WTO: Okonjo-Iweala Solicits Lower Trade Cost to Boost Africa’s Economic Recovery


Dr. Ngozi Okonjo-Iweala, the Director-General of the World Trade Organization (WTO), has appealed for lower trade costs to help Africa’s economic recovery.

At the opening ceremony of the African Development Bank’s (AfDB) 2021 meetings yesterday, Okonjo-Iweala noted that record-high trade costs hamper on the movement of products.

A report by TheCable quoted her as calling for debt relief for African countries, adding that many countries are at risk of entering debt distress.

She said:”When thinking about how to use debt productively, it is paramount to think about how it is managed and what it is used for.

“Debt means to go into high yielding activities with high rates of returns. One potential area for high returns on investment is acting to lower what economists call trade cost, the cost associated with moving goods from the factory gates to the final consumer.

“This would raise the productive capacity of African economies, ultimately reducing debt burdens and helping build regional value chains and competitiveness of firms on the continent.

“Currently, moving manufactured goods across international borders costs roughly 2.7 times more than moving the same goods across the same distance domestically. Costs are even higher for agricultural goods and services.

“Shipping and logistic expenses often accounts for a significant share of these costs and are key factors of why trade cost between high-income countries and much lower than those among low-income countries.”

Trade costs, she claims, may be reduced through the African Continental Free Trade Area (AfCFTA), improved internet connectivity to stimulate e-commerce, regulatory reforms, and the development of port and road infrastructure.

In light of the COVID-19 crisis, which has seen LDCs suffer the greatest drops in services trade, she urged WTO members earlier this month that repairing and enhancing the export performance of least developed countries (LDCs) in services trade should take a higher priority.

Okonjo-Iweala was presenting at the WTO’s Council for Trade in Services’ webinar on LDCs and services.

She emphasized COVID-19’s effect on the services trade of LDCs.

According to her, the pandemic has had a significant impact on services that require face-to-face interaction between suppliers and consumers, particularly in the tourist and transportation sectors, where LDCs have a significant presence in global trade.

In 2020, LDC exports of travel/tourism and transportation services declined by 69% and 16%, respectively, resulting in a loss of roughly $600 million in total services export earnings, she said. 

“Decreased export revenues mean job losses and economic distress for people, along with increased financial and debt pressures for governments.

“Against this background, restoring and increasing the export performance of LDCs in services takes on even greater urgency.

“Services can help LDCs increase and diversify exports from more traditional agricultural products and commodities, reducing exposure to price volatility,” she added.

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