a new u.s.-european approach to trade and development in sub-saharan africa

8/9/2019 A New U.S.-European Approach to Trade and Development in Sub-Saharan Africa

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ECONOMIC POLICY PAPER SERIES 2010

A NEW U.S.-EUROPEAN APPROACH TOTRADE AND DEVELOPMENT IN

SUB-SAHARAN AFRICA

KATRIN A. KUHLMANN

he German Marshall Fund of the United States


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2010 Te German Marshall Fund of the United States. All rights reserved.

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Tis publication can be downloaded for free at http://www.gmfus.org/publications/index.cfm. Jones, Emily and Marti F.,Darlan (2009). Updating Economic Partnership Agreements to Todays Global Challenges. Washington DC/Brussels:Te German Marshall Fund of the United States, Economic Policy Paper Series 09.

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About GMFTe German Marshall Fund of the United States (GMF) is a non-partisan American public policy and grant-makinginstitution dedicated to promoting greater cooperation and understanding between North America and Europe.

GMF does this by supporting individuals and institutions working on transatlantic issues, by convening leaders to discussthe most pressing transatlantic themes, and by examining ways in which transatlantic cooperation can address a variety of global policy challenges. In addition, GMF supports a number of initiatives to strengthen democracies.

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Te United States and Europe account for more than 40 percent of world economic activity, close to $20 trillion in goodsand services on an annual basis. Given the size and importance of this relationship, GMFs Economic Policy Programseeks to ensure that the bene ts of globalization are distributed equitably and fairly. Trough in-depth research, targetedgrantmaking, strategic convening, and outreach to key policymakers and the media, the program supports transatlanticleadership at the critical nexus of economic policy, trade, development assistance, and management of domestic sectors such

as agriculture.


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A New U.S.-European Approach to

Trade and Development in Sub-Saharan Africa

M

Katrin A. Kuhlmann*

* ransatlantic Fellow at the German Marshall Fund of the United States and Adjunct Professor at Georgetown University School of Law.

A New U.S.-European Approach to rade and Development in Sub-Saharan Africa. . . . 3

Europes Change in Direction he Politics Behind the Policy . . . . . . . . . . . . . . . . 4

ransatlantic rade and Development PolicyLimited Approaches and Lessons for the

Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Addressing Capacity Challenges hrough a New Demand-Driven Approach . . . . . . 10

Meeting the Africans Halfway: Unlocking rades Potential and Building on the

Development Corridors Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14


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3

The difficultiesassociated with

getting crops tomarket has madeit easier andcheaper for many people in cities tobuy basic foodsfrom abroad rather than from theinteriors of their own countries.

We are at a critical turning point in trade anddevelopment policy with sub-Saharan Africa. he vehicles for large-scale international policy change,including the Doha Development Round anddeveloped country agricultural reform, have, atleast temporarily, ground to a halt. he deadline formeeting the Millennium Development Goals is fastapproaching, yet we are nowhere close to realizingthem. Poverty alleviation is starting to show signsof success in some parts of Asia, but sub-SaharanAfrica continues to suffer from seemingly intractablepoverty on a massive scale, and hunger is increasing.

Setting sub-Saharan Africa on a different coursewill require creating the conditions for sustainable,regionally-focused, market-led development. Yettoo often international economic policies fallshort of their potential to help move Africa inthis direction. With the overlapping crises of foodinsecurity, climate change, and global financialinstability, the need for viable solutions is now morepressing than ever.

he health of the African agricultural sector is a

critical part of the equation, and international tradeand development policies could be a tremendouscatalyst for positive change, instead of theimpediment to agricultural growth in sub-SaharanAfrica they have often been in the past. Withoutagricultural development, broad-based growthand poverty alleviation in Africa is not possible.Agriculture is the most significant industry in sub-Saharan Africa, with around 500 million people (orbetween 70 and 80 percent of the subcontinentspopulation) dependant on farming for theirlivelihoods. Many of these farmers are women who

are responsible for supporting entire families, andmany live on less than one dollar a day. Around 90percent of African food production comes fromthe small farm sector, and most of these farms arelocated in remote areas with little access to markets.As a result, they are the first to be vulnerable inthe face of change. hese farmers will need reliable

A New U.S.-European Approach o Tradeand Developmen in Sub-Saharan Africa

sources of income and inputs, along with advicefrom other African farmers, in order to achievesustainable livelihoods.

Food insecurity is becoming a growing problemin Africa, and the continent was hit hard duringthe global crisis of 2008. African food productionhas simply not kept up with population growth,and the underdeveloped nature of African foodsystems and markets has made it more vulnerable toglobal market volatility. The difficulties associatedwith getting crops to market has made it easier

and cheaper for many people in cities to buy basicfoods, including staple crops, edible oils, livestock and livestock feed, from abroad rather than fromthe interiors of their own countries. This is notsustainable, and Africas farmers need to be equippedwith the tools necessary to feed its population.

