bilaterals.org | EPA or development? Your choice

Afrique Echos | 21 March 2008

EPA or development? Your choice

Mamadou Ly *

The European Union is proposing to Africa (and not to the African Union — the distinction is important), and other ACP countries, a final transition from the preferential trade agreements of yesteryear (Yaoundé, Lomé I, II, III , IV, IVa and Cotonou) to "fair" free trade agreements that would put the EU on the same pedastal as Africa and which would be fully applied, according to the EU, within twenty years.

The EPA, or "Economic Partnership Agreement", is nothing more than another fool’s bargain that will push Africa deeper into a bottomless pit — a pit which, I must say, describes the very nature of Africa. Let me explain, as simply as possible.

The European Union has confined itself to implementing a globalising plan and to pushing this scheme onto an entire continent, a continent that stands out for its diversity and its economic realities if you look at its composition. The EPA’s primary mission is to reinforce Africa as Europe’s privileged and exclusive partner, while denying it of its own rightful ambition to achieve some hypothetical industrialisation in twenty, fifty or a hundred years.

What is it about?

The deception begins where the EU supports the rules of the WTO (World Trade Organisation) through the "Cotonou Agreement" (2000) with a major twist: the removal of exemptions provided by the WTO to least developed countries (LDCs) if they did not sign free trade agreements. Through the EPAs, the EU presses the nail where the WTO has denied Europe significant concessions, namely:

– Competition shaped by the typical model of the Treaty of the European constitution. How can you, without laughing, talk about fair competition between two people whose individual GDP is respectively 22,600 Euro for the European (who is at once a manufacturer, a supplier of high value-added services and a high-tech subsidised farmer who, moreover, lives almost twice as long as an African) and 424 Euro for the African (who manufactures almost nothing, produces only rudimentary services and farms at a subsistence level in the hope of living barely fifty years)? If you understand this, you can see the balance of power that is exacerbated by this inherently unbalanced — indeed, dishonest — relationship.

– Government procurement systems where the European Union seeks equal treatment between local and foreign companies as if African companies would, overnight, be able to service EU countries when we know that even new members of the EU struggle to do so themselves, and

– The deregulation of investment which will prevent Africa from freely choosing among Chinese, Indian, Brazilian, Malaysian, American or even other investors who operate in its immediate vicinity.

It should be noted that in recent years, non-European investors who are interested in Africa provide for more favourable conditions than the Europeans. The total aid that the EU allocates to the seventy-seven (77) ACP countries amounted to 13.5 billion Euros between 2000 and 2007. On average, it is roughly 20 million Euros per country per year, while Cote d’Ivoire alone collects tax revenues from declining import tariff on products from the EU in the order of, on average, more than one billion Euros per year.

What’s at stake and its magnitude.

The principle of free trade renders the idea of "agreements" impertinent as most so-called emerging nations today have taken off outside the frame of any EC-ACP or EU-ACP Agreement. I think especially of the Chinese, Indians, Brazilians, Malaysians, Singaporeans and Pakistanis. Looking back at the series of shocks — including fiscal, agricultural, industrial and balance of payments shocks — that African countries have been through speaks for itself.

The Yaoundé Agreement (1963), even if it was justified because of the precariousness of African countries’ new independence, was devastating in terms of its systematic looting of raw materials from African states, including Madagascar, and especially its promotion of financial and technical cooperation that siphoned off considerable resources to Europe without supporting the development of Africa’s economic and social infrastructures that it so pompously promised. Ever since Yaoundé, it was understood that the articulation of any trade agreement based on non-reciprocal tariff preferences for African states would not be of much use anyway, since African products were essential to European industries with or without an agreement. That basic reality is still valid.

The Lomé Agreement (1975) stood out for two pillars, "partnership" and "solidarity", where Africa lost on both counts. The partnership produced nothing of consequence for Africa’s industrial growth (we forget too often that the primary objective for an underdeveloped country is to overcome its deficit in industrial production and transform the needs of its people). And solidarity did not lead to much since the continent’s debt reached its incredible peaks during those decades.

Lomé I was dedicated to the establishment of an "export stabilisation" mechanism, the famous "Stabex", which was supposedly intended to stabilise the deteriorating terms of trade due to the price of raw materials on world markets — which, ironically, means European markets for almost all ACP countries.

Lomé II (1979) brought us the "sysmin," another mechanism like the "Stabex" but this time tailoured to mining products, and an expansion of the club with 58 more countries in need of aid.

Lomé III, IV, IVa (1984-1995) were drenched in neoliberalism, so dear to globalisation, and brought us further into compliance with structural adjustment programmes (SAPs, a domain traditionally reserved for the IMF), support for the private sector development (traditionally the flowerbed of the International Finance Corporation, a subsidiary of the World Bank) and...respect for human rights (a task of the United Nations System).

