BusinessDay 24 Aug 2018

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Friday 24 August 2018 10 BUSINESS DAY C002D5556 COMMENT DAN STEINBOCK Dr Dan Steinbock is the founder of Difference Group and has served as research director at the India, China and America Institute (USA) and visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net/ After months of trade threats, the Trump administration announced its 25% tariff on $34 billion of Chinese imports effective in early July, while threatening levies on another $16 billion of imports. To defend its sovereign interest, China responded with 25% tariffs on $34 billion of US imports and recently imposed an additional tariff of 25% on $16 billion of US imports effective on August 23. As Trump is escalating his tariff war, a total of $50 billion of goods on each side will be taxed as of Thursday. Not so long ago, there was still relatively serious talk about the US- China Bilateral Investment Treaty (BIT). After all, Chinese foreign direct investment soared to a record $46 billion in 2016. But that was in the pre-Trump era. Last year, Trump threats caused Chinese investment in the US to plunge to $29 billion, partly due to INWALOMHE DONALD Inwalomhe Donald writes from Osogbo via inwalomhe.donald@yahoo.com Pension arrears are not peculiar to Osun state and most states in Nigeria are presently indebted to retirees. There was accumulation of pension arrears between 1993 and 2011 in Osun State due to the non-payment of pensioners. I am worried over the huge pension and gratuity burden successive administrations had been battling with since the state’s creation. The effect of pension and gratuities on Osun is so high and more than any other state in the region. Osun State Governor, Rauf Aregbesola had disclosed that 80 percent of the total income generated by the state in the past 7 years of his administration was spent on payment of salary of workers and pension of retirees in the state. Aregbesola said the insinuation by his opponents that his administration spent 80 percent of the state income on developmental projects ‎against welfare and salaries of workers as untrue and hogwash. The Governor said over N220 billion Naira has been spent between November 2010 to October 2017 on payment of salaries and pensions. He held that ‎more than 70 percent of the income of the state of Osun from whatever source has been spent on payment of workers salary and How US trade war is spreading from goods to services deleveraging in China but mainly thanks to very stringent US regulatory reviews of inbound acquisitions. After months of trade war, Chinese investment in 2018, asset divestitures included, is negative in the US. In the coming weeks, things will go from bad to worse, as US tariffs are about to spread from goods to services. Ironically, that’s when much of the collateral damage will hit the US, however. Collateral damage in services wars Historically, advanced economies tend to enjoy service surpluses but goods deficits in trade, thanks to higher productivity and valueadded. And US-Chinese trade ties are no exception. According to most recent data (2017), US goods exports to China are $130 billion, whereas imports from China are to $506 billion. As a result, US trade deficit with China amounts to $375 billion. In contrast, US services exports to China are $54 billion, while services imports from China are $16 billion (2016 figures). Consequently, US trade services trade surplus with China is $38 billion. As China exports far more goods to US than vice versa, Chinese retaliations already cover more US goods (85%) than US tariffs cover Chinese imports (50%). So as the ongoing trade war shifts from goods tariffs to non-tariff actions in services, China is likely to target US services. But China will not be the first to do so. A few weeks ago, when Trump unleashed a tweet storm against Germany and the European Union (EU), German Chancellor Angela Merkel rightly pointed out that it is misleading to focus on goods trade, in which the US has deficit against the EU, when the US excels in services trade, in which it has a surplus against the EU. With other EU leaders, Merkel is backing a “digital tax” against US multinationals like Amazon, Facebook or Google, which have come under fire for shifting earnings around Europe to pay lower taxes. Trump tariffs undermine U.S. highmargin services Ironically, Trump’s tariffs have potential to undermine America’s most important competitive advantage Pension arrears and Osun state pensions and that less than N60 billion naira had been spent on developmental projects. THE House of Representatives recently urged the Federal Government to intervene in the current crisis of unpaid pension arrears threatening the lives of Nigerians’ retired senior citizens. The House resolution followed a motion moved by Hon. Toby Okechukwu and six others, entitled, “Urgent Need for Intervention in the Current Crises of Unpaid Pension Arrears Threatening the Lives of Nigeria’s Retired Senior Citizens.” According to him, in annual budgetary appropriation exercises, no provision was made for accrued benefits of pensioners under the Contributory Pension Scheme and Defined Benefits Scheme (DBS). He averred that, under the Contributory Pension Scheme, retirees who retired since 2015 have not been