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5th Annual trapca Trade Conference 25th - 26th November 2010, Arusha, Tanzania
THEME:THE DRAGON'S FORAYS INTO AFRICA
The Surge of Sino-African Trade and Investment Ties and its Policy Implications"
1. Introduction and Context
For decades, world trade has been dominated by commerce both among developed countries-the North-and between the North and the developing countries of the South. Since 2000 there has been a massive increase in trade and investment flows between Africa and Asia. Trade levels between China and Africa has gradually increased from $10 billion in 2000, to an estimated $55 billion in 2008. Analysts predict this level may rise to hit the $100 billion mark before 2010, in which case China will become the most important foreign actor on the continent. The increased level of trade underscores Africa's growing importance to China. China is investing heavily in African oil exploration to help meet its rapidly-growing consumption. The new data suggest Chinese firms are beginning to diversify beyond oil and natural resources into a broad array of industries-a trend that could lead to more sophisticated products being produced in Africa and help Africa more fully participate in world commerce.
In the context of expanding trade relations, the Chinese are making a foray into the African financial sector. In 2007, China Development Bank, which has an estimated asset of $440 billion entered into a Memorandum of Understanding (MoU) with the United Bank for Africa (UBA), evaluated at $5 billion. Chinese firms are also taking on significantly more construction projects in Africa, most notably infrastructure works. But Africa is also buying more Chinese-made goods, the figures show. Exports from Africa to Asia tripled in the last five years, making Asia Africa's third largest trading partner (27 percent) after the European Union (32 percent) and the United States (29 percent), according to a recent World Bank study on African trade relations with China and India.
This lively trade relationship is coming against the backdrop of continued concerns about the economic future of Africa and its 300 million poor; but also at a time when many are hailing progress in Asia that has lifted some 400 million out of extreme poverty in the last 25 years. Many wonder if the same "miracle" can occur in Sub-Saharan Africa. While growing Chinese trade and investment is cause for optimism, some analysts and experts are cautioning that there are major asymmetries in the economic relations between the two regions. China's comparatively high tariffs on Africa's leading-and highest value-exports prevent Africa from fully tapping into these markets. Africa's exports account for a mere 1.6 percent of what Asia receives from the rest of the world, according to some studies.
In spite of the need for caution, "skyrocketing" Chinese trade and investment in Africa represents the beginning of a change in trade patterns. What is going on between China and Africa is part of the broader trend in the world of rapidly growing South-South investment and trade-trade among developing countries; and trade with China is producing goods affordable to Africans and Chinese, that are either being sold in Africa or exported to China, or to a third country. At the same time, more and more Chinese firms are seeking to manufacture and export sophisticated components, such as those produced by the South African auto parts industry, to the global market. This is allowing Africa for the first time to enter into this network of more sophisticated third-country global exports.
If African countries are to benefit more from their trade with China, they must sustain reforms and also exploit the potentials. In this regard, the conventional remedy of reduced trade barriers will not be enough. More important are "behind-the-border" reforms to encourage competition, strengthen market institutions and improve governance in African nations, and "between-the-border" reforms in both regions, to reduce international transactions costs. Moreover, what is needed is something that Africa lacks: infrastructure-roads, airports, transit systems and telecommunications.
Against this backdrop, there is intense interest by policy makers and businesses in both Africa and Asia, as well as by international development partners, to better understand the evolution and the developmental, commercial, and policy implications of African-Asian trade and investment relations. This interest is reflected, perhaps most notably, in the South-South discussions held during the African-Asian summit in Jakarta in April 2005 celebrating the fiftieth anniversary of the Bandung Declaration, where the dramatic rise in international commerce between the two regions figured prominently, as well as at the July 2005 G-8 summit in Gleneagles, where the leaders of the North underscored the growing importance of South-South trade and investment flows, especially as they pertain to the prospects for fostering growth and poverty reduction in Africa.
2.Objectives of the Conference
The objectives of the Conference are to:
a) Examine the context, quality, quantity and patterns trade and investment flows between China and Africa.
b) Discuss the economic impacts of the growing Sino-African trade and investment flows.
c) Critically assess the existing "at the border" and "between the border" policy measures that inform Sino-African trade and investment flows at the moment and what policy adjustments are desirable for optimal economic benefits.
d) To explore the implications of Sino-African trade ties for future economic relationships with the North/West.
3. Key Questions for focus of the Conference Papers
The Conference will offer an opportunity of presentation of in-depth qualitative and quantitative studies on the following, among other questions relevant to the Conference theme:
a) What factors underpin the exponential growth of the Sino-African trade and investment ties?
b) What has been the recent evolution of the pattern and performance of trade and investment flows between Africa and China, and which factors are likely to significantly condition these flows in the future?
c) What have been the most important impacts on Africa of its trade and investment relations with China, and what actions can be taken to help shape these impacts to enhance Africa's economic development prospects?
d) Do the opportunities engendered by the increasing trade and investment ties between China and Africa necessarily be converted into growth and poverty reduction in Africa?
e) Does the increasing quantity Sino-African trade and investment ties represent commensurate quality? How can the quality of the trade and investment ties between China and Africa be made better?
f) What are the country-level patterns and performances of Sino-African trade and investment flows?
g) What factors account for the differences in country level patterns and performances of Sino-African trade and investment flows?
h) What "at the border" " trade and investment policies, are required by both African countries and China including policies affecting market access (tariffs and nontariff barriers (NTBs)); Foreign Direct
Investments (FDI) policy regimes; and bilateral, regional, and multilateral trade agreements?
i) What "between the border" policies by both African countries and China (includingincluding the development of cross-border trade-facilitating logistical and transport regimes; quantity and quality of information about overseas market opportunities, including through expatriates and the ethnic diasporas; impacts of technical standards; and the role of migration), will produce optimal Sino-Africa trade and investment relations?
j) Policy-wise, how does/should the exponential growth of Sino-African trade and investment ties affect Africa's traditional trade ties with the Global North/West?
k) What policy reforms will optimize Sino-African trade and investment ties?
