KUALA LUMPUR, Malaysia, May 8 (IPS) – Africans have long promised that trade liberalization would accelerate growth and structural change. Instead, it has curtailed affordable productive capacity, industry, and food security.
The bug helped sink Africa
The 1981 Berg Report has long been the World Bank’s blueprint for economic reform in Africa. Despite the lack of theoretical and empirical support, Africa’s comparative advantage is presumed to have been in agricultural exports.
Once intrusive government intervention is eliminated, the previously suppressed productive potential of farmers will naturally unlock export-led growth. However, there has been no sustained African agricultural export boom since then.
Instead, Africa transformed from a net exporter of food to a net importer in the 1970s. Over the next two decades, its share of world non-oil exports fell by more than half compared to the early 1980s.
Since the second half of the 20th century, the growth of sub-Saharan Africa (SSA) exports has been mainly due to foreign direct investment (FDI) from Asia, especially China and India. Nonetheless, Africa’s share of global exports has declined.
The high growth of Asian economies had the biggest impact on rising prices of primary raw materials, especially minerals, from 2014 until their collapse.
underdeveloped agriculture
African agriculture has been undermined by decades of low investment, stagnation and neglect. Public spending cuts under the Structural Adjustment Program (SAP) have led to a depletion of infrastructure (roads, water supplies, etc.), leading to a decline in production.
SAP’s neglect of infrastructure and agriculture has left many developing countries unable to respond to new agricultural export opportunities. Meanwhile, forecasts ignore the fate of food security in Africa.
SAP has undermined the competitiveness of Africa’s already poor small-scale agriculture. Not surprisingly, most of the poorest and least developed African countries were expected to be net losers in the Bank’s more ‘realistic’ World Trade Organization (WTO) Doha Round trade liberalization scenario.
Uneven and partial trade liberalization and subsidy cuts have mixed implications. This depends on domestic income and the share of food in household expenditure.
hopeful development thinking
African countries could gain $16 billion from ‘full’ trade liberalization, according to a World Bank study. However, this scenario was never envisaged in the Doha Round negotiations and was virtually abandoned 20 years ago.
Nonetheless, the Bank notes that “agricultural employment, the real value of agricultural production and exports, real returns to agricultural land and unskilled labor, and real net agricultural income would all increase significantly by moving away from capital-poor SSA countries, making SSA significantly more profitable.” He claimed that he would benefit. To free trade in goods”.
In SSA, excluding South Africa, total welfare benefits were just over half of 1%. However, World Bank projections of the overall effects of multilateral agricultural trade liberalization predicted significant losses for SSA.
Globally, profits mainly come from major food exporters from wealthy countries, primarily the Cairns Group. The rich world has long dominated food and agricultural exports through indirectly subsidized agriculture.
Therefore, North Korea’s reduction in agricultural subsidies has led to some increases in imported food prices in developing countries. Additionally, most African governments cannot easily replace lost customs revenue with other new or higher taxes.
After years of trying, developing countries have virtually given up on trying to ‘level the playing field’ by cutting agricultural subsidies, import tariffs and non-tariff barriers from OECD governments.
Benefits from liberalization?
Expanding trade liberalization in manufacturing, strengthened by the WTO Non-Agricultural Market Access (NAMA) agreement, has also weakened African industrialization.
Limited African market access to rich countries’ markets was secured through preferential market access agreements rather than trade liberalization. Mkandawire pointed out that trade liberalization would bring losses to Africa due to the end of EU preferences under the Lomé Agreement.
The overall impact that trade liberalization could have on Africa was therefore perceived as mixed and uneven. The economic well-being of Zambia, South Africa and SSA, which is not a member of the South African Customs Union, was expected to increase by three-fifths of a percent by 2015, ten years later!
At the time, the Doha Agreement emphasized manufacturing trade liberalization. Despite the gains in some developing countries, SSA minus South Africa will lose $122 billion as SAP accelerates deindustrialization.
Excluding South Africa from SSA would result in a loss of $106 billion from agricultural trade liberalization due to poor infrastructure, export capacity and ‘competitiveness’. Partial trade liberalization and subsidy cuts therefore have uneven and mixed implications.
Fraudulent policy advice
Applying more realistic assumptions, the benefits to SSA from trade liberalization would be even more modest. Because economic growth generally precedes export expansion, trade can promote a virtuous cycle but cannot by itself improve productivity and capabilities.
UNCTAD has long emphasized the importance of expanding trade, especially growth in fragile investment-export relationships. This prevents many countries from expanding and diversifying their exports.
Rapid resource reallocation is much more difficult without high growth and investment rates. Gerry Helleiner said, “Africa’s failure was not a failure to export per se, but a failure to develop.” Dani Rodrik argued that Africa’s ‘marginalization’ was not due to its trade performance.
The collapse of Africa’s exports in the 1980s and 1990s resulted in “massive annual income losses equivalent to US$68 billion, or 21% of the region’s GDP.” Former World Bank economist Bill Easterly blames SAP for the lost decades.
Nonetheless, “Africa overtrades relative to other developing countries, with trade being higher than would be expected from a variety of determinants of bilateral trade.”
Trade liberalization has significantly reduced the trade, industrial, technology and investment policy space of developing countries. Not surprisingly, food security and manufacturing have been particularly hard hit.
IPS ONE Office
Follow @IPSNewsUNBureau.
Follow the IPS News UN Secretariat on Instagram
© Interpress Service (2024) — All Rights ReservedOriginal source: Interpress Service
