January 26, 2008
2. Relaxed regulations would earn Africa more infrastructural investment
3. Anti-Chinese sentiment is on the rise in Lesotho
4. Ghana gets a raw deal from EPA
5. African Union worried over over 'divide and rule' effects of EPAs with EU
6. Removing trade tariffs is no solution to Africa's problems
7. Chinese building company to partner in African cement projects
8. Ivorian is new head of West African Economic and Monetary Union's central bank
9. SACU signs tariff MoU with India
''The main problem with the EPAs is that the European Union wants to go too fast with the negotiations, too fast with the regional integration in the ACP group, and too fast with the market liberalisation,’’ says Bénédicte Hermelin, research director at GRET, a Paris-based umbrella organisation of international cooperation groups.
The EPAs, supposed to take effect as of January 1, 2008, propose to create a free trade area between Europe and the 79 ACP signatories of the Lomé Convention. The convention goes back to the 1970s.
EU officials defend the EPAs as trade and development tools, as Peter Mandelson, EU commissioner for trade, has put it. In a speech on January 20, 2005, Mandelson described the EPAs as ‘‘potentially a crucial, hugely positive contribution that Europe can and must make to trade and development’’ in Africa.
The EPAs’ ‘‘purpose is the successful integration of the ACP economies in the global economy - and by that I mean putting the ACP on a ladder of prosperity that ends the grinding poverty which is the daily experience of so many ACP citizens,’’ Mandelson said.
But numerous ACP governments and European non-governmental organisations oppose the EPAs, for they consider them an instrument of ‘‘European economic neo-colonialism,’’ which would destroy these low developed economies by forcing them to open their markets to subsidized agricultural goods from Europe.
However, says Hermelin, at least regarding agriculture, ‘‘for Africa, the imports of poultry from Brazil are more dangerous than those from Europe.’’ Similarly, she says, Africa will still need to import milk from Europe for a long time, until its milk production can satisfy the local demand.
Other experts believe that the EPAs will strengthen Europe’s trade position in Africa at the cost of inter-Africa trade.
‘‘If African coastal countries, such as Senegal, completely open their markets to European agricultural products, then the Saharan countries producing livestock will lose their market shares in those neighbouring countries,’’ said Benoit Faivre-Dupaigre, an economics researcher at the French Institute for Research on Development.
Like Hermelin, Faivre-Dupaigre denounced the pace of negotiations on the EPAs imposed by the EU. ‘‘This fast-track liberalisation contradicts the experience of industrialized countries, which needed decades to build up their domestic markets before they opened them up to international competitors,’’ he said.
According to a study by the Paris-based Research Centre in International Economics (CEPII, after its French name), the impact of EPAs on ACP economies would be negative, if small.
On the one hand, the liberalisation of trade with the EU would represent a 22 percent growth of imports from Europe. But, if 20 percent of these new imports are blocked by the ‘‘sensitive products’’ clause, that growth would fall to 16 percent, representing some 3.5 billion euros in new imports from Europe.
However, these new imports from Europe would substitute goods the ACP countries presently bring in from the U.S., Brazil, China, Japan and other countries, thus reducing the new trade debit balance for the ACP countries to 1.8 billion euros.
As the CEPII notes, given that the ACP countries imported a total of 102 billion euros in goods and services in 2005, that new deficit is insignificant.
More important is the ACP custom revenues loss due to EPAs, as estimated by the CEPII. These losses could go up 3 billion euros per year for the ACP countries, with individual impacts going on from five to 35 percent of the state budget. In the cases of the poorest countries, such losses can be of enormous importance for states almost deprived of income, notes the CEPII.
Such data lead Roger Blein, French development advisor for the 15-member Economic Community of West African States (ECOWAS), to believe that ‘‘even if the impact of the EPAs would be modest, it is clear that the EU is trying to expand its market share in the ACP countries. ‘When the European Commission says that Europe does not have any economic interest in the EPAs negotiations, it is lying,’’ Blein added.
In general, French critics of the EPAs recall that while EU farmers do enjoy massive subsidies - some 50 billion euros in 2005 - small agricultural producers in the ACP do not. The French group ATTAC, for instance, argues that these subsidies for European agricultural goods already encourage overproduction and, if added to so-called free trade agreements such as the EPAs, will also promote export dumping. This will lead to the destruction of livelihoods in developing countries, representing a real and palpable menace for those countries' ‘‘food sovereignty.’’
ATTAC stands for Association for the Taxation of Financial Transactions for the Aid of Citizens and opposes neoliberal globalisation in general, from the World Trade Organisation to the policies of the World Bank and the International Monetary Fund.
In a position paper published last December, ATTAC recalls that the production of tomatoes in Ghana was affected by the structural adjustment programmes imposed by the International Monetary Fund in the 1980s and 1990s. ‘‘The import of tomatoes skyrocketed, from 3,600 tones to 24,000 tones,’’ ATTAC says in its paper.
This growth in imports led to ‘‘weakening of the Ghanaian farmers, traders and the food processing industry in the country’’. EPAs would launch a similar process in the whole of Africa, ATTAC claims.
African and foreign investors would readily provide a mix of public and private financing when governments ease regulatory barriers to enable such projects to earn a profitable return, AfDB development economist Samuel Onwona said in an interview.
"The money is there, provided we can help create the comfort level the private sector is seeking and iron out the policy rigidities," he said, adding traditional aid flows were too small to fund the energy, transport and communications ventures. "Financing Africa outside the official development assistance window -- this has to be addressed to open the floodgates for the funds to flow. This is how Asia did it."
He said the required multinational projects involved $9,5-billion of roads, $10,5-billion in energy and $1,95-billion in information and communications technology ventures.
Historically Africa's infrastructure has been geared to old colonial markets in Europe, resulting in economic isolation for the 40 percent of Africans who live in landlocked countries and starving local markets of cross-border roads and railways.
Another barrier to regional integration comes from a decades-old tangle of contradictory customs, foreign exchange and visa regulations erected by governments that often jealously guard their sovereignty in dealings with neighbours. The problems persist between many states despite the growth of regional African economic trading blocs.
