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Europe/Africa: Underdeveloping Africa (Again)
AfricaFocus Bulletin
Mar 21, 2012 (120321)
(Reposted from sources cited below)
Editor's Note
"EPA [Economic Partnership Agreement], as currently
designed, is a poison chalice. Fragmenting Africa and
ramming through deadly trade arrangements in a manner that
undermines internal African integration, ties the hands of
policymakers and circumscribes the policy space, and
literally enslaves the African economy may be smart for
Europe in the short-run but not wise in the long term." -
Chukwuma Charles Soludo
In the commentary excerpted in this AfricaFocus Bulletin,
highly respected economist Charles Soludo, a former governor
of the Central Bank of Nigeria, lays out a devastating
critique of the Economic Partnership agreements being
pushed on African countries by the European Union. They have
only advanced, he argues, because Europe has pursued an
unscrupulous strategy of divide and rule, and many of those
involved in the negotiations fear to voice their criticisms
publicly.
There is an urgent need, he says, for a more open discussion
about future European-African economic relations, for the
long-term benefit of both Europe and Africa and to avoid
crippling Africa's chances to break out of long-term
patterns of underdevelopment.
For previous AfricaFocus Bulletins on economic issues, visit
http://www.africafocus.org/econexp.php
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Updates - Zimbabwe
Six pro-democracy activists in Zimbabwe have been convicted
for watching a video of "Arab Spring" events in Tunisia and
Egypt last year. Yet another sign of increased crackdown by
Mugabe regime. See updates and call to action at
http://justiceforzim6.blogspot.com
Just in (9:40 a.m. U.S. East Coast time) -
The final verdict for the Harare Six/Zim 6 is 2 years in
jail BUT suspended for 5 years (on condition that no
similar "offence" is committed), 420 hours of community
service (about 6 weeks Mon-Fri) and 500 US Dollars fine
each.
Updates - KONY 2012
- If you haven't seen it yet, watch the response to KONY
2012 by Rosebell Kagumire at http://www.youtube.com/watch?v=KLVY5jBnD-E
As of this morning, it's up to 564,000 views on YouTube.
- I've added several new selected suggestions to the lists
at http://tinyurl.com/7tea5ju
- Particularly noteworthy, for its clarity in providing
background on the LRA for the reader new to the realities in
Uganda and other affected countries, is a "Letter from
Uganda" by a teacher in Gulu (http://tinyurl.com/6oe6bhs).
- In the overwhelming cascade of commentary on KONY2012, the
most significant missing piece is that of voices from the
affected areas outside Uganda, namely in the Democratic
Republic of the Congo, the Central African Republic, and
South Sudan, which have much less access to communications
and internet-savvy spokespeople than does Uganda. I've added
a few articles focusing more on the regional perspective at
http://tinyurl.com/7tea5ju, and the articles on military
realities in http://www.africafocus.org/docs12/kon1203b.php
do highlight the regional situation. But I haven't yet seen
any analysis with an in-depth exploration of this regional
component, or commentaries from people of these affected
areas.
++++++++++++++++++++++end editor's note+++++++++++++++++
Africa: From Berlin to Brussels - Will Europe Underdevelop
Africa Again?
by Chukwuma Charles Soludo
This Day (Nigeria), 19 March 2012
[Excerpts only: full text available at http://allafrica.com/stories/201203191099.html]
Soludo, a Professor of Economics, has served as Chief
Economic Adviser to the President of Nigeria as well as the
Governor of the Central Bank of Nigeria. He is currently on
the Board of the South Centre, Geneva; Chairman of Board of
the African Institute for Applied Economics; and a Member of
the Chief Economist's Advisory Council, World Bank.
Africa is in trouble. Its future is once again on the table,
and it is Europe that holds the ace. Unlike the Berlin
Conference of 1884 to 1885 which balkanized Africa among 13
European powers as guaranteed sources of raw materials and
market, the current contraption under the Economic
Partnership Agreements (EPAs) spearheaded from Brussels is
the modern day equivalent of the Berlin Conference.
