Pitfalls Africa must avoid in global trade

TRADE HAS BEEN variously described as a tool for economic development. But this does not happen in a vacuum. From the standpoint of international trade, a lot is involved. With international trade come diplomatic, economic and political issues. The embassies of trade-focused countries show their seriousness about trade through their activities, priorities and programmes in foreign countries. Those not focuses on trade are also self-evident by their inactivity and laid-back dispositions.

It is important to stress, however, that trade – as promising as it sounds – will require many fundamentals before it fulfils the various ideals attributed to it. In its most simplistic form, successful trade relations between countries require a lot of paperwork, procedures, protocols and policy changes. Emphasis on trade has been known to lead to modifications of some national policies, elimination of certain programmes or reordering of certain priorities.

China, for instance, has had to modify some of its national trade practices since its accession to the WTO in 2001. Although still far from being called a free-trading country, China has realised that, to participate in, and benefit from, the ever-widening opportunities in global trade, it has to adopt the saying that “when you are in Rome, you behave like Romans.” This is largely true in China’s dealing with foreign countries, while it may be less so in its internal trading activities.

That rules have to be changed by trade-focused countries is further exemplified by the current ordeal of China still. Huawei, a Chinese company, has been having a running battle with the US in particular on charges that it is a government appendage and is a possible tool for espionage. The same fear is being sold to many other developed countries who would have embraced Huawei’s leading edge 5G revolution. Only few days ago, the United Kingdom was reported to have found ways round the fear-mongering, and has decided to run along with Huawei in spite of all odds.

With the complex web of globalisation today, it is difficult to make any strong case against trade. The problem, however, is that the reality has shown that today’s and future global trade may not run smoothly on the templates that earlier gave rise to the powerful trade-related global organisations. The United Nations Conference on Trade and Development (UNCTAD) and the World Trade Organisation (WTO) have come to be recognised as undisputed leaders and warehouses of experts in global trade matters. The global architecture of trade is inevitably undergoing a sea change, the existence and leading roles of UNCTAD and WTO notwithstanding.

How effective can we say the WTO has been in promoting multilateral global trade when many regional trading blocs have emerged and seem to be more effective in their programmes, partnership and quantum of trading activities? After the tremendous dashing of hope in the immediate post-Doha years, the failure of the Doha Development Agenda to create a level playing field for the least developed, developing and developed countries became evident. The global economic crises of 2008 could not be fully explained without copious reference to failure on the international trading front.

The unequal yokes of some regional integration efforts did not appear to bode well for many stakeholders. The donor-versus-recipient nature of the European Union and African, Caribbean and Pacific (EU-ACP) nations elicited some sore and grey areas on unequal strength in trade relations. After so many years of back and forth, the Economic Partnership Agreement (EPA) that was first resisted by some developing nations was an evidence of fears of losing out in a trade pact that did not give such nations the voice and sure ground they anticipated.

Apart from the regional integration and economic cooperation that are mostly trade-based initially, regional governments and common markets and common currencies are beginning to spring up. The EU’s case is an example. ECOWAS is following, albeit very slowly. At least, EU now has a supranational currency, the EURO, commonly used all across the member nations. The WAEMU common currency of CFA (and a similar arrangement in Central Africa) involving Francophone countries may be seen as a sign of a greater things to come. In other words, if WAEMU could conveniently (though debatable) use the CFA, a strong case can be made for a West African common currency.

To state it succinctly, the coming of a regional parliament in West Africa, akin to the EU, also speaks volumes. What is not happening presently is that the trade issues that predated all the issues of currency, parliament or any other forms of existing arrangements, are not living yet up to expectation in West Africa, or in any other part of Africa for that matter, for now. Things could change for the better. It is a known fact that all African countries are at different staged of economic development and economies are mostly informal. These will, for a long time, stand in the way of true integration.

