New Africa report urges industrial nations to play fair

 

NEW YORK, 29 September (United Nations Department of Public Information) -- Industrial nations need to play fair in international trade if African countries are to benefit from the opportunities opening up in the global marketplace.  This is a key message of the Economic Report on Africa 2004 -- Unlocking Africa's Trade Potential, released today by the Addis Ababa-based United Nations Economic Commission for Africa (ECA).  The report examines constraints -- some created by policies in donor countries, others home-grown -- that Africa faces as it struggles to take its place in the world economy.  In 2003 African countries recorded an average growth rate of 3.8 per cent, up slightly from 3.2 per cent in 2002 but still well below the 7 per cent annually needed to reduce poverty across the continent, notes the report.  The ECA attributes this slight improvement to more production and higher prices for oil (which benefited producing countries), increased foreign direct investment, better macroeconomic management and good weather conditions.

The report notes that the region's current account deficit fell from 1.6 per cent of gross domestic product (GDP) in 2002 to 0.7 per cent in 2003, mostly because of robust oil and commodity prices and higher remittances from Africans working overseas.  Africa could improve its trade performance if donor policies such as the 2000 African Growth and Opportunity Act (AGOA) are strengthened, the report suggests.  Under AGOA, the United States gives preferential market access to African countries that liberalize their economies.  In reality, the benefits have been limited, ECA reports.  Except in a few sectors such as textiles and apparel, AGOA has not given most African countries greater preferential treatment than they already enjoyed as Least Developed Countries.  In addition, the range of products covered under AGOA is limited to “non-sensitive” items -- that is, goods that are not directly competitive with those produced in the United States.  The report notes that there was a 15 per cent drop in total sub-Saharan African exports to the United States between 2001 and 2002.  The ECA recommends that AGOA be strengthened to allow duty- and quota-free access to all African products.

Giving With One Hand, Taking With Other

The positive impact of AGOA and the European Union's “Everything But Arms” initiative has been counterbalanced by income lost to Africans because of subsidies paid to the United States and European Union farmers.  In 2001, cotton subsidies cost Mali, a West African nation highly dependent on the crop, $43 million in potential revenue.  This is more than Mali received in aid that year. "At the global level, priorities clearly lean away from Africa and developing regions", notes ECA Executive Secretary K.Y. Amoako.  “Each year, $300 billion supports farmers in rich countries, while less than one-sixth of that amount flows to poorer countries in the form of aid.”  The New Partnership for Africa's Development (NEPAD), adopted by African countries and endorsed by the international community, recognizes that governments need to be able to rely on a steady flow of overseas development assistance if they are to spur growth.

Donor countries responded to NEPAD by pledging, at the 2002 International Conference on Financing for Development, in Mexico, to increase the quality and quantity of aid to Africa.  In 2002, the $22.2 billion Africa received in aid was lower than the $26.6 billion received in 1990.  Most of the benefits of aid are lost through debt servicing, which amounted to $22 billion in 2002. Finally, ECA recognizes that the donors' habit of insisting that aid funds be spent purchasing goods and services from the same donor countries is crippling Africa's chances of pulling ahead.  "Tied aid" reduces the real value of the assistance by some 25 to 40 per cent, ECA finds, given that recipient countries are forced to buy imports that are not priced competitively.

Africa Must Develop Export Industry

The report also points out that African countries themselves need to become more competitive in order to attract international investment.  They must do more to end conflicts, produce a better-trained and healthier workforce, improve economic and political governance and develop basic infrastructure.  Peace remains a necessary prerequisite for growth.  But, while there was hope that Africa would benefit from a peace dividend following the end of the Cold War, the report notes that the 1990s were the most conflict-ridden decade on the continent since independence.  If Africa is to attain the internationally-agreed-upon Millennium Developing Goals, such as halving poverty by 2015, its economy needs to grow by 7 per cent annually.

In 2003, only five countries achieved that growth rate -- Angola, Burkina Faso, Chad, Equatorial Guinea and Mozambique. Without substantial external investment and the development of local industry, the necessary growth rates cannot be attained or sustained. If Africa is to take advantage of global trade opportunities, it needs to add manufactured goods to the products it has traditionally made available for export.  Most countries continue to depend on a narrow range of products, primarily unprocessed commodities that fetch lower and lower prices on the global market.  But in this area, some countries are making progress, the report notes.  Mauritius, South Africa, Namibia, and Tunisia are most competitive.

A few, including Kenya and Uganda, are beginning to export non-traditional goods such as flowers and fruit.  Mauritius and Tunisia have both developed thriving manufacturing sectors.  It is also good news that, despite failing to attain the high growth rates needed to reduce poverty, Africa is recovering from the "lost decades" of the 1980s and 1990s.  In 2003 it registered the second-fastest rate of growth among developing regions, behind East and South Asia.  The fastest growing sub region in 2003 was North Africa, which achieved 4.8 per cent growth. The weakest were East and Southern Africa, with 2.5 per cent each.  In the near term, prospects for growth are positive, but the report warns that Africa's recovery is fragile and could be threatened by political instability and military conflict.

The full report is available online:  www.uneca.org.

For more information contact:  in New York, Gumisai Mutume, Africa Section, United Nations Department of Public Information, tel:  (917) 367-2302, fax:  (212) 963-4556, e-mail:  mutume@un.org;  in Addis Ababa, Ethiopia:  Cristina Muller, United Nations Economic Commission for Africa, tel:  (+251-1) 44 54 01, fax:  (+251-1) 51 22 33, e-mail:  cmuller@uneca.org.

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