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World Trade Organization Director-General Optimistic Over Africa’s Trade Prospects

The Director-General of the World Trade Organization, Pascal Lamy, tells This is Africa why he is optimistic about Africa’s trade prospects, especially in agriculture, and calls for a new approach to global trade deals after Doha.

History has cast a long shadow over Africa’s trade performance, argues Pascal Lamy, director-general of the World Trade Organization. Colonial patterns of trade prevented colonized countries benefiting from their comparative advantage in low cost labour.  Africa’s trade profile has not changed much over the last half century – it remains dominated by fuel and minerals, and mostly flows along North-South channels rather than regionally.

Neither implies chronic poor performance. Fast-growing Brazil’s trade is also commodity-driven, and the rise of the BRICS suggests the predominance of North-South trade is not likely to be the prevailing model going forward. What matters for Africa’s share of global trade are the choices of today’s political and business elites.

Mr Lamy claims political energy is key. “Where there is more energy, there are more results,” he argues, describing the East African Community as “ahead of the curve” with leaders who – whilst not agreeing on all trade issues – share a common conviction that trade deepening is a regional priority. “If I take central Africa and ECOWAS, for the moment the political energy is in less quantity.”

Trade liberalization is a political hot potato, as domestic businesses fear being undercut by more efficient foreign producers. Mr Lamy believes businesses in Africa tend not to lobby for trade openness with the same intensity as those in Europe and the US, as well as Asia and Latin America. The reason, he argues, is that entrepreneurship is in a “pre-emergence” phase in Africa, and people running businesses have enormous day to day challenges meaning they “have other fish to fry” rather than shaping policy or producing research advocacy in favor of trade changes.

However, he points to the existence of a new generation of business leaders with a totally different mindset to the older generation of rent-seekers. Whilst younger business people do appear more economically liberal than their predecessors, the claim that business communities in the West are pro-openness could be contested. The agricultural lobby in the EU and US, for example, are among the most powerful pro-protectionist blocs anywhere.

Trade reform need not entail only confronting the politically difficult changes such as tariff levels or import restrictions. Much trade facilitation can be enabled by doing away with pointless and cumbersome bureaucracy.  Even so mundane a tweak as ensuring customs offices in neighboring countries are open during the same hours can improve process efficiency.  Good choices on regulations and standards can also engender real results. “Where has Brazil been most successful?” asks Mr Lamy. “It is in areas like poultry.  Does Brazil have a big comparative advantage in poultry? Not especially. The determinant factor was when they adopted proper sanitary and phytosanitary standards from the beginning. That is what has driven it. Africa can do that”.

At the World Economic Forum on Africa 2012 in Addis Ababa, Africa’s potential to become a major food exporter was frequently cited, with some delegates predicting this could happen within a decade. “I am convinced Africa will become a net food exporter,” Mr Lamy says. “First, Africa was a net food exporter 30 years ago. There are reasons why it has changed, including rapid growth of the population – because intake per head is what matters”. Today, changing dynamics in the global economy are working in Africa’s favor. “We know that for twenty years to come we have this structural imbalance between supply and demand. Demand is growing more rapidly than supply, mainly because of nutritional transition. Protein intake grows with your level of revenue and inevitably this creates more demand on protein output. And there are a number of reasons why supply only adjusts very very slowly. There is not much land available elsewhere as in Africa. So I am convinced it will happen”.  Mr Lamy adds that Africa’s domestic agricultural market is huge, and will probably provide the fastest growth.

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