Though the World Trade Organisation (WTO) has long held that trade between African countries is too low, experts at the South Centre, an inter-governmental think tank of developing countries, say intra-continental trade is already significant in manufactured goods and promises a new path to industrialisation.

Valentine Rugwabiza, deputy director-general of the WTO, says Africa needs to strengthen domestic markets and integrate into the world market Credit: World Trade Organisation

“Trade among African countries is very low. Last year, it stood at 10 percent of the continent’s overall trade,” Valentine Rugwabiza, deputy director general of the WTO, which seeks to reduce barriers and promote aid for trade, told IPS.

“Though Africa’s share in world trade is also very small – less than three percent in 2011 – it is growing very rapidly, particularly with emerging economies; while trade amongst African countries is stagnant.”

With a rigid division of labour inherited from the colonial era, Africa relies on a narrow range of exports and is over-dependent on primary products: in 2010, fuel extraction and mining represented 66 percent of its total merchandise exports.

According to Rugwabiza, lack of investment in infrastructure and non-tariff barriers of all kinds make trade between the 54 countries cumbersome.

“Whereas it takes 18 days to export products from Latin America and the Caribbean, it takes almost 33 days to do so from Africa,” she added, noting that it is also more expensive to ship a container from Africa than from any other part of the developing world.

For instance, shipping a container from South-east Asia costs 900 dollars, compared to 2,000 dollars from Africa; likewise, it costs 935 dollars to import a container from South-East Asia, and almost 2,500 dollars to do so from Africa. The Geneva-based South Centre, however, has a more optimistic view.

“In absolute terms, intra-African trade is low,” Aileen Kwa, trade policy officer with the South Centre, told IPS. “In terms of non-oil exports Africa’s internal trade is almost on par with its exports to the EU. Furthermore, the trade growth rate within Africa is the second highest after China and before the United States and the EU. Therefore, it is very promising, also in terms of the quality of exports.”

She explains that, with the exclusion of South Africa, only 10 percent of sub-Saharan Africa’s exports to the EU are in manufactured goods, a figure that rises to 27 percent for intra-regional trade.

“Most of Africa’s manufactured goods go to Africa. So if the continent wants to industrialise, the market that provides the best opportunities is Africa, not China, the U.S., or the EU.”

For Rugwabiza, however, the industrialisation of Africa will require not only strengthening of the domestic market, but also integration into the world market.

“Today, components of the same piece are produced in different countries all over the world. This is a huge chance for Africa to specialise in single tasks and insert itself into global value chains,” she told IPS.

“Some countries already do so, but they are still an exception. Mauritius, for example, produces pieces for H&M, (a major global clothing store). Since it has a reliable logistics and service sector, the multinational knows that it will receive the orders on time and, thanks to a stable and predictable legal environment, that there will be no unexpected regulations coming up,” she said.

Kwa notes that the picture is uneven: in some parts of Africa, intra-regional trade is larger than in others. The total exports of the East African Community (EAC) to sub-Saharan Africa already surpassed their total exports to the EU in 2000. Other countries like Zambia and Senegal also export more to Africa than to Europe.

Still, other regions display a bleaker outlook.

Rugwabiza belives that Africa, with its high dependence on trade with the outside world, is highly vulnerable to external shocks. This is particularly true of the agricultural sector, as the food crisis has shown.

“In 2008, Africa imported cereals for 15 billion dollars, with only five percent coming from the continent. Agricultural subsidies in developed countries, insufficient investment and low productivity in (domestic) agriculture and non-trade barriers (between African countries) are still a huge obstacle,” she added.

Shoprite (Pty) Ltd, for example, a South African multinational, spends 20,000 a week on securing import permits to distribute meat, milk and plant-based goods to its stores in Zambia alone. For all the countries it operates in, about 100 ‘single entry’ import permits are required each week, but this can increase to 300 per week during busy periods.

