Africa: EU Vying for Resources with Emerging Economies

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Credit: insouth.orgBy Benjamin W. Mkapa*
IDN-InDepth NewsViewpoint

GENEVA (IDN) - In September 2011, the European Commission proposed to remove 16 African countries from the EU Market Access Regulation 1528/2007. At the end of 2007, this regulation allowed those African countries which had initialled or signed an EPA (Economic Partnership Agreements) to enjoy duty-free access to the EU (European Union) market, as they continued to move towards signatory and ratification.

This regulation gave the necessary cover for our countries as we continue to negotiate the difficult issues with the EU – for example – the range of contentious issues (export taxes; level of liberalization; development assistance; MFN clause etc.).

Even as these negotiations have not been concluded by both sides, the EU is now saying that if Ghana, Kenya, Namibia (which have initialled but not signed) and Botswana, Cameroon, Cote d’Ivoire, Swaziland and Zimbabwe (which have signed but not yet ratified) have not ratified the EPAs (Economic Partnership Agreements) by 1 January 2014, they will be dropped from the list of countries receiving EPA treatment.

From what I hear, despite pronouncements of flexibility by the EU, they have not been very 'flexible' and our concerns remain. The AUC (African Union Commission) and all the Regional Economic Communities (RECs), including the EAC Secretariat, came up with a Common Position paper at the end of 2010. The risks for Africa include:

• Effect on industrial development: The EU’s position on the elimination of tariffs for 80% of trade; restrictions on the use of export taxes and quantitative restrictions and the standstill clause; will undermine Africa’s efforts to industrialize and its ability to move up the industrial value chain. As a result, Africa will remain a perpetual supplier of raw materials.

• Effect on Food Security and Rural livelihoods: The EU has not indicated a willingness to abolish its agricultural subsidies. This poses major unfair competition against African producers of milk, poultry, pork, beef, cereals, etc. At present, these subsidies and domestic supports are not being removed at the WTO (World Trade Organiztion), or in the EPA as subsidies and domestic supports are not being removed at the WTO, or in the EPA negotiations.

• Effect on Regional Trade and Integration: Regional markets provide the best opportunity for Africa to diversify and develop. If African countries in EPAs have to liberalize 80% of trade as proposed by the EU, Africa’s regional markets risk being taken over by EU products. The opportunity to increase intra-African trade, diversity and industrialize will be significantly reduced.

• Effect on Tariff revenue

• Effect on governments' support of local enterprises and industries (if services, investment and other Singapore issues are incorporated eventually into the EPA).

• Effect on General Development Due to Tighter Intellectual Property Discipline: The EU would like EPAs to include intellectual property rules. Such tighter WTO plus rules will make it more difficult for African countries to access the knowledge and technology needed to industrialize and increase agricultural production.

EU's Interest

What is the EU's interest in the EPA? The Tshi people of Ghana have a saying: If there had been no poverty in Europe, the white man would not have come and spread his clothes in Africa.

Is this EPA being negotiated because they deeply care about African and EAC regional integration and development? Or are they being primarily driven by their own economic interests?

The EU launched its raw materials initiative in 2008. According to the Communication from the Commission and other European bodies in February 2011, "One of (the initiative’s) main pillars is to ensure a level playing field in access to resources in third countries." The EC even says that an element of this overall raw materials strategy is "the need for a ‘raw materials diplomacy’ anchored in wider policies towards third countries such as promoting human rights, good governance..."

The Commission identifies 14 critical raw materials. These are elements which "display a particularly high risk of supply shortage in the next 10 years and which are particularly important for the value chain. The supply risk is linked to the concentration of production in a handful of countries".

In terms of being the top three sources of imports into EU (2007 or 2006), East Africa shows up twice on this list of 14 – Cobalt for Tanzania, whereas the 3rd largest source for the EU, it makes up 5% of EU imports (DRC is the no. 1 source). Rwanda is also listed as the 3rd largest producer of Tantalum.

For Europe, "access to and affordability of mineral raw materials are crucial for the sound functioning of the EU's economy. Sectors such as construction, chemicals, automotive, aerospace, machinery and equipment sectors which provide a total value added of € 1 324 billion and employment for some 30 million people all depend on access to raw materials".

Also according to the Commission's communication in 2008, "The EU is highly dependent on imports of 'high-tech' metals such as cobalt, platinum, rare earths, and titanium. Though often needed only in tiny quantities, these metals are increasingly essential to the development of technologically sophisticated products".

A look at the raw materials documents also reveals that the EU is threatened by the appetite of the emerging economies in absorbing raw materials and these countries closer links to Africa. There is fear that Europe will somehow be marginalised. The Commission 2011 document notes that:

"The years 2002 to 2008 were marked by a major shift in demand for raw materials, driven by strong global economic growth, particularly in emerging countries such as China. This increase in demand will be reinforced by the further rapid industrialisation and urbanisation in countries such as China, India, and Brazil."

The Commission has also noted in 2008 that "Emerging countries are also pursuing strategies towards resource-rich countries with the apparent aim of securing privileged access to raw materials".

For example, China and India have substantially increased their economic engagement with Africa in recent years; in the case of China this includes major infrastructure projects and active involvement in exploration and extraction activities in countries such as Zambia (copper), Democratic Republic of Congo (copper, cobalt), South Africa (iron ore), Zimbabwe (platinum) and Gabon, Equatorial Guinea and Cameroon (timber).

With these concerns, the EU says that "Access to primary and secondary raw materials should become a priority in EU trade and regulatory policy". Trade and regulatory policy can improve access to raw materials in the following ways.

– The EU should promote new rules and agreements on sustainable access to raw materials where necessary, and ensure compliance with international commitments at multilateral and at bilateral level, including WTO accession negotiations, Free Trade Agreements, regulatory dialogue and non-preferential agreements. In this context the Commission will reinforce its work towards achieving stronger disciplines on export restrictions and improved regulation against subsidies at WTO level.

–The EU will take vigorous action to challenge measures which violate WTO or bilateral rules, using all mechanisms and instruments available, including enforcement through the use of dispute settlement. More generally, the EU will act against the protectionist use of export restrictions by third countries. In determining its actions, the EU will take as priority those export restrictions that pose the greatest problems for EU user industries or give their domestic downstream industries an unfair competitive advantage on international markets’

From the above, we can clearly see the EU's interests – in East Africa, and also more broadly in Sub-Saharan Africa. It is no wonder that despite the issue of export taxes being extremely controversial in all the EPA negotiations, the EU has not changed its position that no new such taxes should be introduced or existing ones increased. There may be narrow exceptions, but our policy space will be curbed.

*Benjamin W. Mkapa is the Chairperson of the South Centre and former President of Tanzania (1995-2005). This article comprises of excerpts from a keynote speech on 'The Role of Multilateral and Bilateral Trade Agreements in Fostering Trade and Development in Africa' at the East African Legislative Assembly, the parliament of the East Africa Community, in Arusha (Tanzania) on February 13, 2012. The full text of the speech is available in South Bulletin 60. [IDN-InDepthNews – April 05, 2012]

2012 IDN-InDepthNews | Analysis That Matters

Picture: Benjamin W. Mkapa | Credit:

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