Monday, June 30, 2014

The Vanishing Exports

Africa, the world's poorest continent, remains heavily dependent on natural resources and so is extremely vulnerable to manipulations in the price of the commodities it extracts and exports, with very real consequences for its economies. Switzerland is a global hub for trade in commodities, and so exerts a significant influence on Africa's development.  Critics say the way commodities are traded through the country ultimately deprives developing regions such as Africa of revenue.

A 2010 study by Christian Aid showed that as Zambia's copper production soared in the 2000s, Switzerland came to account for more than half of the southern African country's exports of the commodity. But the price of Swiss re-exports of the copper was far higher than that received in Zambia.

In 2008, the study estimated, Zambia's GDP would have been 80% higher if the copper leaving its borders in that year alone had received the same price as Switzerland. It's a pattern of trade mispricing that has persisted.

A study in January by the Centre for Global Development, a trade and aid think tank, estimated that developing countries may be losing between $8 billion and $120 billion a year because of mispricing of commodities in Switzerland. That report analysed 244 jurisdictions, including virtually all sub-Saharan countries, and almost 2,600 commodity categories, and found that the average price of commodity exports to Switzerland was lower than to other jurisdictions. The difference here cost developing countries about $8 billion annually, according to the report. But it found Switzerland also declared higher re-export prices for those same commodities and this difference was as high as $120 billion.

 Commodities such as copper will be recorded as destined for Switzerland but instead go to a Swiss-based trading house and onwards to, say, China. The Centre for Global Development study found that from 2007 to 2010, 99.8% of Zambia's exports to Switzerland - 27.7% of all its exports - were not recorded as entering Switzerland. For mineral-rich Burkina Faso, a west African gold producer, 100% of its exports to Switzerland over this period, accounting for 15% of all exports, also "vanished".

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