17 October 2018

Africa: Trade Contradictions Could Cost the Continent

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analysis

The future of Africa will be significantly shaped by two major accords: the post-Cotonou Agreement with the European Union (EU) and the African Continental Free Trade Area (AfCFTA) deal. But backtracking by foreign ministers from some African states who don't want the AU Commission as the lead negotiator with the EU could hamper the success of these agreements.

The 2000 Cotonou Agreement between the EU and the African, Caribbean and Pacific group of states is currently being renegotiated. The new contract will redefine how African (as well as Caribbean and Pacific) countries trade with EU member states.

Meanwhile, the AfCFTA could turn Africa into the biggest single market since the establishment of the World Trade Organization. It will represent a market of 1.2 billion people with a combined gross domestic product of over US$3 trillion and a growing middle class. The AfCFTA is projected to boost intra-African trade by 52% by 2022 and increase the volume of exchange by up to US$35 billion per year. By 2050 the African market will have grown to 2.5 billion people.

Both agreements hold enormous potential for the continent's social and economic development, its ability to the deal with structural causes of conflict (and prevent the eruption of more conflicts), and to harness Africa's demographic dividend.

Foreign ministers of some African states don't want the AU Commission to lead post-Cotonou negotiations

Those who support the AU Commission's leading role in both these negotiations believe this can only be realised if the continent takes a coherent, unified and determined approach - not only to these two agreements but also to the governance issues gripping Africa. For them, Africa's bargaining power lies in its unity, which will allow it to define how it wants to trade with others and with countries on the continent.

Earlier this year the AU Executive Council agreed on an African common position for the post-Cotonou negotiations. It was evident that fragmented cooperation with the EU was detrimental to the continent's integration and its socio-economic interests.

The council said Africa's interests couldn't be properly advanced within the African, Caribbean and Pacific group framework and committed to negotiating as one and signing a new continent-to-continent agreement. This position was confirmed by heads of state at the AU summit in Nouakchott in June.

At this summit, former United Nations Economic Commission for Africa head Carlos Lopes was appointed AU high representative to support member states in negotiations with the EU. The council met in September to consolidate Africa's common position but failed to reach agreement.

Not taking account of the distribution of power within the global economy is at best short-sighted

Some states back-pedalled on the earlier decision, arguing for the African, Caribbean and Pacific negotiation framework to be maintained. A report will now be submitted to the extraordinary summit of heads of state in Addis Ababa next month.

Chad's Foreign Affairs Minister Chérif Mahamat Zene summed up the outcome of the Executive Council meeting: 'Africa has unfortunately failed to agree on the way forward for negotiating as [a single] entity with the EU on post-Cotonou. National and sub-regional egos and prejudices have prevailed over the vital interests of the continent. Pity.'

A united EU negotiating with a fragmented AU doesn't favour the latter, and the benefits for the continent from a revised post-Cotonou Agreement are arguably now in jeopardy. The rationale for renegotiating with the EU as a single entity also applies to Africa's other partners, including China, Russia and the United States.

One of the AfCFTA's stumbling blocks is precisely the plethora of bilateral and regional agreements African countries have signed with various external partners, including the EU. Some of these deals, coupled with issues of poor governance and planning, have kept Africa's economies in the resource-extraction cycle. Not taking into account the distribution of power within the global economy is at best short-sighted.

One of AfCFTA's challenges is the plethora of agreements African countries have with various partners

It is believed that the AfCFTA will increase the volume of intra-African trade by US$35 billion per year. But according to the lower estimates, Africa loses US$50 billion per year in illicit financial outflows. Fixing that problem alone would provide much-needed capital for the continent to develop.

The latest UN Conference on Trade and Development report warns that 19th century trade patterns have persisted and that current approaches have contributed to growing economic inequalities worldwide.

'[T]he ability of lead firms in global production networks to capture more of the value added has led to unequal trading relations even as developing countries have deepened their participation in global trade,' it says. The report further states that while protectionism is not the answer, 'simple-minded calls for more trade liberalization are no substitute for development strategies either'.

African countries' failure to uphold their commitment to negotiate as one with the EU could be seen as a display of how far the continent still has to go in terms of regional integration and speaking with one voice. With a growing and youthful population, and increasing inequalities, Africa would do well to show coherence and consistency in how it deals with current and future challenges.

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