Simon Barber
30 June 2009
opinion
Johannesburg — A PROPOSAL making the rounds in Washington would have the Obama and Zuma administrations make common cause in favour of international trading rules designed to promote Africa's economic integration.
The proposal is timely and could, if it gets traction, help to restore trade relations bruised by the failure of negotiations on a US-Sacu (Southern African Customs Union) free trade agreement under the Bush and Mbeki administrations.
The need to increase the capacity of African countries to trade with each other has been brought into sharp focus by the global economic slump. Currently, less than 10% of African trade is intraregional. Africans would be richer, healthier and far less dependent on foreign aid if they were selling goods and services to each other rather than exporting raw commodities to the rest of the world.
As Lord Malloch Brown, the British Min- ister for Africa, argued in Maputo recently, "If Africa is to weave the social safety nets that lift its people out of poverty... build the businesses that give its people jobs (and) deepen democracy to put sovereignty firmly in the hands of its people, then it's through the regional push that it will get there." The theme is developed more fully in the 2009 Africa development report put out last week by the United Nations Centre for Trade and Development .
Greater integration has been a holy grail for Africa since independence and has resulted in a tangle of overlapping regional economic communities (RECs) and other groupings that have been more talk than action. That seems to be changing now. Obstacles remain, however.
Steve Lande and Tony Carroll of Manchester Trade, a Washington consultancy, identify two important ones in a new paper: current World Trade Organisation (WTO) rules and ongoing European Union (EU) mercantilism. SA and the US have a shared interest in dealing with both these issues, they argue, which could form the basis of a reinvigorated relationship.
WTO rules prevent sub-Saharan Africa or most of its RECs from being treated as single units for trading purposes. This is because they divide African countries into two categories, least developed (LDC) and not least developed, based on UN definitions unrelated to trade competitiveness. Rich countries are not permitted to treat LDC's and non-LDC's equally. They may grant unilateral preferences to the former but not to the latter. Thirty-five of sub- Saharan Africa's countries are LDC, the remaining 13 -- which include countries such as SA, Kenya, Nigeria and Ghana - are not.
Technically, the US African Growth and Opportunity Act is in conflict with WTO rules because it grants unreciprocated access to the US market without distinguishing between LDC and non-LDC. A waiver is in the offing. The EU, on the other hand, has restricted its African Growth and Opportunity Act-like unilateral preferences to LDCs while pushing others to enter into Economic Partnership Agreements (EPAs) granting it reciprocal access to their markets.
The EU is pressing for EPAs with regional African groupings such as the Southern African Development Community, the Economic Community of West African States and the West African Economic and Monetary Union , which include both LDCs and non-LDCs. The EU says its intent is to promote regional integration. Others contend that it is doing quite the opposite. "It is difficult, if not impossible, to form a customs union within an REC if some members are committed to zero duties for EU imports of goods and services and others maintain MFN (most favoured nation) or standard rates," Lande and Carroll write.
In southern Africa, the EU approach has put Botswana, Lesotho and Swaziland, who have agreed to enter into a comprehensive EPA, at loggerheads with SA, Angola and Namibia. Sacu is in crisis. Similar splits are appearing in west Africa. "This is a no-win situation for economic integration in the region," Lande and Carroll argue. "The overall development of the region will be compromised by premature opening of markets, trade diversion from more efficient suppliers and a return to pre-independence colonial trading systems."
They believe there are better ways of promoting regional integration that could be part of a shared US-SA strategy. This could include getting developed economies to agree that all sub-Saharan countries belonging to RECs should get preferences otherwise reserved for LDCs if a majority of the REC's members are least developed.
In the context of the continuing Doha round of international trade negotiations, the US and SA might press for rules allowing such RECs to put off making commitments on access to their own markets for five to 10 years, giving their members time to agree on a common external tariff, to which they could commit as a group. Upcoming meetings between US and South African officials may provide an opportunity to flesh out these ideas.
Barber is US country manager for the International Marketing Council.
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