Sunday, November 18, 2007

Rap on free trade

In principal, everyone is supposed to win after two regions sign a free trade agreement. (Well, almost everyone.) Whenever Europe and Africa get together for free trade, however, it’s the Europeans and their companies who come home the winner, writes John Ochola.

The EC and the East African Community should take heed of lessons from our national and global economic history. Liberalisation brings about factory closures, not start-ups. Witness what happened during structural adjustment policies in Uganda in the 1990s. Since then, other countries like Kenya have strategically raised import tariffs, along with investment, to revive both the dairy and the tannery industry. Just when African countries are realising the power it has to help agriculture and industry develop using tariffs as economic policy tools, these very tools, " this fishing rod for development" will be removed through signing the EPA.

Countries that are successful today did not start out by liberalising. They started out by using tariffs to protect industries and having the state invest in them. Korea and Taiwan both achieved their phenomenal growth rates by using high tariffs strategically to promote specific industries. China and Vietnam also successfully used high tariffs and state intervention for trade-driven development. The EU itself took many years to develop behind protective barriers before opening up its markets to competition.

If the EC were serious about supporting Africa to trade its way out of poverty, it would drastically change non-tariff barriers into the EU that have seriously hindered the ability of Africa to access the EU market. These include such things as domestic subsidises to EU agriculture, complicated Rules of Origin and Sanitary and Phytosanitary measures, as well as support around private sector standards that have the ability to restrict exports from Africa.

But none of these issues will be part of any final EPA text that may be hastily cobbled together to meet the December 2007 deadline. A goods-only EPA is a reciprocal free trade deal, not a fair trade deal.

No comments: