EU-Africa trade: between a rock and a hard place?

The current EU-US negotiations should be a wake-up call for African governments to be proactive and limit the burden that a trade deal of this magnitude will unquestionably bring along. 

by Annie Mutamba

The 4th EU-Africa Summit has concluded with leaders expressing their commitment to “develop globally competitive industries that can succeed in today’s global markets”.

While the intercontinental trade regime is in sore need of reform, the summit failed to provide the political momentum to reinvigorate this relationship. Economic Partnership Agreements (EPAs), while not on the official agenda, unsurprisingly invited themselves onto the sidelines of the summit. It is now high time to consider the other side of the coin: a transatlantic free trade deal currently negotiated between the European Union and the United States could have wide-ranging impact on the overall African economy.

With peace, security and governance on the agenda of the EU-Africa Summit, there was no shortage of elephants in the room. The Summit declaration states “EPAs should be structured to ensure that trade expands and that it supports growth of intra-regional trade in Africa”. It is indeed a multifaceted issue, which deserves particular consideration in the current international framework.

The United States and the European Union recently concluded their fourth round of negotiations on the Transatlantic Trade and Investment Partnership (TTIP), an ambitious trade deal designed to reinforce ties between the two largest economies. If successful, the transatlantic bloc would become the largest integrated market in the world, with both sides already accounting for half of the world’s GDP and 30% of global trade. The partnership would undoubtedly boost US and EU firms’ ability to compete in other markets. Last but certainly not least, TTIP has the potential to set the global trade agenda for decades.

Clearly TTIP is not a mere addition to the current patchwork of international free trade agreements. EU’s main trading partners – and African countries in particular – have an interest in how these negotiations develop and in their ultimate outcome.

TTIP vs EPA vs coherence in the EU-Africa trade regime

In the context of bilateral free trade agreements, legitimate concerns are often raised regarding the impact on third parties: a high degree of economic integration generally goes hand in hand with significant trade diversion effects. Given its preferential access to EU markets, Africa should keep an eye out for TTIP’s long-term implications, as it would then have to compete with the world’s largest free trade zone in a marketplace of 800 million of the world’s richest consumers.

TTIP’s ramifications go far beyond the transatlantic region and, whatever the final scenario, the African economy will have to deal with the consequences. North and West Africa – which share the Atlantic with the USA and the EU - would be particularly affected, given their extensive trade relations with Europe. Furthermore the Ivory Coast and Guinea can expect detrimental effects as their exports into the EU are affected by the USA.  According to a study commissioned by the Bertelsmann Foundation, Sub-Saharan Africa – which currently accounts for 2% of global trade and clearly needs wider access to developed consumer markets – stands to lose ground in the transatlantic market.

A wake-up call for African leaders to manage the impact

African economies are changing fast and coming on strong but they are still exposed and sensitive to changes in global trading schemes.

Of course Africa will have no direct say in the TTIP negotiations. However substantial implications can be foreseen for the private sector, which has a fundamental role to play in Africa’s capacity to compete at the global level. For African business leaders with international ambitions, TTIP could come as an opportunity or a threat - either way ignoring the current talks can be costly in the long-term. By way of example it can be noted that new global trade rules might include ways to handle public enterprises, labor laws and energy subsidies in international trade.

The current EU-US negotiations should be a wake-up call for African governments to be proactive and limit the burden that a trade deal of this magnitude will unquestionably bring along. African countries are under pressure to sign comprehensive Economic Partnership Agreements (EPAs) covering intellectual property rights, sanitary and phytosanitary standards, public procurement, investment, and services – all areas revisited in TTIP.

A lot is at stake, including the added value of the Africa-EU partnership. African leaders are facing a challenge of priority setting with strong policy implications. Should they adopt a wait-and-see approach until they have a better understanding of how TTIP, if successful, will roll out in practice? Or take proactive steps to ensure that improved transatlantic ties do not come at their expense? The clock is ticking.  

On their way out of Brussels, African political leaders should not turn a blind eye to this major issue – it is set to become increasingly self-evident over time. And African economies definitely deserve a fair deal.

Annie Mutamba (@A_Mutamba) is Co-Founder of Meridia Partners

This is a guest post; views may not represent that of ECDPM

Photo Courtesy of Initiative Echte Soziale Marktwirtschaft