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UNCTAD meeting warns of effects of bilateral, regional FTAs 
Sangeeta Shashikant and Riaz K. Tayob

Free trade agreements among developing countries can help them strengthen regional cooperation, but trade treaties between a powerful developed country with developing countries can result in problems for their consumers, farmers and industries. This was one of the major themes that emerged at an expert meeting in Geneva last week on the interface between the multilateral trading system and regional trade arrangements (RTAs), organized by the United Nations Conference on Trade and Development (UNCTAD).
 
South-South RTAs (such as ASEAN, SADC, Mercosur and Caricom) are among neighbouring countries that are at about the same development level while in North-South FTAs, the rich country is so far ahead economically that their goods and firms can overwhelm the developing country's economy.
 
Mrs. Lakshmi Puri, Director of UNCTAD's Trade Division, at the opening said that the meeting's focus was the interface between the multilateral trading system and RTAs, and whether RTAs were building blocks or stumbling blocks towards multilateral trade relations. Approaches to RTAs are not uniform and they differ, whether they are North-South or South-South in nature, especially in relation to delivery of development imperatives. The number of RTAs had grown rapidly, with 366 notified to the WTO, 214 remaining in force and 400 expected by 2010.

Mrs. Puri posed several questions for discussion: How to ensure that participation is beneficial particularly in regard to asymmetries in North-South RTAs? How can special and differential treatment be used in North-South agreements like the Economic Partnership Agreements (EPAs)? How do countries best approach North-South RTAs when developing countries are in the process of deepening South-South processes? Referring to the recently agreed transparency mechanism at the WTO on regional trade arrangements, she asked what can be done to assess RTAs in the multilateral trading system using this mechanism.
 
She said that new-generation RTAs have substantially increased their "bite" to encompass new non-trade areas such as investment, competition and intellectual property (IP). But at the same time some elements of trade liberalisation are not addressed in RTAs, the most obvious example being agricultural subsidies. This theme of "cherry picking" of issues in North-South RTAs was taken up by several experts during the meeting. The selection of issues, done usually by the developed countries, reflects the lop sidedness of such agreements.
 
Issues like investment and IP which benefit the developed countries are put in (even if they were rejected at the WTO) while measures that can most benefit developing countries (such as removing Northern agricultural subsidies) are left out, at the insistence of the more powerful countries.
 
Ransford Smith, Deputy Secretary-General of the Commonwealth Secretariat, said that the expansion of RTAs is evidence of a contradiction in the multilateral trading system whose main tenet is "non-discrimination", while RTAs are based on discrimination. RTAs may also diffuse the negotiating capacity of developing countries.
 
He added that developing countries must be rightly concerned with North-South RTAs. Smith said that developing countries in their RTA negotiations need to consider enhancing special and differential treatment, facilitate the movement of workers and improve trade remedies. On the investment and competition issues, he said that these need to be first implemented at the national level and between countries at similar levels of development.

South Centre Executive Director Yash Tandon distinguished between three types of RTAs: (1) integrative partnerships (where partners have compatible interests and which are based on solidarity and subsidiarity where benefits go to members at the lower levels); (2) enforced partnerships where one side dictates the terms and the other side either has to "take it or leave it"; and (3) structured regionalism where the partnership is enforced and located in structures linked to historical relationships (such as the EU-ACP agreements).

Yash Tandon said that there are two opposing trends. The first is where enforced and structured partnerships are still in place, while the second trend is a struggle by developing countries towards integrative regionalism so as to liberate themselves from the predatory lock of structural relationships. In the economic partnership agreement talks, the ACP countries are trying to reposition themselves to bring onto the agenda their genuine concerns where the structure imposes the interests of the dominant partner, the EU.
 
Third World Network Director Martin Khor said that a major problem for developing countries was that WTO rules hinder the existence of special and differential treatment (SDT) for developing countries in bilateral and regional agreements, because Article XXIV of GATT establishes "reciprocity" in that RTA parties have to eliminate barriers on "substantially all trade."

He said that this seemed to be absurd, because RTAs by their nature contradict the non-discrimination principle of GATT/WTO and thus the multilateral rules should place limits to this non-discrimination, instead of insisting that if parties want to form an RTA, they have to "go all the way" or almost all the way.

If Article XXIV is not amended to enable SDT (as suggested by the ACP Group) and thus enable developing countries not to have to liberalise in such an extreme manner, developing countries are bound to be at a serious disadvantage in North-South RTAs. They have lower production capacity and their domestic firms would be unable to compete if the countries' goods and services markets are opened up suddenly and comprehensively to giant foreign firms through the RTAs.
 
Khor said that in North-South RTAs, developing countries' market access gains are limited by the developed countries' avoidance of opening up in areas that would be of most benefit to developing countries. Most glaring is that elimination of agricultural subsidies are off the table in North-South FTAs involving the US, EU and Japan, and thus the most important Northern trade barrier is not affected, depriving developing countries of what could be their most relevant "WTO plus" benefit.

In FTAs involving the US, the gains from textiles trade are also limited or offset by many tariffs not being eliminated immediately, and by conditions like the "yarn forward" rule (the trade partner has to use yarn that it produces or that is from the US) and stringent rules of origin. There is also very limited WTO-plus gain, if any, in liberalization of labour services.

In return, the developing country partner is asked to open its markets in extreme ways that go far beyond its WTO commitments in goods and services. WTO flexibilities such as less than full reciprocity and maintenance of unbound tariffs in industrial tariffs are removed or drastically eroded. In services, the US insists on using the "negative list approach" in its FTAs, which has many disadvantages as compared to the "positive list" approach in the WTO. Many other development flexibilities built into the WTO's services agreement are also removed.

Commercial presence in services is also merged into the investment chapter in FTAs involving the US, resulting in these services obligations coming under the investor-state dispute mechanism in which developing countries are liable to pay compensation for "expropriation", including indirect expropriation, the definition of which includes government regulations that result in investors losing their future profits.
 
Khor added that through the FTAs, developing countries also have to open their markets in government procurement, which in some countries amount to over 20% of the GDP. The procurement chapter in the FTAs goes far beyond the proposals at the WTO which only covered transparency aspects but not market access. Even then, the procurement issue was removed from the Doha agenda in 2004 at the WTO, while the more extreme version involving full market access was coming in by the side door of the FTAs.

Oxfam's Trade Campaign Director Celine Chaveriat said that FTAs involving the United States and EU strip developing countries of the policy space that they need to effectively govern their economies. For example, IP provisions in FTAs go much beyond the TRIPS Agreement. The negative effects include limiting access to technological know-how and affordable medicines, while failing to protect traditional knowledge.

She added that every FTA being negotiated with the US delays the introduction of generic medicines. For example, these FTAs include protection for clinical trial data that grants exclusive use to the patent holder, preventing registration of generics during the patent term, thus extending patent monopolies.
 
