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BETTER MARKET ACCESS, DIVERSIFICATION NEEDED TO REVIVE AFRICAN TRADE

UNCTAD/PRESS/PR/2003/103
13 October 2003

"Given the difficult overall plight of Africa today, it is more important than ever to propose concrete ideas that can help African decision makers find solutions adapted to their particular problems", said UNCTAD Secretary-General Rubens Ricupero during a discussion yesterday on Africa´s trade performance. The debate was part of the annual meeting of UNCTAD´s Trade and Development Board (Geneva, 6-17 October). Three current issues, he said, deserved more attention, even though they were not on the multilateral negotiating agenda: the erosion of preferences, preferential arrangements and global commodities policy. These questions are frequently discussed within UNCTAD, particularly commodities, one of the areas covered by the organization´s mandate. They will also be in the forefront of debates at the eleventh United Nations Conference on Trade and Development (UNCTAD XI), to be held in Sao Paulo, Brazil, from 13 to 18 June 2004.

Kamran Kousari, Special Coordinator for Africa, introduced a condensed version of an UNCTAD study on Africa´s trade performance of the past 20 years (the full report will be released in December). He said that despite efforts by many African countries to liberalize their economies, the continent´s share in world trade had continued to decline. Africa relied on the export of a limited number of products whose prices were falling, resulting in worsening terms of trade. At $200 billion, terms-of-trade losses in commodities alone were equivalent to the total outstanding debt of sub-Saharan Africa; and incomes would have been about 50% higher today. The decline in commodity prices emanated principally from structural oversupply; a surplus of commodities produced in developed countries (including cotton, groundnuts, sugar and wheat), where agriculture is highly subsidized; increased productivity for tropical beverages such as coffee, cocoa and tea, due to technological advances and expansion of land use; and the entry of non-traditional producers. The winners are the 3% of the population in OECD countries who benefit from farm subsidies, and the multinationals in developed countries involved in commodity trade, processing and retailing. The losers: the millions of farmers in the South, the majority of whom in Africa live on less than a dollar a day, and whose livelihood depends on commodity production and exports. Addressing poverty reduction without addressing the sources of income of the poor would be an exercise in futility, Mr. Kousari said.

In a session held with the participation of invited experts, Michael Atingi-Ego, Director of the Research Department of the Bank of Uganda, said that the opening of domestic markets had not led to increased exports. Instead, imports had risen. Exchange rate fluctuation due to capital inflows and the price of the main commodity export had an impact on other exports. Careful management of capital flows and exchange rates was needed, given their significant impact on trade. Even though trade reforms generated both winners and losers they had not been successful in alleviating poverty. It was important to put in place complementary and compensatory policies that would mitigate the adverse consequences of the reforms. Uganda´s attempts to increase the incomes of the "losers" had come up against budgetary constraints. Both national and international efforts should facilitate market access and the lowering of tariffs.

T. Ademola Oyejide, Professor in the Department of Economics of the University of Ibadan, Nigeria, said that Africa´s problems were linked not to market openness, but to the factors of production. Improvements in the continent´s trade performance would require horizontal, vertical and spatial diversification (expansion into faster-growing markets). Africa had undergone a number of macroeconomic and sectoral reforms that had only reduced institutional capacities. It was essential, he said, to strengthen those capacities.

The most urgent challenge to the African cotton industry was to develop a constructive approach to the problem of distortions in cotton production and trade caused by government subsidies, warned Terry Townsend, Executive Director of the International Cotton Advisory Committee (ICAC) in Washington, D.C. Grown in over 80 countries, cotton production employed some 300 million people. Direct income and price support provided by the cotton industry in 2001/02 was $5.8 billion worldwide, equivalent to about one fourth the value of world cotton production; in 2002/03, the figure was $3.8 billion, according to ICAC estimates. US expenditures alone averaged $3 billion in 2001/02, and $2 billion in 2002/03. Without this government support, market prices would have been about 70% higher in 2001/02 and 15% higher in 2002/03. For sub-Saharan African producers alone, the losses in income linked to subsidies are estimated at $920 million in 2001/02 and $230 million in 2002/03.

Raphael Kaplinsky, Fellow at the Institute of Development Studies, University of Sussex, Brighton (UK), said the key to reviving Africa´s trade was innovation. It was essential to find more creative ways to develop African exports. The path to survival did not necessarily lie in developing labour-intensive industries. A similar deterioration in terms of trade could be observed in the manufacturing sector (see analysis in UNCTAD´s Trade and Development Report 2002). What was needed was a systematic approach to upgrading in the entire value chain.




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