs|51|
|D. Protection Levels from 'Tariffied" NTBS|56|
|E. Appropriate OECD Policy Action on NTBs|58|
|Chapter 5. ISSUES RELATING TO TRANSPORT COSTS|60|
|A. The Evidence from National Customs Statistics|62|
|B. The Magnitude of Cross-Product Variation in Freight Costs|66|
|C. Effective Transport Protection Facing African Exports|70|
|E. Transport Costs: The Potential Policy Dimension|75|
|Chapter 6: SUMMARY AND CONCLUSIONS|78|
|Statistical Annex 1: Transportation Costs for Regional Groups of African Countries Exports|87|
|Statistical Annex 2: Uruguay Round Concessions Received and Profiles of Protection Facing<br>Sub-Saharan African Countries in the European Union, Japan and the<br>United States|96|
(vi) Tables

|Table|Description|Page|
|---|---|---|
|1|The Geographic Destinations of Sub-Saharan African Countries' Exports; 1991 or Latest<br>Year Available|_5_|
|2|The Structure of Sub-Saharan African Countries' Exports; 1990 or Latest Year Available|10|
|3|Sub-Saharan Export Products Facing MFN or Preferential Duties in the European Union<br>(No. of tariff line items)|_15_|
|4|The Incidence of OECD Tariffs on Sub-Saharan African Countries' Non-Oil Exports (all<br>figures in percent)|18|
|5|Margins of EU Tariff Preferences Provided Sub-Saharan African Countries Over Selected<br>Commodity Processing Chains|22|
|6|OECD Uruguay Round Tariff Concessions on Products of Export Interest to Africa|25|
|7|Nontariff Measure Coverage Ratios for OECD Imports from Developed, Developing and<br>Sub-Saharan African Countries|33|
|8|The Share of African Exports Covered by Nontariff Measures: All OECD Countries and<br>Major Industrial Markets|36|
|9|The NTB Coverage of Major Product Categories of African Exports to OECD Markets|39|
|10|The Relative Importance of Different Types of OECD Nontariff Measures Facing African<br>Exports|43|
|I I|Pre and Post Uruguay Round NTB Coverage Ratios for Individual Sub-Saharan African<br>Countries|53|
|12|Nominal Protection Afforded by 'Tariffied" Nontariff Barriers Facing OECD Agricultural<br>Imports|57|
|13|African Transport Costs for Exports to the United States Compared with Competing<br>Nations|65|
|14|Air and Vessel Rates for Sub-Saharan African Countries Major Exports Products to the<br>United States|68|
|15|Statistical Indices Relating to the Level, Distribution and Range in Regional African<br>Countries' Transport Costs for Exports to the United States in 1993|71|
|16|Nominal and Effective Rates of Tariff and Transport Protection Against African Exports<br>of Processed Goods to the United States|74|
(vii)

# ApRendix Tables

|Table|.~~~~~~~~~<br>Description|_<br>Page|
|---|---|---|
|Al-I|Air and Vessel Freight Rates for Low Income East and Southern Africa's Major Export<br>Products to the United States|88|
|A1-2|Air and Vessel Freight Rates for Low Income West Africa's Major Export Products to the<br>United States|90|
|Al-3|Air and Vessel Freight Rates for Middle Income East and Southern Africa's Major Export<br>Products to the United States|91|
|Al-4|Air and Vessel Freight Rates for Middle Income West Africa's Major Export Products to<br>the United States|92|
|A1-5|Air and Vessel Freight Rates for African Oil Exporting Countries' Major Export Products<br>to the United States|93|
|A1-6|Air and Vessel Freight Rates for the Republic of South Africa's Major Export Products|94|
|A2-1<br>to<br>A2-40|OECD Uruguay Round Tariff Concessions for Products of Export Interest to Sub-Saharan<br>African Countries|97|
# Boxes

|Box|Title|Page|
|---|---|---|
|1|Tariffs Facing East Asian Exporters at the Start of their Industrialization Drive Compared<br>with those Facing Sub-Saharan Africa Today|17|
|2|An Extract from the Cartegena Commitment|29|
|3|Nontariff Barriers Applied to OECD Energy Imports|_45_|
|4|Nontariff Measures and International Price Stability|48|
|5|Implications of the Removal of the MFA for African Countries|_50_|
|6|The Incidence of International Transport Costs on Exporters and Importers|61|
|7<br>_=_|Cargo Reservation Legislation in West Africa|76|

Figures

|Figure|Description|Page|
|---|---|---|
|1|The Destinations of Sub-Saharan Africa and All Developing Countries' Exports|7|
|2|The Commodity Composition of Sub-Saharan Africa and All Developing Countries'<br>Exports|12|
|3|The Estimated Total Effect of Tariff and Nontariff Protection for Textiles and Clothing in<br>the United States|41|
|4|Illustration of the Impact of the Uruguay Round on the Profile of Nontariff Protection<br>Facing African Countries|_55_|
# **I.** Introduction: Trade **and African** Development **Prospects**

Economists have long recognized that expanded export opportunities can provide an important stimulus to developing countries' industrialization and growth. For example, Helleiner (1972), Keesing (1967) and Meier (1968) drew on economic theory to show how increased exports can accelerate growth through: (i) learning effects from the development of new products, technologies and information sources; (ii) opportunities to achieve scale economies that could not be realized in many developing countries' relatively small domestic markets; (iii) benefits from increased linkages between export industries and other sectors of the economy; (iv) weakening of monopoly elements that may affect foreign trade which, in turn, would result in more favorable import and export prices; or (v) less reliance on exports of primary commodities whose unstable prices may make development plamning difficult. Numerous empirical studies (see among others Balassa 1977, 1984, Kravis 1970) document the superior growth and industrialization performance of developing countries that adopted outward oriented (export) growth strategies.' In spite of the potentially important positive effects attributed to increased exports, it is sometimes argued that OECD trade restrictions may impair developing countries ability to pursue trade related growth strategies.<sup>2</sup> Given the importance that has sometimes been attached to the potential negative impact of developed countries' trade barriers, this study examines their influence on sub-Saharan African exports. The focus is on Sub-Saharan Africa due to the below average growth and export performance of this region.<sup>3</sup> From the mid-1950s to 1990 Africa's 'Meier (1968, Chapter 7) provides a useful review of arguments advanced in support of outward oriented as opposed to import substitution policies. Key elements of the latter often center on the promotion of infant industries, or efforts to reduce expenditures of limited foreign exchange. See Yeats (1979, Chapter 2) or Little, Scitovsky and Scott (1970) for further assessments of import substitution policies.

2For example, the Commonwealth Secretariat (1982, p. 61) stated 'Protectionist measures (in industrial countries) discriminate against developing countries. For not only has it been on the products in which these countries are primarily interested that most of the new quantitative restrictions have been imposed, but it is also the developing countries (especially the poorer ones) which have suffered most. The most important restrictions, as far as developing countries are concerned, have been on textiles and clothing; exports of this group of products are so significant for these countries, and increasingly so for the poorer and smaller ones, that they regard developments under the umbrella of the MFA as a barometer of developed country attitudes towards protectionism in general. Their experience in this respect has been discouraging." 3UNCTAD (1993) reports world trade grew at an annual rate of 6 percent over 1980-1990, yet the exports of sub-Saharan African countries _declined_ by 2.1 percent over this interval. The UNCTAD report also shows African exports are more highly concentrated in primary commodities than are those of other developing countries.
2 share of global exports fell from 3.1 to under 1.2 percent -- a decline that implies associated export earning losses of about $65 billion annually (1990 exports of sub-Saharan Africa totaled about $38 billion). The objective of this study is to determine the extent to which "external" barriers and policies in OECD countries contributed to this decline. In addition, the study examines the role played by international transportation costs since recent investigations show the nominal equivalents of these charges on developing countries exports are often considerably greater than tariffs, and policy measures often are available for their reduction.

The study proceeds as follows. First, detailed information on the composition and direction of African exports is examined to identify markets and products on which this analyses should focus. An attempt is then made to determine which African countries and products were most heavily affected by pre-Uruguay Round tariffs and how this situation changed as a result of the negotiations. To help assess the restrictive effects of OECD tariffs, comparisons are made between those facing Africa and the successful developing country exporters in East Asia. East Asia is used as a standard for comparison since the tariffs applied to its exports did not stop these countries' sustained export-led industrialization drive after the mid-1960s. Profiles of pre-Uruguay Round nontariff barrier protection against African exports are also analyzed, and empirical analyses are undertaken to show and evaluate the changes resulting from the multilateral trade negotiations. The possibility that some elements of the Uruguay Round agreement on NTBs may have negative effects on African countries export prospects is considered, and policies Africa could adopt to avoid these adverse effects are discussed. In addition, this report also examines a number of policy options relating to tariffs and NTBs the OECD countries might adopt to improve the competitive position of African exports.

Using balance of payments information and national customs statistics the study examines the influence of air and vessel transport costs by estimating their ad valorem incidence on African exports relative to those on similar products from other countries. Given their transit problems, freight cost information for the "land-locked" countries is compared with that for other African exporters in order to determine the magnitude of the adverse differential transport barriers they face. The concept of "effective" protection is employed to assess the influence of transport costs on the location of export oriented industries in Africa, and to determine how freight costs affect African countries' ability to pursue natural resource based industrialization strategies. The study concludes with an overall
3 assessment of the findings and a discussion of policy options available to combat the adverse influence of trade and transport barriers. The basic conclusion is that OECD trade barriers have not played a major role in sub-Saharan Africa's relative decline in world trade over the last two or three decades. Rather, more attention must be given to the detrimental effects of the African countries' own domestic policies -- particularly those that influence transport costs. However, OECD members have policy options available that could improve the external environment for, and competitive position of, African exports. Given the dimensions of rural poverty in Africa, and the potential contribution increased agricultural exports could make toward its alleviation, OECD initiatives relating to this sector should have the highest priority.
4

# II. The Destination and Composition of African Exports

Empirical analyses show major short, or even medium-term changes, in the origin or destinations of a country's trade do not frequently occur (see UNCTAD, 1992 and other years). Finance, commercial ties, transport and other logistical problems such as North-South liner conference routes are preventive factors, as are distance to alternative markets, or cultural elements like language differences (Safadi, Primo-Braga and Yeats, 1994). Established shipping routes tie some developing countries to a relatively few OECD markets, and efforts to trade with others may involve costly transshipment through way-ports. Therefore, one should focus on the effects of trade barriers in markets that are presently the major destinations of African exports since they will, in all likelihood, be of major importance within the near future.

Table 1 shows the value and share of individual African countries' exports to all developed and developing countries, as well as to selected regional destinations, while Figure 1 shows trade weighted totals for all sub-Saharan Africa. The latter also provides similar statistics for all developing countries as a group in order to show the extent that Africa's direction of trade differs from that of other developing countries. This is an important consideration since empirical research shows that countries which are overly dependent on a relatively few markets for imports and exports may experience adverse trade effects.<sup>4</sup> Some caution is warranted regarding these comparisons, however, since it is generally accepted that some intra-African trade is unrecorded.

Table I and Figure 1 show sub-Saharan Africa's reliance on developed countries is considerably greater than average for developing countries with their dependance on OECD Europe being especially important. About 4Numerous "structure-performance" studies of industral countres' domestic markets show a common pattern. When aggressive inter-firm competition is absent consumers pay higher (monopoly) prices, while other firm performance measures are poorer than in more competitive markets (See Bain 1951, Bell and Murphy 1969, or Mann 1966 for Ulustrative examples). Economist frequently employ measures like the share of the three largest firms in a market as an (inverse) proxy for the level of aggressive competition. Subsequent empirical studies show these conclusions also hold for international markets. That is, a country is likely to receive a lower price for exports, and pay a higher price for imports, if aggressive competition is absent from its foreign trade sector (See Avramovitc 1978, Edward 1972, Helleiner 1978, or Yeats 1981).
Table 1. The Geographic Destinations of Sub-Saharan African Countries'<sup>Exports; 1991 or Latest Year Available.</sup>

|||-____________|___________|||Major Ge|ographic Dest|inations(%)||||
|---|---|---|---|---|---|---|---|---|---|---|
|||||of whic|h:|||||of which:|
||World|Developed|||||Eastern|Socialist|Developing||
|Exporting Country|(S million)|<br>Countries|Europe|North<br>America|Japan|Others|Europe|Asia|Countries|Developing<br>Africa|
|Angola|3,105.4|78.1|25.1|52.6|0.1|0.3|0.8|0.1|20.8|1.5|
|<br>Benin|<br>49.1|74.7|55.8|5.7|13.3|-|0.9|3.4|18.0|18.0|
|Burundi|78.0|89.1|76.8|11.8|0.5|_-||-|10.5|8.8|
|<br>Burkina Faso|160.0|42.2|40.3|0.4|1.6|-|-|-|58.4|40.3|
|Carneroon|1,246.0|69.4|66.3|2.5|0.6|0.1|1.8|_6.5_|22.4|14.5|
|<br>Cape Vert|<br>6.5|92.3|61.5|29.2|1.5|-|-|-|7.7|7.7|
|<br>Central African Rep.|139.5|94.8|94.1|0.6|-|0.1||0.4|4.8|3.6|
|<br>Chad|132.8|37.2|31.4|0.1|5.7||-|-|52.8|54.7|
|Comoros|18.9|94.7|69.8|24.3|0.1|_|-|_|5.3|1.6|
|Congo|855.0|97.2|60.9|36.3|-|-|0.1|-|2.5|2.3|
|<br>Cote d' Ivoire|2,953.0|61.7|53.5|7.1|0.7|0.4|2.6|0.2|29.3|26.8|
|Djibouti|17.4|65.7|63.0|0.1|0.1|-|-|-|34.2|9.1|
|<br>Ethiopia|294.2|66.4|40.3|11.2|14.9|0.2|4.8|0.2|26.3|12.7|
|<br>Equatorial Guinea|25.4|94.1|93.7|-|-|-|-|-|5.5|2.4|
|<br>Gabon|<br>2,460.5|82.8|47.7|29.7|4.1|1.2|0.4|0.7|15.2|3.6|
|Gambia|40.0|65.2|37.7|4.5|23.0|-|-|-|33.2|20.0|
|<br>Ghana|1,198.9|81.6|63.4|12.8|5.4|0.1|4.6|0.2|10.0|3.1|
|Guinea|420.5|89.0|52.2|36.7|-|-|-|-|11.0|4.7|
|<br>Guinea Bissau|11.7|76.1|66.7|9.4|-|-|-|-|23.9|0.1|
|<br>Kenya|1,121.1|56.2|48.6|4.3|1.3|2.0|1.4|-|35.0|21.4|
|<br>Liberia|379.9|80.0|77.1|1.5|0.9|0.4|1.0|-|19.0|0.2|
|Madagascar|314.0|88.9|64.4|14.6|9.8|-|1.7|1.1|6.9|3.1|
|<br>Malawi|454.0|85.1|46.9|16.5|10.0|11.8|-|-|13.6|9.5|
|<br>Mali|307.9|33.0|28.6|2.6|1.7|-|12.7|11.6|40.6|19.9|
|Maurhania|451.0|80.1|58.3|2.3|19.5|-|10.7|-|7.5|7.1|
|Mauritus|1,208.0|84.5|71.9|11.1|0.2|1.3|2.0|_|6.1|3.9|
|Mozambique|<br>239.8|51.2|31.3|13.0|6.7|-|-|-|48.8|12.0|
|<br>Niger|240.8|87.4|83.4|3.9|0.1|_|-|0.1|11.1|10.6|
|<br>Nigeria|12,004.0|95.7|48.6|45.9|0.2|-|0.1|-|4.2|3.1|
|<br>Reunion|<br>210.2|12.9|7.2|-|4.8|9.1|-|-|87.1|9.8|
|<br>Rwanda|99.3|82.8|75.7|6.3|0.7|-|_|4.4|6.9|2.3|
|Sao Tome&Principe|7.5|96.0|96.0|_-||-||-|4.0|-|
|<br>Senegal|737.7|63.6|60.7|0.4|2.5|_|_|_|28.8|16.5|
|Seychelles|18.2|72.5|70.4|-|-|_||_<br>_|<br>27.1|20.3|

U'
Table 1. Continued.

|I________________|_________<br>World|Developed||of whic|Major**G**<br>h:|eographic D<br>g p c|**e**stinations (%)<br>tn<br>Eastern|<br>Socialist|_________Mo<br>Developing|of which:|
|---|---|---|---|---|---|---|---|---|---|---|
|Exporting Country|**(S**million)|<br>Countries|Europe|North<br>America|Japan|Others|Europe|Asia|Countries|Developing<br>Africa|
|Sierra Leone|145.4|96.5|59.1|36.2|1.3|_|_|-|1.5|1.3|
|Sonalia|81.0|61.1|60.2|0.4|0.5|-|-|0.5|38.4|1.0|
|South Africa, Rep.|17,052.0|80.4|55.2|12.4|10.8|2.0|0.1|-|15.3|6.1|
|Sudan|554.0|35.4|26.1|3.2|6.0|-|9.0|1.6|53.8|1.1|
|Togo|306.4|52.0|38.2|13.0|0.2|0.6|_6.5_|0.1|41.4|19.2|
|Uganda|152.1|90.5|76.5|10.6|3.3|0.1|0.4|-|9.1|7.1|
|Tanzania, United Rep.|404.0|68.7|59.4|4.5|4.5|0.3|1.8|0.8|30.7|7.1|
|Zaire|853.0|84.5|54.8|22.2|7.4|0.1|1.2|1.2|11.2|5.4|
|Zambia|1,347.5|65.7|34.5|1.6|29.1|0.4|-|12.3|21.8|11.9|
|Zimbabwe|1,467.6|73.4|44.1|7.3|5.5|16.6|0.6|1.8|23.9|17.2|
|MEMO ITEM|||||||||||
|All Sub-Saharan Africa|54,657.2|80.6|51.2|22.1|5.6|1.4|0.9|0.7|15.4|7.5|
|All Developing Countries|708,947.0|63.1|25.5|24.0|12.0|1 .3|3.1|3.6|27.2|2.6|

l________ Note: The shares shown in Table I may not sum to 100 since some sub-Saharan countries trade has not been fully allocated to proper country destinations. That is, some exports are classified as going to 'not elsewhere specified" (n.e.s.) destinations, 'not elsewhere classified" (n.e.c.) destinations, or to bunkers and ships stores.

Source: Compiled from United Nations COMTRADE records or United Nations Conference on Trade and Development, Handbook of International Trade and Development Statistics 1992, (New York: United Nations, 1992).
# Figure 1: The Destination of Sub-Saharan Africa's and All Developing Countries<sup>Exports</sup>

<!-- Start of picture text --> 90<br>s0<br>70<br>60<br>° 50<br>140<br>30<br>20<br>10<br>0<br>Developed Europe North Japan o0he Eastern Socialist Developing Developing<br>Countries Aerica Europe Asia Countries Africa<br>of Which: of Which:<br>| AlI Sub-Saharan Africa *AII DOvYioping Countries<br><!-- End of picture text -->
**8**

80 percent of the SSA countries' exports go to developed countries, and the proportion for Cape Verde, Central African Republic, the Comoros, Congo, Equatorial Guinea, Nigeria, Sao Tome and Principe, Sierra Leone and Uganda exceeds 90 percent. Overall, the share of African exports going to developed country markets is 18 percentage points higher than that for all developing countries, while OECD Europe's share is twice as high (51.2 versus 25.5 percent). Collectively, the share of sub-Saharan African exports to other developing countries is 12 points lower than average, while Japan's share (under 6 percent) is about one-half the developing country average. Developments in Europe, therefore, are of primary importance for any assessment of the near term prospects for African exports.

Having established that OECD markets constitute the major destinations for African exports, a related question concerns the composition of Africa's exports? Table 2 provides statistics on the product composition of each African country's exports while Figure 2 provides similar information for the region as a whole. To facilitate comparisons similar statistics are also given for all developing countries combined. As shown, sub-Saharan African exports consist of a far higher share of agricultural materials, and minerals and nonferrous metals than exports from all developing countries combined (61 versus 33 percent), and a much lower share of manufactures (19 versus 54 percent). Mauritius, the Republic of South Africa and the Central African Republic are outliers with one-third, or more, of their total exports consisting of manufactured goods.<sup>5</sup> This point is important since materials which normally serve as production inputs (i.e., the types of export goods Africa specializes in) typically face low or zero tariffs and relatively few NTBs. For example, the four largest products, namely, crude petroleum (SITC 331), pearls and precious stones (SITC 667), cocoa (SITC 072) and coffee (071) account for 66 percent of African exports to the OECD. None of these items encounter nontariff measures in the European Union, Japan and United States. Japan, however, does apply quantitative restrictions to some refined petroleum products. Also, import duties are zero on these products, although EU tariffs range from 8 to 16 percent on coffee extracts and several coffee 5Manufactures include items in SITC 5 through 8 less SITC 68 (nonferrous metals). Included within this range is the three-digit group "pearls and precious stones" (SITC 667). The SITC system does not distinguish between cut and polished gems (which should be considered a manufacture) and uncut gems (which should not). The Central African Republic's exports are composed mostly of uncut stones which, due to the deficiency in the SITC system, are classified as manufactures. In other words, if uncut stones could be identified separately the share of manufactures in the Central African Republic's exports probably would be far lower than shown in Table 2.
9 products above the roasted bean stage. OECD trade barriers are, however, applied with an above average frequency to temperate zone agricultural products and labor intensive manufactures -- goods which constitute a relatively low share of African exports (see UNCTAD 1993 or Laird and Yeats 1990).
Table 2. The Structure of Sub-Saharan African Countries' Exports; 1990 or Latest Year Available.

||||AGGREGA|By Main<br>TE SITC G|Categories of E<br>ROUPS|xport Produ|cts (percentage<br>M|)<br>anufactures, of w|hich:||
|---|---|---|---|---|---|---|---|---|---|---|
|Exporting Country|Value<br>($ million)|All<br>Foods|Agricultural<br>Materials|Fuels|Ores &<br>Metals|Manu-<br>factures|Chemicals|Other<br>Manufactures|Machinery &<br>Transport|Unallocated<br>Trade|
|Angola|1,296.4|16.4|0.3|82.1|-|1.0|-|0.5|0.4|0.2|
|Benin|49.1|61.8|25.0|4.2|1.1|3.4|0.4|1.9|1.1|4.5|
|Burundi|75.0|65.7|3.6|-|2.5|2.0|0.1|1.6|0.3|26.1|
|Burkina Faso|160.3|27.5|42.0|-|0.1|11.0|0.1|8.1|2.8|19.4|
|Cameroon|1,281.6|35.5|19.0|18.0|11.4|15.2|1.6|8.3|5.2|0.9|
|Cape Verde|6.5|50.8|3.1|-|26.2|12.3|-|6.2|6.2|7.7|
|<br>Central African Republic|139.5|17.3|27.6|-|5.2|48.2|0.1|47.6|0.6|1.7|
|Chad|132.8|44.6|45.9|-|0.3|9.0|0.5|3.5|_5.1_|0.2|
|Comoros|12.4|71.0|1.6|-|0.8|26.6|25.0|1.6|_||
|Congo|776.9|1.3|9.0|81.4|1.4|6.6|-|5.7|0.9|0.4|
|<br>Cote d' Ivoire|2,940.4|49.9|18.3|14.5|0.3|16.8|3.5|11.3|2.1|0.2|
|Djibouti|24.9|39.1|4.7|-|0.2|7.8|0.2|1.0|6.0|-|
|<br>Ethiopia|294.2|63.3|25.1|6.2|-|5.3|2.0|3.2|-|0.1|
|Equatorial Guinea|25.4|57.9|30.0|-|7.5|4.0|-|2.6|0.6|-|
|<br>Gabon|1,692.8|1.1|10.6|74.2|10.6|3.4|1.7|1.5|0.2|0.2|
|Gambia|40.6|72.9|0.5|-|0.2|25.9|-|25.1|0.7|0.5|
|Ghana|1,072.3|41.0|11.1|3.4|21.2|13.4|0.1|13.0|0.3|9.9|
|Guinea|420.5|3.4|0.3|-|95.0|0.5|-|-|0.2|-|
|Guinea Bissau|11.7|73.0|2.0|-|7.8|4.9|1.6|1.4|1.6|-|
|Kenya|1,054.3|58.5|7.7|14.2|1.4|17.3|3.1|12.6|1.7|0.9|
|Liberia|404.4|8.8|29.1|0.1|59.7|1.0|0.1|0.4|0.5|1.4|
|Madagascar|321.9|69.7|4.5|1.0|9.4|15.2|_1.5_|12.7|1.0|0.2|
|Malawi|417.6|90.5|3.2|-|0.1|4.8|-|4.6|0.2|1.4|
|Mali|270.7|22.6|65.8|0.1|0.1|6.8|0.1|4.4|2.3|4.6|
|Mauritania|447.1|47.3|0.4|1.9|48.6|0.5|-|0.2|0.3|1.1|
|Mauritius|1,180.5|31.1|0.5|-|0.1|68.1|0.3|65.1|2.7|0.2|
|Mozambique|101.1|65.7|4.0|0.1|12.1|17.5|0.4|15.5|1.6|0.7|
|<br>Niger|579.7|11.4|0.6|1.1|84.7|2.0|-|1.5|0.5|0.1|
|Nigeria|13,649.3|1.8|1.5|93.6|0.7|2.1|0.3|1.6|0.2|0.3|
|<br>Reunion|<br>185.6|82.4|0.5|0.2|0.4|16.6|2.5|5.8|8.3|-|
|Rwanda|97.6|69.2|9.1|-|2.4|4.7|2.8|1.7|0.2|14.7|
|Sao Tome & Principe|7.4|91.2|2.2|-|0.2|6.3|1.7|1.6|1.6|-|
|Senegal|782.6|53.2|2.7|12.4|9.3|22.5|14.9|5.2|2.4||
|Seychelles|34.2|37.1|0.3|55.6|-|7.0|_|2.0|5.0||