Medicine costs are estimated to rise by $919 million by 2020 in Colombia due to its FTA with the US, an amount which instead can be used to provide healthcare for 5.2 million people.
 
Chaveriat said that FTAs involving the US and EU also require the adoption of plant breeder rights legislation that removes the farmers' right to share seeds, thereby making the livelihoods of the world's poorest farmers even more vulnerable, whilst increasing the market power and profit margins of the world's largest agribusiness. The US-Dominican FTA is expected to raise agrochemical prices in the Dominican Republic by several fold.

On services, the financial sector is especially targeted. Under FTAs with the US, EU and Japan, developing countries liberalise in the hope that greater competition and efficiency would improve poor people's access to finance. However, the opposite has happened, said Chaveriat. Recent IMF and UN studies show that opening up the banking sector leads foreign banks to "cherry pick" only the most lucrative customers in the economy, leaving the poorer and higher risk customers for local banks, as a result reducing the profitability of local banks.

In Mexico, following NAFTA, foreign ownership of the banking system had increased to 85% by 2000 but lending to Mexican business had dropped dramatically from 10% of GDP in 1994 to 0.3 % in 2000. On investment, the FTA provisions ensure that the access and activities of foreign investors in developing countries are unfettered and many provide a powerful system of international arbitration to ensure that the expanded rights of foreign investors are vigorously enforced.

She stressed that the new rules in many FTAs undermine the ability of investment to contribute to development. In Argentina, during the 2001-2002 financial crisis, 39 groups of foreign investors lodged compensation claims, some successfully. Amid increases in unemployment, government emergency measures forced foreign investors to stop charging dollar equivalent rates for basic utilities such as water and gas. Current outstanding claims against Argentina are estimated at $18.55 billion.

On trade in goods, Chaveriat said that developing countries are being pushed to eliminate (in some cases totally) agricultural and manufacturing tariffs. However, the developed countries do not want to negotiate agricultural subsidies (which have damaging impacts on farmers in developing countries). In many cases, the developing countries are asked to undertake such obligations to only secure current levels of access to developed country markets.

She said that impact assessments show that Colombia, under its FTA with the US, could experience reductions of 57% in income and 35% in employment in nine agricultural sectors. She stressed the need for SDT for developing countries in FTAs and called for a serious overhaul of rules governing WTO and RTAs as well as a change of mind-set by big players about their trade policies toward developing countries.

David Vivas of the International Centre for Trade and Sustainable Development said that developed countries had placed strong IP provisions in their FTAs due to strong lobbying from their pharmaceutical, biotechnology, movie and information technology industries. Several FTAs not only require developing countries to undertake IP obligations beyond the TRIPS Agreement but also to ratify several WIPO agreements.

He highlighted several public policy concerns on the incorporation of TRIPS-plus provisions in FTAs. These include: (1) difficulties in keeping or utilizing public policy flexibilities available in TRIPS; (2) reduction of the public domain due to ever expanding IP rights; (3) burdensome licensing procedures; (4) lack of synergy between the FTAs on the one hand, and the Convention on Biological Diversity and the International Treaty on Plant Genetic Resources, on the other; and (5) lack of SDT for developing countries.

There are also direct costs such as increased payments for licensing, and costs establishing a legal framework of action, institutional reform, infrastructure and administration costs. Rohini Acharya of the WTO Secretariat said that the WTO's Doha negotiations on the RTA issue revolve around two categories: procedural issues (to improve RTA transparency and improve procedures for the consideration and surveillance of RTAs by the WTO) and systemic issues (to clarify and improve existing WTO rules of RTAs).

On procedural issues, Acharya listed the following existing problems: (1) there is no effective WTO surveillance of RTAs; (2) there is no consistency assessment of the RTAs in force; (3) many RTAs are not even notified; and (4) there is a lack of RTA transparency. On systemic issues, she listed the following problems: (1) There are divergent interpretations of disciplines in GATT Article XXIV and GATS Article V (that deal with RTAs); (2) There are problems of coherence between RTA rules and between these rules and other WTO provisions (for example, there is no clarity on the meaning of "substantially all trade" in GATT XXIV); and (3) There are institutional tensions and discrepancy between RTAs and the multilateral trading system.

The WTO official said that on 14 December 2006, the WTO General Council adopted a transparency mechanism for RTAs that clarifies existing RTA transparency provisions, that establishes guidelines and that asks the Secretariat to prepare presentations on all notified RTAs. However, she said, the substantial issues are harder to resolve. There has been discussion at the WTO only on GATT Article XXIV but none on GATS Article V.

She added that the WTO discussion had been mainly on defining "substantially all trade", with the focus on thresholds and SDT provisions, but there has been no agreement. In particular, there are mixed views on the desirability of SDT in Article XXIV. The ACP countries have led the move to introduce SDT in Article XXIV in terms of non-reciprocal commitments and length of transition periods, but there is quite a lot of resistance by some other WTO members. Officials from many regional groupings, including ASEAN, the Andean Pact, SADC, Caricom, COMESA, and Mercosur, presented their experiences on RTAs. Other speakers at the UNCTAD meeting included representatives from the World Bank, the OECD, the WTO and research institutions.  
This article first appeared in SUNS #6214 and is reproduced here with kind permission.

Africa’s Investment Climate, Development Finance and the Challenges of Meeting the Millenium Development Goals
Benjamin Mkapa

Mr. Mkapa said, in order to turn Africa’s challenges of today into opportunities for tomorrow, we need a paradigm shift to a development model that emphasizes a greater self reliance as a continent. The declining support of the international community should provide us with the opportunity for a sober reflection on the appropriateness of our “aid dependent” development strategies. It may be time for Africa to empower itself through greater economic nationalism and self reliance to better manage the effects of globalization and be a more proactive participant in that process. Africa may be poor, and feel marginalized in global affairs but this need not be the case considering the magnitude of its resources.

Several developed countries and multinational corporations are busy developing scenarios on Africa future, while appreciating for the support of development partners we must insist on “owning and leading our development Agenda”
  
The following are the abridged remarks from Benjamin Mkapa the former President of the United Republic of Tanzania delivered to the Conference of African Ministers of Finance, Planning and Economic Development Fortieth Session of the African Economic Commission.
1. When I retired from public office about 15 months ago, my plans included returning to my rural home district and trying my hand at farming! They did not include addressing what here today approximates to the Continental Economic Committee of Cabinet! It indeed is an honour and privilege to be invited here to address you and for that I thank you, Mr. Abdoulie Janneh, most profoundly.

