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Ambassador Nathan Irumba Executive Director SEATINI Nathan.irumba@seatini

EVOLUTION OF TRADE POLICIES IN SUB-SAHARAN AFRICAN COUNTRIES SINCE THE 1990S IN THE CONTEXT OF VARIOUS BILATERAL REGIONAL AND MULTILATERAL TRADE NEGOTIATIONS AND AGREEMENTS. Ambassador Nathan Irumba Executive Director SEATINI Nathan.irumba@seatini.org. STRUCTURE. Introduction

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Ambassador Nathan Irumba Executive Director SEATINI Nathan.irumba@seatini

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  1. EVOLUTION OF TRADE POLICIES IN SUB-SAHARAN AFRICAN COUNTRIES SINCE THE 1990S IN THE CONTEXT OF VARIOUS BILATERAL REGIONAL AND MULTILATERAL TRADE NEGOTIATIONS AND AGREEMENTS Ambassador Nathan Irumba Executive Director SEATINI Nathan.irumba@seatini.org

  2. STRUCTURE • Introduction • SAPs and their Impact on Trade Policies • Regional Trading Arrangements • Lagos Plan of Action • Abuja Treaty • Regional Integration • Building Blocs • COMESA, • EAC, • SADC ETC • Bilateral Trading Arrangements • European Union • AGOA • EPAs • Emerging Countries • China • India • Brazil • Multilateral Trading Arrangements • Challenges of WTO/Uruguay Round • Uruguay Round Agreement and its Implications for policy Space • S&DT • Doha Round: • Objectives of Africa • Other Global Organisations • Conclusion

  3. INTRODUCTION AFRICA IN WORLD TRADE • Trade Policies – Now widely acknowledged that trade policy is one of the main drivers of growth and development. • African Economies substantially exposed through trade to the global economy yet remain marginalized. On average exports and imports account for a sizeable part of each African country’s GDP (By Oyejide 1995). • Despite recent Growth Of Exports, Africa’s Share in global exports is very small. It declined from about 3.2% 1985 – 2.3% in 1990 and to 1.5% in 1995 (ECA and Africa Accelerating a continent’s Development pg18 ). • A composition of African exports remain dominated by Primary commodities mainly Agriculture which makes Africa’s export earning capacity highly sensitive price fluctuations. • The Blair Commission notes that Africa will fail to achieve sustainable growth and poverty reduction and the MDGs unless it increases its diminishing share of World Trade. • The drive to Arrest and Reverse the Marginalizationof Africa in World Trade and in the global economy has been the main objective of SSA countries in their domestic, bilateral and multilateral trade policies.

  4. STRUCTURAL ADJUSTMENT POLICIES (SAPS) AND THEIR IMPACT ON TRADE POLICIES • Since early 1980s, Sub-Sahara African Countries have been undertaking SAPs under the auspices of IMF and World Bank. • These policies and the experience there under have done a lot to shape African policies at various levels. • The SAPs have gone through at least three broad phases which can be identified as: • First, The stabilization phase from 1980 - mid 1980s, focusing primarily on restoring macroeconomic balances and eliminating the balance-of-payments and fiscal deficits • Second, Running from mid 1980s to early 1990s, focusing on Adjustment with growth. It added on supply measures to demand management which aimed at re-aligning the incentive structure in favour of tradables. • The Third Phase was intended to address the cost of adjustment and the unequal sharing of the adjustment burden and therefore included special strategies for poverty alleviation and concern for capacity building and governance.

  5. SAPs AND THEIR IMPACT ON TRADE POLICIES Cont… • Trade and Trade policy were important elements of three phases above • In view of the World Bank (1994), most African economies had followed an inward oriented imports substitution strategy supplemented by use of tariff and Non Tariff barriers to reduce external competition mainly in manufacturing and they viewed this protection as unfortunate. • Accordingly, in the prescription in SAPs development strategy framework, an outward oriented trade regime in which tariff and Non tariff barriers against import were liberalized and an export bias eliminated took pride of place.

