G8: How The Rich World Short-Changes Africa

The mass media hype about “a new deal between rich and poor”, in response to the powerful Group of Eight industrialised countries’ plan to cancel multilateral debts owed by 18 mainly African countries, has led many people to believe that a new era of international social justice has dawned. The deal is expected to be ratified by G8 leaders in Scotland on July 6-8.

The uncritical endorsement of the plan by large international aid agencies like Oxfam, the driving force behind the Make Poverty History (MPH) coalition of non-government organisations, and big-name celebrities like Bob Geldof and Bono, has reinforced this hope.

Across the globe, there has been a genuine outpouring of popular solidarity and sympathy with the people of Africa, symbolised by the tens of thousands who attended, and the millions who watched, the Live 8 concerts.

Unfortunately, celebrations to mark what British deputy PM Gordon Brown described as “the intention of world leaders to forge a new and better relationship between the rich and poor countries of the world” are premature.

The G8's promises fall far short, and contradict important aspects, of MPH’s demands as detailed on its web site () — “Trade justice”, “Drop the debt” and “More and better aid”.

MPH demands that “the unpayable debts of the world’s poorest countries should be cancelled in full” and “poor countries should no longer have to privatise basic services or liberalise economies as a condition for getting the debt relief they so desperately need”. Yet, the much publicised British government-brokered deal only cancels the multilateral component of the debt of 18 of the world’s poorest countries (with another 20 that may become eligible in the future). But this “relief” comes with the very strings that MPH opposes — strings that will ensure that poor countries remain trapped in dire poverty.

As the grassroots anti-debt coalition African Jubilee South explained on June 14, eligibility “involves the implementation of stringent free market reforms such as [health and education] budget cuts, financial and trade liberalisation, privatisation” and, as the G8 states explicitly, “the elimination of impedients to private investment, both domestic and foreign”.

(For a detailed critique of the G8 debt and aid scam, visit ‘Africa needs justice not charity’ - Norm Dixon June 29, 2005)

Trade justice?

MPH calls for rich countries to stop imposing trade rules that prevent poor countries from choosing “the best solutions to end poverty and protect the environment”. “These will not always be free trade policies”, MPH notes. Yet, even as Brown, Geldof and MPH were lauding the G8's “historic” debt decision, rich-country governments were pushing ahead to impose “trade liberalisation” on African and other Third World countries.

The European Union is now negotiating bilateral “economic partnership agreements” (EPAs) with the 77 African, Caribbean and Pacific (ACP) countries. These will replace the existing agreement that gives ACP countries some preferential access to EU markets. Under the new free trade agreements, the EU insists that ACP countries throw open their markets to EU products.

The British advocacy group Christian Aid in April warned that, “with their diverse range of products and muscle in the marketplace, European producers can outstrip ACP rivals in their domestic markets. European producers have enjoyed decades of subsidies, support and protection from their governments and have built strong, lean, competitive industries. ACP countries ... stand to lose existing industries and the potential to develop new ones as products from Europe flood their markets.”

The US government too is pushing for bilateral and regional trade agreements with African countries to gain greater access for US corporations.

The EU, US and other Western countries spend billions every year to subsidise their capitalists’ agricultural exports, which are often dumped in African and other Third World markets at ridiculously low prices. This practice lowers world commodity prices, upon which poor countries depend for survival.

In 2003, governments in the 30-member Organisation for Economic Cooperation and Development (OECD), another rich-country dominated club, subsidised farm exports to the tune of $350 billion (compared to providing just US$22 billion in aid to Africa). That’s almost $1 billion a day! The EU gives its agribusinesses around $100 billion a year in subsidies and grants. The obscene scale of this comes into focus when you consider that each European cow gets $3 a day in subsides, while 50% of Africa’s people must live less than $1 a day.

The US government in 2002 alone provided $3.7 billion in subsidies to its cotton agribusiness, three times the entire US aid budget for Africa at the time. It is estimated that African cotton-producing countries — which include Benin, Burkina Faso, Chad, Togo, Kenya and Mali — in 2004 lost up to $400 million in potential export revenue as a result. In 2003, Malian cotton farmers received just 33 cents per kilogram for their cotton, whereas subsidised US cotton producing corporations received $1.45.