As a result of this legal red tape, there could be up to 1,600 documents accompanying each loaded Shoprite truck that crosses a Southern African Development Community (SADC) border.

But things can change. For example, the EAC has managed to substantially reduce the number of control points, while Uganda and Rwanda have set up a common border post that is now open 24 hours a day.

Kwa says that African countries’ over-dependence on imports from world markets, particularly in food, is mainly due to their loss of productive capacities.

She believes there needs to be some balancing between short-term and long-term goals. While in the short run countries must be able to import food quickly and as cheaply as possible to meet their immediate needs, they must, in the long term, produce their own food without relying on imports from developed countries that have an extremely unfair competitive advantage due to the latter’s massive government subsidies.

Relying on imports undercuts domestic producers and undermines their future capacity to produce. Therefore, countries may need to use tariffs and other trade policy tools to stop some of the imports, even from their neighbours, at least for some time.

“First countries have to increase their productive capacities and then trade will follow. The WTO always thinks about increasing trade, but the main question for Africa is how to increase its productive capacities. Then trade will naturally follow,” Kwa told IPS.

Moving the global economy off its current decline-and-collapse path depends on reaching four goals: stabilising climate, stabilising population, eradicating poverty, and restoring the economy’s natural support systems.

Lester Brown Credit: Courtesy of the Earth Policy Institute

These goals – comprising what the Earth Policy Institute calls ‘Plan B’ to save civilisation – are mutually dependent. All are essential to feeding the world’s people. It is unlikely that we can reach any one goal without reaching the others.

The key to restructuring the economy is to get the market to tell the truth through full-cost pricing. If the world is to move onto a sustainable path, we need economists who will calculate indirect costs and work with political leaders to incorporate them into market prices by restructuring taxes.

This will require help from other disciplines, including ecology, meteorology, agronomy, hydrology, and demography. Full-cost pricing that will create an honest market is essential to building an economy that can sustain civilisation and progress.

For energy specifically, full-cost pricing means putting a tax on carbon to reflect the full cost of burning fossil fuels and offsetting it with a reduction in the tax on income. Some 2,500 economists, including nine Nobel Prize winners in economics, have endorsed the concept of tax shifts.

Harvard economics professor and former chairman of George W. Bush’s Council of Economic Advisors N. Gregory Mankiw wrote in Fortune magazine: “Cutting income taxes while increasing gasoline taxes would lead to more rapid economic growth, less traffic congestion, safer roads, and reduced risk of global warming- all without jeopardizing long-term fiscal solvency. This may be the closest thing to a free lunch that economics has to offer.”

The failure of the market to reflect total costs can readily be seen with gasoline. The most detailed analysis available of gasoline’s indirect costs is by the International Center for Technology Assessment.

When added together, the many indirect costs to society – including climate change, oil industry tax breaks, military protection of the oil supply, oil industry subsidies, oil spills, and treatment of auto exhaust-related respiratory illnesses -total roughly 12 per dollars gallon. That is on top of the price paid at the pump. These are real costs. Someone bears them. If not us, our children.

If we can get the market to tell the truth, to have market prices that reflect the full cost of burning gasoline or coal, of deforestation, of overpumping aquifers, and of overfishing, then we can begin to create a rational economy.

If we can create an honest market, then market forces will rapidly restructure the world energy economy. Phasing in full-cost pricing will quickly reduce oil and coal use. Suddenly wind, solar, and geothermal will become much cheaper than climate-disrupting fossil fuels.

If we leave costs off the books, we risk bankruptcy. A decade ago, a phenomenally successful company named Enron was frequently on the covers of business magazines. It was, at one point, the seventh most valuable corporation in the United States.

But when some investors began raising questions, Enron’s books were audited by outside accountants. Their audit showed that Enron was bankrupt – worthless. Its stock that had been trading for over 90 dollars a share was suddenly trading for pennies.

