Bolstering Africa's Trading Power

In this multimedia feature the Director General of the World Trade Organization, H.E. Dr. Ngozi Okonjo-Iweala, engages in a candid conversation about Africa's growing trade opportunities, with Oge Onubogu, director of the Wilson Center's Africa Program.

Transcript:

Oge Onubogu:

Hello from the Wilson Center in Washington DC. I'm Oge Onubogu, the director of the Wilson Center's Africa program. It's a great pleasure to welcome you to this multimedia future as part of the Wilson Quarterly’s special issue titled Africa Matters. With a focus on six key themes, it examines Africa's increasing consequence to the world. To provide a closer look at Africa's role in global trade and the economy, I am pleased to welcome the Director General of the World Trade Organization, Dr. Ngozi Okonjo-Iwaela. Thank you for being part of this important conversation and welcome.

H.E. Dr. Ngozi Okonjo-Iwaela:

Thank you for having me.

Oge Onubogu:

We're going to dive right into the conversation. Currently Africa's share of global trade is quite low compared to its potential. Some data points put it at about 3%. How is the World Trade Organization supporting African governments and businesses to meet their own aspirations around global trade?

H.E. Dr. Ngozi Okonjo-Iwaela:

You're absolutely right that Africa's share of global trade is very small, and it has not been changing much over time. It was about 3% before the pandemic, then dipped slightly below that during the pandemic and immediately after. Whether it is 2 point something, or 3%, it is still small. The other piece of information is that intra-Africa trade, Africa's trade with itself, is also not that large. Different figures are put out, but it’s anywhere between 15 to 20%. So that tells you that Africa needs to trade more with itself, and also trade with the outside. This requires action, both within Africa, and externally.

You asked what the WTO is trying to do—one of the things that we have to think about is how Africa can add value to its products? Africa exports, and has been exporting commodities and raw materials, for quite a long time. I think it's about time we started adding value. When we add value to our products, I think we're likely to be able to increase our share, and then to create more jobs at home, as well as earn more abroad. If we have a market of $1.4 billion, it also makes it easier to increase trade if we can improve infrastructure and reduce trade costs. So here comes one of the big things, trade costs in Africa are very high. It's equivalent to adding a 300% tariff on goods. So you can imagine how can you really trade more or compete if you have an additional 300% tariff.

At the WTO, we are urging African countries to implement an agreement we have called the trade facilitation agreement. It's designed to cut down on customs procedures to digitize trade, and to make it easier and less costly. I think this will remove some of the obstacles that are in the way of trading, because if people know that they're going to have this extra tax, then you can't really compete with such a heavy cost.

We think the countries themselves need to make themselves hospitable. Investment will not fall into our laps. We need to invite it. -H.E. Dr. Ngozi Okonjo-Iwaela

The other thing we're doing is that we are negotiating—right now—an Investment Facilitation Agreement. And this brings me to the point of what the continent needs to do. The continent needs more investment, so it can add value. We are very good at agriculture, we can be even better. But why can't we add value to the products that we sell like coffee, cocoa, and the rest. We are now a home for critical minerals, which are very much in demand as we try to decarbonize the world. But are we going to allow these to be exported as raw material? Are we going to add value? So what we can try to do at the WTO is to encourage African countries to join the Investment Facilitation Agreement and many of them are part of it. We hope to have this completed by the time of our next ministerial in Abu Dhabi. Those are two of the big things that I have to say. We're also looking at other measures within agreements that can be helpful.

Finally, we have supply side interventions through the International Trade Center, one of our offshoots, to try to help businesses, especially micro small and medium enterprises, and women owned businesses, that want to export more. They encounter so many problems and challenges from finance, to lack of knowledge, to quality of products to export that they want to export. And we can intervene from the ITC and the WTO to help them bring their products up to standard, to the quality that is being demanded outside so they can export more. And then also to try and clear some of the other challenges in their way.

When you have a market of 1.4 billion people, it makes a lot of sense to see whether you can invest within this market. -H.E. Dr. Ngozi Okojo-Iwaela

These are some of the ways we're helping. We're spending about 3 million euros to help build country's capacity to implement the agreements reached through the African Continental Free Trade Area.

Oge Onubogu:

Thank you very much Dr. Iwaela for those wonderful points that you've laid out. And I think you mentioned the African Continental Free Trade Area. Over 40 African countries have already signed up to that. And when it finally becomes effective, it will be one of the largest trading areas in the world and would allow African countries to trade with each other without tariffs. What should the US and other countries be doing to position themselves effectively, and their businesses, to partner with African countries to be part of these new opportunities?

H.E. Dr. Ngozi Okonjo-Iwaela:

First of all, I think there's a trial now of eight countries to try and see how implementing this agreement would work. I hope that will succeed, and then we can begin to spread it. We still have the challenges I spoke about, we need to tackle infrastructure challenges and this requires investment in some parts. The others just being doing away with bureaucracy, which we talked about. But some of the infrastructural investments will be needed, and this is where the US and others can be helpful, as well as positioning themselves for a win-win.

