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What NEPAD implies for African policy makers
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3. Theme 3: Capacity building and market access for deeper integration into the global economy
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Trade is a vital engine for financing development, growth and poverty reduction and, hence, a key component of NEPAD (Para 139). Finance ministers often overlook the important role that trade plays in financing development. For instance, of the developing countries GDP in 2001, 34 % came from the exports of goods and services. For sub-Saharan Africa, the figure was higher at 40 %. Clearly trade earnings are a major inflow of resources into African economies. Developing countries that have intensified their links with the global economy through trade and investment have tended to grow more rapidly over a sustained period and have experienced larger reductions in poverty than other developing countries. Unfortunately, many African countries have not shared in the benefits of globalization and still lag in trade growth and in policies and institutions conducive to the integration process.
To be emphasized is that gaining the benefits from trade is far from automatic. A country's social and institutional preconditions determine whether the benefits from trade can be reaped for the entire populace. That is why trade is not just a matter for trade ministers. It is also at the heart of the agenda for finance and development ministers.
A world trade regime that is good for development would provide greater market access to developing countries. Expanding market access for African countries' exports is a clear priority and must be complemented by a concerted effort to ensure that all countries, including small islands and other countries facing special challenges, are in a position to benefit from increasing trade liberalization. That global trade regime would also give developing countries the policy space to allow them to make institutional innovations in promoting domestic production and finance. Clearly one size does not fit all in the rules being devised by (developed-country-led) the World Trade Organization ( WTO).
Africa requires access to international markets
Tariff and non-tariff barriers imposed by rich countries, together with the agricultural subsidies that they give to their farmers, cost developing countries much more than the $57 billion that they receive in foreign aid every year.
WTO calculates that abolishing OECD agricultural subsidies would provide developing countries with three times their current ODA receipts. WTO has calculated that the elimination of all tariff and non-tariff barriers could result in gains for developing countries of around $182 billion in the services sector, $162 billion in manufactured goods, and $32 billion in agriculture. Such issues are of particular importance at a time when the United States has passed legislation to increase its agricultural subsidies by some 80 %, providing nearly $200 billion of subsidies to its farmers over the next 10 years under the new Farm Act, a move that will rob African countries of export opportunities and potential trade earnings.
Expanding market access for manufactured goods, agricultural commodities, and services would generate large income gains in developing and developed countries alike (see Box 4 below). Such gains would be greatest if the very significant barriers to trade in developing countries were also reduced. This suggests the need for broad-based reciprocal liberalization of trade in goods and services, that is achievable only through a new WTO trade liberalization round. Indeed, for the key trade issues facing developing countries, a new trade round with an appropriate focus on development would offer the best solution.
Tariff peaks-rates above 15 %-are often concentrated in products that are of export interest to developing countries. Two sectors that matter most from a developing country export perspective are textiles and agriculture. Although textile quotas will be abolished by 2005, tariff barriers in this sector remain high. High tariffs for agricultural commodities and continued subsidization of agriculture in many OECD countries also have detrimental effects on agricultural exports and world commodity prices. In addition to labour-intensive manufacturing and agriculture, barriers to trade and investment in services remain high. These barriers, which impede service exports and reduce the competitiveness of developing countries, should be high on the market access agenda.
Gains from reciprocal market access achieved through a new trade round will take time. Given the urgent needs of most African countries, a good case can be made for OECD countries to front-load the benefits of trade liberalization for the poorest countries by providing immediate duty-free and quota-free access.
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Box 4
Good opportunities for export development in African LDCs
The International Trade Centre has identified a number of key products that may be particularly promising for export promotion:
| Sectors |
All LDCs: average annual exports, 1995-1999 ($million) |
Countries with Potential |
| Goods |
| Cotton fabrics, textiles and clothing |
2681 |
Malawi, Madagascar, Mozambique, Benin, Ethiopia |
| Fish Products |
1800 |
Madagascar, Mozambique, Equatorial Guinea, Mauritania, Senegal |
| Coffee |
1300 |
Uganda, Tanzania, Ethiopia, D.R. Congo, Burundi, Madagascar |
| Cotton and fibres |
1010 |
Mali, Benin, Sudan, Chad, Burkina Faso, Togo, Zambia, Madagascar, Tanzania |
| Wood and wood products |
856 |
Equatorial Guinea, D.R. Congo, Madagascar |
| Oilseed products |
405 |
Sudan, Senegal, Benin |
| Vegetables |
288 |
Sudan, Ethiopia, Senegal, Zambia, Burkina Faso, Gambia, Madagascar |
| Fruits and nuts |
249 |
Tanzania, Mozambique, Madagascar, GuinР№e-Bissau, Somalia, Malawi |
| Spices |
92 |
Madagascar, Comoros, Tanzania, Uganda, Malawi, Niger, Zambia |
| Cut flowers and foliage |
31 |
Zambia, Tanzania, Uganda, Malawi, Ethiopia, Rwanda, Madagascar |
| Medicinal Plants |
31 |
Sudan, D.R. Congo, Madagascar |
| Services |
| Tourism |
2360 |
Tanzania, Senegal, Uganda |
| Business-related services |
1254 |
Angola, Madagascar, Ethiopia, Senegal, Togo |
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Realizing the gains from expanding market access
Four major issues are key to the ability of many developing countries to benefit from market access opportunities:
- National commitment to, and external support for, improvements in the investment climate (including macroeconomic stability and sound governance).