"The money is no problem, so why is development not taking place in Africa when there is so much money around? Why is Africa attracting only 3 percent of global foreign direct investment when we have seriously lucrative economic activities. It is because we have these institutional rigidities that need to be harmonised," said Onwona.
"We have a lot of work to do to get the politicians on board...We are talking about regional infrastructure that will connect Africa," said Onwona, of the AfDB Infrastructure, Private Sector, Regional Integration and Trade department.
The AfDB, whose shareholders include Africa's 53 nations and 24 non-African donor countries, lends commercially to Africa's richest nations and lends at concessionary rates to poor ones from its Development Fund, financed largely by Western donors.
Last month donor countries agreed a record level of support for the bank's soft loan window amounting $8,9-billion for 2008-2010, a rise of 52 percent over the 2005-2007 period.
But Onwona said the money was "peanuts compared to the demand out there" and the AfDB could help the financing process by anchoring discussions between public and private donors.
"This is where the big money is, but that kind of big money does not chase social development, it chases very economically viable businesses," he said. "You are talking about road corridors, power, economically viable projects that do have a social impact. Putting the economic ahead of the social is not bad, if we can use that to scale up infrastructure."
But dwindling sales forced her to shut down last year, for which she blames the country's growing community of Chinese retailers. "Chinese are selling very cheap and not good quality things, and they are killing Basotho businesses," said Mabekhla, 59.
She now sells cigarettes and beaded jewellery on the sidewalk in the capital, Maseru. "The Chinese, they must go back home," Mabekhla said. "We don't want Chinese here."
Anti-Chinese sentiment is on the rise in Lesotho, making it the latest site of such ethnic hostilities in Africa. A growing number of Basotho blame Chinese immigrants for the ongoing poverty of the small landlocked country, which has few natural resources and depends heavily on remittances from workers in its giant neighbour, South Africa.
Mabekhla's reaction, stoked by opposition parties and local radio stations, is readily echoed from the streets of Maseru to remote villages. "If this government was not in power and we had a new government, we'd just take all the Chinese nicely out to the airport and send them back home," she said. "They are killing Basotho businesses all over! Up in the mountains you find Chinese; they are all over and they're killing us!"
China's ties with resource-rich Africa have created a growing class of Chinese entrepreneurs. China is now Africa's third-biggest trading partner; in the first 10 months of 2007, trade between China and the continent soared by more than 30 percent to US$58.7 billion.
The Chinese presence in Lesotho is not a new phenomenon. For more than a decade, immigrants from mainland China, Taiwan and Hong Kong have fuelled Lesotho's economy, as apparel manufacturers from Asia were drawn by tax incentives and rent discounts to attract foreign direct investment. Today these textile factories are the country's biggest employers, providing more than 40,000 jobs, according to the country's Ministry of Trade and Industry.
But the people who came to run these factories have in turn sponsored family members to come to Lesotho, where an estimated 5,000 Chinese now live. Many have set up general stores stocked with low-cost, imported goods, even in the most remote rural villages of the mountain kingdom.
Backed by a formidable supply and distribution network with direct ties to China, these shops often squeeze out local retailers. So, while ethnic Chinese make up less than 0.5 percent of the country's population of 2 million, they have become the country's most successful business community.
That has made them an easy target for dissatisfied locals. A number of Lesotho's residents told IRIN that the main opposition party, the All Basotho Convention (ABC), has been building a populist platform, partly by focusing on the success of Chinese immigrants.
On 26 November 2007, in what was arguably the most public attack on the Chinese, local street vendors, angered by a municipal campaign to relocate them to a designated market place away from the city centre, went on a rampage in Maseru, targeting Chinese-owned businesses. Many informal traders yelled anti-Chinese slogans and threw rocks at the windows of Chinese-owned internet cafes and stores because some of them had stayed open despite calls for businesses to shut their doors in solidarity with the vendors.
One local business owner, who asked to remain anonymous for fear of retaliation, said local radio stations had fuelled the antagonism towards the Chinese. "The day of the demonstrations, Harvest FM and PC FM were saying: 'We cannot tolerate what government is doing. We have to defend ourselves. How can Chinese run their shops while we are turned out of our country?'"
Martyn Davies, director of the Centre for Chinese Studies at Stellenbosch University, in South Africa, said that as China increased its presence across Africa, ethnic tensions would flare up when stoked for political ends.
Local business leaders say the government should take a more active role in training Basotho entrepreneurs to compete as the global economy comes to their doorstep.
Chinese retailers in Lesotho told IRIN they have no special relationship with government, and feel they are working to contribute to the country's economic growth.
"Some Basotho people think we take their business, but we think we help Lesotho grow as a country," said Chen Ke Hui, chairman of the Chinese Business Association of Lesotho. "We are not involved in politics, we are just doing business."
Chen has lived in Lesotho for 16 years, and by his own account has helped more than 100 of his family members relocate here from China's Fujian Province. In that time, he has become a leader among Lesotho's business elite. He owns a handful of wholesale and retail shops, selling shoes, blankets and cooking pots - all imported from China. He has also become the biggest distributor of liquefied petroleum gas, the fuel many Basotho use to cook and heat their homes.
Chen said he has built deep relationships with his employees. "Lesotho is my second home. I work with Basotho people, I eat Basotho food, I speak the Sesotho language. We're very happy. We enjoy it here."
Chen said he did not feel any hostility from local people. He is known by his employees by his Sesotho name, Thabiso, and is an honoured guest at their weddings and funerals. In fact, Chen and his family have given up their Chinese passports to become naturalised citizens of Lesotho.
But as long as widespread poverty persists in the country, some of their new compatriots will see the Chinese as competitors.
The Ghana Government and the European Community initialed what they called a "stepping stone" Economic Partnership Agreement, which they expect to sign by 30th June, 2008 at the latest.
Contrary to the proclamations of both parties, the agreement is in fact a quick-sand agreement, with the Government of Ghana trapped into dangerous commitments, most of them unnecessary.
The agreement commits Ghana to liberalise an overwhelming proportion of its imports from the EU even as there is no clear basis for deciding how and which sectors of the economy will perform under this situation.
