Interview: Ngozi Okonjo-Iweala
How would you assess Djibouti’s progress in trade development and capacity in recent years?
NGOZI OKONJO-IWEALA: Djibouti’s economic rebound following the Covid-19 pandemic has been engendered by investment in infrastructure, including railways, ports and free trade zones (FTZs) to facilitate regional and global trade. These investments underpin Djibouti’s importance to maritime trade and its ambition to become East Africa’s leading logistics centre. However, trade volumes were still below historic norms as of the end of 2022 due to ongoing disruptions to global supply chains and a reduction in Ethiopian demand.
Djibouti can profit from the opportunities that trade offers in its region. The African Continental Free Trade Area (AfCFTA) is critical in this respect, but it will require further liberalisation and trade facilitation to increase productivity and investment. FTZs can help support trade through increased competition, economies of scale, investment incentives and better resource utilisation. Additionally, special economic zones can be used to spur exports, thereby promoting economic growth by incentivising such sectors and industries.
To what extent can the implementation of the AfCFTA increase Djibouti’s role in global trade?
OKONJO-IWEALA: To ensure that Djibouti and the rest of Africa reap the benefits of the AfCFTA, it will be important to have a strategy that addresses both tariff and non-tariff barriers, and cuts trade costs, which for African countries are the equivalent of a 304% tariff on average. Africa should aim to double its share of world trade within the next decade by adding more value to its products and becoming part of global value chains.
Deeper integration into value chains is equally needed in times of crisis so that food, inputs of agriculture and technologies can reach the people who need them. Processing primary agricultural goods into finished products as part of global value chains will help reduce waste and food insecurity, and create quality jobs for young people. To boost local agricultural production and build long-term resilience, trade-distorting agricultural domestic support – valued at $817bn a year globally – should be repurposed to accelerate innovation, and invest in research and development. Countries should embrace digital and new technologies to transform the agri-food sector and mitigate the impact of climate change. It is equally important to continue improving water and soil management. Raising yields and cultivating local grains can help meet food security needs while reducing expenditure on imported food Which measures are needed for developing economies such as Djibouti to benefit from global trade?
OKONJO-IWEALA: The World Trade Organisation’s responsibility is threefold: to keep markets transparent, open and equitable. By reducing trade barriers, countries like Djibouti will be able to benefit from access to other markets, and the protection and guarantees that a rules-based, multilateral trading system offers. Built-in flexibilities and support for developing countries ensure that this is feasible for more vulnerable economies. We have taken steps to make certain that the trading system remains inclusive and supportive to the needs of all, while trying to modernise its cover and reach. This will be key in supporting the trade ambitions of countries such as Djibouti and essential to avoiding protectionism, nationalism and inward-looking behaviour.
Being self-reliant in critical areas builds resilience, thus tackling the vulnerabilities seen during the Covid-19 pandemic and war in Ukraine. However, self reliance is different from self sufficiency, as the latter could trigger fragmentation and lead to a race to the bottom. Policies based on a false sense of security would undermine the need for international and strategic cooperation. It is imperative to recommit to re-globalisation to bring the countries with good macro environments in Africa, Asia and Latin America in from the margins of the global production networks to the mainstream.
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