The US and EU – Undermining regional economic integration in Africa
By: Margaret C. Lee, Visiting Scholar with the African Studies Program at the School of Advanced International Studies of Johns Hopkins University, Washington, DC.
The most recent report by the United States Department of Commerce on trade between Africa and the US paints a glowing picture of the impact that the African Growth and Opportunity Act (AGOA) has had on increased access for African countries to the US market. In 2003, according to the report, there was an increase of 54 percent (just over USD 14 billion) in African exports to the US over 2002. A closer read of this figure, however, reveals that 80 percent (over USD 11 billion) represents petroleum exports to the US. The remaining 20 percent (less than 3 billion) consists of textiles and apparel (USD 1.2 billion), transport and equipment (USD 732 million) and agriculture (USD 241million). While the 2003 report does not identify the major beneficiary countries, the 2002 report identifies them as Nigeria, South Africa, Gabon, Lesotho, and Kenya. Together these five countries accounted for 93 percent of AGOA utilization. More revealing, however, is that an estimated 85 percent of non-petroleum AGOA exports to the US originate from countries in Southern Africa. It therefore makes sense that the US government should identify the Southern African Customs Union (SACU) as the first African regional economic organization targeted for a free trade agreement with the US under the African Growth and Opportunity Act.
The idea of Western powers seeking free trade agreements with Africa originates from the EU. In fact, the US government makes it very clear that in seeking a free trade agreement with the Southern African Customs Union, it is attempting to ‘level’ the playing field with the EU following the 1999 free trade agreement signed between the EU and South Africa. Like the proposed US–Southern African Customs Union free trade agreement, the EU–South Africa free trade agreement served as the model for future free trade agreements with the EU’s African, Caribbean and Pacific partners. The governments of Eastern and Southern Africa have enthusiastically embraced the free trade agreement negotiations with the EU in the form of economic partnership agreements. In fact, at a conference in Pretoria in March 2004 on trade and investment in the SADC region, I felt like I had committed heresy when I queried whether such economic partnership agreements were a hindrance to regional economic integration in Africa. This query followed a presentation on economic partnership agreements by a person from the COMESA Secretariat who explained how Eastern and Southern Africa is to be reconfigured into two new entities in order to negotiate economic partnership agreements with the EU. The first entity is to consist of 16 countries representing the EU–Eastern and Southern Africa economic partnership agreement and the second eight countries representing the EU SADC economic partnership agreement. I later discovered that the EU initially planned to negotiate one economic partnership agreement with the entire Eastern and Southern Africa region.
The objective of this article is to assess the extent to which the US and EU are undermining regional economic integration in Africa through the creation of free trade agreements with African countries.
From non-reciprocal to reciprocal trade agreements
The EU, in justifying the transformation from non-reciprocal trade agreements with its African, Caribbean and Pacific partners under the Lomé Conventions to reciprocal trade agreements under the Cotonou Agreement, argues that the former are not WTO (the World Trade Organisation) compatible. In not being WTO compatible, such agreements, according to the EU, are deemed to be illegal because they discriminate against member countries that do not have non-reciprocal access to the EU market (e.g. developing countries outside Africa, the Caribbean and the Pacific). This explanation would be laudable if the EU, along with the US, were committed to freer and fairer trade. By maintaining huge trade-distorting subsidies and non-tariff barriers to trade against developing countries, it is obvious that this is not the case. The removal of such trade barriers, according to the World Bank, would increase global income by USD 500 billion annually by 2015, with most of the increase being realized in poor countries.
Another irony about the EU’s alleged commitment to WTO compatibility is the reality that the EU and US, as the world economic hegemonies, determine what is deemed to be WTO compatible. Consequently, for the US, the African Growth and Opportunity Act is not deemed to be WTO incompatible. In fact, under the AGOA Acceleration Act of 2004 (AGOA III), signed by President Bush on July 13, 2004, AGOA beneficiary countries will have their non-reciprocal access to the US market extended until 2015.
In terms of negotiating a US–Southern African Customs Union free trade agreement, unlike the EU, the US government has been very transparent with respect to its objectives. They include, as previously mentioned, leveling the playing field with the EU, and providing US farmers, workers, businesses, and families with greater access to the Southern African Customs Union market. In terms of textiles and apparel, where the Southern African Customs Union countries have experienced the greatest benefit from AGOA, the US government plans to negotiate fully reciprocal access to the Southern African Customs Union market for the US textile and apparel sector.
The US and EU have proclaimed that both AGOA and the Cotonou Agreement will result in economic development, including poverty reduction/eradication, increased regional economic integration, and Africa’s further integration into the world economy.
