CUTS Africa Resource Centre

For Kenya, the main objective of international trade agreements with the European Union (EU) is to promote sustainable forms of development, which assist in reducing poverty by bringing structural transformation in the economy, while enhancing growth and employment generation. There is a need to ensure a strong developmental dimension, to take into account the development gap between Kenya and the EU, which implies, linking achievement of development thresholds with liberalisation.

Kenya and the EU started negotiations for a new economic partnership in Lusaka, in October 2005. This pact will replace the Cotonou agreement of 2000 between the EU and 79 African, Caribbean and Pacific (ACP) countries, which allowed the ACP countries duty free access to the EU market.

The trade arm of the Cotonou Agreement (CA), the Economic Partnership Agreements’ (EPAs) negotiations have so far paid limited attention to the fundamental values and objectives originally set out in the CA, and arte, therefore set to threaten and undermine its vision. The WTO law, with regard to Regional Trade Agreements (RTAs), offers only limited provisions for Special and Differential Treatment (S&DT) and demands that substantially all trade be liberalised in an agreement to qualify as an RTA. The EU has, therefore, demanded that the EPAs require liberalisation of 90 percent of EU-ACP trade, a demand which threatens the ability of ACP countries to protect a wide range of vulnerable sectors in their economies, whose further growth is vital to development efforts and poverty reduction. The EU has so far rejected a wide range of proposals by ACP negotiators without a suggestion of compromise, threatening the vision of Cotonou as an Agreement based on equality of partnership.

The Heavily Indebted Poor Countries (HIPC) Initiative was launched to create a framework for debt relief to the world’s poorest and highly indebted countries, with the objective of enhancing economic growth and reducing poverty. It also attempts to bring the debt burden of the poor countries within manageable limits. After assessing the progress made in meeting the criteria for debt relief, the International Monetary Fund (IMF) and the World Bank (WB) formally decide on a country’s eligibility and the international community commits itself to reducing debt to sustainable levels.

The three stated objectives of HIPC are: achieving long-term debt sustainability, promoting poverty reduction and growth. The main challenge for the HIPCs is not to curtail social spending at the time of tight fiscal squeeze but to focus on poverty reduction programmes without increasing external debt. Against this background, this policy brief argues that the current debate on debt sustainability vis-à-vis poverty reduction should be seen in a much broader context than what is currently the case, so that the needs and requirements of poor countries are better appreciated and addressed.

The experience of the Common Market for Eastern and Southern Africa (COMESA) points to the need for competition policy and law, and also for the establishment of appropriate institutions to enforce it at both national and regional levels. Over the years, competition-related concerns have arisen in the regional groupings that relate to monopolistic behaviour, market segmentation and cartel behaviour. Consumer protection provisions also form part of the COMESA’s regional competition policy and law.

The purpose of this policy Brief is to provide an overview of the COMESA’s competition policy, with specific reference to how it will affect the consumers in the region.

The Africa Growth and Opportunity Act (AGOA) intends to replace the Generalised System of Preferences (GSP) and will be directing trade between Africa and the United States until September 2008. Many African countries were made eligible for AGOA benefits since its inception in 2000. The European Union (EU) and Africa, Caribbean and Pacific (ACP) countries (excluding South Africa), also signed a new partnership agreement in Cotonou, Benin, replacing the Lome IV Convention, on 23 rd June 2000. Under the Cotonou Agreement, the EU has agreed to expand trade and investment with 77 ACP countries. The Cotonou Agreement is a 20-year-old accord, under which the nature of cooperation between the EU and ACP countries are guided by Economic Partnership Arrangements (EPAs).

This paper discusses the challenges and opportunities under AGOA and Cotonou trade arrangements for Tanzania and other African countries.

Zambia hosts the Common Market for Eastern and Southern Africa (COMESA) secretariat and is also a member of the Southern Africa Development Community (SADC). While COMESA wants to negotiate the Economic Partnership Agreements (EPAs) wit the European Union (EU), so does SADC. But, countries with dual memberships will have to determine which organisation serves their interests best, for no country can belong to two customs union at the same time.