- Assistance to low-income countries to integrate trade into national development strategies-as already being provided on a pilot basis under the auspices of the Integrated Framework. If proven useful, such assistance should be extended to all African countries engaged in the PRSP process.
- Initiatives to address specific issues of common concern to all developing countries, including middle-income economies. Examples include product standardization, trade facilitation, intellectual property, and service sector regulation. The needs in these "behind the border" areas are great. Efforts to strengthen trade-related private and public institutions in these areas are necessary to enable a coherent approach to developing country policy reforms, negotiated WTO agreements, and the assistance provided by the development community to be 'coherent'.
- Sustainable technical assistance to help developing countries to participate effectively in multilateral trade negotiations. Though there may be as many as 100 countries requiring assistance (including LDCs), synergies could be realized through networking and collaboration between advisors.
Finally, in moving towards a new trade round, consideration must be given to implementation concerns of developing countries and to the burden imposed on many countries by some WTO agreements-not so much because of the rules themselves, but because of the ancillary investments required. Assessing the impacts of agreements, a costing necessary for ancillary reforms and investments as well as mobilizing financial assistance to meet these costs, must be an integral part of this effort-and a priority for NEPAD (See Box 5 below).
Needed particularly is for Africa's development partners to make:
- Binding commitments to increase access to markets by reducing applied tariffs to a level at least as low as the average for non-agricultural products, increasing trade volumes through the use of tariff quotas, and substituting ad roman tariffs for all specific tariffs.
- Binding commitments to eliminate export measures that distort trade. This is achievable by prohibiting export subsidies, export credits and the misuse of food aid for commercial purposes.
- Binding commitments to eliminate market distortions arising from domestic support through progressive reductions of actual levels of domestic support in all countries.
- Binding commitments to provide greater, more secure and predictable resources for trade related technical assistance and capacity building. This is required to ensure the meaningful and full participation of developing countries in multilateral trade negotiations.
- Concrete actions to broaden and improve on existing market access initiatives, such as the African Growth and Opportunity Act (AGOA) and the EU's Everything But Arms (EBA) by making the duration of these initiatives longer, inclusive of all African countries and all products.
- Faster progress in phasing out the Multifibre Agreement and other reforms in trade in textiles and apparel.
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Box 5
The urgent need for capacity building in trade-Africa lacks representatives at World Trade Organization headquarters
In WTO few African country members are able to participate effectively in negotiations and decision-making. Decisions are based on "one country, one vote" and made by consensus in the General Council or by representatives in subsidiary bodies (such as the TRIPS council or Agricultural Committee). Major decisions are made or endorsed by WTO ministers at ministerial conferences, usually held every two years.
But in practice, a few major industrial countries dominate WTO ? the poorest developing countries have little or no representation or negotiation capacity. In 2000 as many as 15 African countries did not have a representative at WTO headquarters in Geneva ?while Mauritius, a very small country, had five. WTO has responded to these disparities by seeking to establish a technical assistance unit to help developing countries with negotiations. The large number of Africa countries without representation points to the urgent need for regional approaches in research and advocacy-such as that conducted by AERC and ECA-to provide the necessary expertise and analysis to support country negotiating teams.
| Number of Countries |
Number of Representatives |
| 15 |
0 |
| 16 |
1 to 3 |
| 6 |
4 to 6 |
| Note: As of August 2001. |
Source: UNDP 2002.
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Key issues for discussion
- What can be done to ensure that trade is at the heart of the agenda not just for trade ministers but for finance and development ministers as well?
- How can African policy makers maintain their momentum towards a new development round and work with trade and regional cooperation ministers to focus on "behind the border" reforms that can help ignite the supply response?
- How can the autonomy of African countries be preserved while respecting the legitimate objectives of development partners to maintain high labour, social, and environmental standards at home?
- How can the focus of the global trading regime be moved beyond market exchange to development?
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