Effect of China’s Zero-Tariff Treatment under Forum on China-Africa Cooperation (FOCAC) on Export Diversification in Beneficiary Countries in Africa

Sun, Zhina; Omoruyi, Ehizuelen Michael Mitchell

doi:10.2991/jat.k.210618.001

Cited by 2 publications

(2 citation statements)

References 17 publications

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“…Since 2010, following the Forum on China-Africa Cooperation (FOCAC) which represents a collective dialogue between China and African countries, such weighted average tariff continued to fall. Since 2018, for instance, 31 SSA countries pay no tariff to China on 60% of their tariff lines, and 11 additional SSA countries pay no tariff on 97% of all their tariff lines (Sun and Omoruy, 2021). Despite these tariff eliminations, SSA's export volume to China has remained small, and their impacts on welfare and terms of trade have been limited.…”

Section: Some Policy Considerationsmentioning

confidence: 99%

Rethinking the Africa-China Trade: Some Policy Considerations and Implications

Rakotoarisoa

Fang

2022

SEC

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As many countries in Sub-Saharan Africa (SSA) struggle against severe food insecurity, unemployment and poverty, their heavy reliance on the export of raw materials as sources of revenue to solve these problems has long been put into question. The trade between China and SSA is characterized by China’s importing mining and extraction from SSA and SSA’s importing manufactured goods from China. We analyse the asymmetric SSA-China trade and focus on how trade policy and productivity shocks will reduce SSA’s dependency on raw material export to China. We perform accounting and simulation exercises using the General Equilibrium GTAP model. The main innovation in our study is the inclusion of estimates of different labor productivity growth rates across regions and across sectors in the model. These labor productivity growth estimates show that the gaps between China and SSA especially in manufacturing are huge; ignoring these gaps would have biased any estimation. The other innovation is the simulation that the imports from China would yield some technology spillover on productivity in SSA. We examine several scenarios that include tariff elimination by China, common external tariff in SSA, and free regional trade in SSA. We find that with its current low labor productivity growth rates especially in manufacturing sectors, SSA continues to lose in the global trade, including in its trade with China. More important, manoeuvring room for trade policies is limited. China tariffs on imports from Africa are already low and bringing these tariffs down to zero will lead only to a modest increases in welfare and employment for SSA without altering SSA’s dependence on raw material export. Raising the tariffs on manufactured goods from China will reduce SSA’s welfare and employment by harming consumers and the agriculture sectors dependent on intermediate goods from China. Increases in labor productivity and technical progress in SSA’s manufacturing sectors are welfare improving, but will not alter the high share of mining and extraction export to China unless such increases in productivity are accompanied by a voluntary restriction on these raw material exports. As such a voluntary restriction is being practically hard to apply and sustain, SSA shall continue to liberalize internal markets and pursue higher growth rates in labor productivity to cut the losses in international trade. Our simulations show that freer intra-African trade with small and steady increase in productivity can have significant impacts on welfare and employment.

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Section: Some Policy Considerationsmentioning

confidence: 99%

Rethinking the Africa-China Trade: Some Policy Considerations and Implications

Rakotoarisoa

Fang

2022

SEC

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“…This high‐level meeting presided over by President Xi Jinping reflected substantial changes in China's approaches and priorities unlike its previous patterns. While China's financial commitments to Africa decreased from $60 billion in 2018 to $40 billion in 2021, it did not make a specific commitment to infrastructure investments in the next 3 years, despite the country's long history of support to this sector (Sun, 2021). This could be attributed to the difficulties that China has been experiencing in loan repayment by some African countries as in the case of Uganda's Entebbe airport, Kenya's Mombasa port projects and Zambia debt repayment challenges.…”

Section: Literature Reviewmentioning

confidence: 99%

Chinese and Indian economic relations and development assistance to Zimbabwe: Rationale, controversies and significance

Tinarwo

Babu

2022

J of Intl Development

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Recent economic relations including foreign assistance scenario in Africa show expansion of China and India as emerging bilateral partners, competing with traditional countries in Europe and North America. The results of this paper found that the relationship of China and India with Zimbabwe has resulted in several challenges including increasing resource‐backed debt burden, exploitation of the natural resources, and flouting of constitutional, environmental, and labor provisions. The paper recommends that the Zimbabwean government must demand loans and investments that are contracted under clear terms and conditions, with parliamentary oversight and public scrutiny to avoid abuse by the elites.

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Effect of China’s Zero-Tariff Treatment under Forum on China-Africa Cooperation (FOCAC) on Export Diversification in Beneficiary Countries in Africa

Cited by 2 publications

References 17 publications

Rethinking the Africa-China Trade: Some Policy Considerations and Implications

Rethinking the Africa-China Trade: Some Policy Considerations and Implications

Chinese and Indian economic relations and development assistance to Zimbabwe: Rationale, controversies and significance

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