To what extent have the fair-trade initiatives increased standard of living in West Africa - Research Paper Example

identification (all above optional – if you need them) Topic To What Extent Have Free Trade Initiatives Increased the Standard of Living in West Africa? Title West Africa: At the World’s Mercy? Introduction Traditionally, since the end of World War II, the industrialized countries of the world have been befitting from consistently increasing world trade patterns (Sorensen, 2000). International trade fuels both national economies and the international economy, determining the wellbeing of individual States, and directly affecting the standard of living of the population of every country in the world. This essay seeks to establish whether Free Trade agreements have helped or hindered the progress of the countries of West Africa, with particular focus on the standard of living of the populations in those countries. In West Africa, the Economic Community of West African States (ECOWAS) is the overarching economic and political structure, within which unrestricted trade is meant to take place – see NOTE 1 at the end of this paper. This structure was set up to promote “cooperation and integration” leading to an economic union in West Africa “in order to raise the living standards of its peoples” (ECOWAS website, 2011). A Pan-Africanist slant is also evident in that the intention to promote progress and development on the whole continent is explicitly stated. Thus a common market was an original intention; regional economic reform would have to take place; integration particularly in food, agriculture and natural resources was seen as vital; and the establishment of a common market through liberalization of trade among West African States was envisioned. An important aspect of the ECOWAS initiative is also to ensure a “common external tariff” and trade policy with regard to third countries. Additionally, a stated intention in the ECOWAS revised treaty is to promote “balanced development” and a focus on the “special problems of each Member State particularly those of land-locked and small island Member States” (ECOWAS website, 2011). Thus the intention to create improved standards of living, improved Gross Domestic Product (GDP), improved Per-Capita Income (PCI) and generally improved trading position in a global economy for the citizens of this entire region was the original objective. This has not happened. The elites – both within countries and within the region continue to be advantaged, while the poor continue to grow in number, and in levels of poverty. Analysis surrounding the economies of West Africa, their political stances, and their trade policies, as well as the world economy, and West Africa’s part in it will be examined in this paper. The information from the analyses is organized in the Findings Section, to show the realities of the situation in West African countries and their economic relationships with particularly the Western, developed world. In the Comments and Recommendations Section of this essay, it is proposed that the exploitative relationship which has existed between African developing or underdeveloped countries (and other developing countries) since slavery and colonialism has not been redressed. Instead, initiatives such as Free Trade agreementsNote that this has been introduced earlier, extensively within associations such as the Economic Community of West African States (ECOWAS) have no chance of success because of the nature of the trade balance which continues to exist between developing countries and the developed world. All that is maintained is the advantage of the Western power blocs over the developing world, in the guise of aiming to stimulate and improve conditions in these countries. The essay concludes with a summary comment on the nature of the economic, political and power relationships between the countries of West Africa, as well as ECOWAS and the world. Analysis There tends to be a bias toward the economic principles, values and norms of the West in much writing about the economics of West Africa (African Trade Policy Centre, 2005, Briefings 4, 5 & 6; Axtell, 1994; Ball & McCulloch, 1999; Economist Intelligence Unit, 2006 and others). Statistical information, and studies into the economic conditions in West Africa do exist, however, and these are often unbiased, but show the inequalities evident in the power and economic relationships between the West and West Africa (World Bank: World Bank Development Report 1997). The United Nations Organization (UNO) and African Trade Policy Centre (ATPC) publishes Briefing documents from which it is evident that at least on the level of policy, the UN and the WTO recognize the need to create equilibrium in international trade. The provisions for special and differential (S&D) treatment, for example, of certain identified countries aim to eradicate all form of export competition and still benefit the developed countries by having longer implementation periods for the phasing out of all forms of export subsidies (ATPC, Briefing No. 5, 2005). Nonetheless, explicit S&D is communicated, to apparently ensure that developing countries are favored in trade with the West. It is also