At issue in both Berlin and Brussels is whether or not
Africa can be allowed latitude to conduct trade, industrial
and development policies for her own development or for the
development of Europe. A major difference is that the
'agreement' will now be signed by free people, under
supposedly democratic regimes, and in contexts where the
African people again have neither voice nor choice. Only
about 10 out of 47 Sub-Saharan African countries (SSA) have
either signed or initialled the EPAs. Trade ministers of the
affected regions-the African, Caribbean and Pacific (ACP)
countries as well as African trade ministers and the African
Union-have largely rejected the EPAs. Despite all of these,
and the reported public protests in twenty countries against
the raw deal, it seems all but certain to be rammed through.
In private whisperings, not many Africans or policymakers
are happy with the deal but there is a certain sense of
helplessness.
Since 2002, the EU has been negotiating the EPAs with the
ACP countries as a fully reciprocal trade arrangement to
replace the previous non-reciprocal, preferential trade
access of ACP countries to EU markets under the various Lome
Conventions and the Cotonou agreement. The argument,
according to the EU, is that such preferential access
violated Article XXIV of GATT, and that the WTO waiver that
allowed such preferences expired in December 2007.
Consequently, the ACP countries are divided into seven
regions (with five in Africa) for the purposes of the
negotiations. As advertised, EPAs are "set out to help ACP
countries integrate into the world economy and share in the
opportunities offered by globalization". The EU points to
the 'failures' of the previous preferential arrangements to
'boost local economies and stimulate growth in ACP
countries'. Thus, the new reciprocal arrangement is expected
to remedy the failures of the past and usher the Eldorado to
Africa.
Specifically, EPAs are expected to be "tailor-made" to suit
specific regional circumstances; go beyond conventional
free-trade agreements, focusing on ACP development, taking
account of their socio-economic circumstances and include
co-operation and assistance to help ACPs implement the
Agreements; open up EU markets fully and immediately
(unilaterally by the EU since 1st January 2008), but allowed
ACPs 15 (and up to 25) years to open up to EU imports while
providing protection for the sensitive 20% of imports;
provide scope for wide-ranging trade co-operation on areas
such as services and standards; and are also designed to be
drivers of change that will kick-start reform and help
strengthen rule of law in the economic field, thereby
attracting foreign direct investment (FDI), so helping to
create a "virtuous circle" of growth. The above sounds quite
familiar, and anyone familiar with the Structural Adjustment
Programme (SAP) documents will recognise the language.
Consequently, countries were rushed to initial interim EPAs
before the end of 2007, and some countries went on to sign
them later. These have mainly been single countries. Most of
the sub-regions, as groups of countries, are still
negotiating the regional EPAs (e.g. West Africa, Central
Africa, SADC etc).
Put simply, in order to continue to have access to European
markets (on the terms that it had enjoyed for more than
three decades) Africa is now required to eliminate tariffs
on at least 80% of imports from the EU; in some cases,
abolish all export duties and taxes, in others, countries
can retain existing export taxes but not increase them or
introduce new taxes; eliminate all quantitative
restrictions; and meet all kinds of other intrusive and
destructive conditionalities that literally tie the hands of
African governments to deploy the same kinds of instruments
that all countries that have industrialised applied to build
competitive national economies. Under the WTO, least
developed countries (LDCs) are not required to further
reduce their tariffs (at least they have the choice to
decide whether and when to do so) but EPAs require at least
80% of them eliminated.
Indeed, Africa is being asked to comply with more stringent
conditions than Brazil, India and China are required to meet
under the WTO. Almost all the flexibilities in policy choice
that Africa and other developing countries won under the WTO
are lost under the EPAs. Hitherto, the EU had also (in
addition to the Cotonou agreement) granted a special
concession to all African LDCs - the 'Everything But Arms'
(EBA) - allowing them to export duty-free to the EU. This
was the EU's equivalent of the US Africa Growth Opportunity
Act (AGOA) and African LDCs were not expected to
reciprocate. With EPA, it means that EBA is effectively
dead. LDCs would have to provide reciprocal market access
opening. In addition, what the EU has failed to get under
the WTO or issues that developing countries have rejected
under the WTO are being foisted on Africa under the EPA. For
example, the so-called trade-related issues (the Singapore
issues) such as investment, competition and transparency in
government procurement, which are dead under WTO are being
smuggled into EPA.
