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Sub-Saharan Africa and Europe in a restructuring world François Bourguignon and Pierre Jacquet Paris School of Economics and Agence Française de Développement AFD-EUDN Conference, December 2009, Paris 1 Sub-Saharan Africa in a multi-polar world Commodity exports not sufficient to sustain SSA's catching-up: need for diversification. SSA development handicaps: productivity gaps, population growth, hard and soft infrastructure deficit. SSA unlikely to become a development pole by itself without outside support Development prospects depend on relationship with existing and emerging global economic poles The potentially privileged position of Europe 2 Outline 1. Development performances of SSA and its present global economic integration 2. Inward and outward oriented strategies to accelerate SSA development 3. What European policy towards SSA? 3 1. Development performances of SSA and its present global economic integration i. ii. iii. iv. v. Aggregate performances Trade integration Factor flows Aid to SSA Global powers' initiatives towards SSA 4 i. Aggregate performances GDP per capita growth rates by world regions: 1970-2008 8 Developing countries 6 Developed countries 4 2 0 1970 1975 1980 1985 1990 1995 2000 2005 -2 Sub-Saharan Africa -4 -6 5 Sub-Saharan Africa: Terms of trade and GDP per capita growth, 1980-2007 160 8 140 6 120 4 100 2 80 0 60 -2 GDP per capita growth 40 -4 20 -6 0 1980 -8 1985 1995 1990 2000 2005 Year 6 Growth rate (%) Index (2000=100) Terms of Trade (2000=100) Sub-Saharan Africa: Sectoral composition of GDP, 19702008 60 Services 50 Per cent 40 Industry (inc. Manufactuiring) 30 Agriculture 20 10 0 1970 1975 1980 1985 1990 1995 2000 2005 Year 7 Sub-Saharan Africa: mean per capita GDP growth rates by type of country 1970-1978 1979-1994 1995-2007 Sub-Saharan Africa (unweighted mean) 2.0 -0.7 1.7 Resource-rich countries Resource poor countries 1.6 2.1 -1.6 -0.3 1.9 1.6 Landlocked countries Coastal countries 2.0 1.9 -0.6 -0.7 1.8 1.7 Fragile countries Non-fragile countries 1.4 2.6 -1.7 0.4 1.4 2.1 8 ii. Trade integration Sub-Saharan Africa: Openness and share of world trade 2,5% 40 Openness (X+M)/2*GDP 2,0% 30 SSA Exports SSA GDP 1,5% 25 20 1,0% 15 10 0,5% 5 0 2007 2005 2003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 0,0% 1981 % of World Exports and World GDP 35 9 Geographical structure of SSA trade Subsaharan African Imports - 2008 Rest of World Europe Africa China Japan USA 40% 35% % of SSA GDP 30% 25% 20% 15% 10% 5% 0% ALL SSA Resource Non-resource Coastal Landlocked 10 SSA Trade specialization, 2008 250 Fuel Manufactures Agr. Raw Materials Food Ores & Metals Exports Imports Current dollars, in Billion 200 150 100 50 Exports Imports SSA without South Africa Exports Imports Resource rich Source : Comtrade. The category “non-resource rich” includes South-Africa Non - Resource rich 11 SSA manufactured trade by destination countries: 1998-2008 25 1998 20 SSA imports of manufactures US$ billion US$ billion SSA exports of manufactures 2008 70 60 1998 50 15 40 10 30 2008 20 5 10 - - EU - 27 USA SSA China Other Source : Comtrade. The category “manufactures” does not include non-ferrous metals. EU - 27 USA SSA China Other 12 iii. Foreign factor flows 13 SSA migration by region of destination Stocks of SSA migrants outside SSA: 1990-2000 3.5 3 Millions 2.5 2 1990 2000 1.5 1 0.5 0 America Europe EU 15 Region of destination Asia and Oceanis Total 14 iv. Aid to SSA Official Development Assistance to Africa by donor: 1990-2007 35 30 $ Billion 25 1990 1995 2000 2005 2007 20 15 10 5 0 Multi-lateral EU US Others Total 15 v. Global powers' SSA initiatives EU : after 30 years (GSP, Lomé, Cotonou) of a policy based on trade preferences and development finance, shift toward reciprocal trade agreements cum regional integration through the EPAs. SSA comeback as a strategic stake (access to resources, global politics) since the early 2000s AGOA: Apparel and non-apparel preferences EBA: Preferences open to least advanced countries FOCAC: the China-Africa partnership Issues Crucial role of rules of origin :AGOA vs. EU's EBA Questions on the impact of preferences Is WTO compatibility an issue ? Is China more or less effective than the West ? 16 vi. Partial summary A region highly diverse but with common problems A region very open and globally dependent on trade in primary commodities Dismal growth performances in the 1980s and 1990s. No autonomous growth engine at work Very strong links with Europe (trade and market access, aid, migrations) Important role for ODA (programmable aid about 5% of SSA GDP) 17 2. Inward- and outward-oriented strategies to accelerate SSA development i. ii. iii. Limitations of the "business as usual" or the "rentier" scenario Import substitution through proper regional integration Diversifying exports through trade preferences 18 i. Limitations of the "business as usual" or the "rentier" scenario Commodity exports' rent and remittances cannot support ambitious development: Limited development potential of non-traditional tradable sectors: Fragility; dependency on global demand; nontradable bias; demographic growth; weak global prospects Low competitiveness; small domestic market size; lack of hard and soft infrastructure Investing in governance and human capital necessary but not a substitute to a traderelated 'growth engine' 19 ii. Import substitution through proper regional integration Past SSA experiences with Regional Integration Agreements (SADC, ECOWAS, UEMOA, ..) Transforming present agreements into proper custom unions: Free trade areas vs custom unions, overlaps, trade diversion Uniform tariffs and relative protection of a few sectors; effective regulation of competition; infrastructure investments; foreign investors Asian development WTO rules 20 iii. Diversifying exports through trade preferences Revisiting AGOA and EBA types of agreements with US and EU economic poles: Chinese investors using SSA as an export base is not necessarily a problem: Extend country coverage, soften rules of origin Tariffs in US and EU are low anyhow; competition among foreign investors; spillover effects on domestic markets identical Present experiences of Special Economic Zones supported by Chinese firms Combining regional integration and trade preferences 21 3. European policy toward SSA Why is SSA strategic ? Access to energy and natural resources Demographics Game of influence through development effectiveness Why should Europe invest more in SSA ? Natural geopolitical space EU and SSA are natural markets for each other Labor and personal mobility Laboratory for innovation in sustainable development 22 3. European policy towards SSA (2) Evolving relative position of Europe in SSA Define global, consistent policy toward SSA Trade preferences, support for regional integration, more flexible rules of origins Substantial scaling-up in volume and quality of development assistance Consistent immigration policies Promotion of a conducive global governance framework: Allowing SSA policy space for economic diversification (through trade policy, subsidies, forms of “industrial” policies…). 23 END 24