I-
Table 2. Continued.

||||AGGREGA<br>|By Main Ca<br>TE SITC GR|tegories of E<br>OUPS<br>|xport Produc<br>|ts (percentage)<br>M|anufactures, of wh<br>|ich:<br>hi &|Ulld|
|---|---|---|---|---|---|---|---|---|---|---|
||Value|All|Agricultural||Ores &|Manu-||Other|Macnery|naocate|
|Exporting Country|<br>($ million)|<br>Foods|<br>Materials|Fuels|Metals|factures|Chemicals|Manufactures|<br>Transport|Trade|
|Sierra Leone|142.8|24.6|3.9|3.5|40.9|26.1<br>|_|26.0<br>|0.1<br>|1.0<br>|
|Somalia|81.0|90.4|6.8|0.2|1.1<br>|1.1<br>||0.5<br>|0.6<br>|0.4<br>|
|South Africa, Republic of|18,968.8|13.6|9.2|13.9|26.4|34.4|6.5|24.3<br>|3.6<br>|2.5<br>|
|Sudan|573.0|38.6|59.5|-|0.3|1.0<br>|-<br>|0.3<br>|0.7<br>|0.5<br>|
|Togo|267.9|23.0|21.5|-|44.7|9.1<br>|0.4<br>|8.0<br>|0.7<br>|1.8|
|Uganda|152.1|88.9|10.0|-|0.1<br>|1.1<br>|0.1<br>|0.3<br>|0.6<br>|-<br>|
|Tanzania, United Republic|284.9|49.2|22.4|_1.5_|14.5|11.8<br>|0.9<br>|8.4<br>|2.5<br>|0.5<br>|
|Zaire|999.3|8.7|4.5|12.7|55.2|16.6|0.1<br>|15.7<br>|0.8<br>|2.3<br>|
|Zambia|1,347.5|3.9|1.4|0.1|83.4|11.2<br>|0.1<br>|10.8<br>|0.3<br>|0.1<br>|
|Zimbabwe|1,467.6|44.1|7.3|0.7|15.9|30.9|1.7|25.6|3.6|1.1|
|MEMO ITEM|||||||||||
|All Sub-Saharan Africa|53,688.4|18.5|8.3|36.3|16.6<br>|18.8<br>|3.0<br>|13.8<br>|2.0<br>|1.5<br>|
|All Developing Countries|708,947.0|11.4|3.3|26.0|4.2|53.9|3.8|29.9|17.4|1.2|

Source: Data Compiled from United Nations COMTRADE records and<sup>UNCTAD, Handbook of International Trade and Development Statistics. 1992. In some cases the total trade values</sup> reported in this table may differ from those shown in Table 1. Where<sup>this occurs data on the direction of trade had to be taken from a different year than the above statistics on the</sup> composition of trade.

Note: In terms of the SITC (Revision 1) classification the products groups shown<sup>in this table are defmed as follows: All foods and Feeds (SITC 0+ 1 +22+4); Agricultural Raw Materials</sup> (SITC 2-22-27-28); Fuels (SITC 3); Ores, Minerals and Metals (SITC<sup>27+28+68); Manufactures (SITC 5+6+7+8-68); Chemicals (SITC 5); Other Manufactures (SITC 6-68); Machinery</sup> and Transport (SITC 7).
Figure 2: The Commodity Composition of Sub-Saharan Africa's and Developing Countries' Exports <!-- Start of picture text --> so<br>50<br>40<br>a.<br>30<br>U<br>20<br>10<br>0 A<br>AX od Agdkuftwrd Mue.eFUal ores & metlso MusWechtut of w1ich: Chmemical Other Mufeariutcue Machiner & Trm~pr<br>U All Sub-Saharan Africa U All DevelopingConie<br><!-- End of picture text -->
13

# III. OECD Tariff Barriers Facing Africa

A problem which complicates assessments of the importance of tariff barriers in OECD countries is the widespread departure from the most-favored-nation (MFN) principle in their trade regimes. Recently these departures have taken the form of regional trade preferences, such as the Canada-United States Free Trade Arrangement, NAFTA, the Australia-New Zealand Free Trade Arrangement, or European Community and EFTA preferences for Eastern Europe.<sup>6</sup> Developing countries receive important trade preferences under the OECD countries' Generalized System of Preference (GSP) schemes, and through preferences extended under the European Union's Lome Convention to former colonial associates, while the US Caribbean Basin Initiative (CBI) extends tariff preferences to Caribbean countries.<sup>7</sup> Developing countries in Africa receive one of two types of general preferences: those the EU provides under the Lome Convention, and those extended under the GSP. Many GSP schemes differentiate between developing countries and United Nations designated "least developed countries" (LDC) and extend even lower preferential tariffs to the latter. Least developed countries in Africa are: Benin, Botswana, Burkina Faso, Burundi, Cape Verde, Central African Republic, Chad, Comoros, Djibouti, Equatorial Guinea, 6Braga and Yeats (1992, Table 1) estimate that almost 50 percent of world trade in manufactures occurs under preferences. European trade accounts for almost two thirds of this total with the EU and EFTA arrangements being of particular importance. Aside from the intra-trade of countries within these two groups, which is all duty free, a protocol allows for duty free trade in manufactures between EU and EFTA. According to Braga-Yeats tabulations the European arrangements cover a trade value more than _seven times greater_ than that of NAFTA intra-trade. See Harmsen and Leidy (1994) for a listing of free trade arrangements that have been notified to the GATT.

'Several points should be noted concerning GSP preferences. First, some agricultural and manufactured products are exempted from their coverage and developing countries' exports of these goods encounter MFN tariffs. The exemptions are important as UNCTAD (1994, p. 8) estimates that approximately 51.6 percent of developing countries' exports of products subject to OECD MFN duties are afforded preferences. However, for various reasons like preference ceilings or rules of origin only about 50 percent of GSP eligible products actually receive this treatment. This implies that preferential terms of market access only occurs for about one-quarter of developing countries' exports of goods subject to MFN duties. Second, GSP treatment may be withdrawn from specific products once predetermined ceilings are reached. Third, several countries like Singapore, Hong Kong and Taiwan (China) have been "graduated" from GSP schemes (it is unlikely this would happen to a SSA country in the foreseeable future) and no longer receive their tariff preferences. Other developing country suppliers may also have GSP preferences withdrawn if they fail "competitive need" tests, i.e., they are judged able to compete successfully with other suppliers without preferences.
14 Ethiopia, Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, Sao Tome and Principe, Sierra Leone, Somalia, Sudan, Togo, Uganda, Tanzania, Zaire and Zambia.

# A. Tariff Protection Against African ExRorts

The previous analysis showed Sub-Saharan exporters are primarily dependant on developed countries for export markets and, within this group, the European Union is of special significance. Analysis of the terms of access that African countries have in the EU is, therefore, of key importance in any assessment of the influence of tariffs on African exports. Table 3 summarizes the pre-Uruguay Round profile of tariffs facing African countries in this market by showing the number of products exported from Africa that faced: (i) zero MFN duties; (ii) preferences that reduced the duty paid to zero; (iii) non-zero preference rate lines; and (iv) products where the African country faced a non-zero MFN tariff. These data attest to the overall extent of European preferences for Africa, although it should be noted that the ability of African countries to effectively utilize these preferences may be diminished by ceilings (after these ceilings are exceeded further imports are taxed at the MFN rate), or by nontariff barriers applied independently from the preference programs. Import quotas applied under the MFA, for example, diminish the ability of some developing countries to utilize textile and clothing preferences. Finally, for comparison, the table contrasts the African countries' situation with that of two more industrialized exporters, namely, Republic of Korea and Taiwan (China).

Table 3 shows that most African countries' exports are concentrated in a relatively few tariff lines and EU trade preferences cover a high share of these items. As an illustration, Angola exported 134 tariff line products to the European Union (see the right most column -- the EU customs schedule contains 9,506 lines) and 25 of these items faced a zero MFN tariff. However, on 106 line items Angola received a zero preference rate (second column from the left) with the result that 131 or 98 percent of its exports enter the EU duty free -- provided that they satisfied established EU 'rules of origin' and did not exceed any existing ceilings. In two tariff lines (involving exports of fresh grapes and strawberries) Angola did not receive preferences and, as a result, paid the full MFN tariff.
Table 3. Sub-Saharan Export Products Facing MFN or Preferential Duties in the European Union (No. of tariff line tems)

|Exporting Country|Tariff Lines<br>Facing a Zero<br>MFN Duty|Zero Preference<br>Rate Lines|Total Lines with<br>Zero Duties*|Non-Zero<br>Preference Rate<br>Lines|Zero Duty or<br>Preference Rate<br>Lines*|Non-Zero MFN<br>Duty Lines|Total Tariff<br>Lines Exported|
|---|---|---|---|---|---|---|---|
|Angola|25|106|131 (98)|1|132 (98)|2|134|
|Botswana|33|94|127 (99)|0|127 (99)|1|128|
|Cameroon|95|411|506 (98)|4|510 (99)|4|514|
|Central African Rep.|41|83|124 (98)|0|124 (98)|3|127|
|Chad|21|_51_|72 (97)|1|73 (99)|1|74|
|Congo|57|173|<br>230 (100)|0|<br>230 (100)|0|230|
|Cote d'lvoire|121|_595_|716 (97)|6|722 (98)|14|736|
|Ethiopia|67|111|178 (98)|1|179 (99)|2|181|
|<br>Gabon|55|261|<br>316 (100)|0|<br>316 (99)|1|317|
|Ghana|63|250|313 (99)|2|315 (99)|2|317|
|Guinea|50|109|159 (100)|0|159 (100)|0|159|
|Kenya|108|438|546 (98)|4|550 (98)|10|560|
|Liberia|57|84|141 (96)|1|142 (97)|_5_|147|
|Madagascar|63|278|341 (97)|2|343 (98)|8|351|
|Malawi|28|140|168 (98)|2|170 (99)|1|171|
|Mali|34|146|180 (99)|1|181 (99)|1|182|
|Mauritania|18|125|143 (99)|0|143 (99)|4|144|
|Mauritius|46|588|634 (99)|2|636 (99)|6|642|
|Niger|29|151|180 (99)|1|181 (99)|1|182|
|<br>Nigeria|127|392|519 (99)|3|521 (99)|4|525|
|Senegal|90|375|465 (98)|4|469 (99)|6|475|
|Sierra Leone|30|78|108 (98)|0|108 (98)|2|110|
|Sudan|55|84|139 (99)|1|140 (99)|1|141|
|Swaziland|20|118|138 (98)|5|143 (96)|6|149|
|Togo|48|170|218 (96)|2|220 (97)|6|226|
|Uganda|25|60|85 (97)|0|85 (97)|3|88|
|<br>United Rep. Tanzania|79|219|298 (99)|1|299 (99)|2|301|
|<br>Zaire|97|217|<br>314 (98)|0|<br>314 (98)|7|321|
|Zambia|48|125|173 (93)|8|181 (97)|5|186|
|Zimbabwe|91|451|<br>542 (97)|8|<br>550 (99)|6|556|
|MEMO ITEM||||||||
|Taiwan, China|192|0|192 (4)|0|192 (4)|4,080|4,272|
|Republic of Korea|153|0|153 (4)|0|153 (4)|3,350|3,503|

Source: World Bank-UNCTAD SMART Database. These statistics relate to 1988 trade patterns.

* Figures in parentheses show the share of the country's tariff line exports that receive the indicated tariff treatment.
16 The data for other African exporters reveal a situation similar. Preferences result in at least 97 percent of each African country's exports entering the EU free of duty, and in two cases (Congo and Guinea) no duties were paid on any line item. Table 3 also shows how markedly the profile of protection against Africa differs from that of countries like the Republic of Korea and Taiwan (China). Only four percent of the latter's exports (less than 200 tariff line items out of a total of over 4,000) have duty free access -- not due to preferences, but because of a zero MFN rate. These comparisons underscore existing differences in the scope of what the European Union might do to improve conditions of market access for different countries. The EU could make major improvements in market access for Korea and Taiwan (PC) by extending preferences to their exports, but many of the African goods already receive such treatment. Another key point to note is that current OECD tariffs facing Africa are far less of an obstacle than were those the Asian NICs faced (and overcame) when they began their successful export oriented industrialization drive (see Box 1). This is due both to the effect of preferences, and the success of the Kennedy, Tokyo and Uruguay Round in reducing tariff barriers.

Table 4 extends the foregoing analysis by examining the average preference margins African countries have over other exporters to the European Union, United States and Japan. The table shows the average nominal tariff on African exports to these three markets along with their average preference margin -- a negative figure indicates the number of percentage points the African duty was below that on other countries. For example, Angola faced EU tariffs that averaged three-tenths of one percent, a rate 3.2 percentage points below the average for all other exporters of the same products.<sup>8</sup> Similar statistics for Taiwan (China) and the Republic of Korea have again been included for comparison of the relative importance of OECD tariff barriers facing African and Asian countries.

'The duties in Table 4 are unweighted averages of pre-Uruguay tariffs on an African country's exports and those facing its competitors. The tariff facing 'other' exporters is the average of the MFN, GSP, Least Developed, ACP, or regional preference tariff actually applied to imports from all other individual suppliers of the same items. Some industrial and advanced developing countries may face duties that are considerably higher than suggested by these African preference margins if there are significant imports from other Sub-Saharan countries, or if other preferences (GSP, EFTA-EEC, Least Developed, regional arrangements, etc.) cover a high share of trade.
17

# **Box 1**

# **Tariffs Facing East Asian Exporters at the Start of their Industrialization Drive Compared with those Facing Sub-Saharan Africa Today**

One way to assess the current importance of OECD trade barriers facing sub-Saharan Africa is to compare them with those that faced the 'newly industrialized countries' (NICs) when the latter began their successful export oriented industrialization drive that began in the mid-1960s. Since the NICs' experience shows that the external barriers they faced could be overcome, such an inter-temporal comparison could help indicate whether Africa's export problems are largely attributable to OECD countries' protectionism, or to African internal policies and conditions relating to the export sector. Stated differently, are external conditions now facing Africa more or less favorable than those which faced the NICs in the mid-1960s.

The statistics shown below report the average level of tariffs countries like Republic of Korea, Hong Kong, Singapore and Taiwan (China) faced in major OECD markets in the late 1960s. Industrial countries import duties facing their exports averaged about 17 percent and reached a high of 19.5 percent in the United Kingdom. The statistics also indicate that developed countries' tariffs then incorporated a high degree of discrimination against developing countries. This is reflected in the considerably higher than average tariffs on developing countries' exports than on all shipments. Two other points should be noted. First, in the 1960s GSP schemes had not yet been adopted so the Asian NICs had to compete with other suppliers on an equal MFN basis. Second, the degree of escalation in OECD tariffs was far greater than it is today (UNCTAD (1968), Yeats (1987).

|Import Market|Mid-1960 Tariff Averages on<br>Total Imports of Manufactures|Mid-1960 Tariff Averages on Imports of<br>Manufactures from Developing Countries|
|---|---|---|
|United States|11.5|17.9|
|United Kingdom|15.2|19.5|
|European Community|11.0|14.3|
|Sweden|6.6|9.8|
|Japan|16.1|18.0|
|All Developed Countries|10.9|17.1|

Source: UNCTAD, **The Kennedy** Round **Estimated** Effects on Tariff Barriers, (TD/6/Rev. 1), (New York: United Nations, 1968).

In contrast to the situation the Asian NICs faced (and overcame), OECD countries tariffs on African exports now average under one percent and typically incorporate an important preferential component which enhances their ability to compete with many other countries. OECD tariffs facing Africa are, therefore, now far lower than those which the NICs successfully overcame and incorporate preferences that improve Africa's position _vis-a-vis_ other suppliers. Africa's relatively poor general export performance cannot be attributed to OECD tariffs.

Could it be that nontariff measures are now more restrictive against African exports than they were against the Asian NICs? Available evidence suggests the opposite. For example, the Short-Term Textile Arrangement was initiated in 1961 and followed by the Long-Term Textile Arrangement in 1962. Both placed important textile and clothing restrictions on the NICs exports of textile and clothing products. Sub-Saharan African countries are currently (with the exception of Mauritius) largely unrestricted by MFA controls on textile and clothing exports. 'Voluntary' export restraints (VERs) were extensively applied to NIC exports in the 1970s and 1980s, yet no such restraint was ever applied to Africa's exports. Furthermore, while there is evidence that agricultural protectionism has increased (Laird and Yeats, 1989) this has largely been confined to temperate zone products and not the types of goods Africa exports.

In short, the external environment for exports facing Africa today appears to be considerably more favorable than that which faced, and was overcome by, the Asian NICs. This suggests that internal problems are a more important cause of Africa's trade problems than are trade barriers in foreign markets.
Table 4. The Incidence of OECD Tariffs on Sub-Saharan African<sup>Countries Non-Oil Exports (all figures in percent).</sup>

||OECD A|verage|Europea|n Union|Ja|pan|Unite|d States|
|---|---|---|---|---|---|---|---|---|
|Exporting Country|African<br>Tariff|Preference<br>Margin*|African<br>Tariff|Preference<br>Margin|African<br>Tariff|Preference<br>Margin|African<br>Tariff|Preference<br>Margin|
|Angola|0.2|_-1.5_|0.3|-3.2|1.8|0.0|0.1<br>|-0.4<br>|
|Botswaa|0.3|-2.8|0.1|-2.9|0.0|-2.1|3.5|-1.1|
|Cameroon|0.4|-2.5|0.1|-2.8|0.0|0.0|2.1|-1.1<br>|
|Central African Rep.|0.2|-2.2|0.2|-2.3|0.0|0.0|9.0|-1. 1|
|<br>Chad|0.4|-2.7|0.2|-2.9|2.5|0.0|1.6<br>|0.0<br>|
|Congo|0.1|-1.4|0.0|-2.2|0.0|0.0|0.3|-0.6|
|Cote d'Ivoire|0.7|-3.1|0.3|-3.3|1.2|-0.5<br>|3.3<br>|-2.0<br>|
|Ethiopia|0.7|-1.3|0.1|-1.9|_1.5_|-1.3|2.0|0.4<br>|
|Gabon|0.6|-2.0|0.0|-2.7|0.0|0.0|2.9|0.7|
|Ghna|1.0|-2.2|0.1|-3.1|2.3|0.0|2.6<br>|-0.9<br>|
|Guinea|0.6|-3.3|0.0|-2.9|1.8|-1.9|1.9|-1.0|
|Kenya|_0.5_|-3.3|0.2|-3.5|2.4|-1.1<br>|3.1<br>|-2.3<br>|
|Liberia|0.6|-1.7|0.3|-1.9|0.0|-0.3|2.5|-1.1<br>|
|Madagascar|_0.5_|-2.0|0.4|-2.7|0.8|-0.2|0.8|-1.0|
|<br>Malawi|1.1|-2.4|0.1|_-3.5_|0.0|-0.1|_5.4_|-0.6<br>|
|Mali|0.4|-3.4|0.2|-3.5|0.0|-1.6|3.1|-2.2|
|Mauritania|1.7|-2.3|0.2|-3.9|3.6|-0.4<br>|1.2<br>|-1.6<br>|
|Mauritius|1.3|-3.1|0.2|-3.4|4.8|-1.1|6.4|-1.8|
|Niger|0.1|-3.0|0.0|-3.0<br>|0.0<br>|0.0<br>|3.3<br>|-1.6<br>|
|Nigeria|2.7|-0.9|0.1|-2.6|3.7|-0.8|_5.2_|0.7<br>|
|Senegal|_0.5_|-3.3|0.3|-3.5|3.6|0.1|4.9|-1.2|
|<br>Sierra Leone|0.5|-3.1|0.0|-4.0|2.6<br>|-0.7<br>|2.3<br>|-0.2<br>|
|Sudan|0.1|-1.5|0.1|-1.9|0.0|0.0|0.7|-1.0|
|Swaziland|0.8|-4.4|_0.5_|-4.9|6.7<br>|-3.0<br>|3.5<br>|-1.9<br>|
|Togo|0.3|-2.8|0.2|-2.8|9.8|-0.8|0.2|-2.8|
|Uganda|0.9|-2.4|0.6|-3.0|0.0|0.0|2.1|-0.3|
|<br>United Rep. Tanzania|0.1|-2.3|0.0|-2.5|1.4|-1.0|0.0|-2.4|
|<br>Zaire|0.3|-2.1|0.1|-2.4|0.0|_40.5_|1.3|-1.1|
|Zambia|0.3|-1.7|_0.5_|-2.9|0.0|-0.6|1.4|-1.4|
|Zimbabwe|0.9|-2.5|0.2|-3.3|1.2|-1.0|4.0|-1.0|
|MEMO ITEM|||||||||
|Taiwan, China|6.1|0.9|_7.5_|4.0|2.2|-2.2|6.8|0.7|
|Republic of Korea|6.0|0.6|7.8|4.2|2.5|-2.2|7.1|0.7|

*These values show the preferential tariff margin (in points)<sup>that the African country has over all other suppliers of the same goods. A negative value indicates the country pays a lower ~</sup> average tariff than other exporters. The United States does not<sup>extend GSP tariffs to Taiwan (China), the Republic of Korea, or to OPEC members.</sup>

# Source: World Bank-UNCTAD SMART Database
19 In Europe, the average tariff facing Africa typically ranges from zero to three-tenths of a percent with Uganda recording a high of 0.6 percent -- due mostly to a tariff of 18 percent on its exports of fresh grapes. The average preference margins African countries received are in the two to four percentage point range, and reach a high of 4.9 points for Swaziland.<sup>9</sup> Although the margins vary, all African countries faced average tariffs that were below those paid by other exporters. For some products these preferential tariff margins were 20 percentage points or more below prevailing MFN tariffs. This situation is markedly different from that of the Asian NICs. Taiwan (China) paid an average tariff of 7.5 percent on its exports -- a rate that was 4.0 percentage points higher than that facing other exporters of the same items. EU tariffs facing Korea average 7.8 percent -- 4.2 points higher than that facing other exporters (many of which receive preferences).

Due to the important role that textiles and clothing played in the early stages of some countries industrialization, note should be made of the US failure to provide African countries (even those classified as least developed) any preferences for these goods. As a result, African exports face post Uruguay Round tariffs on textile and clothing products that may exceed 25 percent. Table 4 summarizes the profile of preferences that African countries receive (under the GSP) in the United States and Japan, and contrasts this treatment with that in Europe.