paid their pensions due to the failure of the Federal Government to contribute its statutory share of 5% to the Pension Redemption Fund in line with the Pension Reform Act 2014 amounting to a total of N285,946,669,881.00 only. The lawmaker also expressed worries that pensioners under the Defined Benefits Scheme (DBS) which include the Police, Pensions, the Nigerian Customs Service, Nigeria Immigration Service, Nigeria Prisons Service, Civil Service and ‘ In the coming weeks, things will go from bad to worse, as US tariffs are about to spread from goods to services. Ironically, that’s when much of the collateral damage will hit the US, however ’ other parastatals are yet to be paid their 33% accrued arrears amounting to about N174 billion. He said that, “the delay in payment of pension arrears has resulted in dire situations where pensioners are wallowing in penury, sickness, hopelessness and regret for serving their fatherland diligently only to be abandoned by government upon retirement,” he noted. Some Osun Pensioners’ behaviour is business-as-usual in a group run by some Osun political “godfathers,” or political elites who sponsor people to run down the government. I am saddened by the mad (talking of madness) campaign of calumny raging against Ogbeni Rauf Aregbesola.Governor Rauf Aregbesola increased the amount being paid as pension by 500 per cent in 2011. The problem of regular payment of gratuity is not peculiar to Osun; it is a national problem and the government has shown its readiness to pay the gratuity as soon as the state’s finances improve. It is on record that this group of pensioners had, at one time or the other in the past, lied against the Government of the State of Osun; and in specific reference they had alleged that government collected a tranche of the Paris Club refund and diverted it, only for government to wait for a whole month before the actual release of the fund. There has hardly been any month that his critics had spared him and his government even though no one can deny that he has from day one comment is free Send 800word comments to comment@businessdayonline.com in the postwar era – high-value, high-margin services, which range from the technology sector to big pharma. Since 2001, US services surplus with China has increased ninefold. A major beneficiary of the surplus is Houston, Texas. Last fall, Mayor Sylvester Turner led a Houston business delegation to China with energy execs, hospital administrators, physicians, medical researchers and entrepreneurs. The visit fostered many collaborative projects, including a medical center based on imported technology and consulting services from Houston. Much of US services trade surplus with China can be attributed to Chinese travelers’ spending on US business, medical treatment and education, as well as increasingly innovative Chinese companies spending on US licensing fees and royalties for intellectual property. Yet, in Texas, Trump’s tariffs are now endangering major projects that took years to build. As collateral damage will spread, so will the costs. If US metropolitan centers will take severe hits, the stakes will be much higher with US states. Last year, California’s trade with China totaled $170 billion, covering electric cars, engines, auto parts and aluminum. “A trade war is stupid,” warns Governor Jerry Brown, and for a reason. Among the US states, California, which is already facing a $1.6 billion budget deficit, stands to suffer the greatest pain if Trump’s tariff wars worsen. Yet, this could be only the beginning. If trade wars spill from goods to services, neither Silicon Valley nor Hollywood will remain remained very active. Across the state, a campaign of falsehood has reached a crescendo of late, from the laughable to the distracting; and everything is being thrown at it, from religion to national security. The pensioners claim they are on a mission to rescue Osun State. It is important that the people begin to show serious interest not only in the party in power but the oppositions too who are using pensioners. This is because the strength of a nation’s democracy is in how vibrant the opposition is. For many discerning minds, the greatest threat to Osun’s democratic culture and obstacle to a rapid socio-economic development is not the actions or inactions of the party in power. It is clear that the so-called pensioners group is obvious liars who were hired to stage protest during Governor Aregbesola’s mother burial and few days to Osun West Senatorial by- election. Their incessant political protests are unbecoming of a retired civil servant who ought to be placed and respected as a senior citizen. We know the set of pensioners that are protesting, it is not the entire pensioners of the state. Pensioners are being used by political blackmailers. Instead of engaging in dialogue with government on issues bothering their minds as to how their benefits would be paid, they resulted in militant approach known to be orchestrated by opposition; telling immune. Global growth no longer immune By upping the stakes in its trade war, the Trump administration is endangering US services surpluses not just with China, but with its other “deficit targets.” Trump’s dream is to defeat China in the trade war and then use that “demonstration effect” to force others – EU, Canada