By initialing such agreement, the government has signaled an intention to move in a direction which is negative to the overall interest of Ghana, both nationally and within the West African region. This orientation must be reversed.
One major element of the Agreement is the commitment by the Ghana Government to eliminate tariffs on products imported from Europe. But there is no explicit specification of the precise scope of goods to be liberalized.
By the terms of the agreement, the Government committed itself to a schedule by which different tariffs on different categories of products will be removed at different times. For some of these products, all tariffs must be removed in five years, starting from as early as 2009. For others, the tariffs must be eliminated by 2017; for others 2022. In relation to a final category of products, the Ghana government may chose to remove tariffs after a period of 25 years.
However, the agreement does not specify what total percentage of goods should be liberalized according to the schedule adopted. This is only implied in the categorization of the goods for liberalization which was supplied by the European Union, according to which about 20% of imports fall under the category of goods not to be liberalized. Thus by accepting the categorization of goods, the Ghana governments accepted the EC's demands that Ghana should remove tariffs on 80% of imports from the EU.
The danger of accepting this means of establishing the scope of liberalization is what it allows the EU to do; what it has done in relation to other regions like the Pacific and East Africa: progressively expanding the coverage far beyond its own stated demand of 80%.
As many reputable institutions like World Bank and the IMF have warned, removing tariffs even on 80% of European goods will damage domestic producers, government revenue and the economy as a whole.
Even the categorization is hodge-podge. Goods that appear in one category which is supposed to be subject of schedule of liberalization make appearance in categories with other schedules. Examples such as textiles appear in the categories in relation to which tariffs are supposed to be removed by 2013; as well among goods supposed to be liberalized by 2017; and even among those that are not meant to be liberalized.
Moreover, the rationale for the categorization itself is not due to any rigorous specification of the needs of Ghana's economy. Rather, goods are thrown chaotically together, applying such ambiguous criteria as "poverty reduction," luxury goods," even when they relate to sectors where domestic producers are most likely to suffer damage.
Thus in category A where goods are supposed to be liberalized in order to support poverty we find listed second-hand clothing. In the same category, however, are sewing machines. Whatever the logic, it does not strike those who did the groupings that it is precisely the surge in imports of second-hand clothing which have destroyed the sector of small-scale seamstresses and tailors who usually cater to the poor, and are themselves among the poor, and to whom liberalization of sewing machines could be targeted.
This has happened to such an extent that most tailors and seamstresses occupy themselves with re-fitting imported second-hand clothes.
Another product in the same category is essential oils. In relation to this, it has been found that removal of tariffs to zero will lead to an import surge of 57%. Since tariffs are supposed to be removed to zero by the year 2013, it means that by that year, sectors like the oil palm industry, which employ several thousand peasant out growers (not to talk of domestic industry which have invested heavily in this sector), will face an import surge of cheap EU products by 57%.
Thus in the category where tariffs are supposed to be removed for the sake of poverty reduction are sectors which support the very poor in their jobs employment.
All the above go to show that the Ghana Government's commitment on removing tariffs on EC imports was done with only a very fragile basis in fact or economic analysis.
It validates the position of civil society, and affirmed by the ECOWAS and the government itself in October, that Ghana was not in a position make decision on tariff liberalization in a manner consistent with the needs of our economy. The government simply accepted the EC's demands, which have been demonstrated as dangerous to the overall development of our economy.
Furthermore, the Government has made concessions on issues which are not necessary for tariff liberalization. One example is the agreement by the Government to give up its right to charge duties on exports. According to the agreement, the Government will not introduce new duties, nor will it raise the current ones to a high level.
This can only be varied in emergency conditions, after consulting the EC. Thus the Government has given up a policy which governments all over the developing world, use when necessary to discourage the excessive export of locally produced materials in their raw form, so as to encourage value-added processing and export. Elimination of export subsidies was never part of the EPA agenda, nor is it called for under WTO where the EC has failed in its demands to change the rules.
Apart from goods, the Government also made commitments on issues not related to trade in goods at all. These include issues of investment, competition, services, and intellectual property. In these controversial areas of negotiations, the Ghana government agreed to support negotiations of these issues at the West Africa level.
Not only are these issues not necessary for an EPA agreement. In addition, there is controversy as to whether some of these issues - for instance investment and competition, should be included in the negotiations at the West Africa level, with Ghana actively among those countries opposed to negotiating them.
The decision taken at the regional level was that West Africa will adopt its own policies on these issues, and only later will it consider whether they should be negotiated as part of the EPA. However, the current agreement commits the Ghana government to negotiate these issues once the West African policy is adopted.
Thus the Ghana government has committed itself to promote negotiation of the very issues within West Africa which it has itself rejected. This deepens the impression of Ghana as Trojan horse of the EC within West Africa. This not only jeopardizes the role of country in the region, it also undermines its own future negotiating position.
Others include issues such as technical barriers to trade, sanitary and phyto-sanitary standards. These were all unnecessary to be included in an interim agreement. In putting these forward, the EC was hoping to anticipate the negotiations with its own views. As in all the interim agreements with other African countries, the EC got real concessions from Ghana while offering little in return.
Though leaders across the divide acknowledge the importance of the interim trade agreements, there has been concern that the pacts portend a “divide and rule tactic” by Europe that is against the long-term interests of the continent.
Opponents of the interim pacts point to the disquiet that has emerged in the Common Market for Eastern and Southern Africa (Comesa) where some member states entered into agreements with Europe to the exclusion of others. This, they say, could befall other trading blocs.
Although Comesa has been pursuing joint trade deals with the EU under the Eastern and Southern Africa (ESA) platform, only nine of the 16 member states have signed new pacts with Brussels— under separate platforms.
This has prompted the bloc’s Secretariat to raise the red flag over the threat that such moves by member states pose to its future. Comesa is now demanding an urgent review of the interim pacts to forestall a possible fall out among member states. A recent meeting of Comesa’s Regional Negotiation Forum (RNF) held in Lusaka, Zambia, described the situation as “grim.” Its verdict was that the interim arrangements were potentially dangerous to Africa’s regional integration agenda.
