World trade in leather - which is one of the most widely traded
commodities - stands at over US$ 50 billion a year, and it is
growing. The African leather sector, while it has many natural
strengths, risks missing out on opportunities in an expanding
global market.
At the same time, the sector needs to anticipate trade
challenges that may emerge from the Cancún Ministerial
Conference.
Early action to support national and pan-African efforts to
forge realistic negotiating positions for Cancún will be an
important determinant of how the sector seizes emerging market
opportunities.
Africa's achievements in the global leather market vary between
countries and regions. Very successful businesses exist in Africa,
and many small and medium-sized enterprises (SMEs) compete
effectively in international markets in both leather and leather
products.
The great potential of the African leather sector, however,
remains largely unexploited and the continent's leather industry
has not kept pace with the substantial growth of leather and
leather goods in other developing regions.
Seizing global market opportunities in leather is the key
challenge for the African sector. By increasing its exports, the
leather sector will bring a range of both economic and social
benefits to the continent. Since leather is a by-product of the
meat industry, the starting point of the supply chain is linked to
animal husbandry and to rural economies. Successful development of
the leather industry will contribute to poverty reduction in rural
areas. Also, leather is a labour-intensive industry and therefore
an important source of employment.
The leather sector is increasingly integrated globally. Supply
chains, which are often buyer-driven, can spread across several
countries and regions, as marketing and manufacturing agents set up
global production networks, principally in developing countries. To
gain access to new markets and secure additional market share, the
African leather sector must integrate itself - to the extent
possible - at the national, subregional and regional levels.
Effective industry integration is difficult to achieve. Each
stage of the supply chain - from recovering hides and skins and
converting them into leather in tanneries, to manufacturing and
marketing leather products - requires specific policies, human
skills and industry support systems. Along the leather industry
supply chain, problems, constraints and solutions are interrelated.
As such, only a combined approach by the African leather sector can
address the competitive factors it faces. At an expert meeting
organized by ITC and the UN Industrial Development Organization
during "Meet in Africa" 2002, over 30 African experts identified
these factors as including:
- the quality of hides and skins;
- physical infrastructure and services;
- attractiveness to foreign investment;
- technological development, productivity and workmanship;
- facilities for human resource development;
- securing working capital or low-cost capital;
- effective environmental controls; and
- marketing information, expertise and control.
Combined approach to integration
The main challenges to achieving integration include the absence
of mechanisms for regional collaboration for the sector, limited
contact between firms and support institutions, and low
international visibility of the African leather industry. With
challenges of this scale, only a combined effort by all
stakeholders - the leather business, national governments, trade
support institutions and international organizations - will bring
about solutions. In 1997, ITC launched its Integrated Leather
Sector Export Development Programme for Africa to address these
challenges.
"Meet in Africa"
The "Meet in Africa" series of events, launched in Cape Town in
1998 (followed by Casablanca in 2000 and Tunis in 2002) is one
pillar of the programme. The next "Meet in Africa" will take place
in Addis Ababa in 2004. "Meet in Africa" is a trade fair combined
with a concentration of events including seminars, expert group
meetings, buyer-seller meetings and factory visits. The aim is
to:
- provide an environment conducive to networking between firms
and between institutions;
- create awareness of development issues among the African
community and identify measures to be taken;
- help develop partnerships and synergies between support
institutions; and
- promote the visibility of the African leather industry.
With a growing participation of African and international
businesses as well as of support institutions and international
organizations, "Meet in Africa" has emerged as a catalyst for
collective action by the African leather industry. Such an approach
is essential to offer effective advocacy for the African leather
sector in Cancún.
Regional leather federation
The other pillar of the programme was the creation of the
African Federation of Leather and Allied Industries (AFLAI) in 1998
at ITC's recommendation. AFLAI is the only entity representing the
whole African leather sector. AFLAI initiatives have strengthened
existing national and subregional associations as well as
kick-started new subregional associations, notably in West, Central
and North Africa.
AFLAI now represents 46 countries, giving it true continental
coverage. AFLAI's mission, implemented through its network of
associations and based on mid- and long-term strategic plans,
includes activities to promote the development of the African
leather sector at national, subregional and regional levels.
AFLAI, through its work promoting industry coordination and
integration, is also well placed to help African countries to
participate successfully in the Doha Development Agenda and to
advocate for special and differential treatment in multilateral
negotiations.
African leather at Cancún
High tariffs on leather and leather products, which are
progressively higher the further up the value chain the product is,
hamper market access in many importing countries. This is
particularly the case in emerging economies such as China, India
and Mexico.
For example, in India the zero average tariff for leather rises
to 45% in the case of leather clothing accessories and leather
footwear, while Mexico and China respectively apply 34.8% and 25%
on imports of leather footwear.
