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Free trade is not what Africa needs, Mr Cameron

Guardian, England

Free trade is not what Africa needs, Mr Cameron

African prosperity relies on a wholesale rejection of the western free trade model, which is unlikely to be the view of David Cameron or the delegates he’s travelling with in Africa

By Nick Dearden

19 July 2011

On his trip to South Africa yesterday, David Cameron talked of the need to go beyond debt cancellation and aid "to make African free trade the common purpose of the continent". He lamented there has never once been "a march or a concert to call for … an African free trade area". He pointed to the need for more inter-African trade to facilitate the growth that would mean "businesses growing, new jobs on offer, families on the up, living standards transformed".

Cameron’s vision is far from "fresh", and is certainly not a radical extension of the anti-poverty agenda that led to a movement of millions of people calling for debt justice and the meeting of long overdue aid commitments. He repeats an orthodoxy that says the interests of the corporate delegates accompanying Cameron are the same as the interests of ordinary people across the African continent. Nearly three years into a global crisis caused by unbridled financial freedom, this orthodoxy should be consigned to the dustbin of history.

In 2003, Cameron would have been one of the MPs lobbied by 10,000 trade justice campaigners, while in 2005 he can hardly fail to remember the 250,000 people gathered in Edinburgh making the same demand. The debt and trade justice movements have never been simply arguments for more aid, but for a radical restructuring of the global economy and financial sector. They are all about enabling Africa to use its own resources for its own benefit – to genuinely enable countries to outgrow aid dependence.

The problem is that this agenda doesn’t fit with Cameron’s "free trade" ideology, or the interests of his delegation, which includes companies such as Barclays, G4S, Vodafone, Diageo and PricewaterhouseCoopers. So the premise of Cameron’s article is to make it appear that there is only one possible way forward – free trade – and all right-thinking people who care about poverty and inequality must support this agenda.

But trade on the wrong terms has been of no benefit to Africa – rather it has ripped open markets, destroyed infant industries, undermined control of food production, and exploited resources. It is the opposite of what Africa needs.

Multinational companies operating in Africa are nothing new. According to Global Financial Integrity, between 1970 and 2008, Africa lost $850bn to $1.8tn in "illicit financial outflows", most importantly forgone tax paid by corporations. Such a loss of capital led to the need for countries to borrow, in turn leading to a debt crisis during which capital poured out of the continent and into the coffers of rich countries.

Today, the debt of sub-Saharan Africa still stands at nearly $200bn. Aid now accounts for $47bn, though debt repayments still cost $18bn every year, while much of the aid itself comes in the form of new loans or is simply handed to western corporations working in the country concerned.

Cameron says economic growth "will lift tens of millions out of poverty in the long run" but, again, it depends what sort of growth. Growth in recent years, in an environment where corporations are increasingly free to go where they like when they like, has become ever less effective at fighting poverty, and has made the world much less equal. The New Economics Foundation has shown that in the 1990s, for every $100 worth of growth in the world’s income per person, just $0.60 contributed to reducing poverty for those living on less than a dollar a day.

Cameron is right that the idea of more inter-African trade is vitally important. But for years, inter-African trade has been discouraged by rich countries and a global trading system that uses Africa as a source of primary commodities for growth elsewhere. For example, European Union attempts to foist Economic Partnership Agreements on African countries give preferential access to European companies, thereby thwarting African attempts at integration. There are clear reasons why "for much of the continent it is easier to trade with Europe or America than it is to trade with a neighbour", and it has little to do with "red tape".

Africa has much to learn from South Korea, the model Cameron rather surprisingly raises. South Korea used a range of government interventions that are heretical in the free trade religion.

African prosperity relies on a wholesale rejection of the western "free trade" model. It means protecting industries, developing alternative and complementary means of trading, control of food production and banking, progressive tax structures, controlled use of savings, and strong regulation to ensure trade and investment really benefits people. This is unlikely to be the view of most of Cameron’s corporate partners – if it was we would never have needed to march for justice in the first place.