and Mexico, Japan and South Korea – on their knees. That’s the White House’s ultimate goal: First to shock and awe its trade adversaries, and then to negotiate the best terms for the US – America First. However, the White House severely underestimates the resilience of the Chinese economy and its people. Moreover, US tariff wars against its partners in Europe, North America and Asia Pacific are not a matter of principle, just a matter of time. This trade war will have no winners. Instead, expect an avalanche of defaults soon. Dr. Dan Steinbock is the founder of Difference Group and has served as research director at the India, China and America Institute (USA) and visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www. differencegroup.net/ • A shorter version of the commentary was published by China Daily on August 22, 2018. Send reactions to: comment@businessdayonline. lies and character assassination capable of destabilizing the peace of the state. The pensioners group is a fraction of those who retired from service in 2012 to avoid being part of the Contributory Pension Scheme. They are the set of pensioners that are protesting, it is not the entire pensioners of the state, they are being used by political blackmailers. It is disturbing and unfortunate that the acclaimed retires have chosen to be blackmailing the Osun State Government and persistently constituting nuisance on the streets of Osogbo to the detriment of the peace-loving citizens through sponsored protest on the payment of gratuity and not pension. I want to describe the protest by some pensioners in Osun state as politically motivated. It is connected with the forthcoming September 2018 governorship election in Osun. These senior citizens have be hoodwinked by the antics of those who want to play on their minds and emotions to make them appear like tools in the hands of desperate political gladiators. Note: The rest of this article continues in the online edition of Business Day @https://businessdayonline. com/ Send reactions to: comment@businessdayonline.com
Friday 24 August 2018 COMMENT LEKAN FADINA Prince Lekan Fadina is Chairman, Centre for Trade Practitioners, an independent think tank and policy centre for trade, diplomacy, strategic studies and sustainable development. cismevision@gmail.com The Continental Africa Trade Area is a single Continental Market for goods and services with free movement of business, persons and investments. The objectives are, among others, to pave the way for accelerating the establishment of the Continental Customs Union and the African Customs Union; expand Intra-Africa Trade through better harmonisation and co-ordination of trade liberation and facilitation regimes and instruments across Africa; resolve the challenges of multiple and overlapping membership and expedite the regional and continental markets; enhance competitiveness at the industry and enterprise levels through exploiting opportunities for scale production; and provide access and better reallocation of resources across the continental market. Background The free trade started many years ago since the birth of African Union - in various discussions, comments and presentations at conferences such as the Abuja Declaration, among others. The 18th ordinary session of the Assembly of Heads of State and Government of the African Union held in Addis Ababa, Ethiopia in January 2012 adopted a decision to establish a Continental Free Trade Area (CFTA). The Summit also endorsed the Action Plan on Boosting Intra-Africa Trade Area (BIAT) which identifies seven clusters: trade policy, trade facilitation, productive capacity, trade related infrastructure, trade finance, trade information, and factor market integration. The CFTA is expected to bring together all the 55 African countries with a combined population of more than One Billion people and a combined Gross Domestic Product (GDP) of more than $3.4 Trillion. The CFTA was launched on Wednesday March 21, 2018 when the Agreement was signed by 44 Countries at an Extra-Ordinary Summit of the African Union in Kigali, Rwanda. Nigeria was absent at the Summit as the Head of State, President Muhammadu Buhari, dropped the country’s decision at the last minute (three days before the date of the meeting) not to sign because Nigeria is not ready, and that there is need for more consultation and buy-in from Nigerians especially the organised private sector. At the 31st African Union Summit in Nouakchoth, South Africa, Sierra Leone, Namibia, Lesotho and Burundi signed the Agreement. The main objectives of the CFTA are to create a single continental market for goods and services with free movement of business, persons and investments. This is expected to pave the way for accelerating the establishment of the Customs Union; expand Intra-African Trade through better harmonisation and co-ordination of trade liberalisation; and facilitation of instruments across Africa in general. The CFTA is also expected to enhance competitiveness at the industry and enterprise levels through exploitation of opportunities for scale production, continental market access and better reallocation of resources. It is said that the establishment of the CFTA and the implementation of the Action Plan on Boosting Intra-African Trade (BIAT) provides a comprehensive framework