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    Africa Positions Itself for the Global Leather Market


    © International Trade Centre, International Trade Forum - Issue 2/2003

    As the global leather market expands, Africa needs to act now to build on its natural strengths in leather and become a global player. A new federation representing the continent's leather interests as well as business-focused African trade gatherings are steps in the right direction.

    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.

    Exploit natural strengths

    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.

    Supply chain challenges

    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