2. Some of you may know that I had the privilege to serve last year as a member of the UN Secretary General's High Level Panel on "UN System-wide Coherence." Our task on the panel was a daunting one, given the dynamics of the current international system where some Governments and States seem to have forgotten that the UN Charter was declared by... "We the people of these united nations"... The international community most effectively serves humanity when its agenda and priorities serve the "people".

For this reason, on the panel, I held strongly the view that the roles and priorities of the regional economic commissions are best left to their constituencies (you assembled here today) to determine. In this context, I have been impressed by the diligent manner in which the ECA has moved with its repositioning strategy to set its priorities, even before our report came out! That you have chosen the theme "Accelerating: Africa's Growth and Development to meet the MDGs: Emerging and the Way Forward" for this meeting so soon in your strategic repositioning clearly sends the message to all Africans, and indeed to the world, that eradicating poverty in this continent is among your top priorities.
I have chosen within the general context of your theme to speak briefly on the subject of Africa's Investment Climate, Development Finance and the challenge of meeting the MDGs.

3. Chairperson, there is not a lack of studies, commissions, panels of eminent scholars and politicians that have sought to clarify the opportunities, constraints and strategic directions facing Africa and her development partners as they attempt to accelerate growth to reduce poverty and put the continent on a path towards meeting the Millennium Development Goals (MDGs). Among them are to be counted, the Bretton Woods institutions and various United Nations Agencies. The ECA has done some seminal work in the areas of governance and capital markets, and all have contributed to our stock of knowledge. I myself was privileged during 2004/5 to have served on the Africa Commission which examined various aspects of Africa's development challenges. I believe our continent has made some remarkable progress in recent years. Between 1995 and 2005, 17 Sub-Saharan Africa countries grew at average rates exceeding 5% annually, up from only 5 countries during the previous decade. By 2005, 9 countries were near or above the 7% growth rate threshold needed for sustained poverty reduction. The growth momentum was sustained, with overall real GDP growth rate of 5.7% recorded in 2006 compared to 5.3% and 5.2% in 2005 and 2004 respectively. For the second consecutive year, Africa's average growth rate remains higher that that of Latin America (4.8%). Twenty-eight countries in Africa recorded improvements in growth in 2006 relative to 2005 while 25 recorded improvement in 2005 relative to 2004. The challenge, however, remains sustaining these rates for an extended period.

4. Central to Africa's development efforts always has been the subject of resources, especially from external sources. The continent, admittedly, has benefited from external financing in the form of Official Development Assistance (ODA), including debt relief and Foreign Direct Investment (FDI) with significant cross-country variations in the receipt of such finance. In particular, FOI has favoured oil and other natural resource rich countries.

5. By 2004 aid levels to Africa had recovered from their 1990s dip. Much of the recovery however came in the form of debt relief and emergency assistance which, though helpful, does not expand the fiscal space for governments. One source estimates that direct aid to African governments declined from $24 billion (in 1993) to $ 20 billion (in 2004) in real terms. Over the same period, emergency and debt relief grew from 15% to 32% of total OOA. More important than the total aid amount is its sectoral composition. Between 1994/5 and 2003/4, the share of aid going to social sectors grew from 27% t9 43% and those to productive sectors declined from 16% to 14% as did budget/ program support from 20% to 11 %.

6. Tanzania has benefited greatly from both bilateral and multilateral aid and we are grateful for the support we have received for schools, health and other social services. Yet we have had difficulties getting some of our development partners to recognize that economic infrastructure such as roads, ports, telecommunications are equally vital for our development and poverty reduction efforts, even at times when the funding is from our own resources!. But, I believe strongly that the time has come for our growth strategies to be rebalanced with increases of domestic and external funds towards productive sectors, particularly infrastructure and agriculture. This is important given, for example, the very clear links between infrastructure and poverty reduction (MDG's). It has been shown and studies have revealed that:
(a) The construction of an all-weather road in rural Morocco increased girls' primary School attendance from 28% to 68%
(b) In Africa, access to piped water increased school attendance by 2-16%
(c) Replacing wood fuels with charcoal in Kenya would reduce childhood lower respiratory infections by 21-44%
(d) If Africa had enjoyed infrastructure growth rates comparable to those in East
Asia in the 1980s to 1990s, its annual growth rate would have been about 1.3% higher.

7. From Monterrey (2002) to the Millennium Summit (2005) and to Gleneagles (2005), the international community promised "scaling-up" development assistance and its effectiveness to Africa- the "scar on the conscience of the world", as one Western leader described it' African countries, constituting the largest number of least developed countries also find themselves at a stalemate with the Doha Round on Trade Negotiations and the Economic Partnership Agreements (EPAs) with the European Union, primarily because the 'powerful' insist on dictating to the 'powerless'!

That the 'delivery" on these various promises have not reached agreed targets, as recent reviews by the E~.A and the G-8 Research Group at the University of Toronto have shown, should not deter us. Although Swahili conventional wisdom states that "A promise is a debt and a debt must be paid", we must remember that these promises were not made on oath; and as the Igbo saying goes, "A person who took no oath is never guilty of breaking one" In my view, the declining support from the international community should provide us with the opportunity for a sober reflection on the appropriateness of our "aid dependent" development strategies. It may be time for Africa to "empower" itself through greater economic nationalism and self-reliance, as we see in Asia and Latin America, in order to better manage the effects of globalization and to be a more proactive participant in that process.

8. Africa may be poor today and feel marginalized in global affairs. This, however, need not be the case; consider these realities:
Slightly over 800 million today, Africa's population is expected to grow to over 2 billion in 2050; As US Assistant Secretary of State, Walter Kansteiner remarked, Africa is "the last great emerging market".
In the 21st century, Africa will have the world's youngest population and by 2050 only 10% of its citizens will be over 60 (compared to 37% in Europe, 27% in North America, 23% in Asia and 22% in Latin America);
Africa contains a treasure of raw materials which will give it a large share of global production far into the future. South Africa alone has 88% of world's platinum reserves, 72% of chromium, 80% of manganese, etc. Guinea has a third of world's bauxite and the list goes on for several countries. Africa today produces 3.4 million barrels of oil per day (11 % of global exports) from fields in Nigeria, Angola, Equatorial Guinea and Gabon with new producers like Chad and Mauritania. Our continent has about 8% of world oil reserves. The US plans to raise its oil imports from current 15% to 25% from the Gulf of Guinea by 2015.
The point is that several developed countries and multinational corporations are busy developing scenarios on Africa's future! On present trends European and American Business, not African Governments let alone African Business; are planning Africa's future! ! ! In our Southern Africa Development Community, the Basotho have a saying: "The mouth that does not eat is an invitation to the mouth that does eat.”!! Let Africa now eat its resources!

9. To turn our challenges into opportunities tomorrow, we need a paradigm shift to a developmental model that emphasizes greater self reliance as a continent. The one area where there is urgent need for decisive action on our part involves reforms in our investment climates in support of greater private sector contribution to our development efforts.

