Location: Accra, Accra, Ghana

Franklin Cudjoe is head of Ghanaian think-tank Imani: The Centre for Humane Education, whose vision is to educate and create a core of young scholars that will promote market oriented policies throughout Africa. He was formerly a programme officer and research assistant at the Institute of Economic Affairs in Ghana. A Land Economist by training, Franklin works closely with partner think-tanks across the world to promote public policy ideas in Ghana and abroad. He is a frequent commentator in print and broadcast media about Africa development issues, including appearances on BBC, CBC, Swiss and Swedish National TV, Austrian National Radio and varied local Ghanaian media, and has been published or quoted in the Ghanaian Daily Graphic Accra Daily Mail, Ghana Web, My Joy online, London's Daily Telegraph,The Wall Street Journal, El Mercurio (Chile), La Republica (Costa Rica),the Ottawa Citizen, the San Francisco Chronicle, Netzeitung Voice Of Germany, and many others. Franklin speaks to policy makers, students groups in Ghana and abroad. Franklin is an Adjunct Fellow at the Independent Institute in the USA and the International Policy Network in London.

Thursday, December 15, 2005

The poor get ditched again- but salvation is in their own hands.

It was heart-rending to hear Pascal Lamy recommend putting the poor on an aid dosage of two billion Euros a year for the next ten years with some minimal attempt at lowering barriers for the Poor’s agricultural produce. This in effect was the EU “development package.”

But this lame development package, termed ”Aid for Trade,” means in plain terms replacing trade with more aid cash--thus defeating the fundamental purpose of the WTO’s belief that trade enhances development.

We know that 50 years of aid has impoverished Africans while propping up African leaders and making them unaccountable to their citizens.

African Members of Parliament here at the talks are suspicious of “Aid for Trade” both because they fear it might mean them accepting less protectionism and because they know that past aid promises were not fulfilled. This money, on previous form, could just be a re-statement of figures from the G8 deal reached in June 2005.

They are also suspicious some of their members will betray their cause- which is a halt on services liberalisation and enhancing non-agricultural market access. In a Press statement released on 14th December, the Members of Parliament said they were aware some of their members were being co-opted into what they call ‘Green Rooms’ in order to divide the African group.

To the African Members of Parliament, instead of reducing its levels of agricultural subsidies the EU is conditioning their ‘offer’ on Africa “agreeing to extreme liberalisation commitments in services and NAMA”.

So African leaders are considering more protectionism through reciprocal tariffs. But World Bank figures show that African nations already slam tariffs as high as 33.6% on agricultural commodities from their neighbours.

Another World Bank study says removing all agricultural trade barriers would bring US$140 billion a year in benefits to developing countries. Doing away with only the barriers in rich countries, the Bank estimates would generate only US$30 billion of this figure. The rest would come from the removal of barriers in and between poor countries.

The United States Agency for International Development also calculates that 70 per cent of all tariffs in the world are erected by developing countries against other developing countries. The World Bank estimates that 92 per cent of the benefit to developing countries from liberalising agricultural trade would come not from reduced EU and US subsidies but from cutting their own tariffs.

So, although the leaders of poor countries will say that they were once again ditched by the wealthy, they would do well to look in their own backyards first.

Today, trade among African countries accounts for only about 10% of their total exports and imports.

One explanation for this is that most of all Africa’s economies are agrarian. Yes, but they do not stand much chance of diversifying or adding value unless they reduce taxes on imported technological equipment. Currently these are outrageously high.

A simple illustration with the importation of a used car in Ghana will help. Port authorities ask you to pay 50% of the original price of the car, VAT of 12.5%, and other indeterminate taxes that come up to almost 100% taxes on the used car--so imagine importing heavy agricultural machinery.

Much as we want to see this improved, another ill that plagues Africa is corruption. According to Nigerian President Olusegun Obasanjo, corruption alone robs the continent of US$ 149 billion annually--US$9 billion more than the total benefits if all global trade protectionism were scrapped. This figure seems unbelievably high but in August 2004 an African Union report gave a similar figure, representing 25 per cent of the continent’s gross domestic product.

So what we really need is transparent, accountable and decentralized governance in order to pursue a coherent regional trade policy. This would translate into reducing economic intervention, freeing financial markets, removing obstacles to starting businesses, establishing property rights and bringing all Africans under the rule of law. That’s the kind of trade we need and the kind of justice we need.


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