By Antoine Bouët, Brahima Cissé, and Fousseini Traoré published in Dec 10 2020
Photo credit: World Bank
This post originally appeared on telos-eu.com.
Mark Twain once warned, “There are three kinds of lies: lies, damned lies, and statistics.” Yet statistics are a fundamental tool for economic policy and decision-making by governments, international institutions, and even the private sector. International trade statistics play a particularly important role. They allow us to determine a country's current account balance — that is, whether a country is living above or below its means — which is crucial information for macroeconomic policy. Detailed information on trade flows can be used to identify not only a country’s largest trading partners, but also the sectors in which it has a comparative advantage or disadvantage. This makes it possible to design structural actions to improve the competitiveness of certain sectors or trade relations with certain countries. These same statistics also provide valuable information for the private sector, as they help in identifying both attractive sectors for investment and which countries offer promising markets or are emerging as serious competitors.
However, official international trade indicators must be well measured, or at least not stray far from reality! To understand why these statistics can err significantly, one must keep in mind the methods used to collect them: Either customs officials record all flows of goods crossing borders (the usual source of collection), or central banks use tax declarations (VAT) and banking transactions to estimate these flows (this is the method adopted in the European Union to trace European trade flows within this borderless area), or national statistical institutes conduct surveys on representative samples and extrapolate results to the national scale (method used in the United States to evaluate trade between US states). Of course, using several methods is advisable because each has its flaws.
Yet Africa’s trade flows, particularly in the agriculture and food products sector, are known to be very underestimated, suggesting there is a considerable margin of error. This greatly hampers the continent's governments in making policies for food security; without exhaustive trade statistics, they do not know how much food is available for human consumption. Indeed, to establish the national availability of an agricultural and/or food product, a cereal for example, one must account for both the national production of the product and exports and imports of the product. National production, minus exports, plus imports gives the availability for consumption of this cereal or product in this country.
How do we know that the margin of error in trade statistics is substantial in Africa, given that we only have the official figures and not the real trade values? In fact, African national statistics institutes regularly conduct field surveys: for a period of time and/or at a limited number of crossing points, government-funded collectors survey any convoy or person crossing the border with a commodity. In Benin, for example, the ECENE (Enquête sur le Commerce Extérieur Non Enregistré) survey concluded that smuggling (trade at border posts not covered by customs officials) between that country and Nigeria was 3.8 times higher than official trade in 2011. A survey conducted by Rwanda in 2014 concluded that unregistered trade was equal to 59 percent of official trade with its four neighbors (Burundi, Congo DR, Uganda, Tanzania). More recently, since 2015, Uganda's Bureau of Statistics estimates unrecorded exports at just over 15 percent of official exports, based on a daily survey of almost half of the country's border crossings. The high level of unrecorded trade in Africa can be explained by inefficiency of customs operations and weak incentives for customs staff to complete official records, due in particular to the liberalization of trade in agricultural products, by the quasi-absence of tax declarations, and by the low level of access to banking services on the continent.
Although these surveys are interesting, we cannot expect them to fill the data gap — they are expensive and marred by inconsistency in terms of coverage of border crossings and different means of transport and uncertainty in terms of the representativeness of the estimation period.
It is with the dual objective of filling this statistical gap and developing a sustainable and self-financed means of collecting reliable agricultural and food trade data in West Africa that the project titled Family Farming, Regional Markets and Cross-Border Trade Corridors in the Sahel (FARM-TRAC) was launched in June 2020.
With initial funding from the International Fund for Agricultural Development (IFAD), and supported by the United States Agency for International Development (USAID), FARM-TRAC is collecting data on agricultural and food trade along all trade corridors in West Africa with the help of the West African Trade Association for Cross-Border Trade in Agro-Forestry Pastoral and Fisheries Products (WACTAF). The project’s innovation lies in organizing the collection of statistics in collaboration with the region’s apex organizations (associations for producers of cereals, livestock and meat, fruits and vegetables, and so on), greatly facilitating cooperation with these economic operators. Procedures have been put in place to record and collect information on trade values and volumes in real time, bring it up to international customs standards, avoid double counting, identify outliers, and otherwise control the quality of the information.
Data are also being collected on the number of illegal controls and checkpoints put in place by the gendarmerie, police, or customs officials along these road corridors, as well as the amount of payments demanded by these officials. What is modestly called “red tape” is indeed a common practice in the region and is equivalent to bribery.
The private sector is benefiting through access to an electronic platform (ECO-ICBT, http://www.eco-icbt.org/) set up to provide real-time information on the volumes and values of products traded, as well on the illegal checkpoints. To sustain the project without external financing, the levy of a modest share on each trade transaction will be set up by the Trade Information and Border Assistance Desk (TIBAD) with the technical assistance of the United Nations International Trade Center.
Both the national statistical institutions of the 15 countries of the region and the statistical service of ECOWAS (Economic Community of West African States) also benefit by using these statistics to improve the measurement of intraregional agricultural and food trade. The process of integrating these data into official statistics has begun.
The measurement of agricultural and food trade is significantly improved as a result. For example, a comparison of data provided by the ECO-ICBT platform and official data shows that between January and October 2020, for Togo, the total value of trade (exports and imports) of products targeted by ECO-ICBT was about 2.9 billion FCFA, while the values recorded on the basis of Togo's official customs statistics on these same products represent only 2.8 million FCFA, or only about 0.1% of the value recorded by the platform.
Last but not least, FARM-TRAC contributes to the implementation of the Regional Support Program for the Regulation of Informal Trade in ECOWAS (PARCI), which aims to encourage informal trade operators to register their operations with the official authorities, and to promote regional integration, which would enable farmers in the region to sell on more markets and thus improve their economic situation and give people access to cheaper food. PARCI communicates about abnormal practices by police, military, and customs authorities, implements customs facilitation procedures, and improves information on regulatory legislation for trade operators.
Economic statistics are an essential tool for policymakers. In developing areas where food security is far from assured, as is the case in West Africa, international trade statistics more in line with reality, and available in the very short term, could help identify, on a weekly basis, areas where there is a significant risk of undernourishment and/or malnutrition. Indeed, we can imagine projects that would enable us to identify these risks over the course of the year, since the production of each crop can now be reliably estimated in near real time thanks to satellite data and climate data. With such production estimates, coupled with export and import statistics, precise food balances can be established by region. These statistics will make it possible to anticipate food shortages, rather than responding to them with delay. But this will require reliable trade statistics in real time. A well-structured partnership between private operators, apex organizations, national statistical institutes, and international institutions can make an important contribution to improving Africa’s international trade statistics.