TRALAC - Trade Law Centre

Africa’s worth in bilateral trade hinges on talks

Thursday, 07 February 2008

Source: Business Daily Africa

To reorient its economic policy towards Sub-Saharan Africa (SSA) and focus more on promoting American private sector involvement in Africa and to increase the role of trade and investment as vehicle for supporting African economic development, the US came up with the African Growth Opportunity Act (AGOA).

The shift in economic policy was based on the realisation that aid, its exclusive policy for promoting development and advancing American interests, had been inadequate, given the need to establish real partnerships dictated by the neo-classical paradigm. The idea was to create a unified global economy, hence the demand for further liberalisation that would enhance international trade, foreign investment and global economic cooperation.

The paradigm is designed to act as an incentive for Western companies to tap into markets in the developing world by creating conditions under which these companies will, feel at home. Those conditions include market liberalisation, privatisation, and limited state participation in the economy.

The message to developing countries is they stand to gain from more trade rather than less trade. The reality, however, is that Western companies benefit a lot more from freer trade in comparison to SSA. Developing countries had to undergo painful adjustment processes to attract foreign investment.

The question then is, what is in it for SSA in general and Kenya in particular? There was apprehension, and rightly so, that the policy made no attempts to be sensitive to the peculiar demands of economic development imposed on African economies.

Examined from a developmental perspective, SSA countries do not stand to gain much from the extended trade benefits under Agoa unless their capacity to produce and supply the US market is enhanced. Trade arrangements ought to be consistent with SSA countries’ industrialisation strategies which dictate selective market liberalisation.

A SSA country will not be eligible to participate in programmes and projects or receive assistance under the Agoa unless the President of the US determines that; it has established or is making continual progress towards a market based economy, the rule of law and political pluralism, amongst others.

A perusal of the Agoa reveals that it gives the US considerable discretion. While the Act is inadequate in several respects, it should be noted it is but a minimalist first step towards a meaningful US-SSA trade. SSA countries, therefore, should negotiate more suitable bilateral trade agreements.

By Emmanuel Wetang’ula