SA draws line in sand but can it take on emerging giants?
SOUTH AFRICA HAS drawn a line in the sand about what it expects from the United States and other developed nations in the Doha Round of world trade talks that are to be revived later this year. If the US and other developed nations don’t stop pushing for liberalisation in Africa while clinging to protectionism at home, South African Trade & Industry officials say this country will build bilateral trade relations with developing economies such as Brazil, India and China.
“We reject protectionism. We’ll embrace the global trading system as a way to steer the global economy out of the doldrums,” says Demetrios Marantis, new US deputy Trade Representative in Africa. Marantis adds the new Barack Obama-led administration is prepared to “roll up its sleeves” and review trading relations with Africa in a way that proves how the US can “co-operate globally”.
SA Minister of Trade & Industry Rob Davies is heartened by the apparent shift in US sentiment. But he reminds Marantis of what such a shift will require from the US, which stood to benefit far more than developing countries from the current deal on the table. “Inequities pop up in one Doha issue after another. Einstein said it: doing the same thing over and over again and expecting a different outcome is the definition of insanity.”
Davies goes further and pushes what’s been labelled a dissenting view on protectionism. He contends it’s “naïve” to argue developing countries should refrain from using the policy at hand to limit recessionary effects on their industries – especially when the developed world is doing it.
Davies says that if developing countries such as SA renounce the instruments at hand, thinking they’d somehow benefit, they’re wrong. “The world’s rules-based multilateral system does allow us some policy space to act counter-cyclically on a number of fronts.”
However, the key question is whether trade relations with the world’s major developing economies do indeed provide the kind of alternative African leaders are hoping for. If not, then using them as leverage in the soon to be revived Doha negotiations is a gamble that could backfire. The deal is worth around US$150bn to the beleaguered global economy, which is why there’s an air of desperation among developed countries who want access to developing markets.
The talks – which started in 2001 with the aim of allowing poor countries to prosper through world trade – came unstuck in July last year after India and the US clashed over the capacity of poor nations to raise tariffs and protect vulnerable industries when agricultural imports surged.
That’s precisely the point Davies intends pushing at the new talks in Geneva later this year. He’s warned that SA doesn’t want to be put in the “dog box” and unfairly accused of protectionism just because it intends examining tariffs on a case-by-case basis and then increasing or lowering them, depending on the evidence at hand.
That may sound a perfectly reasonable argument against blanket liberalisation. But does it make good economic sense?
The Trade and Law Centre for SA (Tralac) says dealing with the large and diversified economies of Brazil, China and India is going to be just like dealing with large diversified economies of the West. Tralac’s Colin McCarthy says the bottom line is that African economies need to diversify economic growth to escape their current “hub-andspoke trade patterns of exporting a limited range of primary commodities”.
“A South-South perspective propagates expanding trade with economies in the south as a growth engine. But can that have a real impact if note is taken of the fact that the larger, more industrialised economies of the south have a competitive advantage in precisely those goods that would be the prime candidates for export-orientated African industrialisation?”
McCarthy stresses that even if nominal wage levels are lower in Africa, productivity enters the equation in determining much lower levels of unit labour costs in India and China. That will severely encumber exports to those markets.
Sequenced liberalisation. Rob Davies Rejects protectionism. Demetrios Marantis