Aid, loans, commodity exports and prospects of Africa’s prosperity (5)

GLOBAL VALUE CHAINS when applied to commodities, ipso facto, presuppose unbroken links in values addition to and movement of commodities worldwide. In reality, however, much lies beneath and within the expression that appears to be different from what it suggests, prima facie. Competition in global trade has been treated for so long as brutal, non-sentimental, restrictive and highly aggressive, mostly involving the survival of the fittest, until the idea of fair trade began to creep into mainstream trade talks and conversations. That was when the idea of free trade was considered insufficient as a morally responsive mechanism for empowering the perceived weaker nations in international trade. After centuries of international trade under the heavy hands of the powerful, the world gradually began to settle down to what had a semblance of what was regarded as equitable transactions where the weakest were deemed relevant and entitled to their own voices and rights. Africa has particularly been at great disadvantage in trade negotiations with more affluent, industrialised and more advanced countries and the situation persists until now.

For decades, the world grappled with negotiations under the General Agreement on Tariffs and Trade (GATT), an agreement that was signed in 1947 by 23 countries as a treaty minimising barriers to international trade by eliminating or reducing quotas, tariffs, and subsidies. It was a precursor to what became the World Trade Organisation (WTO) on January 1, 1995, essentially, relying on rules earlier provided by it (GATT) as a trading system nearly half a century earlier. How many barriers the system has removed to facilitate Africa’s unhindered participation in the global system is still a subject of much conjecture. This is despite the fact that the economy of the African continent has been heavily commodity export-dependent since the founding of GATT but has not got any appreciable competitive advantage ever since. In essence, Africa’s exports – which are mostly highly sought-after commodities – must have been traded away for decades at heavily discounted prices. WTO has not proved its mettle in empowering the weaker countries as the stalled Doha Development Agenda (DDA) would prove in Nairobi, Kenya, in December 2015 where the talks ended. Prior to the Nairobi meeting, the DDA that commenced in 2001 made no significant progress over 10 years, remaining stagnant as at 2011. Over this period, China had taken advantage of the developing country status to rise to a top notch economy while African countries remained as underdogs. Perhaps China’s feat was possible because it operated as a single country whereas Africa is a gathering of over 50 diverse countries, each with its tiny hand and low voice.

Most issues in trade negotiations are skewed in favour of countries in the global north and against the global south. These bring out the stark reality of persistent inequalities in global trade that are not about to abate anytime soon. Some face-saving initiatives were introduced to give attractive impressions to global trade and divert attention away from the prevalent North-South dichotomy. What the trade experts often like to present as preferential incentives have suffered a lot of criticisms from some economists who are of the school of thought that such incentives distort trade. A potpourri of confusion arises when experts criticise some mechanisms as protectionism or technical barriers to trade on one hand, particularly if such barriers are from the least developed countries (LCDs) against indiscriminate dumping of imports on one hand, but defend tariff bands imposed on raw or semi-processed commodities exported from the LCDs to the global north on the other hand.

Attempts to sound altruistic about global trade by the rule makers thus suffer some amount of trust deficit in what has come to look more like double standard. It is understandable that international politics will almost always trump bilateral and multilateral negotiations. And so, global trade – which depends a great deal on negotiations – is bound to be influenced greatly by politics. However, the sorts of politics that tend to perennially give one side of the negotiation table an undue advantage over the other are fraught with inequalities and may one day collapse. The promoters of free trade who ignore or deny this possibility because of their presumption that they operate a “rules-based” system are obviously willingly ignorant of the need to ensure the bigger picture of a world that can no longer afford a system that creates prosperity on one end while spawning poverty on the other. A time has therefore come when international trade should be carried out with a win-win endgame in mind, especially if sustainability is a part of the broad spectrum of issues under consideration.

Although the proponents of the African, Caribbean and Pacific-European Union (ACP-EU) trade terms over the years seemed convinced that they were promoting free trade, those uncomfortable with the one-sided rules and safeguards tried to make advocacy for fair trade. Bringing negotiations to the doorsteps of the weaker partners seemed ingenious and appeared like a generous gesture. Historically, the hosting of more than two landmark conventions in Western/Central Africa in the years of intense negotiations might have been construed as a recognition of the strength of the ACP countries. For instance, during the Lomé I negotiations of 1973 to 1975, trade issues played an important role in forging solidarity among the ACP countries. The first Lomé Agreements, signed in the capital of Togo on 28 February 1975 by the nine European and 46 ACP States, succeeded the Yaoundé Conventions of 1963 and 1969. Africa was not in any way better economically after all these conventions and agreements.

