TRALAC - Trade Law Centre

African countries can benefit from more trade

Friday, 06 July 2007

Source: USInfo

African countries have much to gain from a global trade liberalization accord if they are willing to open up their economies to trade and investment and press other developing countries to do the same, according to a U.S. trade official.

Such an accord, negotiated under auspices of the World Trade Organization (WTO), “will open up tremendous opportunities for less-developed countries to expand their exports,” said Florizelle Liser, assistant U.S. trade representative for Africa.

But how much African nations can gain from trade liberalization will depend on how much more access to large emerging markets they can obtain and how far their own policy reforms will go to strengthen their international competitive positions, Liser told USINFO.

The WTO negotiations known as the Doha Development Agenda stalled again in late June, as talks among negotiators from India, Brazil, the European Union (EU) and the United States collapsed. Although U.S. and European negotiators had hoped to make real progress in Potsdam, Germany, the meeting broke up earlier than scheduled after Brazil and India strongly affirmed a hard-line position resisting cutting duties currently applied to industrial goods. (See related article.)

Least-developed African countries already enjoy preferential access to rich-country markets under programs such as the U.S. African Growth and Opportunity Act (AGOA) and the EU Everything But Arms program. For example, in 2006, more than 98 percent of U.S. imports from AGOA-eligible countries entered the U.S. market duty-free.

Therefore, Liser said, the Africans could gain most from increased access to big emerging markets, particularly in Asia.

However, in the Doha negotiations most African nations -- out of solidarity or shared past experience -- have aligned themselves with large developing countries such as Brazil and India, who are reluctant to lower their tariffs significantly, she said.

Liser said the United States and the EU Economic Commission for Africa have provided the Africans with studies that show what markets have the greatest potential for their goods, mostly agricultural products.

“If they analyze [this information] and draw appropriate conclusions, their negotiating position will be much more nuanced and will much better reflect their real economic interests,” Liser said.

She said African countries, as the largest regional grouping in the WTO, have significant negotiating power, yet they have taken a defensive stance on many issues, focusing on preserving and expanding preferences and special treatment.

A global trade liberalization deal would reduce the competitive edge some less-developed African countries currently enjoy relative to major developing countries under existing preference programs, according to U.S. officials and independent studies. But the net effect of a global trade accord would be an increase in real incomes in sub-Saharan African nations proportionately larger than in other developing or high-income countries, according to a 2006 World Bank study. Net farm incomes would rise substantially, alleviating rural poverty in the region, the study said.

African countries trade the least with each other of any regional group, something that leaves them largely ill-prepared for a more competitive global trade system, Liser said.

Even though a Doha agreement would not require most African countries to make substantial tariff cuts, the trade liberalization in Africa would bring substantial economic benefits by lowering barriers to intraregional trade, she said.

Several studies note the short-term costs from a global trade accord to less-developed countries, particularly net food importers and those with preferential access to rich-country markets.

Liser said these studies take a narrow view of the Doha round as limited to market access for goods. Actually, the round also aims to increase access for services and improve trade facilitation, all areas from which African countries can benefit, she said. This would be particularly true as they move from raw commodity exports to value-added goods, which generate more revenue but require more sophisticated financial, transportation and distribution services.

For many less-developed countries, Liser said, a WTO global trade liberalization deal also would provide impetus for politically difficult financial, legal and regulatory reforms necessary to put them on a more equal footing with competitors from other regions. Some nations such as Ghana, Mauritius and Tanzania already have initiated such reforms. But even they could benefit politically from a global trade liberalization agreement, she said.

The full text (PDF, 32 pages) of the World Bank report Doha Merchandise Trade Reform: What’s at Stake for Developing Countries? is available on the organization’s Web site at the following link (cut and paste into your browser):