A colleague that had to travel to Tunis from Lagos recently had to go first to Istanbul before making connecting flight to Tunis. That’s one of the most undesirable flight arrangements – to fly first out of Africa from one Africa country and then return to another African country instead of having to make a direct connection. If the inter-regional trade arrangements were working well, that wouldn’t have happened. What the Lagos-Istanbul-Tunis trip tells me is that African countries are still far from being integrated. And, the truism that less than 20 per cent of African trade is intra-Africa holds especially true.

There has been a lot of dependence on external support in terms of resources to organise and strategise in the various regional programmes. For how long will Africa depend on such helps? How does Africa hope to generate resources internally for strategic developmental programmes? From the formative stage of EU-ACP economic cooperation and integration, resources have only been flowing mostly one-way. Development of EPA was supported mostly by the EU.

We will need to be further enlightened on whether or not the vacuum left by WTO and UNCTAD is not what various emerging groups are filling. Apart from regional trading groups that were formed on the basis of contiguity, strong and powerful ones are emerging that are not spatially contiguous. The emergence of the Brazil, Russia, India, China and South Africa (BRICS) should be of interest in this context. Their economic interests and other forms of motivations are worth our attention and curiosity.

Can we confidently affirm that the regional groupings are creating overlapping functions, or are duplications of efforts? Or are there synergies that we need to accept and live with? At this point, we could pause, ponder and wonder if those anti-globalisation campaigners and activists truly have any valid point in their protests and resistance. For instance, why would a meeting of trade experts scheduled for a serene countryside of Seattle in 1999 attract such a barrage of protesters and turn Seattle to a battleground of sorts?

Could every dissenting voice be wrong in the matter of which direction most experts tend to lead the world trade? Given the world of Capitalism Without Capital, according to the book written recently by Jonathan Haskel and Stian Westlake, there are sure signs that the world of trade will create more and more inequalities except certain things are fixed in the present global order. The problem of inequalities that Haskel and Westlake raised is real and needs to be addressed, especially in the context of intangible assets which are becoming greater drivers of wealth, trade and economies.

Competitiveness between the developing and advanced economies is a big issue that must not be glossed over or explained away. Tendencies exist that most trades will remain one-sided and some countries within the emerging world of multilateral trading will have to learn to live with trade deficit while others constantly experience trade surpluses. For instance, what will an Africa that produces mainly primary products and unprocessed commodities make out of a trading arrangement in a world where finished products are traded at higher premium? What becomes of a continent in which, according to a recent discourse by the Centre for Global Development (CGD), is beset with high cost of production in terms of comparatively higher labour costs, logistic challenges due to infrastructure decay or inadequate power generation?

How can a continent that still struggles to fulfil the foundational criteria for acceptable product production be able to cope with nations with hi-tech products in a trading partnership that is defined by competition? While Africa needs to be commended for achieving the Stage IV of its regional integration goals through the 2018 signing of the AfCFTA pact by most countries, it needs to be stated that this was not an end in itself. The hope of creating a free trade area (FTA) or ultimately achieving a customs union might sound too optimistic if certain groundwork remains unaccomplished.

Nations that fear the new arrangements might not favour them may pull back during implementation even if they have signed the agreement.  After all, President Donald Trump, fearing that the US was losing out in the North American Free Trade Area (NAFTA) pulled out and called for a fresh bilateral arrangement with any of the other two countries if they so wished. He also dared the consequences of the trade war with China, all in an attempt to reposition the US in the existing global free trade framework. If Trump could do these, no one should be surprised that – sooner than later – AfCFTA could suffer similar fate in the hands of any daring and influential national leader if there are genuine or imagined fears that their countries are at a disadvantage in the emerging trade relations.

To boost revenues from export, create industrial jobs and diversify economic bases of African countries, trade is necessary. But this must be done with full awareness of circumstances and conditions that could tear any arrangement apart should things go awry. There are lessons to learn from existing arrangements elsewhere in the world. Africa can prosper through international trade, but doesn’t have to learn hard lessons by personal experience. The right structures need to be in place as the continent marches headlong in the direction of global free trade.