IMPROVING UNDERSTANDING THROUGH INTERLINKAGES

TRADE AND INDUSTRY

Trade is incredibly powerful, with taxes, tariffs, import quotas and subsidies imposed elsewhere affecting opportunities for human well-being and sustainable environmental management in the developing world, including in Africa.

The global market and the policies of multilateral economic organizations have implications for the Africa region. The balance of power in international trade organizations, such as the World Trade Organization (WTO), is tilted in favour of rich countries despite each country having an equal vote (WRI and others 2005). Trade and trade-related agreements, such as those on intellectual property, may affect the trade opportunities for African countries. Trade liberalization may make it more difficult for countries to pursue their environmental policies where these affect free market opportunities and may demand wide-scale reforms, with uncertain benefits that developing countries can ill afford. Negotiations in multilateral fora may favour those with better access to financial and human resources.

As the Commission for Africa (2005) noted, protectionist policies in some countries have adversely affected fisheries and trade in cotton and sugar in Africa. For example, despite the impressive efforts to reform the cotton sector in Benin, Burkina Faso, Chad and Mali, the persistence of cotton subsidies elsewhere has depressed world prices and damaged their cotton industry (OECD Development Centre and AfDB 2005).

Subsidies are not the only barriers that Africa faces in international trade. There are also non-tariff barriers and standards which may be difficult for many African nations to comply with. The composition of Africa’s exports has essentially remained unchanged and its share of world trade has collapsed from about 6 per cent in the 1980s to 2 per cent in 2002 (Commission for Africa 2005). Had its share increased by 1 per cent, Africa’s share in the world market would have earned it US$70 000 million, about five times what the region received in development aid (Watkins and Fowler 2002).

The trade situation of African countries is further worsened by the dependence on a very narrow range of primary commodities (coffee, cocoa, tea, palm oil and minerals). In SSA, for example, those commodities account for about half of merchandise exports. Table 1 shows this trend for selected African countries. The consequences of this dependency are four adverse trends that militate against increasing the countries’ share in international trade (Watkins and Fowler 2002):

  • Slow market growth;
  • Adverse price trends;
  • Low value-added; and
  • Market competition.
Table 1: The significance of trade in primary commodities
Country Commodity Gross national income Percentage share of total merchandise exports Total agricultural exports

Malawi Tobacco leaves 23.8 59 74
São Tomé and Príncipe Cocoa beans 16.9 69 97
Burundi Coffee 7.2 75 83
Kenya Tea 6.5 26 42
Guinea-Bissau Cashew nuts 6.3 48 91
Chad Cotton 5.7 37 71
Ethiopia Coffee 5.4 62 69
Burkina Faso Cotton 4.9 39 77

Source: FAO 2002

Liberalized trade measures have led to loss of global market share and substantial income in many African countries. The share of food and agriculture in total merchandise trade fell from 17 per cent to 10 per cent from 1980 to 1997 (OECD 2000); the terms of trade for Africa’s commodity exports were 20 per cent lower at the end of the 1990s than in the early 1970s. Without this, Africa’s share of the world export markets would have been twice as large as it is today (UNCTAD 2001). Many agricultural markets are dominated by rich countries, which subsidize their own farmers at US$1 000 million a day (OECD 2000) or US$365 000 million annually. Trade protectionism by the rich industrialized regimes is the antithesis of free and liberalized trade, policies that have been recommended to developing countries.

Currently, manufacturing, trade, transportation, urbanization, and other activities in the industrialized regions put considerable pressures on the biosphere and stratosphere which influence the environment in Africa and other parts of the world. The G8 countries account for 45 per cent of global greenhouse gas emissions, which is a major cause of climate change, global warming and extreme weather events (Valente, 2005). These changes trigger a series of inter-related biophysical and socioeconomic circles such as drought, floods, hunger, displacement of people and loss of livelihoods, as shown in Box 7. These impacts are particularly severe in Africa given the dependency on natural resources for both subsistence livelihoods, and industry and manufacturing, With more than seven out of ten people engaged in resource-dependent activities, such as subsistence farming, livestock production, fishing, hunting, artisanal hunting and logging (WRI and others 2005), biophysical environment change, whether sudden or cumulative, impacts negatively on the majority of the people.

To respond affectively to these challenges, Africa needs to improve its global competitiveness. As discussed in Chapter 1: The Human Dimension, technological and infrastructural investment, developing niche markets, and improving economic and political governance through reducing corruption and conflict are all important strategies to respond to the environmental challenges and to enhance opportunities.