By Eugene Jernigan
This year serves as an important milestone in the history of trade in Africa. For the first time, the World Trade Organisation’s Ministerial Conference will be held in Africa and, specifically in Kenya later in December.
After the end of the World War II, three powerful institutions were formed, namely the International Monetary Fund, the International Bank of Reconstruction and Development (now World Bank Group) and the International Trade Organisation.
In 1947, the ITO spearheaded the General Agreement on Trade and Tariffs (GATT) which, most African countries joined after gaining independence in the 1960’s, with the exception of South Africa and Zimbabwe which had joined as early as 1947.
In his message titled ‘The WTO at 20′, director general Roberto Azevêdo noted that “over the years, the WTO has helped to boost trade growth, resolve numerous trade disputes and support developing countries to integrate into the trading system….”
However, most African countries are asking hard questions: Has the multilateral trade negotiations made impact on African initiatives? Why are trade reforms at the WTO not changing the prospects of many Africans for the better? Why has trade boosted growth in many other developing countries, but minimal gains in Africa despite its resource endowment? Are the complex regional and bilateral trade agreements affecting gains at the multilateral trading system?
African countries have participated in numerous WTO ministerial trade talks – Bali, Hong Kong, Doha, Cancún, Seattle, Singapore and Geneva – for which they have little to show to populations living below the poverty line. Yet, trade is among key drivers of economic growth and development.
Interestingly, there have been ministerial declarations during the trade talks, which indicate that consensus has always been reached.
What goes wrong then, when the chicken return to the roost? Is it that African countries are concerned with the race to the bottom, closing their books until the next ministerial conference while other countries burn the midnight oil to improve economic growth? Do African countries engage in trade research or depend on that done by international organisations?
“All the participants (read WTO member states) must recognise that several items on the agenda require much more study concerning the economic, political and social implications of establishing new WTO rules pertaining to the matters they cover before serious negotiations are possible.” (Baldwin 2006)
On the other hand, African countries seem to face insurmountable supply side constraints – in that, any trade reforms discussed at the WTO ministerial conferences appear to fall in bottomless pits – and must thus be addressed.
The WTO multilateral negotiations are usually complex and tedious, requiring highly skilled expertise. However, African countries suffer chronic brain drain, with most of its trade experts working for international organisations and universities abroad. They therefore have little influence on lifting the multilateral trading system.
The United Nations Economic Commission for Africa in 2006 said this degenerates to “lack of capacity to conduct research on the impact of various proposals in the negotiations on their economies”.
Rightly, the Global Competitiveness Report 2014/15, showed most African economies are placed under the economic theory stage of development. In this stage, countries only compete on the factor endowments: unskilled labour and natural resources.
Furthermore, agriculture, the backbone of every African country’s economy, has been adversely affected through the schemes of domestic support programmes, export subsidies and export competition propelled by the developed countries in support of their agriculture sectors.
How can African countries succeed in trade negotiation reforms by asking for a level playing field? What will be the implication on the developed world ceding ground to African countries’ ambitions? Will the developed world likely yield to the new bargaining power in Africa? How will trade talks supersede the agenda of security and terrorism in most African legislative assemblies?
One of the contentious issues in multilateral talks is market access for agricultural and non-agricultural exports. There is no doubt that improved market access would see African exporters laughing all the way to the bank, so to speak.
However, African industries need to add value to most of the primary produce. Adding value includes, and is not limited to, packaging and labelling products, quality and standards, and safe, environmental-conscious products.
Firms in Africa nonetheless face high production costs due to poor social and physical infrastructure, including power shortages, lack of access to credit and skilled labour, among others.
African companies also face huge constraints imposed by tariffs. A paper presented by Mavel and Karingi (2012) at the African Economic Conference in Kigali Rwanda indicated that “Africa as a whole imposes relatively high tariffs to imports from the rest of the world (with an average applied protection of 13.6 per cent).
“However, the continent benefits from a relatively good access when exporting to its partners from outside the continent (facing an average protection equivalent to 2.5 per cent); thanks to preferential agreements such as: the various Generalised System of Preferences (GSP), the Everything But Arms (EBA) initiative, and the African Growth and Opportunity Act (AGOA).”
Therefore, for Africa to be successful in the multilateral trade talks, the developed world has to strongly recognise its aspirations, but at the same time, Africa clearly has a lot of research to do to assess the impact of trade negotiation proposals. It must also take actions in liberalising trade and stop depending on ‘fairness’ to every rule.
Eugene works at Consumer Unity and Trust Society, Africa Resource Centre in Nairobi
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