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TRADE-AFRICA: Russia “Could be Left Behind”

Kester Kenn Klomegah

MOSCOW, Sep 25 2009 (IPS) - Russia should reconsider its trade policy towards African states if it wants to keep up with the likes of China, the European Union (EU) and the U.S., say experts.

Authorities in Russia seem utterly unprepared for business deals such as the U.S.’s Africa Growth and Opportunity Act (AGOA). However, Russia is wary about China’s increasingly active role in almost every viable sector of Africa’s economy over the past few years.

Some foreign policy analysts have explained the issue of Russia opening its market for Africa as one of political motivation.

Bright Simons, Sino-African and Russian foreign policy researcher at the Accra-based Imani Centre for Education and Policy, a non-governmental think tank, told IPS in an interview that “Russia, unlike the U.S. and China, has production patterns that do not immediately encourage an expansion of trade between Russia and Africa, and African and Russian trade technocrats know this.”

He further explained “what’s more crucial is that the Russian private sector – unlike the Chinese, Brazilian, Indian and U.S. private sector – has failed to build the requisite networks in Africa. The necessary interests have thus not emerged to push for closer trade between Africa and Russia.”

Earlier this year, just before the Group of Eight (G8) summit in Italy which reconfirmed a collective “commitment to keep markets open and free and to reject protectionism of any kind”, Namibia’s President Hifikepunye Pohamba told visiting Russian leader Dmitry Medvedev in Windhoek to open Russia’s market for Namibian goods.

African leaders and private businesses have been looking for trade which ensures that more people benefit from the exchange of goods and services, as is the case with the introduction of AGOA.

As a first concrete step taken towards the realisation of the goal of improving trade between Africa and the U.S., the United States Agency for International Development (USAID) set up a West Africa Trade Hub in Accra where they provide technical assistance to people who want to export to the U.S..

Simons noted that AGOA itself has been less effective than was anticipated with regards helping African non-traditional exports gain access to U.S. markets. “The bulk of exports from Africa successfully entering the U.S. market continue to be primary products such as petroleum, though in a few categories, like textiles, a few African countries have managed to break this pattern.

“Given that Russia remains such a major producer of primary products itself, one wonders whether the motivation exists on either the Russian or African side to push for a wide-ranging, inter-regional, preferential trade treaty,” Simons concluded.

Dr Arndt Hopfmann, regional director for Africa at the Berlin-based Centre for International Dialogue and Cooperation, believes that under the current conditions of an international economic crisis, there is the tendency that some nations may resort to “selfish” approaches under the headline “buy local”.

“But one should not be fooled about the rhetoric. There are various forms of protectionism still in use, in particular by the G8 (Group of Eight). Unfortunately I have no clear picture whether Russia applies any special protectionist measure against trade with African countries,” Hopfmann told IPS in Moscow.

“But, given the fact that Russia itself exports most of the products that are also exported by African countries and imports goods that are not provided by them but by China, India and other G8 nations, I doubt that any kind of Russian AGOA would have any remarkable effect on African-Russian trade,” he added.

For example, Namibia has diamonds, uranium ore, beef, meat and fish. Many African countries export agricultural products. While Russian agricultural production in general has fallen during the last years, this doesn’t indicate that there is a shortage in supply, Hopfmann said.

In general, he explained, there is certainly a point in believing that collective bargaining would help African states to achieve more.

But a closer look at the current economic partnership agreements (EPA) negotiations between the EU and the African, Caribbean and Pacific countries shows that most African governments struggle to counterbalance the expertise of EU negotiators with African experts.

“They simply lack the skills and a precise and jointly supported definition of aim and objectives to successfully negotiate any common agreement – whether with Russia or anyone else,” Hopfmann claimed.

Economists suggested that Russia and African countries can agree on more equitable trade relations but only on certain terms.

“Fairer trade between developed and developing countries can only happen if developed countries assist producers in developing countries to achieve economic self-sufficiency. This should be based on transparency and dialogue to achieve greater equity,” Adrian Njau, a trade economist at the East African Business Council, told IPS from Arusha, Tanzania.

“Essentially, fairer trade should contribute to development by offering better trading conditions that seek to improve the lives of poor producers in developing countries. This will strengthen the participation of developing nations in international trade.”

Njau agreed that Russia is an economically significant country and therefore presents a good market opportunity for African products, but currently Russia seems to be more interested in Africa’s natural resources without a comprehensive preferential trade deal with Africa.

On the other hand, Africa is attracting a lot of interest from China, the U.S., and the EU. G8 countries will not force Russia to open up its markets to Africa but rather Russia will soon find it necessary to open up its markets in order to keep up with the rest of the global economy.

Many African countries, including Namibia, are not classified as least developed countries (LDC) and therefore do not qualify for the current preferential treatment enjoyed by LDCs.

Collective efforts on the part of the Africa Union (AU) or at sub-regional levels, such as the Southern African Development Community (SADC), present more solid bargaining power as opposed to isolated efforts from individual countries. Much focus is put into negotiating such polices and less on strategies to boost African exports, Njau suggested in conclusion.

According to conventional trade theory, trade provides an avenue through which surplus national production can be exchanged for products of other countries based on the principle of comparative advantage.

In an e-mail response to an IPS request for comments by Matfobhi Riba and Jennifer Kargbo, both officials at the United Nations’ Economic Commission for Africa (UNECA), it was pointed out that the trade structure of most African countries has barely changed in the aftermath of trade liberalisation.

First, the majority of African countries are still predominately non-fuel primary product exporters and vulnerable to volatile global commodity prices; and secondly, trade liberalisation has generally tended to stimulate imports more than it has exports, thereby worsening the balance of trade in many African countries.

Thirdly, African economies display very low levels of export diversification, with no discernible trend away from this situation. Rather, episodes of diversification have been sporadic and short-lasting.

Riba and Kargbo pointed out that African countries need to maintain a resolute focus on export diversification, enhancing supply capacities and migrating up the product value chain. In this context, regional integration offers opportunities to reap economies of scale and scope and attendant increases in productivity and competitiveness.

Regional integration also offers the possibility for African countries to negotiate more favourable conditions under trade preference schemes (i.e. conditions that reinforce development goals and initiatives) because their bargaining power will be enhanced by their operating as a regional economic bloc.

The AU secretariat is perhaps better placed to judge whether or not an intervention on their part would be warranted or even the optimal course of action.

“We can only hope that Russia stands by its commitments as a member of the G8. AGOA and similar initiatives are unilateral policies extended by nations to other nations,” Riba and Kargbo suggested.

“In as much as the focus is often primarily on the gains that the beneficiaries of such initiatives stand to acquire, it should be borne in mind that such arrangements are often also designed to deliver benefits to their sponsors.

“Consequently, one can expect that Russia’s willingness to adopt an AGOA-like initiative will depend primarily on the answer to the question: what does Africa have to offer Russia?” Riba and Kargbo asked rhetorically.

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