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Euro-African trade signifies changing relations

The London Economic | 5 Aug 2014

Euro-African trade signifies changing relations

By Stephen Angus Peter Junor

October represents a deadline for the various African blocs to negotiate and accept a free trade deal with the EU, a deal which has been on the table since Doha 2000. African relations with the EU are split into five blocs: West Africa, Central Africa, Eastern and Southern Africa (ESA), East African Community (EAC) and the Southern African Development Community (SADC).

As of now, West Africa and the SADC are the only two blocs to have effectively agreed to the Economic Partnership Agreement (EPA) while negotiations are still ongoing regarding the other three blocs. The European Commission has shown that West Africa is the largest trading partner to the EU out of the five blocs and contains the largest African economy, Nigeria. Whether or not the other blocs agree to the deal, there has been a paradigm shift towards using trade as a means of development, compared to an aid-based approach.

China has laid the foundations for this approach as official figures show that Chinese trade with Africa has increased 20-fold since 2000, surpassing $200 billion this year. This has coincided with a massive rise in total Chinese GDP and a growing geopolitical influence across the world. Indeed the influence of China may be a factor in the hesitancy of the other African blocs to accept the EPA.

The relationship between Europe and Africa has been a long, turbulent and fundamentally unequal one. From the initial scramble for Africa at the beginning of the last century where most of the continent was partitioned between the major European powers at the time, mostly Britain and France, to the more recent acceptance that aid reinforces power imbalances between the North and South which further entrenches the perception of inequality and reliance.

Martin Drewry (director of the NGO Health Poverty Action) in a recent Guardian article highlighted further imbalances from a UK perspective. He explained how poorly regulated multinational corporations using tax havens and giving aid in the form of unsustainable loans are further examples of how Africa loses out economically. Furthermore, he highlights that climate change adversely affects the developing world, through respective geographies, climates and less ability to adequately mitigate.

An increase in trade is designed to move beyond the inequalities and foster a more equal relationship but as we have seen with Sino-African trade and some of the stipulations within the EPA, it is questionable how equal this relationship is. The former governor of Nigeria’s central bank, Lamido Sanusi, expressed his dismay that China ‘takes’ primary goods such as metals and minerals while Africa receives manufactured goods that often have an adverse effect on local markets that cannot cope with an influx of cheaper goods.

Concerns over opening up markets too much has also prevented Nigeria from fully committing to agreeing to the EPA while the rest of the West African nations have. The Wilson Center commended African negotiators for reducing the extent of market liberalisation stipulated within the EPA but still expected about 80 per cent of African markets to be opened up to European goods and services. It recently appeared as if Nigeria’s worries had been eased but there is scepticism about how much progress has really been made. Zambia (ESA) echoed these worries with their Minister of Commerce suggesting that further regional integration and trade predominantly through value addition of raw materials would be a better strategy, thus protecting local markets and supporting African economies more than the EPA would. This form of South-South cooperation is growing, as represented by the BRICS themselves.

As South-South cooperation is increasing, it is challenging countries in the global North to rethink their relationship with the South. China in particular has a relatively advanced economy and can offer much of what Europe can. As China is still developing and can build a relationship on mutual experience it represents a more equal partner. With China offering so much, Europe has recognised that its relations with Africa need to change, which is signified by a shift towards increased trade.

The USA is now following the same path, with the three day US-Africa summit in Washington taking place from 4th to 6th August. It is expected that up to $1billion worth of business deals will be announced in addition to more peacekeeping support as well as the expansion of food and power initiatives. The President of the African Development Bank, Donald Kaberuka, welcomed the changing relationship, “there are still bits of aid needed here or there but fundamentally the relationship is now defined as one of trade, investment, growth and opportunities.” It comes as no surprise to see America taking this approach but with Europe gaining a foothold and China heavily involved in Africa there is a risk that competition could become too high as the world powers jostle for trade deals and partnerships.

Compared to the historical relationship that Europe has had with Africa, Africa is in a much stronger position now and from a geopolitical perspective Europe arguably needs the trade deals with Africa more than Africa does. This in itself shows that the relationship between Africa and Europe (and the rest of the world) has changed. The rise of developing countries is reworking power relations and this is reflected in Europe’s changing relationship with Africa. Whether the remaining three African blocs agree to the EPA may go some way to determining how influential Europe can be on the continent but the fundamentals of Euro-African relations are now more equal, reflecting Africa’s recent growth and burgeoning potential that will see Africa become an ever more important continent in the future.

 source: London Economic