Increasing farmer productivity is the key to bothachieving greater food security and increasingagricultural trade, but productivity will only increase if farmers are connected to markets andsee tangible benefits from participating in them.

he ability to achieve broad-based food security will depend upon how well markets develop andhow widely these productivity gains are spread.

he global financial crisis has hit the mostimpoverished parts of the world the hardest, andsub-Saharan Africa has already seen a steep declinein sales, jobs, and remittances. African economicgrowth has fallen by two thirds. 1 Prices for thenatural resources and agricultural products onwhich Africa depends have fallen, and incomeshave declined sharply. Markets are shrinking, andsub-Saharan African producers, who did not havean easy time securing regional and international

1 Edward Gresser, Briefing Paper on Global Financial Crisis forChange Agenda Forum, Washington, DC: rade, Aid and Secu-rity Coalition (GlobalWorks Foundation), 2009.


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markets when times were good, are in a very precarious position.

Simultaneously, because of climate change thereis a closing window of opportunity to advanceagricultural development and increase food security in Africa. The Intergovernmental Panel on ClimateChange estimates that between 75 and 250 millionpeople in Africa will be exposed to increased waterstress by 2020, and, in some countries, yields fromrain-fed agriculture could be cut in half. Farmersare not equipped to deal with this looming crisis,

and they will need new information and extensionservices, new meteorological warning systems, newseeds, new fertilizers, and new pesticides in orderto survive. Adapting to climate change will takeregional and continent-wide solutions to developbetter markets and help farmers adapt. Like foodsecurity, climate change adaptation must be dealtwith now. If we do not fix the problem in a systemic,meaningful way, it will only get much worse.

Against this backdrop, policy debates that directly impact sub-Saharan Africa are unfolding within and

among developed countries. he U.S. governmentis embarking on a comprehensive review of tradepreference programs, including the African Growthand Opportunity Act (AGOA), in order to ensurethat these programs yield better, broader gains thanthey have so far. U.S. foreign assistance reform isalso the subject of extensive review within both theU.S. Legislative and Executive Branches. In Europe,the European Commission (EC) is determininghow to move forward with the EconomicPartnership Agreements (EPAs), since negotiationswith the Africans, in particular, have not gone as

smoothly as hoped.

On both sides of the Atlantic, significant politicalwill and resources are being put behind initiatives topromote food security, and increasing focus is beingplaced on how to promote regional integration anddevelopment of markets in sub-Saharan Africa. In

July 2009, the United States and major Europeancountries, along with other G8 partners, committedto provide $20 billion over three years to supportagricultural development and global food security.Going forward, the support given by G8 countriescould be used as an opportunity to address theharsh realities facing Africas farmers.

here is real potential for a positive shift in tradeand development policy with sub-Saharan Africa.Yet it is critically important that policymakers getthe elements of the agenda rightincluding finding

ways to create sustainable opportunities for Africanagricultureand move forward in a coordinated,comprehensive, and systemic way.

his essay will explore the politics behind Europesshift in trade policy with sub-Saharan Africa,summarizing the global implications of the EPAs.It will also examine U.S. and European trade anddevelopment policy, highlighting limitations inpolicy approaches and lessons to keep in mindgoing forward. he essay will then explore anoption for meeting Africa halfway, i.e., how tosolve Africas problem of under-trading, includingaligning international support around an Africaninitiative for building infrastructure, regionalcapacity, and integrated markets that has becomeknown as the Development Corridors movement.

he essay will conclude by outlining concreterecommendations for a new, comprehensiveapproach to European and U.S. trade anddevelopment policy with sub-Saharan Africa thatgoes well beyond the EPAs and the limited policiesof the past, and provides insight for new trade, aid,and food security policies.

Europes change in direction: The politicsbehind the policy

By the end of 2007, European policymakers were ina bind. he W O waiver for the European Unionspreferential trade arrangement with the African,


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Caribbean and Pacific (ACP) countries wasabout to expire, but the strategy Europe had beenpursuing to replace these preferences was comingunder increasing pressure. On the one hand, therewere still complaints from third-party countries,such as Latin American banana producers, whowere excluded from preferential access becausethey did not have the same historic ties to Europe.On the other hand, the ACP countries wereincreasingly resistant to the alternative that theEC was seeking to put in place: reciprocal freetrade agreements dubbed Economic Partnership

Agreements (EPAs). Originally the brain child of Pascal Lamy during his time as European radeCommissioner, the EPAs had been aggressively embraced by Lamys successor, Peter Mandelson.

Contrary to Mandelsons hopes, the Doha Roundwas nowhere near a successful completion, andEuropes debate around agricultural policy reformwas becoming more politically complicated. In thiscontext, Mandelson saw the EPAs both as a way tosolve the problem of W O compliance while alsoleaving a memorable legacy behind. His new vision

for the ACP countries actually tracked closely withthe objectives of the Doha Round and was intendedto represent a comprehensive approach to tradewith developing countries that would promote localand regional trade, as well as trade with Europe.

Under Mandelson, the EPAs moved forwardquickly with the 77 ACP countries, and the ECpressed to conclude negotiations with six regionalgroupsthe Caribbean, the Pacific, and fourregions in Africabefore the Cotonou waiverexpired at the end of 2008. Differences between

the six regional groups were clear from the start,however, and, within these groups, differences incountries levels of development made negotiationof the EPAs particularly challenging. In late 2007,the East African Community (EAC) split out of the Eastern and Southern Africa negotiating bloc,

creating a seventh regional group with whichEurope was negotiating.

CARIFORUM, the Caribbean countries plus theDominican Republic, has been the only one of theseven regional groups to conclude an EPA; the sub-Saharan African regional blocs 2 and a subset of thePacific countries have only concluded piecemealinterim EPAs that do not include all countries and,in some cases, include separate bilateral deals withdifferent timelines and processes for implementation.Matching these up to form consistent regional

commitments is proving difficult.Part of the issue in sub-Saharan Africa has beenthat the subcontinent shares characteristics as awhole, and regional negotiations, while a laudablestart, cannot fully address sub-Saharan Africasneeds. Further, the regional economic communities(RECs) involved in these negotiations do not havesufficient capacity as institutions. Most countriesthat are party to them have yet to implementthe regional agreements fully and still maintainconflicting trade policies. o complicate matters

further, the RECs with which the EC is negotiatingoverlap and often conflict with a web of numerousother regional institutions, 3 and, in some cases,the existing RECs may become part of new, largerregional communities. In addition, the five regionalblocs involved in negotiations do not necessarily correspond with the Development Corridorsdescribed below, which are built around naturaltrade and transport routes that form regional

2

he five sub-Saharan African regional groupings negotiat-ing EPAs are the Economic Community of West African States(ECOWAS), le Communaute economique et monitaire delAfrique centrale (EMAC), Eastern and Southern Africa (ESA),the East African Community (EAC) and the South AfricanDevelopment Community (SADC).3 he typical sub-Saharan country is party to four regional ar-rangements with conflicting requirements. See Paul Collier, TheBottom Billion, Oxford: Oxford University Press, 2007.


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The EPAs couldactually cause

trade diversionrather than trade

creation andcomplicate, rather

than facilitate,regional trade

both within andacross regions.

markets rather than the political boundaries of trade communities.

ECOWAS, EMAC, ESA, EAC and SADC allcontain countries at differing levels of development.As the EPAs have played out, these differencesin development have sometimes pitted countriesagainst each other rather than encouraging regionalintegration. For those countries not classified asleast developed countries (LDCs) by the UnitedNations, the only existing non-EPA option is torevert to the limited preferential market access

available under Europes basic Generalized Systemof Preferences (GSP) program. For those countriesthat are classified as LDCs,4 the EUs EverythingBut Arms (EBA) program continues to apply, sotrade with Europe is already free of duties andquotas. his means that LDCs have little incentiveto open their own markets to Europe in the form of an EPA, since they are already receiving duty-free,quota-free access to European markets. Non-LDCs,however, have powerful incentives to negotiate,since they do not have the EBA program to fall back on. As the regional negotiations continue, some

of the poorest countries with the least negotiatingpower are finding that they will quickly face someof the steepest adjustment costs. 5

If hard-pressed, most European negotiatorswould admit that the EPAs as they continue to beconceived are less than ideal. According to studiesby Patrick Messerlin of the Groupe dEconomieMondiale at Sciences Po in Paris and Antoine Bouetand his colleagues at the International Food Policy Research Institute (IFPRI) in Washington, the EPAscould actually cause trade diversion rather than

4 39 of the 77 ACP countries are classified as LDCs, with most of these LDCs in sub-Saharan Africa.5 For example, Mozambique will face particularly large and costly adjustment challenges as a result of the EPAs. See The New EPAs:Comparative Analysis of Their Content and the Challenges for2008, London: Overseas Development Institute and the EuropeanCentre for Development Policy Management, March 2008.

trade creation and complicate, rather than facilitate,regional trade both within and across regions. heSensitive Product exemption under the EPAs,which allows ACP countries to exclude up to 20percent of trade from liberalization, has effectively enabled countries to protect the products they currently produce, while liberalizing and reducingtariffs on everything imported. his could not only limit regional trade and lock countries into tradepatterns that currently contain very little value-added trade, but lesser developed countries alsoface losing tariff revenues upon which they rely

heavily. EU producers, meanwhile, could diverttrade away from lower-cost, more competitivethird-country producers, including U.S. producers.

he EPAs will not only cause trade diversion withinsub-Saharan Africa, they will also affect trade withother partners. IFPRIs analysis shows that theEPAs would cause certain U.S. exports to decreasesignificantly, as would exports from Central andSouth America, China, Japan, hailand and others.In addition, the EPAs contain a notorious MFNclause that will result in the ACP countries giving

the EU the best trade access afforded any othertrading partner going forward. A number of thecountries that will face trade diversion becauseof the EPAs are currently developing plans toexpand preferential market access to sub-SaharanAfrica through duty-free quota-free initiatives.

he commitment to provide duty-free quota-freemarket access is a central element of both theMillennium Development Goals and pledges madeat the W O, and the trade diversion the EPAscause runs counter to this global commitment toincrease opportunities for sub-Saharan Africa and


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A new form of demand-driventrade policy with

sub-Saharan Africa is the bestalternative.

the worlds poorest countries to trade more with asmany partners as possible. 6

The analysis by Messerlin and IFPRI also showsthe implications the EPAs would have for regionaleconomic integration in sub-Saharan Africa. TheSensitive Product exemptions do not overlapbetween countries and within regions, resulting in asituation where over halfand in some regions upto 92 percentof the products likely to be excludedas sensitive would not overlap with any of theexclusions of any other country in the same region.

Increasing and diversifying regional trade would, asa result, become much more difficult.7 The countriesin sub-Saharan Africa stand to benefit most overthe long term by increasing trade with each otherand capturing economies of scale and economicdiversification. To be fair, however, sub-SaharanAfrican countries have not offered any alternatives tothe EPAs, and regional capacity needed to negotiatein a way that will preserve opportunities down theroad is, as discussed above, limited.

Contrary to the ECs insistence, the fear of beingout of compliance with W O requirements, as theexpiration of the Cotonou waiver loomed, may nothave played out in a W O challenge and disputesettlement. It is possible that Europe could haveoperated under the ACP program without a waiverin order to give adequate time to the developmentof new trade policies with the ACP countries. Other

6 Further, under U.S. law, in order to be eligible for preferentialaccess to the U.S. market, countries must comply with a numberof standards set by the U.S. Congress. One of these is the crite-rion that beneficiary developing countries should not grant pref-erential access to their own markets that has or is likely to havea significant adverse effect on the United States ( itle V of the

rade Act of 1974, 19 U.S.C. 502 (2)(C)). Invoking this provisionwould send the wrong signal to sub-Saharan Africa in a time of great economic challenge, but it reinforces the tension betweenagreements like the EPAs and preferential market access.

7 Antoine Bouet, David Laborde and Simon Mervel, Searchingfor an Alternative to Economic Partnership Agreements, Wash-ington, DC: IFPRI Brief [48], December 2007.

preference programs that do not fall under theW Os Enabling Clause, and thus require W Owaivers, have sometimes existed unchallengedwithout a waiver. For example, the U.S. tradepreference program with sub-Saharan Africa, theAfrican Growth and Opportunity Act, was only recently granted a W O waiver despite beingenacted in 2000.

Moreover, moving from the preferential Cotonouscheme to the EPAs effectively shifted EU-ACPtrade relations from one murky area of WTO law to

another. The legal basis for the EPAs, Article XXIVof the General Agreement on Tariffs and Trade(GATT), which covers free trade areas and customsunions, is not a clear or well-defined area of WTOlaw. Article XXIV requires that duties and otherrestrictions be eliminated on substantially all thetrade.8 Yet this standard has never been explicitly articulated.

Europes experience has also indicated that thesame approach may not have been suited to all of the ACP countries. While the Caribbean countries

negotiated an EPA relatively quickly, as notedabove, negotiations with sub-Saharan Africahave been fraught with difficulty from the start,indicating that the countries are perhaps not ready for the more reciprocal trade policy the EPAs bring.While preferences have not always performed aswell as possible, and their effects need to be betterunderstood, a new form of demand-driven tradepolicy with sub-Saharan Africa that incorporatesmore expansive, transparent, preferential marketaccess coupled with more comprehensive,systematic programs and policies to address needs

and barriers on the ground, is the best alternative inthe immediate term.

An enhanced preferential arrangement with all of sub-Saharan Africa could also be done consistent

8 General Agreement on Tariffs and Trade, Article XXIV 8 (b)(i).


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with the WTO. The WTO Appellate Body hasruled that preference programs, while technically adeviation from the MFN principle underpinning theWTO, are permissible as long as the preferences aremade available to all similarly situated countriesthat share development, financial, and trade needs. 9 Within the group of ACP countries, sub-SaharanAfrica shares common characteristics and wouldbe best approached through one common policy.AGOA deals with this challenge in an innovativeway by bypassing the traditional distinction betweenLDCs and non-LDCs and largely treating most

vulnerable sub-Saharan African countries thesame.10 Had this approach been inconsistent withthe WTO, AGOAs waiver would not have beengranted. Treating sub-Saharan Africa as a whole bestaddresses the inter-connected nature of sub-SaharanAfrican economies and minimizes distinctionsbetween countries in order to build regional marketsand achieve economies of scale.

hus, despite Europes assertions that noalternatives to the EPAs existed when theagreements were proposed, several viable

alternatives exist, including granting significantpreferential market access to sub-Saharan Africaas a whole and, perhaps simultaneously, beginningto liberalize ACP trade multilaterally on a most-favored nation (MFN) basis. his alternativeapproach would satisfy the goals of both W Ocompliance and regional integration in sub-SaharanAfrica.11 Enhanced preferences could have beenestablished under a separate waiver similar to theone granted for the U.S. AGOA program. Moving toan enhanced preferential arrangement would avoid

9 W O Appellate Body Report on EC-India Panel on EC-Prefer-ential ariffs, April 7, 1994.10 Distinctions between AGOA countries that do exist are largely political, i.e. some countries chose to be treated as more devel-oped even though they might have been eligible to be treated aslesser developed for purposes of AGOA.11 See Patrick Messerlin and Clair Delpeuch, EPAs: A Plan A+,November 2007.

trade diversion and revenue loss from tariffs and, if coupled with strong commitments to build capacity and support regional integration, could help createthe ability to integrate ACP countries into regionaland international market systems over the longerterm.

