Friday, November 16, 2007

The path to free trade

After the World Trade Organization ruled that the European Union must cancel its preferential access to its mostly former colonial states by the end of this year, the 25-member body has attempted to forge a new series of trade agreements with various African regions.

Debate has stirred across the continent whether these accords, called Economic Partnership Agreements, will actually benefit African business. Or, will they continue in the same vein that tilted trade access to industrial products, which very little is produced on the continent, and tightened trade to agriculture products, where Africa has definite comparative advantage.

A group of African states felt these issues could not fully be addressed before the December 31 deadline imposed by the European Union, so they recently rejected the new trade deal. The two sides may continue negotiations, but according to this opinion piece by James Thuo Gathii, a professor of international commercial law, Africa should remain weary of the challenges posed by Economic Partnership Agreements:

Global trade is therefore moving away from trade preferences on the false premise that developing countries are now able to compete on the same playing field as the rich countries. This may be true for high (and some low) middle income developing countries. However, this is certainly not the case for the least developed countries.

Least developed countries still require to be treated preferentially because of their innate vulnerability in the global economy.

An overwhelming majority of people in least developed countries live in poverty without access to basic needs like water, health, shelter and education. Thus to suppose a least developed country could compete fairly with a developed economy under a regime of free trade is to suggest that you can treat countries that are so unequal in an equal manner.

Free trade presupposes a somewhat rough parity of conditions among trading partners so that they can produce tradeable goods and services that they can then exchange.

However, in a system where countries have vastly unequal economic power, there ought to be measures to ensure that benefits proportionate to the economic position of each country can be accrued. Without such a rough proportionality in the benefits of a common trading regime, it would be regarded as illegitimate by those left worst off.

[EU Trade Commissioner Peter]Mandelson and [EU Development Commissioner Louis]Michel's reassurances that EPA's will not mean free trade between the EU and ACP countries 'any time soon' cannot be gauged from the ongoing EPA negotiations.

While developing countries have been pushing for a more development friendly trade regime at the WTO, the EU is pushing in the other direction with the EPAs.

[W]hile any trading arrangements that would improve ACP (Africa, Caribbean and Pacific region) product standards while promoting investments and building regional markets are welcome, EPAs (Economic Partnership Agreements) also come with their bundle of challenges.

One of these challenges is not whether ACP countries should adopt free trade rules and policies in their trading relationship with the EU.

Rather, a critical challenge is the rigged nature of the global trading regime in general, and the uneven trade relationship between ACP countries and the EU in particular.

Thus, as long as the EU's cherished common agricultural policy continues to distort global trade patterns in favour of the EU and against its weakest trading partners, EPAs are unlikely to address the development challenges of ACP countries.

In the final analysis, each ACP country will have to establish if the EPA it will sign onto will advance its interests or not. One sure mechanism to do so will be to subject the EPA to a process of parliamentary scrutiny and approval. No ACP country should sign onto an EPA negotiated by trade bureaucrats without the kind of oversight accountable and transparent governance requires.

Without such parliamentary oversight, ACP countries may yet again be railroaded with an enormous package of obligations that would undermine their current efforts to eliminate poverty while spurring economic growth.

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