TRALAC - Trade Law Centre

Opinion Piece: Where are Africa’s trade soldiers?

Monday, 11 May 2009

Source: This Day (Nigeria)

Someone in the Obama Administration may be reading THISDAY. Readers will recall that, back in January, I predicted that once members of Obama’s trade team were in place, they would utilise existing avenues of communication and continue the dialogue of their predecessors.

In late March, newly-confirmed U.S. Trade Representative Kirk met, on separate occasions, with Mozambican Minister Fernando and Nigerian Minister Udenwa to discuss implementation of the African Growth and Opportunity Act (AGOA), World Trade Organisation (WTO) negotiations, improvement of trade with the United States, and other trade-related issues. In April, Assistant U.S. Trade Representative for Africa Liser, a long-time USTR Africa official, met separately with Rwandan Minister Nsanzabaganwa and Mauritanian Minister Boolell to discuss many of the same issues. All of these discussions were held under the Trade and Investment Framework Agreement (TIFA) that each country has with the United States – a pre-Obama trade communication mechanism.

An ongoing problem that exists, however, is the failure of African stakeholders to follow-up with trade officials when things do not go as promised. As many of these high-level meetings go, certain agreements are made in principle, pictures are taken, hands are shaken, and both governments proclaim the meeting to be a resounding success. However, once the officials leave and the time for concrete action arrives, the promises and agreements seem to disappear and give way to “more pressing” priorities. At the end of the day, everything remains as it was before.

What about all those businesses that took action in reliance on what was being promised? Or what if action – such as exporting - cannot be taken because of a “new” measure being taken against shipments from certain countries? Outside of Africa, if a business is being seriously impacted by a trade-inhibiting matter, they send in their trade soldiers in the form of lawyers, consultants, or home government officials, to raise the issues and fight the battles. With African-based concerns, however, this is not the case. There seems to be a fear or perceived inability to confront the guilty parties when a trade wrong has been committed. A perfect example of this has been the recent discussion in the United States regarding the creation of a unified trade preference program that would offer one tier of benefits for all developing countries – or one GSP for everybody. African stakeholders stand to lose many of the AGOA gains they have obtained over the years when placed on equal footing with non-African players. This could have a devastating impact on those stakeholders that have invested in a certain industry or business in reliance on receiving AGOA benefits.

Take for example Kenya’s textile sector. Kenya was one of the first AGOA beneficiaries. In recent years, Kenya has come down of its peak U.S. shipment years in a number of textile categories (e.g., men’s and children’s clothing). The main reason for this is a loss of sales and market share to other textile-producing countries such as China, Bangladesh, Pakistan, and Cambodia. In 2009 alone, Kenyan shipments to the United States in certain categories are down 34%, while shipments from Bangladesh and China are up 21% and 40%, respectively. And this is with AGOA benefits.

If AGOA benefits are taken away, Kenyan textile shipments could exit the market altogether. Why isn’t the Kenyan industry sending out its own trade soldiers and defending itself in this market share battle?

There are four main excuses that are routinely given in response to the ‘why’ question.

First, there is the issue of taking on Europe, China, or the United States over a trade issue. The belief is that only a developed country can take on another developed country. Developing and lesser developing countries, such as those in Africa, cannot do this because they rely on the West for aid. If challenged, the belief is that the aid will be taken away and this money is needed to support a number of in-country efforts – be they trade-related or not.

This is one myth that is long overdue for retirement. Today, Africa is a key destination in terms of trade. African economies have grown at an annual rate of 5% over the last few years and will continue to grow even during the present economic downturn. This means that African countries are both buyers and sellers that the developed world needs. If anything, it is Africa today that the West cannot live without.

Western governments will NEVER reduce aid when confronted with a trade issue. Thanks to the Internet and other electronic media, the world is watching now more than ever before. If a Western government were to threaten a reduction of aid over a trade issue, this would be reported in every major publication in the world and would hit the blogosphere like a tidal wave. It would be a political hot potato and the public backlash would force them to back down from the threat. Rather than shying away, African stakeholders should begin leveraging this new reality and using it to enforce their trade rights.

Second is the issue of capacity. African stakeholders claim to not know enough about the international trading system or another country’s laws to enforce its rights. Isn’t that what trade soldiers are for? They are the ones with the technical knowledge and institutional expertise to do what is needed. And over time, with enough trade battles fought, those lacking in capacity develop the necessary skills to be able to fight the battles themselves.

This is exactly what was done in countries like Japan, Brazil, India, and Australia. South Africa, Uganda, and Ethiopia are now starting on this path. How did these countries do it? By getting directly involved and standing up for themselves when being wronged. It wasn’t until they (with their trade soldiers) stood up and fought that Western governments began to take their complaints seriously. And, you know what, they started winning.

The third alleged stumbling block is the lack of finances. Fees can run quite high depending on the complexity and length of the dispute. How can this be afforded? There are a number of resources available now to those looking to correct trade wrongs that finance can no longer be used as an excuse.

At the WTO, there is the Advisory Centre on WTO Law (ACWL) that assists lesser developing countries in trade dispute settlement. There are also a number of law firms and consultancies that are willing to represent companies and countries at fixed or reduced fees. Contingency arrangements can also be made. In other words, fees do not have to be paid until there is a favorable result, in which the law firm or consultancy would get a percentage of the result as payment. (One note of caution: as with all things in life, the cheaper the deal, the greater the chances that the quality of service will be low. If it sounds too good to be true, it is.)

Also, when it comes to trade, companies being wronged are not alone. There is often a company in the exporting or a neighbouring country that is also being impacted by the same trade measure. These companies can join forces and devise a financing mechanism to address cost. Finally, and not insignificantly, a wronged company can partner with a customer in the destination country and work with that company to fee-share or spread the costs. These are just a few examples. The main point is that there are a number of options that did not previously exist to make the “cost excuse” more myth than reality.

Finally, there is the culture excuse.

In Africa, it is not common to confront/litigate when a wrong has been committed. To that I would respond – there must be some litigation when there is a private wrong; otherwise, lawyers would not exist.

Also, despite everything that has been said above, litigation is not the only solution to trade disputes. Oftentimes, just addressing the issue, in the proper forum and in a manner that will yield the quickest and most effective result, is enough to have the impacting measure removed or modified in a way that is beneficial to the exporter. However, Brussels, Tokyo, and Washington only respond when the arguments are made legally and forcefully, rather than diplomatically. There is an old adage in the West: he who speaks loudest always gets heard. Lawyers do this; ambassadors do not.

Once all the myths and excuses are dispelled, the bottom line is simple – African stakeholders are long overdue in asserting and enforcing their applicable rights against the West and the tools are readily available for them to begin doing so. The time to wait and simply endure (with a smile) is over; the time to act (smile optional) is now.

By Victor Mroczka,

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