Trade Performance of the

LLDCs

during Crisis and Recovery

6th Inter-Agency Consultative Group on

Implementation of the Almaty Programme of

Action

By Willem van der Geest, Acting Director DMD and Lead Economist ITCNew York, November 2, 2010

Outline of ITC programmes for LLDCs

•TRADE MONITORING AND POLICY ANALYSES

Trade Decline during Crisis 2008-09

Recovery

Increased Vulnerability

Types of obstacles to trade – private sector perspective

ITC programme on Non-tariff Measures

NTM classification

Surveys of the business sector perceptions in LLDC

Trade Facilitation – focused on specific sectors and cases

Conclusions and ongoing

LDCs and LLDCs Exports Decline in 2009

Decline in Imports from Developing Country Groups 2008-2009 (USD Billions)

Importing countries: USA, EU27, Japan, Switzerland, China, Turkey, Australia; Period: Q1-2 2008, 2009 Source: TradeMap, Market Analysis Tools, International Trade Centre,

Decline in Imports from Developing Country Groups 2008-2009 (USD Billions)

Decline in Imports 2008-2009 (USD billion) excl. HS27

LLDCs Export values recover during 2010 (q1-q2)

LLDCs export values recover during 2010 (q1-q2)

Key Features(figures exclude crude, based on mirror stats OECD, EU, China, Brazil

others, comparing with same period of Jan-June 2009):

1. Overall strong recovery during 2010 Jan-June

2. Values recover by +50.3 % , while volumes recover by 20.5 %

3. If import prices constant, in effect a terms of trade recovery of nearly 30 %

4. Top 3 products experience major gains: minerals, copper, ores

But some disconcerting features…

LLDCs recovery with disconcerting features

Main Concerns

Several products perform poorly comparing 2010 Jan-June with 2009:

1. Textiles (apparels, knit and not-knit HS 61 & HS 62) declines in volumes and in values with unit price losses

2. Similar picture for footwear (25th item on the list)

No evidence of product diversification away from minerals and primary agri-commodities in post –crisis context

ITC analysis of LLDCs trade performance

Main Issues raised for UN LLDC report (June 2010)

- Under utilization of tariff preferences – 77 % as compared with 89% from LDCs - stringency of ROO likely to be the key obstacle

- LLDC exports mainly intra-regional (53.1 %, with Asia and Africa resp. 48.9% and 20.5% - e.g. EU is 71.4 %)

- Product diversification of LLDCs much below DCs but comparable with LDCs (inverse HHI, 2008)

- Market diversification of LLDCs much above LDCs and comparable with LDCs (inverse HHI, 2008)

- LLDCs which are also LDCs exports are 51.9 % unprocessed, raw material much above LDCs

- LLDC which are DCs export in line with LDCs performance 17.5 %

-

ITC analysis of trade barriers (NTMs)

Definition adopted by multi-agency team working on NTMs:

Non-tariff measures (NTMs) are policy measures, other than ordinary customs tariffs, that can potentially have an economic effect on international trade in goods, changing quantities traded, or prices or both.

Difficult to distinguish between NTMs and non-tariff barriers.

Business sector is most concerned with the costs associated with NTMs/NTBs and related trade cost/ loss of competitiveness.

Need for thorough analysis to reflect heterogeneity amongst LLDCs

ITC analysis of trade barriers (NTMs)

Table 1: NTM incidence by exporting company size in 2010

Share of affected companies, % Nr of companies screened

on the phone Surveyed

country Small

Medium and

large Total Small

Medium and

large

Burkina Faso 76.5 65.0 70.3 34 40

Morocco* 46.7 31.2 32.3 15 205

Paraguay* 65.3 63.8 64.3 72 138

Peru* 42.6 44.4 44.0 115 473

Sri Lanka* 64.3 56.2 57.2 42 290

Documents, time and cost for export and importDocuments to export (number)

Time to export (days)

Cost to export (US$ per container)

Documents to import (number)

Time to import (days)

Cost to import (US$ per container)

LLDCs examples

Bhutan 8 38 1210 11 38 2140

Bolivia 8 19 1425 7 23 1747

Botswana 6 31 2508 9 42 3064

Burkina Faso 11 45 2132 11 54 3630

Burundi 9 47 2147 10 71 3705

Central African Republic 8 57 5121 18 66 5074

Chad 6 78 5367 9 102 6020

Ethiopia 8 46 2087 8 42 2893

Lesotho 6 44 1549 8 49 1715

Malawi 12 45 1671 10 54 2550

Mali 9 38 2012 11 42 2902

Niger 8 59 3547 10 64 3545

Swaziland 9 21 2184 11 33 2249

Uganda 6 39 3090 7 37 3290

Uzbekistan 7 80 3100 11 104 4600

Best practice economies

Denmark 5

France 2 2

Malaysia 450

Singapore 3 439

Developing economy

Egypt 6 14 737 6 15 823

World Bank, Doing Business Report 2009

Estimated Ad valorem Tariff Equivalent fortrade facilitation barriers in Egypt

Chahir Zaki (2009)

CostRwandan coffee:

1,500 km to Mombasa(up to 40% of total costs)

West Africa shea butter producers:

high transport costs from poor roads and vehicle repair costs

Uganda apparel:

transport costs add the

equivalent of an 80% tax on

clothing exports

Unexpected detours increase costs

Source: N. Christ & M. Ferrantino(2009) (extracted from M. Ferrantino presentation Chile 2009) Land Transport for Exports: The Effects of Cost, Time, and Uncertainty in Sub-Saharan Africa