“It was agreed that ESA should consider ways of preserving its regional integration objectives by ensuring co-ordination and harmonisation of negotiations with Southern African Development Community (SADC) and East African Community (EAC) groupings,” the forum said.
“The Comesa secretary-general or ESA Council chairman should make a submission to the AU on how EPA should not undermine regional integration,” the forum said. It has emerged that the AU leadership has now invited Comesa’s top organs to make a presentation at the Summit in Addis Ababa to “enlighten leaders on what is at stake” following the signing of the interim pacts in the run up to the World Trade Organisation (WTO) December 31, 2007, deadline.
Based on the case study presented by Comesa, the AU could flex its political muscle and leverage to propose a review of the provisions of the interim pacts in the run up to the signing of comprehensive EPAs later this year. Of interest to the AU will be the exclusion from the final agreement certain clauses that are deemed to work against regional integration efforts in Africa.
Besides, the AU is also said to be keen on a final pact that will ensure that all members duly benefit from development assistance packages that comes with the EPAs.
Mr Mwencha said although the interim deals had helped countries like Kenya to avert disruption of trade, they had failed to address the critical aspect of development and instead driven wedges among African states. “Our understanding is that the interim trade pacts largely addressed market access. The development component is very weak. Everybody is not happy with what came out from the Brussels talks,” he said.
Mr Mwencha gave the example of Europe’s Euro5 billion development assistance offer to the Comesa region in the next six years, against a costing budget of Euros 27 billion.
“They are not willing to talk of any extras on development and instead cite the EDF (European Development Fund) which has always been in existence. There is nothing new,” he said. “This is why we need to take hard decisions now and not wait to regret later.”
Business Daily Africa
Removing trade tariffs is no solution to Africa's problems; it is a can of economic worms as it cuts government revenue, worsens trade deficits and poverty.
In May 2007, 53 per cent of all of the Uganda Revenue Authority's income was from imports. Without import duties levied especially on finished goods that are also produced in Uganda, and ostentatious goods, how will government fund roads, hospitals, drugs and arms without donors?
Whereas Europe can depend on indirect domestic taxes levied on red light districts, casinos, tobacco and alcohol, Uganda cannot remove import duties because its per capita income is less than $400, meaning that less than 1 per cent of all Ugandans have entered a casino.
Uganda has an increasing trade deficit of $1.4b. Trade deficits cause massive lay offs as imported goods subject domestically produced goods to competition, forcing sub optimal capacity utilisation and laying off workers.
This malignant tumour in the Ugandan economy is the reason why impressive growth rates have not translated into better welfare for many Ugandans (Gross domestic product is an inverse function of the trade deficit). Removal of import duties will encourage consumption of imports, worsen the trade deficit, jobs will be lost and markets for agro produce will dwindle. Poverty will worsen.
Before import duty is removed, consumers should have sufficient purchasing power to spend and pay indirect taxes without the consumer feeling the tax burden.
This requires industrialisation. In fact, Europe's industrial development was shaped by very fierce protectionism called "Fortress Europe" during which period Britain levied an average tariff of 32 per cent, France developed its current agricultural protective system, Bismarck dumped the German Free Trade Policy and average industrial tariffs stood at 19 per cent in Europe.
More so, Intra-African trade liberalisation needs a cautious approach since the EU has already signed free trade areas with leading African economies such as South Africa and Egypt. Removing tariffs on goods from South Africa, in the absence of appropriate rules of origin means offering the EU duty-free market access to Uganda yet "EC" has no offensive trade interests in Uganda. Why offer a lift to a rich man who has several Rolls Royces?
The principle of asymmetry has to come into play when discussing removal of trade tariffs and any other trade controls in Africa. Some countries are at higher levels of development because of advantages bestowed upon them by European colonial masters. Full and immediate liberalisation of trade with such countries can only mean jobs lost in Uganda.
In conclusion, in lieu of liberalising Africa's trade, if the EU is interested in enabling Africa to benefit from world trade, the EU must compensate Africa for the damaging effects of liberalisation implied in the Economic Partnership Agreements.
Africa's true allies will not be those who impose liberalisation, but those who help Africa adjust to the liberalisation by solving its supply side constraints by, for example, building the big dam in neighbouring Congo (this dam if built, will reduce cost of power in Central and Eastern Africa by 50 per cent), building an alternative route for Uganda's imports through Tanzania, etc.
These projects have been identified by Africa and are contained in the development matrix of the Economic Partnership Agreements Negotiations. It is unfortunate that the EC agrees to the development matrix but hates a detailed one that identifies the costs and exact projects. Africa seems to know its problems better now. Liberalisation is surely not the solution to our problems.*The writer is the director, trade Private Sector Foundation Uganda
Named China-Africa Building Material Investment Co., Ltd., the new company is making R&D, manufacturing and sales of a variety of building materials, including cement, in Africa. But this agreement will not take effect until the Chinese government approves.
Established on March 14, 2007, China-Africa Development Fund gained initial capital of USD 1 billion, invested by China Development Bank, and then the capital base was bolstered to USD 5 billion. Its task is to support the African countries to develop their agriculture, manufacturing, energy, communications, telecommunications, and urban infrastructure construction, as well as the development of Chinese business in Africa.
"The conference of (heads of state) decided to appoint Philippe-Henri Dacoury-Tabley as governor of the BCEAO", the Central Bank of West African States, said a statement issued at the end of a summit meeting.
Benin's Abdoulaye Bio-Tchane was also named president of the West African Development Bank (BOAD).
Bio-Tchane is currently the Africa director of the International Monetary Fund while Dacoury-Tabley represents Ivory Coast at the African Development Bank (AfDB).
The two-day meeting, already postponed several times, was seen as a test of unity among the mainly former French colonies in UEMOA both on the central bank issue and the region's trade deals with the European Union.
The Dakar-based central bank is currently run by Burkina Faso's Damo Justin Barro, who took over from Ivory Coast's Charles Konan Banny when he left in December 2005 to become his country's interim prime minister.
Banny has since handed over the premiership to former rebel leader Guillaume Soro.
Barro's nomination to the bank led to a contest between Ivory Coast, where President Laurent Gbagbo and his aides maintain the job has always been held by an Ivorian, and Burkina Faso and Senegal, whose leaders consider it is time for a change.