Catherine Ashton, Mandelsons replacement asrade Commissioner and the new European High

Representative for Foreign Affairs and Security Policy, signaled a new willingness to show flexibilityin the next phase of the EPA negotiations, opening

a window of opportunity for Europe and the ACPcountries to present strong alternative proposalsfor a new framework for collaboration. Hersuccessor, Karel De Gucht, should continue topress for a new direction, particularly with respectto sub-Saharan Africa. More broadly, U.S. interestin trade preference programs, capacity building,and food security, and Africas increasing focuson the Development Corridors, presentopportunities to increase sub-Saharan Africasparticipation in global markets and strengthenregional integration. If brought together, all of these

elements have the potential to chart a new coursefor sub-Saharan Africa.

Transatlantic trade and development policy:Limited approaches and lessons for the future

Up until now, developed country trade policy towards sub-Saharan Africa has focused primarily on one piece of the complex puzzle of sustainabledevelopment, granting access to internationalmarkets on the assumption that the ability totrade and take advantage of these markets wouldfollow. Building capacity has been largely left tothe development side of international policy, and,despite being very closely linked in real worldeconomies and markets, the trade and developmentsides often operate on separate tracks in the policy realm. Strengthening sub-Saharan Africas regionalmarkets has not yet received the focus that other


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Those sectorswith the mosteconomicopportunity need to be thecenterpieceof preferenceprograms.

African development issues have, despite the powerof these markets and regional systems to movegoods, services, people, and information.

Aside from the EPAs, European and U.S. marketaccess for sub-Saharan Africa has been governedmainly by preferential, unilateral market accessprograms, including, in addition to the expiredpreferential arrangements with the ACP countriesdiscussed above, Europes GSP, GSP-Plus, and EBAprograms, and U.S. GSP and regional preferenceprograms, including AGOA. hese programs have

produced limited successes concentrated in afew countries and sectors. his is partly due toproduct carve-outs and complex rules of originand is compounded by complicated productstandards and trade-limiting policies in sensitiveindustries like agriculture that intersect with thepreference programs.

Moving forward, not all elements of preferentialtrade policies need to be set aside, and thecurrent system can provide a foundation uponwhich to build. Existing programs do create

important market access for the worlds poorestcountries. his market access could be expanded,made longer-term, and simplified to ensure thatpreferential trade programs can be fully takenadvantage of.

In building on this foundation, several lessonsfrom past experience should be kept in mind.First, experience has shown that the best policiesare those that are the least complicated and do notattempt to determine how markets will develop.Constructing markets through complicated political

compromises, or forcing choices before marketshave actually developed, limits opportunitiesrather than creating them. Under AGOA, apparelmanufacturing has blossomed in some areas,but value-added investment along the supply chain has proven to be difficult to encouragewithout addressing the underlying conditions

that have prevented integrated markets fromdeveloping. Capacity building and other measures(e.g. investment policies) targeted at the reasonsunderlying this limited development remains thebest policy alternative. Under the EPAs, marketchoices are required before markets have actually developed. Despite the laudable goal of regionalintegration, the overlapping regional carveoutscould actually limit rather than promote regionaltrade and may create narrow, entrenched Africanlobbies that will make future growth difficult.

Second, predictability is an essential factor ininvestment decisions and needs to be an underlyingprinciple of all preference programs. Setting shortexpiration dates for preferences has created adisincentive for sustainable, long-term investment.When AGOA was enacted in 2000, it came withan expiration date, both for the program and forits special apparel rule of origin, the third country fabric rule. Both AGOA and the third country fabric rule have been extended over the years, butthere has never been complete certainty that thebenefits would continue. his uncertainty has

caused instability for both existing and potentialinvestment, and politically it has led to a dynamicthat is focused on preserving the status quo, withlonger-term gains often pushed to the side. Withexpiration dates looming, countries and industriesmust focus on preservation rather than long-termsustainable development.

hird, those sectors with the most economicopportunity need to be the centerpiece of preference programs. Under AGOA, Africanagricultural products remain subject to the

complicated system of quantitative restrictionsthat governs commodity trade in a number of products, including sugar, dairy, and peanuts, andsubjects very poor countries to miniscule or non-existent quotas and very high out-of-quota tariffsthat approach several hundred percent. Whilethe policy debate has often focused on developed


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country agricultural subsidies as the main barrier todeveloping country agricultural trade, these tradebarriers can actually be more of an impediment totrade than subsidies. 12 he European experiencehas shown that competitive producers of theseproducts can see immediate gains once openmarket access is granted. For example, as a directresult of Europes announcement of its EverythingBut Arms program, which granted LDCs duty-free, quota-free access to the European market,Mozambiques sugar trade with Europe went fromzero in the year 2000 to over 130,000 metric tons in

2008, with steady increases each year. Investmentand job creation quickly followed the announcedchange in trade policy, and South African-based investors have opened two new mills inMozambique and plan to triple production by 2010to take advantage of Europes now-open market.