Throughout the Lomé period, the EU gradually replaced the international community even though the EU has neither the mandate, nor the scale, and much less the legitimacy, to impose itself on Africans. For its part, Africa can be faulted for its amateurism and naiveté, if not its pure fear of economic sanctions that would have worsened its fate too much. The Cotonou Agreement (2000) imposed the rules of the WTO with one major nuance: the EU removed the very exemptions that the WTO provides to least developed countries (40 countries out of the 77) that are not signatories to free trade agreements. Goodbye non-reciprocal tariff preferences, Stabex and sysmin. Where the shoe pinches even more is that the EU imposed a division of ACP countries into zones with which it could negotiate separate free trade agreement on a regional level that Europe "accounts for" to the WTO wearing three hats at the same time:

1. Replacing the IMF, the EU takes the commitment to provide support to the ACP countries’ Structural Adjustment Programmes (SAPs). The EU does not say, however, to what extent and for how long.

2. Substituting for the UN system, the EU swears to provide the support for social dialogue.

3. And finally, replacing the regional integration organisations such as ECOWAS and others, the EU promises to stimulate and promote regional integration of zones created for the purpose of the partnership agreements, which is neither its role nor to its benefit.

Let’s be serious!

Africa has neither the means to survive competition on an equal footing with the EU, nor the ability to access the government procurement markets of Europe if it opened its own markets, much less the means to invest in Europe at the expense of its own deregulation and liberalisation. Africa only has raw materials to sell — commodities whose prices and market mechanisms are determined outside the continent, and against Africa’s interests, since the dawn of time.

Africa, in its current economic configuration, would benefit on all accounts from opening up more to world markets if it rigourously defended its interests without sentimentality. Raw materials would command a better price because the demand for them is not restricted to any geographic area, certainly not the EU. We must abandon the logic of the assistanceship. No emerging economy has had any right to this. That tells us a lot.

Conclusion

The EPA will be disastrous for Africa. Its acceptance would amount to locking the continent into some kind of economic vacuum where its manouevring space would be drastically limited because of the exclusivity of such a deal and especially since the evidence shows that no country in the world has taken off with such bogus and demeaning arrangements. Africans must work together as one and say no to an agreement that will accomplish nothing positive. The right to dispose of one’s self should guide any state confronting this kind of unspoken hold-up.

Africa must ignore the threats of sanctions or economic retaliation from the EU if only because we know that Africa’s raw materials are essential to Europe and the rest of the world. If the EU turns away from the African market — a quasi-utopian idea — Africa will take off and grow at a pace that will surprise humanity.

To give in to the EPA is to deny oneself something that Europe never would have denied itself, namely the freedom to be open to the world without exception, the constant search to advance one’s own economic, social and cultural interests, in a world that is becoming increasingly smaller in geography and ever larger through the tentacles of globalisation. The time of "spheres of influence" is behind us. We must take our distance on partners who have brought us nothing for several centuries and build our own responsibility for the destiny of Africa.

The business world has no counterpart to the colonial sentimentality of times past. As a competitor with Europe, Africa has no interest in adopting agreements in a free world. It should review its demeaning practices and arm itself with international standards of good governance, respect for human rights, the refinement of its financial orthodoxy and the cleansing of its aspirations through notions of work, seriousness of undertaking, the recognition of its strengths long hidden from itself, including by others, and finally overcome its inability to emulate the many examples of self-reliant development following one’s own economic spine: grey matter and raw materials. China, India and Malaysia have already succeeded. Brazil, Pakistan and other emerging countries are going to succeed.

The mission of any country, especially a developing country, is not to export raw materials to other lands, but rather to turn them into something at home, meet one’s own local consumption needs and then, ultimately, export the surplus of its finished products to the most interesting world markets, without fuss.

The WTO is the global framework to regulate trade and world markets. Africa should accept that no other grouping, be it the EU, takes the place of this global framework to come and propose some market of fools through the back door. The WTO must therefore call the EU’s attention to the illegality and indecency of its actions against small nations which may not have enough calibre to be listened to. We must escape the complicity of economic oppression imposed on the African continent through concerted action of collective denial and refusal to negotiate.

Finally, Africa, for once, must accept the sacrifice of seeing the European market "close" on it instead of refusing to sacrifice its future generations against a supposed European aid for which it has no need. Closing the European market to Africa is also about opening other, possibly more interesting, markets. Africa needs competitiveness, competition, openness of its markets to more promising horizons and its ability to focus its commercial choices without restrictions in a rapidly changing world.

More than ever, the time is now to challenge the letter and the spirit of any form of EU-ACP agreement and turn to the global framework that is the WTO for global harmonisation, without any preferences. This responsibility lies with our leaders but also with our intellectuals and with all of our people who we need to educate, train, care for and make vectors of the development of a healthy new Africa.

The question is not whether the proposed agreement is fair or to call for a revised EPA-type of agreement but rather to completely change direction by refusing any form of trade agreement outside the WTO.

But for this, we must be courageous. It is above all a question of political will, a rare commodity among us. Let’s face it, nobody will defend the survival of Africa in place of Africans themselves. The high cost of living suffered by our families today will become endemic if Africa does not reposition itself strategically in the global trade landscape. A simple analogy: in a public market, sellers and buyers make no preliminary agreement outside the rules of supply and demand. The exclusivity of "agreements" explains all the misery lived by our people today. Always sell to the highest bidder and buy from whoever provides a better value for money. This is not sentimentality, this is business!

* Mamadou Ly, Director-General, Lyscale Riskgrade & Lybrosis Capital Bank, London, United Kingdom