Eve is here. Africa followed the economic advice of prominent Western institutions such as the World Bank. The resulting setbacks should cause any government to lock its door when a snake oil salesman comes calling.
The plundering of Africa by developed countries has continued for so many years that it is becoming a case of “dog biting man.” Nevertheless, I learned from Nicholas Shaxson’s Treasure Island that thanks to the transfer pricing games of multinational corporations and corrupt elites who gifted and remitted their spoils to overseas tax havens, this impoverished continent I was shocked to learn that Japan was a net exporter of capital.
Similarly, many readers may recall the fact from perhaps five years ago, which is probably still true, that almost all of the poverty reduction in developing countries through trade liberalization occurred in China. That’s worse than you think. Economic restructuring is politically and socially destructive because the process creates winners and losers. It means destructive combat with no net benefit to lessen the pain of destabilization. Jomo’s post shows how trade liberalization worsens the situation in Africa, making the sorry situation even worse.
By Jomo Kwame Sundaram, former United Nations Assistant Secretary-General for Economic Development. It was first published in Jomo’s website
Africans have long been promised that trade liberalization would accelerate growth and structural transformation. In return, it reduced modest production capacity, industry, and food security.
Berg contributed to the sinking of Africa.
of 1981 Berg Report It has long been the World Bank’s blueprint for economic reform in Africa. Despite the lack of theoretical or empirical support, it is believed that Africa’s comparative advantage was probably in export agriculture.
In the absence of obstructionist government intervention, the previously suppressed production potential of farmers will spontaneously achieve export-led growth. However, since then, Africa’s agricultural export boom has not continued.
Instead, Africa changed from being a net exporter of food in the 1970s to a net importer. In the two decades that followed, its share of world non-oil exports fell by more than half from what it was in the early 1980s.
Growth in sub-Saharan Africa (SSA) exports since the second half of the 20th century has been driven primarily by foreign direct investment (FDI) from Asia, particularly China and India. Nevertheless, Africa’s share of global exports is declining.
The high growth of the Asian economy contributed most to the rise in commodity prices, especially mineral prices, from 2014 until the collapse.
undeveloped agriculture
Agriculture in Africa has been marred by decades of low investment, stagnation and neglect. Public spending cuts under the Structural Adjustment Program (SAP) are also depleting infrastructure (roads, water, etc.) and hurting output.
SAP’s neglect of infrastructure and agriculture has left many developing countries unable to respond to new agricultural export opportunities. Meanwhile, the forecast ignored the fate of Africa’s food security.
The SAP weakened the competitiveness of Africa’s already inferior small-scale agriculture. Not surprisingly, most of Africa’s poorest and least developed countries were predicted to be net losers in the World Bank’s more “realistic” World Trade Organization (WTO). doha round Trade liberalization scenario.
Uneven and partial trade liberalization and subsidy reductions have mixed effects. These vary depending on the share of food in a country’s imports and household expenditures.
hopeful development thinking
A World Bank study claims African countries could gain $16 billion from “full” trade liberalization. However, this scenario was never envisioned in the Doha Round negotiations and was effectively abandoned 20 years ago.
Nevertheless, the World Bank notes that “in capital-starved SSA countries, this policy, if introduced, would increase agricultural employment, the real value of agricultural output and exports, real returns to farmland and unskilled labor, and real net agricultural “The SSA will increase significantly because all revenues will increase significantly.” To liberalize trade in goods.”
The total expected benefits for the SSA excluding South Africa was just over half of 1%.but world bank forecast The overall impact of multilateral agricultural trade liberalization is expected to result in significant losses for SSA.
Around the world, the main beneficiaries are mainly the major food exporting countries. cairns group, mostly come from wealthy countries. The rich world has long dominated food and agricultural exports through indirectly subsidized agriculture.
As a result, cuts in agricultural subsidies in the North have increased some of the prices of imported food in developing countries. Also, most African governments cannot easily replace lost customs revenue with other new or higher taxes.
After years of effort, developing countries have effectively given up on OECD governments’ attempts to “level the playing field” by reducing agricultural subsidies, import duties, and non-tariff barriers.
Benefits from liberalization?
Increased trade liberalization in manufacturing, reinforced by the WTO’s Non-Agricultural Market Access (NAMA) Agreement, is also undermining Africa’s industrialization.
Africa’s limited access to rich country markets has been secured through preferential market access agreements rather than trade liberalization. mukanda wire He pointed out that trade liberalization would result in losses for Africa due to the end of preferential treatment by the European Union. lome tournament.
Therefore, the overall impact that trade liberalization could have on Africa was recognized as varied and uneven. Economic welfare in SSA, excluding Zambia, South Africa and members of the Southern African Customs Union, was supposed to increase by three-fifths of a percent by 2015 after 10 years.
The Doha Agreement as envisaged at the time emphasized liberalization of manufacturing trade. Despite gains in some developing countries, SAP’s accelerated deindustrialization will result in a total loss of $122 billion for SSA minus South Africa.
If South Africa were subtracted from SSA, $106 billion would be lost due to agricultural trade liberalization due to poor infrastructure, export capacity and “competitiveness”. Therefore, partial trade liberalization and subsidy reductions have uneven and complex effects.
Advice on unjust policies
and more realistic Following our assumptions, SSA’s gains from trade liberalization will be more modest. Since economic growth generally precedes export expansion, trade can help foster a virtuous cycle, but it cannot by itself increase production capacity or capacity.
Anctad He has long emphasized the importance of expanding trade, especially growth in the weak link between investment and exports. This is the reason why many countries fail to expand and diversify their exports.
Without high growth and investment rates, it is much more difficult to quickly reallocate resources.for jerry helliner“Africa’s failure is developmental, not an export failure per se.” dani rodrik He argued that Africa’s “marginalization” was not due to its trade performance.
Africa’s export collapse In the 1980s and 1990s, there was a “staggering annual revenue loss of US$68 billion, equivalent to 21 percent of regional GDP.”Former World Bank Economist bill easterly He blamed SAP for these lost decades.
Nevertheless,“Africa trades excessively relative to other developing regions, in the sense that the amount of trade is higher than would be expected given the various determinants of bilateral trade.”
Trade liberalization has significantly reduced the scope for trade, industry, technology, and investment policies for developing countries. Not surprisingly, food security and manufacturing have been particularly hard hit.
