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Why Africa rejected ‘divide & rule’ EU trade deal

During the Lisbon AU–EU summit, the majority of African nations refused to sign the new trade agreements put forward by the EU. They said the deals brought them no new benefits but left their industries threatened by European imports. Neil Ford explains why Africa took this stance.

Perhaps the most outstanding feature of the Africa-European Union summit in Lisbon in December was Africa’s bold and united refusal to be browbeaten by the EU into accepting the status quo as sign of progress. (African Business, January 2008). The overriding object of the summit was to try to settle the rules of trade between Africa and Europe but little progress was made on this count. The failure to reach agreement could have important ramifications for both Africa and Europe. Africa could lose some export markets but Europe could find itself facing supply deficits of vital raw materials and also losing ground on its own exports to Africa. It is difficult to grasp the significance of the Lisbon meeting and of the ongoing trade discussions without some understanding of exactly what is at stake. Most European colonial powers enjoyed close trade ties with their African colonies; colonialism provided direct access to raw materials and

also an, albeit limited, market for manufactured goods from the metropole. The creation of entire colonial economies built on a narrow export market obviously left most African states in a vulnerable position at independence. This dependency was recognised by the colonial powers, which provided the newly independent states with preferential trade agreements that enabled their former colonies to maintain their existing export industries by allowing duty free export to the European country in question. In addition, the former colonial power insisted on duty free access to the African market for some of its consumer goods and other processed output. Although this arrangement prevented severe economic dislocation at independence and helped to stabilise the international price of some commodities, it also entrenched the existing dependency on a narrow range of raw materials. Many also argued that it was of more benefit to Europe than to Africa.

The creation of the European Economic Community (EEC) and its gradual evolution into the EU forced member states to adopt common tariff structures. Following the accession of the biggest former African colonial power, the UK, to the EEC in 1973, an all-embracing preferential trade agreement was created between the EEC and almost all of the former colonial territories within the Africa, Caribbean and Pacific (ACP) group of nations. This trade agreement, which allowed all ACP states to export many goods duty free or with reduced tariffs, was finally signed as the Loméé Convention in 1975. It was periodically renewed until it was replaced by the Cotonou Agreement in 2002. This deal sought to encompass efforts to tackle poverty and promote sustainable development within the trade agreement.

New framework of trade However, it was becoming increasingly clear that both Loméé and Cotonou broke World Trade Organisation (WTO) rules on fair trade because they discriminated against non-ACP developing countries. Matters were eventually brought to a head by complaints from Latin American banana exporters that Caribbean producers had unfair access to the EU market. The WTO ruled in their favour and insisted that a new framework for trade between the ACP and EU be installed by the start of 2008. Rather than replacing Cotonou with another

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African Business | February 2008
Top Left: President Abdoulaye Wade led a united front in rejecting the EPAs during discussions at the Lisbon EU-Africa summit. Above: The EU’s trade commissioner, Peter Mandelson, dismissed objections to EPAs saying they showed “no respect for the many ACP negotiators and reform-minded ministers who have worked hard with the EU”.

deal that would encompass all ACP states, Brussels has decided to negotiate separate Economic Partnership Agreements (EPAs) with all 78 ACP governments. The EU insists that this is necessary to abide by the WTO rules. However, during 2007 it became clear that many African states were not happy with the deals offered to them. Although the pace of negotiations speeded up during the final months of the year, just 14 states had agreed an EPA by the time of the Lisbon summit. Each ACP country will retain preferential access to all EU member states for many of its key commodities. Given there are now 27 members of the EU, this will allow exporters to

target consumers far beyond the original former colonial powers of Western Europe. However, in return ACP states must remove duties on certain imports from European countries and it is feared that this will prevent African manufacturing companies from emerging and entrench the existing pattern of trade, whereby African countries export raw materials at relatively low cost to Europe and then buy expensive consumer goods from Europe, many of which contain raw materials that came from Africa in the first place.

Lisbon clash The Lisbon meeting was arranged to enable African governments to put up a united front in negotiations over the EPAs. Most press attention focused on the general declaration on the promotion of democracy and free trade, plus promises to promote good governance, security, trade and development but such ambitious pledges mean little in practice. One key concession was reached: African tariffs on European goods can be phased out gradually over up to a decade rather than being removed overnight. A total of 35 governments signed deals by the end of 2007 but this has still not calmed the fears of most African leaders. President Abdoulaye Wade of Senegal said: “We are not talking any more about EPAs, we’ve rejected them,” while South Africa and Nigeria both refused to sign them, partly because they would be required to offer any preferential deal to the EU that they had previously offered to another major trading power or block. This appears to be a direct attempt to counter the threat of increased Indian and Chinese involvement in a continent previously seen as a European preserve. South Africa’s deputy trade and industry minister, Rob Davies, argued that governments had signed EPAs under pressure from the EU. According to Davies, the threat of high duties “led to a situation where a country that was unwilling to sign on did so under huge duress and with little enthusiasm”. He added: “This would lock us into a primary relationship with the EU for ever more. It would be an unacceptable limit on our sovereignty.” The mixed results of the EU policy could produce some trade complications. For instance, Botswana, Lesotho, Namibia and Swaziland have all signed EPAs, although South Africa has not, while all five are members of the Southern African Customs Union (SACU). This could encourage exporters in South Africa to ship or fly their goods to the EU from neighbouring states, claiming they were produced in signatory nations. If this situation persists, it could even encourage the relocation of some businesses. The EU trade commissioner, Peter Mandelson,

condemned criticism of the EPAs. He said: “The EPAs have been subjected to an aggressive NGO campaign. The EU has been accused of forcing open African markets to European companies; of bullying poor countries into liberalisation they do not want or need. “What strikes me most about these arguments is that they carry such a profoundly distorted view of the value of trade. More importantly, they show no respect for the many ACP negotiators and reform minded ministers who have worked hard with the EU to build agreements that reflect development needs.” He added that South Africa did “not seem to speak for the many African countries who need these agreements and who are signing up to them”. Kenya is one of the African countries to sign an EPA, partly because of the risk to its agriculture and horticulture industries from a failure to sign. After the EPA had been concluded, the country’s permanent secretary for trade and industry, David Nalo, commented: “The much feared disruption of trade between the European Union and Kenya after 31 December has now been put to rest. Kenya, along with other East African Community (EAC) states, has sealed the first deal towards a full agreement.” While African nations may bitterly resent the EPAs, they are under no obligation to sign them. If they feel that they lose more by opening up their own markets to European exporters than they gain from duty free access to the EU, they could opt not to replace the Cotonou Agreement and end the system of preferential tariffs. However, in practice, most countries have preferential deals on some goods with other economies, so entering into the EPAs does not need to sustain dependency. Those governments still holding out against signing EPAs may make some headway through collective bargaining but it seems unlikely now that the individual EPAs can be replaced by a single regulatory agreement for trade between the ACP and the EU. Moreover, the international rules of trade, as embodied by the WTO, generally favour industrialised economies, particularly with regard to the acquisition of raw materials, so African governments would be advised to shop around for the best deals they can get on a range of goods. The role of each African government should be to secure the most favourable trade deals possible with the EU, the US, Japan, China, India and the rest of the world, while promoting African cross-border economic liberalisation. It should then leave it up to exporters to determine the destination for their produce or goods. Only then will post-colonial dependency end, allowing the normalisation of relations between Europe and Africa.

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