Fair Trade?
January 12, 2008
When the Senegalese unions ordered people to take to the streets in protest against food and energy prices this week, the target of their ire was, at first glance, their own government alone. But the unions and the government have a common enemy.
On Monday, Jan. 7, members of the government marched alongside the unions to express their opposition to signing an Economic Partnership Agreement (EPA) with the European Union. This, experts believe, could make the economic situation in the country even more precarious.
That's set to give EU Trade and Industry commissioner Peter Mandelson a considerable headache. He clearly regards the EPAs as the best way of placing trade relations with Africa on a new footing.
In December, the favorable trade arrangements that the EU had with African, Caribbean and Pacific (ACP) countries -- most of them former European colonies -- ran out. The World Trade Organization found that the trade preferences broke world trade rules and ordered the EU to extend them to all poorer countries or roll them back altogether.
EU splitting African states
The EU decided to plump for the latter option. The bloc wants to forge EPAs with individual African regions. Under the proposals, EU import barriers upon African goods would be lifted. But in return, African states would be expected to open their markets to EU countries.
This free trade agreement means that the African states would lose the relative advantage that they have enjoyed up to now in European markets. It's hardly surprising that the EU-African summit on this topic ended without agreement.
The representatives of most African countries refused to put their signature to the EPA deals -- first and foremost Senegal's President Abdoulaye Wade, who categorically rejected them. The EU has had to face more criticism since then.
After failing to pull off their grand plan, the Europeans are now concentrating on trying to sign pacts with individual states which do signal willingness. The international aid organization Oxfam has accused the bloc of exploiting its stronger position to coerce states into agreeing.
Worse still, the EU is -- the organization says -- playing off African states against one another. What will happen, for example, to the customs union between South Africa, an EPA opponent, and neighboring Botswana, which has signed up?
"This is ironic given that the EU efforts were supposed to promote the regional integration of African economies," said Oxfam spokeswoman Amy Barry.
African markets are "not yet ready" for this step
Dirk Kohnert from the GIGA Institute for African studies in Hamburg said the African's worries are justified.
"The EU is hiding behind the World Trade Organization's ruling," he said. "In fact, the Europeans are trying to assert their own interests."
He said European companies were waiting in the wings ready at any moment to move into the liberalized African markets. But most of the states are not prepared for this. On the other hand, African products are also facing barriers that are not dealt with under the EPAs.
"Cotton products from West Africa are competing in the EU with products from Southern Europe -- where the EU is subsidizing the sector's development," Kohnert said.
And the EU's chocolate purity regulations is an obstacle to African cocoa producers who would like to switch from exporting cocoa beans to producing chocolate.
Another problem of the EPA, according to Barry, is the loss of important customs income, which could endanger the budgets of African states.
"It is also threatening jobs and the growth of domestic industry," she said.
African states keeping their options open
But the African states are not going quietly. Many have not signed the EPAs and others, such as Kenya and a number of its neighbors in East Africa which have said yes to the EU, are not bound by those agreements, according to Oxform. Up to now, the states' negotiators have only signed the pacts and not their heads of state.
"This means they could pull out at any time," Barry said.
Peter Mandelson's opposite number in the African Union, Trade Commissioner Elisabeth Tankeu, has announced this week that the trade ministers from across the continent are planning to meet before the end of February to decide on a common position vis-a-vis the EU.
Transitional arrangements mean that not much has changed for African states since the end of the EU's preferential trade tariffs. But it is not clear how long this situation can last. Time is on the Africa's side. The EU is now facing a number of powerful competitors in the African market, such as China, India and Brazil.
These transitional economies see the continent as a useful source of raw materials and have been investing in local industry. China's Foreign Minister Yang Jiechi has been striking these kind of trade deals on his four-day trip to Africa this week. According to official Chinese statistics, trade between China and Africa grew more than 30 percent to 50 billion euros in last year alone.
This pressure is having an effect, according to Kohnert.
"The EU has decided to put back by one year the deadline for the conclusion of the EPA agreements with the Africans -- this is an option that the Europeans firmly ruled out at the outset," he said.
He believes that the Chinese competition in Africa could mean that the EU will be forced to negotiate with their African partners on a truly equal footing.