The purpose of this policy brief is to analyse that what happens when the country is caught in the web of two competing regional organisations.

Economic transformation achieved through foreign direct investment (FDI) is now widely acknowledged as an engine of growth in developing countries, including least developed countries (LDCs). LDCS have low incomes and generally exhibit low rates of growth. They receive relatively small amounts of FDI, which can play an important role in their capital formation. But, there are vast differences in the growth offered by FDI in various LDCs, where social and economic conditions vary, sometimes vastly.

This Policy brief discusses the role FDI has come to play in the economy of two LDCs: Tanzania and Zambia. These countries are similar in many ways, but differ fundamentally in their approach to a similar external influence. This policy brief is based on findings of the country research studies carried out under a CUTS project, entitled, ‘Investment for Development’.

The passage from the GATT to the WTO represented a major turning point for trade policies in developing countries. However, it has been almost eight years since the inception of WTO in 1995, developing countries face new challenges and priorities related to their participation in multilateral trade negotiations.

This Briefing Paper argues that there are some clear lessons, which need to be learnt by the developing countries. The results of the UR indicate that countries, which participated actively and for longer period, gained most. In other words, absence is damaging in trade negotiations. Another crucial factor discussed in the paper is the need for crafting alliances, not necessarily regional and among the countries of same developmental level, but with countries of similar interests.

The issues pertaining to competition and the measures to deal with restrictive business practices were raised in the Uruguay Round negotiations. Although there is no multilateral agreement on trade and competition policy, the issue is very much present in many of the existing WTO Agreements.

The Agreements that refer to competition issues are General Agreement on Trade in Services (GATS); Trade Related Aspects of Intellectual Property Rights; and Trade Related Investment Measures (TRIMs). The Paper deals with WTO Agreements, which are related to a number of competition issues.

The three core mechanisms outlined in NEPAD: ‘sound’ macro-economic policy and stability; greater openness of the African economies; and "good governance" are at the core agenda of the post-Washington Consensus. In the area of how development programming addresses the challenge of poverty, we encounter NEPAD’s disappointing inability to transcend the discourse of the Bretton Woods Institutions (BWIs). The assumption that growth delivers on poverty reduction is, often, overstated. While growth is necessary for poverty reduction, two questions arise. First, are the policies of the Washington Consensus good for growth? Second, are they poverty-reducing and, indeed, can they be? The evidence, the paper argues, is that this is not the case, nor is it likely to be. The "equity-growth" trade-off continues to dominate the policy discourse of the BWIs. Further, NEPAD suggests the adoption of existing policies of the BWIs without an awareness of the crisis confronting these instruments. A review of evidence from these policies shows that: (a) anti-poverty measures continue to be treated as residuals of ‘sound’ macro-economic policies; (b) there is considerable dis-juncture between macro-economic policies and the stated objective of poverty reduction; and (c) the macro-economic policies are imminently deflationary, create instability, exacerbate inequality, and undermine commitment to inclusive social policies.
The paper concludes by arguing the need to transcend current discourse and practice embedded in NEPAD and the BWIs.

3. Environment at the WTO
Implications for Poor Countries (CUTS-ARC No1/2002)
It had been hoped that the United Nations World Summit on Sustainable Development (WSSD), which concluded in Johannesburg at the end of September 2002, would be a forum for setting the action plan to tackle the myriad environmental problems being faced by the world. Though the focus was not trade itself, one trade-related issue discussed was farm subsidies. The high amounts of cash (US$1.3mn every two minutes 1 ) that the West spends on its farmers are an important barrier to Third World development through trade. Subsidies mean African farmers cannot get a toe-hold in the Western marketplace. But, despite fine words from the North, the fact is that decision-makers in countries such as Ireland, France and the US are not keen on upsetting their farming lobbies and, hence, have not countenanced a reduction in subsidies. The main issue is that these agricultural subsidies are environmentally unsound and flout international trade rules. The Summit’s Action Plan on trade and globalisation was, therefore, unsatisfactory. It failed to realise that the WTO-driven agenda for trade and globalisation already raises trade and environmental issues that still have to be adequately solved. There is a fear even at the WTO, that, the interests of the poor countries and the natural environment, in general, may not be adequately solved. The short history of the WTO as an institution seems to validate this view.

