chapter  9
14 Pages

Some Consequences of Trade Liberalization in Sub-saharan Africa

ByAfrica JOMO KWAME SUNDARAM

A basic premise of the influential Berg Report2 was that Africa’s supposed comparative advantage lay in agriculture. If only the state would stop “squeezing” agriculture through marketing boards and price distortions, the supply-side response to agricultural producers would drive export-led growth. But, contrary to popular assumptions, Africa is at a comparative disadvantage with agricultural exports, relative not only to the developed world, with its protected “green pastures,” heavy subsidies, and industrial farming, but also tomuch of Asia and Latin America as well. Subsequent changes in Africa’s exports indicate no significant increase in activities in which African countries ostensibly had comparative advantage. Indeed, after two decades of reforms, Africa’s share of global non-oil exports fell to less than half what it was in the early 1980s3 with the trend continuing over the last decade. As this chapter shows, Africa has experienced significant deindus-

trialization since the 1980s with the share of manufacturing in national output declining over the last three decades. In parallel, the continent has been transformed from a net food exporter into a net food importer over the last three decades. Instead, the recent improvements in growth have been largely associated with increased mineral and agricultural exports. Much of the recent increase in food production is for export to countries that have bought or leased land for production for their own food needs or for conversion to biofuels. High growth in large Asian economies, especially China, has probably

contributed most to the recent increase in primary commodity prices, especially for minerals, inducing strong supply responses frommany subSaharan African countries helped by foreign direct investments from these same big Asian developing countries. However, despite this upsurge, the African share of world exports still remains well below its earlier level. Moreover, the damaging consequences for sustainable development and food security have become apparent, and renewed attention

is now being given to the issue as food prices rose sharply from late 2007, and again more recently. Official development rhetoric continues to imply that small farmers

in Africa would benefit greatly if agriculture were liberalized under a comprehensive Doha trade agreement. However, this is unlikely. After all, many food importing African countries would be worse off in future decades without subsidized food imports while very few economies are likely to be in a position to significantly increase their output and exports in the short term. African agricultural production and export capacities have also been undermined by the last three decades of low investment, economic contraction, and neglect. Severe cuts in public spending under structural adjustment have

caused a significant deterioration of infrastructure (roads, water supply, and so on) and have undermined the potential supply response.4 Even World Bank estimates of the overall welfare effects from multilateral agricultural trade liberalization do not suggest significant gains for subSaharan Africa, but stress, on the contrary, the likelihood of losses.5 Gains from agricultural trade liberalization would largely accrue to existing major agricultural exporters, mainly from the Cairns Group,6 again of little benefit to most of sub-Saharan Africa. Agricultural trade liberalization has probably contributed to the

decline of African food production, undermining food security. With food production in most rich countries, especially in Europe, heavily subsidized, many African countries have turned to importing food from abroad, with local food producers unable to compete and survive in the face of lower food prices and higher costs of producing food without the benefit of subsidies.Meanwhile, with improved external market access for non-food agricultural commodities, food production has declined, with non-food agricultural commodities growing in significance. Not surprisingly then, sub-Saharan Africa is said to have been transformed from a net food exporter in the 1980s to a net food importer over the last decade (see Figures 9.1 and 9.2). Meanwhile, greater trade liberalization in manufactures with a Non-

Agricultural Market Access (NAMA) agreement would further undermine the potential for African industrialization. Not surprisingly then, much of the mainly import substituting manufacturing capacity developed in the early years after independence, mainly from the 1960s, has collapsed while very little new manufacturing capacity has developed in the continent. Consequently, manufacturing as a share of national output has declined significantly over the last three decades although industrial output has not fallen as much, mainly because of increased mining activities (see Table 9.1 and Figure 9.3).