The risk perception of American businesses is very high. Yes, there's some risk, but I think it's completely overblown and I would ask them to take another look before passing judgment. -H.E. Dr. Ngozi Okonjo-Iwaela

When you have a market of 1.4 billion people, it makes a lot of sense to see whether you can invest within this market. It's like dealing with the market of China, India—1.4 billion people is a lot of consumers to think about. US companies, I would urge them to take another look at Africa and see how they can position themselves to invest on the continent, and add value to products there, to make products there which they can sell within the continent, and also export outside.

The advice I would have is that it's about more investment. And that is the reason why at the WTO, we are absolutely pushing this Investment Facilitation Agreement because we think the countries themselves need to make themselves hospitable. Investment will not fall into our laps. We need to invite it. At the same time, I would also urge that the risk perception of American businesses is very high. They view the African continent as very risky for investment. Yes, there's some risk, but I think it's completely overblown and I would ask them to take another look before passing judgment. There's no reason why we have such a high risk premium.

And finally, the US can also help by blending finance to help cushion or manage some of this risk that the private sector perceives. Public-private blending of finance can help leverage and cushion the so-called risk that the private sector perceives.

Finally, investment in infrastructure is really key, especially as we go green. I think the US should look at green investments that can be competitive on the continent. Critical minerals, adding value to those rather than exporting them outside. This is something that could be a win-win for the US as it seeks to diversify its sources of these kinds of materials that will be needed for decarbonization.

Oge Onubogu:

Thank you so much for that. I want to stick with the US as we continue this conversation. The African Growth and Opportunities Act, AGOA, has been the cornerstone, really the backbone of US Africa trade relations since the year 2000, about a quarter of a century. And it's set to expire in 2025. What are your thoughts about how the US might reimagine AGOA, given the current realities and changes on the continent, as well as ongoing global trade discussions?

H.E. Dr. Ngozi Okonjo-Iwaela:

There's first the debate about whether AGOA should be continued or not, and then how should it be? Should it be the older AGOA? Should it be reimagined? What I hear from trade ministers and the AU is that they would like to make sure that AGOA is continued, and they want some certainty because that is also good for investment. Even our domestic investors on the continent would want to know. So they're looking for a 10-to-20 year agreement when it's renewed.

I think we need to re-look at the agreement from the investment perspective. I come back to my old point, in the AGOA of old, there were thousands of lines that could be exported to the US but if you look, you see that only a few lines of exports were actually used. And most of these were raw materials and commodities and things like that. I know from my own country, mostly petroleum, but there's so much more that can come from the continent. As we have this large market, that makes it even more possible to have economies of scale so that we can bulk our exports through AGOA.

We are trying to reform at all levels and embrace new ways of doing things. One is digital trade. -H.E. Dr. Ngozi Okonjo-Iwaela

So I think we need to reimagine a new AGOA that looks at more value added. How can we make it easier for Africa to export more value added products? How does the US need to work with us on the continent to make this possible? I think AGOA, the way it was before, really with the changing times, as you said, I don't think we should repeat that, but look at the new opportunities that we can possibly seize, and reimagine the agreement in that way. We need to make better use of it. If you look at what we're exporting now from the continent, really it's nothing to write on about.

Oge Onubogu:

In August this year with the recent edition of Egypt and Ethiopia, there are now three African countries in the BRICS Economic Alliance. This is the Brazil, Russia, India, China, and South Africa economic alliance. What does an expanded BRICS mean for Africa? Does it mean anything for Africa? I'd love to hear your thoughts on this.

H.E. Dr. Ngozi Okonjo-Iwaela:

Well, I hope it'll mean something otherwise I don't know why countries are signing on. When we look at it, we need to get more out of all the trading agreements and investment agreements we have. For the BRICS, one of the trends we are seeing is that South-South investment is becoming very important. We are all used to looking at North-South investment, we look at the US, we look at Europe. China, as you know, is very big in investment on the continent. So that's a country "from the south." But you now see many BRICS countries where investment from those to Africa is becoming far more important than investment from the north.

Hopefully, African countries joining the BRICS will mean that the larger emerging markets among the BRICS will see these countries as good investment destinations. And I hope it encourages South-South investment and South-South trade. This is a trend we have already seen, and I think it should be encouraged. If we don't get that out of it, then why are the countries joining the BRICS?

Oge Onubogu:

You talk about South-South investments and South-South trade, and there are ongoing discussions about reforming multilateral institutions. You are one of just a handful of Africans who currently leads a major multilateral agency. Can you share your thoughts about some of the ongoing reform proposals and discussions?

H.E. Dr. Ngozi Okonjo-Iwaela:

I think the multilateral institutions are key, multilateral institutions have delivered. Let me speak about the Bretton Woods institutions, of which the WTO is part. There were three institutions created to help govern the world's economy. The IMF, the World Bank, and the WTO. The WTO started as the GATT, General Agreement on Tariffs and Trade and then morphed into the World Trade Organization in 1994. These organizations have delivered, the WTO, in particular was created with the idea that interdependence and trade would help bring peace. And I think that that idea has delivered for 75 years. It's been largely war free, and it's only now we have the one in Ukraine. I think the IMF and World Bank have also delivered on their own part, but there's absolutely no doubt that we are now living in a different world with different needs.

