Regional Trade Agreements in Africa: what the continent needs to do in order to grow and diversify its economy.Photo by Simphiwe Mbokazi

Kingsley Ighobor

SIXTY-ONE heads of government and other top-level officials from Africa and Europe converged in Brussels in March last year to discuss mutual relations. After two days of deliberations, they issued a 63-point agreement laced with platitudes such as: “We take particular pride in the breadth and depth of our partnership”, and: “We are convinced that the growth of our two continents will be mutually beneficial.”

Although the leaders discussed issues such as ongoing fighting in the Central African Republic, democracy, regional integration, immigration and development assistance, the elephant in the room was flagging trade relations between Africa and Europe.

South Africa is one of the EU’s most important trading partners in Africa, but President Jacob Zuma did not attend. This was in solidarity with Zimbabwe’s President Robert Mugabe, who refused to fly to Belgium because his wife, Grace, was denied a visa.

“That time must pass wherein we are looked at as subjects, we are told who must come and who must not come,” Zuma said. His boycott was one of many incidents in the seemingly endless trade talks between Africa and Europe.

European Commission president José Manuel Barroso reiterated Europe’s preference for dealing with African countries as equal partners, but in reality only South Africa can be considered as such, says Christoph Hasselbach, the editor of Deutsche Welle, a German broadcasting organisation.

Trade agreement talks began actively in 2000 after Europe and 79 countries from Africa, the Caribbean and the Pacific (ACP) signed the Cotonou agreement on trade, aid and political relations. That agreement stipulated that economic partnership agreements (EPAs) had to be signed by 2008.

But while the EPAs require both sides to lower tariffs on imports and exports, the participants cannot agree on the terms. Nevertheless, 14 countries have accepted interim EPAs, with Mauritius, Madagascar, the Seychelles and Zimbabwe the first to do so.

Interim EPAs permit countries to export to the EU duty free, while gradually allowing EU imports over 15 to 25 years.

No hurry

Before the Cotonou agreement was the 1975 Lomé convention, under which the EU granted “non-reciprocal” trade preferences to ACP countries for the export of agricultural and mineral materials duty free to Europe. Now the EU wants these agreements to be replaced with EPAs, which are “reciprocal”, so ACP countries can equally open their markets to EU exports. But Africa is in no hurry to liberalise its markets.

“African countries typically have quite high protection, so liberalising in favour of Europe would hand Europe a terms-of-trade gain,” writes Paul Collier, the director of the Centre for the Study of African Economics at Oxford University.

Africa is not embracing EPAs because of fears that bigger EU companies could flood the continent with cheaper products, destroying nascent local industries. Also, cutting tariffs will lower the government revenues Africa needs to invest in areas including agriculture, health and education.

James Asare-Adjei, the president of the Association of Ghana Industries, says Ghana relies heavily on tariff revenues to fund development. With an EPA, the country could lose up to $300 million (R3.2 billion) a year in revenues.

Aliyu Modibbo Umar, a former Nigerian commerce minister, says: “If 30 years of non-reciprocal free market access into the EU did not improve the economic situation of the ACP, how can a reciprocal trading arrangement achieve anything better?”

Bingu wa Mutharika, the late Malawian president, once dismissed EPAs as “a divide-and-rule tactic being advanced by Europe for selfish interests”.

The EU admits EPAs will create more jobs in Europe. But it notes that Africa stands to benefit from improved economic stability, training opportunities and knowledge transfer, and higher export sales. “For over 30 years, exports from ACP countries were given generous access to the European market,” it states on its website. “Preferential access failed to boost local economies and stimulate growth.”

But provisional implementation is allowed.

The EU is also promoting the World Trade Organisation’s trade facilitation agreement, reached in Bali, Indonesia, last year. Trade facilitation focuses on lowering the cost of doing business by minimising regulations and procedures required to move goods and services across borders.

The Bali agreement – an offshoot of the inconclusive 2001 Doha Round of talks – urges countries to adopt fast and efficient customs procedures.

Africa is not convinced of the purported benefits of the trade facilitation agreement. The continent’s trade ministers have agreed to implement it provisionally, which is allowed. But the EU would prefer a total, not tentative, implementation and is determined to twist arms to have its way.

EU trade negotiators who were in Malabo, Equatorial Guinea, during the AU summit in June mounted pressure on African leaders to change their stance. An AU official was quoted as calling their approach “an unprecedented power game rarely witnessed at an African heads of nations meeting”.

Angered by such arm-twisting, Nigeria and Mauritius announced they might renege on their provisional acceptance of the agreement.

But Africa may not hold the line for long, facing EU threats to cut off aid and the US’s warning that it could allow the expiration of the Africa Growth and Opportunity Act (Agoa), a US law enacted in 2000 under which Africa can export certain goods to the US duty free. Unless renewed, Agoa expires in 2015.

The WTO is pushing for total implementation of the trade facilitation agreement.

Director-general Roberto Azevêdo has warned that provisional implementation could mean less development aid. “All the Bali decisions – every one – would be compromised.”

And Angelos Pangratis, the EU envoy to the WTO, says, “The credibility of the negotiating function of this organisation is again at stake.”

Double standards

But Nelson Ndirangu, the director for economics and external trade in the Kenyan foreign ministry, questions why the EU opposes Africa’s proposal “to implement the trade facilitation agreement on a provisional basis” as allowed under the Doha declaration. “Clearly there are double standards.”

At the end of the Malabo summit, divisions appeared in Africa’s position. “We never said we will not implement the [trade facilitation] agreement, but we don’t know how to implement it,” Ndirangu says.

South Africa, Uganda, Tanzania and Zimbabwe have urged Africa to implement the trade facilitation agreement only after Europe demonstrated its commitment to providing development aid through action, not just words. Under the Bali agreement, a commitment to provide aid is not binding.

Asian trade

Africa’s growing trade with Asia, especially China, is of concern to Europe, Hasselbach says. Africa’s share of global trade has increased steadily, from $277bn (2.3 percent) in 2001 to about $1 trillion (4.6 percent) in 2011, according to the UN Conference on Trade and Development.

While Europe is still Africa’s largest trading partner, Africa’s trade with Asia grew by 22 percent during that time, while trade with Europe grew by only 15 percent. In addition, Europe’s contribution to Africa’s manufactured imports declined from 32 percent in 2002 to 23 percent in 2011, while Asia’s share increased from 13 percent to 22 percent during the same period.

More twists and turns are likely to take place in EU-Africa trade relations before next year, when implementation of the trade facilitation agreement should begin.

Big economies like Nigeria and South Africa are talking tough, but others are more circumspect. Rashid Pelpuo, Ghana’s minister of state for public-private partnerships, warns that trade agreements are always tied to “aid, technical and political assistance… It will be too costly not to sign.”

This feature is provided by the UN’s Africa Renewal Features Service.