TRADE: Africa Still the Odd One Out
While globally trade agreements are more and more about linking production chains between countries and continents, Africa remains locked in a struggle to overcome the colonial legacy of fragmentation, trade experts say.
'It’s no longer a world of them and us. Countries are all part of the same production chain, so by practicing protectionism we would shoot ourselves in the foot,' said Chief Economist of the World Trade Organization (WTO) Patrick Low.
Speaking on Thursday at the two-day Trade Law Centre of Southern Africa’s (Tralac) annual conference in Cape Town, Low said preferential trade agreements (PTAs) are less and less about tariffs and increasingly deal with ‘deep integration’, or linking production networks.
Low referred to the WTO’s World Trade Report 2010 that shows that 87 percent of trade conducted under PTAs enjoys a preferential margin of just two percent. And only 16 percent of world trade is subject to preferences.
'It’s no longer just about opening markets, but about subtle ways to create a competitive environment for your industry. By engaging in such deep PTAs, trade within production networks has gone up by eight percent,' said Low.
However, this does not apply to Africa.
'Africa does not fit into this pattern. Rather than accommodating production networks, it is locked in a struggle to overcome the colonial legacy of fragmentation. PTAs in Africa are therefore rather shallow and do not necessary lead to deeper integration,' observed Low.
An analysis of global trends in PTAs shows they increasingly facilitate the removal of obstacles to cross-border production. They are highly private sector-driven, with a buy-in from government and with domestic regulation supporting regional developments. They also often go further than what the WTO prescribes for free trade.
In Africa, said trade law expert and Tralac associate Gerhard Erasmus, PTAs are motivated by post- colonial politics and characterised by a top-down government-led approach. Africa also pursues a linear model of trying to move from Free Trade Areas (FTAs) to a customs union and ultimately a common market. This is not always realistic and results in ‘messy’ FTAs without the proper monitoring and enforcement of rules.
For instance, the Southern African Development Community (SADC) is in name a FTA, but it continues to suffer from numerable trade barriers.
'A truck driver shipping goods from South Africa to the Democratic Republic of Congo will be, for instance, held up at a border by obstinate officials citing improper documentation and be forced to abandon the truck.
'Upon returning to the border post, after months of unsuccessfully trying to seek redress through the courts, the truck will be gone and so will the merchandise,' Erasmus said of the daily challenges private sector players face.
Development of services, such as a cost-effective transport sector, is largely avoided in the extensive trade talks African countries have engaged in over the past decade. Yet without them, trade suffers.
'For example 40 percent of Rwanda’s export income is gobbled up by transportation costs,' said Erasmus.
'Africa continues to be preoccupied with trade in goods, rather than embracing a deeper regional integration agenda like elsewhere in the developing world. Talks are mostly state-driven with both the private sector and civil society occupying a peripheral place. The private sector should be engaged to boost deeper integration,' said Tralac Director Trudi Hartzenberg.
© Inter Press Service (2011) — All Rights Reserved. Original source: Inter Press Service