Ivory Coast, split since a foiled coup in September 2002 and a subsequent rebellion, has lost its role as UEMOA's driving force, but remains an economic heavyweight as the world's leading cocoa exporter, which also produces oil.
As petroleum producers, the Ivorians are less hard hit than other countries in the grouping by soaring world oil prices, but another divisive issue that faced the heads of state is finding common ground on economic partnership with the European Union.
Senegal's President Abdoulaye Wade has come out strongly against economic partnership agreements (APE) put forward by the European Union. He argues that far from being the "instrument for African development" presented by Europe, they will "totally open up African markets to subsidised European products."
Ivory Coast and Ghana have signed interim deals with the EU, accepting the new system in place of the preferential trade accords that expired on December 31, 2007.
The MoU will facilitate the expansion of trade between the parties by providing the mechanisms to negotiate a Preferential Trade Agreement (PTA) between them, in conformity with the rules of the World Trade Organisation (WTO).
SACU, the oldest Custom Union of the world, comprises of South Africa, Namibia, Botswana, Swaziland and Lesotho.
PIB - India
January 16, 2008
The impact of China on global manufacturing is certainly no under-reported topic, but the discussion usually focuses on the consequences for the US. One of my colleagues suggested that African textile and clothing firms have also taken a real hit, and that the culprit could be Chinese exchange rates. Other colleagues saw the decline as relatively mild and wondered, if Arvind is right, why we haven't seen more of a fall.
Of course, the big fact that jumps out at you when you look at industrial production in Africa is not the ups and downs, but just how little of it there is.
Rather than 'blame China' (regardless how well that blame may or may not be deserved) I wonder whether there are other culprits that account not just for the decline in, but the persistently low level of, African industry.
One thing that has always struck me in the African countries I have worked is that the real wages (i.e. wages adjusted for the cost of living) of African formal sector workers seem to be incredibly high, at least compared to that of workers in China or India. Given that firms in China and India seem to be more productive than their African counterparts, it creates a double disadvantage for African workers, and raises the question of why the situation continues. Why don't manufacturing wages fall in Africa, stimulating more jobs for more people at wages still higher than those available in agriculture or informal business?
Why, when I run a survey in rural Uganda, do youth with the same education and experience expect a wage three to four times higher than the youth I worked with in India? I don't begrudge anyone anywhere a living wage. It's the relative differential that puzzles me, and that could be keeping Africa from doing business globally.
There are probably lots of plausible reasons. Perhaps we ought to consider (and get data on) the informal sector in Africa, which could be larger and have more moderate wages than the formal sector ones. It may be that all my notions and data about African wages are erroneous.
Another possibility, however, is that the largest employers of skilled workers in most African countries are international NGOs and the local government. They are competing, in many cases, for the same pool of skilled and semi-skilled workers as the manufacturers and service sector firms. Neither the government or NGOs, moreover, seem to set wages according to the local market or local conditions, and it requires little imagination to wonder whether they set their wages higher than the market would normally do.
Could the government and NGOs be distorting local wage markets and pricing African industry out of the world market? I don't know, but this is a question some economist ought to start investigating.
I have seen the mechanism at work on a small scale in Kitgum, the town where much of my northern Uganda research was based. Large NGOs and UN agencies have begun to drive up local wages as they offer salaries and benefits many times in excess of the local norm. I don't know if firms have been crowded out by this rise, but I have first hand experience how smaller local NGOs (and research projects) cannot compete. I also can't help but notice that the best and the brightest pursue degrees in social work, not business. This is not necessarily a bad thing, but it does not feel terribly sustainable. You can't build a national economy on NGOs.
A similar concern pervades aid in general, of course. Some macroeconomists point to the undervaluation of the Chinese currency (its exports look cheap to the rest of the world) and contrast it to the overvaluation of many African currencies (so that their goods look expensive). The reason? Hard to say, but some blame aid inflows that are large relative to the size of the economy.
By this argument, the incoming funds create much needed roads or deliver humanitarian aid, but at the cost of stifling jobs and industrial growth because of rises in real exchange rates. Even farmers are hit hard by these forces, since their agricultural produce begins to look expensive to the rest of the world.
I don't know what the problem is, let alone the solution, but this is one subject not being sufficiently examined in academia or the media. I welcome references to existing work in the comments section.
The fund, financed by policy lender China Development Bank, was unveiled in June, honouring a promise made by Chinese President Hu Jintao at a summit with African nations in Beijing in November 2006.
In one of the four projects, the fund will work with Shenzhen Energy Investment Co Ltd to finance a power station in Ghana, the fund said in a statement.
Another of the projects will fund a glass factory in Ethiopia, and a third will support a joint venture ferrochrome plant being built by state-owned Sinosteel in Zimbabwe, it added.
The fourth will help China National Building Material Co invest in cement and glass production facilities around Africa.
The fund has initial capital of $1 billion which will eventually expand to $5 billion.
Western critics say China has turned a blind eye to misrule and corruption as it woos African nations with investment.
Beijing says the fund will focus on industries that are important to the development of African nations and the welfare of their people, including infrastructure, agriculture and manufacturing.
The unimaginable has happened, to the displeasure of arrogant Europe. Africa, thought to be so poor that it would agree to anything, has said no in rebellious pride. No to the straitjacket of the economic partnership agreements (EPAs), no to the complete liberalisation of trade, no to the latest manifestations of the colonial pact.
It happened in December at the second EU-Africa summit in Lisbon, where the main objective was to force the African countries to sign new trade agreements by December 31 2007 in accordance with the Cotonou Convention of 2000 which wound up the 1975 Lomé accords. Under these, goods from former colonies in Africa, the Caribbean and the Pacific are imported into the European Union more or less duty free, except for products such as sugar, meat and bananas, which are a problem for European producers.
The World Trade Organisation has insisted that these preferential arrangements be dismantled or replaced by trade agreements based on reciprocity, claiming that this is the only way African countries can continue to enjoy different treatment. The EU opted for completely free trade in the guise of EPAs. So the 27 were asking African, Caribbean and Pacific countries to allow EU goods and services to enter their markets duty free.