10. In the past decade, considerable reforms aimed at reducing government direct roles in the economy have taken place in several African countries as have improvements in tax systems, structures, and administration. These have strengthened the public fiscus, as for example in South Africa. A lot more, however, needs to be done before economically significant increases of tax revenues as a ratio of GDP can be achieved. This leaves the private sector as the principal driver of growth with governments primarily in a facilitating role. This in my view is the realistic path towards sustainable self reliance and poverty reduction. It will require bold actions with respect to removing the several constraints in our investment climate, a mission that the recently launched Investment Climate Facility (ICF) with the support of both government and the private sector will support.

11. The ICF is a US$550 million public-private partnership of Africa's development partners and private corporations aimed at grant funding solutions that improve the business environment, and whose Board I am privileged to be co-chairing. We hope to generate and shape policies-nationally and regionally- to make Africa more attractive to domestic and foreign investment by working in the following areas:
a) Property rights and contract enforcement;
b) Business registration and red tape;
c) Taxation and customs;
d) Competition;
e) Corruption and crime (governance);
f) Financial and capital markets;
g) Infrastructure; and
h) Labour markets

12. The Facility is envisaged to have a lifespan of seven years, and our success will be measured against higher levels of investment, faster economic growth, enhanced business opportunities and sustained returns for investors. I invite you all to visit the ICF website at www.investmentclimatefacilitv.org .I urge you further to work with the facility; they are open for business!

13. An important reason for moving expeditiously to tackle investment climate issues is that solutions stimulate greater foreign and domestic private investment, and also provide the confidence required for flight capital to return. The UNECA, among other sources, estimates the private savings of Africans outside of the region to be as high as above $100 billion or about 30% of the formal GDP, the highest among all developing regions. An improved business climate on the continent will also further attract greater remittances.

14. Remittances from the African Diaspora constitute a significant portion of funds as it does in the rest of the developing world. Remittances to Sub-Saharan African countries now exceed the flows of ODA and Fill combined and have been found to be more stable. In 2004, remittances to SSA totaled $160 billion (from $58 billion in 1995) while ODA flows were $79billion (from 59 billion in 1995). These are the recorded transactions. With rife informal channels, the amounts could be substantially higher! There is conclusive evidence that remittances reduce poverty. Research has shown that empirically, a 10% increase in international remittances reduces poverty by 3.5% in developing countries
 
15. Remittances will continue to be an integral part of Africa's developmental agenda and need to become an important factor in the resource mobilization effort. Governments must aim at reducing transaction costs in the formal financial and banking markets. African countries also need to strategically promote the role of the Diaspora as, for example, Ghana has done by establishing a dedicated ministry as part of an integral "self -reliance" program. In the wisdom of our ancestors, "A river is enlarged by its tributaries"!

16. Finally, we ought to examine more closely how we can promote proactive economically targeted investments by African pension funds and other long term insurance companies. In many African countries, pension schemes constitute a significant portion of national savings, but their roles continue to be constrained by excessive regulation and poor governance. In my own country Tanzania, the four pension funds have had on average, $500 million of investible resources annually over the past decade. FDI which has gone mostly into minerals and other natural resources totaled $300 million over the same period! We need, therefore, to create the opportunities for pan-African investments by our pension funds in support of "self-reliant" development. A recent UNIDO survey of investors found that Intra-African investors pay higher wages, train more workers and spent more on R&D. We must therefore promote Intra-African investment.

17. In conclusion, my messages simply are that:
This is a decisive moment for Africa to commit itself to a strategy of "self-dependent" path to reducing poverty by "scaling-up" our own efforts through maximizing efficient and effective use of resources. This particularly calls for integrating the African Diaspora into resource mobilization plans and in the new links with other "South" nations. African governments need to focus on learning more from those whose history and developmental experiences most closely resemble ours, i.e. Asia, particularly as regards reforms in the investment climates that have transformed India and China into today's economic powerhouses; We must redirect resources to build infrastructure, integrate markets and promote regional trade. Intra-African trade is only 12% of our total trade, the lowest among all regions of the world.
We must invest in agriculture and aggressively support our entrepreneurs, vital creators of wealth, employment and a key target for poverty reduction; We need to learn more from each other: e.g. from Botswana about managing mineral wealth; Mauritius on export diversification; Mozambique about post-conflict economic and political management, and South Africa about fiscal responsibility, etc. We also need to trust and have greater confidence in our own experts and specialists, many of whom left our shores out of frustration not being appreciated. While we remain grateful for support from our development partners, we must insist on "owning" and "leading" our own development agenda. "Poverty is NOT Africa's destiny!", Madiba once said.

18. A distinguished economist and compatriot of mine has stated acute discernment: "In the end, decisions must be made about priorities, specific actions and modes of financing. The central question is leadership. Political leadership that makes growth the number one priority and focuses the efforts of both government and non-government on achieving accelerated growth cannot fail. None of the steps necessary to achieve levels of growth sufficient to reduce poverty are easy. There will be political, technological and capacity constraints. But these can be overcome, and African countries can succeed, if the will to succeed is present".

19. Mine is a call for ACTION. As we concluded in the Africa Commission report, "... The time is ripe for change... To do nothing would be intolerable. To do something is not enough. To do everything we can is not only a requirement, it is our clear duty. Now is the time to act".

EU offers full market access to Africa, Caribbean and Pacific regions in EPAs negotiations

The EU (4 April, 2007)  has today proposed to remove all remaining quota and tariff limitations on access to the EU market for all African, Caribbean and Pacific regions as part of the Economic Partnership Agreement negotiations. The offer covers all products, including agricultural goods like beef, dairy, cereals and all fruit and vegetables. It will apply immediately following the signing of an agreement - with a phase - in period for rice and sugar. The only exception will be South Africa where a number of globally competitive products will continue to pay import duties.

This offer will:
Eliminate all tariffs and import quotas for all ACP countries. Give all African Caribbean and Pacific countries the same full access to EU markets that all Least Developed Countries have under the EU's "Everything But Arms" Duty and Quota Free market access system. This means all ACP countries would have the same market access conditions, encouraging ACP neighbours to collaborate and helping build regional markets and supply chains - responding to the concerns of agricultural exporters in countries like Kenya or Ghana.

Not be tied to the requirement of equivalent openness from the ACP countries. The EPAs are not free trade agreements in the classic sense. Flexibility under WTO rules means that ACP counties will have to offer market access, but this will phase in over many years. The ACP will also retain the right to protect sensitive products where the removal of import duties could threaten local producers. Apply in full from day one - planned to be 1 January 2008 - with the exception of a transition period for rice and sugar. The transition periods for rice and sugar will ensure compatibility with EU market reforms and ensure stability to protect the interests of both the EU and ACP producers who supply those markets.

