African Development for the Completely Bloody Ignorant

The discussion of how economic growth can help Africans out of poverty has often become a row between those who focus on the steps Africans and their governments can take to improve growth rates, and those who focus on the steps rich countries must take. As we saw last time, the Report of the Commission for Africa has much to say about the steps African countries can take to improve their economic performance. However, it has plenty to say about what rich countries must do too.

Drop agricultural subsidies.

Western agricultural subsidies are the whipping boy of the Africa debate - it’s hard to find anyone, from the left, right or middle of the political spectrum, who will really stick up for them.¹ So it’s not a massive shock to see the Report join the chorus, calling rich countries’ trade barriers (including subsidies) “politically antiquated, economically illiterate, environmentally destructive, and ethically indefensible” (p89). Rich countries spend 16 times as much on subsidising their farmers as on aid to Africa. Such subsidies artificially lower prices, pushing poor-country producers out of business. For example, US cotton farmers are paid twice the world price for cotton, and the resulting overproduction drives the price down, threatening the livelihoods of farmers in West Africa. The Commission calls for a commitment to ending all export subsidies and trade-distorting support - that excludes things like research funding - by 2010, with cotton and sugar subsidies immediately scrapped.²

Drop other barriers

Subsidies lower the prices African farmers can obtain for their exports; import tariffs (taxes) slash the potential benefits of exports even more by hitting African imports when they come into rich countries. Just as rich countries subsidise agriculture more than industry, they protect agriculture more with tariffs as well, with agricultural tariffs three to four times higher than manufacturing ones, punishing Africa in the sector which over 80% of its farmers rely on for their livelihoods. “It is essential,” the Commission notes, “that rich countries stop discriminating against the few goods in which Africa has a comparative advantage” (p95). It calls for a reduction of all tariffs (not just agriculture) to zero by 2015. They also call for more care to be paid to development issues when considering things like health and safety standards: for example, the EU’s standards on banana pesticides are stricter than international standards, blocking $410 million of African banana exports.³

The Commission notes that Africa’s share of world trade has actually dropped in recent decades, from around six per cent in 1980 to two per cent in 2002.

Extend and improve preference schemes

For all the barriers placed between African exports and Western markets, there are some cracks in the edifice, in the form of “preferences” - direct country-to-country agreements to improve access in particular goods. Prior to the wave of multilateral trade talks that began in the 1980’s, these agreements were the main way in which tariffs were reduced. The preferences that exist give African countries important market access in key areas, but they need to be extended to poor African states currently excluded, like Ghana and Kenya. Moreover, they need to be simplified - current regimes are overcomplicated and overstrict, the Commission claims. For example, rules that specify a product has to be made in the country exporting it, have in some cases been extended to rule out, for example, fish caught by a boat from one country if the boat’s captain is from another country. The US is actually ahead of this, requiring on agricultural arrangements only that the country in question manufacture the goods, not worrying about the source of the fabrics. The Commission calls for this pattern to be adopted by other rich countries, and extended to other manufacturing. Such changes could ultimately increase African growth by 1%.

One-way concessions in trade talks

Ultimately though, the Commission recognises that multilateral agreements, not preference schemes, are the long-term solution to Africa’s trade problems. The report calls for a strong deal in the Doha round of World Trade Organisation negotiations by the end of 2006. What’s more, it asks that the steps outlined above be taken by rich countries without reciprocal concessions by poor countries. As the Commission notes, “this is not a level playing field,” and Africa needs to be allowed to lower its trade barriers at a slower pace.

This ultimately became a huge sticking point at the WTO negotiations, in Hong Kong in December 2005 and in Geneva in July 2006. While there was widespread agreement that rich countries should cut their tariffs and subsidies, particularly on agriculture, there were strong demands from rich countries that it make reciprocal concessions. Ultimately, this derailed the talks completely, and the Doha round is now widely considered over. It’s been said that the US was to blame, but the US denies being inflexible.

I’ll go into detail about the trade issue later on. It’s probably the most complex and bitter, with aid agencies disagreeing even about the importance of the Doha round’s collapse, some calling it “a disaster” and some “the best outcome for the world’s poor.” The Commission’s demand for African countries to be required to make no immediate concessions is comparatively strident, though, putting it in dispute with both the EU and US’ official positions.

Overall, the Commission’s proposals for ensuring growth are broad and quite comprehensive. But a central criticism of recent development thinking is that, while it’s adept at promoting growth, it forgets about making sure growth benefits the poor. So the Commission also devotes considerable time discussing how to spread the benefits of growth to those traditionally excluded from them - how, in their words, to “leave no-one out.”

1. OK, not everyone. And those who do agree they’re part of the problem are dragging their heels on scrapping them; this was one of the key disagreements behind the collapse of the Doha round of trade negotiations. More on that later. Nevertheless, cutting subsidies has the crucial advantage of appealing to both sides of politics: left-wingers like it because they think it will benefit poor countries, and right-wingers like it because they see subsidies as wasteful and distorting of free markets.
2. The Commission called for these moves to be made at the December 2005 meeting of the WTO in Hong Kong. Nothing of the sort happened, and the Doha round of WTO negotiations all but collapsed in Geneva in July 2006. But major reductions in subsidies remain a goal of the negotiations, should they ever be completed.
3. Seriously, how do they measure these things?

*No puns till I get some donations. I warned you!