Several important points are evident from the table. First, the average pre-Uruguay Round United States and Japanese tariff is often higher than in Europe (i.e., an average 9.8 percent duty is paid on Togo's exports to Japan; the tariffs on Mauritius' exports to the United States average 6.4 percent) and the margins of preference are often lower. The high Japanese average was largely due to a MFN tariff of 25 percent on Togo's exports of prepared and preserved tomatoes, while the results for Mauritius were due to US MFN tariffs of up to 35 percent on a number of textile and clothing products including men and boys shirts, babies blouses, and sweaters. In several cases where Canada and Israel had a high volume of exports to the US, FTAs resulted in zero tariff being 9Swaziland exports mandarin and other oranges to the European Union and pays a full MFN duty of 4 percent on these shipments -- as it does on exports of a several fresh agricultural products including asparagus, lemons and other citrus. Outside the agricultural sector, Swaziland faces a MFN tariff of 8.5 percent on coal exports to the EU of about $1.6 million.
20 applied to competitors' products with the result that African exporters<sup>paid a higher-than-average duty."0</sup>

# B. The Influence of Tariffs on African Commodity Processine

In multilateral negotiations like the Uruguay Round, developing countries'<sup>have attempted to remove</sup> constraints, like escalating tariffs in foreign markets, to the further<sup>processing of domestically produced</sup> commodities. The rationale for such efforts is that local commodity processing<sup>might have important employment</sup> creation effects, it may increase the number of trade contacts and provide<sup>benefits associated with "outward-</sup> oriented' policies, there may be important linkages between the<sup>processing industry and other sectors of the</sup> economy, and it may produce an increase in export revenues due to the<sup>higher value added content of processed</sup> goods (see Roemer 1979 or Yeats 1981 for a survey of relevant issues).<sup>Since African countries' exports include</sup> a large share of unprocessed agricultural and mineral commodities (see<sup>Table 2), they naturally have a strong</sup> interest in the further processing of these goods before export. Has this objective been frustrated<sup>by OECD trade</sup> barrier escalation?" Given the special relations between Africa and many industrial countries (particularly those<sup>in Europe), ve,-y</sup> little empirical evidence has, thusfar, been compiled that is relevant to this question -- at least<sup>as far as sub-Saharan</sup> Africa is concemed. Previous analyses of tariff escalation focused almost entirely on the structure<sup>of most-favored-</sup> nation tariffs, and the possibility exists that import duties may behave differently once account is taken of the GSP, Lome Convention, or Least Developed preferences Africa receives.

Table _5_ utilizes a processing chain scheme developed by the World Bank (see Yeats 1991 for<sup>details) to</sup> "<sup>0</sup> Adverse African tariff differentials are largest for Gabon and Nigeria because<sup>US customs regulations preclude</sup> the extension of GSP treatment to OPEC members. In addition, the United<sup>States does not extend GSP treatment</sup> for textile and clothing products. As a result, textile and clothing exports<sup>from these countries face a U.S. MFN</sup> duty of over 20 percent. Ethiopia also had GSP treatment withdrawn due to<sup>US opposition to the govermnent's</sup> policies.

"OECD tariffs generally increase or 'escalate' as one moves from primary<sup>to semi-fabricated to processed</sup> stages of a given commodity. Developing countries maintain this tariff structure<sup>is an important constraint to the</sup> further processing of their natural resources before export. Section D<sup>of the Punta del Este (Uruguay Round)</sup> Ministerial Declaration states that the "negotiation **s** hall aim to achieve<sup>the fullest liberalization of trade in natural-</sup> resource based products, including in their processed and semi-processed<sup>forms. The negotiations shall aim to reduce</sup> or eliminate tariffs and nontariff measures, including tariff escalation."
21 analyze the structure of European Union tariffs on 19 primary commodities exported from Africa. The classification scheme normally identifies a primary, semi-processed, and processed stage for the commodities defined in terms of the SITC Revision 1 system, although in 7 of the chains differentiates between a primary and processed stage. The table shows the import duty actually applied to African exports of the processed stage(s) (the primary stage item always faced a zero MFN duty) and also indicates the margin of preference afforded Africa countries. The latter figures relate to three different situations: (i) where African GSP, Lome and least developed beneficiaries all receive preferences; (ii) where preferences are extended to African Lome and least developed countries; and (iii) where only Lome convention countries receive preferences (see the notes to Table 5).

Viewed in this context, tariffs do not appear to have been a major general constraint to the further processing and export of African commodities (provided that eligible exports actually get "due" preferences), although escalation -- which would work against further processing -- is evident in several "MFN covered" chains. In addition, the fact that different groups of countries are afforded preferences at various stages of the chains could also pose a constraint to further commodity processing in some cases. For example, all African countries receive full EU duty free preferences over all stages of the wood, rubber and leather chains, while only the least developed and Lome Convention countries receive full preferences for wool and cotton products (i.e., GSP receiving countries are excluded). The latter would, therefore, encounter an obstacle to further processing activity at the cotton and wool yarn stages.

For the 19 commodities listed, all three groups of African countries receive full preferences on all stages of 58 percent (11) of the chains. In these cases the margins of preference range from 2.6 percent (tin) to 15.1 percent for wool. That is, for these important commodities not only do tariffs not escalate against Africa (a zero duty is applied to all stages of the chain), but Africa receives preferences that should improve its ability to compete internationally and enhance its attraction as a location for commodity processing.

Outside these 11 chains there is some variation in the countries designated as preference beneficiaries that reduce their utility to sub-Saharan Africa as a whole (although they do improve some African countries ability to compete against others). For three chains (groundnuts, cotton and wool) preferences are extended only to least developed and Lome Convention countries with the result that GSP eligible countries face a tariff on the processed
# **Table 5. Margins of EU Tariff Preferences Provided Sub-Saharan African Countries Over Commodity Processing Chains**

||||African|Preferentia|l Tariff||
|---|---|---|---|---|---|---|
||||Sta|ge 2|Sta|ge 3|
|||**Stage 1**<br>|||||
|Processing Chain|Stage of Processing|Tariff|African<br>Tariff|Pref.<br>Margin|African<br>Tariff|Pref.<br>Margin|
|Agricultural Materials|||||||
|Wood|Rough Logs-Sawn Lumber-Plywood and Veneers|0.0|0.0|3.3|0.0|6.5|
|Rubber|<br>Natural Rubber-Vulcanized or Unvulcanized Rubber-Rubber Manufactures|0.0|0.0|3.4|0.0|4.7|
|Leather|Hides and skins-Leather-Leather Manufactures|0.0|0.0|3.5|0.0|8.3|
|Jute|Raw Jute-Jute Yam-Jute Fabrics|0.0|0.0|3.0|0.0|8.6*|
|Cotton|Raw Cotton-Cotton Yams-Cotton Fabrics|0.0|0.0|6.0*|0.0|10.0*|
|Flax|Raw Flax and Ramie- Flax and Hemp Yarn|0.0|0.0|4.6|||
|Wool|Raw Wool-Wool Yam-Wool Fabrics|0.0|0.0|5.1*|0.0|15.1|
|Ores and Minerals|||||||
|Iron|Iron Ore-Pig Iron-Iron Plate, Bars and Strip|0.0|0.0|2.9**|0.0|5.4|
|Manganese|Manganese Ore-Ferromanganese|0.0|0.0|3.8**|||
|Copper|Copper Ore-Unrefmed Copper-Copper Bar and Sheet|0.0|0.0|0.0|0.0|6.2|
|Nickel|Nickel Ores-Unwrought Nickel-Nickel Bar and Sheet|0.0|0.0|0.0|0.0|4.6|
|Lead|Lead Ores-Unwrought Lead-Lead Bars and Sheet|0.0|0.0|3.5**|0.0|8.5|
|Zinc|<br>Zinc Ores-Unwrought Zinc-Zinc Bars and Sheet|0.0|0.0|3.5**|0.0|8.0|
|Tin|Tin Ores-Unwrought Tin-Tin Bars and Plate|0.0|0.0|0.0|0.0|2.6|
|Oilseeds|||||||
|Groundnuts|Groundnuts-Groundnut Oil|0.0|0.0|7.5*|||
|Copra|Copra excl. Flour-Coconut Oil|0.0|0.0|12.5***|||
|Palm nuts|Palm Nuts and Kernel-Palm Kernel Oil|0.0|0.0|12.5***|||
|Soya bean|Soya Bean excl. Flour-Soya Bean Oil|0.0|0.0|12.5***|||
|Cotton seed|Cotton Seed-Cotton Seed Oil|0.0|0.0|12.5***|||

* The preference margin is for least developed and ACP African countries. No GSP preference is extended on this stage of the processing chain. ** The preference margin is only provided ACP African countries.

***African ACP and least developed have a zero preference rate. GSP receiving countries have a non-zero preferential tariff.
23 stages of some goods as high as 10 percent. Also, for some of the intermediate stage metal products the country coverage is even more limited as preferences are only extended to Lome Convention countries.'<sup>2</sup> In short, there are opportunities for OECD countries to improve market access conditions for some processed commodities and one way to do this would be to extend existing preferences. However, Table **_5_** indicates that a more extensive analysis of the behavior of post-Uruguay Round MFN and preferential tariffs over commodity processing chains would be needed to indicate where the major problems are occurring.

# C. The Influence of the Uruyuav Round on Tariffs

The previous discussion analyzed the importance of OECD tariff barriers prior to the Uruguay Round. How will the situation change as a result of the trade negotiations? Overall, the Round reduced industrial countries tariffs by about 40 percent on average. What magnitude of cuts occurred on products of export interest to Africa? Table 6 provides relevant information by showing (columns 3 and 4) the average pre-Uruguay Round MFN and .applied' tariffs on all non-oil products exported by each African country to the European Union, Japan and United States. The latter duties are the average of the preferential or MFN tariff actually applied to African exports. Similarly, columns 5 and 6 indicate the corresponding duties that will be in place after the final Uruguay Round tariff cuts are fully implemented. Finally, the right-most column in the table shows the reduction in each African countries preference margin (in percentage points) that will occur as a result of the Uruguay Round MFN tariff cuts. It should be noted that both the MFN and applied rates shown in the table incorporate estimates of the 'tariffied' levels of protection associated with the Uruguay Round elimination of agricultural nontariff barriers (see Chapter 4, Section D for information on this point).

An example can help illustrate the proper interpretation of the information in Table 6. As indicated, the "<sup>2</sup> There is a further potentially important issue involving preferences that goes beyond the scope of the present study. The objective of preference schemes such as the GSP was to stimulate the industrialization and growth of the beneficiary countries. However, ceilings or quotas may be placed on some products exported from individual countries and, once these are surpassed, further imports are taxed at the prevailing MFN rate. It has been alleged that some countries ceilings have been set below the level of minimum efficient plant size (particularly in the area of minerals and metals) with the result that the incentives for new investment are greatly diminished. Analyses to determine the extent to which preference quotas are set below minimum efficient plant size would be useful for improving the impact of preference programs.
24 average pre-Uruguay Round MFN tariff on products exported by Kenya was 4.88 percent. However, once preferences are accounted for the average applied tariff actually facing Kenyan exports was slightly more than 0.11 percent -- which implies an average preference margin of 4.76 percentage points. However, as a result of the Uruguay Round, MFN tariffs on the products exported by Kenya will be reduced to 2.88 percent -- which means a 1.99 percentage point reduction in Kenya's margin of preference. In the case of Cape Verde and Somalia even larger reductions occur as preference margins fall by 10.3 and 12.8 percentage points respectively. A 12 percentage point reduction in MFN tariffs for two line items (Rock Lobster and Cigars) accounts for Cape Verde's results while Somalia's preference reduction is almost entirely due to a reduced tariff on bananas. Appendix Tables A2-1 through A2-49 present similar, but more detailed information for broad groups of products (separate tabulations are show for the EU, Japan and United States) exported by each African country along with full information as to the basis for these computations.

For the 44 African countries combined pre-Uruguay Round MFN tariffs averaged 4.56 percent while the "aplied' duties (which account for preferences) were some 4.25 percentage points lower. As a result of the Uruguay Round the average MFN tariff on products exported by Africa was reduced to 2.68 percent -- which resulted in an average 1.78 percentage point reduction in preference margins. Aside from Somalia, Cape Verde, Rwanda and Uganda the preference margin reductions were modest (all under three percentage points).

A key question concerns the magnitude of the export earning losses Sub-Saharan Africa will experience as a result of the Uruguay Round erosion of their trade preferences. A recent World Bank study (Yeats 1994) provides relevant information. Specifically, this investigation determined that African export losses would total about one-quarter billion dollars _if Africa's trade preferences were fully eroded_ (i.e., MFN tariffs were reduced to the level of tariff preferences). The Cote d'lvoire accounted for about one-fourth of the African losses ($57 million of this country's annual exports would be displaced) with Mauritius and Kenya each recording declines of about $25 million. However, these figures overstate the actual Uruguay Round effects since preferences were reduced, but not fully eliminated. Based on what occurred it appears that actual African trade losses would be in the range of $100 million annually in the EU, Japan and United States which represents approximately one-half of one percent of total annual exports.
**Table 6. European Union, Japanese and United States Uruguay Round Tariff Concessions on Non-Oil Products of Export Interest to Afrka.**

||||-IT<br>l|Tariff Rate(%<br>l<br>|)<br> <br>i<br>|<br>~~~~~~~~~Prefcerw<br>|
|---|---|---|---|---|---|---|
|Exporter|Value ($ million)|Applied 1992|<br>MFN 1992|<br> <br>Applied 1999|<br> <br>MFN 1999|<br><br> Margin Reduction|
|Angola|246.9|0.01|2.48|0.01|1.41|1.06|
|Benin|36.5|0.10|1.80|0.10|1.27|0.53|
|Bumndi|137.0|0.00|2.41|0.00|0.14|2.37|
|Burkina Faso|97.4|0.01|1.08|0.01|0.80|0.29|
|Cameroon|890.9|0.00|3.81|0.00|1.62|2.19|
|Cape Verde|5.7|0.00|19.60|0.00|9.30|10.30|
|Central African Rep.|98.5|0.00|1.63|0.00|0.39|1.24|
|<br>Chad|55.8|0.01|0.39|0.00|0.25|0.14|
|Comoros|20.9|0.00|3.45|0.00|2.07|1.38|
|Congo|231.7|0.00|0.92|0.00|0.49|0.43|
|Cote d' Ivoire|2,062.4|0.01|5.51|0.00|2.94|2.56|
|Djibouti|13.2|0.18|1.13|0.14|0.89|0.20|
|<br>Ethiopia|293.3|0.02|2.49|0.02|0.73|1.77|
|<br>Equatorial Guinea|48.4|0.00|2.90|0.00|1.26|1.64|
|Gabon|624.7|0.00|1.11|0.00|0.71|0.40|
|Gambia|90.3|0.59|7.05|0.37|4.21|2.62|
|Ghana|764.4|0.08|2.99|0.06|2.15|0.82|
|Guinea|419.4|0.01|0.77|0.01|0.04|0.32|
|Guinea Bissau|7.6|0.07|6.52|0.05|4.59|1.91|
|Kenya|667.1|0.11|4.88|0.10|2.88|1.99|
|Liberia|935.6|0.00|0.09|0.00|0.02|0.07|
|Madagascar|268.8|0.31|4.98|0.01|2.45|2.34|
|<br>Malawi|197.5|0.39|9.05|0.34|7.14|1.87|
|Mali|74.9|0.01|0.92|0.01|0.42|0.50|
|Mauritania|402.6|0.24|6.47|0.16|3.90|2.49|
|Mauritius|857.9|3.94|13.29|3.59|11.70|1.25|
|Mozambique|113.1|0.60|8.02|0.23|5.13|2.52|
|<br>Niger|70.5|0.07|2.79|0.06|1.94|0.84|
|Nigeria|676.2|0.07|2.36|0.06|0.83|1.52|
|Reunion|157.9|4.09|4.29|2.09|2.34|_0.05_|
# **Table 6. Continued**

|||||Tariff Rate_(%)_||_<br>_<br>_|
|---|---|---|---|---|---|---|
|Exporter|Value**($**million)|Applied 1992|MFN 1992|Applied 1999|MFN 1999|Preference<br>Margin Reduction|
|Rwanda|127.0|0.01|3.60|0.00|0.22|3.57|
|Sao Tome & Principe|12.0|0.00|6.45|0.00|3.85|2.60|
|<br>Senegal|466.9|0.13|10.40|0.10|8.58|1.79|
|<br>Seychelles|121.8|0.00|21.24|0.00|20.78|0.45|
|<br>Sierra Leone|190.2|0.33|1.87|0.32|1.12|0.75|
|Somalia|52.4|0.00|14.29|0.00|1.61|12.68|
|South Africa, Republic of|17,358.8|0.93|1.01|0.53|0.58|0.02|
|<br>Sudan|311.6|0.00|0.85|0.00|0.55|0.30|
|Togo|145.7|0.00|1.68|0.00|0.58|1.10|
|Uganda|284.4|0.00|3.03|0.00|0.02|3.02|
|Tanzania, United Republic|258.9|0.11|3.23|0.09|1.33|1.88|
|Zaire|1,331.6|0.00|0.74|0.00|0.14|0.60|
|Zambia|751.1|0.00|0.29|0.00|0.22|0.07|
|Zimbabwe|930.7|0.88|6.58|0.61|4.50|1.81|
|ALL ABOVE COUNTRIES||0.31|4.56|0.21|2.68|1.78|

The averages shown below include Uruguay Round "tariffied" rates of protection for agricultural nontariff barriers. The 1992 applied tariffs are the average of the GSP, Lome, Least Developed or MFN rates actually applied to the African country's exports. The 1999 applied rates reflect the Uruguay Round reductions in any MFN tariffs that may have faced African exporters. The 1992 and 1999 MFN rates show the average Most-Favored-Nation tariff applied to the products exported by each African country. The preference margin reduction shows the decline in the average preference margin each country received due to the Uruguay Round MFN tariff cuts.
27

# D. Regionalism and African Exports

A point that is often not given adequate recognition is the extent to which regional trade arrangements have spread among OECD countries, what an important position they have achieved in global trade, and how they influence developing countries' export prospects. As an example, under the preferences members give each other the intra-trade of EFTA or EU countries is duty free behind the European Union's common external tariff or EFTA members national MFN tariffs. Similarly, trade between EFTA and the EU member states is mostly duty free under a special protocol. The Canadian-American Free Trade Arrangement (CAFTA) provides the United States and Canada with duty free access to each others markets for most goods, while the intra-trade of Australia and New Zealand is also duty free under a free trade arrangement. The combined size of these agreements is enormous. In a recent tabulation, Braga and Yeats (1994) concluded that European FTAs covered more than one-third of world trade in manufactures, while all such OECD arrangements covered almost 50 percent of world trade in these items. Although the point has largely gone unrecognized, the spread of these OECD regional trade arrangements has markedly altered the relative conditions of market access that OECD members extend to developing countries. Specifically, the GATT Decision of the Contracting Parties of 28 November 1979 on Differential and More Favorable Treatment. Reciprocity and Fuller Participation of Developing Countries (GATT 1979) makes developing countries eligible under the Generalized System of Preferences for lower rates of duty on their exports to developed countries than apply to similar exports from other developed countries. This treatment was extended in recognition of the fact that many developing countries often could not compete, on equal terms, with OECD members and needed an edge to accelerate their industrialization and growth.'<sup>3</sup> The preferences that OECD countries extend to each other under the regional arrangements have markedly affected the competitive position of African and other developing countries and are implemented in a manner that runs counter to the GATT 1979 Agreement. Formerly, OECD preferences under the GSP or Lome Convention provided developing countries with a competitive advantage in the products covered by these schemes. This advantage has been neutralized by the intra-OECD arrangements. Worse yet, in products not covered by schemes '<sup>3</sup> See Hindley (1987) for a discussion of the rationale for, and procedures through which, special and differential treatment could be extended to developing countries.
28 like the GSP or Lome, African and other developing countries are being placed at a steadily increasing competitive disadvantage as the intra-OECD arrangements widen (i.e., incorporate more countries). That is, on many items where either present or potential future competition with OECD FTA members occurs, exports from Africa and other developing countries will face MFN tariffs (and whatever nontariff restrictions are in place) while the intratrade of industrial countries' is (will be) unrestrained. The importance of this point is reflected in the fact that about one-half (by value) of developing countries exports of products in MFN dutiable product lines did not receive preferences. Among these items, developing countries exports of agricultural products, foodstuffs, footwear, textiles and clothing will be placed at an important competitive disadvantage due to the high levels of MFN protection for these goods in some OECD markets.

Aside from direct trade losses, the "minilateral" OECD arrangements have other adverse implications for Africa. African countries exports are often highly concentrated in a relatively few product lines (see Table 3) and an important objective is to expand their export base. However, the number of potentially new product lines that Africa might be able to compete successfully has almost certainly been reduced by the 'special and differential' treatment OECD countries provide each other under regional agreements. Although relatively few attempts have been made, thus far, to quantify the magnitude of these losses, the evidence that exists suggests they may be large and growing (World Bank, 1994, Chapter 5).

# E. Tariffs: The Potential for Positive OECD Policy Action

Although Africa's disappointing overall trade performance cannot be attributed to OECD countries' tariff protection (tariffs facing Africa are far lower than those that faced the Asian NICs at the start of their sustained export oriented industrialization drive) there are several initiatives industrial countries could adopt that should have positive effects. These include a number of proposals based on the Cartegena Commitment which was adopted at the conclusion of UNCTAD VIII (see Box 2). Basically, the agreement re-affirmed developed countries' commitment to provide 'special and differential' treatment for developing countries and to incorporate further improvements in their established preferences schemes (see Hindley 1987 for a discussion of the rationale for, and
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**30**

ways of providing such treatment). The following proposals for OECD policy actions are in the spirit of the commitment.

* Labor intensive products like textiles, clothing and footwear played a key role in the early stages of the newly industrialized countries transformation, and have a similar potential for Africa. In cases were they are now excluded (as in the case of the United States) they should be incorporated into established schemes - particularly so since, in these cases, OECD regional arrangements actually discriminate against African countries.

* In the early 1970s, industrial countries adopted Generalized System of Preference programs in recognition of the fact that "special and differential" (favorable) treatment was needed to assist developing countries to industrialize. However, under the spreading OECD regional arrangements industrial countries extend such treatment to each other and actually _discriminate against_ African and other developing countries. Policy initiatives are needed to, at least, place African and other developing countries on an equal basis with OECD members in these arrangements.

* Since African exports are normally highly concentrated in primary commodities, there is an strong interest in the contribution that natural resource based industrialization strategies could make toward their industrialization and growth. Where further commodity processing appears suitable for developing countries (i.e., where labor intensive production processes are involved) OECD preferences should be extended to processed product stages which now face MFN tariffs. European preferences for these items should be extended evenly to all countries and not differentiate between Lome Convention and GSP receiving countries'<sup>4</sup> .

* An accelerated phase-in of Uruguay Round tariff cuts could be adopted by OECD countries.

- The WTO and UNCTAD have argued that the importance of preferences as a vehicle for stimulating industrialization and new investment is greatly reduced by the uncertainty associated with these schemes (see Box 2). Countries may be graduated out entirely, or excluded from specific products on the basis of "competitive need" criteria. Also, the product coverage of these schemes may be altered on short notice. Incorporation of a longer time horizon in the plans, with countries and products "locked in" could have important positive effects.

* Ceilings and quotas should be eliminated from developing country preference schemes, at least to be made consistent with intra-OECD preferences. Ceilings considerably reduce the potential worth of the GSP to developing countries since, aside from their direct trade effects, they also introduce considerable uncertainty in the system (i.e., exporters may not know whether a shipment will qualify for GSP treatment until its arrival in the import market). It is also been alleged that ceilings for some products are sometimes set below minimum efficient plant size. This negates the intended trade and investment increasing incentives of the preferences.