  6. SAPs AND THEIR IMPACT ON TRADE POLICIES Cont… • Before the SAPs were introduced, Africa like other developing countries had pursued policies for imports substitution industrialization policy which were also being protected by tariffs and other measures. The state was also a major player in the economy. • The impact of SAPs was to dismantle these policies with a view of having an outward oriented free market driven economy where the state plays only a minimal role. • The dismantling of these policies has adversely affected Africa’s industrial strategy and has resulted in de-industrialization with the collapse of a number of industries with attendant unemployment. • This is the backdrop against which SSA has been participating in bilateral, regional and multilateral negotiations.

  7. REGIONAL TRADING ARRANGEMENTS • Both within the continent and the rest of the world, regional integration has emerged as a framework to address obstacles to intra African and International Trade. • Historically the African domestic market has been small and fragmented. The disadvantage of the small domestic market adversely affected import-industrialization strategy which was adopted by Africa in the 1960s and 1970s. • This suggested regional economic integration as a means of enlarging the size of the market which could enable manufacturers to produce at a lower cost for a larger domestic unit. • Following Lagos Plan Of Action of 1980, the Abuja treaty was signed in 1981 adopted a timetable for the creation of African Economic Community by 2025 with sub-regional groups as the building blocs.

  8. REGIONAL TRADING ARRANGEMENTS Cont… • The building blocs include inter alia COMESA, EAC, SADC, ECOWAS etc. These sub-regions are at various stages of integration. • The Abuja treaty envisaged 6 stages to achieve an Economic Union starting with Free Trade Areas and the custom unions, moving to common markets and eventually monetary union with the regional communities at the pillars. • EAC for example has already implemented a custom union with a Common External Tariff and it is expected to implement a common market protocol before the end of the year (2009). • The Intra EAC Trade had increased and for some countries trade within the region is more than their trade with EU or the rest of countries in the world. • COMESA has a Free Trade Area and eliminating tariffs on a number of items. Aims at creating customs union by December 2008. • While these groups have Trading Opportunities they also face a number of challenges e.g. problem of overlapping membership and therefore the need to rationalize them, problems related to unequal sharing of benefits, reluctance to cede sovereignty to regional institutions.

  9. BILATERAL TRADING ARRANGEMENTS • A Major trading partner for SSA has been the European Union under Lome and Cotonou Arrangements. • Trade relations between ACP and EU since 1975 governed by preferential trade agreements • The latest of these was the COTONOU Partnership Agreement (CPA) 2000 • The CPA was challenged at WTO by central American Countries. It was decided that Cotonou Agreement was not consistent with Most Favoured Nation (MFN) provisions of the WTO. WTO Members were challenging the preferences • Africa and other ACP countries pressed WTO for a waiver. This was granted at Doha MC (2001).

  10. BILATERAL TRADING ARRANGEMENTS Cont… • The waiver for Cotonou Preferential Trade Arrangements was granted up to December 2007. • This set in motion the Launch of EPA negotiations to put in place new arrangements consistent with WTO Rules. • Africa and other LDCs in 1980s and 1990s pressed the international community to grant Duty Free Quota Free Market Access for all their products. • At UN LDCs conference in Brussels EU announced that they will grant DF&QF market Access to products from LDCs except arms (EBA). In this context LDCs have been pressing for simplified Rules of Origin to allow cumulation.

  11. BILATERAL TRADING ARRANGEMENTS Cont… • EPA negotiations were Launched. As per Cotonou the aim was to have an agreement for a Free Trade Area and which will cover goods, services, other trade related issues and development. • Objectives of EU – More Liberalization • Objectives of AfricanCountries – Development, Market Access and Policy Space. • Interim EPAs – signed pending conclusion of comprehensive agreements. • New Arrangements fundamentally change the nature of trade relations between EU and SSA and have implications fro regional integration.

