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Infrastructure crucial for Africa’s trade development

Daily Monitor, Uganda

Infrastructure crucial for Africa’s trade development

By Samuel Kasirye

11 May 2011

On May 9, the European Community celebrated Europe Day as one of the symbols designed to foster unity among Europeans.

Indeed, the European Union (EU) has been a strong and committed partner of the developing world. However, as the EU marks Europe Day, relations with the African, Caribbean and Pacific (ACP) states continue to be tense due to the impasse in the Economic Partnership Agreement (EPAs) process.

The EU and the ACP countries have had a long standing economic relationship which is being restructured with reciprocal trade instruments known as the EPAs.

The key objectives of the EPAs is to serve development through promoting sustainable development, contributing to poverty eradication, enhancing the production, supply and trading capacity and fostering smooth and gradual integration of ACP countries into the world economy.

However, due to the impasse, many have raised the question of how an instrument that was conceived to foster economic development and enhance the partnership between the EU and the ACP/Africa risks turning into a liability in their strategic relations.

In the Daily Monitor supplement of May 9, highlighting the EU Day, one of the key aspects was Duty Free Quota Free (DFQF) market access the ACP States have enjoyed with the EU over the decades. However, despite DFQF market access and receiving preferences for more than 25 years, ACP exports have in general performed poorly and the share of ACP exports to the EU fell for example by more than a half, from 8 per cent in 1975 to 2.8 per cent in 2000.

Judging from the composition of aggregate ACP exports, trade preferences have also failed to promote diversification. The bulk of the ACP products exported to the EU comprised mainly of primary products (95 per cent) while manufactured goods accounted for a mere 3-4 per cent.

In any case, most of these primary products were restricted to one or two products from particular countries.

Market access in the EPA is not new to the ACP states since it has been enjoyed under earlier trading arrangements with the EU. The real challenge to the ACP states has been market entry factors. On the EU side, there have been increasing government Non Tariff Barrier regulations as well as a surge in individual private standards which are normally set up by large distribution chains including supermarkets.

The use of these systems under a legitimate cover may be used to gain competitive lead. Although it is still difficult to give an accurate estimate of trade impact due to the need to comply with different foreign technical entry regulations and standards, it certainly involves significant additional costs for producers and exporters.

On the other hand, one of the key contentious issues that have led to the impasse in the EPA negotiations has been the development aspect.

The expectation of the ACP states is that there would be additional funding that will be provided by the EU to address supply capacity constraints and other trade related infrastructure.

The ACP states face enormous infrastructure challenges ranging from inadequate road and rail network, erratic power supply, lack of appropriate standard and conformity related infrastructure, among others.

The ACP states are therefore demanding enough resources to have the means to undertake the required adjustment to face the challenges of a new trade relationship based on reciprocity with the EU.

It is therefore important that the EU and the ACP states work together to address some of the long-standing structural challenges ACP states face, especially trade facilitating infrastructure, so that such states can build competitiveness, industrialise and work towards eradicating poverty.

Mr Kasirye is a programme officer at the Southern and Eastern African Trade Information and Negotiations Institute