Algeria reduces Chinese imports after criticism from EU

Algeria’s trade numbers for 2018 reflect a renewed dependence on the European market.
Tuesday 31/07/2018
A view of the entrance of the commercial port of Algiers. (Reuters)
Faulty protectionism. A view of the entrance of the commercial port of Algiers. (Reuters)

TUNIS - Algeria reduced Chinese imports by 26.4% in the first six months of 2018 after criticism from the European Union over its trade priorities.

China remained Algeria’s leading import market from January through June, sending $3.4 billion worth of goods. However, Algeria significantly increased imports from European countries, taking in $6 billion more in imports from France, Italy and Spain, increases of 14.5%, 13.1% and 19.6%, respectively, government data state.

Algeria’s swing to European providers came as Algiers looks to trim imports and shore up depleting foreign currency reserves. That campaign began in 2016, when Algeria introduced a list of import restrictions, later expanded to include more than 800 products, most imported from the European Union.

While Algeria clamped down on European goods, it expanded trade ties with Asian countries, specifically China and South Korea. In 2017, China shipped $8.3 billion worth of goods to Algeria, while imports from France, Italy and Spain all fell at least 10%.

EU trade official Cecilia Malmstrom said at a recent parliamentary hearing that “Algeria is encouraging trade with China.”

“We must find solutions to this issue,” she warned. “Otherwise, we will resort to the clauses of the settlement of disputes.”

Spanish Trade Minister Maria Luisa Poncela told Algerian officials that Spain has a “problem when Algeria’s import cuts have an effect on our exports to Algeria.”

The Algerian government said it understood EU authorities’ concerns and that its measures were temporary to reduce imports and control foreign currency reserves.

Analysts said Algeria’s trade numbers for 2018 reflect a renewed dependence on the European market.

“Among the 15 most important trade partners of Algeria, all the European partners among them have seen their imports to Algeria increase during the first half of this year,” said Algerian economist Sadoune Hassan.

“The non-European partners, except Saudi Arabia and Turkey, saw sales to Algeria decline. That change came after the protests by senior officials in the European Union that followed Algeria’s import cuts.”

Algeria has had a trade agreement with the European Union since 2005 but Algerian officials have repeatedly said the deal hurt local manufacturing and agriculture.

EU officials said the deal could benefit Algeria by opening its goods up to the EU market if the country introduced business reforms.

Italy, France and Spain took in a combined $7.4 billion in imports from Algeria during the first half of 2018, while China took in $574 million, Algerian government data state.

Algeria cut its trade deficit by 48% for the first half of this year to $2.97 billion, compared to $5.66 billion during the same period last year.

Experts said the improved trade balance was due to higher oil and gas exports and rising oil prices and that government efforts to cut imports had not had a major effect.

Algeria’s total exports increased 12.5% to $19.83 billion for the first half of 2018, compared to $17.6 billion during the same period of 2017. Imports were down 2.1% to $22.78 billion, government figures show.

“This trend is likely to continue during the second half of this year to end the year with the value of imports at more than $45 billion versus $46 billion in 2017,” said Algerian economist Hassan Haddouche. “That sheds light on the limits of the government’s measures to cut imports.”

While imports have fallen marginally, the government’s plan to slash imports to $30 billion in 2018 will be difficult to reach, economists said.

Algerian economist Brahim Guendouzi said measures taken by Algiers to cut imports yielded a slim decline of the value of imports but a fall in foreign currency reserves, results less than authorities expected from a policy that angered Algeria’s trade partners.

“The reason is simple. Imports mirror the whole economic structure. The Algerian manufacturing industry accounts for 5% of gross domestic product but it absorbs three-quarters of the value of the total imports while it accounts for only 2% of exports," Guendouzi said.