clear that a central difficulty in ensuring fair trade with Africa, generally, including trade with West Africa, is the question of how to improve market access for agricultural and non-agricultural products from the developing country (ATPC, Briefing No. 6, 2005). The solution consistently proposed is the increase of inter-country trade within West African Free Trade Agreement regions, and the other economic communities established in developing areas of the world (ATPC, Briefing No. 4, 2005; Adeyemi, 2002; EXPECT Initiative website, 2010 and others). It is agreed that regional integration to enable mutual benefit in the form of accelerated growth and development is very difficult within Africa as a whole (Maruping, 2005). Inevitably, and this has been the case in ECOWAS: disputes have arisen, as members have questioned policies which stray from the stated intentions of ECOWAS, and on occasion even perceived a loss of sovereignty due to certain aspects of agreements. The implementation of agreements between West African countries, including such as concluded in the establishment of ECOWAS, have failed due to the nationalist and self-preserving attitudes of the governments of West Africa (Maruping, 2005). Extensive migration among the ECOWAS countries also complicates matters. Limited capacity in the public sector to provide employment opportunities, the rural nature of the populations, and the high illiteracy rates mean that employment of about 70% of the labor force is in the subsistence agriculture sector. Thus poverty and population pressure lead to high migration rates. Added to this, the endemic conflicts and political and inter-country strife in the region have served to increase numbers of migrants (Adepoju, 2005). Migration has thus almost prevented the aims of ECOWAS from being reached, and some restructuring of the ECOWAS agreements may serve to address this situation (Adepoju, 2005). Trade relationships between West African states and the rest of the world also pay a role: an example of these relationships can be found in the document published by the The European Commission, Directorate-General for Trade, and the Directorate-General for Development and European Commission Delegation in Nigeria, (2007), in which the nature and parameters of the proposed Economic Partnership Agreement (EPA) between the European Union and Nigeria is outlined. The roles of organizations such as the International Monetary Fund (IMF) and its goals and aims have relevance to the countries of West Africa. The need to facilitate balanced growth in all trade, and to eliminate cross-border currency restrictions are two specific aims of the IMF (Jonnaid, 1998). At the same time, American small and medium business enterprises are assisted to enter the export market, in a way contrary to the spirit in which the IMF formulates its intentions. Direct advice given to business in the USA is to encourage the removal of import barriers in host countries, and to take advantage of the credit and subsidy programs provided by the Federal Government of the USA as fully as possible (Axtell, 1994). The theoretical basis on which international trade is based implies that all trade should become multinational when comparative advantage can be gained: a company will be able to benefit from the exploitation of natural resources, or manufacturing possibilities in other countries (Venter, Erwee & De Lange, 2007. Thus, statistical data shows, almost in all the literature examined for the purposes of this essay, that trade continues to benefit the West, whether it is constrained by the regulations of the international bodies or not. It is necessary for economic growth in Africa (including the ECOWAS countries) to be maintained at 5% per annum for at least 10 years to make a significant impact on the standards of living of Africans (Ford, 2005 and Onimode, 2009). And still, theorists in the field notice the inequalities and define one characteristic of much of the trade between the west and Africa, particularly, as predatory pricing policies, so that price is used as a competitive weapon to drive competitors out of the international market (Hill, 2002). The false hope continues to exist, however, for new forms of global economic differentiation and integration favoring African countries with qualitative economic thinking, rather than profit-driven motives (Christie, Lessam, & Mbigi, 1994). Discussion Beyond the legacy of colonialism lie the continuing challenges faced by West Africa to find economic stability and a favorable balance of trade with the rest of the world. Within ECOWAS, events have occurred to counteract the potential benefits of the system envisioned by the original treaty creating the economic and political alliance. The clear imbalance of wealth among signatory countries has been a problematic area. Adepoju (2005) relates the labor migration that occurred in the region, when a period of recession in the region, coincided with the implementation of the Protocol of Free Movement of Persons in 1980, a simultaneous boom in Nigeria’s economy due to its earnings from oil. The migration of Ghanaians to Nigeria was extensive, and the oil boom in Nigeria served only to enrich the Nigerian elites. Thus