to pursue African trade flows from 2012 and January 2022. The Agreement requires members to remove tariffs from 90% of goods allowing free access to commodities, goods and services across the continent. It is estimated, according to the United Nations Economic Commission for Africa (ECA), that the Agreement will boost Intra-African trade by 52% percent by 2022. In Nigeria, there are arguments for and against signing the Agreement. It is useful to consider some of them but space will not permit us to deal extensively with the issues raised. The Manufacturers Association of Nigeria (MAN), the Nigeria Labour Congress ,some academicians, some stakeholders opposed Nigeria joining just as the Nigeria Association of Chamber of Commerce industry ,Mines and Agriculture (NACCIMA) some academicians and other commentators supported. Their position can be summarised as follows: 1. President Muhammadu Buhari, in refusing to sign the Agreement, said he was delaying signature to the Agreement to widen and deepen consultation among the stakeholders. He said, “Trading is important and the terms of trade are important. Therefore, there is a need to ensure that our national interest as well as our regional and international obligations are balanced.” He further said that with a country as big as Nigeria, with a population of about 200 million people, there is need to carry all stakeholders along in the process of entering such agreement. 2. On the government side, the position appears to be that “There are advantages of our being there, but we must ensure to get the best possible terms for Nigeria. Our market could be a real target, our local manufacturing could become unprofitable and our agricultural advantage could be reversed” (Remarks by Vice President, Prof. Yemi Osinbajo, at the quarterly meeting of the Presidential Enabling Business Environment Council (PEBE) in Abuja, 2018). 3. The Nigerian Traders Association (NTA), while agreeing that the Agreement has some advantages for Nigeria, however suggested that we should be mindful of legal, structural, operational and other implications. 4. The Nigeria Labour Congress (NLC) described the Agreement as “neo-liberal policy. A statement credited to the NLC President, Comrade Ayuba Wubba, said, “the policy initiative, for instance, would make it possible for foreign airline to directly do local schedule flights without employing Nigerians.” He also raised the issue of the Government not consulting the relevant stakeholders on the possible impact of the Trade Agreement. 5. The Manufacturers Association of Nigeria (MAN) rejected the government’s move to sign the Agreement until proper consultations and inputs from all interest groups have been received on issues concerning market access and enforcement of rules of origin were addressed. 6. Some argue that the treaty would negatively impact government revenue and social welfare as elimination of all tariffs among African countries would erode the treasury of the trading states by up to $4.1 Billion annually and deepen poverty with millions of Africans potentially exposed to starvation and death. 7. Others, particularly among the poorest economies, are afraid that the benefits in the free area may not be equitably distributed among economies. 8. The Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA) urged the Federal Government to sign the Agreement in order to maximise the economic benefits of the initiative. 9. The African Development Bank in a presentation by its President, Dr. Akinwunmi Adesina said that the Bank fully back the Continental Free Trade for Africa and called for opening up of Africa. “Lets thrive together” he said. Nigeria has its challenges including the state of our industrial base, infrastructure, non-competitive manufacturing activities, import, and leadership, among others. The view of the writer is that we should note the following: 1. The Continental Market will make it possible to compete with the big emerging countries of the South. These are the 2. The current Intra-Africa Trade is $128.25 Billion, up by 5.6% between 2016 and 2017. Its share in the total volume of the continent’s trade remains weak. For 2017, this fell to less than 15% of all trade on the Continent, amounting to $907.63 Billion (Afrexim Bank 2018). 3. With CFTA, it is estimated that we can expect a growth of more than 50% C002D5556 BUSINESS DAY 11 comment is free Send 800word comments to comment@businessdayonline.com The Continental free trade area (CFTA) There is need for private sector involvement to explain their role and put their requests on the table. The private sector knows where the shoe pinches. It is evident that the success of the Agreement will, to a great extent, depend on the private sector as engine of growth and development ‘ ’ in the Intra-African trade by 2022.The CFTA is expected to increase GDP by between 1 and 6 percent, which is expected to broaden the tax base and boost revenue collection from other sources. 4. If Africa speaks with one voice, our influence will be stronger than 55 voices. 5. We can change the course of events and have more influence in the affairs of the world in the new block of One Africa Market 6. Nigeria cannot be an on-looker in a market of 1.2 Billion people with a combined Gross Domestic Product of more than $2 Trillion. 