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Overview VI: Economic Report on Africa 2007

Guest post by: United Nations Economic Commission for Africa

Article Overview: Developments in trade negotiations

Overview VI: Economic Report on Africa 2007

Trade negotiations are recognized as an important tool for increasing trade prospects
and facilitating Africa’s integration in the world economy. However, negotiations are
still far from realizing the continent’s expectations. Much was expected of a successful
Doha Round. Likewise, it is often suggested that Economic Partnership Agreements
(EPAs) with the European Union (EU) would result in an improved business
environment in African countries, allowing for more investments and enhancing the
prospects for diversification of their economies.

Unfortunately, on the World Trade Organization (WTO) negotiations front, progress
has been limited and below the expectations of African countries. One main reason
for the deadlock in WTO negotiations appears to be the disagreement with the
levels of demand and offers on agriculture, a critical area for Africa’s development
prospects. This lack of progress has clearly been a setback for the multilateral process,
prohibiting the international community, and especially poorer countries, from
significant improvements in the multilateral trading system.

The limited progress in the WTO negotiations is impacting negatively on the cotton
initiative, which was sponsored by some African countries for the elimination of
cotton subsidies by the developed countries. While the cotton-textile sector in Africa
holds a tremendous opportunity for diversification, delays in finalizing the Doha
Round is hindering the exploitation of these opportunities. As it were, the Hong
Kong Ministerial Conference of December 2005 reached agreement on the elimination of cotton export subsidies, but agreement has yet to be reached on the elimination
of domestic cotton subsidies. There was expectation that progress in the WTO
negotiations would allow for an expeditious agreement on cotton.

Probably one of the most significant developments has been the evolution of the participation
of African countries in the actual negotiations. African countries were not
only engaged actively in the definition of the mandate for the negotiators, but have
been active at every stage, as the negotiations have progressed. This active participation
has not translated to concrete results whereby African priorities are holistically
addressed.

There has been growing concern in Africa that EPAs, while representing significant
potential for growth and development, also pose great challenges in terms of adjustment
costs. The standstill in WTO negotiations also complicates the EPA process.
In the absence of evolutions on rules for preferential trade arrangements, important
uncertainties remain on the degree of flexibility African countries would have on the
length of transition periods and on the coverage of liberalization. EPA negotiations
are probably the major task ahead of African trade policy makers, especially given
the slow pace of the Doha Round. They pose great challenges but also real opportunities
in terms of development for the continent.

In light of the slow progress in the WTO negotiations and the ongoing EPA process,
African countries have an ever greater interest in diversifying their export markets.
They are involved in a number of regional and free trade agreements negotiations.
Fostering regional integration has been a long-standing objective, but African
regional integration remains hampered by several obstacles including political and
security factors, and also by poor transport and communication infrastructure, a low
degree of complementarity in the structures of production and the overly complex
web of memberships across different Regional Economic Communities (RECs).

Preferential trade arrangements are considered promising complementary platforms
for diversification. Thirty-seven African countries are eligible to the African Growth
and Opportunity Act (AGOA), which grants African countries quasi duty-free,
quota-free access to the US market. Thirty-four African countries are LDCs and
therefore are eligible to the EU’s Everything-but-Arms (EBA) scheme. Other non-
LDC African countries are either beneficiaries of the EU’s General System of Preferences
(GSP) or are party to a bilateral free trade agreement with EU.

Several African countries or groupings are also involved in bilateral or trade negotiations
in order to diversify their export markets and enhance their integration in the
global economic system. For example, West African Economic and Monetary Union
(WAEMU) countries are currently negotiating free trade agreements with several
North-African countries. The US and the South Africa Customs Union (SACU) are
also engaged in free trade talks. South Africa is also discussing with India and MERCOSUR
countries on a potential free trade agreement. With the recent explosion of trade flows between Africa and China and India, several countries also envisage talks
with these two Asian nations.

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Article Tags: Africa, African countries, cotton subsidies, diversification, diversification, Economic Partnership Agreements, EPA, Trade negotiations, trade prospects, World Trade Organization WTO, WTO negotiations



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