WTO is a beacon of false hope because free trade is a mirage
What you need to know:
- In trade negotiations, the BRIC associate more with developing countries but they have their own interests.
- Often, large multinational companies operate behind the scenes in WTO negotiations to influence the outcome.
- For the economies to grow, we must reduce imports through comprehensive industrialisation policies while at the same time increasing exports.
- Africa has abundant land, mineral and labour resources, which, if harnessed well, can elevate the continent to a level whereby it can dictate terms of trade.
The World Trade Organisation’s role is to promote free trade globally by providing a framework for negotiating agreements and resolving disputes.
But the organisation has never lived up to its mandate. It is trite but true that there is nothing like free trade in the world today.
Rich countries with advanced production systems use WTO to broker skewed agreements that impoverish developing countries.
Then there are the newly industrializing countries such as Brazil, China and India that have branded themselves BRIC.
Having improved their production to match that of developed countries, they also mimic advanced countries when dealing with developing countries, but pretend to be poor developing countries at the WTO negotiations. They are wolves in sheepskins.
In trade negotiations, the BRIC associate more with developing countries but they have their own interests.
Like the developed countries, the BRIC bring a large phalanx of loud and stealthy negotiators who intimidate our small teams of mesmerised and often inexperienced negotiators into submission.
Even the noisy NGOs often join in the fray to disenfranchise the poor states. The process is unfair from the start to the end. Indeed, the failed Doha talks were due to differences between advanced countries and the BRIC.
The one key issue of contention, which we should focus on, is the subject of agricultural subsidies for farmers in the developed nations, which undermine the very essence of free market.
Often, large multinational companies operate behind the scenes in WTO negotiations to influence the outcome.
Some countries have numerous advisors, expert negotiators in addition to support from broad pre-conference consultative meetings with different interest groups, including corporate entities in their home countries.
In Africa on the other hand, very little, if any, consultations ever happen. In Kenya, the majority of the people only came to know about the conference only recently, although it was confirmed long ago that the meeting would be held in Nairobi this year.
This happened just as academics attending the 50th anniversary of the Institute for Development Studies complained that the state never involves them on key policies that require extensive studies to execute.
Lack of consultations is not only unconstitutional — since the Constitution requires public participation — but it means our representatives in such talks have no expert knowledge that is locally contextualized.
In effect, we do not know what they expect to achieve from the negotiation. We don’t even know who our negotiators are, who appointed them, who they consulted, their negotiation strategy, the level of alignment of such strategy to our Constitution and national interest, their experience and their agenda.
Given this state of affairs, whatever outcome we get from the meeting, including failure, we shall assume we succeeded. After all, he who does not know where he is going cannot get lost.
The long and shot of it is that Africa went into the negotiations unprepared. We do not have a common agenda and our hope that someone will favour us is utter nonsense because there is nothing that will come on a silver platter.
Given this lack of preparation, some countries in Africa end up adopting agenda sponsored by foreign powers without quite understanding the consequences.
In this day and age, almost 60 years after independence, some African countries import virtually all processed goods as well as some primary goods from Europe.
These imports are often subsidised to such levels that there can never be viable production of the same in the African continent. We must design strategies to catch up with the rest of the world.
It is for this reason that the Organisation for Economic Cooperation and Development recently brought together the United Nations Economic Commission for Africa and the Economic Commission of Latin America and the Caribbean in Addis Ababa.
The agenda was to deliberate on a policy dialogue titled: “Africa and Latin America at crossroads: Addressing Structural Transformation in the New Global Landscape.”
Its mission is to renew the push towards industrialization and take advantage of abundant resources within and outside of Africa and Latin America.
Industrialisation in developing countries of Africa and Latin America has been on a downward trend. The global supply chain in these regions is now dominated by the BRICs.
The meeting in Ethiopia was to rally Africa and Latin America to leverage the global supply chain and expand their economies. These regions must fight to find their footing in the global supply chain.
In reality there will be virtually nothing that Africa will benefit from all the talks if we fail to understand global trade dynamics. Unlike in the past when we exported raw materials and imported processed goods, Africa today is a net importer of food as well as manufactured goods.
If you walk into any of our supermarkets today, you find garlic, ginger and Tilapia fish from China, ketchup and all kinds of sauces from America, rice from India and even honey and dates from the Middle East.
It is partly our fault that we have no strategy in place to diversify our agricultural production. Food in Kenya means maize, even when consumption patterns favour wheat.
Consumption of wheat increased from 671,000 tonnes in 2004 to 1,850,000 tonnes in 2014. This means consumption of wheat has more than doubled within 10 years.
Even for cash crops, we are focused on exporting coffee and tea in their raw form while importing some of the processed tea and coffee.
We should by now have improved our production capabilities to add value to our harvests to fight against frequent market volatility of primary goods that often hurts poor farmers.
In my view, Africa countries should have started the WTO meeting with the demands to strike out the BRIC from the classification as developing countries. It would have made our negotiations much simpler. Who, in this day and age, still thinks China, which lends money to America, is a poor developing nation?
Much of the developing countries’ trade deficits are with the BRIC. Take Kenya, for example. While the leading export market is European Union, our leading import market is India and China.
For the economies to grow, we must reduce imports through comprehensive industrialisation policies while at the same time increasing exports.
Our interest will only be met if we develop a serious catch-up strategy where we use the WTO platform to broker deals for technology transfer, access to international markets for genuinely developing countries, and a reduction in trade deficit with the BRICs.
We must shift our agriculture from subsistence to industrial production capabilities that lead to economies of scale. A multipronged strategy of development must also entice the diaspora to invest at home as well as work with likeminded nations and peoples.
Africa has abundant land, mineral and labour resources, which, if harnessed well, can elevate the continent to a level whereby it can dictate terms of trade.
Until we wake up to realise our dire situation, consult local experts, align our negotiation strategy with our national interest and indulge in value-addition manufacturing, our expectations in WTO are misguided.
The writer is an associate professor at University of Nairobi’s Business School.