* Until the above objectives are fully accomplished, improved statistical information is required on constraints that Africa and other developing countries encounter in attempting to utilize preferences schemes. Details are needed on the extent to which quotas or ceilings are exceeded (with the result that additional African exports are taxed at the prevailing MFN rate) and the extent to which exports are disqualified due to existing rules

"According to Biggs et. al. (1996) the "originating requirements" under the 4th Lome Convention are so restrictive that some African exports covered by this agreement are unable to take advantage of the preferences available. When an African exporter is unable to meet the originating requirements under Lome, the full tariff must be paid on the item entering the EU (for example, a man's shirt), while an exporter of the same item from (say) India or China only has to pay 85 percent of the tariff under the Generalized System of Preferences. The GSP does not cover African exporters of these products because they are included within Lome. Modifications to remove inconsistencies between the two EU preference systems should benefit African countries.
31 of origin. Such information is central to any proper assessment<sup>of the economic impact of preferences on the</sup> receiving countries and to initiatives for improving these programs.
32

# **IV.** OECD Nontariff Barriers Facing Africa

Although the previous analysis showed Africa's generally poor export performance could not be attributed to OECD tariffs, the possibility still exists that protectionism had an influence. Aside from import duties, OECD countries employ nontariff restrictions like quotas, variable levies, "voluntary" export restraints, and restrictive licensing arrangements to control imports. Any assessment of the influence of protectionism facing Africa must also examine the potential influence of these measures. Furthermore, since the Uruguay Round made major changes in the ability of GATT members to utilize many of these restrictions one should analyze the incidence of NTBs facing Africa both before, and after, the conclusion of the negotiations.

## A. Pre-Uruguay Round NTBs Facing Africa

What does available information indicate conceming the nature and extent of OECD countries' nontariff barriers on Africa and other groups of countries? Utilizing World Bank-UNCTAD records, Table 7 shows the share of OECD imports from: (i) other OECD countries, (ii) developing countries, and (iii) all sub-Saharan African countries that encounter NTBs.'<sup>5</sup> The latter is reported both with the Republic of South Africa included and excluded due to the relatively high share of manufactures in South African exports, and the fact that this country faced sanctions as a result of its apartheid policies.

As Table 7 shows developed countries' nontariff measures affect a notably higher share of imports from non-OECD countries than they do for OECD intra-trade. Approximately 17 percent of developing counties' exports (excluding petroleum) encounter NTBs, while the corresponding share for OECD intra-trade is under 10 percent. An even greater difference in NTB coverage ratios exists for several product groups. Approximately 53 percent '<sup>5</sup> Laird and Yeats (1990, Chapter 4) describe how this inventory of nontariff measures was constructed and discuss its utility for research and policy studies. In particular, they note that trade coverage ratios are a rough approximation of the importance of NTBs in that they provide no indication of the restrictiveness of the measures. Low coverage ratios, for example, could be associated with highly restrictive NTBs. Laird and Yeats also provide extensive empirical information on the results of NTB inventory studies for industrial countries. UNCTAD (1993, p. 37) tabulates the annual share of developing countries' exports that encountered nontariff measures over the last decade -- it rose from 16.2 percent in 1981 to 18.3 percent in 1991.
**Table** 7. Nontariff Measure Coverge **Ratios** for OECD Inports from Developed, Developing **and Sub-Saharan**<sup>African Countries</sup>

|Product Group (SITC)|Developed<br>Countries|1992 Imports<br>Developing<br>Countries|(Smillion)<br>Sub-<br>Saharan<br>Africa|SSA<br>excluding<br>South Africa|<br>Developed<br>Countries|Nontariff Barrier C<br>Developing<br>Countries|overage Ratios<br>Sub-<br>Saharan<br>Africa|SSA<br>excluding<br>South Africa|
|---|---|---|---|---|---|---|---|---|
|ALL NON-FUEL ITEMS (0 TO 9-3)|1,900,481|540,783|25,137<br>|15,647<br>|9.7<br>|16.6<br>|10.8<br>|10.4<br>|
|All Foods (0+ 1 +22+4)|190,602<br>|79,053<br>|8,022<br>|6,223<br>|24.6<br>|17.1<br>|23.4<br>|18.6<br>|
|Food and Live Animals (0)|152,772<br>|69,241<br>|7,044<br>|5,327<br>|28.1<br>|18.2<br>|24.5<br>|19.5<br>|
|Oil Seeds and Nuts (22)|5,849|2,509|72<br>|59<br>|1.3<br>|3.6<br>|6.3<br>|2.2<br>|
|Animal & Vegetable Oils (4)|5,046|2,841|171|169<br>|5.7<br>|5.7<br>|0.1<br>|0.1<br>|
|Agricultural Materials (2-22-27-28)|53,386|20,303<br>|2,719<br>|2,109<br>|1.3<br>|1.3<br>|0.3<br>|0.2<br>|
|Ores and Metals (27+28+67+68)|116,438|42,227<br>|7,521<br>|2,810<br>|13.6<br>|10.1<br>|5.7<br>|2.6<br>|
|Ferrous Metals (67)|55,326<br>|11,294<br>|1,097<br>|171<br>|38.2<br>|35.9<br>|38.6<br>|44.4<br>|
|Non-Ferrous Metals (68)|37,753|15,192|3,677<br>|1,465<br>|0.0<br>|0.0<br>|0.0<br>|0.0<br>|
|Mineral Fuels (3)|86,298|164,851|19,654<br>|18,012<br>|21.5<br>|16.4<br>|17.4<br>|16.8<br>|
|All Manufacures (5 to 8 - 68)|1,499,800|383,871|6,524<br>|6,369<br>|8.5<br>|18.8<br>|5.6<br>|6.5<br>|
|Chemicals (5)|216,755<br>|22,039<br>|769<br>|320<br>|6.0<br>|3.9<br>|0.2<br>|0.0<br>|
|Other Manufactures (6 to 8-67-68)|1,283,045<br>|361,832<br>|5,755<br>|3,953<br>|8.8<br>|19.9<br>|6.4<br>|9.7<br>|
|Leather (61)|5,004|3,749|237<br>|134<br>|3.0<br>|1.2<br>|0.0<br>|0.0<br>|
|Textile Yarn & Fabric (65)|49,545|19,485|275|173<br>|4.4<br>|52.5<br>|18.7<br>|34.1<br>|
|Clothing (84)|43,250|79,659<br>|1,019<br>|845<br>|3.4<br>|62.5<br>|44.8<br>|47.5<br>|
|Footwear (85)|12,142<br>|15,864<br>|17<br>|7<br>|12.2<br>|32.0<br>|1.3<br>|2.6<br>|
|ALL ITEMS (0 to 9)|1,986,779|705,634|44,791|33,659|10.2|16.6|13.1|13.1|

Note: The following measures were included<sup>in the computation of the nontariff barrier coverage ratio: tariff quotas; increased duties, safeguard duties, retaliatory duties and customs surcharges;</sup> variable levies and flexible import fees; non-automatic<sup>licensing and discretionary licensing; quotas and prohibitions; voluntary export restraints, MFA quotas and other restraints including textile</sup> restraint agreements, orderly marketing arrangements;<sup>other quantitative restrictions; other restrictions imposed under the Multifiber Arrangement; minimum, reference or other import price controls;</sup> voluntary export price restraints; state monopoly of<sup>imports; and local content regulations.</sup> Source: World Bank-UNCTAD SMART Data Base. The<sup>statistics in this and the tables that follow reflect nontariff barriers which are applied in all OECD markets with the exception of Iceland</sup> and Turkey. Developed countries are defined as all<sup>OECD members less Turkey while developing countries are all countries less the OECD plus Turkey. The countries included in the sub-Saharan</sup> group are listed in Table 1.
34 of developing countries' textile exports face restrictions while the coverage ratio for clothing is about 63 percent. In contrast, under 5 percent of OECD intra-trade in these goods encounter restrictions (mainly goods shipped from Japan). The Multifiber Arrangement, special textile quotas, bilateral quotas, and voluntary export restraints account for these major differences. Nontariff barrier coverage ratios for developing countries' footwear exports are about 20 points higher than on OECD intra-trade of these goods. "Voluntary" export restraints imposed by the EU and EFTA largely account for these differentials.'<sup>6</sup> Table 7 shows OECD coverage ratios are not always higher for developing countries' exports. Twenty five percent of OECD intra-trade in foods encounter NTBs compared to the 17 percent coverage ratio for shipments of these goods from developing countries. The difference is due to the fact that tropical food products like tea, coffee, and cocoa -- which account for approximately 15 percent of all developing countries' food exports - - face relatively few OECD nontariff barriers. Most agricultural NTBs are applied to temperate zone products (particularly grains and dairy products) which are mainly exported by other OECD and some developing countries, like Argentina, outside the tropics. Sugar, which is produced in temperate zone countries (from beets) as well as in the tropics (from cane) is an exception. Some African and other developing country oilseeds and vegetable oils, which can be substitutes for temperate zone products, encounter NTBs in the form of European variable import levies.

Table 7 indicates the profile of nontariff protection against sub-Saharan African exports differs somewhat from other developing countries. First, only about 11 percent of African non-fuel exports face NTBs as opposed to the 17 percent average for all developing countries. The lower NTB coverage ratio is largely accounted for by the fact that most African countries' textile and clothing products are not affected by MFA restrictions. Mauritius is a noteworthy exception with $116 million, or 88 percent of its textile and clothing exports to the United States, covered by quotas. Only 19 percent of African textile exports face NTBs, as opposed to 53 percent for all "<sup>6</sup> Evidence shows that textile and footwear restrictions have major distorting effects on the exports of developing countries who face the measures. For example, the US International Trade Commission estimates of tariff plus NTB protection for 54 broad classes of textile and clothing products. The estimates range to over 100 percent with the nontariff barrier component of total protection generally being far higher than that of tariffs. It is generally held that levels of nontariff protection against textiles and clothing in Europe are of a similar magnitude to that of the United States,
35 developing countries combined, while the African coverage ratio for clothing is about 18 points below the 63 percent developing country average. This pattern is reversed, however, for several food and feed product groups where African countries encounter a higher incidence of NTBs than all developing countries. If coffee were excluded from the tabulations the African food trade coverage ratios would be considerably lower than those for developed and developing countries as a group. Coffee exports are subject to quantitative controls (voluntary export restraints) imposed under the International Coffee Agreement. Special taxes are also applied to coffee imports in several European markets.

Analysis of NTB protection in individual OECD markets indicates that EU trade barriers are directed against African and other developing countries' exports with an above average frequency. While Table 8 shows that only 2 to 3 percent of sub-Saharan African exports to EFTA, Japan and the United States encounter nontariff measures the coverage ratio for the European Union is about _ten times higher_ (21.2 percent). In contrast, less than 9 percent of EU imports from the OECD face nontariff measures. Six African countries have more than one-quarter of their total exports to the European Union covered by NTBs, with the coverage ratios for Reunion and the Seychelles ranging from 88 to 96 percent. Sugar's importance in Reunion's and several other African countries' exports (sugar faces variable levies in Europe) accounts for the high pre-Uruguay Round ratios while the results for the Seychelles are largely due to EU reference prices for imports of tuna and skipjack.

In the United States the pattern of nontariff protection is the reverse of that for the European Union. Here, less than 2 percent of all African exports face nontariff restrictions, while the NTB coverage ratio for US imports from developed countries is 15 percent. Almost 21 percent of Burkina Faso's exports to the US encounter NTBs - - mostly due to global quotas on imports of feathers totalling $77,000 -- while Mozambique's ratio is 32 percent due to US tariff quotas and variable levies on sugar.

Aside from the Republic of South Africa, nontariff barriers in Japan do not appear to pose much of a problem for Africa. Malawi is an exception as almost all of its exports (which consist solely of tobacco) are required to pass through a regulatory state import agency. Between 16 to 20 percent of Equatorial Guinea and the Comoros exports face Japanese NTBs -- the former's exports (parts of tropical plants) are also required to pass through a state agency while the Comoros exports of whalebone is subject to a global quota. For most other African
Table **8.** The Share of African Exports Covered by Nontarff Measures: AD OECD Countries and Major Indusrial Markts.

||199|2Value of Expo|rts (Smillion)|||Share|of Exports C|overed by N|TBs||
|---|---|---|---|---|---|---|---|---|---|---|
|Exporter|All OECD|EFTA|EU|Japan|USA|All OECD|EFrA|EU|Japan|USA|
|Angola|3,684|1|1,132|5|2,436|4.7|2.2|14.7|0.0|0.0|
|<br>Benin|76|1|60|2|10|1.3|7.6|1.5|0.0|0.0|
|Burkina Faso|53|-|41|5|-|12.3|32.8|13.1|0.0|20.8|
|Burundi|74|6|22|2|9|0.1|0.4|0.0|0.0|0.0|
|Cameroon|1,577|8|1,360|13|90|20.8|0.1|26.8|0.0|0.0|
|Cape Verde|7|-|6|1|-|39.5|0.0|60.8|0.0|0.0|
|Centrl African Rep.|102|-|99|-|1|0.1|0.0|0.1|0.0|0.0|
|Chad|66|1|42|_5_|-|0.1|0.1|0.1|0.0|0.0|
|Comoros|28|-|13|-|11|0.6|1.1|0.3|16.2|0.0|
|Congo|1,440|13|851|2|547|38.5|19.7|4|0.0|0.0|
|Cote D'Ivoire|2,258|49|1,623|16|206|14.1|2.4|16.1|0.0|3.6|
|Djibouti|4|1|3|-|-|5.2|46.2|3.2|0.0|0.0|
|<br>Equatorial Guinea|39|-|37|-|-|0.1|0.0|0.1|20.0|0.0|
|Ethiopia|160|6|67|44|9|1.8|1.3|3.3|0.0|0.0|
|Gabon|2,119|31|956|89|984|15.8|0.1|22.6|0.0|0.0|
|Gambia|<br>183|1|145|36|1|0.5|1.6|0.9|0.0|0.0|
|Ghana|886|42|442|65|102|0.4|3.7|0.4|0.0|0.0|
|Guinea|526|29|329|1|125|0.3|4.2|0.4|0.0|0.0|
|Guinea Bisau|8|-|7|-|-|1.6|0.0|1.7|0.0|0.0|
|Kenya|837|58|510|22|78|3.5|4.3|3.8|7.6|0.0|
|<br>Liberia|804|90|642|43|13|0.0|0.0|0.0|0.0|0.0|
|Madagascar|340|20|188|32|56|7.6|1.1|9.6|0.0|7.9|
|Malawi|393|20|130|68|64|29.6|13.5|18.2|99.5|13.4|
|Mali|117|1|95|_5_|2|0.4|2.4|_0.5_|0.0|0.0|
|Mauritania|413|-|241|151|10|1.3|1.6|2.3|0.1|0.0|
|Mauritius|1,279|23|950|4|147|61.6|43.0|59.9|2.0|79.9|
|Mozambique|<br>147|4|94|16|21|10.3|5.7|9.1|0.0|31.7|
|Niger|184|1|172|-|3|0.2|7.2|0.2|0.0|0.2|
|<br>Nigeria|11,379|510|3,720|2|5,299|14.4|0.1|38.2|0.0|0.1|
|<br>Reunion|<br>154|-|<br>151|1|<br>-|83.0|8.5|88.8|1.4|0.0|
|Rwanda|64|_|32|-|5|1.1|0.4|1.2|0.0|0.0|
|Sao Tome&Principe|_5_|-|3|-|-|17.2|0.0|18.4|0.0|0.0|
|Senegal|362|6|317|11|11|19.1|29.4|20.0|0.1|0.4|
|SeycheLes|37|_|34||I 1|91.4|7.1|95.5|0.0|0.0|
# Table **8.** Continued.

||199|2 Value of Expo|rts ($million)|||Share|of Exports C|overed by N|TBs||
|---|---|---|---|---|---|---|---|---|---|---|
|Exporter|All OECD|EFTA|EU|Japan|USA|All OECD|EFTA|EU|Japan|USA|
|Sierra Leone|354|3|256|3|65|0.1|7.6|0.1|0.0|0.0|
|Somalia|19|1|14|-|2|9.0|0.0|9.6|0.0|0.0|
|South Africa|11,132|525|4,892|1,781|1,878|13.0|5.2|14.9|21.1|0.0|
|Sudan|149|5|74|29|11|12.4|0.1|17.4|0.0|0.0|
|Tanzania|266|8|158|33|12|3.8|1.2|5.4|0.1|0.0|
|Togo|121|8|65|1|7|_0.5_|0.7|0.5|2.2|0.0|
|Uganda|162|4|120|4|14|0.0|0.7|0.0|0.0|0.0|
|<br>Zaire|1,277|17|801|83|259|0.0|0.4|0.0|0.0|0.0|
|Zambia|630|8|279|249|71|0.7|12.1|0.7|0.0|0.0|
|Zimbabwe|875|54|418|120|114|20.3|6.5|28.5|4.4|_8.5_|
|TOTAL SUB-SAHARAN AFRICA|44,791|1,556|21,592|2,945|12.675|13.1|3.4|19.7|13.2|1.6|
|Memo Item|||||||||||
|SSA excluding S. Africa|33,659|1,031|16,700|1,164|10,798|13.1|2.5|21.2|3.2|1.9|
|Developed Countries|1,986,779|186,789|908,622|110,548|317,996|10.2|6.6|8.8|_16.5_|15.4|
|Developing Countries|705,634|29,551|204,374|120,426|233,595|16.6|15.1|24.9|4.2|15.4|

Note: See the notes to Table 7 for country definitions and a listing of measures that have been included in the computation of the NTB coverage ratios.

Source: Trade statistics from UN COMTRADE records. NTB information from the World Bank-UNCTAD SMART Database.
38 countries, however, the Japanese NTB coverage ratios are zero, or very low.

Table 9 provides a further perspective on OECD protection facing African exports by showing NTB trade coverage ratios for major product groups, both in total and for individual countries. These tabulations indicate NTBs on most African countries' food exports are considerably more important than those on manufactures (i.e., the coverage ratio for food is 23 percent versus 5.7 percent for manufactures). For some countries the food coverage ratios exceed 80 percent (Djibouti, Mauritius and Reunion) and reach 94 percent for the Seychelles. The importance of this point is highlighted by the fact that numerous studies have estimated that European Union and Japanese NTBs on many food products have ad valorem equivalents of 50 to 200 percent or more (see Laird and Yeats 1991 for a survey of these studies' findings or Table 12 in this report for pre- and post-Uruguay Round estimates).

In contrast to foods and feeds, only about three-tenths of one percent of African agricultural raw material exports encounter NTBs, while the ratio for the ores, minerals and metals group is under 6 percent -- about the same for manufactures. Mauritius and Malawi's coverage ratios for manufactures are exceptions, being 8 or more times the sub-Saharan African average. As previously noted, US textile quotas are a factor responsible for the Mauritius' results -- see Figure 3 for estimated ad valorem equivalents of these MFA restrictions. Import certification regulations are applied to ivory and reptile skin products exported from Malawi. Between 17 to 24 percent of Cameroon, Cote d'lvoire and Madagascar's manufactures exports encounter NTBs, but aside from these countries the coverage ratios are low. In fact, manufactures exports from 11 of the 44 countries encounter no NTBs, and 56 percent (25 out of 44) of the African countries have less than one percent of their manufactured exports facing nontariff measures.

Table 10 addresses the question of what types of nontariff measures do African exports most frequently encounter. Shown here are total 1992 OECD imports (both including and excluding fuels) from individual African countries and summary statistics showing African group totals. The table also indicates the share of this exchange that face six categories of nontariff measures: (i) all NTBs; (ii) directly price raising measures; (iii) quotas and prohibitions; (iv) "voluntary" export restraints; (v) non-automatic licensing requirements; and (vi) other restrictions. The notes to Table 10 indicate the specific types of measures included in each nontariff barrier group.
Table 9. The NTB Coverage of Major Product Categories of African Exports to OECD Markets.

|Exporter|Al<br>Goods|1992 Valu<br>Foods<br>and<br>Feeds|e of OECD Imp<br>Agricultural<br>Materials|orts(USS millio<br>Ores and<br>Non-Ferrous<br>Metals|ns)<br>Manufactures|All<br>Goods|Share of<br>Foods<br>and<br>Feeds|OECD lmports<br>Agricultural<br>Materials|Covered by Non<br>Ores, and<br>Non-Ferrous<br>Metals|tariff Measures<br>Manufactures|
|---|---|---|---|---|---|---|---|---|---|---|
|Angola|3,684|17|1|2|192|4.7|4.9|0.0|0.0|0.0|
|<br>Benin|<br>76|22|32|-|12|1.3|3.5|0.0|0.0|_1.5_|
|Burkina Faso|53|13|35|n.a.|4|12.3|51.1|0.2|6.5|0.5|
|Burundi|74|65|3|4|2|0.1|0.1|0.0|7.6|0.1|
|Carneroon|1,577|335|346|84|44|20.8|_5.0_|0.0|0.3|17.2|
|Cape Verde|7|6|0.1|-|1|39.5|67.9|0.0|0.0|7.9|
|Central African Rep.|102|5|19|-|78|0.1|0.0|0.0|4.4|0.1|
|<br>Chad|66|1|64|-|1|0.1|1.5|0.0|0.0|0.0|
|Comoros|28|20|-|-|8|0.6|0.0|28.8|0.0|0.6|
|Congo|1,440|11|122|6|365|38.5|58.5|1.2|0.0|0.1|
|Cote D'Ivoire|2,258|1,587|364|3|266|14.1|17.9|0.2|0.0|16.7|
|Djibouti|4|-|I|-|2|5.2|87.0|0.0|5.7|3.1|
|Equatorial Guinea|39|6|29|2|2|0.1|0.2|0.0|0.0|0.1|
|<br>Ethiopia|160|92|27|-|40|1.8|1.1|0.0|0.0|7.4|
|Gabon|2,119|16|189|180|70|15.8|0.6|0.0|0.0|2.8|
|Gambia|183|49|1|-|133|0.5|0.8|0.0|0.0|0.0|
|Ghana|886|386|130|266|88|0.4|0.5|0.0|0.0|0.1|
|Guinea|526|18|5|370|132|0.3|6.2|0.0|0.0|0.0|
|Guinea Bissau|8|4|2|-|1|1.6|2.3|0.0|2.7|1.8|
|Kenya|837|591|107|11|111|3.5|4.2|1.7|0.0|0.2|
|<br>Liberia|804|2|90|41|546|0.0|0.2|0.0|0.0|0.0|
|Madagascar|340|251|13|25|50|7.6|6.3|0.0|0.0|24.2|
|<br>Malawi|393|363|10|-|18|29.6|28.0|0.0|28.3|59.3|
|Mali|117|4|52|-|61|0.4|3.4|0.1|3.8|0.1|
|Mauritania|413|206|1|201|3|1.3|0.6|0.0|0.0|2.4|
|Mauritius|1,279|408|6|1|860|61.6|86.5|5.4|0.0|47.2|
|Mozambique|147|108|21|4|13|10.3|13.2|0.0|0.0|4.4|
|<br>Niger|184|1|2|1|179|0.2|10.4|1.4|<br>10.3|0.0|
|Nigeria|11,379|200|111|17|155|14.4|0.3|0.0|13.7|2.1|
|<br>Reunion|154|147|1|1|6|83.0|89.5|0.0|0.0|2.0|
|Rwanda|64|50|8|3|2|1.1|1.1|0.0|0.0|2.1|
|Sao Tome & Principe|5|4|-|-|1|17.2|18.1|0.0|0.0|0.0|
|Senegal|362|291|17|25|21|19.1|24.6|0.0|0.0|2.8|
|Seychelles|37|34|_|_|2|91.4|94.3|0.0|8.0|0.6|

=~~~~~~~~~~~~~~~~~~~~~~~~~~.
# Table 9. Continued.

|||1992 Value|of OECD Impo|rts(US$ millions)|||Share of|OECDInports|Covered by Nontar|iff Measures|
|---|---|---|---|---|---|---|---|---|---|---|
|Exporter|All<br>Goods|Foods<br>and<br>Feeds|Agricultural<br>Materials|Ores and<br>Non-Ferrous<br>Metals|Manufactures|All<br>Goods|Foods<br>and<br>Feeds|Agricultural<br>Materials|Ores, and<br>Non-Ferrous<br>Metals|Manufactures|
|Sierra Leone|354|47|1|86|220|0.1|0.3<br>|_5.5_<br>|0.0<br>|0.0<br>|
|Somalia|19|16|2|-|1|9.0|11.6|0.0|43.1|0.0|
|South Africa|11,132|1,799|609|4,711|2,251|13.0|57.1|0.6|8.4|0.4<br>|
|Sudan|149|39|102|1|6|12.4|31.9|0.0|0.0<br>|0.0<br>|
|Tanzania|266|153|36|34|40|3.8|5.8|0.0|0.0|5.3|
|Togo|121|31|14|64|7|0.5|1.6<br>|0.1<br>|0.0<br>|0.2<br>|
|Uganda|162|143|16|0.3|3|0.0|0.0|0.0|0.0<br>|0.0<br>|
|<br>Zaire|1,277|80|64|472|395|0.0|0.0|0.0|0.0|0.1<br>|
|Zambia|630|16|6|579|28|0.7|29.8|0.0<br>|0.0<br>|0.6<br>|
|Zimbabwe|875|386|61|324|102|20.3|30.3|0.1|19.4|8.0|
|SSA|44,791|8,022|2,719|7,521|6,524|13.1|23.4|0.3<br>|5.7<br>|5.6<br>|
|SSA excl S.Africa|33,412|7,822|2,608|7,503|6,369|13.1|18.6|0.2|2.6<br>|6.5<br>|
|Developing Countries|705,634|79,053|20,303|42,227|383,871|16.6|17.1|1.3<br>|10.1<br>|18.8<br>|
|Developed Countries|1,986,779|190,602|53,386|116,438|1,499,800|10.2|24.6|1.3|13.6|8.5|

Source: Trade data from United Nations COMTRADE files.<sup>Nontariff barrier information from World Bank-UNCTAD SMART Data Base.</sup> See the notes to Table 2 for the components of the product groups shown in this table<sup>defined in terms of the SITC (revision 1) classification system. The notes to Table 3 indicate which nontariff measures have been</sup> employed for the computation of the trade coverage ratios.

