"The impacts (of removing trade barriers) are likely to be huge" Paul Brenton of the World Bank on Borderless 2013

Thursday, January 31 2013

Joe Lamport

Paul Brenton, Trade Practice Leader in the Africa Region of the World Bank, is a keynote speaker at this year’s Borderless Conference in Accra, February 21-22. Mr. Brenton is among the world’s most influential economic thinkers in the field of African trade, and is co-editor of the 2012 book “De-Fragmenting Africa.”  With the Borderless Conference fast approaching, Tradewinds asked Paul Brenton about his vision for the future of cross-border trade in Africa.

Tradewinds: There’s a lot of talk about eliminating trade barriers, and it seems many agree that this needs to happen. Why is it so important?

Paul Brenton
Paul Brenton
Paul Brenton: Removing trade barriers will lower costs and hence reduce prices. This benefits both consumers of final products, and firms that need to use materials and other inputs from abroad. Removing trade barriers is also associated with a wider range of goods and inputs being available on the domestic market. Workers benefit as well, since jobs are likely to be created when exporting firms are able to sell more abroad, and the lower costs of inputs allow firms to expand production. The boost to GDP is also likely to stimulate employment growth. Certainly, some firms may find it more difficult to compete, but productive industries and firms will expand, increasing productivity and wages. Many of the key barriers to trade in the region are non-tariff barriers such as roadblocks, inefficiencies in customs procedures, poorly designed and applied standards and so on, which occur along the whole of the supply chain. Removing these barriers is of particular importance, because they just waste resources and create a wedge between producer and consumer prices.

Tradewinds: In gross numbers, what are the potential impacts? What’s at stake for West Africa?

Paul Brenton: The impacts are likely to be huge. Take food, for example: the potential for increased food production in West Africa is enormous. Yields for basic crops are a fraction of what farmers elsewhere are achieving, and large areas of cultivatable land remain fallow. This is in the face of ever-increasing food import bills. Investment in food production in West Africa is being constrained by segmented markets for both key inputs such as seeds and fertilizers and for final crops. In terms of magnitudes, models suggest that if West Africa achieves its potential yields and opens regional markets, a $2 billion trade deficit in food staples could turn into a $12 billion surplus. This would in turn increase returns to farmers, reduce poverty and more effectively deliver food security in the region.

Also, hundreds of thousands of Africans, mainly women, cross borders daily in West Africa. Their trading activities are critical to the families who depend on them. Improving the conditions that these traders face - and women often face greater harassment - and reducing the costs they incur would have profound impacts on poverty in border areas.

Tradewinds: Despite all the talk, however, eliminating trade barriers turns out to be hard. What are the main barriers to removing barriers?

In many cases, removing the barriers to trade along the supply chain requires investment – not in hard infrastructure, although improving infrastructure is clearly important – but in better-designed rules and regulations and in the capacity to enforce these in a way that causes minimal disruption to business. Often the necessary regulatory reform requires coordinated actions across different agencies and ministries; this can prove difficult to achieve without strong leadership and oversight. But there are also vested interests that will resist reform. In the private sector, it is the politically well-connected that are best placed to lobby for protection and resist changes that will undermine the rents that they are earning. In the public sector, resistance may come from agencies whose function will be removed or substantially changed. Again this demands strong leadership and political commitment to open regional markets.

Tradewinds: Barriers stem from public policy, and consequently many people hold the public sector responsible for trade barriers. Why should the private sector be engaged with this issue when it appears that doing something about it appears to be beyond their power?

Paul Brenton: Public sector bodies should be held accountable for the policies they have been mandated to implement. The private sector can play a crucial role in providing information and indicators on the extent to which commitments to regional free trade are being implemented. The work of Borderless is a good example of the sort of indicators that can be instrumental in shedding greater light on what is going on in reality at borders and along trade corridors. In addition, the private sector can play a key role in opening up discussion of trade and regulatory policies. When policies are determined by small groups within government with little scrutiny, they are more likely to be influenced by narrow interests. In regulatory agencies it is important that new rules are determined with input from all affected stakeholders.

Tradewinds: Many people outside of Africa look at food security and assume it’s a question of droughts and farmer productivity. While these are factors, marketing is a part of it, too. How are trade barriers relevant to the issue of food security?

Paul Brenton: Africa has the potential to feed itself, and more - but it cannot achieve this as a series of segmented markets. Regional fragmentation has undermined the development of efficient input markets for seeds, pesticides and fertilizers – all of which are critical for increased productivity. For many farmers the nearest large market is across a border, but their incentives to invest to serve that market are undermined by policies such as export bans and by the costs of getting across the border when they are permitted to do so. Fragmented markets also constrain the emergence of institutions that can make big contributions to food security. For example, weather-indexed insurance can play a key role – financial institutions are more likely to lend to farmers if they have such insurance – but this has yet to emerge in Africa, partly because national markets are too small and policies too unpredictable. Africa can feed Africa, but this will require changing to a regional approach to food security.

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