‘DUMP EPAs FOR INTRA-AFRICAN TRADE’

“Is there a rationale for us in Africa to abandon promotion of intra-Africa trade? Certainly, there isn’t!! –Benjamin William Mkapa.

By TZ Business News Staff.

 

Tanzania’s third-phase President,  Mr. Benjamin Willian Mkapa, has maintained his disapproval of  the so-called Economic Partnership Agreements (EPAs) with Europe, insisting that Africa’s economic prosperity lies in increased intra-Africa commerce within the continent’s trading blocks.

The former President said recently that the EPAs, negotiated and in some cases already signed, were agreed upon “under unprecedented economic duress and coercion” and in effect amounted to the second scramble for Africa. But he expressed relief  East African countries had not yet ratified the agreements to legalize them.

Mkapa made the remarks when giving  a lecture on ‘Economic Diplomacy’ to Tanzania’s foreign service officers (FSOs) in Dar es Salaam in early April, 2015.

“EU Economic Partnership Agreements (EPAs) have already been finalised and a number of member states of individual countries have either signed or initialled interim EPA agreements, though no country has fully ratified an EPA with the European Union. So all is not lost, at least not yet,” the journalist former president said and continued with  his lecture at the Mwalimu Julius Nyerere International Convention Centre:

“Is there a rationale for us in Africa to abandon promotion of intra-Africa trade?
Certainly, there isn’t!!

“The 2013 United Nations Economic Commission for Africa (UNECA) Report on International and Intra-Africa Trade indicated that Africa sustained a meagre 3.2 per cent share of global trade.

“The enduring prevalence of lack of value addition in Africa’s predominantly raw material based-export portfolio has meant that Africa’s export fortunes are contingent on commodity price movements exacerbating the continents susceptibility to external shocks.

“The solution therefore lies in expanding regional trade which will provide Africa with opportunities to address major constraints to export competitiveness imposed by small sizes of our economies.

“Regional trade will enable African enterprises to enhance competitiveness through exploiting economies of scale associated with large markets and this will serve as the first step towards building capacity for subsequent exports globally.

“UNECA is in fact suggesting that Africa is under-trading with itself and could potentially realise more trade given geographical proximity, cultural affinity and size of our economies,” Mkapa argued.

The former President continued: “In general the historical trend, especially in the period from 2002 – 2010, shows a positive trend in export within Regional Economic Communities (RECs) every year. The only exception is a pronounced fall in total intra-REC exports in 2009, predominantly influenced by the global financial crisis.

“On average the top four RECs in Africa,–which actively pursued intra-REC exports–were SADC (34% of intra-REC trade), CEN-SAD (26%), ECOWAS (15%) and COMESA (11%). Absence of EAC in the list of top four entails that there is a huge potential to improve intra-EAC trade and that should be our main preoccupation instead of jumping to the EPAs,” Mkapa said.

“Having said all that, I remain firmly convinced that ‘all is not lost’. The system of preferences is the Marshal Plan of the developing countries; we have to continue fighting for that policy space,” he said. “Our main focus should then be directed towards developing intra-regional and intra-Africa trade which will help us build, develop and sustain the capacity to be a meaningful player in the global value chains of Production and Exchange. When that is achieved then EPAs can come; short of which, we will continue to be architects of our own socio-economic retrogression”.

Economic diplomacy was introduced for Tanzania’s foreign servicemen and women during the third-phase Government which Mkapa led after elections in 1995. During the lecture, the former President asked Tanzania’s foreign servicemen and women to take into account the country’s ‘self interest’ when negotiating agreements.

He also reminded them that Africa was currently at the epicentre of the world’s struggle for resources, and a major target for espionage, and that South Africa was now the hub of espionage activity on the continent.

In the first four decades of independence African States were preoccupied with political diplomacy. They had no option. Newly independent, they faced the challenge of asserting their identity, fostering their newly won freedom, and taking their places in the cluster of international organizations. They had to ward off the covetous hands of the nations locked in the cold war. Diplomacy was therefore largely the promulgation of political relations.

