What Free Trade Is Doing to Africa!

shutterstock_118101748_2_1

New African

June 2010

So often we are told that the free market is the path to economic prosperity. All an impoverished nation needs to do is privatize, deregulate, reduce the size and role of government, cut tariff protections and open its economy to foreign investors, and it too can become a developed model economy. This gospel is preached by the U.S. and Western European nations and enforced through international financial institutions such as the International Monetary Fund (IMF), World Bank and World Trade Organization (WTO). The neoliberal economic model, it is claimed, is beneficial for all nations and in all circumstances. But is it true? These assertions never acknowledge the actual experience of developing nations that implement these policies. To do so would dispel such notions. The effect of free trade on agricultural development in Sub-Saharan Africa provides a characteristic example.

Ghana faithfully enacted structural adjustment programs in accordance with agreements it had signed with the IMF and World Bank. Subsidies to farmers were ended and the state-run seed company was closed down. The removal of subsidies caused the price of fertilizer to sky-rocket, with a predictable fall in consumption and its consequent effect on agricultural production levels. State-provided tractor services and land clearing operations were halted. Government programs that actively supported farmers were ended, and loans by commercial banks to agricultural producers nearly dried up. Import tariffs were dramatically reduced and in many cases eliminated altogether. This led to a flood of cheap imports from abroad. Domestic smallholders were compelled to compete with imports from subsidized large-scale Western agribusinesses.

In the U.S., Western Europe and Japan, many billions of dollars are provided to rice growers each year, allowing them to set an export price at well below the cost of production. Local growers in Sub-Saharan Africa simply cannot compete on equal terms, especially as they must manage without subsidies due to IMF/World Bank strictures. Such “free market competition” has brought only hardship to Ghanaian farmers. Surveys in 2002 and 2004 found that two thirds of rice growers in Ghana operated at a loss. “Why are we suffering?” a Ghanaian farmer asked. “Maybe the international lenders want us to be totally dependent on them.”

Heavily subsidized tomato paste imports from the U.S. and Western Europe into Ghana increased by more than five times in the decade ending in 2002. The wholesale closing of domestic tomato processing plants and storage facilities resulted, hampering prospects of success for growers. On top of that, many plants were forced to shut down due to IMF-imposed structural adjustment plans. Offered for privatization, these plants in many cases found no buyers, and thus had to cease operations in accordance with neoliberal principles. One farmer commented on the local cannery in his area, which had “made things easier for us.” But now it had closed. As a state-run firm, it was no longer allowed to operate without a buyer. “Selling our tomatoes is a game of chance,” he said. “It’s heartbreaking to stand here and watch the fruit go rotten.” Not surprisingly, given such factors, imports now account for 90 percent of the tomato paste sold in Ghana.

Poultry imports into Ghana have increased so much that many domestic farms are having to slaughter thousands of chickens a week due to market glut. Hatcheries are operating at under half of their capacity. In Senegal, poultry imports over the six year period ending in 2002 increased by a factor of 33 times, causing 40 percent of poultry farmers to go out of business. Under terms of World Trade Organization agreements, Ghana is permitted to raise the tariff on poultry to as high as 99 percent. But when the nation actually attempted to raise its tariff from 20 to 45 percent, the IMF threatened to halt future loan disbursements and the tariff increase was never put into effect.

Kenneth Quartey, owner of one of the largest poultry farms in Ghana, has had to slash operations and reduce staff due to competition from imports. “What you’re breeding is a culture of dependency,” he pointed out.

Liberalization has also had a devastating effect on the fishing industry in Ghana. European commercial fishing vessels operate on a large-scale level of production, and are able to sell their produce at much lower prices than local fisherman can manage. Furthermore, with their deep drafts and large nets, these commercial fishing vessels often inadvertently drag along the nets and traps used by local fisherman, wiping out their production. With declining income and growing debt, many domestic fisherman have been forced to abandon fishing altogether.

In Cameroon, a threefold increase in poultry imports over a five year period reduced local production and led to the loss of over 100,000 rural jobs every year. It took only five years to drive 92 percent of poultry farmers out of business. In Mozambique, vegetable oil imports now account for 81 percent of the total market, while most oil-crushing operations have closed. And in Senegal, import levels of tomato paste increased by a factor of 15 times, leading to a halving of local production. Throughout Sub-Saharan Africa similar patterns are developing.

Economic restructuring in Côte d’Ivoire transformed agriculture. By the turn of the century, the ten rice mills that had been built by the state-owned rice company were privatized. Two years later, not one remained in business. Inevitably, the privatization drive closed down the rice company. Also eliminated were fertilizer subsidies for rice growers, state-owned seed farms and price supports for locally-produced rice. In their place there was only the removal of restrictions on imports.