There are all kinds of studies on the possible effects of
the EPAs on African economies. While it is fair to
acknowledge that some of the presumed impacts (positive and
negative) may be exaggerated, there is abundant evidence
that the EPAs would be damaging. Africa's nascent industrial
sector and agriculture (which is the mainstay of the poor)
would be damaged by the new import armada and dumping
thereby exacerbating unemployment and poverty. In some
countries, imports of sugar, dairy, poultry, rice, vegetable
oil, etc have already increased four-fold. Tariff revenues
will shrink; premature and permanent opening up of service
sectors including financial services leaves them open to the
full hazards of the perennial global financial bubbles; and
it will badly hurt intra African economic integration.
Africa would almost be consigned to be specialists in the
export of raw materials. African countries cannot use
government procurement and contracts to prop up and promote
domestic companies as European companies would be required
to be given equal treatment in competition for government
contracts. The list of the damages is long and cannot be
detailed here. Some independent studies by EU admit these
damages, and one such study predicts that EPA could
accelerate the collapse of manufacturing in West Africa.
Perhaps, that is why the EU is promising 'aid for trade' -
to sooth and compensate for some of the damages.
What is worrying is that it is difficult to point to any
significant net benefit of EPAs to Africa. Already 33 out of
the 47 countries are LDCs and therefore qualify to export
'everything but arms' to the EU with 100% duty-free and
quota-free. So, what is the additional benefit to these
countries? For the remaining 14 non-LDC countries, it is
curious why the EU cannot accede to the request by the
African Union to treat Africa as the world's archetypical
LDC region and grant the same EBA to all of the countries.
Or, alternatively there are several proposals about
benchmarking and sequencing the
conditionalities/liberalization to synchronize with economic
advancement of these remaining 14 countries. So far, these
proposals have not been accepted by the European Commission
even for discussion.
In any case, the EU's peculiar interpretation of Article
XXIV of GATT is a convenient one. The EU relies on this
Article to argue that the WTO outlaws non-reciprocal,
preferential trade to Africa under the Cotonou agreement.
But the same Article refers to trade in goods, and so why
has EU brought up all kinds of issues - services,
investment, procurement into the EPA? Second, it must be
noted that this article crafted in 1947 is itself still a
subject of the Doha trade negotiations. Third and to be
honest about it, the WTO does allow for non-reciprocal
preferential trade arrangements if the motivation for EU's
action is to assist Africa. Currently there are more than 7
active waivers in the WTO provided to the US, EU and Canada
for preferential trade schemes for developing countries and
transition economies. For example, the US has a waiver for
its AGOA for sub-Saharan Africa. Recently, the EU has
obtained two waivers to grant non-reciprocal trade
preferences to poorer European countries namely, Moldova,
and another one to the Western Balkan transition economies
(Albania, Bosnia and Herzegovina, Croatia, Macedonia,
Serbia, Montenegro, and Kosovo).
It is remarkable to note the EU's argument for applying for
waiver to the WTO in respect of Moldova. According to the
EU, "Moldova is the poorest country on the European
continent... and does not have the competitive strength to
take reciprocal obligations of a free-trade agreement with
the European Communities" (WTO document of 29 February,
2008). But Moldova (the poorest European country with per
capita income of about $2,300; life expectancy of 71 years
and adult literacy rate of 99%) is far better than most subSaharan
African countries, and not to talk of much richer
ones like Croatia with about $10,000 per capita income.
Compare this to much of Africa and even the 14 countries
dubbed 'non-LDC' (Nigeria has a per capita income of about
$1,200; Ghana $1,475; Kenya $1,125; etc and in all of these
countries poverty incidence is at least 50%). Something is
not adding up here. According to the EU, granting nonreciprocal
preferential trade concessions to fellow European
countries that are richer than most African countries does
not violate WTO rules, but doing so for Africa does. Africa
remains the world's poorest region and perhaps the last
development challenge. The EU needs to come up with a
credible explanation. I can almost hear some people
screaming... Double standards, or isn't it?
EU needs to come clean. It does not have to apologize about
it because after all, it can argue that it is the way the
world works. From the time of slavery to the Berlin
conference, Africa has either been a source of free labour
and profit or source of raw materials and market. Only the
dynamics change but the substance has remained. After all,
nation states hardly act out of love but in pursuit of selfinterests.
