Trade between two un­equal part­ners

Africa and Europe search for an elu­sive agree­ment

Africa Renewal - - Contents - By Kings­ley Igho­bor

Sixty- one heads of gov­ern­ment and other top-level of­fi­cials from African and Euro­pean coun­tries con­verged last March in Brus­sels, the de facto Euro­pean Union cap­i­tal, to dis­cuss mu­tual re­la­tions. Af­ter two days of de­lib­er­a­tions, they is­sued a 63-point agree­ment laced with cus­tom­ary plat­i­tudes such as “We take par­tic­u­lar pride in the breadth and depth of our part­ner­ship” and “We are con­vinced that the growth of our two con­ti­nents will be mu­tu­ally ben­e­fi­cial.”

Al­though the lead­ers dis­cussed such is­sues as the on­go­ing fight­ing in the Cen­tral African Repub­lic, democ­racy, re­gional in­te­gra­tion, immigration, and devel­op­ment as­sis­tance, the ele­phant in the room was the flag­ging trade re­la­tions between Africa and Europe. South African Pres­i­dent Ja­cob Zuma, whose coun­try is one of the EU’s most im­por­tant trad­ing part­ners in Africa, did not at­tend the sum­mit, in sol­i­dar­ity with Zim­bab­wean Pres­i­dent Robert Mu­gabe, who re­fused to fly to Bel­gium be­cause his wife, Grace, was de­nied a visa. “I think that time must pass wherein we are looked at as sub­jects, we are told who must come and who must not come,” said Pres­i­dent Zuma. His boy­cott is one of many in­ci­dents in the seem­ingly end­less trade talks between Africa and Europe.

Euro­pean Com­mis­sion Pres­i­dent José Manuel Barosso re­it­er­ated Europe’s pref­er­ence for deal­ing with African coun­tries as equal part­ners, but in re­al­ity only South Africa, the con­ti­nent’s most so­phis­ti­cated econ­omy, could be con­sid­ered as such, says Christoph Has­sel­bach, ed­i­tor of Deutsche Welle, a Ger­man broad­cast­ing or­ga­ni­za­tion.

Trade agree­ment talks be­gan ac­tively in 2000 af­ter Europe and 79 coun­tries from Africa, the Caribbean and the Pacific (ACP) signed the Cotonou Agree­ment on trade, aid and po­lit­i­cal re­la­tions. That agree­ment stip­u­lated that Economic Part­ner­ship Agree­ments ( EPAs) had to be signed by 2008. But while the EPAs re­quire both sides to lower tar­iffs on im­ports and ex­ports, the ne­go­tia­tors can­not agree on the terms. Nev­er­the­less, 14 coun­tries have ac­cepted in­terim EPAs, with Mau­ri­tius, Mada­gas­car, the Sey­chelles and Zim­babwe the first to do so. In­terim EPAs per­mit coun­tries to ex­port to the EU mar­ket duty-free while grad­u­ally al­low­ing EU im­ports over 15 to 25 years. For ex­am­ple, Mau­ri­tius agreed to open its mar­ket to EU prod­ucts over a 15-year pe­riod. To pro­tect lo­cal in­dus­tries, EPA sig­na­to­ries can ex­clude cer­tain prod­ucts. For in­stance, Mada­gas­car ex­cludes EU ex­ports of meat, to­bacco, sugar, chem­i­cals and other prod­ucts.

Be­fore the Cotonou Agree­ment was the 1975 Lomé Con­ven­tion, un­der which the EU granted “non-re­cip­ro­cal” trade pref­er­ences to ACP coun­tries for the ex­port of agri­cul­tural and min­eral ma­te­ri­als duty-free to Europe. Now the EU wants th­ese agree­ments to be re­placed with the EPAs, which are “re­cip­ro­cal” in­stead of the Lomé Con­ven­tion’s “non-re­cip­ro­cal” trade pref­er­ences, so that ACP coun­tries can equally open their mar­kets to EU ex­ports. But Africa is in no hurry to lib­er­al­ize its mar­kets.