0
41 Figure 3: The Estimated Total Effect o' Tariff and Nontariff Protection for Textiles and Clothing in the United States <!-- Start of picture text --> W&ovn oMUoees t_t*:I<br>MB awean_I I._<br>MBITCWUI&trs I - __-:_:_-_--<br>he Njt. type Co w .. _I ... _.<br>Kn ft & bpwum _ __<br>WCmh xltn k3P_I mjt_ _ . _.<br>Cotton tweah I I<br>MB Se coa_~~I _ ............. . .. ..... - ..............<br>kV go-type c I w<br>j MB s*Ch-,p<br>M p o il _- _ w _ - .- _ _ _ _ _ _ _ _ _ _ _ _ _<br>YVGI I I .:<br>_ __ -~~~~~~~,,-~ ~ .. ~.., -' .<br>oo swate MB i -<br>hLnot krWI MMP f~~~~lcs__L..r~~~~..riw..,.. J ..<br>MMF n j -k-ghtwsa .- . Tariff equivalent of NTBs minuis<br>_ . 0 Tariff rate<br>WGI wool swe I _twm<br>we roerI . -...<br>londk&estAfsm<br>0 20 40 60 ~~~~80 100 120<br>Not_: M.me1O nvnrne f__.. b:WGI rmeans wmensgis.n iIfwrtl., MB mea meris aid boy.<br>S"O..c: USLTC 1989<br><!-- End of picture text -->
42 Overall, quantitative restrictions are the most important type of barrier facing African exports, although the relative importance of these measures changes when fuels are excluded from the tabulations (Box 3 summarizes the nontariff barriers which are applied to fuel imports in major OECD markets). QRs affect approximately 8 percent of African exports, followed by price raising restrictions that cover 4 percent of total trade.'' When energy products are excluded, however, the importance of price raising measures, which are applied to many agricultural products, is more than double that of quantitative restrictions. Voluntary export restraints (including MFA restrictions on Africa) are marginal -- they affect only about four-tenths of a percent of SSA exports and are only applied to shipments from Mauritius and, to a lessor extent, countries like Kenya and Nigeria. The application of MFA restrictions to Kenya's exports in the early 1990s had especially negative implications for Africa since they demonstrated that OECD countries would not hesitate to "freeze" the further expansion of an export oriented textile and clothing industry that was in a very early stage of development.

# B. The Achievements of the Uruguav Round

The foregoing discussion established two main points. First, before the Uruguay Round some African countries faced important OECD nontariff barriers, although others exports were largely unaffected. Second, these measures are applied more often against developing countries than against other countries' exports. This situation will change markedly as a result of the Uruguay Round's achievements in the areas of agriculture, textiles and clothing, and safeguards. While the Round also achieved an agreement on the elimination of 'voluntary" export restraints these measures are only of marginal importance to a few African countries' exports.

"I1n some cases, the sum of the coverage ratios for the six different types of measures may exceed the total shown for all NTBs. This is due to the multiple application or "stacking" of more than one type of nontariff barrier on a single product. For example, the United States applies flexible import charges (variable levies) to sugar imports and also subjects this trade to a tariff quota.
Table 10. The Relative Importance of Different Types of OECD Nontariff Measures Facing African Exports.

||||||||Share of|OECD Impo|rts Facing|Nontariff Me|asures||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
||1992 OEC<br>(Sm|D Imports<br>illion)|All<br>M|Nontariff<br>easures|Price<br>Mea|Raising<br>sures|Quo<br>Proh|tas and<br>ibitions||VERs|Non-<br>Lice|Automatic<br>nsing|O<br>M|ther<br>easures|
|Exporter|Total|Non-Fuel|Total|Non-Fuel|Total|Non-Fuel|Total|Non-Fuel|Total|Non-Fuel|Total|Non-Fuel|Total|Non-Fuel|
|Angola|3,684|219|4.7|1.2|0.0|0.3|4.7|1.2|0.0|0.0|0.0|0.0|0.0|0.0|
|Benin|76|66|1.3|1.5|0.9|1.1|0.3|0.4|0.0|0.0|0.0|0.0|0.0|0.0|
|Burkina Faso|53|53|12.3|12.3|0.4|0.4|12.2|12.2|0.0|0.0|0.0|0.0|0.1|0.1|
|Burundi|74|74|0.1|0.1|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Cameroon|1,577|814|20.8|3.7|0.0|0.1|20.8|3.7|0.0|0.0|0.0|0.0|0.0|0.0|
|Cape Verde|7|7|39.5|39.5|15.1|15.2|24.4|24.5|0.0|0.0|0.0|0.0|0.0|0.0|
|Central African Rep.|102|102|0.1|0.1|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Chad|66|66|0.1|0.1|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Comoros|28|28|0.6|0.6|0.0|0.0|0.6|0.6|0.0|0.0|0.0|0.0|0.0|0.0|
|Congo|1,440|508|38.5|3.8|1.4|3.1|37.1|0.6|0.0|0.0|0.0|0.0|0.0|0.0|
|Cote D'lvoire|2,258|2,223|14.1|14.4|2.6|2.7|11.4|11.7|0.0|0.0|0.0|0.0|0.0|0.0|
|Djibouti|4|3|5.2|5.2|2.8|2.8|2.4|2.4|0.0|0.0|0.0|0.0|0.0|0.0|
|Equatorial Guinea|39|39|0.1|0.1|0.0|0.0|0.1|0.1|0.0|0.0|0.0|0.0|0.0|0.0|
|Ethiopia|160|160|1.8|1.8|0.3|0.3|1.5|_1.5_|0.0|0.0|0.0|0.0|0.0|0.0|
|Gabon|2,119|458|15.8|1.5|0.0|0.0|15.8|_1.5_|0.0|0.0|0.0|0.0|0.0|0.0|
|Gambia|183|183|0.5|0.5|0.5|0.5|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Ghana|886|872|0.4|0.2|0.2|0.2|0.2|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Guinea|526|526|0.3|0.3|0.1|0.1|0.2|0.2|0.0|0.0|0.0|0.0|0.0|0.0|
|Guinea Bissau|8|8|1.6|1.6|0.2|0.2|1.5|_1.5_|0.0|0.0|0.0|0.0|0.0|0.0|
|Kenya|837|833|3.5|3.5|1.3|1.3|2.2|2.2|0.0|0.0|0.0|0.0|0.1|0.1|
|Liberia|804|720|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Madagascar|340|340|7.6|7.6|4.7|4.7|2.9|2.9|0.0|0.0|0.0|0.0|0.0|0.0|
|Malawi|393|393|29.6|29.6|9.0|9.0|20.6|20.6|0.0|0.0|0.0|0.0|0.0|0.0|
|Mali|117|117|0.4|0.4|0.1|0.1|0.3|0.3|0.0|0.0|0.0|0.0|0.0|0.0|
|Mauritania|413|413|1.3|0.3|0.2|0.3|1.0|0.1|0.0|0.0|0.0|0.0|0.0|0.0|
|Mauritius|1,279|1,279|61.6|61.7|32.5|32.5|16.6|16.6|13.1|13.1|0.0|0.0|0.1|0.1|
|Mozambique|147|147|10.3|10.3|9.1|9.1|1.2|1.2|0.0|0.0|0.0|0.0|0.0|0.0|
|<br>Niger|184|184|0.2|0.2|0.2|0.2|0.1|0.1|0.0|0.0|0.0|0.0|0.0|0.0|
|Nigeria|11,379|497|14.4|1.0|0.0|0.4|14.3|0.0|0.0|0.5|0.0|0.0|0.0|0.0|
|<br>Reunion|154|154|83.0|83.0|81.2|81.2|1.8|1.8|0.0|0.0|0.0|0.0|0.0|0.0|
|Rwanda|64|64|1.1|1.1|0.0|0.0|1.1|1.1|0.0|0.0|0.0|0.0|0.0|0.0|
|Sao Tome & Principe|5|5|17.2|17.5|17.2|17.5|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Senegal|362|357|19.1|19.1|5.8|5.8|13.3|13.3|0.0|0.0|0.0|0.0|0.0|0.0|
|Seychelles|37|37|91.4|91.4|83.0|83.0|8.3|8.3|0.0|0.0|0.0|0.0|0.0|0.0|
Table 10. Continued

||||||Share|of OECD Im|ports Facin|g Nontariff M|easures||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
||1992 OEC<br>($mil|D Imports<br>lion)|All N<br>Meas|ontariff<br>ures|Price<br>Mea|Raising<br>sures|Quot<br>Prohi|as and<br>bitions||VERs|Non-A<br>Lice|utomatic<br>nsing|M|Other<br>easures|
|Exporter|Total|Non-Fuel|Total|Non-Fuel|Total|Non-Fuel|Total|Non-Fuel|Total|Non-Fuel|Total|Non-Fuel|Total|Non-Fuel|
|Sierra Leone|354|354|0.1|0.1|0.1|0.1|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Somalia|19|19|9.0|9.0|4.1|4.1|5.0|_5.0_|0.0|0.0|0.0|0.0|0.0|0.0|
|South Africa|11,132|9,490|13.0|11.5|9.4|10.6|3.9|1.3|0.0|0.0|0.0|0.0|0.2|0.2|
|Sudan|149|149|12.4|12.4|12.3|12.3|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Tanzania|266|266|3.8|4.1|3.1|3.4|0.7|0.8|0.0|0.0|0.0|0.0|0.0|0.0|
|Togo|121|118|0.5|0.5|0.2|0.2|0.2|0.2|0.0|0.0|0.0|0.0|0.0|0.0|
|Uganda|162|162|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Zaire|1,277|1,126|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|0.0|
|Zambia|630|630|0.7|0.7|0.3|0.3|0.4|0.4|0.0|0.0|0.0|0.0|0.0|0.0|
|Zimbabwe|875|875|20.3|20.5|18.7|18.9|2.3|2.3|0.0|0.0|0.0|0.0|0.0|0.0|
|SSA|44,791|25,137|13.1|10.8|4.9|7.5|8.0|3.0|0.3|0.5|0.0|0.0|0.1|0.1|
|Memo Item|||||||||||||||
|SSA exci S.Africa|33,659|15,647|13.1|10.4|3.5|6.0|9.3|3.8|0.4|0.7|0.0|0.0|0.0|0.0|
|Developing Countries|705,634|540,783|16.6|16.6|3.3|3.6|4.8|2.0|9.6|12.5|0.0|0.0|0.1|0.1|
|Developed Countries|1,986,779|1,900,481|10.2|9.7|2.6|2.4|2.9|2.3|5.0|5.2|0.0|0.0|0.3|0.3|

Note: For a listing of ali measures that were classified as nontariff barriers see the notes to Table 3. The classification used for the different types of nontariff barriers is as follows:

- (i). Price raising measures include tariff quotas, increased duties, safeguard duties, retaliatory duties, customs surcharges, variable levies and flexible import fees, import price controls including reference and minimum import prices, and 'voluntary' export price restraints.

- (ii) Quotas and prohibitions include non-automatic and discretionary licensing requirements, bilateral and global quotas, seasonal quotas, and state monopoly of imports.

- (iii). 'Voluntary' export restraints include orderly marketing arrangements, all restrictions relating to the Multifiber Arrangement, other textile export restraint agreements and quotas.

- (iv). Nonautomatic licensing includes import permit requirements, imports restricted to select purchasers, permit dependant on the purchase of local goods, and other discretionary licensing schemes.

- (v). Other entry formalities include prohibitions for noncommercial purposes, miscellaneous regulations including import certification requirements, and local content import requirements.

# Source: Trade statistics from United Nations COMTRADE records. Nontariff barrier informiation from the UNCTAD-Wortd Bank SMART Data Base.

**45-**
45

# Box 3 Nontariff Barriers Applied to OECD Energy Imports.

The previous analysis documented two points relating to OECD nontariff barriers on energy imports. First, the NTB coverage ratios for these products (17.4 percent) is approximately 7 percentage points higher than that for all non-fuel goods imported from Africa. Second the OECD restrictions often take the form of price raising measures, although energy products are also subject to quotas and special import authorization requirements (quotas in Japan are particularly important). A third point is that NTBs on energy imports were virtually unaffected by the Uruguay Round. As a result, in the post-Uruguay environment this sector will be one of the more heavily NTB ridden of all product groups.

|Country|Measures Applied|Products Affected|
|---|---|---|
|Australia|None Reported|No restrictions reported on any coal, petroleum or gas imports.|
|Austria|Licensing, Excise Taxes|License required to import lignite. Excise taxes applied to crude and<br>refined petroleum products.|
|Canada|None Reported|No restrictions reported on any coal, petroleum or gas imports|
|European Union|None Reported|No restrictions reported on any coal, petroleum or gas imports.|
|Finland|Licensing, Quotas|Discretionary licensing for coal, coke and crude and refined petroleum.<br>Global quotas on refined petroleum products, gasoline and petroleum<br>based coke.|
|Japan|Quotas, Tariff<br>Quotas|Global quotas on coal imports. Tariff quotas on refined petroleum<br>products and gasoline.|
|New Zealand|None Reported|No restrictions reported on any coal, petroleum or gas imports.|
|Norway|Import Authorization|Import authorization needed for peat, refined petroleum and gasoline.|
|Sweden<br>Switzerland|Additional Charges<br>Surcharges, Excise Tax|Special additional fiscal charges on coal and natural gas<br>Surcharges applied to fuel oil imports. Excise taxes on petroleum based<br>lubricants|
|United States|Product Specific Tax|Special taxes and charges on crude and refined petroleum products|

The above tabulations list the types of restrictions that are applied to energy imports in 11 major OECD markets. The fact that price raising measures (tariff quotas, product specific taxes, surcharges, etc.) are applied in over one-half of these countries could have implications for exporters of refined products, i.e., any attempts to increase trade through subsidies or other price lowering measures could be offset by increased taxes on imports. Importing countries might have an incentive to raise these charges to protect domestic refining industries (or domestic coal producers as in the case of Japan) and could easily do so given that none of these special charges are legally bound under existing GATT regulations.

From the viewpoint of energy exporting countries, how much importance should be attributed to the measures listed above. While there appear to have been no formal studies that attempted to estimate their ad valorem incidence there is reason to believe that they do not have a major cost raising impact on imports. Energy is an important production input for many key OECD industries (agriculture, ferrous and nonferrous metals, transport and machinery, etc.) and binding import restrictions on coal, oil and natural gas could severely disadvantage domestic industry relative to foreign suppliers. However, given that, in the post-Uruguay Round environment, this will be one of the most heavily NTB ridden sectors, further analysis is warranted on the impact of these measures on the level and structure of energy trade.
46

# 1. Agriculture

After more than four decades during which agriculture was de facto excluded from mainstream GATT rules the Uruguay Round achieved a major breakthrough. The agreement requires that participating governments do not "maintain, resort to, or revert to any measures of the kind which have been ... converted into ordinary customs duties. "" The barriers to be converted include virtually all NTBs. Nontariff measures are to be converted into ad valorem or specific tariffs as soon as the agreement enters into force. The resultant tariffs are to be "bound" and reduced over a period of six years." The agreement includes a special safeguard measure which allows an additional duty to be imposed on a product if its price falls, or the volume of imports increases, by a specified amount.

The conversion of NTBs under the "tariffication" exercise was intended to be based on the difference between internal and external prices during 1986-88. The relevant calculations have been undertaken at the fouror six-digit level of the Harmonized System. Tariff equivalents for most processed products were not calculated from direct price comparisons, but were computed as an average of those for the component products weighted by their share in the final good. Both the base year for the tariffication exercise, and the manner in which the calculations were undertaken, could lead to increases in the level of short-term protection, but any such increases should be lowered by the tariff reduction commitments (i.e., industrial countries will lower tariffs by an unweighted 36 percent over six years while developing countries will stage reductions of 24 percent over ten years). In addition, "tariffied" products are subject to minimum access requirements which are guaranteed, where necessary, "Article 4.2 of the Agreement on Agriculture. Essentially, the Agreement covers all items in Harmonized System chapters I through 24 (excluding fish and fish products) plus a number of additional products like: raw cotton, silk, flax and hemp; wool and animal hair; raw fur skins and other hides and skins; sorbitol and mannitol; essential oils; and several finishing agents. As a result of the exclusion of fish, this product group (along with chemicals and energy products) will be among the most heavily ridden NTB sectors after the Round.

'<sup>9</sup> A tariff binding is the legally set maximum rate at which an import duty may be set. Actual tariffs can be below the bound rate, but cannot rise above it unless the rate is renegotiated with a country's trading partners. It should be noted the period of tariff reduction is extended to ten years for developing countries, and the least developed countries are not required to make any reductions. They are, however, prohibited from maintaining nontariff measures.
47 through tariff quotas.' The Round also achieved commitments to reduce domestic agricultural support measures and export subsidies. These changes should both increase export opportunities for African countries and also substantially reduce the level of price instability in international markets for agricultural goods (see Box 4 on this point). The latter could make an important contribution toward the reduction of African food security problems. A narrowly defined exception has been made to the general elimination of nontariff measures. Countries may designate certain agricultural products for "special treatment" if they meet specified criteria, thereby exempting them from the tariffication requirement. Despite the right to maintain NTBs on designated products, minimum access requirements will apply on these products which will bring their level of import penetration (i.e., the ratio of imports to consumption) from a minimum of 4 percent up to 8 percent by the end of the six-year implementation period. In order to qualify for special treatment, imports of designated products must comprise less than 3 percent of corresponding domestic consumption in the 1986-88 base period. Second, designated products should not have benefitted from any export subsidies since the beginning of the base period. Third, measures restricting domestic production should be applied to the relevant primary agricultural product. Perhaps the most important example of a product receiving this special treatment is rice in Japan.

# 2. Textiles and Clothing

the Agreement on Textiles and Clothing in the Uruguay Round provides for the elimination of MFA-type arrangements or, in other words, of all current NTBs in the sector over a ten year period. The phase-out will gradually involve the progressive elimination of quantitative restraints by product category combined with more rapid quota expansion (i.e., quotas must be expanded by more than the quota growth during the 12 month period prior to entry into force of the agreement). Restrictions must be removed from products accounting for not less than 16 percent in terms of 1990 volumes of items covered by the MFA (including those without bilateral QRs at present and non-binding QRs) as soon as the agreement enters into force. There are then three additional phases 2Minimum access opportunities are provided when imports of a product subject to tariffication are less than _5_ percent of domestic consumption in the 1986-88 base period. The minimum access opportunity is equal to 3 percent of the base period consumption in the first year, rising to 5 percent in six years. In the case where imports of tariffied products exceeded 5 percent of consumption in the base period countries must maintain the access opportunity that existed in the base period.
48

# **Box 4**

# **Nontariff Measures** and International Price Stability

Initial analyses of the Uruguay Round's accomplishments relating to NTBs tend to focus on the resulting trade gains. This orientation understates the importance of what was achieved since there is reason to believe other benefits should also result. African countries, for example, have long been concerned with the effects of price and earnings instability for their major exports and imports and have been strong supporters of measures like STABEX and UNCTAD's Common Fund which would assist them counter the adverse effects. Related studies have shown, however, that industrial countries' nontariff measures are an important source of this instability. For example, quotas and other quantitative restrictions (like VERS) make the import demand curve completely inelastic at the point where they become operative. As such, any shift in export supply will result in a grater price change than that which would occur under normal demand conditions. Similarly, European countries' variable import levies -- which are widely applied to agricultural imports -- are designed to shield domestic producers from instability in agricultural prices and earnings, but in doing so have a destabilizing influence on international markets.' Actions taken during the Round on NTBs should reduce the importance of the effects of international price instability on African economies.

Variable levies may have both an upward and downward destabilizing influence on the products to which they are applied. When world prices rise variable levies fall and may become negative (i.e., they become subsidies on imports) if the world price rises above the EC's threshold price. In this case EC import demand is higher than under a nominal tariff. The excess demand in an inflationary period contributes to a further increase in world prices. In periods when world prices are falling, however, the variable levies rise thereby restricting any increase in demand. Thus, through their perverse effects on import demand variable levies destabilize world prices. Although EU and EFTA countries rely heavily on variable levies, they are also used by the US and Japan.

Aside from levies, other types of nontariff measures are also recognized to have a destabilizing impact on international trade and prices. For example, in an analysis of international commodity markets the OECD (1982) compiled the following matrix which showed how international price instability would be affected by different NTBs

||Variance of Price Instability Com|pared to that Under Free Trade|
|---|---|---|
|Importing Country Measures|Exporting Country|Importing Country|
|Specific Tariff|same|Same|
|Ad Valorem Tariff|smaller|Larger|
|Fixed Quota<br>Proportional Quota|Generally Larger<br>Generally Larger|Generally Larger<br>Generally Larger|
|Import Prohibition|Generally Larger|Generally Larger|
|Price Fixing|Larger|Smaller or the Same|
|Variable Levy|Larger|Smaller|

relative to what would occur in a free trade situation. The importance of this classification is highlighted by the fact that Laird and Yeats (1990, p. 105) show that more than 70 percent of EC(10) imports of meat, cereals, dairy products, sugar and honey, live animals, and beverages are subject to variable import levies or minimum import prices. Levies are also applied to over 80 percent of Japan's sugar and honey imports while fixed quotas are applied extensively to Japan's meat, dairy, fish and cereal imports. While attempts to quantify exact magnitudes would be useful, there is every indication that the Uruguay Round's "tariffication" of NTBs will make an important contributions to the reduction of global price and trade instability for agricultural products.

'Food security issues have been a major concern on many African countries and one factor increasing these concerns is the wide variability in international prices for basic import staples like grains. Sampson and Snape (1980) develop quantitative evidence showing that OECD nontariff barriers have played an important role in increasing price instability for these goods. This, in turn, raises the cost of food security programs.
49 that take effect at the beginning of the fourth, eighth, and end of the tenth years in which an additional 17 percent, 18 percent and 49 percent of the 1990 import volumes must be fully liberalized.

The agreement also establishes a 'transitional safeguard" mechanism that allows NTBs to be used in certain circumstances. These safeguards can be applied if increased import volumes cause, or threaten, serious damage to the domestic industry, and they can be maintained for a maximum of three years. The safeguard is invoked on a country-by-country basis, but can only be applied on products which have not yet been integrated into GATT/WTO rules (i.e., products on which MFA type quotas may still be applied). A second restriction on the use of the special safeguard is that it cannot be invoked on an eligible (non-integrated) product if that item is already subject to a MFA quota in the market concerned.

Unlike agriculture, where the removal of most NTBs will occur immediately when the agreement enters into force, the process in the textile and clothing sector will be more gradual. Indeed, a very high share of all quota restrictions by volume existing in 1990 could still be in place until the last day of the ten year phase-out period. Use of the transitional safeguard could also raise the coverage of NTBs above the levels initially suggested by the phase-out schedule. Moreover, since the MFA and its phase-out program are built on a series of bilateral arrangements, and countries face quite different levels of restrictions, it is difficult to make any straightforward judgements about how individual developing countries will be affected. Indeed, the possibility exists that some aspects of the agreement may have adverse implications for Africa unless appropriate policies are pursued. Specifically, African exports will be subject to increased competitive pressures when barriers facing other exporters of their products are liberalized and technical assistance, along with reforms domestic policies, will be urgently needed in order to respond to these increased pressures (see Box 5).

