Download Evolution Of Trade Policies In Sub-Saharan African Countries Since

EVOLUTION OF TRADE POLICIES IN SUBSAHARAN AFRICAN COUNTRIES SINCE THE 1990S
IN THE CONTEXT OF VARIOUS BILATERAL
REGIONAL
AND
MULTILATERAL
TRADE
NEGOTIATIONS AND AGREEMENTS
Ambassador Nathan Irumba
Executive Director
SEATINI
[email protected]
STRUCTURE
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Introduction
SAPs and their Impact on Trade Policies
Regional Trading Arrangements
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Lagos Plan of Action
Abuja Treaty
Regional Integration
Building Blocs
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Bilateral Trading Arrangements
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European Union
AGOA
EPAs
Emerging Countries
• China
• India
• Brazil
Multilateral Trading Arrangements
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COMESA,
EAC,
SADC ETC
Challenges of WTO/Uruguay Round
Uruguay Round Agreement and its Implications for policy Space
S&DT
Doha Round:
• Objectives of Africa
• Other Global Organisations
Conclusion
INTRODUCTION
AFRICA IN WORLD TRADE
• Trade Policies – Now widely acknowledged that trade policy is one
of the main drivers of growth and development.
• African Economies substantially exposed through trade to the
global economy yet remain marginalized. On average exports and
imports account for a sizeable part of each African country’s GDP
(By Oyejide 1995).
• Despite recent Growth Of Exports, Africa’s Share in global
exports is very small. It declined from about 3.2% 1985 – 2.3% in
1990 and to 1.5% in 1995 (ECA and Africa Accelerating a
continent’s Development pg18 ).
• A composition of African exports remain dominated by Primary
commodities mainly Agriculture which makes Africa’s export earning
capacity highly sensitive price fluctuations.
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The Blair Commission notes that Africa will fail to achieve sustainable
growth and poverty reduction and the MDGs unless it increases its
diminishing share of World Trade.
The drive to Arrest and Reverse the Marginalization of Africa in World
Trade and in the global economy has been the main objective of SSA
countries in their domestic, bilateral and multilateral trade policies.
STRUCTURAL ADJUSTMENT POLICIES (SAPS)
AND THEIR IMPACT ON TRADE POLICIES
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Since early 1980s, Sub-Sahara African Countries have
been undertaking SAPs under the auspices of IMF
and World Bank.
These policies and the experience there under have
done a lot to shape African policies at various levels.
The SAPs have gone through at least three broad
phases which can be identified as:
(1) First, The stabilization phase from 1980 - mid 1980s, focusing
primarily on restoring macroeconomic balances and eliminating
the balance-of-payments and fiscal deficits
(2) Second, Running from mid 1980s to early 1990s, focusing on
Adjustment with growth. It added on supply measures to
demand management which aimed at re-aligning the incentive
structure in favour of tradables.
(3) The Third Phase was intended to address the cost of
adjustment and the unequal sharing of the adjustment burden
and therefore included special strategies for poverty alleviation
and concern for capacity building and governance.
SAPs AND THEIR IMPACT ON TRADE
POLICIES Cont…
• Trade and Trade policy were important
elements of three phases above
• In view of the World Bank (1994), most African
economies had followed an inward oriented
imports substitution strategy supplemented
by use of tariff and Non Tariff barriers to reduce
external competition mainly in manufacturing
and they viewed this protection as unfortunate.
• Accordingly, in the prescription in SAPs
development strategy framework, an outward
oriented trade regime in which tariff and Non
tariff barriers against import were liberalized and
an export bias eliminated took pride of place.
SAPs AND THEIR IMPACT ON TRADE
POLICIES Cont…
• Before the SAPs were introduced, Africa like other
developing countries had pursued policies for imports
substitution industrialization policy which were also being
protected by tariffs and other measures. The state was also a
major player in the economy.
• The impact of SAPs was to dismantle these policies with a
view of having an outward oriented free market driven
economy where the state plays only a minimal role.
• The dismantling of these policies has adversely affected
Africa’s industrial strategy and has resulted in deindustrialization with the collapse of a number of industries
with attendant unemployment.
• This is the backdrop against which SSA has been
participating in bilateral, regional and multilateral
negotiations.
REGIONAL TRADING ARRANGEMENTS
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Both within the continent and the rest of the world, regional
integration has emerged as a framework to address
obstacles to intra African and International Trade.
Historically the African domestic market has been small
and fragmented. The disadvantage of the small domestic
market adversely affected import-industrialization strategy
which was adopted by Africa in the 1960s and 1970s.
This suggested regional economic integration as a
means of enlarging the size of the market which could
enable manufacturers to produce at a lower cost for a larger
domestic unit.
Following Lagos Plan Of Action of 1980, the Abuja treaty
was signed in 1981 adopted a timetable for the creation of
African Economic Community by 2025 with sub-regional
groups as the building blocs.
REGIONAL TRADING ARRANGEMENTS
Cont…
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The building blocs include inter alia COMESA, EAC, SADC,
ECOWAS etc. These sub-regions are at various stages of
integration.
The Abuja treaty envisaged 6 stages to achieve an Economic Union
starting with Free Trade Areas and the custom unions, moving to
common markets and eventually monetary union with the regional
communities at the pillars.
EAC for example has already implemented a custom union with a
Common External Tariff and it is expected to implement a common
market protocol before the end of the year (2009).
The Intra EAC Trade had increased and for some countries trade
within the region is more than their trade with EU or the rest of
countries in the world.
COMESA has a Free Trade Area and eliminating tariffs on a number
of items. Aims at creating customs union by December 2008.
While these groups have Trading Opportunities they also face a
number of challenges e.g. problem of overlapping membership and
therefore the need to rationalize them, problems related to unequal
sharing of benefits, reluctance to cede sovereignty to regional
institutions.