Free trade agreements with the US and EU
In addition to trade, free trade agreement negotiation issues will include investment, intellectual property rights, e-commerce, transparency, labor standards, the environment, government procurement, dispute settlement, transparency, competition policy, and sanitary and phytosanitary rules. While there may be some benefits arising from providing Western countries with greater access to African markets, including technology transfer, investment, and greater economic efficiency, the costs will likely outweigh the benefits.
Anticipated costs include revenue losses, possibly resulting in the worsening of the regional debt situation; de-industrialization; increased unemployment; increased poverty; fragmentation of export and tariff regimes; loss of export competitiveness; undermining of local agricultural and industrial production arising from EU and US dumping; more trade diversion than trade creation; and undermining existing regional economic integration strategies.
In order for the EU to successfully negotiate an economic partnership agreement with the Eastern and Southern Africa economic partnership agreement group and the SADC economic partnership agreement group, both entities have to at least become free trade areas (preferably customs unions). All of the 16 Eastern and Southern Africa economic partnership agreement members (the Democratic Republic of Congo, Malawi, Zambia, Zimbabwe, Burundi, Djibouti, Eritrea, Ethiopia, Rwanda, Sudan, Comoros, Madagascar, Mauritius, Seychelles, Kenya, and Uganda) are members of other regional economic organizations that are at various levels of market/trade integration. These include the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA), and the East African Community. Similarly, with the exception of one country, all the members of the EU–SADC economic partnership agreement (Botswana, Lesotho, South Africa, Namibia, Swaziland, Angola, Mozambique, and Tanzania) are also members of other regional economic organizations, including the Southern African Customs Union. In the case of the EU–SADC economic partnership agreement, South Africa only has observer status, and as previously mentioned, has its own free trade agreement with the EU. In addition, as members of the Southern African Customs Union, Botswana, Lesotho, Namibia and Swaziland (the BLNS countries) are de facto members of the EU–South Africa free trade agreement. Given this reality, the negotiations for the EU–SADC economic partnership agreement should be very interesting.
The proposed economic partnership agreement configurations raise serious questions about the continued viability of regional economic integration in Eastern and Southern Africa, which was already in a perilous state prior to the EU’s reconfiguration of the region. Since 2000, all the regional economic organizations in Eastern and Southern Africa have signed new agreements with a view to deepening regional economic integration. The plethora of existing regional economic organizations in Eastern and Southern Africa is not a reflection of economic logic, but of political realities. Similarly, the two new regional entities for the economic partnership agreement negotiations reflect regional political realities, and in literally cutting paths through existing regional economic organizations, the potential exists for sowing further seeds of political and economic instability. With the carrot in one hand and the stick in the other, African governments are being promised financial compensation if they comply with the EU’s aspirations and threatened with further marginalization if they do not. Seemingly the only way that the countries of Eastern and Southern Africa can successfully negotiate the two proposed economic partnership agreements with the EU is to disband all other regional economic organizations and negotiate an Eastern and Southern Africa economic partnership agreement free trade area and a SADC economic partnership agreement free trade area. This is not realistic. However, time is of the essence since all economic partnership agreements must be in force by January 1, 2008. With an EU–Eastern and Southern Africa economic partnership agreement and an EU–SADC economic partnership agreement in place, the EU would have successfully undermined home-grown African efforts at regional economic integration.
A US–Southern African Customs Union free trade agreement will no doubt further challenge the economic stability of the Southern African Customs Union countries. This has already been done with the revenue losses experienced by the BLNS countries as a result of the EU–South Africa free trade agreement. A similar free trade agreement with the US will further erode revenue losses and result in the dumping of cheaper and more efficiently produced US products. These products in turn will enter the markets of the SADC countries as a result of the porous regional borders. This will further undermine regional economic integration among the SADC countries. Losing non-reciprocal access to the US market, Lesotho and Swaziland will likely lose the gains they have made under AGOA since textiles and apparel are their major exports to the US. The extent to which the BLNS countries are vulnerable to a prospective US–Southern African Customs Union free trade agreement is evident in the fact that the US government has provided computers to their negotiators in order to enhance their negotiating capacity.
Conclusion
It is perplexing that the US and EU sees the need to gain greater access to the markets of a region, sub-Saharan Africa, whose income is the equivalent of one European country – Belgium. After two decades of structural adjustment programs there exists irrefutable evidence that openness, without an appropriate economic development strategy in place, does not result in economic growth and development, or increased integration into the world economy. Such integration, it is argued, is a consequence of economic growth and development and not greater openness. Instead of enhancing Africa’s integration into the world economy, the free trade agreements proposed by the US and EU will likely result in Africa’s further marginalization and the undermining of the already perilous state of regional economic integration in Africa. On the one hand it seems unbelievable that African governments have not rebelled against these proposed free trade agreements, but on the other, the history of rebellious states against world hegemonies does not bode well for countries that are struggling to stay afloat amidst the rising tide of the vicious waves of the ocean .