# 3. Safeguards and the Implications for "Voluntary" Restraints

Over the years voluntary export restraints, and similar bilateral arrangements involving exporters in the administration of restrictions became an increasingly common approach to the protection of domestic industries. Exporters wished to avoid having direct (possibly more restrictive) import barriers on their goods which could also reduce any rents associated with VERs. Importers preferred a less transparent protective arrangement, and one
50

# **Box 5** Implications of the Removal of the **MFA** for **African Countries**

For over 30 years international trade in textiles and clothing was restricted by the Multifiber Arrangement and its predecessor the Short-Term Textile Arrangement. These 'agreements" established quotas on developing countries' exports to the OECD based on pre-existing market shares. This had positive implications for some developing countries and negative effects on others. For example, developing countries that lost their cost competitiveness were still able to export textiles and clothing because of the MFA quotas' 'market reservation" effects. Countries which were new producers, or were becoming increasingly cost competitive, found their market shares frozen. With few exceptions (Mauritius and Nigeria) Africa does not face MFA restrictions. However, the MFA probably had positive implications for African exporters in that they were shielded from direct competition with countries that may be more competitive producers (i.e., China, Thailand, Sri Lanka, etc.) due to MFA constraints on the latter.

This situation will be altered dramatically due to the Uruguay Round. MFA quotas will be phased out over 10 years. At this point textile trade will become subject to _aggressive international comnetition._ Whether Africa can maintain viable textile and clothing exports will depend on its ability to compete with other producers.

Very limited information is available on relative costs in Africa vis-a-vis other textile producing countries, yet the data that exists indicates Africa may have problems. For example, the following shows estimates of the direct costs (in US dollars) for the production of a man's casual long sleeved shirt in India, the United Arab Emirates, and four African countries. In each case, Africa's production costs are above those for India. Costs in Senegal are actually about 50 percent higher. Ghana comes closest to matching the Indian cost structure, but still are 3 percent higher. It should be noted that the above do not incorporate any adverse marketing and distribution costs that may also affect Africa.

|Item|Zimbabwe|Kenya|Senegal|Ghana|India|UAE|
|---|---|---|---|---|---|---|
|Fabric|3.28|3.00|4.31|3.18|2.90|2.95|
|Misc. Materials|0.31|0.40|0.55|0.42|0.39|0.37|
|Washing|0.10|0.12||0.11|0.12|0.12|
|Labels/Packaging|0.16|0.31|0.36|0.36|0.40|0.42|
|Direct & Indirect Labor|1.72|1.34|2.36|1.22|1.22|1.60|
|Transport to Port|0.18|0.20|0.15|0.05|0.15|0.17|
|TOTAL OF ABOVE ITEMS|5.75|5.37|7.73|5.34|5.18|5.63|

Source: Biggs _et. al._ (1994). The authors report (p. 37) that no data could be collected for Cote d'Ivoire because the only remaining garment exporter was unable to compete for standard shht export orders. Also, the authors include a MFA quota cost in India's total production costs. These charges are excluded from the above totals due to the Round's agreed phase-out of MFA restrictions. It should be noted that the above cost comparisons were made for a period prior to the CFA devaluation. As a result of this exchange rate adjustment Senegal's cost structure is now probably closer to that of the other countries.

To compete effectively in the post-Uruguay environment Africa will need to adopt reforms that will allow domestic producers to be cost competitive. These reforms must address a broad range of measures, from the impact of government imposed trade barriers that raise the costs of imported production inputs, to measures that limit access to the most efficient international sources of finance, technology, transport and communications. Indeed, the Uruguay Round appears to have shifted the focus for further reforms to the African countries themselves to ensure that they can react to the new export opportunities and competitive challenges resulting from the multilateral trade negotiations.
51 where neither explicit compensation, nor the constraint of nondiscrimination rule, would apply. Another reason why safeguard measures were used less frequently may have been the growing reliance on antidumping and countervailing duty actions. While safeguard actions are a tacit admission of the inability of a domestic industry to compete, antidumping and countervailing duties are instruments whose justification is the counteraction of unfair behavior on the part of foreign producers or governments.

The Uruguay Round Agreement on Safeguards seeks to provide more flexible arrangements, but under tighte rules. There is a relaxation of the nondiscrimination rule in exceptional circumstances, and no compensation is required during the first three years that a measure is applied. On the other hand, safeguards can only be applied for a limited period (four years, renewable for a further four), and cannot be renewed for the same time period for which they were originally applied. In addition, safeguards must be progressively liberalized, and are subject to surveillance and review.

The most significant feature of the safeguards agreement, however, is the _commitment to eliminate all voluntary restraints (VERs)._ All VERs, with the exception of one per country, are to be removed within a period of four years. The exception of a single measure from the general phase-out commitment was designed to accommodate the wish of the EU to continue to restrict Japanese auto imports. According to the agreement, however, the single exception permitted to each party runs only until December 31, 1999. This commitment implies a significant reduction in nontariff measures facing all developing countries, although the immediate direct impact on African exporters, which with one or two exceptions do not face these measures, will be limited. Africa could, however, face substantial new competition from countries whose exports were formerly blocked by VERs once these measures are lifted. Industry sectors where such heightened competition should occur include ferrous metals and footwear.

# C. Implications for African Exports: The Round's Effects on NTBs

The overall importance of pre-Uruguay Round NTBs is evident from the fact that approximately $5.9 billion of OECD imports from Africa face these measures -- $4.4 billion excluding South Africa, see the data in Table 7. This raises the question of how the Round will influence the overall level of nontariff protection facing
52 sub-Saharan Africa, and how will the relative importance of NTBs on different types of export products change. **Using published details on** the agreement (GATT 1994), Table 11 provides an indication by showing the preUruguay Round NTB coverage ratios for individual African countries along with an estimate of what the ratio will be after the agreement is implemented. These estimates were derived by tabulating the value of pre-Uruguay Round **trade that** will **still be subject** to (post-Uruguay Round) NTBs, and then expressing this value as a share of total (pre- **Uruguay Round)** exports.<sup>2</sup> ' In order to more clearly show the impact of the Round, Table 11 classifies countries **into three groups** (highly NTB affected, moderately affected, and largely unaffected) based on their pre-Uruguay Round coverage ratios.

For several countries the estimated change in the nontariff barrier coverage ratios are dramatic. Prior to the Uruguay Round, 83 percent of Reunion's exports (which consist largely of sugar) faced OECD restrictions while this ratio should fall to zero as a result of the agreement. The coverage ratio for Mauritius should decline by almost **60** percentage points (to just over 2 percent) after textile and clothing restrictions are lifted from this countries' exports, while the tariffication of agricultural NTBs causes Cape Verde's ratio to decline from about 40 percent to zero. **Overall,** the share of Africa's non-oil exports that face nontariff barriers should decline from approximately **11 to about 3 percent.** Figure 4 presents another prospective on the impact of the Round by showing how it altered the overall profile of nontariff protection facing Africa. The top most line Nb ranks African countries in terms of increasing pre-Uruguay Round NTB coverage ratios (the ratios increase as one moves rightward along the horizontal scale), **while the** lower line (N,) indicates what the estimated coverage ratio for each country will be after the Round. **Actual values** of NTB coverage ratios are recorded on the vertical axis.

> **21The results** -- the post Uruguay Round coverage ratio (Cpr) -- was derived from,

# (1) C,,, = VI, **Vtb**

**where V. is the value** of pre-Uruguay exports that will still be subject to post-Uruguay Round NTBs and V, is the **total value of pre-Uruguay Round** exports. This measure probably overstates the importance of remaining nontariff **barriers since the removal** of the OECD nontariff barriers should produce a trade response. That is, African exports **should increase as a result of** the liberalization of OECD NTBs which would make the denominator in the above **expression larger, and coverage** ratio smaller. Whether African trade in textiles and clothing expands, however, **largely depends on these** countries adoption of necessary measures to achieve cost competitiveness.
# Table 11. Pre and Post Uruguay Round NTB Coverage Ratios for Individual Sub-Saharan African Countries.

|||||OECD|Nontariff Mea|sure Coverage R|atio||
|---|---|---|---|---|---|---|---|---|
||1992 OEC<br>(Smil|D Imports<br>lion)||All Goods||A|ll Non-Oil Good|s|
|Exporter|All<br>Goods|All Non-Oil<br>Goods|Pre-<br>Uruguay|Post-<br>Uruguay|Change|Pre-<br>Uruguay|Post-<br>Uruguay|Change|
|HIGHLY NTB AFFECTED|||||||||
|Seychelles|37|37|91.4|84.7|-6.7|91.4|84.7|-6.7<br>|
|Reunion|154|154|83.0|0.0|-83.0|83.0|0.0|-83.0|
|Mauritania|1279|1279|61.6|2.2|-59.4|61.7|2.3|_-59.4_|
|Cape Verde|7|7|39.5|0.0|-39.5|39.5|0.0|-39.5|
|Congo|1440|508|38.5|38.0|-0.5|3.8|2.2|-1.6|
|Malawi|393|393|29.6|3.7|-2|29.6|3.7|-25.9|
|Cameroon|1577|814|20.8|19.7|-1.1|3.7|1.6|-2.1|
|Zimbabwe|875|875|20.3|6.9|-13.4|20.5|7.1|-13.4|
|MODERATELY NTB AFFECTED|||||||||
|Senegal|362|357|19.1|0.0|-19.1|19.1|0.0|-19.1|
|Sao Tome & Principe|5|_5_<br>|17.2<br>|2.7<br>|-14.5|17.5<br>|3.0<br>|-14.5<br>|
|Gabon|2119|458|15.8|15.8|0.0|1.5|1.5<br>|0.0<br>|
|Nigeria|11379|497|14.4|14.4|0.0|1.0|0.9|-0.1|
|Cote d' Ivoire|2258|2223|14.1|1.5|-12.6|14.4|1.6|-12.8|
|South Africa|11132|9490|13.0|3.7|-9.3|11.5|0.6<br>|-10.9<br>|
|Sudan|149|149|12.4|4.1|-8.3|12.4|4.1|-8.3|
|Burkina Faso|53|53|12.3|0.0|-12.3|12.3|0.0|-12.3|
|Mozambique|147|147|10.3|0.6|-9.7|10.3|0.6|-9.7|
|Somalia|19|19|9.0|0.0|-9.0|9.0|0.0|-9.0|
|Madagascar|340|340|7.6|2.9|-4.7|7.6|2.9|-4.7|
|Djibouti|4|3|5.2|5.2|0.0|5.2|5.2|0.0|
|Angola|3684|219|4.7|4.7|0.0|1.2|0.8|-0.4|
|Tanzania|266|266|3.8|0.5|-3.3|4.1|0.8|-3.3|
|Kenya|837|833|3.5|0.3|-3.2|3.5|0.3|-3.2|

Ln
Table 11. Continued

|||||OEC|D Nontariff Mea|sure Coverage R|atio||
|---|---|---|---|---|---|---|---|---|
||1992 OEC<br>($m|D Imports<br>illion)||All Goods||Al|l Non-Oil Good|s|
|Exporter|All<br>Goods|All Non-Oil<br>Goods|Pre-<br>Uruguay|Post-<br>Uruguay|Change|Pre-<br>Uruguay|Post-<br>Uruguay|Change|
|NTB UNAFFECTED COUNTRIES|||||||||
|Ethiopia|160|160|1.8|1.2|-0.6|1.8|1.2|-0.6|
|Mauritania|413|413|1.3|1.0|-0.3|0.3|0.0|-0.3|
|Guinea Bissau|8|8|1.3|0.2|-1.2|1.6|0.5|-1.2|
|Benin|76|66|1.3|0.3|-1.0|1.5|0.3|-1.2|
|Rwanda|64|64|1.1|0.2|-0.9|1.1|0.2|-0.9|
|Zambia|630|630|0.7|0.0|-0.7|0.7|0.0|-0.7|
|Comoros|28|28|0.6|0.6|0.0|0.6|0.6|0.0|
|Gambia|183|183|0.5|0.3|-0.2|0.5|0.3|-0.2|
|Togo|121|118|0.5|0.1|-0.4|_0.5_|0.1|-0.4|
|<br>Ghana|886|872|0.4|0.2|-0.2|0.2|0.0|-0.2|
|Mali|117|117|0.4|0.2|-0.2|0.4|0.2|-0.2|
|Guinea|526|526|0.3|0.1|-0.2|0.3|0.1|-0.2|
|Niger|184|184|0.2|0.1|-0.1|0.2|0.1|-0.1|
|Burundi|74|74|0.1|0.0|-0.1|0.1|0.0|-0.1|
|Chad|66|66|0.1|0.1|0.0|0.1|0.1|0.0|
|Central African Rep.|102|102|0.1|0.1|0.0|0.1|0.1|0.0|
|Equatorial Guinea|39|39|0.1|0.1|0.0|0.1|0.1|0.0|
|Sierra Leone|354|354|0.1|0.0|-0.1|0.1|0.0|-0.1|
|Uganda|162|162|0.0|0.0|0.0|0.0|0.0|0.0|
|Zaire|1277|1126|0.0|0.0|0.0|0.0|0.0|0.0|
|Liberia|804|720|0.0|0.0|0.0|0.0|0.0|0.0|
|Sub-Saharan Africa|44791|25137|13.1|8.0|_-5.1_|10.8|3.3|-7.5|

Source: NTB information from World Bank-UNCTAD SMART Database. Trade data from UN COMTRADE Records.

I-f
Figure 4: Illustraffon of<sup>the Impact of the Uruguay Round on the Profile of Nontariff Protecton</sup> Facing African Countries <!-- Start of picture text -->
- Pre-Uruguay -U- Post-Uruguay|<br>100<br>90<br>80<br>Nb<br>70<br>An60<br>seo<br>N<br>30<br>20<br>10- -- -<br>0 o- an ~ ~ ~ ~ ~ ..<br>African Countries Ranked In Terms of Increasing Pre-Uruguay NTB Coverage Ratio<br><!-- End of picture text -->

<!-- Start of picture text --> L<br><!-- End of picture text -->
56 This presentation suggests that African countries could be classified in three groups as far as the Uruguay Round results are concerned. Those in the left side of the figure (like Burundi, Ethiopia, Gambia or Mali) had very low coverage ratios before the Round so these countries' direct export prospects could not be much improved. They do have the potential, however, of being adversely affected by more aggressive completion with exporters who were formerly restricted by the MFA Agreement, or by "voluntary" export restraints (see Box 4). Second, the right side of the Figure identifies countries like Reunion and Mauritius which previously had high NTB ratios that will fall dramatically due to the Round. (note, however, that tariffs on sugar will afford higher levels of protection). These countries may have significant new export opportunities, although they too should prepare for more aggressive international competition. Between these two groups are a number of countries like Nigeria, Congo, Gabon or the Seychelles with relatively high pre-Uruguay NTB ratios that were largely unaffected by the UR agreement. In most cases, the failure of the Round to liberalize restrictions on energy products account for these results (as noted, the exclusion of fish explains the high post-Uruguay ratios for the Seychelles and a few other countries). However, even with these exceptions Figure 4, shows the Round had a major impact in lowering nontariff protection facing Africa.

# D. Protection Levels from Tariffied NTBs

Given the dimensions of rural poverty in Africa, and the potential contribution increased agricultural exports could make toward its alleviation, special attention should focus on the external "environment" for these exports in the post-Uruguay Round world. A recent World Bank study (Ingco 1995) attempted to estimate the levels of protection associated with the "tariffied" agricultural NTBs, and to assess their implications for developing country exporters. The initial conclusions concerning this exercise are not comforting since there is evidence that the "dirty tariffication" of the Round may have permitted higher levels of protection than previously in place.

As an illustration, Table 12 shows World Bank estimates of the levels of OECD protection for 8 agricultural product groups as a result of the tariffication exercise. In the European Union, post-Uruguay Round protection for sugar, beef and rice (all products of actual export interest to Africa) range from 125 to 360 percent. In Japan, sugar, coarse grains and rice face levels of protection that range from over 100 to 500 percent. Even a country like the United States, which is generally held to have low levels of agricultural protection, still registers
# Table 12. Nomna Protection Afforded by "Tarflied" Nontariff Barriers Facing OECD Agriulural Imports.

||||Nomi|nal equivalent of ta|riffied nontariff barr|iers(X)|||
|---|---|---|---|---|---|---|---|---|
|Importing Country|Rice|Wheat|Coarse<br>Grains|Sugar|Beef and<br>Veal|Pork|Poultry|Dairy|
|Austnklia|0.0|0.0|0.4|52.4|0.0|0.0|0.0|6.7|
|Canada|0.9|57.7|34.7|34.7|38.0|0.0|226.0|288.4|
|United States|_5.0_|6.0|8.0|197.0|31.0|0.0|7.0|144.0|
|European Union|360.5|155.6|134.4|297.0|125.4|51.7|44.5|288.5|
|Japan|_500.0_|239.6|233.1|126.1|38.5|87.3|14.0|489.4|
|<br>New Zealand|0.0|0.0|7.2|2.9|0.0|20.0|28.5|19.6|
|Austria|0.0|400.0|241.0|178.0|239.0|178.0|38.0|463.0|
|Finland|10.0|352.0|204.0|493.0|394.0|320.0|264.0|389.0|
|Norway|454.0|495.0|394.0|na|405.0|428.0|379.0|435.0|
|Switzerland|67.0|179.0|242.0|273.0|479.0|227.0|767.0|795.0|
|Turkey|_50.0_|200.0|200.0|_150.0_|250.0|250.0|30.0|200.0|

'Delayed tariffication on this product. The figure shown is the estimated pre-Uruguay Round level of support.

Source: Merlinda Ingco, Agricultural Trade Liberalization in the Urucuav Round: One Steo Forward. One Sten Back?, (Washington: Supplementary Paper for the Conference on the Uruguay Round and Developing Economies, Washington, January 26-27, 1995).

**Un** **_4._**
58 "tariffied' rates of over 30 percent for beef, and close to 200 percent for sugar. How are African countries expected to compete with domestic (OECD) producers when the latter receive such high levels of border protection?r It should also be noted that regionalism is a factor here. Under OECD arrangements industrial countries' exports of many of these products receive significant preferences while developing countries face the full (high) tariffied rates. Aside from the direct border controls on agricultural products, other OECD measures have an adverse impact on African and other developing country exporters of agricultural products. Behind the high wall of external European protection huge surpluses of products like sugar, dairy and beef have been generated. To dispose of these surpluses OECD countries have often resorted to (highly) subsidized exports that have a well documented twofold impact. First, these shipments have displaced developing country producers in third country (export) markets. Second, a similar displacement occurs in the domestic markets of developing countries as local producers are unable to compete with the subsidized foreign suppliers. While many African countries have been (rightly) criticized for domestic policies that disadvantage local agricultural producers, more attention should also be given to the potential adverse influence of foreign (OECD) export practices.23

# E. AnDrovriate OECD Policy Action on NTBs

OECD nontariff trade barriers have contributed to Africa's relatively poor trade performance in some specific product sectors, although they do not seem to have played a major role in the general decline. With a few exceptions African countries have not been subject to MFA restrictions, and no African country has faced a .voluntary' export restraint. Similarly, in the 1980s only 2 OECD antidumping actions were taken against any sub'Available evidence suggests that the benefits of agricultural trade liberalization may be very impressive for developing countries such as those in Africa when viewed in terms of domestic employment effects. This conclusion is based on studies by the International Labor Office (Lydall, 1975) which show that developing countries may use (on average) up to 30 times as much labor per unit of agricultural output as some developed countries. Furthermore, the ILO studies conclude that the linkage and multiplier employment creation effects in the agricultural sectors of developing countries are among the largest of all industry groups. The implications of these findings are that increased opportunities for agricultural exports could make a significant contribution to alleviating the basic social and employment problems in African countries.

2It should be noted, however, that these practices may have benefitted developing countries that were net food importers to the extent that they lowered international prices and net food import bill.
_59_ Saharan African country (out of a total of 1,300 such cases) and in only one case was a countervailing action taken (out of 460 total actions). That the relative unimportance of nontariff protection cannot be held responsible for it poor export performance is also reflected in the fact that pre-Uruguay Round NTB coverage ratios for African exports were about one-half those for the successful fast growing developing country exporters in East and South Asia.

The situation regarding the future importance of NTBs is somewhat unclear due to the major achievements the Uruguay Round made on the liberalization of these measures, and the extent to which OECD countries may attempt to adopt other measures (like antidumping actions or safeguards) to circumvent the liberalization. However, there do appear to be several policy options and/or research initiatives that could be particularly important for Africa. These include:

- The Uruguay Round converted agricultural trade barriers to [specific] tariffs which may incorporate levels of protection of several hundred percent -- which may be all but prohibitive for many potential suppliers. Given the problem of extreme rural poverty in Africa, and the potential contribution increased agricultural exports could make toward its reduction, policy initiatives are needed to reduce this protection against African food exports. One possible option would be to extend (ceiling free) preferences under established GSP programs.

- The Uruguay Round dramatically changed the profile of nontariff barrier protection facing developing countries. The UNCTAD Inventory of Trade Control measures should be updated to reflect the current (preUruguay Round) situation and to identify remaining NTBs which are of particular importance to Africa (like those on fisheries and energy products). Also, monitoring mechanisms need to be developed to ensure that no legalized or other backsliding occurs in sectors were nontariff protection is being relaxed. This might involve a cooperative effort between various international institutions.

* Aside from the direct adverse effects of OECD agricultural trade barriers, developing countries exports to third markets often have been undercut by subsidies that industrial countries have employed to dispose of surpluses generated behind high level of external protection. While the Uruguay Round did achieve some discipline in the use of such subsidies what was achieved appears to have fallen far short of what had been envisioned at the start of the Round. Analyses should be undertaken to determine where export incentives have had there most important adverse effects on Africa, and what sorts of corrective policy actions could be implemented.

* In many of the poorer developing countries problems associated with food security and spoilage are of major importance. Since further processing (canning, drying, freezing, packaging, etc.) generally extends the usable life of a product any external constraints to the development of this activity -- where output would be directed to both internal and external markets -- should be removed. In particular, the preferences OECD countries extend each other under regional FTAs have increasingly disadvantaged African export oriented food processing industries. Measures are needed to, _at least,_ place sub-Saharan African countries and other developing countries on an equal competitive footing with OECD members.
60

# V. Issues Relating to Transport Costs

Unlike foreign (government imposed) trade barriers, relatively little attention has been given to the influence of other market access barriers like Africa's international transportation costs for exports.' Transport costs have an impact similar to tariffs in that they impose additional charges foreign producers must absorb to penetrate export markets, and they are subject to direct policy control by national governments and traders. Also, transport costs are particularly important for sub-Saharan Africa since these countries normally must absorb all, or most, of these charges for penetrating foreign markets (see Box 6). However, in contrast to tariffs, major differences in the incidence of freight charges on individual exporting countries can occur. General Agreement on Tariffs and Trade (GATT) provisions require tariffs be assessed on an (equal) most-favored-nation basis, while international transport costs for similar goods may vary markedly across countries. Those which are geographically disadvantaged, or have pursued inappropriate national policies relating to the transport sector, may experience important adverse freight rates.25 In spite of the attention devoted to the influence of transport costs on intra-OECD trade flows (Sampson and Yeats 1976, 1977), or on the exports of developing countries in Asia and Latin America (Brodsky and Sampson 1979, Yeats 1976, 1977), no similar analyses has been conducted for sub-Saharan Africa. This chapter undertakes such an investigation to complement the previous analyses of tariff and nontariff barriers. The objective is to 2'4The neglect of transport costs may have been due to difficulties in getting data on their incidence, or to the (erroneous) assumption these charges could not be influenced by policy makers. Another reason may have been the presumption that nominal transport costs, relative to tariffs or nontariff barriers, were small. Empirical studies show these views should be re-examined. For example, two analyses of barriers to Indian and Indonesian exports determined ad valorem freight costs on these countries' exports to the United States were four to five times preUruguay Round tariffs (Yeats 1976, 1977). For some products groups like woven textile fabrics, textile yarn and thread, footwear, or leather manufactures nominal freight costs ranged from 20 to 30 percent. These investigations also show countries may be able to substantially reduce freight costs by adopting more efficient technologies in port and handling procedures, removing barriers to competition for transport services, or organizing shippers to make the more efficient use of liner conference services.

