Development assistance and debt relief are critical to jump-starting development, but countries need the opportunity to earn their own resources for fighting poverty and growing their economies. ONE focuses on Africa’s specific trade needs because as a region, it has been earning less and less from trade instead of earning more resources to invest in the well-being of its people. In 1980, Africa had a 6% share of world trade. By 2005, this had dropped to less than 2%. Even small percentages of global trade can make a big difference: in 2006, 1% of global trade was worth $117 billion.
Africa faces inherent trade problems: a lack of infrastructure, high concentration of land-locked nations and reliance on the export of primary commodities (such as minerals and agricultural products) all present significant challenges to expanding trade on the continent.
African exports also face trade barriers such as high tariffs and taxes that make it difficult for their products to compete in important markets in the U.S., Europe, and Japan. Making matters worse, wealthy nations pay their richest farmers to overproduce, which artificially lowers prices. As a result, African farmers cannot compete and therefore do not earn enough to meet their basic needs.
In order to create more opportunities for Africa to trade, donors need to reduce or eliminate artificial trade barriers and provide assistance that helps Africa to trade - this means constructing roads and ports that bring African products to markets and helping African farmers and entrepreneurs find buyers for their products. African countries must also prioritize trade as part of a comprehensive strategy to fight poverty and take steps to encourage trading relationships among African countries.
Moving Forward
In partnership with African countries that have prioritized trade as a key component of poverty reduction and national development, donor countries should pursue a trade approach which includes the following components. These components should be delivered either through the Doha development round of the WTO or through individual country-led efforts.
Expanded market access: In order to significantly increase exports from Africa to developed country markets, duty-free/quota-free access should be extended to 100% of products from all African countries, including non-LDCs. Agricultural products are particularly important as farming employs the majority of the African workforce.
Subsidy reform: In 2005, the OECD estimated that farmers in developed countries received $279 billion in subsidies - an amount equivalent to more than 60% of the GDP of all sub-Saharan African countries combined. Agricultural subsidies that distort world markets and make it difficult for African countries to compete should be reduced and eventually eliminated.
Scaled-up aid for trade: Increased “aid for trade” is needed to address Africa’s supply-side problems so that even as the rules are improved, Africans can produce and transport products to markets. Infrastructure and telecommunications, financial services, payment of adjustment costs to compensate for losses due to the reduction of import tariffs, strengthening of regional trade entities, education and marketing are all necessary. Recent analysis shows that Africa needs $12-13 billion per year in aid for trade.
Expanded policy space: In order to develop and implement trade policies that enhance individual countries’ poverty alleviation strategies, African countries must have an appropriate level of flexibility in multilateral, regional, and bilateral agreements. This will ensure that African countries have access to the same flexibilities that rich countries benefited from as they pursued their own economic growth.
