Africa And World Trade

Concerns are being expressed over Africa’s share of global trade, with experts proffering the way out.


Experts have been expressing concern over Africa’s overall contributions to the global trade. While the continent’s trade in goods and services has gradually risen from 2005 to 2019, its global share has remained consistent at just 3% of global imports and exports. Reasons for this are not farfetched. Most importantly, the continent’s exports remain basically raw materials, without much progress in producing finished products which have greater demands on world trade. Although global trade has fluctuated over the years, it has also rapidly increased. However, the structure and pattern of trade vary significantly by products and regions. Undoubtedly, trade has come with both benefits and daunting challenges to countries involved, especially among African nations, where primary and intermediate merchandise form a substantial share of exports. Because advanced and newly industrialized economies like China, Brazil, Taiwan, and India have better technology and know-how, manufacturing industries, access to finance, and market than Africa, they therefore have a greater market proportion in the world trade. African countries have therefore, been left in the cold as they struggle to compete with the advanced economies. Sadly the continent has been struggling to be relevant in the world market. Worse still, its global share of merchandise trade has reduced over the decades. This is partly because the continent has concentrated on the exportation of few primary commodities, like mineral fuels, iron ores, gold, cocoa beans, with volatile prices and demand in the global markets. The frequent world oil crunch and other raw products are no doubt a wake-up call for a rapid industrialization and diversification for competitiveness for Africa. The World Trade Organization (WTO) has a role to play in this regard, as it is to ensure that defensive trade remedies should not be the next frontier of protectionism.

For trade, growth, and development to be stimulated, African countries should urgently open their markets to expand intra-African trade. The movement of goods, services, finance, and human resources across national borders has been driving socioeconomic and political globalization, especially in the past six decades and the continent must look for ways to take advantage of these. Experts also opine that for Africa to make desired impact, it has become imperative for nations to trade by exporting products that they have a comparative or competitive production factor and importing products that are scarce domestically. This partly explains why African countries largely export primary commodities and import processed or manufactured goods. On the other hand, modern trade theories stressed that there are many gains from trade that are heavily determined by imperfect competition, increasing economies of scale, technological advancement, tastes, and the levels of per capita income in countries.

For Africa to make desire impact in world trade, therefore, it must make progress on the mentioned indexes, especially in technological advancement. Thus, they have some arguments in favour of cross border trade: as trade brings a wide variety of goods and services that spur choices of consumers in the countries involved. Likewise uneven distribution of natural resources and the climatic conditions across the globe have made trade inevitable, as it could either complement or supplement domestic production to the countries involved in such transactions.

Many leaders and experts are hopeful that concerted efforts will be made on increasing Africa’s share of the world trade with the coming of their own, Dr. Ngozi Okonjo-Iweala into the management of the World Trade Organisation (WTO). When on 15 February the chair of the World Trade Organization’s (WTO’s) General Council, Ambassador David Walker of New Zealand, announced that Dr. Ngozi Okonjo-Iweala, Nigeria’s former minister of Finance, would be the new Director-General, the mood among delegates was of relief. Dr. Okonjo-Iweala commanded overwhelming support from the start of the selection process in July 2020, but her historic elevation, as the first African and the first woman to become Director-General of the 26-year-old trade organization was by no means certain only a few weeks prior. According to her: “Without the recent swift action by the Biden-Harris administration to join the consensus of the membership on my candidacy,” the new Director-General said in her acceptance statement, delivered via video link, “we would not be here today.”

This plain statement of fact underlines the challenges she will likely face. It is also indicative of the paralyzing difficulties experienced by the world’s main trade arbiter in recent years, where key decisions are made by consensus among over 160 members. So, what can Africa gain from an African Director-General of the world’s premier trade organization? This question was never openly asked during the selection process, in part, because as well as being an African and a woman, Dr. Okonjo-Iweala’s qualifications, Harvard-educated economist, top World Bank official, longest-serving Finance Minister of Nigeria (Africa’s largest economy), and Foreign Minister, towered above her rivals. But the question will likely become a point of conversation during her tenure. Some will try to use it as a benchmark for evaluating her performance in office. Noteworthy is the fact that for the past 20 years, no round of trade negotiations at the WTO has been successful. The WTO’s dispute resolution mechanism, the Appellate Body, has been stymied, including through the blocking of all its new appointees by the previous United States administration. But there are important areas where the Director-General, with her political clout and proven leadership skills as a reformer, can lead “from behind… to achieve results,” as Dr. Okonjo-Iweala herself noted in her acceptance statement. In that statement, she highlighted as a top priority an inclusive and effective approach to COVID-19 vaccine distribution, which surely must include an agreement to suspend intellectual-property protection for vaccines and other vital drugs to enable their mass production and distribution in poor countries. This is known as the TRIPS Waiver proposal, an initiative of India and South Africa that now has more than 50 co-sponsors.

Dr. Okonjo-Iweala, as chair of the vaccine alliance Gavi and one of the African Union special envoys for the continent’s response to the COVID-19 pandemic, has been consistently passionate about this issue and has called for the rejection of “vaccine nationalism and protectionism.” There are other potent options for Africa. Experts are of the view that in post-pandemic recovery, Africa will focus on operationalizing the African Continental Free Trade Area (AfCFTA), which is expected to connect some 1.2 billion people across 55 countries with a combined GDP of $3.4 trillion. The trade pact will unify and amplify Africa’s voice in urging the WTO to create a vision that reflects the continent’s economic aspirations. The AfCFTA itself signals a preference for a rules-based multilateralism, which aligns with the WTO’s ideals. Therefore, Dr. Okonjo-Iweala should actively cheerlead for the AfCFTA and canvass for necessary technical support for its successful implementation. Perhaps more difficult but vital to African and other developing economies is improving market access for their agricultural products. This access is severely limited in part because of the huge distorting subsidies that wealthy nations provide their farmers.

There have been encouraging overtures from European countries and Australia to African diplomats to help mitigate this problem, but it will need the leadership of the WTO to give the initiative the momentum it needs. Dr. Okonjo-Iweala, who has stressed that trade must be centred on people and focused on economic development and reducing global inequities, is singularly positioned to lead this effort. Negotiations around fisheries, which have persisted for years at the WTO, are an equally urgent concern for Africa. To date, some members even refuse to agree on what constitutes ‘fish.’

But wealthier nations lavish subsidies on their fisheries sectors, leading to over-enhanced capacity, which enables their fishing boats to infringe upon the sovereign rights of poorer countries in Africa. African-caught fish, already limited as a result of such encroachment, stand little chance of gaining market access in wealthy countries. During her rounds of meetings in Geneva before her selection, Dr. Okonjo-Iweala advanced an important concept that was widely praised by African diplomats – trade finance. She boldly stated that providing financial and technical support particularly to least developed economies to export agricultural and fisheries products to richer countries can advance both trade and development. Negotiations on such support for the cotton sector within WTO have, like those relating to fisheries, generated positive statements of support but no real action yet. African members have recently raised the issue of a WTO Joint Action Plan to provide support for the development of cotton by-products in poor countries. This should be uncontroversial; it is certainly less contentious than intellectual property rights, for example. It merits urgent support.

Its realization, in addition to actions on agriculture and fisheries, will be the kind of incremental progress that will help reduce poverty and boost global trade. For many African countries, it will constitute the kind of reform that would make multilateral cooperation – and the great honour to the continent represented by the elevation of a highly distinguished African trailblazer.