Trade Policy at Work

Africa: Correcting Historical Injustices in the World Trade Rulebook

Why did Africa move from being a net exporter to a net importer of food in the 1980s when the prices of its key commodity exports tumbled and its agriculture slowed down? Its food trade deficit is now around USD 20 billion and, given the current rise in prices, could get much worse.

Why did Africa move from being a net exporter to a net importer of food in the 1980s when the prices of its key commodity exports tumbled and its agriculture slowed down? Its food trade deficit is now around USD 20 billion and, given the current rise in prices, could get much worse.

While it is vital to understand how the continent became a net importer, it is also important to understand how African agriculture can become more efficient and competitive.

A country can have a perfectly efficient and competitive agricultural system yet still be an important importer of food, or even a net importer. Europe, for example, exports 9 percent of the world’s food and imports 12 percent. The United States exports 10 percent and imports 8 percent. Being a food export powerhouse does not preclude being a major importer too.

African agriculture needs to become more efficient, and in that efficiency it needs to discover specialisation.

As a fraction of the continent’s total merchandise exports, African agricultural exports have also fallen sharply over the years, from 42 to 6 percent between 1960 and today. But this in and of itself is not a bad sign. In fact, it simply mirrors what has happened at the global level. In 1960, agriculture comprised about 50 percent of world trade; today that figure is about 6 percent. All this says is that the world, including Africa, has industrialised.

One of the principal findings in a recent publication by the Consumer Unity & Trust Society (CUTS) is that African agriculture has been shackled by: first, colonial patterns of trade that have locked Africa into commodity exports; and second, macroeconomic and trade policies aimed at import substitution and food self-sufficiency that have achieved the exact opposite of their goal. In taxing agriculture and shielding it from international competition, these policies made African agriculture less competitive.

The publication documents incredible infrastructural bottlenecks in Africa, which for trade in perishables is a very serious problem. It also points out the limited regional food trade that exists in Africa, sometimes because of a lack of product complementarity though also because of a simple lack of regional integration. Indeed I have often heard it lamented that in Africa a food-surplus and a food-deficit country located side by side can be unable to trade with one another. Another problem is shortages of agricultural inputs, many of which are imported. In fact, I know from first-hand experience that animal vaccines and improved seeds are often considered a luxury in Africa.

Another astonishing statistic from CUTS is that “about 80 percent of trade in agricultural produce and food in the East African region is informal and not statistically recorded”.

Stagnant agriculture, combined with a population growth rate higher than the world average, is obviously leading to food insecurity in Africa. In fact, expenditures on food there comprise a very high percentage of total expenditures and a far higher percentage than in the OECD. In Gabon, the figure is about 50 percent. Clearly, then, food security is also about food affordability. Greater competition and international trade helps bring down the price of food.

African agriculture has clearly passed through various phases: state control and import substitution in the 1960s, when Africa’s food deficit started building; then the structural adjustment era of the 1980s, marked by the gradual privatisation of state-owned farms; and then the dismantling of marketing boards for key commodities. Nonetheless, Africa’s food deficit has persisted. What preoccupies me the most, however, is that its agricultural productivity continues to languish.

The CUTS study sets out a very important menu of recommendations for our consideration: increasing agricultural productivity, promoting regional trade, “facilitating” trade through better infrastructure, and educating and building the capacities of farmers and traders. But this menu also includes the rapid conclusion of the Doha Round of trade negotiations, which is considered a priority.

Contrary to what some have been saying about international trade somehow being responsible for the plight of African agriculture, this publication, as well as several others, demonstrates that import-substitution policies and a lack of investment in agriculture have been the principal culprits.

In my view, here is how the Doha Round can make a modest contribution to helping boost African agriculture. It will give least-developed countries duty-free, quota-free access to export markets. It will deal with the colonial patterns of trade by reducing the phenomenon of tariff escalation: for example, the high tariffs imposed on processed coffee and chocolate relative to coffee and cocoa powder. The Round will also reduce the subsidies in the rich world that have made it difficult for Africa to compete in international markets and have flooded its markets with cheap imports. The world needs cheaper food, but food that is produced under conditions of fair competition. In short, the Doha Round will help level the playing field for Africa, correcting historical injustices in the world trade rule-book.