a rapid deterioration of living and working conditions in Nigeria, and the devaluation of the Nigerian currency, caused the Nigerian Government to revoke Articles 4 and 27 of the abovementioned Protocol and between 900,000 and 1.3 Million illegal immigrants were expelled from Nigeria in 1983. Similar events occurred again in 1985, when 200,000 foreign nationals – still from ECOWAS countries – were expelled from Nigeria. Thus two fundamental tenets of the original agreement have been all but destroyed: the right to free movement of citizens between ECOWAS states; and the protection and consideration of the smaller states’ conditions. In yet another instance the free trade agreements so nobly aimed for by ECOWAS were a failure. The ordinary person in West Africa was even more poorly off than before despite the boom in the world’s most sought-after commodity – oil. The share of intra-regional trade within ECOWAS should indicate an area in which some success has been achieved. Informal trade in the region has historically been robust, and national boundaries have not been considered too seriously in this trade for a very long time (Kennes, 1999). The share of intra-regional trade is, however, very low in West Africa: 11% as compared to 60% in, for example, the European Union (EU) (Adepoju, 2005 and Writer Unknown, 2010). Cross-border roadblocks, interference by customs officials, and expensive formalities at border posts in the region seem to hamper trade: thus the intentions of ECOWAS are countered by the reality on the ground of officials and local authorities seeking to extend their own power and wealth. The situation is further complicated by the low levels of international investment in the region. It has continued to be difficult to maintain peace and stability in the region, and this has contributed to the reluctance of major investors to spend funds in the region. Border disputes have occurred between Senegal and the then-member, Mauritania; between Ghana and Togo. The Liberian Civil War affected Sierra Leone, Guinea, Guinea Bissau and Cote d’Ivoire (Adepoju, 2005). The population displacements caused by these and other conflicts have left a continuing legacy of unemployment and instability in ECOWAS countries. Trade, it is claimed, has not played a “propulsive role” (Sodersten, 2000) for the growth of the ECOWAS countries. Since 1945, growth across the world has been steady and consistent. But it has been primarily the industrialized countries that have benefited from this growth. This is reflected by the growth of their share if world export markets: In 1960 – developed market economy countries had 66.3% of world trade; developing countries just 12.6% In 1970 – developed countries 71.9%; developing, 9.1% In 1980 – developed countries 65.5%; developing countries 7.6% (note that the decrease in share of trade during this period was only due to increased, in fact the boom, in demand for oil, that allowed particularly Middle Eastern countries to enter world markets on a more sustained basis) (Sodersten, 2000). At present, Africa holds approximately 14.5% of the world’s population, and it is predicted that by 2050, 27.4% of the world’s people will live in Africa (UNO website, 2011). The Gross National Product Per Capita (GNP per capita) for West African countries still compares negatively to countries in Europe and North America, however. Below a table of sampled countries: GNP per capita: 1995 In US$ Average Growth Rates of GNP per capita: 1985-95 Country Annual Population Growth: 1985-95 41,210 1% Luxembourg 1.1% 26,980 1.4% USA 0.9% 270 2% Nigeria 3% 230 -0.1% Burkina Faso 2.8% 220 -2.1% Niger 3.2% Source: World Bank: World Bank Development Report 1997 It is only when GDP per capita growth occurs at a faster rate than population growth that an economy is expanding, according to Ball & McCulloch (1999). Thus, 25 years ago, it was evident that the economies of significant West African countries were in fact shrinking, from low base starts, while representative European and North American countries were growing significantly from already high bases. In 2007, growth in the Middle East and Africa was expected at 5.6%, but realized only 2% (EIU, 2008 and World Bank, 2007). In fact, by the end of 2007, the World Bank (2007) in its “World Development Indicators” publication, contended that the following countries (among others in the world) could still be ranked as “Low Income Economies” – i.e. the per capita Gross National Income (GNI) was US$825 or less: Burkina Faso; Cote d’Ivoire; Ghana; Liberia; Niger; Nigeria; Senegal; Sierra Leone; and Togo. In fact, this is a list of ECOWAS countries. Estimates are that the population of Africa as a whole will grow to over two billion people by 2050 (Hill, 2002) and that current life expectancy at birth: women – 40-49 years; men – 50.3 years, will continue to decrease (Onimonde, 2009). The proportion of 33% of the continent’s GDP being derived from agriculture and this forming 40% of the continent’s exports is not likely to change significantly. And notably, Ford (2005) estimated that in order for significant improvements in standards of living in Africa to be possible, growth of GDP has to be maintained at over 5% per annum. If