What are EPAs?
Economic Partnership Agreements are the trade and development agreements that the European Union is currently negotiating in parallel with 6 African, Caribbean and Pacific (ACP) regions (The Caribbean; West Africa; East and Southern Africa, Central Africa, Southern Africa and the Pacific). They will replace the trade chapters of the 2000 Cotonou Agreement between the EU and the ACP countries. The waiver exempting these chapters from WTO law will expire at the end of 2007, requiring both parties to have put in place a WTO-compatible alternative. The European Union has committed to ensuring that the EPAs will guarantee both the development focus and improve on the preferential trading terms currently enjoyed by ACP countries, while complying with WTO obligations.

Improving the system           
The Economic Partnership Agreements aim at integrating the ACP into the world trading economy and increasing the quantity and diversity of their trade. After more than thirty years of preferential access to Europe's markets, the ACP still exports just a few basic commodities, many of whose prices are in long term decline. The EU's Economic Partnership Agreements are the agreements that the EU is negotiating with the six African Caribbean and Pacific regions with new agreements that are WTO compatible, preserve existing benefits and encourage economic diversification and development. They will change our relationship, from one that offers tariff preferences to one that builds lasting regional and international markets for the ACP.

Under current arrangements, the 40 ACP Least Developed Countries (LDCs) already have duty and quota free access to the EU while the 37 non-LDCs have special tariff preferences under the Cotonou Agreement and one country, South Africa, has a bilateral Free Trade Agreement (the Trade and Development Co-operation Agreement). A core objective of the EPAs is to bring each EPA region under a single trade regime to encourage regional integration, the growth of regional markets and creation of regional supply chains.

Sugar
The need for a transition period to phase in duty and quota free access for ACP sugar exports is to protect the balance in the EU market while internal reforms are underway, which is in the interests of both EU producers and ACP exporters. From 2015, ACP sugar would be duty and quota free and there will be an adjustment to the standard EPA safeguard to take account of the sensitivity of sugar.

Rules of Origin  
Rules of Origin are used to ensure that it is ACP producers who benefit from access to EU markets and ACP countries do not simply become a transit channel for exports from third countries with no benefit to local industry. To ensure EPAs deliver the maximum benefit to the ACP, the European Commission, in parallel to its market access offer, has also begun discussions with the 6 ACP regions on developing simpler and more development friendly Rules of Origin.

Oxfam International reaction to EU market access offer
Luis Morago, Head of Oxfam International's Brussels office said: “Today’s offer by the EU provides some answers to legitimate ACP concerns. However, it is made as part of negotiations on free trade agreements, which are themselves fraught with problems.

Developing countries look set to be asked to open their markets dramatically, which could have seriously negative implications for poor peoples’ livelihoods and future economic development.  
Also, developing countries will only be able to take advantage of market access if it is accompanied by reform of rules of origin and much greater support for overcoming supply-side constraints.
Furthermore, this is the least that the Commission needed to do, given their obligation under the Cotonou agreement to provide at least equivalent to existing market access post 2007, and their stated commitment to promoting regional integration. 

This mustn’t be used as a way to bribe ACP countries into signing deals by the end of year. UN and other studies have suggested than many ACP countries are not ready to sign EPAs yet - as they haven't done sufficient impact studies and are they are (rightly) concerned about the implications of new rules in areas such as investment and government procurement.

They should be given more time to make sure that the deals they sign up to will not harm development. Furthermore, if countries do not sign by end 2007, they should still be assured of continuing market access into the EU - without this the impact on producers, workers, businesses and economic stability will be very serious.”

Internal Evaluation Criticises IMF’s Confused Role in Africa
Celine Tan

An internal evaluation of the International Monetary Fund (IMF)’s role in sub-Saharan Africa (SSA) reveals that there is ambiguity and confusion about the institution’s policy and practice on aid and poverty reduction in the region and that there is a disjuncture between the IMF’s rhetoric and its policies on the ground, leading to incoherent policy responses from the institution.

The report, a culmination of research by the IMF’s Independent Evaluation Office (IEO) into the IMF’s operations in sub-Saharan Africa from 1999 – 2005, also concludes that the expected institutional changes which were to accompany the IMF’s switchover from the Enhanced Structural Adjustment Facility (ESAF) to the Poverty Reduction and Growth Facility (PRGF) during that period have not been borne out in practice.

In other words, in spite of the so-called conceptual shifts towards country ownership, poverty reduction and the inclusion of other stakeholders in policymaking under the PRGF, the IMF has reverted to its old economic policy prescriptions in affected countries, attributing these limitations to weak staff performance in these areas, inconsistent guidance by the Executive Board and Fund Management and less than effective collaboration between the IMF and the World Bank.

According to the report, released on Monday, the PRGF, when introduced in 1999, was supposed ‘to be far more than a name change’ but ‘in the face of a weakening consensus in the Board and a staff professional culture strongly focused on macroeconomic stability – and, most important, changes in Senior Management and a resulting lack of focused institutional leadership and follow-through – the Fund gravitated back to business as usual’.

The IEO report will increase the pressure on an institution reeling from a crisis of legitimacy. The IMF is already facing the strain of maintaining relevance among its members, with the withdrawal of many of its middle-income members from its financing facilities and the graduation of a number of its low-income members, including SSA countries, from its concessional lending programmes in recent years.

In a response to the evaluation at an Executive Board meeting on 5 March, The IMF’s Managing Director, Rodrigo de Rato, had welcomed the report’s ‘candid assessments and useful recommendations’ saying that it ‘will help management and the Board clarify further the institution’s mandate and policies to help SSA achieve growth and reduce poverty’, adding that it ‘should be considered in the context of the Fund’s Medium-Term Strategy (MTS)’.

The issue of policy coherence was central to the evaluation’s findings. The IEO argues that the differences in the views of Executive Directors about the IMF’s role and policies in low-income countries had contributed fundamentally to the failure of this ‘attempted – but ultimately unsuccessful – institutional change’ in their operations in SSA..

The lack of clarity on the institution’s stance and policies on the mobilisation of aid, alternative macroeconomic scenarios and the application of poverty and social impact assessments (PSIAs) of macroeconomic policy has led to Fund staff reverting to a focus on macroeconomic stability ‘in line with the institution’s core mandate and their deeply ingrained professional culture’. Consequently, the study found that PRGF programmes had limited focus on the linkages between infrastructure spending and supply-side responses from the economy in spite of macroeconomic implications and made limited use of poverty and social impact analysis, partly reflecting their weak collaboration with the World Bank. Programmes also failed to adopt more ambitious targets with regard to aid and aid inflows.

The IEO report concludes that although ‘social impact analysis was to inform the consideration of distributional impacts of program design and the identification of countervailing measures to offset adverse impacts’, PSIAs carried out by the World Bank and other donor agencies ‘have not systematically informed PRGF program design’. Additionally, Bank staff involved in the formulation of PSIAs revealed to the IEO that ‘they generally lacked incentives and resources to meet the specific needs of Fund-supported programs’. This reveals a lack of synchronicity between the IMF and its sister agency, in spite of increased collaboration being a distinct objective of the Poverty Reduction Strategy Paper (PRSP) framework which underpins the PRGF and the work of the Bank’s concessional lending facility, the International Development Association (IDA).

On the IMF’s role in mobilising aid, the study found that some of the criticism directed at the institution’s conservative macroeconomic programmes and the blocking of aid inflows were unfounded, arguing that ‘PRGF-supported macroeconomic policies have generally accommodated the use of incremental aid in countries whose recent policies have led to high reserves and low inflation’. However, it did acknowledge that ceilings on public expenditure, particularly budgetary wage caps, have led to the undermining of countries’ capacity to absorb additional aid inflows for the hiring of additional staff in social sectors, such as health and education.

The report also concludes that PRGFs have generally not set ambitious targets or identified additional aid opportunities where such absorptive capacity exceeds projected aid flows and that the Fund has not been ‘proactive in mobilizing aid flows’. Moreover, IMF staff ‘have done little to analyze additional policy and aid scenarios and to share the findings with the authorities and donors’.

The IEO study further found that public investment in infrastructure has declined relative to social spending in sub-Saharan Africa during the evaluation period, arguing that the ‘pendulum’ in public expenditure in sub-Saharan African countries under PRGF programmes ‘has gone too far in the direction of pro-poor spending for safety net programs, at the expense of pro-growth spending for infrastructure’  This potentially undermines private sector growth, external competitiveness and employment creation in these countries. These concerns concur with conclusions of other external evaluations of the PRGF programmes, including the study of the PRSP approach by the United Nations Conference on Trade and Development (UNCTAD) in 2002.

According to the IEO, the Fund’s failure to live up to its promises under the PRGF has been compounded by the overselling by Fund communications of the institution’s commitments on poverty reduction and aid, creating an ‘external impression’ that the Fund is committed to more work on aid mobilisation and poverty reduction analysis in its programmes than it actually delivers. For example, it argues that ‘institutional communications continue to suggest a more expansive view of the Fund’s role in aid mobilization, advocacy for aid, and alternative MDG scenarios than the Board has agreed’. Consequently, the ‘resulting disconnect has reinforced cynicism about, and distrust of, the Fund’s activities in SSA and other low-income countries’.

The Fund has also missed opportunities to build alliances with ‘a broader audience’ in sub-Saharan Africa, including engagement with other donors and local partners, including civil society actors, say the report. The evaluation found that in spite of a network of resident representatives across SSA which act as ‘a largely untapped source of information on what is happening on the ground among donors and civil society’, their observations ‘do not systematically inform institutional positions’ on SSA.

The evaluation’s main recommendations to the IMF stemming from its findings is primarily the improvement of coherence – ‘actual and perceived’ – by the IMF of its policies and actions relating to aid to sub-Saharan Africa, including the clarification by the Executive Board of Fund policies on the issues raised in the report and the provision of clear guidance by IMF Management to its staff based on the Executive Board’s directives.

Additionally, the Fund Management ‘should establish transparent mechanisms for monitoring and evaluating the implementation of the clarified policy guidance’ and clarify expectations and resource availabilities to local representatives and their interactions with local partners.
The IEO report, ‘The IMF and Aid to Sub-Saharan Africa’ can be found at: http://www.imf.org/External/NP/ieo/2007/pr/eng/pr0701.htm

This article is reproduced with kind permission  from SUNS #6213.

A model challenge for Ghana
By Yao Graham
Third World network Africa.

Mr. Graham, observes that Martin White who declared ‘that people of Gold Coast find themselves a pioneers advance and the touchstone of political competence in Africa’,, would be in comfortable company among those celebrating Ghana as today’s model of African countries as it is more in keeping with the model Gold Coast he was talking about 60 years ago, than the independent structurally transformed mode which Nkrumah wanted to establish as “black star for Africa.”  

60 years ago, surveying the latest tinkering with the political system rule in the then model colony of the Gold Coast, the British constitutional expert Martin Wight, declared that the ‘people of the Gold Coast find themselves the pioneers of political advance and the touchstone of political competence in Africa’. Within two years the ordinary peoples of the colony would rudely intrude onto the political stage through the 1948 riots' and sound the death knell for the preferred approach to politics of the Gold Coast elite - writing petitions to the Governor and the King. Both the colonial government and local political class were caught off balance by the riots, in which 29 died and hundreds were wounded. It was triggered by the police killing of three and wounding of many demobilized World War II soldiers, marching to present a petition to the Governor about their entitlements. The emergence, a year later, of the, Convention People's Party (CPP) a radical mass anti-colonial party under the leadership of Kwame Nkrumah put the last nails in the coffin of the model colony. The whirlwind progression of the CPP from creation in 1949 to power within two years remains an outstanding feature of Nkrumah's much discussed place in Ghanaian, African and world history.

Amilcar Cabral, the outstanding African revolutionary intellectual and anti-colonial leader of Guinea-Bissau, described Nkrumah as 'the strategist of genius in the struggle against classic colonialism'. .' Seek ye first the political kingdom' is one of Nkrumah's most cited sayings. The Declaration to the Colonial Peoples of the World (written by Nkrumah) which was adopted at the 1945 5th Pan African Congress unequivocally pointed the road to the political kingdom. 'Today there is only one road to effective action - the organization the masses', it asserted. The creation of the CPP and its fashioning into the spearhead of a successful anti-colonial mobilization which yielded an overwhelming electoral victory and placed Nkrumah and his colleagues in power was the foundation for all that Nkrumah was subsequently able to do in Ghana and beyond.

Anti-colonial struggles around the globe took two main forms - non-violent mass mobilization or armed struggle, although many armed movements were a response to the absence of space for open political activity, the ‘classic colonialism’ referred to by Cabral and prevalent in Africa was colonialism of extraction, exemplified by the Gold Coast. The white settler population was insignificant and government was based on co-opted traditional rulers and other indigenous elite. In almost all of these colonies, in contrast to the settler colonies, the successful organizational strategy of the anti-colonial movements centered around non-violent mass nationalist political parties of the CPP type. In Ghana the CPP united farmers, workers, ex-servicemen, petty traders and other lower middle class elements. The nationalist coalitions in other African countries, for example Guinea-Conakry under the leadership of Sekou Toure, through Congo Leopoldville led by Patrice Lumumba to Zambia under the leadership of Kenneth Kaunda, embodied various permutations of these groups.