Bone of con­tention

“African coun­tries typ­i­cally have quite high pro­tec­tion, so lib­er­al­iz­ing in favour of Europe would hand Europe a terms

of trade gain,” writes Paul Col­lier, the direc­tor of the Cen­tre for the Study of African Eco­nom­ics at Ox­ford Univer­sity, United King­dom. Africa is not em­brac­ing the EPAs be­cause of fears that big­ger EU com­pa­nies could flood the con­ti­nent with cheaper prod­ucts, de­stroy­ing nascent lo­cal in­dus­tries. Also, cut­ting tar­iffs will lower gov­ern­ment rev­enues that Africa needs to in­vest in ar­eas in­clud­ing agri­cul­ture, health and ed­u­ca­tion.

James Asare-Ad­jei, the pres­i­dent of the As­so­ci­a­tion of Ghana In­dus­tries, says that Ghana re­lies heav­ily on tar­iff rev­enues to fund devel­op­ment, and that with an EPA, the coun­try could lose up to $300 mil­lion per year in rev­enues. Aliyu Modibo Umar, a for­mer Nige­rian com­merce min­is­ter, says, “If 30 years of non-re­cip­ro­cal free mar­ket ac­cess into the EU did not im­prove the economic sit­u­a­tion of the ACP, how can a re­cip­ro­cal trad­ing ar­range­ment achieve any­thing bet­ter?” Bingu wa Mutharika, the late Malaw­ian pres­i­dent, once dis­missed the EPAs as “a di­vide-and-rule tac­tic be­ing ad­vanced by Europe for self­ish in­ter­ests.”

The EU ad­mits that the EPAs will cre­ate more jobs in Europe. But it also notes that Africa stands to ben­e­fit from im­proved economic sta­bil­ity, train­ing op­por­tu­ni­ties and knowl­edge trans­fer, and higher ex­port sales. It states on its web­site, “For over 30 years, ex­ports from ACP coun­tries were given gen­er­ous ac­cess to the Euro­pean mar­ket. Pref­er­en­tial ac­cess failed to boost lo­cal economies and stim­u­late growth.”

But pro­vi­sional im­ple­men­ta­tion is al­lowed

The EU is also pro­mot­ing the World Trade Or­ga­ni­za­tion’s Trade Fa­cil­i­ta­tion ( TF) agree­ment, reached in Bali, In­done­sia, last year. Trade fa­cil­i­ta­tion fo­cuses on low­er­ing the cost of do­ing busi­ness by min­i­miz­ing reg­u­la­tions and pro­ce­dures required to move goods and ser­vices across bor­ders. The Bali TF agree­ment—an off­shoot of the in­con­clu­sive 2001 Doha Round of talks— urges coun­tries to adopt fast and ef­fi­cient cus­toms pro­ce­dures.

Africa is not con­vinced of the pur­ported ben­e­fits of the TF agree­ment. The con­ti­nent’s trade min­is­ters have agreed to im­ple­ment the TF agree­ment pro­vi­sion­ally, which is al­lowed by a clause in the Bali deal. But the EU would pre­fer a full—not ten­ta­tive—im­ple­men­ta­tion and is de­ter­mined to twist arms to have its way.

EU trade ne­go­tia­tors who were in Mal­abo, Equa­to­rial Guinea, dur­ing the African Union (AU) sum­mit in June mounted pres­sure on African lead­ers to change their stance. An AU of­fi­cial was quoted as call­ing their ap­proach “an un­prece­dented power game rarely wit­nessed at an African heads of na­tions meet­ing.” An­gered by such arm-twist­ing, Nige­ria, Africa’s big­gest econ­omy, and Mau­ri­tius, one of its fastest-grow­ing economies, an­nounced they might re­nege on their pro­vi­sional ac­cep­tance of the TF agree­ment.

But Africa may not hold the line for long, fac­ing both EU threats to cut off aid and the US’s warn­ing that it could al­low the ex­pi­ra­tion of the Africa Growth and Op­por­tu­nity Act (AGOA), a US law en­acted in 2000 un­der which Africa can ex­port cer­tain goods to the US duty-free. Un­less re­newed, AGOA ex­pires in 2015.

