Raise Intra-Africa Trade to Counter U.S. Effect, World Bank Says

(Bloomberg) — African nations should consider increasing access to markets within the region to help offset the effects of increased U.S. protectionism, the World Bank’s vice president for the continent said.

“The region may need to expand market access to absorb the costs arising from the hike in tariffs,” Hafez Ghanem said in an interview Thursday in Nigeria’s capital, Abuja. “This would include strengthening trade among Africa countries.”

Escalating trade tensions are threatening to derail a global upswing that’s already losing momentum amid weaker-than-expected economic growth in Europe and Japan as financial markets seem complacent to the mounting risks, the International Monetary Fund warned July 16.

In June, the administration of U.S. President Donald Trump imposed a 25 percent duty on steel and 10 percent levy on aluminum from South Africa, the European Union, Canada and Mexico, after refusing their calls for permanent exemptions. The U.S. says the tariffs are needed to protect its industry and national security. The government of Africa’s most-industrialized economy is concerned that the U.S. is considering a new wave of tariffs that could be extended to the auto industry, which is one of the cornerstones of South African manufacturing.

Trade Effect

The extent of the impact will depend on the size and pattern of trade countries have either with the U.S. or with third-party nations that trade with it, Ghanem said. China, upon which the U.S. has imposed billions of dollars of duties, was sub-Saharan Africa’s biggest trading partner last year at about $120 billion.

“Take South Africa for instance: the possible imposition of a tariff on imported cars from Asia may affect the international supply chain of the steel industry and Asia, in general, remains the main export destination of South Africa’s iron and steel products,” Ghanem said. “Tariffs may also affect export volumes of non-oil exporting countries in the region, which typically sell apparel, agricultural and other manufactured edible products abroad.”

While Africa’s trade with the rest of the world expanded 11 percent to $907.6 billion last year, the portion of trade within the continent declined to 14 percent of the total, the African Export-Import Bank said in a July report.

South Africa, Namibia and Nigeria accounted for more than 35 percent of intra-Africa trade last year. South Africa contributed a quarter of the region’s domestic commerce in 2017, mostly in oil imports from Nigeria and Angola.

Talks to establish the African Continental Free Trade Area, with a combined gross domestic product of more than $3 trillion, started in 2015 and in May, Ghana and Kenya became the first countries to ratify the deal. South African President Cyril Ramaphosa signed the agreement in July and will soon ratify it, he said at the time.

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