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Old 07-10-2002, 11:06 AM   #1
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(07-10-2002) Africa Needs Free Trade, Not Aid - All Africa


Africa Needs Free Trade, Not Aid

The Nation (Nairobi)

July 10, 2002
Posted to the web July 10, 2002

James Shikwati

Twenty-two of the 26 states benefiting from the Highly Indebted Poor Countries (HIPC) initiative are in Africa.

Taxpayers in the developed nations also have to foot their bill in the form of foreign assistance either during disasters or in form of aid, which in most cases ends up in the pockets of top officials in Africa.

Parochial politics in poor countries also harm industries, as is the coffee sector in Kenya whose instability has been caused by political interference and international market manipulation.

In 1996 during the first food summit, world leaders pledged to reduce the number of starving people from 800 million to 400 million by 2015. But the situation seems to be getting worse.

Sub-Saharan Africa's share of world agricultural trade fell from 8 per cent in 1965 to 3 per cent in 1996. The continent's rampart has led to sympathisers holding protests against globalisation blaming it for the present plight of the poor.

Anti-globalisation crusaders

The wrath of anti-globalisation crusaders has focused previously on rich multinationals such as McDonalds and the Domino. It is estimated that McDonalds serves 20 million customers around the world every day, drawing more customers daily than the populations of Greece, Ireland and Switzerland.

The Dominos earned enough revenue to fund collective expenditures of Senegal, Uganda, Bolivia and Iceland in 1991 from $2.4 billion worth sale of pizzas. Toshiba had sales of $25 billion almost enough to fund Argentina's budget that year. These corporations employ millions of people worldwide churning out wealth to poor countries. Where will they get materials if African goods are closed out of western markets?

A keen analysis of the situation in Africa reveals two important points. That aid has helped little in reviving economies on the continent. Many aid recipients have been losing ground economically. Seventy countries are poorer than they were in 1980, 43 are worse off than they were in 1970.

The subsidies in both the United States and the European Union have indirectly affected Africa's capacity to trade. The anti-globalisation crusaders could help Africa more if they advocate for the promotion of free trade and abolition of subsidies in the west. The protective barriers in the developed countries should be removed to allow consumers to sample African products.

It is estimated that west and central Africa cotton exporters would take an additional $250 million a year if the US stopped subsidising domestic production. The Organisation for Economic Cooperation and Development (OECD) indicates that the damage US and European Union protectionism does to farmers in Africa in particular is in the range of billions of dollars. This is far much more than the aid dished out.

Better use for tax payers dollars

The tax payers dollars used to subsidise farmers could be released to other ventures both in the US and Europe and reduce the burden the third world countries put on the developed nations in the name of aid.

A writer recently observed that poor people are chronically averse to risk, an attitude that keeps them poor but alive. This could be one of the reasons the rock star Bono had in mind during his recent tour of Africa with US Treasury Secretary Paul O'Neill.

Bono said: "We are driving down the streets and people are waving, people are jumping up and down, they are glad to see the United States. If this country doesn't get help you come back in five years and they'll be throwing stones at the bus".

What Africa needs is open trade that will make her people prosperous. Trade will benefit the farmer and give incentives for more production; the African cannot be productive through aid.

Aid money or mere cancellation of debts will not haul Africa out of her predicament. The poor may fear risk because of the lulling effect of aid. If subsidies and corporate welfare in the developed nations were stopped, there will be a development miracle in the third world countries.

To empower the poor economically give them a chance to trade. This can be done through trade in commodities that are cheaper to produce in Africa due to its favourable weather conditions. Africa's exports have remained largely primary commodities with a bigger share being from the agricultural sector. Trade will provide incentives to improve this sector.

People who are economically stable will not be cheap to be bribed during elections and hence will elect the right leaders. Africa presently has a share of bad leadership because poverty has made it difficult for people to access information and many view books as a luxury.

Checking large-scale misery

This has led to a belief that if you want to hide something from an African, hide it in a book. If the continent has to develop it must have people who are well informed, and this cannot happen if people are poor. It cannot happen if all they get are either anti-globalisation moralists who don't explore causes of Africa's plight. It cannot happen when the world decides to incapacitate Africa through aid.

The wealthy nations may continue to supply aid funds with the hope of checking large-scale misery and to shut out desperate people keen on migrating to their countries, but this may not help if the situation in Africa does not improve.

President Yoweri Museveni of Uganda observed correctly that opening markets for African goods would lead to more local investment and an increase in the purchasing power of Africans. This will in turn create a market for both the US and European Union, create employment opportunities in Africa and reduce the number of migration to the developed nations in search of better standards of living.

Mr Shikwati is the director Inter Region Economic Network (IREN Kenya)
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