Some industrialized countries also apply high tariffs. Japan,
for instance, applies average tariffs of 21.8% for leather, 13.9%
for leather clothing accessories and 25.6% for leather
footwear.
Market access is also affected by export restrictions on raw
materials, such as export bans, quotas, duties or minimum export
prices. These policy instruments to protect emerging industries may
distort competition on the global market when they produce
'subsidies' for domestic operators and when they continue to be
applied after the industry has moved to higher-value products.
Expect changes in main market
The European Union (EU), the main export market for the African
leather industry, applies relatively lower tariffs, with averages
of 5.1% for leather, 6.6% for leather clothing accessories and 7.7%
for leather footwear. Many African countries have preferential
access to EU markets under schemes such as the Generalized System
of Preferences or the Convention with the African, Caribbean and
Pacific Group of States (ACP).
These preferences, however, are being progressively eroded by
bilateral free trade areas that EU countries are negotiating with a
growing number of trade partners outside the Convention.
African countries will also be confronted in Cancún with an EU
proposition for trade in leather, for the products covered by
Chapter 41 of the Harmonized System (HS) classification (see
box).
To be ready for Cancún, the African leather sector needs to:
- develop a clear negotiating position to bring forward requests
and to be ready to consider concessions; and
- support the African country representatives sitting at the
negotiating table in order to seize opportunities and benefit from
long-term advantages that may derive from sound representation of
the sector's interests.
The sector will only be able to achieve this by fostering
dialogue between countries, and particularly between the private
and public sectors, in order to integrate business requirements
into those of broader economic and social development.
The "Meet in Africa" meetings and the activities of AFLAI are
both critical steps in allowing the African leather sector to
represent itself more effectively in important intergovernmental
trade negotiations.
A world of traded leather
Leather and leather products are among the most widely traded
and universally used commodities in the world. Already, the total
value of annual trade is estimated at:
- 1.5 times the value of the meat trade;
- more than five times that of coffee; and
- more than eight times that of rice.
Formal trade is calculated at over US$ 50 billion a year and
according to analysts, the market is far from saturated. In the
next decade, the demand for raw materials and finished products may
exceed supply.
The dynamism of the leather sector in some developing countries
has resulted in a move up the value-added chain and stronger market
positions. As a result, developing countries already hold a 45%
share of world trade in leather manufactures.
The African leather gap
Africa's abundance of livestock represents a natural strength
for the sector, as leather is a by-product of the meat industry.
Africa has about 15% of the world's cattle population, a percentage
that grew by about a quarter over the last decade, overtaking the
global trend. Similarly, Africa possesses about 25% of the world's
sheep and goat population.
Despite its significance as a livestock producer, Africa
accounts for only 8% of world production of cattle hides and about
14% of goat and sheepskins. Further, even though African countries
often rank leather high in importance as an export commodity,
leather and leather products generally account for less than 4% of
total exports.
COTANCE position for Doha
negotiations
The European leather industry, represented by the Confederation
of National Associations of Tanners and Dressers of the European
Community (COTANCE):
"1. Agrees to the removal by the EU of all import duties and to
the avoidance of export restrictions, including export duties,
applied on the products covered by HS Chapter 41, provided that at
least the following countries take the same commitment: Brazil,
Argentina, Uruguay, Paraguay, USA, India, Pakistan and China.
2. COTANCE recommends a sectoral agreement for HS Chapter 41
products to be negotiated between the EU, the USA, MERCOSUR, India,
Pakistan and China as core trade partners and open to as many other
trade partners as possible where the principles of point 1 (above)
could be consolidated.
3. The phasing out of conventional import duties and the
elimination of export restrictions, including export duties, should
be at the same rhythm so as to arrive at the same time to full
liberalization. Developing countries might follow different
timetables for the implementation of their commitments on the
import tariff side but not with regard to export restrictions,
including export duties. Full liberalization of core trade partners
should be enforced in a timeframe that does not exceed three years
between those having eliminated all protection and those others
benefiting of a longer timetable.
4. Special and differentiated treatment should apply to all
least developed countries joining the initiative, notably ACP
countries, whereby they may be entitled to longer timetables for
elimination of their import tariffs and export restrictions,
including export duties, on products covered by HS Chapter 41,
where justified due to their low participation in the sector's
international trade. It is recommended, however, that the maximum
delay until full liberalization does not exceed a phasing in period
of ten years so as to stimulate active industrialization
policies.
5. Japan should implement a trade regime for HS Chapter 41 in
full reciprocity with its developed trade partners (EU, USA)…"
Extracts from "COTANCE position for the WTO Trade Round -
Doha Development Agenda", presented by COTANCE to AFLAI for
dissemination within the African region.
For information about "Meet in Africa", contact Johanna
DeParedes, ITC Senior Market Development Adviser, at deparedes@intracen.org
For information about AFLAI, contact Hachemi Cherif,
President of AFLAI, at facic@planet.tn