trends thus continue as they have, even most recently, 39% of Africans will still be living in extreme poverty in 2015 (Ford, 2005). Neither the economic agreements within West Africa, nor the international organization policies seem to make any difference. West Africa is hampered by its own internal conflicts, regionalism and corruption, while the Western world continues to insist only on securing economic benefits for itself. It is even more unlikely given the international economic downturn, beginning in the USA in 2008 and continuing to affect the world economy, that West Africa will be an international priority. It is therefore not only the political conditions within West Africa, noted above, but also the international domestic policies of the stronger national economies that further disadvantage West Africa. In the USA, the Foreign Agriculture Services (FAS), the National Association of State Development Agencies (NASDA) and indeed the Federal Government continue to promote the expansion of American producers into foreign markets (Axtell, 1994). US farmers, for example, are able to access seed money and low interest rates, loans for shipment, labor, equipment and materials, and 100% export credit insurance at lowered rates to cover any potential losses, if they export their produce, or even establish their projects offshore. An obvious destination, thus, is West Africa, where the need for capital is great, and the restrictions on these unfairly competitive farmers are unenforceable in many instances. The overtures from the European Union to expand agreements and mutual trade between the EU and Nigeria, particularly, also give some insight into the intentions of the West (EU Commission, Directorate-General for Trade, Directorate-General for Development and European Commission Delegation in Nigeria, 2007, and EXPECT Initiative website, 2011). The statement that free access to European markets for Nigerian agricultural produce is certainly counterbalanced by the heavily subsidized farming industries in almost all farming countries in the EU. Another practice which threatens effective balance between the ECOWAS countries and the developed world is the phenomenon of “countertrade” (Storobin, 2005 and Axtell, 1994). Particularly USA businesspeople are encouraged to engage in a form of barter with developed countries: Third World countries need chemicals, fertilizers, pharmaceuticals and oil according to this source, and should then be prepared to barter for these with goods or with rights to produce goods in their countries (Axtell, 1994). It seems that the situation which existed in 2003 has not yet changed significantly. Declining agricultural prices – particularly cotton and sugar (both highly relevant to the ECOWAS countries) are due to increase in government subsidies paid to cotton farmers in the US and agricultural subsidies in the EU. Rich nations of the Organization of Economic Cooperation and Development spent about $360 Billion on agricultural supports during 2001, for a range of commodities and it is clear that subsidies foster unfair trade and flood world markets with cheap goods, thereby eroding commodity prices (Mutume, 2003 and The Philadelphia Enquirer, Staff Reporter, 2005). The populations of West Africa – heavily reliant on being able to sell their farming produce both locally and on international markets – are unable to sustain their farming methods and their consequent income. Again, the disadvantaged are the already poor. Mineral and natural resources available in West Africa suggest that the potential for economic prosperity in the region is great. Any progress toward such potential has been, and indeed continues to be, slow due to both internally unsuccessful free trade agreements, and the international economic realities. For the powerful countries in the region, economic prosperity is controlled by their elites; for the less powerful, it becomes even more impossible to provide a means of sustaining or improving standards of living. Recommendations and Comments Economic theory argues that the formation of a trading bloc, such as ECOWAS in West Africa, should promote the ability of member countries to become more powerful and effective in the world trading environment. The Findings Section of this essay has shown that in the case of ECOWAS, this has not been the case. In attempting to redress the situation, it must be considered that the economic marginalization of West African countries has been due to the impact of slavery and colonialism; attrition due to poverty; continual rural-urban resettlement; the pan-African reduction in agricultural production; and an internal and inter-country conflicts over land – civil wars and cross-border conflicts in the region (Hill, 2002). But the effects of ongoing attempts by essentially western powers to create agreements and unions between themselves and the West African countries has also added to the challenges, rather than assisted in solving some of them. The failure of these, historically, can be attributed to: The external imposition of such policies; And consequently, the lack of ownership of such initiatives by the African countries; The ineffective management of resources – both financial, and