Fourth, trade preference programs need to be partof a demand-driven approach to trade policy with sub-Saharan Africa that effectively couplesopportunity-based market access with targeted,systemic policies and assistance programs to

address needs and remove barriers on the ground.Building functioning regional markets needs to bea primary goal of both preference programs andaccompanying trade capacity building programsand other assistance. Preference programs canencourage regional trade by giving the samebenefits to all similarly situated countries, e.g. allof sub-Saharan Africa, and by allowing for simple,transparent rules of origin that explicitly allow forregional cumulation.

Creating comprehensive trade programs for sub-

Saharan Africa that treat the region as a whole anddo away with product exemptions, complicatedrules of origin, and frequent expirations could turn

12 odd Moss and Alicia Bannon, Africa and the Battle overAgricultural Protectionism, Washington, DC: Center for GlobalDevelopment, 2009.

preferences into predictable access to markets,rather than political bargaining chips, which helpfew rather than many. Building on the existingfoundation, and taking lessons learned intoaccount, Europe and the United States shouldgo beyond the EPAs and the current preferenceprograms to create a new, shared policy that plays asignificant, constructive role in building sustainablemarkets within and with sub-Saharan Africa.As a critical complement to this new approach,however, the needs and barriers on the groundmust be addressed in a much more comprehensive,

systematic way.

Addressing capacity challenges through anew demand-driven approach

Ultimately, trade preference programs and othertrade policies will not work without complementary policies to build capacity and allow for the creationof functioning regional trade routes in sub-SaharanAfrica and sustainable commercial opportunitiesacross sectors and along supply chains. Existingtrade capacity building assistance can be betterexpanded, better utilized, and more explicitly and systematically linked to trade programs andrefocused towards areas where Africa needs thehelp most.

The European Union, the United States and the otherG-8 countries have pledged substantial resourcesto build capacity in sub-Saharan Africa throughdevelopment assistance, food security initiatives andtrade capacity building assistance programs. Despitethese commitments, however, current programs donot come close to meeting the needs on the ground.This is due to a variety of factors on the donor side:limited resources, competing political interests,difficulty identifying and prioritizing barriers andneeds in developing countries, lack of coordinationwithin and between governments, etc. Both Europeand the United States stand to gain from greaterinternal coordination and transatlantic cooperation


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a demand-driven approach that links specificeconomic opportunities to targeted programs thataddress market barriers and capacity building orassistance needs. In other words, the economicopportunity, i.e., the product that has demand andmarkets waiting in the wings, must be the startingpoint, with policies and programs used in a targetedand coordinated way to remove the barriers oraddress the needs that stand in the way of realizingthese opportunities. 16

he link between trade policy and addressing

needs on the ground through capacity building andother channels needs to be made much stronger. 17 Despite the fact that European institutions betterintegrate trade and development functions, theEPAs do not go far enough to lock in additionalcapacity building resources and deliver ontheir goal of being a powerful instrument fordevelopment. 18 On the U.S. side, AGOA has beenaccompanied by some capacity building assistance,but, again, existing capacity building efforts havenot gone far enough. Lack of capacity to trade andbarriers within regional markets are often cited as

primary factors in the underutilization of AGOA.In the United States, the disconnect betweentrade and development policy is often due to jurisdictional issues in the U.S. Congress, since theCongressional committees with the responsibility for trade do not have the sole power to authorizefunds for trade capacity building programs and, in

16 For a more detailed analysis of the demand-driven approachand a case study of five East African countriesMozambique,Rwanda, anzania, Kenya and Zambiasee the authors forth-coming work with the German Marshall Fund.17 See Bouet, Laborde and Mervel 2007.18 See Overseas Development Institute and the European Centrefor Development Policy Management 2008.

any event, cannot appropriate money.19

While thereis some coordination on trade and developmentamong U.S. Executive Branch agencies, thiscoordination could be improved across the board.

Building local and regional capacity, and addressingbarriers to trade on the ground, need to be partof this equation if U.S. and European policies areto have a positive impact. Meeting the Africanshalfway and supporting their own goals is the final,and perhaps most important, step in making tradework for sub-Saharan Africa.

Meeting the Africans halfway: Unlockingtrades potential and building on theDevelopment Corridors framework

he current state of trade with sub-Saharan Africais just a sliver of what remains possible. Accordingto IFPRI, Africa remains an under-trader, withthe potential to go well beyond its current tiny share of world trade. 20 rade with Europe andthe United States remains low. otal U.S. importsfrom sub-Saharan Africa vary widely, hittinga low of $18 billion in 2002 and a high of $86billion in 2008, and much of this trade is in energy products. Agriculture accounts for only about$1.2 to $1.4 billion per year. European trade withsub-Saharan Africa is significantly higher overall,with agricultural exports to Europe totaling around$20 billion per year. As noted above, trade is now

19 he U.S. House Ways and Means Committee and SenateFinance Committees have jurisdiction over trade policy. Autho-rizations for development assistance, including economic growthfunding which covers trade capacity building assistance, must becoordinated with the House Foreign Affairs and Senate ForeignRelations Committees, and the House and Senate Appropria-tions Committees are responsible for actually committing funds.20 Africas share of world exports has declined sharply, goingfrom about 5.5 percent in 1975 to about 2.5 percent in 2002.

hese losses in world trade have cost Africa almost $70 billionper year. See Saswati Bora, Antoine Bouet and Devesh Roy,Research Brief: he Marginalization of Africa in World rade,Washington, DC: IFPRI Brief, 2007.

