Global Trends by Martin Khor
Monday 17 April 2006
An African Trade Ministers’ Conference last week voiced the need for fairer trade rules. Especially of interest for Asian countries is the African leaders’ insistence that negotiations on their free-trade agreements with Europe should not open up their economies to cheap goods and to rules on investment and government procurement.
A conference of African Trade Ministers, held last week in Nairobi, brought out the economic problems of this poorest of continents, and dilemmas of how the leaders can get their countries to move ahead.
The Africans want to increase their export earnings to boost growth. But even if markets are opened, they don’t have enough productive capacity to make and sell products abroad.
In areas where they are competitive, there are problems. Prices of their commodities (mainly tea, coffee, cocoa, cotton) have fallen and agricultural exports are blocked by the high tariffs and subsidies in rich countries.
The Kenyan Vice President Moody Awari said from 1990 to 2003, Africa’s share of world trade fell from 3.1 to 2.3 per cent; its share of world services exports dropped from 2.5 to 2.1 percent.
At the World Trade Organisation, the Africa Group has strengthened its negotiating clout. Previously, their views were simply ignored.
Recognition of this clout was marked by the presence of WTO Director General Pascal Lamy, and high officials from the United States, the European Commission and Brazil at the Nairobi conference’s last day.
The African Ministers expressed their unhappiness to these officials at the slow progress in the WTO Doha negotiations, blaming this on the refusal so far of the European Union and the US to sufficiently reduce their agricultural subsidies and tariffs.
Kenyan Trade Minister M. Kituyi said he did not believe the WTO’s end-April deadline for concluding “modalities” (formulas and figures for cuts in tariffs and subsidies) would be met.
Like others, the Africans hope to improve their access to foreign markets. But what worries them is that they will be required to further lower their tariffs, resulting in more imports that would damage local industries and farms.
The Economic Commission of Africa presented data showing how the high tariff cuts (of 50% or more) proposed at the WTO would cause African countries to lose local industries, jobs and government revenues.
The African Ministers are even more worried about a free-trade pact they are negotiating with the European Union. The countries, divided into four sub-regions, are to conclude these Economic Partnership Agreements (EPAs) with Europe by 2007.
As details of the EU demands became clearer, the African countries are getting more anxious that these EPAs will be used to pry open the African markets to European goods and firms, even more than is done through the WTO.
After a heated debate, the Ministers adopted a Declaration on the EPAs stating the need for the EPAs to allow them to protect weak industries. The EU is seeking reduction of African tariffs to zero for “substantially all trade.”
The Ministers also said that African countries will only offer market openings in services similar to what they have done in the WTO, and not more.
On intellectual property, they showed concern on the effect of high patent standards. They rejected any attempt to have provisions in the EPAs that go beyond their obligations in the WTO on any aspect of intellectual property.
Most contentious were the issues of investment, competition and government procurement. Attempts by the developed countries to get developing countries adopt binding rules on these areas at the WTO had been rejected in 2003 and 2004.
The EU, US and Japan are now sneaking these rejected issues back through bilateral and regional agreements.
The African Ministers reaffirmed their stand that these three issues remain outside the ambit of the EPA negotiations, even though the EU is insisting on them.
They are concerned that rules in these areas would prevent them from regulating foreign investments and the market for government procurement, and that this would result in losses or closure of local firms.
At a dialogue session with the European Commission’s trade director, African ambassadors attacked the EU for being insensitive to their development concerns in the EPA negotiations.
Their Ministers’ declaration is a political signal that Africa should not bow to Europe’s demands to simply lay open their economies to the giant European firms, and to their often heavily subsidized products.
The African Ministers’ declaration on EPAs can be an interesting reference document for Asian countries negotiating free trade agreements with the US, Japan and Australia, and possibly with the EU in the future.
Whether the points of the political declaration can be maintained in the negotiations, at which the EU has an advantage of skills and personnel, remains to be seen.