Aid is regarded among the Western public as an act of selfless beneficence. Yet aid almost always comes with strings attached, in ways that align with neoliberal goals. The U.S. Millennium Challenge Account is helping to fund agricultural modernization in Ghana for selected crops, none of which compete with U.S. exports. Rice is specifically excluded from the grant. Furthermore, for a nation to receive money from the account it must rank high in so-called “economic freedom.” That is, it must demonstrate that it is implementing neoliberal policies and opening its economy to Western corporate interests.

The provision of food aid offers an opportunity for ideological and commercial penetration. The U.S. Department of Agriculture (USDA) is rather blunt about its objectives when it comes to food aid. Although it is generally cheaper, quicker and more efficient to send money to a recipient nation for the purchase of regionally produced food, the U.S. will only provide direct shipments of its own food. Among the various food aid programs, the USDA reports, Public Law 480 “seeks to expand foreign markets for U.S. agricultural products, combat hunger and encourage economic development in developing countries.” Note which goal is listed first. Recipient nations under the Title I option of the program are required to “have the potential to become commercial markets for U.S. agricultural commodities.” The U.S. Food for Progress Program provides “for the donation or credit sale of U.S. commodities” in order to “support democracy and an expansion of private enterprise.” Under this program, food is given to “private voluntary organizations to introduce elements of free enterprise into the countries’ agricultural economies.” USDA reports proudly that the program has never funded recipient nations to purchase food from regional sources. All of the food aid programs and agricultural trade programs “are designed to develop and expand commercial outlets for U.S. commodities in world markets.” Aid is provided where it can advance the interests of U.S. agribusiness. Humanitarian concerns play a secondary role, when they factor at all.

The African Growth and Opportunities Act (AGOA) was initially designed to primarily benefit U. S. textile producers wanting to take advantage of cheap labor in Sub-Saharan Africa. The act offers the prospect of expanded trade with African countries the U.S. designates as having “market-based economies” that have eliminated “barriers to U.S. trade and investment.” As it has turned out, petroleum exports from Nigeria and Angola to the U.S. predominate, accounting for 85 percent of exports under AGOA.

U.S. technical assistance under AGOA is provided only to those nations that meet certain conditions. They must liberalize trade, harmonize their laws and regulations with the World Trade Organization, carry out financial restructuring, and promote increased agribusiness “linkages.”

Efforts are unceasing to further expose the African market to Western penetration. In 2007, African nations were obliged by the World Trade Organization to open 80 percent of their markets to European imports. The World Bank’s International Finance Corporation actively works to promote the easing of restrictions on imports from Western nations and for what it terms “improving the business environment.” Improvement, it goes without saying, in the eyes of Western investors.

The U.S. Agency for International Development (USAID) launched the African Global Competitiveness Initiative in 2006. This program seeks ways to remove “barriers to investment” and to carry out “practical solutions” leading to “a more competitive environment for investment and trade.” Competition, as always, is on unequal terms. Protections are to be removed, and one of the key components of the initiative is recommending to African nations that they change “tariff and non-tariff barriers” and “regulatory requirements.” Political meddling goes hand in hand with these efforts. “Where change is slow,” USAID explains, “support to reform-oriented leaders – in both the public and private sectors – to press for change can help galvanize the needed internal political will.”

Another of USAID’s programs is Trade for African Development and Enterprise, which supports trade “reform” and “investment in and privatization of African enterprise.” Among its achievements, USAID “assisted the privatization of the seed industry” in Ghana, an action that had harsh results for domestic farmers. USAID also initiated the South African Agriculture Financial Restructuring and Privatization Program (SARPP), which extended privatization efforts to include “restructuring of agricultural assets and enterprises” in South Africa. The SARPP approach to land reform is the “willing buyer/willing seller” model, which has quite effectively stalled any meaningful progress.

Agriculture is of primary importance to the economies of Sub-Saharan Africa. Free trade and free market policies have brought only hardship. “Interestingly, in the countries where they subsidize, only about five percent of the population are farmers,” comments the National Union of Cotton Farmers of Burkina Faso. “Here, farmers represent some 80 percent of a population that is becoming increasingly impoverished on land that is itself becoming poorer, without the least help from the state.”

Christian Aid calculates that over the past two decades, Sub-Saharan Africa has lost $272 billion from the effects of trade liberalization. That money did not vanish. It is being transferred to wealthy corporate pockets in the developed nations. It is worth noting that none of the developed nations achieved their economic status through free trade policies. Protectionist measures were essential for development. And nations such as South Korea that managed to successfully leap from third world conditions to developed economies did so through policies that ran counter to free market principles. The free market mantra, as spouted by the West, is self-serving. It is only Western corporate interests that gain from neoliberal orthodoxies, which bring only privation to the many. What is needed is fair trade, not free trade.