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A2 Macroeconomics / International Economy
Globalisation - Africa
Globalisation and the marginalisation of African Countries
The African continent remains by and large marginalized in the world economy, with over half of the population living under US$1 a day per person. If the major Millennium Development Goal of reducing poverty by half by the year 2015 is to be achieved in Africa, a major policy shift is required, both at the national and international levels, to help boost growth and development in Africa.
Some regions and countries have struggled to make any sustained progress in using trade as an instrument for long term growth and development. Africa, for example, experienced marginal economic growth during the 1990s leading to an ever-widening gap between living standards in Africa and the rest of the world. Its share of world trade continued to fall, from only 2.7 per cent in 1990 to 2.1 per cent in 2000, and critics argue that the global trading system continues to discriminate against the world's poorest countries.
They argue that high-income countries continue to protect their agricultural industries against imports from low-income economies, pointing in particular to the inequities created by the European Union Common Agricultural Policy whereas developing countries' markets have been liberalised opening them up to exports from the developed world. Developed nations spent £154bn on agricultural support in 2005 according to the Organisation for Economic Cooperation and Development (OECD). In fact Average tariff levels on agricultural products coming into developed countries are far higher than those set for industrial products.
Inequities in the global trading system
In a recent report on Global Poverty and Fair Trade, Oxfam argued that "global trade has the potential to act as a ‘powerful motor for the reduction of poverty, as well as for economic growth, but that potential is being lost’. The problem according to Oxfam is not that international trade is inherently opposed to the needs and interests of the poor, but that the rules that govern it are rigged in favour of the rich. Barriers to imports in the advanced countries are, argues Oxfam, ‘biased against the exports of developing countries at a cost to the latter of $100bn (or nearly £70bn) a year. The Make Poverty History campaign also focuses on some of the barriers to fair trade that holds back the growth and development of many of the world’s poorest countries.
Many development economists claim that the current asymmetry of international trade barriers is actually biased against high-income countries. Tariffs on industrial products set by high-income countries average 3% whereas poor countries' tariffs average 13%.
Dependence on Primary Exports
The least developed countries have a greater dependence on exports of primary commodities despite attempts at import substitution. For many of the poorest African countries, primary exports account for over 90% of total exports
For many developing countries, free market access to the high income and high spending markets of developed countries remains the single most important objective in trade negotiations with other countries. Domestic markets for lower income nations can often be small-scale – so producers have little chance of achieving important economies of scale that would reduce their average costs and allow them to generate a higher rate of profit from their production. This, added to the fact that foreign markets in developed countries are often protected by high tariffs, means that industries and firms based in developing economies will find it difficult to become competitive in the international market.
Export subsidies promote cotton dumping
That said it is often the case that tariffs on trade between developing countries are in fact much higher than between developing and developed nations. There is much to do to bring tariff rates down and to gradually erode the wide range of non-tariff barriers that exist all of which distort the nature of free trade based on the principle of comparative advantage.
|Author: Geoff Riley, Eton College, September 2006|
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