  12. BILATERAL TRADING ARRANGEMENTS Cont… • The Africa Growth and Opportunity Act (AGOA), enacted in May 2000 has at the centre of USA’s trade and investment policy towards SSA. • It is aimed from the US viewpoint at promoting open market, expanding US and Africa trade and investment, stimulating economic growth and facilitating SSA integration in the global economy. • Section 116 of AGOA, calls for negotiations of FTAs between USA and SSA countries. Currently no free trade area exist in SSA and USA. This remains ultimate objective of USA in the context of AGOA. • In the mean time they are pursuing trade and investment framework agreements (TIFAs), Bilateral investment treaties (BITs) etc. • SSA welcomed the enactment of AGOA and much of their trade diplomacy towards the US was directed at ensuring that AGOA is enacted, renewed, on one hand and endeavouring to benefit from the arrangements. Some countries such as Lesotho, Mauritius, and Kenya etc have benefited from the textiles under apparel provisions and increased their exports to US market. • Inherent problems with AGOA – Conditionalities regarding labour standards, WTO plus provisions on IPRs, and Supply side constraints of SSA, RoO etc.

  13. BILATERAL TRADING ARRANGEMENTS Cont… • China, India and Brazil are emerging as global power houses with implications for the global economy. • China has become a major importer of raw materials at the same time a major importer of both high and low skill manufactured products. • The china Africa trade relations have been increasing since in the 1990s. • According UNECA 2004, trade between China and Africa reached over $12 billion, $15 billion in the first 12 months of 2003. African exports in that period to China was $6.77 billion while imports from China reached $8.21 billion. • Exports from Africa were mainly of primary commodities and oil while imports from china are mainly manufactured goods. • Growing trade with emerging countries assist Africa in their policy of diversifying their export destination market away from traditional markets of US and EU. • Africa-China and Africa-India Summits – Highlight Africa’s interest in engaging in trade with this new emerging power houses.

  14. MULTILATERAL TRADING ARRANGEMENTS • The conclusion of the Uruguay Round under a single undertaking and establishment of WTO posed a great challenge to SSA and had a great impact on the policies they were to pursue. • Under the GATT they had a choice which Agreements to adopt this is no longer the case. • Uruguay Round going beyond border measures and dealing with internal regulations – Agreements were lopsided in favour of Developed Countries. • Challenges of implementing the agreements. SSA had to adopt their laws and regulations in order to implements the agreements. • TRIPS – trade related agreements • TRIMS and • Services • The struggle to rectify the imbalances in the agreements and to put development on the agenda of WTO • TRIPS and Public health • S&DT • Doha Round Negotiations and Africa’s interest (Kigali Ministerial Declaration) • Agriculture • Cotton • Industrial Products [NAMA] • Services • Singapore issues • Developmental issues • New issues

  15. MULTILATERAL TRADING ARRANGEMENTS cont… • The Impasse in the Doha Round and Lamy proposals • Prospects for the Doha Round • Other global issues • Food Crisis and Financial Crisis and their implications for African Trade policy • Epicentre of the crisis is US and Europe but affects Africa and the rest of world in many ways • Measures are implement by developed countries to address the crisis include state interventions • The need for Africa to rethink its liberalization and deregulation approach • The demand by Africa to democratize the world financial institutions • Multilateral negotiations have gone a long way in helping Africa to harmonize and articulate their policies on international trade issues in the context of the negotiations .

  16. CONCLUSION • Africa’s trade policy has quite evolved considerably from where the state has commanding role in the economy and import substitution was a primary concern in ensuring development. • Under SAPs it swung to the other extreme of the market having free reign. This was re-enforced by obligations being undertaken in the context of multilateral and bilateral commitments. • The recent financial crisis as well as the failure of countries to realise the promised benefits of liberalization is causing a rethink in the role of state and the need to have sufficient policy space for development.

  17. THANK YOU!!! • nathanirumba@yahoo.com • www.seatini.org

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