Agriculture liberalisation and economic integration in Africa

9 December 2011

Africa needs to accelerate regional economic integration to avoid the risks of agricultural (including food) ‘trade diversion’ and to reap the benefits of full or reciprocal liberalisation under multilateral and preferential trade agreements.  Although these agreements may improve market access and consumer welfare in least developed countries in Africa, they may also weaken these countries’ production sector and divert trade away from other developing countries, including their neighbors in the region. That is simply because tax-free imports from outside sources will be cheaper than the barrier-stricken imports from sources within the region.  So, the more trade barriers remain among countries within the region, the more trade risks being diverted away and revenue and employment potentially lost in the region. The losses could weaken the regional agricultural sector that could have been a more efficient supplier had the intra-regional barriers not existed.  A weak agricultural sector is no help for a continent struggling with high and costly food trade deficit and food insecurity and has to be avoided.

Agriculture liberalisation and economic integration: te challenges
Many initiatives to enhance regional integration have been taken but not followed through.  In 2008 for instance, African regional groupings planned to move beyond regional borders to a full African economic integration by announcing the ‘Africa Free Trade Zone’.  Each year, regional groups such as the Southern Africa Development Community (SADC) and the Eastern African Community (EAC) announce more commitments towards deeper integration.  Likewise, the Comprehensive African Agriculture Development Program (CAADP) has set as one of its goals the promotion of the regional integration that makes agricultural sector more competitive.   This year, the EAC, SADC and Common Market for East and Southern Africa (COMESA) have confirmed the tripartite agreement for a greater economic cooperation and towards economic integration.  The question is why all these commitments and the many more before them have not been followed through at a faster pace?
The main stumbling block towards agriculture liberalisation and economic integration is the fear of losing both the revenues from the duties that are still imposed on certain products and the flexibility to use trade policy as a tool to address socio-economic or political challenges (e.g. protecting consumers against high food prices, protecting infant industry).  Governments want to protect some ‘sensitive’ products, ‘sensitive’ meaning products of high tariff revenue or of great socio-economic or political importance.  The protection is also targeted against highly subsidised exports from developed countries.
But while justifiably defending the sensitive product argument against subsidised foreign exports, African countries have unfairly extended the same argument against intra-regional suppliers. Not long ago, for some agricultural products, regional partners faced much higher applied tariffs than outside suppliers did.  More importantly, many studies reported the high levels of non-tariff barriers within regions in Africa and cite examples of  ‘border red tapes’ such as the lengthy periods to receive trade approvals, strict licensing requirements for importers or exporters, and a high number of unnecessary controls and road blocks.  The question to be asked is whether or not all these intra-regional trade barriers have made the domestic agricultural sectors more competitive and solved food insecurity. Many analysts now agree that these barriers address neither issue.
The case for economic integration and regional policy
Theoretically, the mere threat of a competition with suppliers outside the region and the elimination of intra-regional barriers will encourage intra-regional agricultural sector to focus on competitiveness and release resources away from inefficient sub-sectors.  A vigorous regional agricultural sector will raise and keep employment and value-added within the region and improve access to food.  Regional savings from the increased income and more efficient allocation of resources will lead to regional investments that will enlarge capacity in, say, infrastructure or research and extension and enhance competitiveness further.  But, to practically achieve all of that, current policy strategies need some reconsideration.
To start with, the trade-off between consumer and producer welfare or between national and regional interests has its own rationale, but over the years it has led to agricultural policies that are inconsistent and often erratic and which suppress thereby incentive of domestic and regional producers.  For instance it was not unusual that during the food crisis in 2008, many African governments have reneged on their commitment to free export by banning it.   A clear priority on stakeholders’ welfare has to be established and once adopted the accompanying policies must stay the course.
The inconsistencies between national and regional policies are what the likes of CAADP are aiming to reduce.  True, interests among countries may differ a great deal but working on basic common goals such as regional food security and regional capacity building is a way forward.  An example is the Economic Community of West African States/Agricultural Policy (ECOWAP) program based on identifying and matching national policies with regional policy to promote  regional food security and  agriculture markets.
Moreover, the growing unregistered cross-border trade in agricultural products between neighboring countries in Africa proves the impracticality of the official intra-regional barriers, and highlights the need for deeper regional integration and effective regional policy.   Despite the barriers, herds of livestock, bags of paddy rice and sacks of maize still manage to cross national borders unrecorded.  Such trade contributes to welfare and income increases for consumers, producers, and traders alike.  At minimum, some, say, strict quality or sanitary controls should have been put on this cross-border trade to reduce the risks of a spread of animal or plant diseases, but such controls are better handled and coordinated at regional, rather than national, level because of the immensity of the task.
Conclusion
There is a consensus that deeper regional integration helps mitigate the risk and magnify the benefits of trade agreements.  Admittedly, under multilateral trade negotiations there are valid arguments for African countries to maintain some minimal protections, especially when developed countries continue to support their producers and exporters.  Nevertheless, the urgent step to take is to remove intra-regional trade barriers and trade distortions such as subsidies in order to open opportunities at the regional level to improve food security and enhance development capacity.  Ultimately, the position that trade barriers can be lowered for distant suppliers and not for the next door neighbor is untenable.
Author : Manitra A. Rakotoarisoa is an Economist, Trade and Markets Division at the Food and Agriculture Organisation

References

Morissey , Milner , Zgovu  (2010).  Designing Economic Partnership Agreements to Promote Intra-regional Trade in ACP countries.
Koroma  Mosoti , Mutai , Coulibaly , Iafrate  (2009). Towards an African Common Market for Agricultural Products.  . Lapodini (2009). Etude des Barrières Tarifaires à l’Echelle Regionale et l’Impact des Barrières Non Tarifaires sur le Commerce Intra et Extra Communautaire en Afrique de l’Ouest.
Ubwani Z  (2011).  East African Community’s Non-Tariff Barriers Faulted.

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