The president of Senegal, Abdoulaye Wade, denounced these strong-arm tactics, refused to sign and stormed out. South Africa’s Thabo Mbeki immediately supported his stand and Namibia also decided not to sign (bravely, since an increase in EU customs duties would make it impossible for Namibia to export or continue to produce beef). Even French President Nicolas Sarkozy, who made unfortunate remarks at Dakar in July 2007, supported the countries that were most strongly opposed to these agreements, saying he was in favour of globalisation but not the despoliation of countries that had nothing left.
The EPAs aroused wide public concern. Social movements and trade union organisations south of the Sahara mobilised against them. And the revolt against them bore fruit: the summit ended in failure. The president of the European Commission, José Manuel Barroso, was forced to back down and accept the African countries’ call for further discussions. He promised to resume negotiations in February.
This crucial victory is another sign that things are improving for Africa. In the past few years, the bloodiest conflicts have been settled, leaving only Darfur, Somalia and East Congo. Democratic progress has been consolidated and local economies prosper under the guidance of a new generation of leaders, despite social inequalities.
Africa has another asset in the form of massive Chinese investments. China will overtake the EU as one of the continent’s principal suppliers and could beat the US to become its most important client by 2010. The time when Europe could impose disastrous structural adjustment programmes is gone. Africa has had enough.
*Ignacio Ramonet is editor of Le Monde Diplomatique
Mail and Guardian
As a result, any good done by aid, the argument goes, is usurped by how the Union can imperil the livelihoods of small farmers or fishermen by flooding their markets with lavishly subsidised exports or by helping European vessels overexploit fish stocks in foreign waters.
Complaints of that nature were heard regularly during 2007 as the EU executive, the European Commission, sought to negotiate a series of free trade deals, or economic partnership agreements (EPAs), with the African, Caribbean and Pacific (ACP) bloc. While nearly 80 ACP countries took part in these talks, just 35 signed agreements before a Dec. 31 deadline stipulated by the Commission. Signatories have given an undertaking to open at least 80 percent of their markets to goods from Europe.
Shortly before assuming his duties as EU development commissioner in 2004, Louis Michel stated that the Union must ensure greater 'coherence' between its different policies that have an impact on poor countries. But how much progress has been made since?
Michel, formerly Belgium's foreign minister, spoke to IPS Brussels correspondent David Cronin.
IPS: In a recent report, the European Commission gave a positive assessment of the progress you have made on increasing coherence between development and other policies. Yet the report admitted that EU officials who are not specialising in development issues tend not be adequately informed about them. How can you improve that situation?
LM: Officials already know that when they are dealing with a dossier or propose a measure that will have an impact on developing countries, they have to provide details of their work to our services for development.
We've made considerable progress. Are there many more things to do? The main thing relates to agricultural subsidies. By 2011, 90 percent of subsidies given to agriculture will have no link to direct production. That will be a drastic reduction.
I believe the best way to ensure policy coherence is to affirm a principle under which the EU's development work is not only done by the commissioner for development or ministers for development. All ministers who directly or indirectly control a policy relating to development must play a role. I hope there will be meetings of ministers for trade, finance, education about using this unexploited potential.
IPS: Is it not an exaggeration to claim that there is now a harmonious relationship between the EU's policies on trade and development?
LM: The progress has been considerable. When we were negotiating the economic partnership agreements, we said to our (ACP) partners: 'You don't have to liberalise 20 percent of your trade, you will have 15 years to do so, in order to protect sensitive products.' If you do not think we have done a lot, look at how we have reduced agricultural subsidies. Look at how we allow sugar from outside the EU to come to our markets. These are significant. They are not acts of charity.
IPS: But the EU's new Lisbon treaty contains a clause committing the Union to abolishing all barriers that European firms face in doing business abroad. Memos prepared by the Commission have made clear that it regards strong environmental and safety rules in developing countries as barriers to trade, even though those rules could be in the long-term interests of those countries.
LM: I don't know what you are speaking about.
IPS: Before Christmas, I spoke to Rob Davies, the deputy trade minister in South Africa. He told me that South Africa refused to sign an EPA because the EU wanted it to contain a 'most favoured nation' clause (under which any trade preferences it agrees in future with major world economies would automatically be extended to the EU). He said that placing such requirements on South Africa would affect its national sovereignty.
LM: Evidently, it is a question of national sovereignty. But it's also a question of sovereignty for Europe. The European Commission and our member states provide 56 percent of all development assistance in the world. It is difficult to say that Europe should let our partner countries treat our economic adversaries better than us. We are generous but not naive.
IPS: I've spoken to activists from non-governmental organisations (NGOs) in Africa who contend that you have used the fact that Europe is such a major aid donor as a weapon to put pressure on developing countries.
LM: Pressure to do what?
IPS: To sign the EPAs.
LM: Jan. 1 2008 has passed and has there been a catastrophe? I don't know what the NGOs were speaking about.
It's true that countries like Senegal were against the EPAs and didn't sign. But Senegal is a least-developed country. (Under a scheme known as Everything But Arms), it has complete and total and unlimited access to our markets. It can flood Europe with its products without any quotas or tax. And it can hit goods from Europe with an import tax. I don't know what the problem was for Senegal.
IPS: Moving on to a different topic: biofuels. Jean Ziegler, the United Nations special rapporteur on the right to food, is worried that biofuels could be grown instead of crops that should be used to feed the hungry. What do you think about his call for governments to impose an international moratorium on setting targets for the increased use of biofuels?
LM: I agree with him.
IPS: But the EU has a goal under which biofuels will account for one-tenth of its transport fuel by 2010.
LM: The risks Mr Ziegler has spoken about are real. It's good to issue warnings on the illusions about biofuels. It is clear the use of forests for the manufacture of biofuels is dangerous. The use of arable land to produce the resources necessary for biofuels could be detrimental to agricultural production.
IPS: There have been studies suggesting that stocks of some fish in West Africa have declined by 50 percent over the past 30 years. The fisheries agreements that the EU signs with African countries have been blamed for this decline. During 2008, a new series of so-called fisheries partnership agreements with Africa will come into effect. Will they be any different?
