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International trade: Calling on African leaders

This Day (Lagos) - OPINION - May 2, 2006

International Trade: Calling On African Leaders

By Ken Ukaoha

At the creation of the General Agreement on Tariff and Trade (GATT) which later translated into the World Trade Organisation (WTO) in 1995, many thought that Africa was in for the much awaited sustainable development and poverty reduction. Unfortunately, observers and analysts have expressed shock and disappointment over the state of Africa and her poor despite their toiling and excruciating pains to wriggle out of poverty using the instrumentality of trade.

This disappointment has been traced to the fact that the development of international trade has allowed people in the northern hemisphere to consume tropical or out-of-season products, and for their businesses to produce at lower costs and become richer, while the developing countries, particularly, Africa, have suffered the negative impacts of being forced to open their markets.

They have almost themselves become traded commodities courtesy of liberalisation policy pushed by the World Trade Organisation and her Bretton Woods cohorts. Not only has African enterprises and people lost their food sovereignty (the ability to choose and produce their own food), production of commodities and processed products has been given up to the domineering muscle and intimidating prowess of foreign companies.

More so, most African countries lack a healthy network of SMEs while industrial production remains in limbo in most of the countries. Essentially, there are very few synergies between neighbouring countries, which instead of coming together often compete with one another even producing the same line of items.

No doubt, international trade can be a powerful tool for eliminating poverty, but the unfair laws that govern it has today made it almost impossible for accessibility to millions of people.

To this end, Africa’s share of world trade has remained at about a dismal percentage of (2%), and has not therefore been able to create more wealth or better distribution of wealth around the continent.

The most visible effect of this liberalisation or opening-up has often been the import of products at dumping prices from industrialised countries, rather than any increase in African exports. Essentially, this situation could worsen with the evolution of new trade agreements negotiations as seen today at the Economic Partnership Agreement (EPA) on-going between Africa, Caribbean and Pacific countries (ACPs) and the European Union.

But why is there a sudden contemporary shift to regionalism as opposed to the much over-blown globalisation represented by multilateralism? Can Africa begin to understand that there is a dynamic and concerted effort at balkanising the continent into segmented disciplines ostensibly towards realising the quest for poverty reduction?

Why is the European Union and the United States currently engaging themselves in a fight to possess Africa and her other developing friends at the multilateral level? There are clear indications even from recent happenings at the WTO that these erstwhile collaborators have shifted the battle field of ownership to regional trade environments with the introduction of regional trade agreements (RTAs).

Some Analysts have asserted that while one is flagging and demarcating her boundaries through the African Growth and Opportunity Act (AGOA), the other has introduced the Economic Partnership Agreement (EPA) through the resuscitation of the ghost of the Cotonou Agreement.

Perhaps again, the struggle could be unconnected with the drive to maintain colonial boundaries and respect. While one is an unsolicited gift to ’some boys that cannot export’ that are incapacitated in terms of ability to produce and sell, the other is a negotiation - ’competition’ between two ’unequal partners’.

None of these glorious fights has attempted to wink towards the truth that barring a few rare exceptions, African countries’ dependence on commodities has not abated; and the distribution of wealth, both globally and by continent, is increasingly unequal. In rural areas, hundreds of millions of people are still living on less than one dollar per day.

Specifically, on the Cotonou Agreement’s EPAs consisting of new WTO compatible trading arrangements, removing progressive barriers to trade between (the EU and ACP countries) based on regional integration initiatives of ACP states, thus putting an end to the unilateral trade preferences granted to ACP countries.

Some studies have alerted that EPA would also establish a trade regime that might be stricter than that of the WTO.

The establishment of free trade zones will expose Africa to devastating competition from the EU; losses in tax revenue linked to the opening up of ACP countries’ markets to EU exports will limit their financial capabilities. African countries will incur substantial adjustment costs in opening their markets to exports from the EU.

It should also be noted that although the new agreements mention the promotion of fair trade in exports from ACP countries to the EU (Article 23. G), they contain no measures for its implementation.

The EU’s approach on the EPA has severally received bashing from international organisations who have noted that the negotiations imperil the goal of fostering development in ACP countries, especially Africa.

Notable among these organisations is the United Kingdom’s Parliament which conducted a public hearing on the EPA in the presence of personalities involved in the negotiations (like Peter Mandelson - the EU Trade Commissioner) and in the end, rendered a strong and critical judgment that categorically declared that "the EU is approaching the EPA negotiations as if they were a game of poker".

This ought to provide a lesson for African leaders to shine their eyes within the process of the on going negotiations with a view to ensuring that the promises of poverty reduction and sustainable development through improved market access is achieved. Africa needs to appreciate the fact that there is ’no free lunch’ as far as trade negotiation is concern.

Trade is unfair, and nobody is therefore ready to freely give you what you do not negotiate for, and this brings to fore the issue of capacity building for African trade negotiators and the articulation of negotiating positions for the African region. Has the New Partnership for African Development (NEPAD) created provisions and goals in terms of trade and the appropriate strategies to realising such objectives?

The Fassa report in 1998 invited the European Commission to promote fair trade as an integral part of the European Union’s development policy, cooperation aid and trade policy and to put in place WTO compatible non-discriminatory mechanisms to support fair trade initiatives. In response, the Commission adopted the fair trade movement’s definition of fair trade and recognised the role played by this type of trade as a tool for development cooperation.

Fair trade apart from being part of the civil society consultation process in the EU development package is also part of the Cotonou Agreement Compendium. It is also one of the four areas for action identified by the European Commission in its Sustainable Trade Action Plan launched in July 2003, which has as its goal to promote sustainable development.

However, the lack of development style, the push and speed involved in the EPA negotiations seem to reduce every connotation of fairness and is therefore a sign that it is unlikely to produce equity and fairness as an outcome of an evolving trade agreement with Africa. There are already many technical and administrative protection barriers to the European market, European products’ entry into African countries remain to a large extent unrestricted. The foregoing must be taken into account in Africa’s trade negotiations especially given the fact that African producers are impeded by the difficulty of obtaining working capital and making investments that will allow them to escape conventional trade channels. They also lack of an ’institutional’ structure (either via an institution like ISO, or via the states themselves as for organic farming) for fair trade, which is at present mainly based on membership of associations.

The poverty of Research and Development, infrastructure deficiency, incoherency of trade and economic policies must first be addressed to build Africa’s capacity especially in terms of supply constraints before negotiations of any trade regional trade agreement.

Essentially, as African Leaders meet at Abuja to discuss the way forward for the continent, the primary issue of a harmonised trade policy that touches all facets of macro-economic sectors should form the spring board for benefiting from any regional trade agreement.

Africa does not need to be rushed into the deep and murky waters of trade agreements with the potential of being thrown back into the debt that has just been forgiven, and ultimately, not getting to the promised land of the Millennium Development Goals.

Ukaoha, President, National Association of Nigerian Traders (NANTS), wrote in from Abuja.