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Global protectionism may be holding back digital trade in Africa, WTO chief says

Updated Sep 25, 2024, 10:47am EDT
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African countries should work together to develop regulatory systems to boost digital trade across the continent, the head of the World Trade Organization said in an interview with Semafor’s Alexis Akwagyiram on Tuesday.

Speaking at Semafor’s “The Next 3 Billion” event in New York, Dr. Ngozi Okonjo-Iweala, who is seeking a second term as director general of the WTO, identified infrastructure deficits and patchwork regulatory frameworks as the biggest obstacles to digital trade in Africa. But protectionist approaches to digital trade could lead to almost a 1% loss in GDP in the long term, with “bigger losses for developing countries,” she said, citing the WTO’s research. “Protectionism leads to fragmentation of trade” and avoiding it would make it easier for businesses to operate in Africa.

The value of digitally-delivered trade is about $4.25 trillion but Africa has only 0.9% of it, she estimated. Growing the continent’s share requires concerted efforts to establish the right regulatory systems in multiple countries.

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Increasing Africa’s capacity for digital trade would require greater investment in electricity and telecommunications infrastructure, Okonjo-Iweala said. About 600 million Africans, or 40% of the population, are without electricity, the World Bank estimates.

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Speaking at the event Tuesday, Okonjo-Iweala said that the US Federal Reserve’s decision to cut interest rates by 0.5% at its latest meeting could have a positive downstream effect for Africa by lowering the cost of debt, she said. Lower debt service costs as a result of the Fed’s actions could free up capital for governments to finance social infrastructure, Okonjo-Iweala said.

She cautions that the effect will differ between countries. “Even if the Fed cuts and your domestic issues are very severe, it doesn’t automatically mean you’ll have lower interest rates,” she said. African governments must “look inward” to solve their monetary and fiscal problems — particularly inflation, she said. Many African governments this year have faced pressure from youth-led protests drawing attention to rising costs of living.

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Reforms aimed at addressing inflation and other macroeconomic problems should be considerate of their effect on poor people, and be done “within a medium-term context,” the former Nigerian finance minister said. Policymakers need to show they have a strategy to ensure confidence from citizens expected to bear the hard consequences of reforms, she said.

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