Trade issues were also a particularly prominent feature of the EU’s relations to the ACP group of developing countries and ECOWAS. The Cotonou Agreement, signed in 2000 in the Republic of Benin’s largest city, between the EU and 77 ACP countries, marked a profound change in the relationship between partners (Cuba did not sign). The agreement built on generations of cooperation agreements between the expanding ACP group and an evolving Europe. Although with far fewer countries as members of the EU then, the EU had the economic bargaining power, creating an upper hand in the trade negotiations with the former colonial countries and other developing countries.

The Cotonou Agreement was the backbone of the partnership between the EU, EU member states and 79 ACP countries. The new agreements would provide for a shift from the system of non-reciprocal trade preferences to Economic Partnership Agreements (EPAs), which are in effect bilateral free trade agreements. But EPA is not what it sounds like, especially for the disproportionate advantage of the EU over the ACP countries.

Many African countries are very small in size and weak at individual bilateral trade negotiations. It becomes even more so when they have to individually negotiate with a group of nations such as the EU. Their ability to negotiate clearly receives a boost when done under regional groupings such as the regional economic communities (RECs) or at the continental level of the African Union (AU). Their abilities to take advantage of preferential incentives and bargaining agreements are better under the group influence. African countries have a decision to make. As long as a bulk of revenues of individual countries arise from commodity exports – minerals or agricultural produce – African countries are expected to be better equipped to negotiate more favourable terms of trade.

They have to be able to determine favourable conditions on export of their raw commodities and import of finished goods. They are also expected to be able to scale the hurdles of technical barriers to trade (TBT), mostly erected by importing trade partners. They are expected to set up their own rules to justify the rejection of dumping, while striking a delicate balance on rules of reciprocity. Why does the EU not encourage semi-processed inputs from the ACP countries or choose to impose tariff bands to discourage value addition to commodities exported from the ACP countries?

In the global cocoa value chain, for instance, Côte d’Ivoire – the world’s highest producer and exporter – receives just four percent of the $100 billion chocolate industry’s profits. Côte d’Ivoire and Ghana account for approximately 65 percent of global production of cocoa. According to UNCTAD, cocoa farmers in Côte d’Ivoire and Ghana earn less than six percent of the chocolate industry’s total revenue. The World Bank explained that the “low profit-sharing by Ivorian producers in export sales” is a disincentive, especially when the highest profit accumulated along the cocoa-chocolate global value chain goes to the chocolate producers. In New York Times’ observation, “it is chocolate made abroad, not raw cocoa, that yields the most revenue, and that money flows to larger foreign producers.”

Africa remains weak in the context of global value chains. The presence of WTO notwithstanding, Africa still has a long and tortuous journey ahead. Trading on the platform of the African Continental Free Trade Area (AfCFTA) has fully run its third year and has entered the fourth year this month since its commencement in January 2021, but with limited success to showcase at the continental level on value chains. Deliberate agenda needs to be set for Africa’s place in the global value chains on competitiveness and sustainability, particularly as more attention is now focused on energy transition and mitigation systems on climate change. Strategies that are favourable for Africa can only emanate from Africans, not from the Western countries or the global north. As more and more opportunistic actors enter the climate change and energy transition fray, Africa can only be postponing the evil days by being tardy, unresponsive or failing to take proactive steps in these areas. Trade is clearly at the heart of these topical issues. Africa’s trade policies, strategies and negotiations should be robust, comprehensive and encompassing natural resources, commodities as well as climate considerations in well-articulated manner as to give the continent good bargaining powers rather than depending on the offers from the advanced countries based on smarter and shrewd agreements that put Africa in awkward positions on their own resources. Other than that, poverty will continue to stalk the continent despite its enormous resources, while it continues to trade away these resources for very little revenues to the greater benefits of the richer, more advanced countries.

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