ACRE - EUROPE'S FASTEST GROWING POLITICAL MOVEMENT

The Great Lakes Trade Summit - Reforming European trade with East Africa

27.06.2017.

On the 14th July, Kampala will play host to the Great Lakes Trade Summit, a gathering of politicians, businesses and pro-market advocates from Europe, East Africa, and beyond. The Summit will explore the vast opportunities for greater trade and investment with the region; and make the ethical case for free trade as a means of poverty alleviation, conflict resolution and social justice.

This conference is an initiative of the Alliance of Conservatives and Reformists in Europe (ACRE), who recognise that the European Union’s protectionist trade policies have often stunted the ability of third countries to add value. With Britain on the brink of regaining an independent trade policy and Europe recognizing the imperative need for reform, there is now a unique opportunity to erase unethical trading barriers and embrace free trade.

The agricultural and horticultural sectors account for a significant proportion of African exports. However, the EU’s protectionist Common Agricultural Policy acts as a serious barrier to African farmers seeking to export their produce into the European market, as well as creating artificially high food prices for European consumers. ERGA OMNES, the EU’s favoured nation tariff rate, enables African growers to export raw agricultural commodities, such as coffee beans, tea, cocoa and groundnuts tariff free, but imposes burdensome tariff barriers when it comes to refined, value added goods. For example, a country would face a 0% tariff when exporting unroasted coffee to the EU, but a 7.5% tariff if exporting roasted coffee. Similarly, cocoa beans are also subject to zero tariffs, however chocolate products accrue various export charges. The onus for the future must be on assessing the opportunities for domestic, value added processing and packaging of raw commodities grown in East Africa.

Imposing punitive tariffs on value added products holds back economic development in the origin countries, whilst monopolizing the benefits of value added trade in more developed European economies. African producers are restricted from adding value to their products and limited to largely low value exports. For example, in 2013 nearly 80% of Tanzanian and 66% of Ugandan exports were either raw materials or intermediate goods. In the case of Burundi, 83% of the countries exports are either raw materials or intermediate goods, while 68.1% of its imports are either consumer or capital goods. This form of EU protectionism is not just immoral; it is also bad economics. Ultimately, the EU has a vested interest in the growing prosperity of African economies, as this will lead to a higher demand for European exports. The removal of tariffs would see European consumers enjoying lower prices; African exporters enriched by the sale of higher value products and European exporters profiting from higher demand in African markets. The beauty of free trade is that everyone is a winner.

Furthermore, non-tariff barriers such as quotas, embargoes, sanctions, levies, and other restrictions have also been imposed to restrict trade in goods and services. Accordingly, the onus is increasingly on sweeping away non-tariff barriers, which prevent the free and frictionless exchange of goods and services. As Dr Mohammad Razzaque of the Commonwealth Secretariat has pointed out, ‘a major challenge for many Sub Saharan African (SSA) exporters is compliance with the high standards and regulations to access the EU market. There are concerns that some of these regulations are unnecessarily onerous and even protectionist, and should be reviewed’.[1] The Great Lakes Trade Summit will explore these criticisms and enable business leaders to set out a series of recommendations on how the EU’s trade stance with countries throughout the ACP can be reformed to boost trading links.

That being said, the EU has gone some way in encouraging free trade as a precursor to development. The Everything But Arms (EBA) initiative, launched in 2001, enables all exports from Least Developed Countries, except for armaments, to enter the EU market free from tariffs and quotas. All EAC countries, apart from Kenya (being a Middle-Income Country), have benefitted from this preferential system. Whilst this is clearly a desirable policy, the exclusion of Middle Income Economies such as Kenya means the benefits are restricted. The Great Lakes Trade Summit envisages a world in which all nations can enjoy the benefits of free trade.

Therefore, moving forward, the priority for the EAC must be the establishment of comprehensive free trade agreements with Europe.  Economic Partnership Agreements (EPAs) are trade and development treaties negotiated between the EU and countries in the African, Caribbean and Pacific regions (ACP). Despite protracted negotiations, the EPA between the EU and the EAC has not yet been ratified. Furthermore, there remain many barriers to trade under EPAs, particularly where it relates to agricultural products and food.  The protection and subisidies afforded by the Common Agricultural Policy create an artificial, unlevel playing field for encouraging value added exports of food and other agricultural products from regions such as Sub Saharan Africa. Consequently, significant progress is still to be made in designing a trade arrangement which delivers complete and reciprocal free trade. The UK, should it choose to leave the EU Customs Union, has a unique opportunity to lead the way on this front. The Commonwealth ties between the UK and members of the EAC provide a strong basis upon which to develop closer economic co-operation.

The Great Lakes Trade Summit seeks to reform the trading relationship which currently exists between Europe and East Africa. Dismantling trade barriers will enhance the prosperity of both continents and benefit those on the lowest incomes the most. In the current climate of growing protectionism, it is time once again to make the moral case for free trade and open markets.

 

For all information pertaining to the summit, including registration, see the website here: http://www.conservativesinternational.org/kampala2017

 

[1] Post Brexit UK Africa Trading Relationship: Can it be more Development friendly than EPAs? By Dr Mohammad Razzaque, in The Future of Africa UK Trade and Development Cooperation in the Transitional and Post Brexit Period, All Party Parliamentary Group on Africa & The Royal Commonwealth Society, February 2017.

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The ACRE is recognised and partially funded by the European Parliament. Sole liability rests with the author.and the European Parliament is not responsible for any use that may be made of the information contained therein.

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