Enron had devised some ingenious techniques for leaving costs off the books. We are doing exactly the same thing, but on a global scale. If we continue with this practice, we too will face bankruptcy.

Another major flaw in our market economy is that it neither recognises nor respects sustainable yield limits of natural systems. Consider, for example, the overpumping of aquifers. Once there is evidence that a water table is starting to fall, the first step should be to ban the drilling of new wells.

If the water table continues to fall, then water should be priced at a rate that will reduce its use and stabilise the aquifer. Otherwise, there is a “race to the bottom” as wells are drilled ever deeper. When the aquifer is depleted, the water-based food bubble will burst, reducing harvests and driving up food prices.

Or consider deforestation. Proper incentives, such as a stumpage tax for each tree cut, would automatically shift harvesting from clearcutting to selective cutting, taking only the mature trees and protecting the forests.

Not only do we distort reality when we omit costs associated with burning fossil fuels from their prices, but governments actually subsidise their use, distorting reality even further. Worldwide, subsidies that encourage the production and use of fossil fuels add up to roughly 500 billion dollars per year, compared with less than 70 billion dollars for renewable energy, including wind, solar, and biofuels.

Governments are shelling out nearly 1.4 billion dollars per day to further destabilise the earth’s climate.

Shifting subsidies to the development of climate-benign energy sources such as wind, solar, and geothermal power will help stabilise the earth’s climate. Moving subsidies from road construction to high- speed intercity rail construction could increase mobility, reduce travel costs, and lower carbon emissions.

We are economic decisionmakers, whether as corporate planners, government policymakers, investment bankers, or consumers. And we rely on the market for price signals to guide our behaviour. But if the market gives us bad information, we make bad decisions, and that is exactly what has been happening.

We are currently being blindsided by a faulty accounting system, one that will lead to bankruptcy. As Øystein Dahle, former vice president of Exxon for Norway and the North Sea, has observed: “Socialism collapsed because it did not allow the market to tell the economic truth. Capitalism may collapse because it does not allow the market to tell the ecological truth.”

*Adapted from World on the Edge by Lester R. Brown. Full book available online at www.earth-policy.org/books/wote.

The only green in biodiesel fuel is the money producers make from it, new research has revealed.

Greenpeace activists protest at a Neste refinery in Porvoo, Finland. Neste is set to become the world's largest consumer of palm oil. Credit: Greenpeace Finland/CC BY 2.0

Most biodiesel production is making climate change worse not better, studies show. Biodiesel from palm oil plantations may be the world’s dirtiest fuel – far worse than burning diesel made from oil when the entire production life cycle is considered.

Biodiesel made from the many palm oil plantations on Indonesia’s peatlands have a “carbon debt of 200 years”, said Louis Verchot, a research scientist at the Center for International Forestry Research in Bogor, Indonesia.

This means it will take 200 years of continuous biodiesel production from these palm oil plantations to pay off the “carbon debt” that results from land conversion and indirect land use changes.

Verchot and colleagues’ study is the first real-world look at the climate impacts of biodiesel and was published last month in the journal Ecology and Society. The study looked at biodiesel production involving palm oil, jatropha and soy at 12 sites in six different countries.

“Our study shows we have to eliminate a lot of what we’re trying to do in the name of protecting the atmosphere,” he said.

Global biodiesel production worldwide has risen by 10 times over the last eight years, topping 11 billion litres in 2010, according to the International Energy Agency. Ethanol production has risen by more than four times since 2000 and was close to 90 billion litres by the end of 2011. Those gains are being driven by government policies that mandate ever increasing amounts of biofuel be used in transportation fuels.

When burned, biodiesel emits between 40 and 75 percent less climate- heating carbon than regular diesel, according to various estimates. However, in order to grow palm oil, Indonesia’s peat forests have been cleared and burned, resulting in huge emissions of carbon – on the order of 200 to 300 tonnes of carbon per hectare – Verchot told IPS.