“Do we know our problem? Is there a panacea? My take is, we really don’t know our problem.

It is time to shift the focus away from the post-independence  political  posture,  to now focus on economic diplomacy, Mkapa said. First the definition: What is economic diplomacy? This is the deployment of diplomacy in furtherance of the national economy.

He used China as the yardstick to shade more light on this definition: “I have picked on China to show us how and what economic diplomacy can achieve, because they have, in thirty years succeeded in raising the Chinese economy from the fourth/fifth largest to the second largest in the world, second to the United States.

“According to the China Institute of International Studies. They have done so by deliberately enhancing international influence, improving the overall diplomatic environment for peace, development, cooperation and win-win situations. China’s Ministry of Foreign Affairs has taken the lead in setting the goal of cooperation and has been active in the formulation of international economic rules.

“Working with the Ministry of Trade and Industry, they have strengthened economic exchanges and promoted diversified participation of private sector, non-governmental organizations and the business community.  And the Ministry has improved the economic literacy of its diplomats. If China has done this, the least we can do is learn from its experience,” Mkapa said and continued:

“It is incumbent upon you to understand [the EPAs] potential impact and as Foreign Service Officers, devise better ways to help your country mitigate against their impact and promote your country’s ‘enlightened self-interest’.

“Ironically, most of the relationships we forge and agreements we enter into today with the West in our ostensible attempt to diversify our market opportunities, integrate our economies in the global value chains and attract sustainable investment may have the opposite effects. These agreements amount to a new scramble for Africa,” Mkapa said.

“Africa is again in trouble. Its future is once again on the table. And it is Europe, not the purportedly independent Africa that holds the ace. The Berlin Conference of 1884 to 1885 balkanized Africa among 13 European powers as a guaranteed source of raw materials and market.

“One may perhaps critique this analogy with the argument that this current intercourse is consented by free people under purportedly democratic regimes in the continent, after a protracted negotiations during which every party’s interest are thoroughly ‘scrutinised’.

“It is however foolhardy to subscribe to such a flimsy and idealistic narrative. The reality is that Africa negotiated …EPAs under unprecedented economic duress and coercion.

“In the process African governments were arm-twisted into glossing over some very pertinent aspects of the agreement essentially for EU’s economic expediency. It is against this background that I see the current contraption of the Economic Partnership Agreements (EPAs) orchestrated from Brussels as the modern day equivalent of the Berlin Conference Treaty.”

“The tariff elimination demanded by EPAs means domestic producers will lose market share to EU imports. This insistence on complete elimination of tariffs must be viewed against the EU’s refusal to deal with agricultural subsidies. The EU provides domestic supports in agriculture to the tune of between 80 – 90 billion Euros per year. Can East African domestic production of milk, poultry, pork, beef, cereals, etcetera seriously compete with EU’s?

“The EPAs put regional trade and integration at risk. Most of the products that are locally produced are in fact traded regionally. Because of the EPA liberalisation and the EU competitiveness, EAC’s regional trade will be jeopardised. EU products are likely to flow into these regional groups and displace domestic and regional production.

“The elimination of tariffs will also have an adverse impact on state revenues. In the case of Tanzania for example, a modest estimate on current trade figures is that tariff losses could be up to 62 million US dollars a year. As for export taxes, against the strident objections by many African countries, the EU continues to insist on their being eliminated.

“There are two more clauses in the EPA negotiations which make the prospective agreements non-developmental for East Africa. The first is the Most Favoured Nation Clause. It obliges us in the EAC to accord to the EU Party any more favourable treatment applicable as a result of EAC countries having a Free Trade Agreement with a major economy.

“The major economies envisaged here encompass all developed countries and also include Brazil, China, Hong Kong, Indonesia, Malaysia, Mexico, Russia, Saudi Arabia, Singapore, South Korea, Taiwan, Thailand and United Arab Emirates. This is to say whatever better conditions we offer the emerging economies, Europe will also be given the same conditions.