We appreciate that the global economy today is rumbling,
with new tensions and challenges. As the old economic powers
are largely broke, the emerging economies with cash are
roaring. The BRIC (Brazil, Russia, India, and China) are
seen as the 'new threats'. The global economic landscape is
unravelling and recoupling in such a manner that would
likely alter the economic, military, and geopolitical power
in the medium term. With this has emerged new pressures and
demand for exhaustible natural resources and markets to
sustain national security and prosperity. Since the major
powers are no longer able to make use of the WTO as they
wish to impose new rules on developing countries, they are
now resorting to bilateral and regional policies and
agreements to try and get their way. There is a subtle war
for 'territories' and Neo-mercantilism is the name of the
game.
The US is locking-in its neighbours in Latin America into
one form of free trade agreement (FTA) or another. Africa
has once again attracted attention as a theatre of the new
struggle. China is accused by the West of either 'invading'
or 'exploiting' Africa with its peculiar brand of 'aid'. In
this circumstance, it could only be expected that EU would
move quickly to secure its possession-Africa. In the
European Commission's 2008 document entitled "The Raw
Materials Initiative-Meeting our Critical Needs for Growth
and Jobs in Europe" and presented to the European Parliament
and the Council, one can get a clearer glimpse of the real
impetus for EPA. Trust the sophistication of the
negotiators, it is being branded as an initiative to 'help'
or 'develop' Africa. History repeats itself in a funny way.
Recall that the advertised 'benefit' to Africa of the Berlin
conference that cemented colonization was to 'help in
suppressing slavery'. The rest is history!
In terms of the technique deployed to coerce compliance by
Africa, it is the old classic: divide and rule, and carrot
and stick. EU negotiates as a bloc, but ACP countries are
divided into seven regions, sometimes not exactly matching
the regional integration arrangements. Even within the
negotiating regions, each country is literally on its own:
that way, it is easy to pick them off one by one. If Africa
negotiates as a bloc, it may be difficult for EU to get its
way easily. The principle of the early bird is applied to
create what economists call the prisoner's dilemma and thus
making collective action difficult. Countries that have
'signed' are allowed to continue to enjoy their preferential
access to European market while those that have not signed
are under all kinds of threats.
Those already in the privileged club do not want to lose
their privileges and see themselves as 'special' while those
excluded struggle to sign on the dotted lines. Different
EPAs signed by different countries contain significant
differences in terms of tariff lines, sequencing and speed
of liberalization, depending on the negotiating capacity of
the country/region. We understand that in some cases, the
advisers to some countries' negotiators are Europeans. Most
countries still resist and now export under the EU
Generalized System of Preferences (GSP); EBA for the LDCs;
and the standard GSP for Nigeria, Republic of Congo, Gabon
and some Pacific countries. South Africa continues with its
old free trade arrangement with EU. Even the GSP for some
countries is now under threat. Power is the issue here.
Given the weaknesses of the states and structural
vulnerabilities of most African countries, including
dependence on aid and trade with Europe for many, it is
evident that what is going on is not negotiation but
dictation.
The apparent sweetener to the bitter pill is the EU's
'promise' of 'EU Aid for Trade' by which EU is to provide
financial assistance to EPA countries to enable them to
build capacity, including infrastructure, and facilitate
their implementation of the new agreement. This new
'promise' for aid is indeed funny, and raises important
questions. Is this going to be an 'additional aid' or a rebranding
of existing but unmet commitments? Under the
auspices of the United Nations, the rich industrial
countries in 1970 committed to devote 0.7% of their Gross
National Income to aid. Some 42 years now, it remains a
promise not kept. Only five countries- Sweden, Norway,
Denmark, Netherlands, and Luxemburg - have met the 0.7% of
GNI in aid.
...
A recent one was the EU's 'promise' to increase aid to 0.56%
of GNI by 2010 (aid to all countries not just Africa). Our
question is whether the 'aid for trade' will be additional
to the yet to be met 0.7% or is a new benchmark being
'promised'? Without doubt Africa needs huge resources to
develop intra and inter regional transportation networks to
integrate the national markets as well as to address the
myriad of critical supply bottlenecks that were decisive in
preventing Africa from fully taking advantages of previous
preferential trade arrangements. However, anyone following
the developments in the EU as well as its history of
delivering on previous 'promises' can make some judgements
as to the credibility of a new 'promise'.