LM: The finance given under fisheries partnership agreements is often more than development aid. For example, in the case of Mauritania, it is five times more than the financial 'envelope' for development. It is evident that we need a scientific evaluation. The Commission is taking this into account.
If the EU's trade policy is to fulfil its potential as a "powerful instrument for African development", its system of economic partnership agreements (EPAs) needs a rethink, argue Kalypso Nicolaïdis and Paul Collier for Open Democracy.
The January analysis highlights the "intense controversy" surrounding the EU's practice of negotiating EPAs with the ex-colonies of its member states, referred to as the ACP (African, Caribbean and Pacific) nations.
EPAs are special trade agreements which offer preferential market access and support for commodity prices and, in the authors' view, serve as an "instrument for post-colonial atonement."
Nicolaïdis and Collier argue that the EPAs must be reformed to make them compatible with World Trade Organisation (WTO) rules. A temporary accord was struck following the expiry of a waiver at the end of 2007, but the existing EPAs are in essence illegal, as they are neither reciprocal nor provided to developing countries on a non-discriminatory basis, they claim.
Thus there is an opportunity for "a welcome rethink" in 2008, state the authors. ACP countries, and particularly African ones, need a "credible means" of locking in their own future policies and "the reciprocity requirement of EPAs can provide such insurance" in the eyes of the world, they believe.
Nicolaïdis and Collier argue that ACP countries should apply most-favoured nation treatment to their liberalisation plan and negotiate EPAs with this in mind in order not to be discriminatory by setting lower tariffs on goods imported from Europe – a move which "would also be in Europe's long-term interest."
Moreover, they believe that ACP countries need improved market access to Europe, calling in particular for changes to the current scheme's "highly restrictive" rules of origin, which stipulate that "70% of content must be local" and prevent Africa from realising its manufacturing export potential.
Nicolaïdis and Collier conclude that the EPAs of the future must not force African governments to embrace policy change in which they do not believe in return for EU aid.
Moreover, EPAs should not be a device for the EU to "reintroduce issues like investment, procurement, trade in services or intellectual property" into the debate, they add.
January 10, 2008
2. Malawi's bumper harvest and donor hypocrisy
3. SADC Free Trade Area comes into effect
4. Zambian workers strike at Chinese-owned copper mine
5. African Union seeks common position on EPAs
6. South Korea considers free trade pact with SACU
The European Commission will unveil plans in the coming months for a partnership between the European Union and China over Africa, EU Development Commissioner Louis Michel said on January 9.
Michel said he would present the partnership plans after his first official visit to China in March amid mounting concern in Europe about the Asian giant's growing influence in the resource-rich continent.
In order that the partnership would not be drawn up "on the back of the Africans," the commissioner said he wanted it to be discussed together between Africa, China and the EU.
He did not elaborate on what form the partnership could take or what issues it could cover.
"The aim is to reinforce the partnership with China in Africa," Michel told reporters, stressing that "Africa has become a sought-after continent rather than a seeking continent."
Asked what interest China would have in such a partnership, Michel said the "African elite" was becoming aware about China's growing interests on the continent, which "would inevitably incite reactions."
"I have the impression that this idyllic relation between Africa and China is inevitably going to end," Michel said.
In the catastrophic harvests from 2001 to 2005, the government of Malawi -- under pressure from the World Bank and donors such as the United States and Britain -- eliminated nearly all its subsidies for fertilizer. The African nation then exported its diminished cash crops for foreign currency with which it was supposed to buy food (from subsidized French and U.S. farmers, as things turned out) for its starving peasants.
The result was the Malawi Revolution, a revolt against the supposedly "free trade" conditions set by foreign-aid donors. Malawi's president defied the World Bank and subsidized fertilizer and seed -- a course of action that has lifted farmers from poverty, nearly tripling crop outputs in two years.
Malawi was not rejecting free trade per se. But like other Third World agricultural nations, Malawi has found that free-trade policies that are supposed to help economies develop in fact seem to make subsidized cash crops from developed countries more competitive.
The World Bank says subsidies impede trade; underwriting seed and fertilizer would give Malawian farmers an unfair advantage. And yet American and French farmers, who are regularly subsidized by their governments, sell grain to Malawi. Is that fair competition? Or just plain hypocrisy?
Who can blame the cynical for thinking that the International Monetary Fund and the World Bank -- international institutions dedicated to promoting economic growth and eradicating poverty -- manipulate the rules to the benefit of rich nations? The Third World goose marches to the tune of Milton Friedman, while the First World gander plugs its ears and lets the subsidies flow.
In the end, even U.S. foreign aid gets distorted. According to a report in the New York Times last month, the United States has given Malawi $147 million in food relief since 2002 -- in essence, an undeclared subsidy to American farmers. But it has given only $53 million to help farmers in Malawi grow their own food. And not a nickel for the fertilizer subsidy program.
There are countless examples of the pernicious effect of donor hypocrisy. Argentina played by the IMF's rules earlier this decade, dismantling much of its social agenda as instructed, yet reaped not prosperity but the whirlwind. Not so long ago, ore-rich regions of Africa allowed the World Bank to pump money into mining and other extraction industries, and watched investors walk away with all the profits. The World Bank has since changed its tune, but the damage has been done.
Investors talk about "conditionality," meaning recipient nations must hew the free-market line to secure capital investment, even if that means cutting healthcare, food subsidies, social insurance and other popular government benefits. Only by challenging such market nostrums did Malawi's political leaders preempt potentially catastrophic economic and political consequences -- rural poverty, dependency on foreign food and even famine.
Malawi found a way out, but the danger elsewhere is that nations fed up with First World hypocrisy will throw democracy out with trade-and-aid rules. Argentina's experience made it easy for other Latin American leaders, such as Hugo Chavez, to be demagogues on free trade and undermine democracy through guilt by association. Chavez -- who has consistently thumbed his nose at free-market rules by manipulating the oil industry -- tried to leverage discontent with globalization and free trade to eliminate term limits on his presidency and obliterate constraints on presidential power. He came within a percentage point of getting his way in a vote last month.