7. On January 23,2018 Africa countries signed the Single African Air Transport Market (SAATM) as one of the 12 projects to deepen African trade and integration. 8. There is an argument that until we get it right, we should not sign. But the question is when are we going to get it right? We must remember that he who fights and runs away, leaves to fight another day. We must realise that we have strength so we have weaknesses. We must do a through SWOT analysis to determine our (Strength, Weakness, Opportunities and Threats) There is need for driving inclusive growth and sustainable development. Africa is seen as the destination of the 4th Industrial Revolution and the next phase of Africa’s growth is expected to be driven by private sector investment, development, trade, innovation, technologies and knowledge that bring about broad based benefits to millions of its people. It is said that the days of aid are over and “Africa is now the highway to boosting Africa’s prosperity without borders among the African nations.” In deciding to be or not to be a member, Nigeria should take cognisance of issues such as: 1. Industrialisation Industrialisation is key to the successful implementation of a Continental Free Trade Agreement. The Industrial policies that are needed to impact the Agreement must consider competition, diversification, productivity and economic issues. 2. Human capital The manufacturing sector needs skilled, capable, healthy workers. Policy makers must bear in mind that we are in a world of knowledge, digital, technology, creativity, among others. We need to adjust our education curricula to ensure that skills are adapted to the market and should include special attention to the youths who constitute over 60 percent of Nigeria population. There should be focus on skills acquisition, capacity building for entrepreneurship, skills upgrading through continuous education, promotion of science, technology, engineering, mathematics and entrepreneurship as well as vocational and on the job training. In short, we should develop human capital necessary for the industrialisation of Nigeria and Africa. We must know that “Youth Unemployment is Africa’s Greatest Leadership Challenge “(Tony Elumelu). 3. Cost of doing business It is necessary to bring the cost of doing business down – addressing infrastructural facilities – roads, power, security, financing, bureaucratic restrictions, corruption, dispute settlement, property rights, land use, among others. We should also ensure effectiveness of our special economic zones. 4. Supply network There is need to ensure competitive networks, easing trade restrictions, integrating regional and continental trade networks, increasing our ability to develop sophisticated products, encouraging small and medium size business, enveloping, encouraging and addressing the informal sectors. 5. Domestic actions/demands The local market is very important in the scheme. We have a market of about 200 Million and a situation where what will see around are imported goods, manufactured from other countries thereby creating job opportunities for their citizens should concern us. There is urgent need to create jobs, increase individual and household incomes. Higher purchasing power for households will increase the size of the domestic market given the rapid growth of the demand of manufactured goods. 6.Knowledge and skilled gaps There are evidences of knowledge and skilled gaps in the areas of market access, regulations and requirements on global requirements on importation of food, product quality, assurance/ control-packaging, labelling, grading, standardization, traceability, competitiveness, among others. In short we must be ahead of what the markets want and realise the sovereignty of the consumer. 7. Investment in human capital We need to train officials from relevant ministries, agencies, private organizations, academia and nongovernmental organizations in the basic skills required for international negotiators and practitioners. Trade has become an important tool for economic growth and sustainable development. Our people must be knowledgeable on the trading and operational systems, learn the ropes and be masters of the game. Trade issues must be properly addressed as the Agreement involves understanding and knowledge of the present and future issues. Trade can promote growth, reduce poverty and create vast opportunities especially in the professional and service areas. There is need to develop capacity to take advantage of available market access and evidence-based trade analysis on specific commodities and sectors. Professional services will be an area that can benefit our people - lawyers, accountants, doctors etc. 8. Business engagement in continental integration We must take cognisance of business engagement in the Continental Integration and we must, in our overall action, consider the framework for business engagement in regional and continental Integration in the following areas: 1. Continental Business to Business 2. Advocacy for Trade within the Continent 3. Advocacy for Trade outside the Continent. Note: The rest of this article continues in the online edition of Business Day @https://businessdayonline. com/ Send reactions to: comment@businessdayonline.com
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