Climate change was not the existential threat years ago that it is today. So we have to ask ourselves, the world is changing, we are going digital, there's AI, there's climate change, there are so many new things happening. Are the organizations fit for purpose or should they be reformed in order to be able to meet today's challenges? And the answer to that squarely is yes. And I think the WTO is part of the organizations that need reform. That is why WTO reform is so big on the agenda of what we are doing here.

We are trying to reform at all levels and embrace new ways of doing things. One is digital trade. Let me just speak about the WTO. What we see is that the trend of trade for the future is digital trade, especially digitally delivered services trade—anything from streaming music to videos to education online to selling other services online. This is growing at about 8% per annum and as far as stripping goods trade at 5.6%.

So when we see that, we know that the WTO has to be up to speed in trying to support countries to go digital. And you know why I'm excited about digital trade? Because micro, medium, and small enterprises and women, they're the ones trading digitally. So any actions that we can take, benefit them. What do we have to do at the WTO? Two things, first we need to ask, do we have the rules on such trade? Are we able to create a level playing field so that all can benefit from this equally? The WTO makes agreements and rules about trade. At this time we are negotiating an e-commerce agreement, which 90 of our countries are involved in doing. This is a plurilateral agreement that will underpin the rules for digital trade. We hope that by the end of next year, 2024, we'll be in a position to have that agreement wrapped up. It's going into things like cross-border data flows, e-signatures, all the things that we need to deal with digital trade.

That's one of the reforms we're looking at: How do we modernize ourselves so that we can cope? I've just given that as long example. The other one we need to be up to speed on is climate change. How does the WTO, its rules, and the multilateral trading system work to help solve this global challenge? Here we are looking at modernizing our approach so that trade can be part of the solution to climate change. We strongly believe it can. From looking at trade policies that could be made more friendly to renewables, and renewables as compared to fossil fuel driven goods. We're looking at such policies. We have a government procurement agreement. Government procurement is a $13 trillion endeavor, $13 trillion, 13% of global GDP. That is a powerful instrument to use to move countries to green.

Whenever I run into young Africans, they seem to be doing exciting things that are right. They're with the digital revolution. Most African young people are with it. They're the ones creating FinTech that are being invested in by others, from outside. They're creating digital businesses. They're far ahead of the crowd. -H.E. Dr. Ngozi Okonjo-Iwaela

I could go on and on. There are many ways in which the instruments we have, and the ones we're developing are making us more modern, changing. We're also reforming our dispute settlement system to be up to the times. It's the only type of its kind in the world, where all members can come and settle trade disputes with each other, but it needs to be modernized, and we're working on it.

The WTO is an example of a multilateral that is embracing reform because we know we cannot deliver for people unless we reform and keep up with the times.

Oge Onubogu:

Thank you so much. You've definitely given us a lot of food for thought here. I have one final question for you. You are the first woman and the first African to lead the World Trade Organization. As you look across the African continent today, what really makes you most hopeful about Africa and its people?

H.E. Dr. Ngozi Okonjo-Iwaela:

Someday I hope this first woman and first African will be a thing of the past. Because that's when you know that we have arrived as women and Africans, when there are many more. But people know I'm an eternal optimist about Africa and one of those who is excited. Does that mean I have rose-colored glasses and I don't see all the challenges on the continent? Absolutely not. I see the challenges and I see what we ourselves are to blame for, and what we should take responsibility for. We need better governance on the continent. Things are changing for the better in that direction, but we need much more change.

But what makes me most hopeful are the young people on the continent. Whenever I run into young Africans, they seem to be doing exciting things that are right. They're with the digital revolution. Most African young people are with it. They're the ones creating FinTech that are being invested in by others, from outside. They're creating digital businesses. They're far ahead of the crowd. So they give me hope that they know which direction the world is going, and they're going in that direction. I think what they need is better governance in their countries and better authorizing environments that can support them. Young people need to be given the space to really put their ideas in place to help govern, implement.

I think the continent will move in the right direction. Young people, young women and men, I see so many and I have full confidence that they can move us eventually in the right direction. That's what makes me excited.

Oge Onubogu:

Well, thank you so much. And from one eternal optimist about Africa's future to another, I thank you for being with us, Dr. Okonjo-Iwaela. And to our audience, I also thank you for joining us for this conversation. I hope you take some time to explore the rest of this special edition of the Wilson Quarterly. Thank you so much.

H.E. Dr. Ngozi Okonjo-Iwaela:

Thank you, Oge, very much.

Cover photo: US President Joe Biden, center, speaks with World Trade Organization Director-General Ngozi Okonjo-Iweala after a group photo of G7 leaders and Outreach guests at Castle Elmau in Kruen, near Garmisch-Partenkirchen, Germany, on June 27, 2022. (AP Photo/Matthias Schrader).