In Iraq, free-market zealotry has contributed to the unfolding anarchy. After Baghdad's fall, U.S. administrators seemed convinced that democratization and privatization were the same thing -- that forcing free-market rules on the new government would enhance Iraqi autonomy. It did not, any more than it did in Argentina or Malawi.
The free market can contribute to economic development and even provide a basis for greater democracy, but only if the rules apply equally to the wealthy and the poor. And only if developing nations are permitted enough leeway to help their people (through subsidies, welfare programs or other government interventions) reach a stage at which they are capable of competing with First World economies that have had a century or more head start.
So if bickering U.S. presidential candidates are wondering why the Iraqi economy is in disarray, why Chavez is popular in much of Latin America and why so many people in the developing world see U.S.-led globalization and free trade as a form of servitude, they might take a careful look at Malawi's peaceful and successful economic revolution.
*Benjamin R. Barber is distinguished senior fellow at the think tank Demos and author of "Consumed."
The Southern African Development Community (SADC) Free Trade Area has come into effect as from the start of this year. This means most goods produced in the region can now enter member countries free of custom duties.
The products will now move freely among member states, but other countries will still continue with tariffs as they feel there is a need to protect some of their infant industries.
There are also fears that goods from large exporters like South Africa can swamp markets of small countries and therefore result in the collapse of industries. But the South African government says inter-state dialogue will be maintained to ensure that the declaration of SADC as a free trade area benefits all role players.
Economists say this is a step in the right direction. They say in the long term, the region will, when trading with other similar international organisations, negotiate from a strong position.
Authorities say importers will need to produce a certificate of origin, guaranteeing that the goods really do come from other SADC member states.
The employees of Chambishi Smelter, which is due to start processing copper from the Chambishi Copper Mine by August, began striking on January 3, ZNBC radio said. The Chambishi Copper Mine is a unit of China's NFC Africa.
"The workers at Chambishi Smelter are on strike demanding better salaries and other entitlements which include (ground maize) meal, transport and holiday allowances," it said.
The workers blocked the main road leading to the smelter to prevent both Zambian and Chinese managers from entering the plant and vowed not to return to work until their demands were met, said ZNBC.
There was no immediate comment from Chambishi Smelter management. The strikers are not members of any unions.
Copper production is Zambia's main economic lifeblood and the vast mines are a major employer in this southern African country of 12 million people.
Chambishi Smelter, which will cost more than $200 million to construct, is part of China's planned $900 million investment in the small mining town of Chambishi, which the government has turned into a tax free economic zone to attract Chinese investment.
The strike is the latest in a wave of industrial unrest since 2007 in Zambia's restive Copperbelt region.
After years of negotiations, the European Union had hoped to sign far-reaching economic partnership agreements (EPAs) with mainly poor former colonies before preferential trade terms expired on December 31, but most failed to reach a full deal.
Some African leaders have been critical of the proposed agreements, saying they were being strong-armed by Europe into signing deals that would be damaging to local economies.
But others who were anxious to safeguard their exports -- including cocoa and banana growers Ivory Coast, Ghana and Cameroon -- broke ranks last month and initialled 11th hour interim deals.
"We at the AU intend to hold a meeting of trade ministers in Addis Ababa before the end of next month to critically analyse the provisions of the EPAs and adopt a common position before comprehensive agreements are signed," AU trade commissioner Elisabeth Tankeu said.
"Africa must remain very vigilant and speak out with one voice. Hurrying to do things individually can lead to errors which the countries may regret in later years."
Critics of the interim deals, including aid organisations like UK-based Oxfam, say they threaten to blow apart the regional integration which the EPAs are meant to promote.
Tankeu said that disparities between the interim agreements struck with individual countries weakened the hand of regional blocs trying to negotiate with their European partners.
"It is regrettable that some countries have gone ahead to sign interim EPAs with the European Union," she told reporters. "At a meeting in Cairo last January all the countries agreed and appealed to the EU to delay the date for signature by one year so that we could reach a common position," she said.
The European Union insists that EPAs remain the best replacement for the trade preferences granted to nearly 80 former colonies, which have been deemed illegal by the World Trade Organisation (WTO).
A WTO waiver on the preferences expired on December 31, 2007.
As part of efforts to secure deals with six groups of African, Caribbean and Pacific states, the EU offered last year to remove all import tariffs for countries signing EPAs.
But many governments, aid groups and unions are sceptical about opening up African markets to too much competition.
Hundreds of government-backed protesters marched in Senegal's capital, Dakar, on January 7 against the proposed trade deals. The march organisers said similar protests were planned in other West African cities in the coming days.
South Korea is considering a free trade pact with the the Southern African Customs Union (SACU) to expand cooperative ties with resource-rich countries, the government said on January 8.
The Ministry of Finance and Economy said the establishment of a free trade agreement (FTA) with the five member union could promote Seoul’s efforts to participate in a greater number of resources development projects, while helping those countries build up vital social infrastructure networks.
Resource-poor Korea has engaged in the so-called packaged approach, where local companies build roads, railways, power generation and petrochemical plants in exchange for a chance to take part in resource development projects.
The ministry also said an FTA with South Africa, Botswana, Lesotho, Namibia and Swaziland would allow Korea to expand preferential loans and aid to African countries that can enhance the country’s positive image on the continent.
It said while soft loans and aid totaled $35 million and $26 million respectively in 2006, Seoul plans to increase the former to $700 million by 2011. Aid will be increased to 61 million by 2009.
Africa is gaining importance with global raw materials prices going up in the face of greater demand and dwindling supply. The continent’s undeveloped reserves of oil and gas and other resources have helped push up average annual economic growth to 5.5 percent in 2007.
Korea’s main rivals for natural resources like Japan and China have also stepped up efforts to strengthen ties with the region.
January 04, 2008
2. West African Economic and Monetary Union risks break up over EPAs
3. How Asia is "browning" Africa's technology
4. Why Africa is its own worst trading enemy
5. Why the world needs the World Bank
6. COMESA Censures EAC Over Trade Deal With EU
7. $500 billion aid spent on African road to nowhere over 50 years
8. West Africa to sign EPA with EU by June 2009
9. The unknown Africa of growth and business opportunity