Time

Kenya–Uganda border:

avg. 2 days to cross

Some West African corridors may

have roadblocks every 30 km

In 2003, wait at Bietbridge

reached 6 days

Uganda–Rwanda border:

avg. 1 day to cross

CAR–Cameroon border:

up to 2 weeks to cross

Unexpected detours increase time

Source: N. Christ & M. Ferrantino(2009) (extracted from M. Ferrantino presentation Chile 2009) Land Transport for Exports: The Effects of Cost, Time, and Uncertainty in Sub-Saharan Africa

USAID (2009) West Africa Trade Hub

Road transport corruption: Landlocked countries more affected

Importing country/Market

(top 20 export destinations for

Ugandan products)

Ugandan

export value,

USD (*)

Share in total

Ugandan export

Number of

reported

complaints about

this market

Export value of

Ugandan affected

products, USD (**)

Share of affected

products in the value of

Ugandan export to this

market

Africa

Sudan 157,066,535 11.8% 51 70,476,613 44.9%

Kenya 118,054,232 8.8% 59 51,124,302 43.3%

DRC 100,046,098 7.5% 25 30,594,081 30.6%

Rwanda 83,284,389 6.2% 110 27,545,528 33.1%

Burundi 42,718,942 3.2% 28 15,132,939 35.4%

Congo 42,231,387 3.2% 7 46,187 0.1%

United Republic of Tanzania 30,594,091 2.3% 20 1,087,705 3.6%

South Africa 10,710,972 0.8% 8 14,320 0.1%

Sub-total Africa 584,706,646 43.8% 308 196,021,675 33.5%

Africa

United Arab Emirates 177,887,225 13.3% 6 119,797 0.1%

Singapore 22,515,163 1.7% 0 0 0.0%

China 14,406,211 1.1% 18 350,038 2.4%

Sub-total developing countries

outside Africa 214,808,599 16.08% 24 469,835 0.2%

Sub-total developing countries 799,515,245 59.84% 332 196,491,510 24.6%

Developed countries

Switzerland 86,618,601 6.5% 10 79,221,211 91.5%

Netherlands 66,506,134 5.0% 40 30,477,476 45.8%

Germany 65,093,340 4.9% 21 57,177,212 87.8%

United Kingdom 53,265,627 4.0% 52 39,034,002 73.3%

Belgium 52,787,915 4.0% 7 27,283,006 51.7%

France 32,708,525 2.4% 10 28,212,641 86.3%

Spain 26,647,552 2.0% 8 17,971,571 67.4%

United States of America 19,588,130 1.5% 20 7,353,283 37.5%

Italy 13,239,898 1.0% 10 10,265,539 77.5%

Sub-total developed countries 416,455,722 31.2% 178 296,995,941 71.3%

Other 120,200,644 9.0% 85 6,185,817 5.1%

Total 1,336,171,611 100.0% 595 499,776,022 37.4%

NTM cases reported in the surver of Ugandan exporters and corresponding trade data,

for top 20 Ugandan export destinations, broken down by region

(*) Data source: UNSD Comtrade, 2007.

(**) Affected product is the product for which one or more complaints were reported in the survey with the corresponding country.

Selected results from the survey of the business perceptionsin Uganda

Overwhelming number of the interviewed exporters complained about poorinfrastructure (roads and railway), high air freight charges, power shortages, access to loans, low skills on technology, low access to information. Very few comments concern destination markets outside Africa (EU, US, Asian markets).

• “The government should standardise and improve on its facilities like warehouses and cold rooms. Sometimes the Entebbe cold room malfunctions and this leads to spoiling of many flowers awaiting export, thus revenue is lost.”

• “Trade with Sudan is really ok. The only problem is roads.”

• “Transport from Mombasa to Kampala is more expensive than transporting a container from China to Mombasa.”

ITC analysis of trade barriers (NTMs)

Table 7: Comparison of trade openness of landlocked developed and developing countries

Developing countries

Africa Asia

Latin America

and the

Caribbean

OECD

countries

Landlocked

Export, US bln $ 24,9 151,0 11,3 542,8

GDP, US bln $ 118,2 306,2 32,6 1,008,8

Export/GDP 0.21 0.49 0.35 0.54

Non-Landlocked

Export, US bln $ 519,8 2,565,2 321,7 8,232,8

GDP, US bln $ 1,442,6 3,321,4 1,348,1 39,451,4

Export/GDP 0.36 0.77 0.24 0.21

Note: Data refer to 2008. GDP data is sources from World Development Indicators. OECD aggregates are calculated excluding Chile,

Mexico, Republic of Korea and Turkey to avoid overlapping groups. BRIC (Brazil, Russia, India and China) are also excluded.

Conclusions

ITC Trade Monitoring of LLDC performance shows

• encouraging signs of recovery

• disconcerting lack of progress in product diversification

Ongoing exporter surveys show that

• NTBs are a major impediment to trade

• Part of the NTBs are directly related to business environment

• In many cases intra-regional trade is more affected.

• Business sector in the landlocked countries experience more obstacles to

trade due to

• Implications for transport (cost, time, uncertainty)

• Requirements to comply not only with domestic and partner country

requirements but also with the requirements in the transit country(ies)

• In order to be effective, economic policies should address NTBs.

ITC’s ongoing project on non-tariff measures:

Identify problems (through business surveys and official data collection)

Discuss them with national, regional and international institutions

All invited to NTM survey seminar in Burkina Faso Nov 8, 2010

Thank you for your attention!

Contact Details:

Willem van der Geest

Acting Director DMD & Lead Economist

vandergeest@intracen.org