Five years after Gleneagles, the G8's promises to complete an ambitious, balanced global trade deal by improving market access for the world’s poorest countries, reducing tradedistorting subsidies and increasing aid for trade appear to be mere rhetoric. G8 progress on these promises is scant and Africa continues to miss out on opportunities to achieve greater growth and development through trade and investment. Without substantial action by all WTO members to conclude an ambitious Doha Development Agenda (DDA) that puts development at its core, the gains made in trade over the past decade will be lost and the region’s efforts to achieve the MDGs will be further undermined.
In lieu of progress through the DDA, developed countries should each agree to implement a set of rules and policies to improve the trade and investment climate in Africa, through significant progress on the reduction of agricultural subsidies in developed countries; an expansion of market access for goods from African countries, as well as improved preferential trade programmes that focus on simplification and harmonisation; a renewed financial commitment towards aid for trade; and support for developing countries to improve their investment climate to leverage foreign and domestic private investment. In order for the G8 to live up to their commitments at Gleneagles and subsequent summits, they must accelerate progress in the following areas:
- Trade flows with African countries have slowed dramatically. To reach previous levels of annual growth that were nearing 7%, trade flows must be resumed and all developed countries must avoid adopting protectionist measures.
- Preferential trade programmes help to integrate poor countries into the global market, but could be much more effective. To improve preference programmes, donors must expand them to all African countries, cover all products (especially in the agriculture and textile sectors) and make efforts to ensure that they are permanent and predictable, with simplified and harmonised eligibility rules that make it easier for African exporters to sell their products into all developed countries.
- Expanding preferential access to all LDCs will hurt African market shares once they have to compete with stronger exporters. Safeguards including more meaningful aid for trade, prioritisation of infrastructure and trade facilitation should be implemented to prevent preference erosion for African LDCs and to improve Africa’s long-term competitiveness.
- Trade-distorting subsidies prevent African countries from maximising the gains from trade, particularly in sectors in which they maintain a competitive advantage. The G8 must prioritise the elimination of these subsidies on crops that Africa produces, such as cotton, rice and sugar, with or without a conclusion to the DDA. The G8 must also eliminate all export subsidies by 2013 and, through the upcoming EU budget debate, reduce overall CAP subsidies and redirect spending into growth, development and carbon-mitigating investments that do not compete with African exports.
Aid for trade and infrastructure
- Aid for trade financing is essential to increasing Africa’s ability to trade. G8 leaders must substantially increase the G8 aid for trade pledge so that annual aid for trade reaches at least the estimated requirement of $25 billion for Africa’s infrastructure needs. Additional financing will be required to fund other aid for trade needs, such as technical assistance and capacity-building for developing communications systems and modernising customs and tax systems. Aid for trade should also be directed to facilitate economic integration and to promote regional trade in Africa.
- Aid for trade should also be directed to facilitate economic integration and to promote regional trade in Africa by fully financing and utilising African-led institutions such as the African Development Bank Group, through both a full replenishment for the ADF and a 200% capital increase for the AfDB.
- Creating a more conducive climate for investment is not only a G8 promise, but a necessary foundation for improving trade and growth on the continent. Investment flows in infrastructure and regional integration must be increased to at least their 2008 levels and must leverage additional finance from private investors. As regional integration is key to Africa’s growth, more attention and investment should be directed towards African-led initiatives such as the development corridors and the AU/NEPAD Climate Investment Facility.