In addition, these wet peatlands are drained and when exposed to air the peat decomposes and releases about 10 tonnes of carbon per hectare per year. The resulting “carbon debt” is so large it will take 200 years of continuous biodiesel production from these palm oil plantations to pay it off, he said.

In other words, if palm oil was planted during Napoleon’s invasion of Russia, it would still be paying off its carbon debt today.

“I don’t know of any place in the world where a single crop has been grown that long,” Verchot said.

The size of the carbon debt of biodiesel from palm oil plantations has been seriously underestimated, said Ross Morrison of Britain’s University of Leicester. Morrison is co-author of an independent analysis completed before Verchot’s study was published.

Biodiesel from tropical peatlands emits more carbon than diesel from oil, Morrison and his colleagues reported in their analysis for the International Council on Clean Transportation.

Tropical peatlands in Southeast Asia hold more carbon than tropical forests and are under steady conversion to highly profitable palm oil plantations. Conversion of these lands also has negative impacts on local peoples and results in loss of habitat for many species, including endangered orangutans and Sumatran tigers.

“Projections indicate an increase in palm oil plantations on peat to a total area of 2.5 million ha by the year 2020 in western Indonesia alone – an area equivalent in size to the land area of the United Kingdom,” said Sue Page, co-author of the Leicester study.

The study also concluded that biofuels grown in Europe are no better than oil-based fuels, and biodiesel made from food crops like soy and rapeseed are worse. Bioethanol or biodiesel from waste cooking oil, on the other hand, could still offer carbon savings.

While palm oil plantations have long been criticised by environmentalists, Verchot’s study also looked at biodiesel made from Jatropha and grown in Ghana, Zambia and Tanzania. The study found it had a 100-year carbon debt on average, although the debt could be as high as 300 years depending on where it is grown.

Jatropha yields much less oil per hectare than palm oil and more land must be cultivated, increasing its carbon debt.

Biodiesel made from soy grown on Brazil’s dry cerrado grasslands in the state of Mato Grosso had the smallest carbon debt of the 12 study sites in six countries, at about 30 years. The main reason the carbon debt is low is because the cerrado doesn’t have much biomass to begin with, Verchot said.

It is unknown whether soy could actually be grown year and year for three to four decades.

“We’re not saying that all biofuels are bad. What we’ve found is that the right circumstances for growing biofuels are much more limited than people realise,” he said.

Verchot’s study did not look at the social impacts of biodiesel production. There is very little land capable of growing food on the planet that someone is not already using. Large-scale biodiesel crops often displace small landholders and local people who often don’t have formal land titles, resulting in growing numbers of conflicts over land grabbing.

“Biofuels certainly create incentives for land grabbing,” he says.

The biofuel industry and its supporters see things very differently. One reason is that the European Union has a goal of biofuels providing 10 percent of all transport fuels by 2020. The U.S. has target of tripling biofuel use from 2009 to 2022. Other nations also have targets as well creating a very large market in need of supply.

Attention is turning to Africa and its more than one billion hectares of rain-fed croplands as the next big source of biofuels.

Biofuels can be Africa’s next big cash crop, according to the new book “Biofuels in Africa” published by the World Bank last year.

“Abundant natural resources and low-cost labor make producing biofuel feedstocks a viable alternative to traditional crops,” the book says.

While noting that the effectiveness of biofuels in reducing emissions is in dispute, the U.S. or Europe will have to import increasing volumes of biofuels to meet their targets. In addition, the high fossil fuel prices mean Africa will produce much more biofuel for domestic markets in the coming decade, it concludes.

Governments, agribusiness, energy companies and venture capitalists have invested many billions of dollars into biofuels for at best a tiny net reduction and quite likely an increase in greenhouse gas emissions. Most climate experts say biofuels are not even in the top five things that need to be done to meet the climate change challenge.

“It turns out that biofuels are not the miracle crop people had hoped it would be,” Verchot said.