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AKST: Generation, Access, Adaptation, Adoption and Effectiveness | 71
imports (Yeats, 1998), though they have a comparative advantage in producing and exporting these commodities. Additional benefits are also likely to accrue from formalized existing informal trade in food and food products between countries that share common borders. The trade potential from processing and value addition
and in services from medical to education to ICT is
enormous. African economies that produce commodities
could benefit from moving up the value chain and process
foods they produce rather than export raw materials. For
example, Ghana, the world’s second largest cocoa grower,
has moved slowly into making chocolate; Ethiopia, which
has been growing coffee for a thousand years, still exports
raw, unprocessed beans. Rwanda, which has moved into
specialty coffee, exports less than 10% of its coffee fully
washed. This is despite the fact that these countries face
no European Union tariff on chocolate and on roasted and Factors that affect regional trade groupings and make them less competitive in SSA include lack of needed infrastructure, unfavorable geography and low GDP. Another factor that affects the competency of regional trade arrangements in SSA is the number of overlapping initiatives, such as in eastern and southern Africa. In SSA regional trade arrangements have (1) created incentives for removing restrictive trade practices and licensing procedures, (2) streamlined customs procedures and regulations, (3) integrated financial markets, (4) simplified transfers and payment procedures, and (5) harmonized taxation. Countries have gone even further, seeking to harmonize investment incentives, standards and technical regulations, as well as policies relating to transportation, infrastructure, labor and immigration. Regional economic integration may help prevent SSA from becoming more marginalized as a result of globalization and competition with trade and economic blocs in other parts of the world. Regional economic integration can improve the success with which SSA articulates its concerns and prevent international agreements that may disadvantage SSA. An assessment of the effect of economic communities on trade and growth in SSA shows that regional agreements are far from reaching their intended goal of integration (UNECA, 2005). Achieving the highest level of integration are SACU, UEMOA and EAC. The most successful regional integration has been where a relatively compact geographical neighborhood coincides with other essential elements such as colonial past, language and macroeconomic parameters like currency and customs union. Empowerment of regional economic corporations can improve the negotiating power of SSA and help meet the international sanitary and phytosanitary standards that will |
allow for more participation in international trade. Scientific
and technological advances can also be shared through
regional economic cooperation. There is no doubt that trade is an effective source of growth for SSA. However, it requires improved efficiency in the trading sectors. Distortions in WTO regulations and the SSA position as a supplier of raw materials have contributed to the low levels of economic growth. SSA farmers will face reduced competition if subsidies on exports from European and other developed countries are removed. Similarly, removing the taxes that most African governments impose on food production and consumption could stimulate farm investment and lower food prices (IAC, 2004). The US decision in May 2002 to increase its domestic agricultural subsidies by 67% will not enable SSA to increase agricultural exports. SSA countries tend to enjoy little leverage within the global economy. One view is that leverage can best be strengthened through regional cooperation. This is to be in parallel with globalization within the scope of WTO. The aftermath of decisions made in previous WTO meetings has disappointed African countries. Benefits of African, Caribbean and Pacific–European Union (ACP-EU) negotiations have been negligible. Although world market prices for some commodities have risen recently in general during the last two decades, the adoption of internal and international market liberalization polices and other associated agricultural sector policies promoted by international financial institutions has led to a catastrophic fall in the prices of many of the agricultural products exported, especially by East and Central African countries due to systemic overproduction stimulated by components of structural adjustment programs. The major flaw in this strategy was that similar advice was given to almost all tropical countries at the same time; for example, coffee-producing countries were encouraged to boost coffee production and sugar producers to produce more sugar; crops in which these countries had a comparative advantage. This resulted in overproduction of these commodities, which caused prices to plunge in the international markets and less income to be earned as more commodities were produced. East and Central Africa countries are highly dependent on the production of cash crop commodities for employment, economic growth and export revenue. Countries that produce and export raw commodities such as coffee, sugar, |
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