TRALAC - Trade Law Centre

New demands on trade likely to hurt African exporters

Monday, 02 March 2009

Source: Business Daily

The volume of African exports is set to drop by half as Europe and America roll out rescue packages for their bankrupt corporations laced with inward-looking trade policies that require them to buy raw materials from the domestic market, analysts said.

The decline is expected to come from America’s insistence on using its bailout cash to buy local and ongoing labour market restrictions in Europe that have only tightened with the financial meltdown.

African exporters are likely to be hit hardest by the buy American clause in US President Barack Obama’s stimulus package, which wants firms benefiting from the rescue money to buy raw materials domestically.

Chileshe Mulenga, an analyst with the Institute of Economic and Social Research at the University of Zambia, says these clauses will hit African exporters of primary goods to Europe and America hardest because they amount to non-tariff barriers to trade.

“Should America go ahead with this policy, African exports to the US market will drop and the gains recently made under the African Growth and Opportunity Act (Agoa) reversed,” he said.

Economists see pressure for American firms receiving bailout funds to buy local as a major reversal in the drive for an open global trading regime that has been the main driver of economic growth in the developing world over the past decade.

The stimulus packages are expected to hit even harder countries like Zambia that are dependent on exports of single commodities such as copper.