Opinion: Making the WTO work for Africa

The contest to succeed Roberto Azevêdo as director-general of the World Trade Organisation has entered a crucial new phase, write Hippolyte Fofack and Pat Utomi.

With the first round of voting by WTO members set to end on September 16, two of the remaining five contenders are African: Ngozi Okonjo-Iweala, a former Nigerian finance minister, and Amina Mohamed, a Kenyan former chair of the WTO General Council.

Africans are hoping that one of these two highly competent candidates will emerge victorious when the winner is announced in November. But regardless of who eventually prevails Africa must demand a level playing field from the WTO.

Trade is vital for Africa’s development and to generate enough good jobs to absorb the 17 million young people who enter the labor market every year. But, for too long, global trade regulations have left the continent holding the short end of the stick.

In the 25 years since the WTO succeeded the General Agreement on Tariffs and Trade, the organisation has mostly failed to work in the interest of development. Instead, the WTO has largely benefited its chief architects, namely, countries that had already industrialised or were otherwise in positions of strength.

The resulting global trade rules did not take the developing world’s circumstances into account. Despite the huge trade volumes – and profits – generated by globalisation, Africa’s share of global trade since 1970 has fallen from 4.4% to 2.7%. This is partly because binding supply-side constraints have limited Africa’s exports largely to natural resources and primary commodities. But unfair trade rules also have undermined Africa’s foreign-trade growth in sectors where the region could benefit from comparative advantage.

For starters, persistent import barriers in developed economies – including tariff escalations and stringent standards for final goods – have limited Africa’s ability to move up value chains.

Shifting rules are another obstacle to Africa’s effective integration into the global economy. In particular, advanced economies do not allow developing countries to adopt the industrial policies that they themselves used to transform their production structures and diversify their exports. The University of Cambridge economist Ha-Joon Chang described this phenomenon as rich countries “kicking away the ladder” with which they had climbed to the top.

But perhaps the most serious indictment against the WTO system is the agricultural subsidies developed-country governments provide, at the expense of millions of Africa’s poorest farmers. These subsidies not only depress world food prices, making it difficult for African producers to compete, but also lead to excess production being dumped in African markets, which wipes out local industries and thus threatens food security.

The current global trade regime is the cause of African countries’ structural balance-of-payments deficits and increasing external debt, as well as the main cause of inter-generational poverty and migration pressures. Encouraged by their thriving private sector, today’s Africans are asking for fair trade, not aid.

A growing number of African entrepreneurs and industrialists are leading the continent’s economic transformation, supported by regional financial institutions such as the African Export-Import Bank (Afreximbank). For example, Aliko Dangote, one of Africa’s most successful industrialists and an Afreximbank Trade Champion, is now making his biggest bet yet by building a $15 billion petrochemical complex near Lagos, Nigeria that will contain one of the world’s largest oil refineries.

Moreover, African markets will be big enough to support large-scale industrialisation once the African Continental Free Trade Area – the world’s largest trading bloc in terms of the number of participating countries – starts operating on January 1, 2021. With its relatively cheap labour, Africa could become an investment mecca and, in time, a net exporter of industrial and manufactured goods as well as commodities.

The private sector is well aware of these opportunities. But a recent survey commissioned by the Pan-African Private Sector Trade and Investment Committee (PAFTRAC) of over 200 African CEOs – including leaders of multibillion-dollar firms, start-ups, and other fast-growing businesses – revealed a clear consensus on the need to reform the WTO. And a majority of those who report that trade is an important growth driver for their business also stress that unfair trade practices severely constrain their companies’ expansion.

Notwithstanding these problems, development-finance institutions are helping to power Africa’s economic transformation. For example, Ghana and Côte d’Ivoire produce 70% of the world’s cocoa, but until recently accounted for less than 5% of the global processed cocoa market. The Afreximbank African Cocoa Initiative enabled both countries to capture a larger share of the value chain. Today, Côte d’Ivoire, the world’s leading cocoa producer, is effectively competing with the Netherlands to be the world’s top processor.

Africa is now a mature global player, with a private sector ready to drive development and take its rightful place alongside firms in more advanced economies. All we ask is that the WTO remove the artificial barriers and prejudicial hindrances that prevent Africans from unleashing their creative and productive energies.

A fairer, more equal, and more accessible global trade system must be at the top of the next director-general’s reform agenda. A WTO that is fit for purpose will also allow governments of smaller developing countries to act on behalf of their private sectors without fear or favour. Africa will support Azevêdo’s successor, provided that the WTO serves Africa in the same way it serves the rest of the world.

Hippolyte Fofack is Chief Economist at the African Export-Import Bank (Afreximbank). Professor Pat Utomi is Chair of the African Union’s Pan-African Private Sector Trade and Investment Committee (PAFTRAC), and heads the Centre for Value in Leadership at Lagos Business School.

This opinion piece was first published on Project Syndicate. It was written as part of a webinar organised by PAFTRAC. A communiqué was subsequently sent to the WTO voicing the concerns as well as expectations of the African private sector with respect to global trade and the current multilateral trading system.

SOUNDBITES FROM THE WEBINAR –

Pat Utomi

 “The whole thing about international trade is that the comparative advantage that parts of the world bring to the table makes for everybody’s greater prosperity. It is in the mutual interests of all that trade be more equitable.”

Jaswinder Bedi, President of the Export Promotion Council Kenya

“We have moved into a new space called protectionism and from protectionism we are moving into a new space called localisation, nationalisation and popularism.”

 “If Doha has not been concluded for 16 years, what guarantee do we have that it’s going to be concluded in the next 16 years. The WTO is only currently being used as a dispute mechanism and for dispute resolution, and if that’s the only purpose, maybe we need a new organisation.”

Daphne Mashile-Nkosi, Executive Chairperson of Kalagadi Manganese

“We need to have a reformed WTO, failing which we need to look at whether we really need it? I’m more included to be of the view that we actually do not need a WTO if it’s not going to take the interests of Africans.”

Samuel Dossou Aworet, President of the African Business Roundtable

 “What is the first need of the continent? For me, it’s that we have to be self-sufficient in terms of what we eat, in the area of food, and in terms of how we take care of each other, in the area of health.”

“We have created PAFTRAC to put together women and men who can elaborate our own strategy as a continent. Up to now, the strategy has been the strategy of our international partners.”