Political summits are known for sweeping declarations that are, more often
than not, forgotten as soon as the ink is dry. The April 2014 EU-Africa
summit, held in Brussels, appears to be no exception. Leaders from both
sides unanimously proclaimed the need for a fundamental shift from aid to
trade as agent of poverty reduction, but their actions did not stray far
from the status quo.
Yet the summit declaration deserves attention for bringing to the forefront
some of the fundamental obstacles that block the long-proclaimed goal of
poverty reduction through trade-based partnerships. Both sides mistakenly
equate job creation and economic growth with the reduction of poverty.
Moreover, neither side seems to have a clear understanding of what rights
and obligations accompany such a shift to trade-based policies. Until both
shortcomings are addressed, the tremendous potential of trade for poverty
reduction cannot be realized.
The missing link
European and African leaders both recognize that a shift from aid to trade
(and investment) would lead to job creation, economic growth and poverty
reduction. While properly designed trade policies can arguably contribute to
economic development, they are not an automatic mechanism for poverty
reduction. Higher incomes do contribute to a reduction in the number of
people living below the poverty line, but the gains made by increased trade
cooperation are not distributed equally — and it is often the poor that miss
out.
More than half of the population of Nigeria, Africa’s biggest economic
powerhouse, continues to live below the poverty line of less than $1 per
day. Shifting from aid to trade policies is unlikely to make a significant
contribution to poverty reduction unless distributional policies and social
investment are targeted as well. This is a major challenge for African
governments who have so far refused to tackle the issue of staggering
inequality.
How European trade policies fit in with poverty reduction strategies remains
unclear, while some of the EU’s economic aims may even come in conflict with
the poverty reduction agenda. Africa’s resource sector industries are
infamous for their deleterious effects on sustainable development, and are
of strategic interest for Europe.
Partnership of equals?
Part of the intention behind the call for a shift from aid to trade is the
desire for an EU-Africa relationship that is a “partnership of equals”. More
than half a century after the first wave of independence, it is time to
acknowledge the evolution of the EU-Africa relationship from its
traditionally patronizing donor-recipient arrangement towards a more
egalitarian, business-like trade partnership. Yet the EU and African sides
are caught up in internal contradictions regarding the roles they want to
play in their relationship. The EU points out Africa’s unprecedented
economic and demographic growth, at a time of European stagnation, as the
key motive for a shift towards mutual obligations. At the same time, Europe
insists on its right to set the agenda on economic reforms. The EU largely
determined the model that Economic Partnership Agreements (EPAs) between the
partners ought to follow. It also set October 2014 as a new deadline for the
EPA negotiations, despite heavy criticism from the African side.
African countries seem divided on how to accept the principle of greater
reciprocity as a new basis of their trade relationship. While many countries
lobby hard for having an equal say at the negotiating table, there is a
reluctance to accept equal obligations given existing asymmetries in
economic development. In the EPA negotiations, West Africa fought hard to
lower its market opening commitments from 80 percent to 70 percent vis-à-vis
its European counterpart, and demanded “aid-for-trade” to be part of the
agenda. It is therefore far from clear that a trade-based “partnership of
equals” will lead to an increase in cooperation, or even contribute to
poverty reduction.
The way forward
The arguments for a shift in EU-Africa relations from aid to trade are not
substantive in the face of a missing causal link between economic growth and
poverty reduction. An open acknowledgement of the obstacles that lie in the
way of a development-oriented trade partnership is needed if the
relationship is to move forward successfully. Economic policies can only
contribute to poverty reduction if distributional and social policies enable
so-called “pro-poor growth” — something which African countries need to
prioritize if they are to take on a trade-based economic agenda. The African
side’s demands for “aid-for-trade” underline that it makes little sense to
treat trade as an isolated policy sector. Improving trade policies as an end
in itself is pointless if you have nothing to trade, or lack the capacity to
put new trade agreements into practice.
The blind spots in the recent summit declaration show that a real discussion
about these fundamental preconditions is urgently needed for any trade-based
partnership. A key priority for the new European Parliament elected on May
25 and the reshuffled Commission should be an increase in resources towards
developing a joint strategic approach on EU-Africa trade relations.
The call for a shift from aid to trade is, however, not a lost cause. While
EPAs are not exactly a success story yet, they do hint at the potential that
an EU-Africa trade partnership holds for moving the development agenda
forward. Not only did the prospect of greater trade openness provoke a great
deal of economic and political analysis within African countries on trade
policies, it has also strengthened and diversified existing trade-policy
making institutions. These developments were driven forward by the African
side in a proactive way rarely seen in response to past handouts of European
financial aid.
Yet, for such constructive steps to be promoted systematically and
successfully, European and African leaders need to clearly define the roles
they are to play in a development-oriented trade partnership. Equal
treatment of parties that are unequal in economic terms is likely to result
in unequal outcomes at the negotiating table. The European side needs to be
willing to respond to the African side’s demands — even if this means
prolonging asymmetrical preferences in what cannot yet be considered a
“partnership of equals” in economic terms. African leaders need to realize
that they cannot have it all: balancing the desire to have equal weight at
the negotiating table with demands for aid and flexibility will be a
delicate, but important task for building a development-oriented trade
partnership with the EU.