“This makes our countries less attractive for prospective FTA partners since these partners will always have to compete with Europe in our market causing serious trade diversion and deflection.

“The second clause, the Rendezvous Clause concerns the so called “Singapore issues” – namely competition, investment, transparency in public procurement, intellectual property rights, and even possibly labour and environment. With the exception of Kenya, EAC countries are LDCs, and the WTO allows them a transition period before they implement reciprocity. But the EU wants us to provide equal competitive conditions, or as favourable treatment, to foreign countries as those enjoyed by local companies. Yet supporting local companies is a strategy that has been used by many countries that have successfully developed. I find that demand inconceivable and hard to subscribe to!!!

“Another area of my discomfort with regard to EPAs is on the fact that while EPA obliges EAC governments to undertake significant reforms and design and create new policies which will have significant costs attached ― including adjustment costs and revenue loss as a consequence of tariff elimination ― the EU has vehemently refused to include a Development Matrix in EPA.

“Instead, the burden of assembling Development Capital is left to the recycled, unreliable, and cumbersome European Development Fund (EDF), and the Aid for Trade (AfT) Programme.

“Despite justifiable concerns from EAC, the EU maintained their stance and we caved in as EPA was later signed without a development matrix!!!

“These randomly cited clauses unmask fundamental flaws in the negotiations and clearly demonstrate the Jekyll and Hyde attributes of this EPA. Negotiations took place on an asymmetrical ground and culminated into an extremely unfavourable and economically-unfriendly agreement.

“While we are deeply embroiled in the discussions on the potential impacts of EPAs, there is another worrying development in the international trade regime. There are trade negotiations currently going on between the three powerful entities in the global trading system; the United States, the European Union (EU) and Asia.

These multi-country, globally significant–in terms of their trade impact, and regulation–intensive agreements are wide in scope and deep in ambition and constitute a major distraction to the stalled multilateral trade negotiation under the aegis of WTO.

These proposed agreements are laden with many implications for non-party states like us and for the entire global trading system for once the negotiations are completed and new regulatory frameworks agreed upon by the participating countries, they will apply to trade and investment relations with the rest of the world including East Africa.

“Do we know our problem? Is there a panacea? My take is, we really don’t know our problem. To me, our problem is not the political alignment with the rest of the world; it is the economic alignment that has perpetually condemned us into being “hewers of wood and fetchers of water” for our masters.

“Our economic appendage to former colonialists and imperialists is still there and it unfortunately runs very deep. While we currently have the wherewithal to coalesce Pan-Africanist efforts in collaboration with other emerging economies like the BRICs to extricate ourselves from the stranglehold of imperialistic international economic order, but we have ironically relented and not been able to take full advantage of the present geopolitical reality of the rise of China, India and others that really works to our advantage.

“Africa’s Agenda 2063 envisions an Africa at peace with itself, secure, corruption free, democratic, with properly governed states, efficient and effective public service institutions and skilled human resources.

“To bring this about, we need to rethink development and not simply go deeper in directions that have not served us.

“The EU provides autonomous non-reciprocal trade preferences to its neighbouring countries, such as to the Western Balkans since 2000. That agreement allows nearly all their exports to enter the EU without customs duties or limits on quantities.

“In seeking a waiver at the WTO for these non-reciprocal preferences, the EC has said that:  “Terminating the trade preferences would have a negative impact on the overall economic performance of the Western Balkans, with consequent negative repercussions on their domestic reform and transitional processes. Moreover, given the current worldwide economic slowdown, the Western Balkans’ economic recovery could be seriously jeopardized.

“If a different paradigm is acknowledged to be good for the Western Balkans, why is the discourse different for Africa? Do you as FSOs fathom this conspicuous double standard in trade negotiations with Africa and the rest? Do you use such knowledge to front your position in trade negotiations?”