Nkrumah explicitly acknowledged a debt to the mobilisation methods and successes of the Congress Party of Gandhi and Nehru, but the importance of the CPP's success for mass anti-colonial around mobilization Africa cannot be overstated. The CPP showed that what had worked in India and elsewhere could work in sub-Saharan Africa. Nkrumah did not simply leave the lessons that Ghana offered to be drawn. The turning of the Ghanaian capital Accra into a staging point for the African anti-colonial movement started almost immediately after independence and the lessons of the Ghana experience were pressed home.

When Nkrumah hosted the first ever meeting of independent African countries in April 1958, there were only eight such countries. By contrast more than two hundred delegates from sixty two nationalist organisations, including future ruling parties such as the ANC and FLN, took part in the first ever All-African Peoples Conference held in Accra eight months later. Against the background of the armed struggles in Algeria, Kenya and racist violence in South Africa the conference declared that 'where democratic means are available, it guarantees its support to all forms of peaceful action. This support is pledged equally to those who, in order to met the violent means by which they are subjected and exploited, are obliged to retaliate'.

Many future post-colonial leaders, such as Patrice Lumumba, A.M. Babu, Joshua Nkomo, Franz Fanon and Tom Mboya attended the People's Conference. (Fanon subsequently served as the ambassador to Accra of the provisional government of the Algerian FLN and played an important role in setting up a southern supply route for the guerrillas.) In his closing address Nkrumah declared that the coming decade was one of independence and urged the delegates to go home and fight for independence now, an echo of the self government now slogan which had proved such a powerful mobilising catchphrase for the CPP. Most African countries did gain independence in the ensuing decade, thereby improving the possibilities for the collective self organisation of ex colonial countries not only in Africa around Nkrumah's vision of African unity but also around the principles of the April 1954 Bandung conference.

In discussions of Bandung most attention focused on the attempt of the nonaligned movement to find some political space amidst the Cold War rivalries. In his speech to his guests at Bandung, Indonesia's President Sukarno underlined the most important common challenge facing all former colonies. In the struggle against colonialism the target of weakening or destroying the power of the colonial ruler was clear. However how to respond to the challenge of using the new power to create a new society was not at all clear. Nkrumah and others may have been geniuses in the project of anti-colonial destruction but the challenge of post-colonial construction was quiet a different ball game.

The Kenyan academic, Ali Mazrui, argues that while 'Nkrumah was a great African, he fell short of becoming a great Ghanaian' primarily because of the authoritarianism into his regime,  which descended in its last years along with what another writer has called a 'grotesque personality cult'. Mazrui blamed Nkrumah for establishing the precursor single party regime in Africa. 'He became Africa's hero and Ghana's dictator simultaneously'. Mazrui is wrong about Nkrumah' s standing in Ghana. More than thirty years after his death Nkrumah remains the standard of leadership vision for national development and his years in power the reference point for what could be achieved by a committed government. The obsession of his political opponents of the right with disputing this legacy implicitly affirms that standing.

The repressive aspects of Nkrumah's rule represent the greatest source of discomfort for his defenders and continue to provide the happiest hunting ground for his right wing opponents at home who know they cannot affect his international standing. The authoritarian politics of the period did not only dampen public life, crucially for Nkrumah and the CPP, it also ate at the insides of the ruling party. By the time of the 1966 coup the nationalist coalition that the CPP led to independence had decayed as an effective political force. This was somewhat disguised by the formal trappings of a bureaucratized single party with incorporated trade union, youth, farmers and women's wings and Nkrumah's frantic efforts to prod a new type of cadre through ideological training notwithstanding. In the years before the single party model ended across Africa in the 1990s a similar fate overtook most of the mass nationalist parties that came to power at independence. The current debates and tensions in South Africa about the policy directions of the ANC, Mbeki' s style of leadership and the fate of the Alliance involve some of the same issues that confronted the CPP and the other victorious nationalist parties.

The erosion of democratic space under Nkrumah was a function of both politics and economics. On the political side there were a number of elements. The violence unleashed by an embittered opposition, led by an alliance of elite elements who felt cheated of their 'birthright' to succeed the colonial rulers and chiefs who saw the end of colonial rule as offering the chance for a reversion to chiefly rule as opposed to the CPP's drive towards a Republic, engendered a repressive response. From the mid 1950s the opposition, anchored in a number of separatist organizations under the spearhead of the National Liberation Movement (NLM) carried out bombings, attempts on Nkrumah's life and generalised thuggery. Another political factor was the limitations of the internal culture of the CPP which came to power within two years of its creation with very little time to develop as an organization before the temptations and corruption of power confronted its leaders and cadres. These limitations were compounded by Nkrumah's dominance of the organisation and his increasing towering above it, a process which was accepted and institutionalised in a personality cult.

The challenges these factors represented was not helped by the fact that the CPP was born into an authoritarian culture of power and inherited an autocratic state.

The crisis of inner party democracy and the problems in the CPP regime's relations with important segments of its historic mass constituency such as the trade unions and the farmers the autonomy of whose organisations had been abolished has to be partly understood through the prism of the issue Sukarno posed at Bandung: the path of transformation for ex-colonial countries. Transformation implies disruption of existing patterns of doing things. Capital accumulation entails denial or postponement of consumption by some or all. This is an issue of continuing contestation in all countries, in countries seeking structural transformation they are issues of confrontation or repression in the absence of a hegemonic consensus. Even where consent is given, upheavals may erupt if the project does not deliver.

In the Ghanaian case the challenges were; how do you generate resources for a steady improvement in the living standards of a people whose expectations have been greatly fuelled by independence and the visionary pronouncements of Kwame Nkrumah himself? How do you transform an underdeveloped economy and society, highly dependent on a single crop (cocoa) with unstable international prices for the bulk of its export earnings? How do you transform and raise productivity in a low productivity small holder based agricultural sector?; and How do you industrialise a country with a small home market whose foreign trade patterns were heavily locked into those of a few Western economies?

Many of Nkrumah' s critics as well as some of his supporters insist on describing his economic policies as socialist. Nkrumah was outspoken in his self description as a socialist influenced by Karl Marx, Lenin, Christ and Marcus Garvey. It was socialist if one accepts a broad definition of the term. In truth many of his policies sought to apply the lessons of the dominant orthodoxies drawn from different models to Ghana's development challenges, albeit with a growing attraction to elements of the Soviet and Maoist Chinese models during his last five years. Nkrumah at one time was in power, a leading role for the state in the economy, was the norm in both communist countries and the West where Keynesian economics prevailed. The experience of the Soviet Union offered lessons in rapid industrialization which India had started learning before Ghana came along. The relative success of import substituting industrialisation in Latin America had made that strategy a respectable one by the time of Ghana's independence. The Labour Party was undertaking extensive nationalizations in Britain when Nkrumah first came to power. Nkrumah's pan-Africanism was powered by a grander vision and ambition than the modest European Coal and Steel community, which has flowered into the European Union, but they were united by a recognition of the benefits of regional integration.