US rice growers receive a US government refund of 72 cents in every dollar they spend to produce rice, according to the British Financial Times.

The Financial Times on June 22 reported that the Mozambican sugar industry, which employs 26,000 people, is in jeopardy due to the EU subsidies and tariffs. This is despite the fact that Mozambique can produce cane sugar for between $108 and $144 a tonne, whereas European beet sugar costs $577 a tonne to produce. The EU gives subsidies to its big sugar companies, such as British multinational Lyle and Tate, of $990 million a year.

The EU imposes import tariffs of more than 200% on non-EU cane products. This impacts harshly on sugar-producing African countries like Mozambique, Ethiopia, Malawi and Zambia. On top of this, European overproduction of sugar results in 5 million tonnes being dumped on world markets, driving prices down, in many cases to below the cost of production in Third World countries. A small amount of sugar is bought from poor countries at preferential prices, as a result of a 2001 agreement, but the EU wants to slash the price it pays by 40%.

In 1990, many Senegalese made a decent living growing tomatoes. After the introduction of “free trade”, prices farmers got for their crops were halved and production tumbled from 73,000 tonnes in 1990 to just 20,000 in 1997. The market was flooded with cheap bottled European tomato products, which caused local factories producing tomato paste and other value-added products to close.

In Ghana, the local poultry industry collapsed, impoverishing 400,000 small farmers, after the market was flooded with cheap, subsidised EU and US frozen chickens, which sell at half the price of fresh local chooks. In 1992, local farmers supplied 92% of the market; by 2001 their share had plummeted to just 11%. Ghana’s attempt to raise tariffs to prevent this dumping has been blocked by the IMF and WTO. The EU gives annual subsidises its poultry producers of $52 billion a year. Cameroon and Senegal have also had their markets flooded with cheap EU chooks.

Real cost of ‘free’ trade

On June 20, Christian Aid released a study ( http://www.christianaid.org.uk/indepth/) that revealed that the last 20 years of trade “liberalisation”, a condition for aid, loans and debt relief, have made sub-Saharan countries a massive $272 billion worse off than they otherwise would have been. The figure represents the income lost as a result of being forced to open their markets to heavily subsidised imports from rich countries.

This amount is about the same as sub-Saharan Africa has received in aid during the same period. It could have paid off much of the region’s $300 million debt, or allowed all of its children to go to school and be vaccinated against major diseases, Christian Aid notes.

In 2000 alone, sub-Saharan Africa lost income worth $28 billion, enough to halve the number of people living on $1 day, based on United Nations estimates. While in 2000, Africans lost almost $45 per person due to trade liberalisation, aid per person was just $20.

The Christian Aid study found that contrary to promises of the advocates of free trade, when poor countries phase out measures such as tariffs, quotas and import duties designed to protect their local industries and consumers, imports climb sharply and local producers are priced out of the market by cheaper, often subsidised, Western goods. This also depresses prices.

Demand for the things that African countries export — cash crops, raw materials and minerals — tends to stay relatively constant. Income from any small increase in exports is lost via ever-falling prices. For example, from 1980 to 2000, the world price of sugar has fallen 77%, cocoa by 71%, coffee by 63% and cotton by 47%. So the overall impact is less local production and less income. This simply compounds poor countries’ debt problems as they have to borrow because they must spend more than they earn.

After 14 years of “free trade” policies, Ghana’s GDP in 2000 was almost $5 billion. Christian Aid estimates that without “liberalisation”, its GDP would have been $850 million higher. Ghana has lost $10 billion since 1986, which works out at $510 per person.

Between 1991 and 2000, Uganda experienced a total loss of $5 billion. Christian Aid found that, without liberalisation, its 2000 GDP of almost $6 billion would have been more than $735 million higher than it was. That’s more than its combined health and education budget for that year. In 2000, aid to Uganda amounted to $35 per person; it lost $32 per person that year through “free trade”.

Mali’s GDP in 2000 was $191 million less than it otherwise would have been without trade liberalisation,; $191 million is more than Mali’s annual health budget. Losses since 1991 add up to $1.4 billion.

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