4.The Challenge of Sino-Africa Research and Areas of Inadequate data
While the proposed Conference theme is timely and relevant for policy makers, given the relatively recent opening/deepening of markets between Africa and China (a phenomenon of last fifteen or so years), many of the interesting research questions are likely to remain unanswered. To be sure, qualitative analysis may well serve the purpose for the moment.
First of all, there is adequate data to suggest a significant shift in destination of Africa's exports and provenance of its imports. The data may not suggest a tipping point but do suggest a structural break. Ditto data on investment flows. Likewise, enough quantitative information is available to suggest certain patterns: heavy concentration of trade and related investments in a few countries/sectors. Much of the trade and investment is controlled /driven by public sector/state trading enterprises. What are the implications of this? A similar pattern was evident in the early China forays in East Asia: a good question here is whether the China-East Asia trade and investment patterns are/were fundamentally different and if so, what are the differences. The same question may be posed with respect to China/Latin America trade and investment ties. Lessons and experiences documented with respect to these ties may be relevant for Africa.
Among the questions regarding which there may not be enough data/evidence/ information but nevertheless ought to be on the agenda of any examination of China/Africa relations include:
Impact of Chinese tariff policies, notably as regards tariff peaks and tariff escalation on Africa's processed exports.
Do Chinese rules of origin adversely affect SSAs processed exports
What is the nature and modality of technology transfers?
And of the balance of trade in services? Indeed, what is the quantum and nature of services trade ?
What has been the impact on net local employment and productivity growth?
What do the principal macroeconomic aggregates such as domestic savings, balance of payments, fiscal balances and monetary and exchange rate evolution suggest? For example, has the sudden infusion of external capital led to "Dutch Disease" syndrome?
What is the role of foreign aid in driving the new relationship...is external capital qualitatively different in terms and conditions from that provided by traditional donors and MFIs? Given the opaque nature of this flow from China ( there are no official data comparable to those provided by DAC/OECD), and the lack of accurate publicly reported data from the recipients, what lessons, if any, can be drawn about aid effectiveness and its impact on the economy?
Is there any evidence to suggest that investments from other Asian countries ( In dia, Malaysia, Singapore etc ) is qualitatively different from that originating from China.
Reference was made earlier to the possible differences in investments originating from state-public enterprises (China) and investments originating from the private sector. It has been suggested that
Investments from state trading enterprises are generally less transparent and accountable. Likewise, private sector investments are more likely to go towards augmenting domestic productive capacities and result in better employment and technology transfers. It is known, for example, that visas are issued en masse for Chinese projects (Tanzania reportedly issues 30,000 visas annually to China without any scrutiny whereas virtually every employment visa application from others is vetted and is limited. Clearly, it is not possible to get any satisfactory and reliable data regarding labour inflows from either China or the recipient. But these surely are important questions and have a bearing on the extent to which investments add local value.
Then again, take the nature of contracts (and attendant rights and obligations) that underpin the extractive sectors (minerals, oil and gas and even timber). Given the historical experiences with these sectors, what, if any, lessons are learnt and what are the terms of these contracts? Do we know anything about royalty terms and remittances? The fact that, like foreign aid, they remain largely opaque and unreported by both the supplier and the recipient raises many questions: most notably, is the weight and economic clout of China allowing it to force agreements that undermine African economic progress.
Subject to minor changes, the Conference will have the following sessions, other than the opening and closing sessions:
Session 1: Context, Magnitude and Patterns and Impacts of Sino-African Trade and Investment Flows
Session 2: "at the border" " trade and investment policies for optimal Sino-African trade and investment flows: including policies affecting market access (tariffs and nontariff barriers (NTBs)); Foreign Direct Investments (FDI) policy regimes; and bilateral, regional, and multilateral trade agreements etc.
Session 3: "between the border" (domestic market) policies by both African countries and China (including including the development of cross-border trade-facilitating logistical and transport regimes; quantity and quality of information about overseas market opportunities, including through expatriates and the ethnic diasporas; impacts of technical standards; and the role of migration) etc, for optimal trade and investment flows.
Session 4: Trade policy implications for the exponential growth in Sino-African trade and investment
Except for the Roundtable/ Panel Discussion, paper presentations will precede plenary discussions in every other session. The summary of the discussions will be captured, and these summaries together with the papers will thereafter be published as Conference Proceedings.
7.Call for Papers
Interested paper presenters are invited to submit abstracts (maximum 500 words) by 31st August 2010 and thereafter, those whose abstracts will have been accepted will be expected to present full papers latest 15th October 2010.
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