Using existing resources Nkrumah rapidly expanded education, health and infrastructure and aided other newly independent countries such as Guinea. With additional borrowing industrial and agricultural investments were made. Many of the agro-industrial projects, not all well conceived, were in their infancy when he was overthrown. He inaugurated the Akosombo hydroelectricity dam, the centre piece of the Volta River project, which he saw as powering Ghana's industrialization a month before his overthrow. The many new factories were yet to be properly rooted in planned local supplies of raw materials central to centre piece of the By that time the crisis in the international price of cocoa had brought considerable damage to 'revenue and growth projections, putting pressure on imports and consumption. The shortages and associated discontent was a perfect climate for the CIA sponsored coup of 24 February 1966 which placed the NLM cohort in power as ministers and advisers to the military NLC (National Liberation Council).

The turn towards the Soviet Union and China was an economic as well as political act. Nkrumah's anti-imperialism meant that he did not believe he could rely on the West for full support for his transformational project especially given the centrality of African unity with its implication for existing colonial spheres of influence as well as US intrusions into the continent. In the climate of the Cold War a project combining Pan-African unity, economic nationalism and looking east for friendship and resources looked like communism from the standpoint of the White House and its NATO allies. The communism bogey was the great legitimating card played by the 1966 coup makers. In the weeks following the coup the mass media was filled with pictures of 'communist subversives' who were being deported from Ghana. The rubric covered a rag bag - the hundreds of militants from national liberation movements based in or receiving training in Ghana and their military advisers from the Soviet bloc and China and industrial technicians from Eastern Europe.

In the forty years since Ghana has gone through many phases as a development fashion icon. The backers of the coup held up the IMF stabilization programme that the military regime initiated as a model. The return to civilian rule through elections set up to put the civilian members of the junta in power was hailed as an African first submission to the IMF and World Bank since 1983, which has once more made Ghana an economic model. The World Bank reportedly recently described Ghana as among the top ten models of adjustment in the world. Four successive peaceful elections since 1992 have earned Ghana the tag of an island of peace in a turbulent region. The political openness and stability are important. However the transformational challenges that Nkrumah identified and grappled with have not been overcome. The country is still heavily dependent on a small basket of commodities for export earnings and aid is crucial for public investment. Most simple manufactures are imported. Martin Wight would be in comfortable company among those celebrating Ghana as today's model African country. It is more in keeping with the m.odel Gold Coast he was talking about 60 years ago than the independent structurally transformed model Nkrumah wanted to establish as a 'black star' for Africa.

Editorial: Africa must insist on Owning and Leading its Own Development Agenda

By Ambassador Nathan Irumba

This year marks the 50th Anniversary of Ghana’s independence, a seminal event that is indelibly marked not only on Ghana’s history, but also that of Africa as whole. Ghana’s independence was welcomed with a sense of pride by all Africans and their well wishers. It raised hopes about the prospect of a prosperous bright future for Africa with possibilities of economic and social transformation. Ghana became the beacon of hope for all those involved in the quest for a free United Africa and struggle inspired by Nkrumah’s vision and commitment. But it has also since gone through the tribulations all African countries have experienced.

Under Nkrumah, Ghana was intent on achieving industrialization and indeed projects to this end were initiated. Some of them like the Volta River Dam, which were depicted at the time, by detractors as a symbol of extravagance, can now in hindsight and in the light of present energy needs, be viewed as symbols of foresight and prudence. Mr. Graham in an article in this issue puts in context the problems Ghana faced at the time of the independence in trying to achieve its vision. He observes that;

“In the Ghanaian case the challenge was how do you generate resources for a steady improvement in the living standards of a people whose expectations have been greatly fuelled by independence and the visionary pronouncements of Kwame Nkrumah himself? How do you transform an underdeveloped economy and society, highly dependent on a single crop (cocoa) with unstable international prices for the bulk of its export earnings? How do you transform and raise productivity in a low productivity small holder based agricultural sector? How do you industrialize a country with a small home market whose foreign trade patterns were heavily locked into those of a few Western economies?”

“However, the transformation challenges that Nkrumah identified and grappled with have not been overcome. The country is still heavily dependent on a small basket of commodities for export earnings and aid is crucial for public investment”
 
These are same challenges that Africa and other developing countries face today in a globalizing world. Depending on how successfully these are addressed, will determine the prospects of modernization. We remain trapped in the production of primary commodities. Even the current geopolitical interest in Africa seems to be motivated by the desire to extract and secure oil and gas supplies and other raw materials for industrial countries. Horizontal and vertical diversification remains the key in Africa’s development.

The 2007 report of the Economic Commission for Africa points out that two distinct periods stand out in Africa’s development strategy. The period spanning the 1960s and the 1970s was characterized by policies aimed at strengthening economic autonomy. It is during this period that diversification oriented policies were aggressively pursued in most countries. A major shift in economic policies in Africa was occasioned by the economic cries of the early 1980s. Most of the post-independence economic policies geared to long-term development were replaced by macroeconomic stabilization policies focusing on short-term goals. This re-orientation of economic policies has failed to yield the expected result, and it is clear a shift in policy orientation is needed to accelerate progress towards the MDGs.

In recent decades, sparks of economic growth have often vanished as quickly as they have been ignited. The current growth momentum also rests on a very fragile foundation. The continent continues to rely on primary commodities whose prices have been major sources of trade shocks. Therefore, it is critical for African countries to embrace diversification as the central development paradigm. But how can this be achieved.

The German Chancellor in her address to the Davos Economic Forum underscored that one thing must not be allowed to happen namely that Africa is treated unfairly in fight for raw materials in the 21st century and that more should be invested in this continent and growth and employment be put on a broad basis.

ACP countries are on one hand engaged in Doha Round negotiations in WTO and simultaneously in the Economic Partnership Agreement negotiations with the European Union. This was held out as away of creating conditions and opportunities for these countries trade their way out of poverty. The challenge is how to craft the outcome of these negotiations to ensure that Africa has sufficient policy space to pursue their own developmental goals. The prospects, as of now, are not all that promising as Doha Round is stalled with development issues sidelined and the EPA will invariably involve reciprocal provisions to allow EU imports. This may adversely impact on ACP prospects for industrialization. There is also a danger of losing policy autonomy in many areas and continuing to be trapped in the production of low value goods by lopsided agreements. ECA economic report for 2007 observes that the evidence for African countries suggests that there is merit for policy space with respect to liberalization. Equally the much hoped for FDI has not been forthcoming.