"An interactive effect between tariffs and freight costs may further worsen the competitive position of an exporters facing above average freight rates. Most countries apply tariffs on the cost-insurance-freight (c.i.f.) value of imports (the United States and Canada are important exceptions) so exporting countries which have higher freight costs will, _ceterus paribus,_ pay higher import tariffs. Stated differently, if African exports generally experience adverse freight rate differentials their competitive position would be further eroded by c.i.f. tariffs.
61 Box 1 The Incidence of International Transport Costs on Exporters and Imnporters.

-Whil t nspott as rd ly pail bycxporeawben goods are sold on a cif. basis, and by;the impnrhnpurchasesa ta&thoe pstypsig the fitight bill doss not necessarily bear dhe trasport cost. In **t,cja** the exprcar bexugard ashearig 1<sup>hrcwaslffth~lvedp</sup> ir the inposiagmarkatis no affected by changes in uanportosuta. Cmen,theimporterbe lbs cost of uasotlfthecmoite pric in the xport marke remains thec same irrespecive afcaet rsb3ipping costs. 't **(a) Incidence ot freighi cosfa when supply (j b) Incidence ol 1reigh' cost when demand Is Is perfectly hIneldslc per@fectly lneam|tlc** I I-- **D** .~~ O ~~~~~~~~~~~~~ ***** cw orafany changer in these , d.idkmfrabindt~zob.S--C is detemed ym dnsd.bJ4m-n6cras pIy Whe yzpl swrdatwyinelsi ( liklsey aoeirstiuaifon <Wt ls **thawiwn n4r1ebndn evl-Ay,n4t** in te latickys of deand ahiMa oaiof:£dthnnpo&bwdcroeth impoter.When decad andiupply aduulul havec eai ates s.hipping costs am shared eqaltbuymund selr demand grows jxgeidbcbdtesae of freight coeborn by importes rises, with the eatictyofdemsad deterraining frumtwtlwh;iquain~tD etatdeddoin h bsence of right41cagLAey pointtonotek that tbeAf :coun±rfrs ar generally _smlls_ fnple ainE s i E rdcs a lulbe quit **dUL** the ahoY iClgZt _|show,thi su_ tharhincidnceofmn costs orha inhesecots) wil falmosthe6ils ou iXdca,rx 'ies'
62 determine whether relative differences in freight costs between Africa and other countries contributed to the former's poor export performance and what influence these costs have on the location of industrial activity in Africa.26 This chapter also attempts to determine whether the _structure_ of freight costs on African exports has influenced the composition of goods shipped, i.e., are these charges biased (say) against processed goods in favor of primary commodities? Finally, several possible explanations as to why abnormalities in Africa's transport cost profile occur are suggested, and options African governments might utilize for reducing international freight costs are discussed. Before proceeding, it should be noted that analyses of balance of payments statistics (Amjadi and Yeats, 1995) illustrates the importance of this objective. Specifically, this World Bank study showed that sub-Saharan Africa's net freight and insurance payments were about $3.9 billion in 1990/91, which represents approximately 15 percent of total value of the region's exports. However, the individual country's statistics reflect a wide degree of variation around this average. Net transport and insurance payments average more than 25 percent of total exports for 10 of the 30 countries which had available data. The 1990 net payments averaged 42 percent for the 10 landlocked African countries (namely, Burkina Faso, Central African Republic, Chad, Ethiopia, Malawi, Mali, Niger, Uganda, Zambia and Zimbabwe) whose trade must transit neighboring territories and, therefore, incur additional foreign exchange costs. For all developing countries as a group these payments average 5.8 percent, a figure which represents about one-third the corresponding African ratio.

# A. The Evidence from National Customs Statistics

Data compiled by some national customs services can be used to provide some perspectives on the incidence of international transport costs for African exports. Since 1974 the United States has tabulated imports, by-product260ver twenty-five years ago Little, Scitovsky and Scott (1970, p. 310) suggested capital intensive transport technologies (such as containerization) could place some developing countries at an important cost disadvantage. They noted "because competitive pressures in developed countries are stronger, containers, and possibly other innovations in transportation, will be introduced there first, and will not spread to developing countries' trade for a long time. This might be accompanied by a fundamental change in the whole system of rate fixing, since it would seem rational to base the charge on the container rather than on its contents. The result might be a big reduction in freight on exports of manufactures between developed countries, putting exports from developing countries at a severe disadvantage. There are already appreciable economies of scale in shipping, and these may be increased by the introduction of containers. Small volumes of traffic coming from small ports cost more to handle than big volumes from big ports."
63 by-country, on a joint free-alongside-ship (f.a.s.) and cost-insurance-freight (c.i.f.) basis. (Argentina, Brazil, Chile, Mexico, Panama, Philippines, Uruguay and Venezuela are among other countries that follow similar procedures). The f.a.s. valuation includes the purchase price of the product plus all charges incurred in placing merchandise along the vessel at the port of exportation.27 In contrast, the c.i.f. valuation measures the value of imports at the port of entry in the United States and includes all freight, insurance, and other charges (excluding import duties) incurred in bringing the merchandise from the port of exportation and placing it alongside the carrier.<sup>2</sup> ' Since this detailed freight cost information is available for almost two decades is can be used to determine how African freight rates compare with those for other countries, and how these charges have changed over time.

Several points should be noted regarding the available transport cost data. First, although the United States ranks below OECD Europe as a destination for Sub-Saharan countries exports, this trade exceeded $10.8 billion in 1993 which places it ahead of any other market. For some countries like Angola, Congo, Liberia, Nigeria, Sierra Leone, and Zaire over one-fifth of total exports went to North America. Second, although U.S. imports are concentrated in fuels, foods, and raw materials, some labor intensive manufactured goods are still of sufficient importance that freight costs can be analyzed for these products. As such, the United States transport cost information should provide a useful "base" for assessing the importance of the comparative level and changes in "An important limitation of these data is that they do not reflect the cost of inland transportation -- which may be very high for some African countries -- or port charges. The importance of the latter should not be underestimated. For example, World Bank data compiled by Tyler Biggs show port charges for clearing a 20 foot container in Abidjan (Cote d'lvoire) and Dakar (Senegal) were $1,100 and $910 respectively. In contrast, the ocean freight cost for shipping the container to the Hamburg/Le Havre ranged between $1,350 to $1,430.

2&The c.i.f. to f.a.s. ratio can be used to measure nominal international transport and insurance charges for exports of product i from country j (Fj) from: (2) f = (V..i, - _Vf,d)_ Vf, = (vc Vfj)- I where V,bj represents the c.i.f. and Vfij is the f.a.s. value of exports of tariff line level product i from country j to the United States. The measure understates the true importance of transportation costs for land-locked African countries. Since the f.a.s. value is measured alongside the ship at the exporting country it excludes costs incurred by a land-locked country in transitting its neighbors. United States import statistics tabulate the f.a.s. and c.i.f. values of goods imported by air and ocean vessel separately so nominal freight rates for both these modes of transport can be estimated. A further point is that equation (1) likely will not reflect port costs as it primarily measures **"at** sea" charges. Several related studies suggest that port costs and port problems in many African and other developing countries often are of key importance for exporters (see Hans Jurgen Peters (1989)).
64

# African freight costs.

Table 13 is based on this information and provides summary statistics on 1993 tariffs and transport costs for African exports to the United States. In the interest of brevity the data are compiled for specific regional-income level country groups employed by the World Bank (i.e., low income East and Southern Africa, middle income West Africa, etc.) and for the largest African exporting countries in each group. Given its level of industrialization, which could allow it to utilize more sophisticated and cost efficient transport technologies, similar statistics are also provided for the Republic of South Africa. The table also shows nominal freight rates facing all other countries (with the exception of Mexico and Canada) exporting the same underlying tariff line level products.29 These data are included to help determine whether African countries' transport cost profiles are substantially different from their competitors.

The key points reflected in Table 13 are as follows. First, average ad valorem transport costs for all subSaharan countries exports (about 8.7 percent) are more than 8 points higher than the average tariff on these goods (0.5 percent).<sup>0</sup> Freight costs are, therefore, a _far more restrictive barrier to African exports than tariffs,_ a point that should direct increased attention to transport cost saving measures. Second, a high degree of variation exists in the incidence of transport costs across the African countries which, at least in part, are influenced by differences in the goods exported. Nominal freight rates for Guinea average about 25 percent, largely due to a high concentration of exports (over 80 percent) in unprocessed aluminum ores, a bulky relatively low value product.

2"he very disaggregate level of these comparisons is reflected in the fact that United States customs schedules differentiate between some 8,500 individual tariff line products. The reader should note the data in Table 13 are trade weighted averages based on African exports. Canada and Mexico are not included in the "other countries" group since their exports may pass into the United States through land border crossings and not incur international transport costs. Similarly, other sub-Saharan African countries are excluded from the "competitors" group since the objective was to determine whether African freight costs differ from those of exporters outside the region.

30The sub-Saharan totals reported here, and in the subsequent tables, exclude the African oil exporting countries (Angola, Congo, Gabon and Nigeria) since their relative importance in global energy trade may have lead to the development of transport systems and infra-structure that was significantly different from other African countries. A second point is that some of the tariff averages reported in Table 13 warrant explanation. The 11.6 percent duty facing Malawi is due to the fact that over 55 percent of this country's exports consist of stemmed tobacco which has a 14.4 percent import tariff. Similarly, tobacco and various clothing products (which do not receive GSP preferences in the United States) account for the 12.2 percent average shown for Zimbabwe. The high concentration of Mauritius' exports in textiles and clothing accounts for the 16.2 percent tariff average.
65 Table 13. African Transport Costs for Exports to the United States Compared wlth Competing Nations.

|||Average<br>|Average No<br>Rate<br>|minal Freight<br> (%)<br>|
|---|---|---|---|---|
|African Group and Major Supplier(s)'|Value of Exports<br>($ millions)|Tariff (%)|African<br>Group|Other<br>Countries|
|ALL SUB-SAHARAN AFRICA|1,737.6|_0.5_|8.7|7.2|
|Low Income East and Southem Africa|778.9|1.1|6.8|5.3|
|Kenya|92.3|0.6|8.8|6.5|
|Malawi|84.2|11.1|10.0|5.4|
|Zaire|240.7|_0.5_|5.4|4.9|
|Zimbabwe|142.3|3.2|9.2|6.0|
|Low Income West Africa|418.7|0.3|11.4|10.0|
|Benin|15.7|0.7|7.5|7.2|
|Ghana|208.5|0.0|4.7|4.4|
|Guinea|113.0|0.0|25.2|22.0|
|Middle Income East and Southem Africa|253.1<br>|12.8<br>|6.7<br>|5.6<br>|
|Mauritius|196.4|14.4|7.1|5.8|
|Middle Income West Africa|287.0|0.6|11.3|9.9|
|Cameroon|101.2|0.8|9.7|8.5|
|Senegal|7.5|2.6|12.1|7.4|
|Oil Exporting Countries|8,833.1|0.7|6.4|7.6|
|Nigeria|5,309.5|0.7|5.8|7.6|
|Republic of South Africa|1,851.0|1.6|4.5|4.3|

'The country group definitions are as follows: (i). The all sub-saharan group includes all countries listed below except the oil exporting countries (Angola, Congo, Gabon and Nigeria) and the Republic of South Africa.

(ii). Low income East and Southern Africa includes: Burundi, Comoros, Eritrea, Ethiopia, Kenya, Lesotbo, Madagascar, Malawi, Mozambique, Rwanda, Somalia, Sudan, Tanzania, Uganda, Zaire, Zambia, Zimbabwe.

(iii). Low income West Africa includes: Benin, Burkina Faso, Central African Republic, Chad, Equatorial Guinea, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Sao Tome and Principe, Sierra Leone and Togo.

(iv). Middle income East and South Africa includes: Djibouti, Namibia, Swaziland, Botswana, Mauritius, Mayote, Reunion, and the Seychelles.

(v). Middle income West Africa includes: Cameroon, Cape Verde, Cote d'lvoire and Senegal.

(vi). The oil exporting countries include: Angola, Congo, Gabon and Nigeria.

Source: Nominal transport costs computed from United States Department of the Census trade tapes. Pre-Uruguay Round tariff averages are from Erzan and Svedberg (1989).
66 In contrast, Ghana's relatively low freight rate (under 5 percent) reflects the high share of diamonds (about 35 percent) in this country's total exports. Seemingly, very different values and stowage factors for the goods being exported explain some of the cross-country variation in African freight costs.

A third point reflected in Table 13 is that average nominal freight rates for African exports are consistently higher, with the exception of the oil exporters, than those on similar goods shipped from other countries.31 For all sub-Saharan countries combined, ad valorem freight costs are about 20 percent above their competitors. However, these aggregate figures conceal the true importance of adverse freight rates on specific products due to the overall importance of gemstones, gold, other precious metals and similar products in African exports. Freight is typically a very small share of these high value, easily transportable products, so wide variations in their nominal transport costs will not occur (however, for some footwear, textile and clothing products African transport costs range between 15 to 50 percent -- see Table 14). Also, many products like coffee, cocoa, petroleum and metal ores can be transported by bulk carriers, tankers, or tramp shipping which can be chartered in more competitive markets than those for the liner trades. This study will later argue that government policies relating to the liner trades plays an important role behind Africa's adverse freight costs.

# B. The Magnitude of Cross-Product Variation in Freight Costs

An important question concerns the magnitude of the variance in African transport costs across products - - particularly manufactured goods. If sectors exist where the nominal freight costs are low, or the adverse African transport differential narrows (or is even reversed), their identification may be helpful for "flagging' potentially promising areas for investment and the promotion of export ventures. A related question is whether the adverse African transport cost differentials generally extends to different types of carriers. Since the United States data distinguish between air and vessel shipments, African freight rates for each mode of transport can be analyzed 3'The reversal is due to the fact that Africa (particularly Nigeria) exports a light high quality crude to the United States which generally commands a price premium over crude petroleum shipped from other regions. For example, the U.S. Department of Energy (1995, p. 112) estimates that in 1993 the average price per barrel of Nigerian crude was $17.79 as opposed to an average price of $14.78 for all OPEC shipments. As a result of this African price premium the nominal freight rate (i.e., actual freight charges as a percentage of product price) for Africa is lower than average for all OPEC members.
67 separately (air freight currently accounts for about 25 percent of all United States imports in terms of value). This is a potentially important consideration, particularly for the land-locked African countries. If air freight is commercially feasible for some products this could allow them to avoid costly land transport across their neighbors territories.

Table 14 addresses this point by showing the value of exports along with sub-Saharan African air<sup>and vessel</sup> freight rates for each two-digit Harmonized System (HS) product group<sup>with $50,000 or more in trade. In addition,</sup> the average African freight rate margin has been tabulated along with the value of<sup>exports utilizing each mode of</sup> transport. Over 20 percent of African exports (by value) enter the United States by air with the<sup>balance shipped</sup> by vessel. However, for almost one-quarter of the two-digit product groups the share<sup>of sub-Saharan exports by</sup> air actually equals or exceeds 50 percent. As might be expected these groups are<sup>composed mostly of high value</sup> non-bulky products i.e., scientific instruments, clocks and watches, pearls<sup>and precious stones, etc. Similar</sup> information on air-vessel shipments and cross-produc **t** ransport costs for each of the regional African country groups is provided in the appendix tables.

The statistics in Table 14 show nominal freight rates pose an important<sup>barrier to African efforts to expand</sup> exports -- particularly for some manufactures where opportunities for increasing the value added<sup>content of traded</sup> goods may be most promising. For approximately one-quarter of the products listed, African<sup>nominal freight rates</sup> exceed 15 percent and for 10 product groups rates of over 20 percent occur. To put the importance of these figures in perspective, the average post-Uruguay Round tariff on United States imports from all sources is under 4 percent. In short, transports costs place African producers' at a far greater competitive disadvantage _vis-a-vs_ US<sup>producers</sup> than do tariffs. However, these nominal rates probably understate the true importance of transport<sup>costs for two</sup> reasons. First, they do not indicate their influence on African producers value added in export oriented<sup>production</sup> ventures. As a result of such high freight costs African producers may have to reduce payments<sup>to factors of</sup> production to such an extent that otherwise promising export the ventures are not viable. A similar<sup>situation may</sup> occur when tariffs, like those in many African countries that might be markets for intra-trade, are<sup>set at prohibitive</sup> levels (see the following section for more discussion of this point). Second, there is the "own,<sup>trade weighting</sup> problem that has often been observed in the calculation of tariff averages. Products facing very high (or prohibitive)
# Table 14. Mr and **Vesel Rates** for Sub-Saharan African Counties Major Export Products to the United Stae

|||||Expor|ts bvr|Expnort|s by Vessel|All E|xUoxis|
|---|---|---|---|---|---|---|---|---|---|
|HS<br>||Export<br>|s ($000)|Freight|AfriMan|Freight|African|Freight|African|
|Code||Air|Vessel|Rate|Mar!|<br>Rate|Maryi|<br>Rate|Maroim|
|01<br>|Live animals<br>|4,538.6<br>|0.0<br>|20.2<br>|3.1|.|.|20.2|3.5|
|03<br>|Fresb or frozen fish<br>|618.5<br>|9,082.9<br>|42.9<br>|3.0<br>|9.1<br>|-1.6|11.2|-0.4|
|04<br>|Dairy products and eggs<br>|6,369.5<br>|382.7<br>|2.9<br>|-1.5|7.3|1.0|3.1|-1.4|
|05<br>|Anima parts and skins<br>|246.4<br>|66.9<br>|5.8<br>|-4.2<br>|13.8|-1.6|7.5|-5.3|
|06<br>|Live tes and plas<br>|572.0<br>|295.0<br>|40.9<br>|16.9<br>|27.1<br>|7.5<br>|36.2|13.7|
|07<br>|Edble vegetabes and roots<br>|47.3<br>|749.1<br>|92.6|41.4|30.3|7.5|31.9|7.3|
|08<br>|Freshordriednutsandfruits<br>|0.0<br>|11,363.9<br>|.|.|_5.1_|1.2|_5.1_|0.3|
|09<br>|Coffee, tea and spices<br>|1,702.7<br>|100,012.9<br>|3.2|-4.2|7.9<br>|1.7<br>|7.2|0.7|
|11<br>|Products of milling industry<br>|0.0<br>|116.1<br>|.<br>|.<br>|19.3|_5.0_|18.4|-3.7|
|12<br>|Oil seeds and nuts<br>|1,310.3<br>|929.9<br>|1.8<br>|0.0<br>|25.2<br>|15.6<br>|11.5|7.0|
|13<br>|Raw vegetable sitedbr dyeimg<br>|16,391.3<br>|11,186.9<br>|2.5|-1.9|5.6|0.3<br>|3.7|-1.2|
|14<br>|Vegetable produts<br>|0.0<br>|864.6|.|.|24.4|_10.5_|24.4|10.7|
|_15_<br>|Animal and vegetable oils<br>|0.0<br>|603.9<br>|.<br>|.|9.8<br>|1.0|9.9|0.4|
|16<br>|Preserved foods<br>|6.4<br>|5,180.5<br>|11.7|.|3.8<br>|-2.4|3.8|-2.4|
|17<br>|Sugars and sugar confectionery<br>|0.0<br>|27,010.7<br>|.|.|12.4<br>|2.0<br>|12.4<br>|2.3|
|18<br>|Cocoabe nsandchocolate<br>|0.0<br>|165,099.0<br>|.|.|11.7<br>|-0.8<br>|11.7<br>|-0.8<br>|
|20<br>|Preparation of vegetables<br>|0.0<br>|1,887.5<br>|.|.|6.2|0.8|6.1|0.6|
|21<br>|Miscellaneous preparedfods<br>|0.0<br>|845.6<br>|.<br>|.<br>|6.3<br>|2.4<br>|6.3|0.1|
|22<br>|Beverages<br>|1.4<br>|708.3<br>|91.5|90.7|21.5<br>|9.1|17.1|6.2|
|23<br>|Animal feeds<br>|0.0<br>|2,966.5<br>|.<br>|.<br>|56.1<br>|20.9|56.1|20.9|
|24<br>|Manufactured tobacco<br>|9.4<br>|88,003.3<br>|50.2<br>|0.0<br>|14.5<br>|8.5<br>|11.2|_5.8_|
|25<br>|Sulphur and related compounds<br>|56.6<br>|3,469.0<br>|19.6|-1.8|20.2<br>|5.7<br>|19.7<br>|4.8<br>|
|26<br>|Ores and concentrates<br>|0.0|135,128.3|.|.|24.9|3.0|24.9|3.5|
|27<br>|Mineral fuels and oils<br>|0.0<br>|293,483.0<br>|.<br>|.<br>|9.5<br>|1.3<br>|9.5<br>|1.2|
|28<br>|Inorganic chemicals<br>|1.6<br>|10,584.0<br>|10.8<br>|6.7<br>|_5.1_<br>|1.2<br>|4.1<br>|0.7|
|29<br>|Organic chemicals<br>|1,390.0<br>|192.0<br>|1.1<br>|-0.1<br>|46.1<br>|39.5<br>|6.6<br>|4.5<br>|
|30<br>|Pharmaceutical products<br>|29.9<br>|33.2|_5.1_|1.9|2.8|-6.4|_5.1_|3.4|
|31<br>|Fertilizers<br>|0.0<br>|487.8<br>|.<br>|.<br>|29.2<br>|10.6|28.4|9.9|
|32<br>|Tanning and dyeing extrcs<br>|113.9<br>|221.8<br>|30.2<br>|28.7<br>|13.4<br>|8.4<br>|16.4<br>|12.1<br>|
|33<br>|Essential oils and resinoids<br>|352.9<br>|1,169.9<br>|9.3<br>|_5.1_<br>|_5.5_<br>|1.9<br>|6.4|2.9|
|34<br>|Soap and washing preparations<br>|22.9<br>|43.7<br>|15.4<br>|-3.8<br>|7.0<br>|-1.3<br>|9.9<br>|_1.5_<br>|
|35<br>|Ghes and substances<br>|620.5<br>|336.2<br>|5.4<br>|-0.3<br>|2.6<br>|-0.8<br>|4.4|-1.1|
|38<br>|Miscellaneous chemiicals<br>|68.5<br>|331.8<br>|3.9<br>|0.3<br>|3.3<br>|-2.3<br>|3.4<br>|-1.9<br>|
|39<br>|Artificial resins and plastics<br>|35.0<br>|603.2<br>|6.7<br>|-6.8<br>|8.1<br>|-0.7<br>|7.6<br>|-1.8<br>|
|40<br>|Natural and synthetic rubber<br>|21.0<br>|10,933.2<br>|4.6<br>|-6.2<br>|11.0|0.7|10.9|0.6|
|41<br>|Hides, skins and leather<br>|1,897.3<br>|7,384.4|5.3|-0.5|2.0|-I.5|2.6|-1.9|
|42<br>|Articles of leather<br>|457.4<br>|726.9<br>|12.7<br>|0.8<br>|3.5<br>|-0.7<br>|6.8<br>|1.0<br>|
|43<br>|Furskins and artificial fur<br>|371.7<br>|72.1<br>|9.4<br>|3.7<br>|10.1<br>|6.0<br>|10.1<br>|4.4<br>|
|44<br>|Wood and wood articles<br>|668.4<br>|10,546.5<br>|38.6<br>|14.4<br>|19.1<br>|4.6|19.8|5.5|
|46|Manufactures of plaiting|212.1|342.5|47.0|10.3|22.5|_0.5_|31.9|9.9|

