Development and Cooperation (D+C)
March 2005,Vol. 32, no. 3
[ African trade ]
Globalisation blocks regional integration
It is sometimes suggested that African countries should chose between regional integration and globalisation. This dichotomy is misleading. The real question is whether, under the pressure of global market forces, regional strategies remain viable at all. The trade policies of both the US and the EU are anything but helpful.
[ By Henning Melber ]
Under the regime of the World Trade Organisation (WTO), local and regional policies are increasingly determined by global factors. One example is the New Partnership for Africa’s Development (NEPAD), which serves as the socio-economic development blueprint for the African Union (AU). Similarly, bi- and multilateral trade relations between external actors and individual African states or regional blocs are becoming ever more decisive. This is true of the USA’s African Growth and Opportunity Act, the EU Free Trade Agreement with South Africa and more recently the Economic Partnership Agreements negotiated by the European Union. All these initiatives have a potentially detrimental impact on regional integration (Melber, 2005).
Outwards looking NEPAD
NEPAD claims that its agenda is “based on national and regional priorities and development plans”, which ought to be prepared “through participatory processes involving the people” (para. 49). So far, however, no visible signs indicate that the collective (multilateral) efforts aim at a united approach of the various regions in their relations with the outside world. Nor does NEPAD, so far, translate its noble aims into practical steps. The blueprint emphasises sub-regional and regional approaches under a separate sub-heading. It stresses “the need for African countries to pool their resources and enhance regional development and economic integration … to improve international competitiveness” (para. 94). The dilemma is that the emphasis on international competitiveness comes at the expense of strengthening local economies and people.
NEPAD also claims to enhance the provision of essential regional goods as well as to promote intra-African trade and investments, with a focus on “rationalising the institutional framework for economic integration” (para. 95). But again, such an approach neglects the local/internal in favour of the global/external orientation. In the meantime, NEPAD emerges as a type of mega-NGO channelling aid-funds to developmental projects. The claim that these are driven by a desire for closer regional collaboration is hardly more than lip service. Countries, not regional bodies, implement the programmes and policies. All summed up, NEPAD does more to undermine than to strengthen regional institutions (Bond, 2002).
Indeed, NEPAD defines the strengthening of African regional markets as a steppingstone towards greater integration into the global economy rather than as a goal in itself. Accordingly, its market access initiative advocates an external orientation. NEPAD identifies a need to negotiate for “more equitable terms of trade for African countries within the WTO multilateral framework” (article 188). This is deemed “an historic opportunity for the developed countries of the world to enter into a genuine partnership with Africa, based on mutual interest, shared commitments and binding agreements” (article 205). One wonders to what extent the NEPAD architects had lost their sense of reality when they drafted such obviously “wishful thinking”.
The African Growth and Opportunity Act (AGOA) was originally adopted as Title I of the Trade and Development Act of 2000 under the outgoing Clinton administration and was meant to apply the “trade not aid” paradigm. President Bush has extended its duration twice. As a US-law, AGOA was neither negotiated with its African beneficiaries nor based on any agreement with them. Its applicability is at the exclusive discretion of the US-administration.
AGOA delivers different benefits to different countries according to their resources. Ironically, external capital (from mainly East Asian countries) has managed to exploit the opportunities created for supplying the US market with textiles from those African countries that rank as Least Developed Country (LDC) in the AGOA context. These countries are granted preferential treatment (such as reduced import taxes). However, the mostly unqualified and underpaid workforce in African sweatshops is hardly reaping any benefits. Rather, people are being super-exploited. Nor do the governments of the countries affected register much additional revenue. After all, initial investments and even running costs tend to be heavily subsidised with public funds whereas profitable operations normally enjoy tax exemption.
This setting makes neighbouring countries compete for foreign investors rather than foster common growth strategies. Asian companies exert pressure on African governments in the pursuit of the most attractive investment opportunities under AGOA. Officials strive to offer foreign investors the best incentives for projects of an ultimately dubious nature. It all boils down to elite pacts, in which local African administrations and Asian capital gain from providing US markets with cheap goods at the expense of workers who hardly earn enough to survive.
Empirically, AGOA has slim positive impacts in only six out of 37 eligible countries: Kenya, Lesotho, Malagasy, Mauritius, Swaziland and South Africa (Thompson, 2004). This is mostly attributed to the textile and apparel sectors: Only in Kenya and South Africa, did exports from other sectors (primarily agriculture) rise substantially. After the Multi-Fibre Agreement ran out early this year, the textile and apparel industries in China, India and other Asian countries will be able to compete much more freely with African products favoured by AGOA. The predictable result will be a decline – if not collapse – of the short-term industry seeking temporary gains. Once the AGOA bonanza is over, internationally operating capital and a handful of local compradors will turn out to have been the winners.