Effective useof resourceswill require a

demand-drivenapproach that

links specificeconomic

opportunities totargeted programs

that addressmarket barriers

and capacity building or

assistance needs.


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declining due to the global financial crisis, so 2009will show less trade than previous relative highs.

Africas trade has been limited for severalinterconnected reasons. It has failed to diversify into new products and has seen falling marketshares for traditional exports. 21 As discussed above,sub-Saharan Africa lacks infrastructure, regionalmarkets remain weak, and many products havedifficulty reaching regional and internationalmarkets. In many cases, African policies limitopportunities for trade and investment, and

numerous local and regional barriers persist.As a result, Africas markets are often unable togenerate sufficient economies of scale to attractthe sort of private sector investment needed to fuelgrowth, increased exports and, ultimately, poverty alleviation. Small producers, in addition to lackingtechnical knowledge and capacity, often remain cutoff from the established commercial enterprisesthat could provide a link to larger, more profitablemarkets, and many continue to operate largely outside of a functioning market system.

European and U.S. trade and development policiesundoubtedly have a significant role to play, 22 butinternational policies will not have as great animpact as is possible unless they address industriesmost important to Africa, including agriculture,and complement the Africans own initiatives tobuild regional markets and address needs andbarriers on the ground. he main constraints totrade, including intra-African trade barriers andweak infrastructure, are within sub-Saharan Africa,

21 Bora, Bouet and Roy 2007.22 Over the long run, open global trade would have a significantimpact on developing country income. One estimate predictspossible gains of around $200 billion per year. See William Cline,Trade Policy and Global Poverty, Washington, DC: Center forGlobal Development, 2004.

not in international markets.23

Policy changeinternationally has to be met with internal policy change, and African political will is a critical driver.

he only real solution is to meet the Africanshalfway. Given the size of the continent and thescale of the infrastructure and capacity gaps, acomprehensive framework around which to aligndeveloped country and African interventions wouldhelp achieve more significant results and economiesof scale. As mentioned above, this framework exists not in the RECs but in an African movement

around unlocking the development potential intrade and transport corridors, often referred to asDevelopment Corridors.

he Development Corridors movement consists of building out existing roads and railways that link mines and other investments to regional marketsand ports in order to bring farmers and other smallproducers into a system that can move food, goods,services, and information. here are 26 officialcorridors as identified by the New EconomicPartnership for African Development (NEPAD),

and they criss-cross the continent. In many cases,as Development Corridors, they may hold thepotential for true sustainable development, similarto corridors that spurred development in ancientRome, industrializing Europe, and 20th-century United States.

At a recent meeting of the W O General Council,the top trade official of Zambia intervened andasked W O members to make the DevelopmentCorridors part of trade and development policy with sub-Saharan Africa. While the Development

23 Weak infrastructure and intra-regional trade barriers particu-larly impact agricultural trade, as do low technology, poor skills,high internal taxes, continued dependence on a small numberof commodities, high transport costs, the spread of HIV/AIDSand pricing and marketing policies that penalize small farmers.See odd Moss and Alicia Bannon, Africa and the Battle overAgricultural Protectionism, Washington, DC: Center for GlobalDevelopment, 2009.

DevelopmentCorridorsmay hold thepotential for true sustainabledevelopment,

similar to corridorsthat spurreddevelopment inancient Rome,industrializing Europe, and20th-century United States.


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E P P S 14

Corridors have the backing of the Africans, they will require additional resources to modernizeand expand infrastructure and build capacity toconnect remote rural areas to markets. Given theimportance of agriculture to sub-Saharan Africasfuture, particular attention will need to be placedon linking poor farmers with commercial markets.

he Development Corridors could help buildregional integration, more value-added production,and greater economic diversification. Ros homas,an expert in African spatial development and aformer senior official at the African Development

Bank, estimates that trade could expand by $250 billion over the next fifteen years if theDevelopment Corridors receive adequate support. 24

24 Rosalind homas, rade Corridors in AfricaConnect-ing Markets: Development Corridors and SDIsan AfricanPrivate Sector-Led Growth Strategy, presentation to the PaulNitze School of Advanced International Studies, Johns HopkinsUniversity, Washington, DC: October 2008.


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A new approach to trade with sub-Saharan Africa iswithin reach and could complement new directionsin African policy. he following recommendationssummarize the suggestions contained in this essay.

1. Establish open, transparent internationalmarkets for all trade from sub-Saharan Africa

Access to international markets should becomprehensive, simple to use, and reliable, andit should complement, not complicate, regionaltrade opportunities. Developed countrieshave already shown leadership in this area, so

expanding and maintaining market access forsub-Saharan Africa should be within reach.Open international markets across sectors,including agriculture, are critical if sub-SaharanAfrican economies are to grow and diversify.

A comprehensive, duty-free, quota-freeprogram for the region as a whole, covering100 percent of trade that contains transparent,simple rules of origin and allows for regionalcumulation would work best as a first step forencouraging trade within sub-Saharan Africa

and between the region and the rest of theworld. Such preferential access to developingcountry markets is only a beginning, and itshould pave the way for further liberalizationon local, regional, and multilateral levels.