00
|48|Paper and paperboard|90.7|144.2|9.3|-11.9|11.5|3.2|10.6|2.4|
|---|---|---|---|---|---|---|---|---|---|
|49|<br>Printed books and newspapers|75.6|138.3|23.3|13.7|8.2|4.3|12.5|8.0|
|50|<br>Silk and waste silk|169.8|0.0|2.2|-1.7|.|.|2.2|-1.3|
|52|Fabrics of cotton|3,492.4|9,790.9|25.3|15.2|7.5|2.1|12.2|6.6|
|54|Flax and ramie|7.7|261.7|6.1|-4.8|4.2|0.3|4.2|-0.9|
|_55_|Cotton|73.9|329.1|33.3|27.8|5.2|1.2|10.4|5.8|
|56|Discontinuous man-made fibers|1.1|2,686.6|10.1|-58.3|19.2|10.1|18.5|9.3|
|57|Other textile materials|62.6|22.2|25.5|11.2|3.0|-1.2|17.1|9.8|
|<br>61|<br>Articles of apparel and clothing|3,926.9|78,761.1|16.3|5.2|5.7|2.1|6.2|0.6|
|<br>62|<br>Other textile articles|<br>32,214.4|<br>154,885.3|19.8|4.7|5.0|1.3|7.5|1.8|
|<br>63|Old clothing and other textiles|<br>161.8|<br>1,375.8|46.9|30.9|4.7|0.5|9.1|4.0|
|<br>64|<br>Footwear|263.3|<br>2,834.1|15.9|0.0|3.2|-0.7|4.3|-0.6|
|65|Headgear and parts|440.5|<br>369.5|10.7|-2.0|6.8|_-0.5_|8.8|-1.3|
|<br>66|<br>Accessories like umbrellas|0.0|55.2|.||7.1|-0.7|7.1|_-0.5_|
|67|Skins of birds for wigs or beards|27.6|982.1|10.7|2.8|4.1|-2.1|4.3|-1.8|
|<br>68|<br>Articles of stone or plaster|247.1|1,679.6|45.8|29.9|13.4|_0.5_|17.5|_5.1_|
|69|<br>Ceramic products|64.2|<br>571.8|28.6|15.3|16.3|7.4|17.1|8.1|
|<br>70|<br>Glass and glassware|37.7|2,568.8|34.6|27.6|7.4|1.9|7.7|1.5|
|71|<br>Pearls and precious stones|219,152.2|<br>648.2|0.5|0.3|6.3|0.2|0.5|0.3|
|72|<br>Ferrous products|0.0|23,137.7|.|.|4.5|-5.8|4.5|-5.8|
|<br>73|<br>Iron and steel|20.7|<br>548.8|11.5|-10.7|7.2|0.5|7.3|-0.2|
|74|Copper and articles|128.9|30,000.9|14.2|2.7|3.9|1.3|4.0|1.0|
|<br>75|<br>Nickel and articles|0.0|<br>8,489.4|.|.|3.1|1.1|2.9|0.9|
|<br>76|Aluminum and articles|0.0|<br>791.5|.|.|4.7|0.2|5.3|_0.5_|
|78|Lead and articles|0.0|447.6|.|.|8.1|2.4|8.1|-0.3|
|79|Zinc and articles|0.0|988.1|.|.|0.2|_-5.1_|0.2|-4.6|
|81|Other base metal products|71.4|45,864.5|14.0|11.0|0.8|0.1|0.6|-0.1|
|<br>82|<br>Tools and cutlery|25.7|<br>166.6|4.2|-2.6|4.6|0.5|4.5|-0.1|
|<br>83|<br>Articlesofbasemetal|192.1|285.1|26.5|12.6|13.1|6.4|17.4|11.0|
|<br>84|Boilers and machinery appliances|3,348.8|1,029.9|2.5|-0.2|3.2|0.3|2.4|0.1|
|85|<br>Electrical mnachinery|<br>4,490.2|3,104.2|3.2|0.5|2.2|0.2|2.4|-0.7|
|87|<br>Vehicles other than railways|3.6|1,060.8|14.1|-8.5|1.9|-2.1|1.8|-2.7|
|90|<br>Scientific instruments|5877.8|<br>437.8|6.0|-0.2|1.1|-1.1|5.6|1.8|
|<br>91|<br>Clocks and watches|,<br>85.3|7.1|4.2|-5.2|23.7|15.4|6.6|3.0|
|<br>92|<br>Musical instruments|25.6|151.5|42.1|26.1|17.4|12.9|20.2|15.1|
|<br>94|<br>Fumiture and parts|_50.5_|_2,555.0_|87.4|70.9|8.5|-1.2|10.8|1.0|
|95|<br>Toys and games|520.1|<br>912.9|11.0|-14.3|8.4|1.1|9.3|1.7|
|<br>96|<br>Miscellaneous manufactures|302.4|921.2|18.2|6.3|3.4|-0.6|7.0|1.6|
||||||||||63|
|97|Works of art|2,737.3|129.3|8.3|7.1|5.3|3.7|7.7|.|
|<br>|<br>|<br>161198|59090|37|26|85|53|38|24|
|98|Special classification|,.|,.|.|.|.|.|.|.|

'.0
70 transportation enter into the calculation of an average freight rate with low trade weights due to the restrictive effect of the transport costs.

Table 15 provides another perspective on the profile of transport costs facing all sub-Saharan countries exports as well as similar statistics for each regional group. Each groups nominal air and vessel freight rates for two-digit HS products were ranked in ascending order and the quartile values were computed along with these charges range. In addition, each group's median transport cost margin relative to competitors (positive values indicate an African disadvantage) is shown along with the margins range.

Overall, the statistics in Table 15 confirm that Africa generally is at an important (but not overwhelming) transport cost disadvantage relative to its competitors. For example, the median vessel nominal freight rate for "middle income West Africa" (10 percent) is approximately 2 percentage points above that paid by competitors. To put this margin in perspective the recently completed Uruguay Round achieved a 2.4 percentage point reduction in industrial country tariffs (to 3.9 percent). The other important points evident from Table 4 are that, in every instance, a larger adverse margin occurs for air freight than for vessel shipments. African air transport, at first glance, appears to be relatively less cost efficient than vessel.<sup>32</sup> Finally, the third quartile values indicate that some African exports encounter very high transport costs. For example, 25 percent of sub-Saharan Africa's air exports incur freight rates exceeding 26 percent -- about one-quarter of Low Income West Africa's vessel shipments have nominal freight rates of more than 19 percent.

# C. Effective Transvort Protection Facing African Exports

It is recognized that nominal rates of protection may sometimes provide an inaccurate indication of the true importance of trade barriers (either tariffs, transportation costs, or nontariff restrictions). As such, many analyses involving these restrictions utilize the effective rate of protection (ERPs) concept. Effective rates measure the 32There is a problem in the proper interpretation of these data since air freight shipments may go directly to interior U.S. markets, and therefore avoid some inland transport costs in both the importing and exporting country. Also, air freight may also allow some African countries to avoid costly internal land transport costs if the servicing airfields are located close to the centers of production. As such, the air-vessel margin may overstate the true difference in transport costs for these alternative modes of transport.
Table 15. Statistical Idices Relating to the Level,<sup>Distribution and Range in Regional African Countries' Exports to the United States in 1993.</sup>

|||N<br>|ominal Freight R<br>Quartile Values|ate Level Distrib|ution<br>|Africa<br>(percent<br>|n Margin<br>age points)|
|---|---|---|---|---|---|---|---|
|||Transport|||~~~~~~~~~|~Range<br>||
|African Region|Transport|First|Median|Third||Median|Range|
|All Sub-Saharan Africa|Air|_5.3_|14.1|26.5|0.5 to 87.4<br>|3.5<br>|-13.9 to 71.2<br>|
||Vessel|4.6|7.5|13.8|0.2 to 56.1|1.1|-5.8 to 39.9|
|Low Income East and|Air|3.7|9.2|23.6|0.7 to 56.9|4.4|-11.9 to 44.9<br>|
|Southern Africa|Vessel|4.2|7.1|13.8|0.2 to 55.9|1.2|-5.8 to 22.8|
|Low Income West Africa|Air|3.7|20.5|35.6|0.4 to 92.6|7.4|-0.9 to 41.5<br>|
||Vessel|3.5|9.3|19.4|0.2 to 89.7|1.1|-6.1 to 84.5|
|Middle Income East|Air|2.5|8.0|16.4|0.9 to 29.7<br>|0.9<br>|-19.8 to 14.1<br>|
|and Southern Africa|Vessel|3.8|6.2|8.9|0.7 to 17.5|0.8|-4.3 to 7.0|
|Middle Income West Africa|Air|7.3|13.3|24.2|0.4 to 43.1<br>|3.0<br>|-18.8 to 20.4<br>|
||Vessel|4.9|10.0|12.8|2.3 to 50.6|1.9|-4.0 to 17.3|
|Oil Exporting Countries|Air|na|na|na|na<br>|na<br>|na<br>|
||Vessel|9.2|11.3|17.2|1.0 to 55.7|1.9|-7.2 to 29.6|

Note: Trade Flows or less than $50,000 have been excluded<sup>from the above comparisons. Insufficient data existed to make meaningful air freight comparisons for the African</sup> oil exporting countries.

Source: Nominal transport costs computed from United<sup>States Department of the Census trade tapes.</sup> _,'
72 protection for value added in a production process while nominal rates show the protection for the final good. Stated differently, ERPs indicate the reduction in returns to productive factors (labor and capital) a foreign supplier must absorb in order to compete with domestic producers in the protected markets.<sup>3 3</sup> For example, if the effective rate of transport protection for a specific good is 10 percent African producers would have to reduce payments to domestic labor and capital that much below what these factors earn in the United States in order to export competitively. While some of the margin probably could be absorbed in the wage bill, the scope for doing so may be more limited than often thought due to relatively low African labor productivity, and to the fact that some African wages may be quite close to subsistence levels. Furthermore, the cost of capital in Africa is almost certainly to be considerably higher than in North America due to uncertainty and political instability. Given the profit maximizing objectives of many international firms even relatively low effective rates of transport protection, or small differences in transport ERPs within and outside the region, may reflect a major disincentive for the location of export oriented production activity in Africa.<sup>3</sup> Table 16 provides estimates of U.S. nominal and effective rates of transport cost protection facing African 33For early formulations and applications of the concept of effective protection see Balassa (1965) or Basevi (1966). Grubel (1971) provides a useful nontechnical discussion of the concept. The effective rate of transport protection in the US against African exports of product j, (Etj) can be calculated from a modification of the normal formula, where rj is the nominal freight rate for African exports of product j to the United States, r1 is the average freight rate on all U.S. imports of product i used in the production of j, and aj' is the observed Leontief coefficient. Following Waters (1970) we utilized the observed production coefficients (and not the theoretically preferable zero transport cost coefficient). As a result, our ERP estimates will be downward biased. The information on production coefficients was drawn from the U.S. Census of Manufactures.

34The influence of even small variations in international transportation costs on the location of global production may not receive adequate recognition. For example, in a Nobel Symposium on the location of international economic activity Assar Lindbeck argued that "given other costs, firms chose between alternative international locations in order to minimize transport costs. These costs, therefore, may become low precisely because they have been highly important for location -- high transport cost locations are avoided if other costs are equal". Similarly, Jagdish Bhagwati observed that 'even if transport costs for any alternative location were a small proportion of total product price, they could still affect location if they varied geographically more than other costs of production". See (Ohlin et. al. 1977, p. 276).
73 exports of processed products for which required production and trade data were available. Considerable variation is evident as the transport ERPs range from about 7 percent for electrical machinery to over 90 percent for animal feeds. This degree of variation suggests that freight costs will play an important role in determining the specific types of products Africa might export successfully. Another noteworthy point is that some relatively modest nominal freight rates conceal very high effective rates of protection -- for 6 of the 30 product groups the effective rates are more than double the nominal rate of protection. An extreme situation occurs for animal and vegetable oils where the transport ERP (56 percent) is more than 5 times higher than the corresponding nominal rate.' While Africa is an important producer of several types of oilseeds, like groundnuts and copra, that might be further processed for export, this activity almost certainly is constrained by the amount that local value added would have to be reduced to offset the effects of transport costs.

As previously noted, many developing countries have a strong interest in pursuing resource based industrialization strategies to facilitate their industrialization and growth and it is often held that tariff escalation in their major markets is an important obstacle to expansion of commodity processing. In this context, the results in Table 16 assume special importance since effective transport rates exceed nominal freight rates for 28 of the 30 processed products. The properties of the ERP index are such that this will occur only when the average rates of (transport) protection for production inputs are lower than that for the final product (i.e., the rates increase or escalate with additional fabrication). As such, the statistics in Table 16 shows international freight costs generally are structured in a way that works against the local processing of domestically produced African commodities.<sup>3</sup> 6 'Since the ERP measures the percentage difference between value added in the presence of protection, and without trade barriers, relatively low nominal freight costs can produce quite high effective rates of protection for low value added products. That is, as equation (3) shows, the value added coefficient is the base for the ERP calculation and when this term takes relatively small values (say 10 to 15 percent as is the case with some vegetable oil products) quite high effective rate indices can result. Empirical studies show that production coefficients are generally quite similar across countries. However, if they are significantly different for some African products the results would be affected.

> 3' Tariff or transport cost escalation is held to exist when these charges increase, for a specific exporting country or group of countries, as the goods shipped experience further processing. Since the ERP calculations shown in Table 5 are based on: (i) nominal freight rates for African exports of processed products; and (ii) average nominal rates for the production inputs from **all foreign sources,** it describes a different situation. The latter is employed since it shown the margin by which domestic United States producers of the inputs may raise local prices and not be displaced by competing foreign suppliers.
Table 16. 1993 Nominal and Effective Rates of Transportation Protection Against African Exports of Processed Goods to the United States.

|HS<br>Code|Description|U.S. Value Added<br>Coefficient|Nominal Transport<br>Protection (9)|Effective Transport<br>Protection (%)|Difference|
|---|---|---|---|---|---|
|11|Products of the milling industry|0.22|18.4|33.0|14.6|
|14|Vegetable products|0.38|24.4|36.1|11.7|
|15|Animal and vegetable oils|0.08|9.9|56.1|46.2|
|20|Preparations of vegetables|0.41|16.1|28.2|12.1|
|23|Animal feeds|0.52|_56.1_|87.2|31.1|
|24|Cured tobacco|0.10|11.2|32.3|21.1|
|31|Fertilizers|0.29|28.4|62.9|34.5|
|32|Tanning and dying extracts|0.66|16.4|20.4|4.0|
|34|Soap and cleansing preparations|0.52|9.9|12.1|2.2|
|42|Articles of leather|0.49|6.8|9.3|2.5|
|46|Manufactures of plaiting materials|0.42|31.9|62.6|30.7|
|48|Paper and paperboard|0.43|10.6|8.3|-2.3|
|52|Fabrics of cotton|0.41|12.2|16.9|4.7|
|56|Discontinuous man-made fibers|0.35|18.5|33.6|15.1|
|57|Other textile materials|0.55|17.1|24.1|7.0|
|61|Articles of apparel and clothing|0.56|6.2|14.5|8.3|
|64|Footwear|0.48|4.3|3.2|-1.1|
|65|Headgear and parts|0.56|8.8|12.1|3.3|
|68|Articles of stone or plaster|0.53|17.5|26.6|9.1|
|69|Ceramic products|0.58|17.1|22.8|5.7|
|70|Glass and glassware|0.64|7.7|10.2|2.5|
|73|Iron and steel|0.53|7.3|12.1|4.8|
|82|Tools and cutlery|0.60|6.9|8.1|1.2|
|83|Articles of base metal|0.34|17.4|36.8|19.4|
|85|Electrical machinery|0.56|2.4|7.1|4.7|
|90|Scientific instruments|0.68|5.6|7.7|2.1|
|91|Clocks and watches|0.40|6.6|11.2|4.6|
|92|Recorders and musical instruments|0.54|20.2|34.2|14.0|
|94|Furniture and parts|0.53|10.8|18.6|7.8|
|95|Toys and Games|0.58|9.3|16.3|7.0|
||AVERAGE ALL ABOVE PRODUCTS|0.46|14.5|25.5|11.0|

Source: Value added coefficients and effective rate esimates based on data drawn from the US Department of Commerce, Census of Manufactures. Nominal transport costs computed from Department of Commerce trade tapes.

-_
75

# E. Transport Costs: The Potential Policy Dimension

Two key questions relating to the present analysis are: (i) what factors account for the adverse African transport costs; and (2) what types of corrective policy measures might be employed to deal with them. While the question needs further in depth investigation evidence suggests (see Box 6) that the anti-competitive cargo reservation policies adopted by most African governments have had an important adverse influence on freight costs.<sup>37</sup> Recognition of the true effects of these anticompetitive measures carries with it the policy prescription for corrective action -- deregulation. World Bank studies for other regions show that deregulation, and the promotion of measures to stimulate competition for shipping services may reduce freight rates in the liner trades by as much as 50 percent (see, for example, Bennathan et. al. 1989).

This report showed that international transport costs constitute a major barrier to African exports and more information is needed on these charges level and incidence -- particularly in the European Union and Japan. Customs officials in these markets should assist African countries and concerned international organizations by making existing information available and to improve procedures for the future collection, processing and tabulation of information on international transport costs.

A final point to note is that numerous investigations show that governments and traders generally have far more policy options for reducing transport costs than is generally recognized (UNCTAD 1975, Yeats 1985). These options cover such measures as cargo bulking to achieve transport economies of scale in transport, rationalization of shipping services and improved scheduling for liners, adoption of procedures to speed vessel turnaround, utilization of potentially lower cost tramp services where feasible, development or improvement of coastal feeder services, unitization and the adoption of new transport technologies, promotion of shippers associations, or port and 'An OECD (1992, p. 43) provides a description of these anti-competitive practices and the current situation regarding shipping in Africa in West and Central Africa. 'In 1992, West and Central African states showed no indication of liberalizing their protectionist shipping policies based largely on the unilateral interpretation of certain provisions of the UN Liner Code Convention. On the contrary there were various moves towards enacting existing, but not yet implemented restrictive policies. These attempts met with opposition by OECD member countries and their shipping lines which considered this as both protectionist and discriminatory. However, the operation of some 50 shipping lines offering regular services to West Africa from most ports of the world was not only hampered by protectionism. Civil unrest, economic depression, a sharp increase in criminal activities towards vessels together with poor port management and severe and often discriminatory customs regulations were factors shipping lines had to struggle with.
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77 storage improvements to name a few. The precise corrective measures will require detailed analyses of African transport costs and systems at the country or regional level. This study's findings accent the importance of further analysis in this direction.

In the interim, several OECD policy initiatives could help alleviate Africa's international transport problems:

* Technical assistance. International shipping has undergone a major transformation in which procedures for cargo unitization, port operations, and related logistical functions have evolved into highly complex operations requiring a considerable degree of technical expertise. Since most African countries have limited access to such expertise, technical assistance programs (such as those provided by UNCTAD and the World Bank) should be expanded and also extended to related activities (such as customs clearance procedures) that impinge on the efficiency of international transport operations.

* Finance and development. Due to insufficient attention and funds, many African countries' fleets, ports, and connecting inland transport infrastructure have deteriorated, or have become technologically outmoded. OECD countries should sponsor a comprehensive survey and report on sub-Saharan Africa's transport problems along with policy proposals for their alleviation. Given the small size of many African countries, and its influence on cargo volumes and the utilization of efficient transport technologies, further attention should be given to the development of regional ports and required inland infra-structure.

- The situation of land-locked African countries needs special attention given the major problems these countries face in transitting their neighbor's territories. A major effort should attempt to identify the special trade problems of the land-locked African countries and formulate policy suggestions for their reduction.
78

# VI. Summary and Conclusions

With regard to the importance of OECD countries' tariffs, the key finding<sup>of this report is that these</sup> charges have not been a major factor accounting for Africa's poor trade<sup>performance, although some specific goods</sup> like textiles and clothing face relatively high import duties in some<sup>markets. In fact, once preferences are taken</sup> into account tariffs conveyed significant competitive advantages over competing<sup>goods shipped from some other</sup> countries, and were likely a positive factor for the location of commodity<sup>processing in Africa as opposed to some</sup> other foreign locations. Africa may experience some losses due to the<sup>Uruguay Round erosion of these preferences,</sup> but their magnitude should not be large.

As was the case with tariffs, nontariff barriers do not provide an important<sup>general explanation for Africa's</sup> poor trade performance although these restrictions were important for<sup>some specific types of agricultural products</sup> like beef and sugar. Also, this will change significantly in the near<sup>future since a major accomplishment of the</sup> Uruguay Round relates to agreements that were reached on nontariff<sup>barriers. All NTBs imposed under the</sup> Multifiber Arrangement (MFA) will be phased out over a ten year<sup>period (Mauritius, Kenya and to a lessor extent</sup> Nigeria were the only African countries facing these restrictions) as<sup>will all 'voluntary' export restraints (none of</sup> which were applied to Africa). OECD countries' nontariff barriers<sup>on agricultural goods will be converted to tariffs</sup> and then reduced by an average of 36 percent. Agreement was<sup>also reached on limiting subsidies and other</sup> incentives to support agricultural exports.

These achievements will markedly change the profile of OECD nontariff protection<sup>facing Africa.</sup> Formerly, about 11 percent of sub-Saharan Africa's non-fuel exports<sup>faced NTBs -- this ratio will fall to about 3</sup> percent because of the Uruguay Round. For some African countries the changes<sup>will be dramatic. Pre-Uruguay</sup> Round NTBs covered more than 60 percent of Mauritius' exports -- this<sup>ratio will fall to about 2 percent as a result</sup> of the Round. Formerly, 83 percent of Reunion's exports faced NTBs<sup>and this ratio will drop to zero. However,</sup> some African countries will be largely unaffected by the Uruguay Round's accomplishments.<sup>No NTBs on energy</sup> products were liberalized so the coverage ratios for countries like Angola, Congo<sup>and Nigeria will remain relatively</sup> high. Exclusion of fish from the Round's agreement on agriculture limited<sup>the benefits to countries like the</sup> Seychelles that specialize in these exports. Others simply faced no (or<sup>few) nontariff restrictions prior to the trade</sup>
79 negotiations.

While there is a (correct) tendency to regard these developments as being positive from the viewpoint of all developing countries as a group, some may incur losses. Trade in textiles and clothing has been rigidly controlled over the last three decades through the use of quotas imposed under the Multifiber Arrangement. The phase out of these restrictions over a 10 year period _will subject African exports to aggressive international competition._ The ability of many African countries to maintain a viable textile and clothing export sector depends on their capacity to implement necessary reforms aimed at achieving cost competitiveness. The fact that the MFA liberalization is so heavily backloaded (roughly one-half of the restrictions will be removed at the end of a ten year period) provides ample time for adjustments to be implemented. In any event, losses of market share for textiles and clothing need not be an accurate indication as to the impact on welfare -- particularly if African exports are heavily subsidized. Africa may also face more vigorous competition on products like footwear and ferrous metals, where exports from some other developing countries were formerly restrained by 'voluntary" restraints which were eliminated by the Round.

Any assessment of these likely future development must recognize that policy options are available to combat potential losses. Probably one of the most promising of these involves reforms in the African countries' own trade regimes. Detailed statistics compiled by UNCTAD (1987) on developing countries trade barriers show that African tariffs are generally far higher than average, and that their trade regimes are often NTM-ridden. Extensive studies by the World Bank (see Thomas and Nash, 1991) document the important economic gains that can result from trade policy reform and it appears that such reform could have a major positive impact in Africa. In short, the best response to an erosion of trade preferences in foreign markets would appear to be an aggressive liberalization of African countries own trade barriers.

As far as "unfinished' business is concerned, further initiatives are needed to address NTBs facing energy products, fish and chemicals since these were largely bypassed by the Round. Since little information is now available on their trade impact, efforts should be made to estimate the levels of protection afforded by the postUruguay NTBs (as was done previously in the "tariffication" exercise for agriculture). These NTB nominal equivalents could be helpful in establishing priority sectors for post-Uruguay Round action. Also, there is a need
80 for stricter regulations on the use of OECD antidumping duties and safeguards to ensure that these forms of protection are not substituted for those that were eliminated. However, a very large part of the unfinished business involves reforms in the African countries themselves to ensure they can react to the new export opportunities and competitive challenges resulting from the Uruguay Round.

In contrast to the relatively minor role of tariffs and NTBs, this study concluded that transport costs have a significant negative impact on African exports, or the location of manufacturing activity in Africa, which is more important than generally recognized. Freight rates for African exports often are considerably higher than those on similar goods originating in other countries, and these charges often conceal very high rates of effective protection for processed goods -- a point that significantly reduces incentives for new investment in export oriented production activities. This combination of factors clearly limits African countries' ability to fully utilize natural resource based industrialization strategies in their development process. A related disturbing finding is that African net payments for transport services is very high relative to other developing countries and has actually increased over the last two decades. As a result, a large share of foreign exchange earnings that might have otherwise been employed in productive capacity building investments is being diverted to payments for transport.