...
But humanity has experience in delivering aid that works. We
can replicate it for an effective and truly developmentoriented
EPA. The most effective aid in human history was
the US aid to Europe after the Second World War--- the
Marshall Plan to rebuild the European infrastructure. The US
felt a sense of obligation (given the historical ties with
Europe) to provide a 'big push' to lift Europe up after
devastation by the war. We are not sure if EU feels the same
sense of obligation to Africa (given the history we all know
too well). But just imagine for a second that EU feels a
need to support Africa through a Marshall Plan kind of aid.
Imagine that the EU were to stop its subsidy to agriculture
and divert just three years' subsidy fund to create African
Fund for Transformation--- call it the 'Brussels Plan for
Africa'---and this will come to about $225billion.
Alternatively, instead of stopping the subsidy abruptly, EU
could go for a phased process, diverting just 50% of the
subsidy fund into the Africa Fund over the first six years
before finally phasing the subsidy out. If this Fund (akin
to a sovereign wealth fund) is invested and the annual
income proceeds invested (estimated at about $20 billion per
annum in perpetuity), you could over time build highways and
train networks linking all of Africa, and increasing the
irrigation of its arable agricultural land from the current
less than 5% to more than 50%. Let EU bring its own
contractors-since it cares much about procurement, but let's
get this done. That way Africa can feed itself, Europe, and
the world cheaply; lift hundreds of millions out of poverty,
and you can create an environment for a truly 'virtuous
circle' of growth and transformation. With a truly
integrated African market, a new dynamism for quantum leap
will have been created, and no one will be surprised that
the combined African economy might become the next China or
India. This is when the kind of FDI inflows romanticised
about in EPA documents can be expected to kick-in.
The point of the foregoing is that an alternative future
between Africa and Europe is possible. Pervasive leadership
failures have been at the heart of African underdevelopment
in the last 50 years. Finally, there seem to be some
flickers of light, and Africa is gradually pulling itself up
by its own bootstraps. Africa has never had it better than
in the last one decade, and compared to the lost decades it
has begun to at least crawl. If EU cannot assist Africa to
walk and run, the least it should do is not to hinder the
nascent progress.
Aggregate African economy is less than 2% of global GDP, and
thus as a small open economy, it needs to integrate within
and without: Africa needs the global market. But lessons of
the last two decades have reconfirmed that there are right
and wrong ways to integrate into the global market,
especially for poor and fragile economies. While the world
is yet to invent anything better than a market economy, it
is also true that extreme market fundamentalism-that denies
the existence of market failures and missing institutionshas
brought more ruin than remedy. A more balanced approach
has been the winning strategy for all countries that have
developed in the last century. But EPA, as currently
designed, is a poison chalice. Fragmenting Africa and
ramming through deadly trade arrangements in a manner that
undermines internal African integration, ties the hands of
policymakers and circumscribes the policy space, and
literally enslaves the African economy may be smart for
Europe in the short-run but not wise in the long term.
...
Africa and Europe need a "Development Summit": we need to
talk to each other frankly and directly. If the issue is
'development' of Africa, there are certainly superior
alternative proposals for a more beneficial relationship
between Europe and Africa. The African Union, various subregional
groupings, and even the ACP ministers of trade have
canvassed alternatives to EPA. History should not repeat
itself. In the mid 1980s, Africa came up with the Africa's
Alternative Framework to Structural Adjustment Programme
(AAF-SAP). All African governments endorsed it; the United
Nations General Assembly endorsed it, but the conventional
SAPs were rammed through by the donor agencies which had the
power of the purse. It took almost two decades of
destruction for most development partners to admit that
'mistakes were made' and that 'no one had all the answers',
and before major elements of AAF-SAP became part of the
Washington orthodoxy. This kind of costly experiment must be
avoided. It is the lives of hundreds of millions of Africans
that are at stake again. It is time to sit down and talk.
Other partners, such as China, India, and the US can join
the Summit.
...
AfricaFocus Bulletin is an independent electronic
publication providing reposted commentary and analysis on
African issues, with a particular focus on U.S. and
international policies. AfricaFocus Bulletin is edited by
William Minter.
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