The East African on AGOA

The East African has published an interesting article on AGOA, which is in line with my blog post on African trade.

The trade accords do not protect us from the simple realities of market economics. For all the hullabaloo about giving certain African products free access to the US market:

(a) The things the USA buys from Africa are the same things it would have bought even if AGOA did not exist. Indeed, the leading African exporters of raw natural resources (South Africa, Nigeria, Angola and the Democratic Republic of Congo) reap nearly all of the "benefits" of AGOA. I put benefits in quotes, because these countries were exporting the same exact resources before AGOA, would have been exporting those resources without AGOA, and would export those resources if AGOA were cancelled today. In fact, the much-touted success of AGOA before the global credit crunch was no more than spin-doctoring; the dramatic increase in the price of crude oil (and concomitant increase in the dollar value of exports to the USA of crude producers like Nigeria and Angola) was responsible for the huge increase in African exports to the USA and not AGOA. The same principle holds true with trade agreements African countries sign with Western Europe or East Asia. They buy what they would have bought anyway. This is economic rationality that cannot be avoided by means of fancy words on fancy treaty documents.

(b) And as far as economic rationality goes, AGOA, and trade agreements like it do not protect us from efficient competition on world markets. Quite a few African countries (in my prior post, I used Uganda and Namibia as examples) expended or gave up rights to scarce public funds to subsidize and give uneconomic (downright rent-seeking) advantages to "foreign investors" to build textile plants to ostensibly take advantage of AGOA. Unfortunately for them, between changes in the USA's own policy/law and mandates from the World Trade Organization, US quota restrictions on textile imports from China and other low-cost Asian producers were lifted. The result was Asian producers (China in particular) not only dominated the US market, but began to dominate the African market too. Those African countries that directly and indirectly sank public funds into AGOA textiles-promotion have suffered losses, wasting scarce resources that could have gone into more productive uses. And this was before the credit crunch and the associated drop in global demand for everything, including African exports (as The East African article relates).

It is time we Africans stopped thinking that signing a piece of paper with European, North American, West Asian or East Asian governments will somehow free us from the responsibility of developing our internal and continental markets and associated production chains.

Trade between Africa and the rest of the world would go on even if there were no treaties. The things the world economy buys from Africa are things the world economy needs; we do not need to ask them for a special no-tariff treaty permitting us to sell them crude oil, platinum, uranium, columbite, diamonds, tanzanite, tin, iron ore, timber, natural gas and aluminium. Treaty or no, they will buy these things.

Conversely these treaties do not magically make it economically viable for African countries to produce and export the sort of things that would truly make an economic difference. In fact, as I said in the prior blog post, the only reason our trade partners have no qualms about signing 100%-tariff-free-access-for-all-goods treaties with African countries is they know those countries will not be able to actually exploit the treaty as written. If we had the capacity to exploit those treaties as advertized, we would be in the same category as China -- a competitor to be wary of, to squabble with over unfair trade practices and trade deficits, a competitor they treat with caution even as they write a million mournful articles fretting about power shifting from west to east.

The only thing these trade treaties do is get African countries to sign away any rights to forming any kind of economic or industrial policy, in exchange for nothing more than what they already get from the other side.

Not that it matters. We do not have much of an economic or industrial policy to begin with. Which is why we waste our time negotiating, then celebrating trade treaties that never achieve as much as the spin-doctoring hype.