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SPEECH/00/231
Speech by Pascal Lamy
European Commissioner for Trade
The challenge of integrating Africa into
the World Economy
South Africa Institute for International Affairs
Johannesburg, 21 June 2000
Introduction
We all know that statistics are notoriously easy to use to support one’s case and we
all make liberal use of them. However, when it comes to assessing the progress
made in integrating Africa into the world economy, whichever way you look at them,
the figures show that that progress has been disappointing to say the least. Whilst
world production has more than quadrupled and global trade has risen seventeenfold since the 1950s, developing countries performances have been a model of
inconsistency where splendid successes stand side-by-side with stark failures:
where South East Asia and China have recorded an annual increase of GDP per
head of more than 5% in the 30 years to 1996, Sub-Saharan Africa has suffered a
sharp deterioration in living standards, it’s share of world trade, shrinking from 3% in
1950 is less than 1% today. Although statistics should always be viewed with a dose
of healthy scepticism, we cannot get away from the fact that most African countries
have if anything been further marginalised than integrated in the world economy.
What should we read into this reality?
The lesson is clear and unambiguous. The inescapable fact is that a large part of
the African continent has failed or been unable to take advantage of the
unprecedented wave of technological innovation to sweep the rest of the world after
the Second World War. Freer trade and increased FDI coupled with short term
capital flows have had what can at best be described as a marginal impact on
global development in the region. Miracles do happen but even King Midas would
have had trouble conjuring them up in Sub-Saharan Africa with no more than 4% of
the world’s annual FDI flows to all developing countries to work with.
I am convinced that the process of globalisation and, more specifically trade
liberalisation, if correctly employed can and will be good for development if and this
is an important if, these forces are harnessed correctly. If I didn’t believe in this and
if I weren’t personally committed to contributing to this challenge, I not I would not
have taken on my current job. But freer trade which I will come back to later, is only
part of the development equation.
As the saying goes “charity begins at home”. Well, the same holds true for
development where the elaboration and implementation of sound domestic policies
are essential to its success.
The need for adequate domestic policies.
So why have only a few African countries derived significant benefits in terms of
higher growth rates and reduced levels of poverty from pursuing greater integration
with the global economy, whilst many others have been left behind?
Clues to explaining this lie in an examination of Africa’s success stories. These are
countries that have been much more successful in creating an incentive structure
that encourages investment in human and physical capital. This is key because the
accumulation of human and physical capital is what drives economic growth.
Countries with unstable, unpredictable and inconsistent policy frameworks will find it
difficult to create an incentive structure which rewards growth-enhancing behaviour
by their citizens.
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To create such a structure, a multi-faceted approach is required which
encompasses appropriate macroeconomic policies, a commitment to wide-ranging
structural reforms, a credible legal system, an adequate social framework,
improvements in the quality of governance and, above all, political and social
stability in order to prevent or solve conflicts.
If the process of reform is to be sustained over a sufficiently long time horizon to
generate visible results, it is essential that the stakeholders in the process should go
beyond governments to include civil society and here I refer to both NGOs and
economic operators. I am here today in a country which is fortunate to have both a
stable government and probably the continent’s most vibrant civil society. South
Africa stands as an example that the rest of the region can look to for inspiration.
With the foundations a solid domestic framework provides in place, an international
dimension can be added to contribute to development and to successfully
integrating African countries into the world economy. On the one hand, this
dimension involves the definition and implementation of international rules that fully
take into account the specific needs of your continent. On the other, it involves
strengthening the regional integration process.
An international support framework for development
To be successful, an appropriate policy framework at the domestic African level
must also be buttressed by multilateral rules and supporting actions with coherence
from key international actors. The capacity of the multilateral system to
appropriately address and take into account the specific economic and social
capacities and constraints of African countries and, in particular, of the least
developed among them is an element of crucial importance.
In this context, the European Union has proposed some priorities in the WTO
framework, which relate to the concerns of Africa, which has the highest
concentration of least-developed countries in the world:
 To improve market access for least-developed countries with a view to provide
them with duty-free access for essentially all products;
 To make special and differential treatment more operational to effectively meet
African countries’ needs, having regard to the specificity of each WTO
agreement or decision;
 To address the concerns of African countries on the implementation of WTO
agreements in a way that will genuinely help their efforts at full and faithful
implementation of these agreements;
 To ensure that future multilateral negotiations in new areas support and make a
contribution to the African development processes, ensuring that the
development dimension is at the centre of negotiations in such new areas and
that liberalisation be carried out in a sustainable fashion; and
 To enhance capacity building and support participation of the African countries in
the multilateral negotiations.