natural (such as oil in Nigeria, noted earlier in this essay); Limited accountability from individual governments and from the regional organization authorities; and Inadequate monitoring and evaluation of the initiatives both by international organizations and the local organizations. (Hill, 2002). Even such agreements as the Cotonou Agreement, with 48 African members (including the ECOWAS countries), 16 Caribbean, and 14 Pacific nation members, and the stated intention to facilitate greater inclusion of African, Pacific and Caribbean economies in the world economy, has failed to make significant progress (Onimode, 2009). It may this be that as Hill stated in 2002, Free Trade boosts national income at the expense of other countries and that this is particularly true when the trade is between economically unequal countries, such as those in West Africa – Nigeria, for example, would certainly have an economic advantage in any negotiation with Burkina Faso (Hill, 2002). ECOWAS should theoretically assist to improve the power-base from which West African countries can enter into trade agreements and partnerships, the strength of the Western trading blocs, such as the EU, and the US economy’s domination, has prevented the empowerment of West Africa. While the Common Agricultural Policy within the EU continues to benefit inefficient Farmers and the politicians who rely on the farm vote (Hill, 2002), very little will change in the balance of trade between ECOWAS and the EU, for example. In fact, historically, unfavorable trade terms have been a major factor in the erosion of the market share of poor nations and world agricultural exports show that the share of developing countries in such exports fell from 40% in 1961 to 35% in one year (Mutume, 2003). The chief economist of the World Bank, Nicholas Stern, in 2003, is quoted as saying that it is “hypocritical” to try to persuade the world of the advantages of free trade and free markets (Mutume, 2003). Indeed, the movement of exports into poorer nations at their expense could be seen as unwritten policy in the USA, when the advantages of offshore production and manufacture are so heavily subsidized by the Federal Government (Vedder & Galloway, 1997). It is also difficult for ECOWAS to make too many demands on international organizations such as the WTO, as these organizations are inevitably heavily financially supported by the developed, industrialized countries. Members of ECOWAS are cash-strapped and dependent on debt and aid-relief from the Western and European nations. The unstable political conditions, historically ongoing since independence in West African countries, do not make for successful growth in regional or international trade (Nivet, 2006). Perhaps one option would be to negotiate for compensation for losses in earnings from industrial nations – a proposal made in 1993 already by the commissioner of Senegal’s State Cotton Enterprise. This has, however, to date not proven a successful strategy. Reform within the countries of West Africa, individually, is certainly necessary. Further, the individual member states must become more accountable to the agreements established by the ECOWAS initiative. Disputes between the countries of ECOWAS must be peacefully settled and the stability of the region must become a priority. All these internal necessities are given; and equally importantly the effects of trade agreements favoring the developed world must be faced, and addressed by world organizations. Free Trade in West Africa is thus not in any way improving the living standards of West Africans. Certain political and economic elites within the region are advantaged, but the population generally sees little advantage. Conclusion Economic and political power on a global stage continues to be centered in Europe and North America, even when considering the growth and expansion of Asian economic players – such as India and China. The relationship between West Africa and the central economic powers is highly influenced by history, and also by current political conditions in the countries of the region. Despite free trade agreements between the countries of West Africa, prosperity is not immediately, or perhaps even in the long term achievable. It seems, in conclusion, that it is neither probable nor possible that free trade initiatives can increase the standard of living in West Africa, under current conditions. References Adeyemi, S. (2002) Fostering Regional Integration through NEPAD Implementation: Annual Report, 2002, of the Executive Secretary Dr. Mohammed Ibn Chambas Abuja: ECOWAS. 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Accessed September 17, 2011 World Bank Publications (1997) World Development Report 1997 Washington D.C: World Bank Group World Bank Publications (2007) World Development Indicators Washington D.C: World Bank Group World Trade Organization (WTO) (2007) WTO News: Speeches – DG Pascal Larny: Bangalore, India, 17 January 2007 available at www.wto.com. Accessed September 16, 2011 NOTE 1 ECOWAS (Economic Community of West Africa) Member countries: Benin Burkina Faso Cape Verde Cote d’Ivoire Gambia Ghana Guinea Guinea-Bissau Liberia Mali Niger Nigeria Senegal Sierra Leone Togo Read More