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Comment: Choosing trade over aid

Comment: Choosing trade over aid

Africa needs trade not aid. This has been the reverberating message from many African leaders, economists and business pioneers of late. At this September’s UN General Assembly, Ghanaian President John Dramani Mahama and Senegalese President Macky Sall addressed world leaders with this very sentiment.

The emphasis on trade over aid is in part a backlash against the modest results of development aid. Africa has received over $1 trillion in international aid over the past 50 years, but this has been ineffective in combating poverty and spurring economic growth in a sustainable way.

Moreover, aid inefficiencies are acutely heightened where there is a lack of strong political institutions, a common difficulty across the continent. In contrast, there is a proven link between openness to trade and economic performance, an approach that has taken centre stage in the trade policies of the EU, Africa’s second largest trading partner after China.

Towards a reciprocal relationship

The embodiment of the shift towards trade can be seen within the context of the Economic Partnership Agreements (EPAs) between a number of African groupings (Central Africa, Eastern and Southern Africa, East African Community, Southern African Development Community and West Africa) and the EU. Essentially, the EU wants to move towards a reciprocal trading relationship with the continent, in which African regional groups gain duty- and quota-free access to the EU market.

In return, over time, participating African countries will have to liberalise just 83% of their markets, as sensitive products will be protected. For example, the Economic Community of West African States (ECOWAS) has excluded from eventual liberalisation all products that currently face the highest rate under its Common External Tariff (CET), as they considered to be the most sensitive for the countries’ economies.

In their reciprocity, EPAs reflect a clear shift towards a trade- rather than aid-based relationship. Even the aid aspects are squarely aimed at channelling development aid towards trade-related areas.

In the case of the Southern African Development Community (SADC), for example, an EPA fund will channel development finance towards the implementation of the SADC-EU EPA. However, these agreements, by and large, have been the subject of protracted negotiations, and have resulted in only one region, SADC, implementing an EPA. Why? Broadly speaking, because Africa is not quite ready to embark on this free trade trajectory.

All the Central African countries except Cameroon and the majority of countries in the Eastern and Southern African region (ESA) have been in deadlock over EPAs. Pockets of disagreement persist from Tanzania in the East African region and Nigeria, The Gambia and Mauritania in the West African region.

This has been due to concerns around European products putting local industries at a disadvantage, despite the liberalisation of markets being the very basis of free trade.

Therefore, it might well be high time to consider more precisely how African countries might transition to trade over aid dependency, especially within the context of the evolving relationship with one of its largest trading partners, the EU.

Uzo Madu

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