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Regional integration as a stepping stone to integration into the
multilateral trading system.
This support at the international level, must be complemented by actions at the
regional level. For the weaker African economies, it is often very difficult to follow
and understand what are the realities of the global economy, how domestic laws
have to be reviewed in order to compete with other nations on an equal footing, and
what are the areas where world growth would be the most beneficial for the welfare
of the populations.
Recent advances in regional integration in Africa are a clear indication that most
African countries have themselves decided to anchor their integration into the world
economy through regional economic integration.
Regional economic integration will increase the stability of economic policy and the
legal framework, provide a multiplier effect on growth and should be complementary
to multilateral trade liberalisation. In the case of many African countries, it can be a
stepping stone in preparing for their integration into the world economy.
Regional integration makes both economic and political sense, providing economies
of scale, a more powerful voice in the international arena and playing an important
role in the prevention of armed conflicts which have for so long plagued Africa and
held back its development. Again, the role played by South Africa as a leading
regional player in SACU and SADC is essential in encouraging further integration in
the African continent.
The EU has been traditionally supportive of regional economic integration initiatives
in Africa that are coherent with national economic reform programmes and open
towards the world market keeping tariffs and non-tariff barriers at a level that guards
against trade diversion. This support is concentrated in four main areas: capacity
building, assistance to the private sector, balance of payments support and
assistance to regional trading agreements among African countries.
This continued support will be confirmed this coming Friday in Kotonu where the EU
and its ACP partners will be signing a new Agreement which will serve as a
framework for their future economic and trade relations, building, where
appropriate, on regional integration initiatives among ACP countries and in full
coherence with them.
Both parties have agreed to conclude WTO compatible trading arrangements,
removing progressively barriers to trade between them and enhancing co-operation
in all areas relevant to trade. These agreements will be introduced gradually and
therefore a preparatory period is necessary in order to facilitate the transition.
During this preparatory period, measures to enhance competitiveness, to develop
capacity building in the public and private sectors of the ACP countries, to
strengthen their legal system and, where appropriate, to give assistance to
budgetary adjustment and fiscal reform will be promoted.
It is important to underline that, in the framework of these trade arrangements,
liberalisation will be done according to the ACP countries’ own economic and social
constraints. The approach followed by the EU in its trade relations with South Africa
concerning asymmetry, differentiation and flexibility principles offers an example
that could be emulated.
These trade agreements will contribute to the consolidation of the ACP States trade
policy, making them more predictable, transparent and reliable. They will also
represent an important contribution to the consolidation of the regional integration
processes thus preparing the ACP for their full participation in a liberalised world
economy.
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I cannot conclude my remarks without underlining the crucial role to be played by
South Africa if this continent is finally to integrate itself fully in the world economy in
fostering the development of Africa.
A plea for join EU-South Africa co-operation.
The EU places a great deal of faith in South Africa, a country which has already
greatly contributed to peace and stability in the Southern African region and beyond.
I note with satisfaction that we have entered a new and promising era in our
relationship with the entry into force of the Trade Development and Co-operation
Agreement which will undoubtedly reinforce and expand our political and economic
co-operation.
As Europe’s Commissioner for Trade, I am personally committed to ensuring that
the Free Trade Agreement framework which is now up and running is correctly
implemented and that the enormous potential for further expanding our bilateral
trading relationship is fully realised.
In taking up the challenge of working with South Africa to integrate Africa fully into
the world economy, I know I can count on the support of my influential friend Alec
Erwin with whom I have struck up a good rapport in the short time we have worked
together.
I am sure that closer links between South Africa and Europe will benefit also to the
region and the whole African continent. Let us make our economic, trade and
political co-operation a model for other African countries to follow and emulate. Let
us engage in an open, friendly dialogue with a view to better understand and
respect each other positions and concerns. We have a common responsibility in the
future of Africa. Together I am confident that we can discharge it successfully to the
benefit of Africa, Europe and the world at large.
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