Category Archives: Trade

Economic Partnership Agreements: Is Europe Under-developing Africa?

In 2004, I was in Lome Togo for a few months to work on my french and while there, I was introduced to an agreement between the European Union (EU) and African Caribbean Pacific (ACP) countries. The Lome Convention Agreement is also known as “Everything But Arms” (EBA), a process introduced by the European Union under which all imports to the EU from the Least Developed Countries are duty free and quota free, with the exception of armaments. The EBA had been the basis of ACP-EU cooperation for a period of time. It does have some stiff clauses and conditions which may be difficult to meet. Whether or not the the EBA entered into actually provides growth in terms of an increase in Gross Domestic Product (GDP) for ACP is the question for another day. The rule of origin put in place by the EU makes it difficult, so that the import from the developing countries is not full of impact as the capacity to begin and finish the production of apparels and other products do not apply. If things were different and ACPs had the capacity, they may have progressed tremendously in the export of bananas, sugar and rice. Unfortunately, many ACP countries import these products themselves and do not have the capacity to produce enough to feed itself.

Cassava Tubers Source: www.thenetworks.co.za
Cassava Tubers
Source: http://www.thenetworks.co.za

However, a few years after the new millennium, the Cotonu negotiations and agreement replaced the Lome Agreement. This was geared towards a more reciprocal agreement which would give the ACP and EU an equal opportunity to negotiate and enjoy mutually beneficial trade agreements that were in consonance with the World Trade Organisation’s regulations. The biggest outcome of the Cotonu Agreement is the introduction of a series of negotiations which will lead to the Economic Partnership Agreements (EPA). The EPA basically provides for the EU and ACP to have equal rights to import and export duty free and is being negotiated in blocks; South African Development Community (SADC), Economic Community of West African States (ECOWAS) and so forth. These blocks have been requested to conduct their negotiations themselves and thus it has turned into a regional affair, as the ACP is much too large for one single negotiation anyway.

Groundnut Sellers at a local Maraba Market Source:nairaland.com
Groundnut Sellers at a local Maraba Market
Source:nairaland.com

The WTO is regulating this as much as it could, although invariably, the WTO is made up of and funded by the countries with the highest GDP in the world. It reminds me of the voting on the Securuity Council of the UN before the invasion of Iraq by the US. But I digress. In negotiating the EPAs, I have followed the ECOWAS story very closely and I have struggled to find the light at the end of this tunnel. The countries that constitute the ECOWAS are all really small countries in the throes of famine and post-war reconstruction; Togo, Cote’d’Voire, Mali, Niger, Nigeria, Ghana, Liberia, and many more. Granted, there are a few relatively stable nations among them, or nations who could potentially be wealthy, had the mismanagement and corruption of governments not ruined their capacity for growth. Agriculture in the EU is already heavily subsidized. Imagine that all sorts of products and produce from the EU which may include fruit, chicken, fish,toothpick, soaps, flood the markets in the ECOWAS? The local markets and economy do not stand a chance.

Tailor Zaki Baushe Source: cartercentre.org
Tailor Zaki Baushe
Source: cartercentre.org

Let’s paint a picture here. My tailor charges $80 to make a lovely dress for me which I can wear to work or to a nice event. I was in the UK a few weeks ago, and it cost me half of that amount to buy a lovely dress which I wore to a wedding in London, and I saw dresses for a fourth of that price. The labour and the scale of production of these conglomerates in the EU (although loads of these factories have been moved to Asia) are so massive that they can churn out these dresses at a tenth of my tailor’s price. Imagine that the local market is flooded with those clothes duty free, the local market will completely die. My tailor Nnanna does not stand a chance if the EPA happens. Right now, he is not rich by any means; $100 per dress and all. He barely manages to get by, no thanks to the very high cost of production and business here as well as a tough business environment and lack of infrastructure. One of my dad’s oldest friends owns a poultry. He raises chickens and sells them to supermarkets in the small town where I grew up. He sells one large chicken between $10-$20, which can then be cut into small pieces for a family to use for one week, and he barely breaks even. Imagine that the market is opened and cartons of frozen chicken are allowed in (it is already happening, although they are being smuggled), and sold at a fourth of that price. How can anybody local compete?

Locally Produced Snack (Nkatie Peanuts) Source: nairaland.com
Locally Produced Snack (Nkatie Peanuts)
Source: nairaland.com

In theory, trade defense provisions will need to be negotiated, anti-dumping rules, and safeguard measures will be put in place in the negotiation of the EPA to encourage fair trade as well as the development of the world’s poorest countries. I worry though, that the EPA if signed, could destroy the economies of ECOWAS countries which are only just seeing the beginnings of a flutter before the flourish. The first deadline given to for 2008 has come and gone, it tells me that a lot of people are asking questions. These economies are being forced to liberalise to fast and too quickly and this could potentially pose a downhill turn to decades of baby steps taken towards development. A lot of these countries are very dependent on aid and cannot be liberalising their economies at this point. Why are they not refusing to negotiate? The countries voiced their objections, but the EU is not listening and the ACP cannot opt out completely because these trade talks are tied to aid and lending. It is my sincere hope that these issues continue to be flagged. A bad economy equals very poor standard of living for a people which equals non-existent human capacity development. If EPA is signed with economies that are not ready for competition with the almighty EU, the world will be worse off for it. Think about the influx of immigrants into the EU; legal and illegal, think about the drug problems, crime and potential sectarian and ethnic clashes that result from lack of opportunities and livelihoods.

Kano groundnut pyramid Source: superstock.com
Kano groundnut pyramid
Source: superstock.com

It is my hope that EPA is delayed by decades upon decades, while these economies are provided a fighting chance to improve themselves and gather momentum to compete with one another first, before being thrown in to compete with some G8+ nations.