Free trade between the U.S. and EU could change the dynamic of value chains in Africa
June 24, 2013 Editor 0
A free trade agreement between the U.S. and EU could provide a much needed economic boost, but not for banana farmers in Ghana.
President Barack Obama stated during his 2013 State of the Union address that negotiating a free trade agreement between the United States and the European Union was a high priority during his second term in office. This agreement, known as the Transatlantic Trade and Investment Partnership (TTIP), would effectively abolish trade tariffs between member nations and allow access to markets that were previously closed.
The potential economic boon associated with TTIP (up to 1.5 percent GDP growth) could provide a much needed boost to the reeling economies of the U.S. and the EU, but the ramifications of such an accord might adversely affect the burgeoning economies of some sub-Saharan African nations. For example, Ghanaian banana farmers could find themselves excluded from gaining access to trade opportunities with the U.S. and EU under the new agreement, despite producing their product at a competitive level.
A New York Times article in May contended that one of the pitfalls of TTIP was the disharmonious nature of the policies that the U.S. and EU currently have regarding trade with sub-Saharan African nations:
“It is difficult to justify a North Atlantic trade deal in which the participants have differing rules for developing countries. What foreign policy interest is served, for example, if the E.U. and the U.S. provide different access to Kenya’s products? All relatively poor sub-Saharan countries should benefit equally.”
Both the U.S., with its African Growth and Opportunity Act (AGOA) and the EU, with its Everything But Arms (EBA) program, offer trade preference schemes for developing African nations, but they differ in scope. For instance, under the more restrictive AGOA program, banana farmers in Ghana are excluded from participating in U.S. markets, but are free to engage in trade with the EU because the EBA has no product restrictions.
The Times article continued:
“The scheme should cover all products, since excluding just a few could encompass most products that these countries can produce competitively. Rules of origin need to be relevant, simple and flexible for beneficiaries to be able to use the schemes and benefit from the growth of value chains.”
“Such value chains have virtually bypassed the region so far, but they hold considerable potential for less-developed African countries. It is much easier for these countries to develop capabilities in a narrow range of tasks than in integrated production of entire products or processes.”
With stalled negotiations at the World Trade Organization’s Doha Round, which focused on improving trading prospects with developing nations, the emergence of TTIP would be another opportunity to open up markets in Africa, rather than diverting its trade potential elsewhere. This could be a mutually beneficial agreement for all of the countries involved because of the enormous wealth potential within sub-Saharan Africa.
Hopefully, as TTIP negotiations between the U.S. and EU continue, trading policies with sub-Saharan Africa are streamlined so farmers, like those in Ghana, can reap the rewards of trade and share their produce competitively.A woman selling bananas at market. Sean Sheridan for Mercy
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