Apparently, US trade policy is not really geared to support Sub-Saharan economic development, but rather to provide access to potential markets. This would be fine if it only resulted in mutual benefits in the interest of all partners. But the bulk of African countries will not reap any such harvest. To a large extent, AGOA centres on oil and related commodities. African oil exports already amount to more than one fifth of the annual supply in the USA.
Disruptive EU strategy
The EU is currently negotiating Economic Partnership Agreements (EPAs) with African, Caribbean and Pacific countries (ACP). The goal is to replace the Cotonou Agreement with separate sub-regional accords and to, thereby, make existing EU-ACP relations compatible with WTO rules. Observers accuse the EU of using EPAs to push through agreements on a number of sensitive matters (such as investment, procurement and competition policy) that were rejected by developing countries at the WTO ministerial meeting in Cancun in 2003. In any case, such agreements will reduce the policy space for African governments (Wade, 2003).
The EU is striving for separate deals with each region, and no country may negotiate in more than one block. For EPA purposes, the Southern African Development Community (SADC) is accordingly reduced to seven (from 14) member countries. What could make the inbuilt conflict between regionalism and global perspectives more obvious? As an outcome of current negotiations, developmental space is likely to shrink. Official discourse does not even deal with issues of internal and regional integration anymore. Even experts at the International Monetary Fund seem reluctant to generally consider EPAs as beneficial (Khandelwal, 2004)
The negotiations on future EPAs cause serious implementation problems and a negative impact on regionalism within the ACP group in general and its African members in particular. Regional organisations will suffer from capacity problems in the process. The matter is further complicated by the fact that all regions involved are made up of LDCs and non-LDCs, to which, so far, different rules have applied (Ochieng, Sharman, 2004).
The EU’s free trade agreement with South Africa had an even more divisive effect on the Southern African region. The fact that a single country entered a preferential trade relationship exacerbated regional tensions that result from divergent economic interests. In many respects, South Africa, the monetary zone, the South African Customs Union (SACU) and SADC are already not in harmony. The EU intervention adds to the friction. While the Free Trade Agreement does have beneficial effects for South Africa, that is no convincing argument in favour of more free trade arrangements with other – less industrialised – countries.
South African interests are by no means identical with those of the region. While regional integration would (and should) certainly not be at the expense of the hegemonic power, it would include the interests of the junior partners in the neighbourhood. The political economy of such regionalism depends on constantly
(re-)negotiated arrangements, with shifting boundaries and changing coalition of interests. The EPA configuration process does not seem to strengthen such alternative routes.
Recent trends indicate less rather than more regional cooperation. This is so, at least in macro-economic terms, among the members of bodies as SADC. As a study (De Vylder, Axelsson, Laanatza, 2001) submitted to the Swedish development agency Sida warned: “While EU, through its enlargement, is collecting the European states into an increasingly strong unit, EU’s African policies may have the opposite effect.”
Bond, Patrick, ed., 2002: Fanon’s Warning. A Civil Society Reader on The New Partnership for Africa’s Development. TrentonN.J.: Africa World Press
De Vylder, Stefan, Gunnel Axelsson Nyander and Marianne Laanatza, 2001: The Least Developed Countries and World Trade. Stockholm: Swedish International Development Cooperation Agency (Sida studies, no. 5)
Khandelwal, Padamja, 2004: COMESA and SADC: Prospects and Challenges for Regional Trade Integration. Washington: IMF Working Paper WP/04/227
Melber, Henning, ed., 2005: Trade, Development, Cooperation: What Future for Africa? Uppsala: The Nordic Africa Institute (Current African Issues, no. 29; in print)
Ochieng, Cosmas and Tom Sharman, 2004: Trade traps. Why EU-ACP Economic Partnership Agreements pose a threat to Africa’s development. London: Actionaid International
Thompson, Carol B., 2004: US Trade with Africa: African growth & Opportunity? In: Review of African Political Economy, vol. 31, no. 101, 457-474
Wade, Robert Hunter, 2003: What strategies are viable for developing countries today? The World Trade Organization and the shrinking of ‘development space’. London: CrisisState Programme/Development Research Centre, LondonSchool of
Economics (Working Paper no. 31)
Dr. Henning Melber is Research Director at The Nordic Africa Institute in Uppsala, Sweden. From 1992 to 2000, he was Director of The Namibian Economic Policy Research Unit (NEPRU) in Windhoek. He is currently a Vice-President of the European Association of Development Research and Training Institutes (EADI).