This Briefing Paper emphasises the point that the work on trade and environment in the GATT/WTO is not new and, though dating back to 1972, there is still much to be done. Environment is one of the key post-Doha WTO Ministerial Conference areas for immediate discussion. From the perspective of the rather quick turnabout of the EU at Doha in agreeing to certain concessions on the Agreement of Agriculture in return for the three main elements that it felt needed to be pushed for immediate discussions under environment, it is useful to analyse how these issues would manifest themselves from the perspective of the poor countries. These are Multilateral Environment Agreements (MEAs), the precautionary principle, and eco-labelling.

1. East African Community and the Need for A Regional Trade Agreement (CUTS-ARC No4/2001)
During a summit in Arusha, Tanzania in January 1999, the three Heads of State of Kenya, Tanzania and Uganda resolved to sign a treaty re-establishing the East African Community (EAC). The purpose was to achieve a set of developmental objectives for the three countries as well as to promote trade within the region. It was expected to improve their economic and political bargaining power by forming a united entity.

In January 1999, the EAC was reconstituted to achieve a set of developmental objectives. However, it was not clear what economic and political conditions are to be taken into account for these objectives to materialise.

This Policy Brief examines arguments for a regional trade agreement among members of the EAC and points out the benefits that these countries could draw from such an arrangement.

2. Capacity Building for WTO Participation African Perspectives (CUTS-ARC No3/2001)
The World Trade Organisation (WTO) has emerged as a key organ of governance and management of the globalising world economy. Its establishment as a forum for continuous negotiations on a range of trade and trade-related issues is creating new challenges for African countries.

An essential requirement of participation in the trade regime under the WTO is more rapid investment and overall economic growth by securing better market access for products. For African countries, this can be possible only if they can participate more effectively in the design and enforcement of trade rules as well as strengthening the institutional mechanism that shapes the trade regime on appropriate terms.

This Policy Brief explores the question of why has African countries' participation in the WTO has been marginal and suggests recommendations to improve the situation.

Prior to this, there were two initiatives by the rich countries, which intend to offer better market opportunities for the LDC exports. The US introduced the Africa Growth and Opportunity Act (AGOA), while the European Union (EU) came out with the Everything But Arms (EBA) initiative.

This Policy Brief provides an objective assessment of the marginalisation of the LDCs in the global trading system by citing suitable examples and highlighting the need for sustained global actions for strengthening the LDC exports. An effort has been made to understand the possible outcomes of the EBA by examining its weaknesses, challenges and opportunities from the political economy perspective.

4. US Politics and Free Trade: Trade Policy Options for Africa (CUTS-ARC No1/2001)
On the heels of the Quebec Summit of the Americas and meeting of the Organisation of American States (OAS) to re-energise efforts to create the world’s largest free trade area of the Americas (FTAA), America’s tradefocus has turned to Africa. May 23, 2001 marked the first anniversary of passage of the Africa Growth and Opportunity Act (AGOA). A number of receptions were held at the US Congress to celebrate the occasion, with several African ambassadors, American officials and business people attending in good numbers.

The AGOA itself is little more than a framework for shaping future US-Africa economic relations and serious implementation issues has already arisen. Even this fact did not slow down the public relations campaign from all quarters praising AGOA as the first step in the beginning of a new era.

In spite of the rash of AGOA seminars put on by US missions and private consultants around Africa and the announcement of the first high level US-Africa AGOA ministerial on October 3-4 2001, African policy makers must recognise that all is not well in the Bush Administration’s world of global economic development through free trade.

In fact, careful analyses of other US bilateral free trade initiatives, US positions on WTO (World Trade Organisation) issues, and Republican and Democratic domestic political maneuvering on US trade policy offer insights into some of the dynamics African policy makers must contend with.

The following issues represent important policy and political contexts for African nations to consider, as they contemplate the role of trade and economic relations with America in relation to issues of peace, reconstruction, growth and development.