What a way to go!
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CTA. 2001. What a way to go!. Spore 94. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/46219
Internet URL: http://spore.cta.int/images/stories/pdf/old/spore94.pdf
Is regional trade really the stepping stone that many publicly claim it is for integrating a developing economy into the world market? Or is it a blessed alternative, as many southern politicians, rather more privately, actually believe? Some say...
Is regional trade really the stepping stone that many publicly claim it is for integrating a developing economy into the world market? Or is it a blessed alternative, as many southern politicians, rather more privately, actually believe? Some say that, as far as agriculture is concerned, it doesn t matter. Really? Selling to your neighbour has always been a good way to start a business, and buying in supplies from your neighbour a fine way to continue it. For decades, macro-economic theory has held that regional trade is a sound base from which to propel an economy into the world. As the article in Spore 93 about regional trade in the Indian Ocean explained, the different parties in a regional trade agreement can learn and grow strong together before taking on the world. In a touching sort of way, there is the implicit comfort that, if all else fails, at least we have each other. In life as in economics, however, you have neighbours and you have neighbours, and with some it may be that you have little more to share than your proximity. In terms of national economies, this can well be the case: the principal products of one country may have a better market elsewhere outside the region, or the lines of communication and transport may connect more satisfactorily outside the region than within it. There will, nonetheless, almost always be some advantages to developing the regional market. The principal one is that of economies of scale: by having access to more consumers than there are in the national market, the sales outlets for processed foods or manufactured goods become more viable. The point is, for those looking at regional trade from an agricultural perspective, that economies of scale only really become interesting with products that have had a lot of value added through processing. These may sometimes be extensively processed foods, but more usually they will be manufactured and semi-manufactured industrial items. The small agricultural base The economies of most ACP countries are primarily agricultural only in the sense of the number of people involved. When we say that many ACP countries earn much of their living from the ground under their feet, it is not necessarily the top soil that we are talking about. Much of the time, for many national exchequers, agriculture takes second place to mining and the extraction of mineral wealth, in the form of precious ores and metals, and fossil fuels. In some, it even takes third place, behind the manufacturing sector. Of course, there are perhaps two dozen ACP States, notably in central Africa and the Caribbean and Pacific, where agriculture is also the major export earner, and the difficulties in expanding trade on that basis are well chronicled. Overall, the trade of the African continent is dominated by mining products and manufacture, and their sales are principally outside Africa. In 1999, according to the World Trade Organisation, Africa exported goods of all sorts for a total of t 132 billion, half of which went to western Europe. Almost half of these overall exports, worth t 63 billion, were in the form of mining products, including petroleum. They therefore include the oil and other mineral revenues of the North Africa States, and Nigeria, Angola, Gabon and other sub-Saharan African producers. In second place were manufactured products, to the tune of t 40 billion. Of these, more than t 6.5 billion were sold to other African countries. Agriculture accounts for exports valued at t 26 billion, most of them headed for Europe and Asia. Trade in food and other agricultural raw materials to other African countries was valued at t 3 billion. Of this, a significant share is explained by agricultural and allied food exports of the relative powerhouse of the South African economy which, in addition to its almost ubiquitous presence in sub-Saharan African breweries, now sells vast quantities of semi-processed and processed foods throughout the continent. In sum, a mere 2.3% of all African exports in 1999 were agricultural exports to other African countries. That, in the cold light of statistics (which of necessity ignore any unrecorded transborder trading) is the figure on which to base future strategies for developing the agricultural component of regional trade. It is all the more surprising given the diverse and sometimes complementary agreements which have been established to promote regional trade (see box). However modest it may, the figure takes on added importance with the fact that the value of agricultural exports to outside the continent has dropped annually by several percentage points since 1996. Between 1998 and 1999 alone, the total export earnings from agricultural goods to western Europe fell by 13%. Within Africa however, the same earnings rose by 6%. Trade thrust not enough Hope there may be that the quality and quantity of regional agricultural trade can grow, but such are the uncertainties that it is fair to ponder whether the favoured sequence of local regional global is a realistic one for all regions. One argument in favour of the staggered approach is that regional trade agreements help in the process of liberalising trade and the local economy, by gently and gradually exposing producers to competition before the harsher wind of globalisation blows in. In reality, that argument has not always worked. According to Christopher Stevens of the Institute of Development Studies at Sussex University in the UK, trade liberalisation has been a 'minor factor in propelling successful regional trade agreements (RTAs), which may be stimulated primarily by political or strategic considerations (as with the EU s eastward enlargement). By the same token, in the absence of non-trade imperatives RTA initiatives may prove harder, not easier, to implement than multilateral ones. Sub-Saharan Africa has liberalised more under external pressure, as part of structural adjustment or in multilateral negotiations, than it has under its numerous overlapping RTAs.' The same does not apply, it must be pointed out, in other ACP regions. In the Pacific, and to an even greater extent in the Caribbean, with its dynamic Caricom, regional trade has succeeded in developing a wider market, in achieving the intended economies of scale, and in helping economies adjust to multilateral free trade. The woes of some sectors, such as the banana industry, in the context of globalisation have been mitigated to some extent by Caricom efforts to facilitate their transition to niche marketing or alternative production. Is the obvious preference of several ACP economies for regional trade, to ask the famous question, a building block or a stumbling block on the road into the world economy? Time, statistics and the balance of trade will tell. In terms of developing the manufacturing sector, the growth potential is clear. Some argue that it is this growth, with associated improvements in living standards, which will then pull agricultural trade along. In terms of enabling the required growth in the agricultural sector, perhaps more is needed. In a world where sometimes artificial borders such as regions are increasingly crossed not only by winds, birds and viruses but also by global trading opportunities and the attractions of electronic commerce, you need to stand on some rather firm ground to persist in that preference, and to protect it. Contact: International Trade Centre UNCTAD/WTO, ITC, Palais des Nations, 1211 Geneva 10, Switzerland Fax: +41 22 733 44 39 Email: email@example.com Website: www.intracen.org