THE TTALK QUOTES 

On Global Trade & Investment

 

Published Three Times a Week By

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No. 58 of 2014 

WEDNESDAY, AUGUST 27, 2014     

 

   

Filed from Portland, Oregon  

     

Click here for the August 13 TTALK Quote from Richard Cunningham.
TRADE LIBERALIZATION AND AFRICA'S SKEPTICS

"African countries have been reluctant to fully liberalize their economies despite the conventional wisdom that free trade is good for growth.  So why is that?

"Partially, this is true because there is no convincing evidence that trade liberalization leads inevitably to economic growth."

Millard Arnold
August 5, 2014
CONTEXT
Millard Arnold served in the Clinton Administration as the first U.S. Minister Counsellor for Commercial Affairs in Southern Africa.  Today is he is a Special Representative for the South Africa based law firm of Bowman Gilfillan. Today's quote is from the paper he prepared for his presentation at the August 5 colloquium on "Africa, the WTO, and the Future of Multilateral Trade Negotiations." 

This event was organized by the Cordell Hull Institute and co-sponsored by the Global Business Dialogue.  Richard (Dick) Cunningham of Steptoe & Johnson, the chairman of the Cordell Institute, introduced Mr. Arnold.  In doing so he described Bowman Gilfillan as "the outstanding Africa-wide law firm."

Africa & Trade Liberalization.  Mr. Arnold's presentation had several strands, but two in particular need to be both highlighted ... and separated.  One dealt with attitudes toward trade by Africa writ large.  Another was the perspectives of South Africa not only on trade but also on its role in the continent.  Today's featured quote provides some flavor of what he had to say about how the countries of Africa view trade and trade liberalization.  His starkest observation along those lines was perhaps this:
 
"Fairly recently, Christian Aid conducted studies which shockingly indicated that trade liberalization has cost sub-Saharan Africa $272 billion over the past 20 years.  The study points out that had African nations not been forced to liberalize as the price of aid, loans, and debt relief - the essential pillars of structural adjustments and the 'Washington Consensus' - sub-Saharan African countries would have had enough extra income to wipe out their debts and have sufficient left over to pay for every child to be vaccinated and go to school.  It is too important a finding not to pause and consider its implications."

Yes, these statements are qualified, as you will see if you read Mr. Arnold's paper, but only up to a point.

South Africa's Role.  On the basis of purchasing power parity, South Africa's economy is the largest on the continent.  (On a nominal basis, Nigeria's is larger).   Mr. Arnold explained to the audience at the August 5 event that South Africa sees itself not only as the gateway to sub-Saharan Africa but also as the continent's natural leader  - the country that, after a long struggle, triumphed over apartheid.  How widely that viewed is shared by the rest of Africa is another issue.  We will return to that in a moment. 

First, however, it is worth recalling some of what Mr. Arnold said about both South Africa's history and the contemporary attitudes that that history has shaped.  Mr. Arnold said:

"The African National Congress, the ruling party in South Africa, was formed over 100 years ago.  For many of the leaders of the party today, the vast majority of those years were spent in exile where the issues of internationalism and solidarity with revolutionary movements were forged.

"Rightly or wrongly, good or bad, present day South Africa reflects that heritage.  Communism is alive and well in South Africa, Socialism is alive and well in South Africa, Trade Unionism is alive and well in South Africa, and all of this is manifested in the approach South Africa takes to world affairs and foreign policy."

 He didn't add trade but he might have.

As Others See It.  The August 5 program that brought forth these observations was itself an outgrowth of an event the Cordell Hull Institute had held in South Africa.  Understandably, Mr. Arnold and others focused heavily on the views of South Africans.  He did acknowledge, however, that, in East Africa, for example, there is not a great deal of sympathy for the notion that South Africa is the continent's leader.  He talked about the possibility of more formal cooperation among the countries of East Africa, suggesting that such a development would be a significant blow to South Africa's leadership aspirations.

COMMENT
We learned a great deal from Mr. Arnold's presentation, and yet we were troubled by it.  We believe, for example, that the Christian Aid study he was referring to was "The economics of failure, the real cost of free trade for poor countries," a Christian Aid briefing paper of June 2005.   We don't fault him for citing it.  Clearly, it has been influential among those who think about Africa and trade.  We do wish, though, that instead of focusing on its implications, he had questioned the study itself.   Our initial impression is that what Christian Aid has produced would be better characterized as counter-factual speculations than as findings. 

That quibble aside, the trade views Mr. Arnold ascribes to the countries of Africa do seem more than a little removed from those of the U.S. Congress, which is now in the process of trying to craft "a seamless renewal" of the African Growth and Opportunity Act, AGOA.  The Trade Subcommittee of the House Committee on Ways and Means held a hearing on renewing AGOA on July 29.  The Senate Finance Committee held one on July 30.  We expect to revisit both of those hearings in future entries. 

We will close this one with the following excerpt from the opening statement of Rep. Devin Nunes (R-CA), the chairman of the Ways and Means Trade Subcommittee:

"[T]o make AGOA more effective, we must help Africa address both political and supply-side barriers to trade.  To encourage greater regional integration, Africa must remove domestic barriers to trade and investment, including high tariffs, forced localization requirements, legal restrictions on investment, and customs barriers among others."
SOURCES & LINKS
The GDP of African Countries (Nominal) is a link to the Wikipedia article with these numbers.

The GDP of African Countries (PPP) is a link to the Wikipedia article with these numbers.

The Economics of Failure takes you to the Christian Aid briefing paper mentioned above.

African Responses is a link to the paper prepared by Millard Arnold for the August 5 colloquium on Africa and Trade Negotiations.  Mr. Arnold's paper closely paralleled his oral presentation.  We chose to draw today's featured quote from the former, as it is the more accessible of the two.

Doha Mirage is a link to the TTALK Quote for August 13, which highlights the presentation given by Richard O. Cunningham at the August 5 colloquium on "Africa, the WTO, and the Future of Multilateral Trade Negotiation."

Opening Statement of Chairman Nunes takes you to the text of this statement from the Trade Subcommittee's AGOA hearing on July 29, 2014.

NOTE ON EAST AFRICA.  We are not clear about which countries in East Africa are pursuing closer political ties.  We would simply note, therefore, that the current members of the East African Community (EAC) are Burundi, Kenya, Rwanda, Tanzania, and Uganda.  The link takes you to the EAC website.


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