2. F s g g k ts s -S A y g k t ss

t - ss st

Functioning regional markets in sub-SaharanAfrica would open up opportunities forAfricas farmers and businesses along entire

supply chains and would help Africa meet thechallenges of food security and climate change.Improving regional markets involves facilitatingthe connection between supply and demandand focusing on specific needs in addressingmany of sub-Saharan Africas capacity gaps, e.g.,improved infrastructure, transport, customs

and storage, and targeted training for farmersand other businesses in areas like standards andSPS. Better regional markets would also createmeaningful opportunities for developed country businesses in the short- and long-term.

As countries implement Aid for Tradecommitments, and as the WTO continues towork in this area, the focus should be bothon creating functioning regional markets thatallow the broadest economic participationand on responding to the specific needs andopportunities identified by developing country market participants. U.S. and European processesthat integrate trade policy with development goalsshould be part of this leadership. The UnitedStates and Europe should also work with theprivate sector in these efforts in order to leveragefinancial resources and expertise, integratesmallholder farmers into existing and sustainablesupply chains and commercial systems, andsupport the transfer of best practices fromsuccessful businesses to smallholder farmers.

3. M k A g t k ts k y

t g s ty t t sAfricas potential lies in agriculture, andpoverty reduction and increased food security will not succeed without focusing on linkingsmallholder farmers to commercial systemsand connecting farmers to open, functioningmarkets. In order to be sustainable, tradeand food security efforts must focus onincreasing agricultural market capacity withinAfrica itself. However, this must go beyondsubsistence farming. In order to feed a growingand increasingly urban population, Africanfarmers must have an incentive to increase theirproductivityand just like any other business,productivity will not increase unless marketsare available in which to sell surpluses.

Ultimately, a secure food supply for Africawill come from a combination of regional

Recommenda ion


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Comprehensiveapproaches that

address all stepsin getting products

to market will

help ensure thatfarmers can takeadvantage of opportunities

to trade.

E P P S 16

intra-African and domestic food trade, as wellas imports of certain foodstuffs from abroadexactly the way that populations are fed inother regions of the world. his flow of food, aswell as the necessary incentives for increasingproductivity, will only happen as a result of improved infrastructure all along the valuechain that connects producers to markets in areliable way. his means roads, cold storage,ports, electricity, and other infrastructureinvestments must be a central policy focus.

In the international policy realm, the United

States and Europe should support initiatives toincrease food security and can simultaneously open their markets to African agriculture at littlecost to domestic producers. Europes relaxationof its sugar program for LDCs through EBAhas already shown the immediate job-creatingpotential of a change in policy. Comprehensiveapproaches that address all steps in gettingproducts to market will help ensure that farmerscan take advantage of opportunities to trade.

4. S t A t t s, g tD t C s

African political and economic leaders arebehind the Development Corridors, and thepolitical will is growing to bring about realchange. By supporting the DevelopmentCorridors, donors could better prioritize andleverage their investments, and the commonframework the Development Corridors providewould bring stakeholders together in a targetedand systemic way. As major donors, Europe andthe United States can take the lead, workingclosely with the Africans, the private sector,

and public-private partnerships. hrough theDevelopment Corridors, barriers to trade on theground, including infrastructure deficiencies,transport links, storage, the lack of economiesof scale, and local and regional trade policies,can be identified and addressed, creating theforce multiplier for change that could open up

opportunities within sub-Saharan Africa andbetween Africa and the rest of the world.

5. C t t s t t y tU.S. E g ts

Coordination between the United States andEurope should increase wherever possible,including on food security initiatives anddialogues on regional integration in sub-Saharan Africa. Within U.S. and Europeangovernments, dialogues that bring diverseexpertise to the table on all sides, like theU.S. rade and Investment Framework Agreements ( IFAs), are good models thatshould be prioritized and more extensively used. Working across government agencies isalso important; for example, the United Statescould comprehensively promote sustainabledevelopment and regional markets in sub-Saharan Africa by coordinating resources andprograms across agencies, including the U.S.Department of Agriculture, the U.S. Agency for International Development, the U.S.Department of State, the Millennium ChallengeCorporation, the U.S. Export-Import Bank, theU.S. Overseas Private Insurance Corporation,the U.S. rade and Development Agency, theU.S. Department of reasury, and others.

6. C t t k t g t WTO

Europe, the United States, and other countriescould implement a comprehensive strategy totrade and development policy with sub-SaharanAfrica that would complement an eventualDoha deal and help African countries see thebenefits of open trade. A package that includesduty-free, quota-free preferences, aid for trade/

trade capacity building, and trade facilitationwould make a big difference and would give theAfrican countries a stake in the process. Doingthis now would show sub-Saharan Africa thattrade can have a positive impact, and extramarket access would become a meaningful toolinstead of a painful concession.


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O F F I C E S

Wa hin on Berlin Bra i lava PariBru el Bel rade An ara Buchare

.g s. g

a new u.s.-european approach to trade and development in sub-saharan africa

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