BILATERAL TRADING ARRANGEMENTS
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A Major trading partner for SSA has been the
European Union under Lome and Cotonou
Arrangements.
Trade relations between ACP and EU since 1975
governed by preferential trade agreements
The latest of these was the COTONOU Partnership
Agreement (CPA) 2000
The CPA was challenged at WTO by central American
Countries. It was decided that Cotonou Agreement was
not consistent with Most Favoured Nation (MFN)
provisions of the WTO. WTO Members were
challenging the preferences
Africa and other ACP countries pressed WTO for a
waiver. This was granted at Doha MC (2001).
BILATERAL TRADING ARRANGEMENTS
Cont…
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The waiver for Cotonou Preferential Trade
Arrangements was granted up to December 2007.
This set in motion the Launch of EPA negotiations to
put in place new arrangements consistent with WTO
Rules.
Africa and other LDCs in 1980s and 1990s pressed the
international community to grant Duty Free Quota Free
Market Access for all their products.
At UN LDCs conference in Brussels EU announced
that they will grant DF&QF market Access to products
from LDCs except arms (EBA). In this context LDCs
have been pressing for simplified Rules of Origin to
allow cumulation.
BILATERAL TRADING ARRANGEMENTS
Cont…
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EPA negotiations were Launched. As per
Cotonou the aim was to have an agreement for a
Free Trade Area and which will cover goods,
services, other trade related issues and
development.
Objectives of EU – More Liberalization
Objectives
of
African
Countries
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Development, Market Access and Policy Space.
Interim EPAs – signed pending conclusion of
comprehensive agreements.
New Arrangements fundamentally change the
nature of trade relations between EU and SSA
and have implications fro regional integration.
BILATERAL TRADING ARRANGEMENTS
Cont…
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The Africa Growth and Opportunity Act (AGOA), enacted in May 2000
has at the centre of USA’s trade and investment policy towards SSA.
It is aimed from the US viewpoint at promoting open market, expanding US
and Africa trade and investment, stimulating economic growth and facilitating
SSA integration in the global economy.
Section 116 of AGOA, calls for negotiations of FTAs between USA and
SSA countries. Currently no free trade area exist in SSA and USA. This
remains ultimate objective of USA in the context of AGOA.
In the mean time they are pursuing trade and investment framework
agreements (TIFAs), Bilateral investment treaties (BITs) etc.
SSA welcomed the enactment of AGOA and much of their trade diplomacy
towards the US was directed at ensuring that AGOA is enacted, renewed,
on one hand and endeavouring to benefit from the arrangements.
Some countries such as Lesotho, Mauritius, and Kenya etc have
benefited from the textiles under apparel provisions and increased their
exports to US market.
Inherent problems with AGOA – Conditionalities regarding labour standards,
WTO plus provisions on IPRs, and Supply side constraints of SSA, RoO etc.
BILATERAL TRADING ARRANGEMENTS
Cont…
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China, India and Brazil are emerging as global power houses with
implications for the global economy.
China has become a major importer of raw materials at the same
time a major importer of both high and low skill manufactured
products.
The china Africa trade relations have been increasing since in the
1990s.
According UNECA 2004, trade between China and Africa reached
over $12 billion, $15 billion in the first 12 months of 2003. African
exports in that period to China was $6.77 billion while imports from
China reached $8.21 billion.
Exports from Africa were mainly of primary commodities and oil while
imports from china are mainly manufactured goods.
Growing trade with emerging countries assist Africa in their policy of
diversifying their export destination market away from traditional
markets of US and EU.
Africa-China and Africa-India Summits – Highlight Africa’s interest
in engaging in trade with this new emerging power houses.
MULTILATERAL TRADING ARRANGEMENTS
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The conclusion of the Uruguay Round under a single undertaking and
establishment of WTO posed a great challenge to SSA and had a great impact on
the policies they were to pursue.
Under the GATT they had a choice which Agreements to adopt this is no longer the
case.
Uruguay Round going beyond border measures and dealing with internal
regulations – Agreements were lopsided in favour of Developed Countries.
Challenges of implementing the agreements. SSA had to adopt their laws and
regulations in order to implements the agreements.
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TRIPS – trade related agreements
TRIMS and
Services
The struggle to rectify the imbalances in the agreements and to put
development on the agenda of WTO
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TRIPS and Public health
S&DT
Doha Round Negotiations and Africa’s interest (Kigali Ministerial Declaration)
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Agriculture
Cotton
Industrial Products [NAMA]
Services
Singapore issues
Developmental issues
New issues
MULTILATERAL TRADING ARRANGEMENTS
cont…
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Other global issues
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The Impasse in the Doha Round and Lamy proposals
Prospects for the Doha Round
Food Crisis and Financial Crisis and their implications for African
Trade policy
Epicentre of the crisis is US and Europe but affects Africa and the
rest of world in many ways
Measures are implement by developed countries to address the
crisis include state interventions
The need for Africa to rethink its liberalization and deregulation
approach
The demand by Africa to democratize the world financial
institutions
Multilateral negotiations have gone a long way in
helping Africa to harmonize and articulate their
policies on international trade issues in the context
of the negotiations .
CONCLUSION
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Africa’s trade policy has quite evolved
considerably from where the state has
commanding role in the economy and import
substitution was a primary concern in ensuring
development.
Under SAPs it swung to the other extreme of the
market having free reign. This was re-enforced
by obligations being undertaken in the context of
multilateral and bilateral commitments.
The recent financial crisis as well as the failure of
countries to realise the promised benefits of
liberalization is causing a rethink in the role of
state and the need to have sufficient policy
space for development.
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• [email protected]
• www.seatini.org