Cracks in Africa’s po­si­tion

The WTO is also push­ing for to­tal im­ple­men­ta­tion of the TF agree­ment. Direc­tor-Gen­eral Roberto Azevêdo has warned that pro­vi­sional im­ple­men­ta­tion could mean less devel­op­ment aid. “All of the Bali de­ci­sions—ev­ery sin­gle one of them—would be com­pro­mised.” And An­ge­los Pan­gratis, the EU en­voy to the WTO, says, “The cred­i­bil­ity of the ne­go­ti­at­ing func­tion of this or­ga­ni­za­tion [WTO] is once again at stake.” But Nel­son Ndi­rangu, direc­tor for eco­nom­ics and ex­ter­nal trade in the Kenyan for­eign min­istry, ques­tions why the EU op­poses Africa’s pro­posal “to im­ple­ment the trade fa­cil­i­ta­tion agree­ment on a pro­vi­sional ba­sis” as al­lowed un­der the Doha Dec­la­ra­tion, adding, “Clearly there are dou­ble stan­dards.”

At the end of the Mal­abo sum­mit, di­vi­sions ap­peared in Africa’s po­si­tion. “We never said we will not im­ple­ment the TF agree­ment, but we don’t know how to im­ple­ment this agree­ment,” says Mr. Ndi­rangu, bounc­ing the ball back to EU’s court. But South Africa, Uganda, Tan­za­nia and Zim­babwe have urged Africa to im­ple­ment the TF agree­ment only af­ter Europe demon­strates its com­mit­ment to pro­vid­ing devel­op­ment aid through ac­tion, not just words. The snag is, un­der the Bali TF agree­ment, a com­mit­ment to pro­vide aid is not bind­ing.

Asia’s trade surge

Africa’s grow­ing trade with Asia, es­pe­cially China, is of con­cern to Europe, says Mr. Has­sel­bach. Africa’s share of global trade has in­creased steadily, from $277 bil­lion (2.3%) in 2001 to about $1 tril­lion (4.6%) in 2011, ac­cord­ing to the UN Con­fer­ence on Trade and Devel­op­ment. While Europe is still Africa’s largest trad­ing part­ner, Africa’s trade with Asia grew by 22% dur­ing that time, while trade with Europe grew by only 15%. In ad­di­tion, Europe’s con­tri­bu­tion to Africa’s man­u­fac­tured im­ports de­clined from 32% in 2002 to 23% in 2011, while Asia’s share in­creased from 13% to 22% dur­ing the same pe­riod.

Some African trade ex­perts have said that fears sur­round­ing the TF agree­ment may be ex­ag­ger­ated. Pa­trick Kany­imbo and Calvin Man­duna, trade ex­perts with the African Devel­op­ment Bank, ar­gue that a TF agree­ment will im­prove bur­den­some bor­der op­er­a­tions and com­ple­ment “a lot of the in­fra­struc­ture in­vest­ments that are be­ing un­der­taken across the con­ti­nent, par­tic­u­larly in the trans­port sec­tor.”

More twists and turns are likely to take place in EU-Africa trade re­la­tions be­fore 2015, when TF agree­ment im­ple­men­ta­tion should com­mence. Big economies like Nige­ria and South Africa are talk­ing tough, but oth­ers are more cir­cum­spect. Rashid Pelpuo, Ghana’s min­is­ter of state for public-pri­vate part­ner­ships, warns that trade agree­ments are always tied to “aid, tech­ni­cal and po­lit­i­cal as­sis­tance… It will be too costly not to sign.” Only time will tell if—or when—Africa will ac­cept the trade deals.

Euro­pean Ex­ter­nal Ac­tion Ser­vice

Par­tic­i­pants at a min­is­te­rial meet­ing on the mar­gins of the EU-Africa Sum­mit in Brus­sels.

African Union Com­mis­sion

African lead­ers at the AU Sum­mit in Mal­abo, Equa­to­rial Guinea.

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