Annual Law Lecture: How global trading rules are contributing to Africa’s deindustrialization and what we can do about it

By Georgia Marks

On the 21st November 2016, the WCIA, in partnership with Centre for Law and Society/ Law and Global Justice Programme, Cardiff University, held the fifth annual law lecture by Professor James Thuo Gathii at the Temple of Peace in Cardiff. John Harrington, the chairman of the Board of Justice for the WCIA, chaired the event. He introduced the speaker and the discussant, Celine Tan. Overall, the event was insightful and gave the audience a range of solutions to think about in terms of global trade.

Professor Gathii began by defining deindustrialization as the movement of workers from industry and then went on to give a brief context. He stated that Africa’s economy has been growing, but this has brought deindustrialization. In the 1970s, the governments had policies focusing on agriculture, but wanted to be like the West so produced industrialised economies, with structural adjustment programmes set up to reduce the role of the state in the economy. In 1990, the World Bank and the IMF drove for reform which the speaker says had a debilitating effect on industries. For example, in Senegal, the manufacturing and processing of sugar decreased in the past 20 years.

Next, Gathii highlighted the problems behind deindustrialization. He said that bad economic governments contributed. Many governments are corrupt, as well as the fact that the African elite have been able to source products, that can be made in Africa, outside of the continent at the expense of local producers. He then went on to use the supply of palm oil to reinforce his point. He then went on to talk about the phenomenon of consumption cities where workers are moving from manufacturing as there is less work. This is exacerbated by the lack of sustainable effort to create work in industry, and thus the problem grows. This seems to be a valid problem in these countries which in turn create a variety of different problems, particularly to local businesses.

The speaker continued by proposing solutions which he referred to as ‘big ideas.’ Firstly, he suggested making technology transfers a key component of the trade system, for example with Japan and China. Emphasis was placed on Africa’s need to go for innovation seeking investments and utilise other countries’ need for resources. He also gave importance to the fact that the availability of these contracts allows the transfer of knowledge between countries. I think that this is important as it allows for African countries to develop which will hopefully enhance their position within trade. Gathii stated that there is a lot of potential in this idea as exemplified in South Korea doing business with Britain over the manufacturing of rail cars. Countries can gain leverage in order to get what they want instead of just selling off resources. In his belief, African countries have the capacity to do this. This idea is a good one as it encourages African countries to be more assertive in trade which appeared to be one of the main themes in the talk, but it is also interactive for Western countries as they will participate in this trade.

The next proposed solution was improved regional trade among African countries. This is perhaps one of the strongest solutions as it promotes self-sufficiency in Africa. Gathii expressed that there is currently an unequal system in international trade as the ways trading rules are interpreted are consistent with bias because big countries will make sure that their view prevails. This solution is within Africa itself, so does not address part of the talk which askes what we can do about it, but despite this, it is still a strong solution. The speaker gave the shocking statistic that inter-African trade is only 9% of their overall trade, with Africa importing $35 billion worth of food each year. What is worse, according to Gathii, is that it is the sort of food that Africa grows! He went on to say that famines in African countries were because of no trade, not because of lack of food. This stresses the importance of inter-African trade. He stated that commitments to reduce the trade barriers are all there. If there have been things put in place for this solution then there is no reason why it should not be successful. A member of the audience from Cardiff University asked how we could focus on south-south cooperation to reduce dependence on the western world. In response, Gathii expressed that southern countries were doing a bad job of trading with themselves. In order to improve this we could make evident these blind spots as there is a possibility to build a vibrant market in rural Africa with the right policies. How we could make them see the blind spots was not made clear, however the speaker is right in the fact that good policy making will help to boost trade.

Third, Gathii suggests productivity enhancing initiatives, which could be done without the other two proposals. He goes on to recommend basic processing of natural produce and simple but critical farming technology. All of this centres on product development, but also ensures that the changes are realistic and work for regionalists. Whilst this proposal is the simplest of all the solutions, it is a positive that it can work independently of the others given, and may also be the most realistic recommendation.

Overall, the proposals made by Professor Gathii were good as they would be effective if carried out properly. However, the emphasis is not on what the West can do about it. Yet, I do not think that is a bad thing, as a lot of discussions have the tendency to be too focussed on the West, which can sometimes mean that the issue at hand can get forgotten. So I think the fact that the main subjects are the African countries strengthens the proposals given by the speaker, but also gives a more innovative perspective to these solutions.

The discussant, Celine Tan, then analysed the proposals made by Professor Gathii, stating that they were excellent. This I totally agree with. She took on an Asian perspective as a child of Malaysian industrialisation. She spoke of the lack of regulation which made industrialisation problematic in Malaysia, however despite this it is undeniable that industrialisation was the driver in the country’s economic growth. The discussant claimed that in Africa, external factors are constraining the continent’s industrial development, and expressed that Gathii was too generous to the external sources. The main question surrounding Tan’s talk was how much of Gathii’s proposals does he think is achievable? Particularly in terms of current constraints. She went on to say that external factors were not barriers to other countries such as Malaysia, particularly that they did not have pressures from external places to get funds. Malaysia’s transition from agriculture to industry was gradual because they had the policy space to do so. However, according to Tan, African countries have lost their autonomy of the constraints, whereas Malaysia maintains their scope for determining what to do with their economy. I think this highlights one of the key constraints on Africa which is unique to them, and emphasizes that as a continent they need to try and address these limits. Also, bringing in a different perspective on industrialisation made for a really effective comparison, so that the audience could see the realistic limits on African countries.

Tan highlights three key issues that Gathii’s proposals may encounter. Firstly, there is the issue of Africa’s dependence on external finance, as some of the speakers’ proposals were predicated on public finance. But where is this finance going to come from? I think that this is a really crucial question to ask, as how can we see any of these solutions put into place if there is nothing to fund them. Secondly, there is a question of international regulation as it hinders the finance available. She stated that multi-national firms threaten countries’ revenue. This is the downside to processes with foreign investors as how can we ensure that African countries keep onto the revenue. Again, I think that this is a point worth addressing as there is a risk of exploitation here. In the Q&A session after the talks, a representative from Fair Trade Wales asked what the solutions can be provided to support farmers and ensure that they have a choice a choice on a global scale. Gathii responded by saying that we shouldn’t leave things the way they are if they are corrupt. Investment programmes are the solution. The speaker acknowledged the limits as inevitable, but everyone says that this is the right thing to do. On basic necessities trade could be improved, but the time scales need to be more visible. There are interesting policies already existing. He went on to express that if trade does not benefit the people then there is no point. Western ideas do not truly know about African issues, so aid is not going to help as much as trade. I think this makes a good point in that instead of the West attempting to help, we should be taking a step back and let Africa retain control of their own policies so that they have more influence in trade as Africa knows what will benefit them the most.

Lastly, Tan emphasised the constraints of investment rules in global trade. These trade rules mean that countries like the UK generate value from raw materials. Additionally, the discussant also highlighted the constraints that treaties bring to African countries, such limits are not faced by countries in south-east Asia. She continued by saying that the rules are so stacked against African countries, it is doubtful as to whether the proposals given by Gathii will work. This is point is very valid as it shows the problems as exclusive to African countries, which only emphasizes the problems of trade in these countries. It is also an important aspect to consider when asking whether the proposals would realistically work.

Ms Tan concluded by saying that a more holistic outlook was needed. Overall, her rebuttals to Professor Gathii’s proposals were all persuasive and acted for a good academic discussion. These proposals appear to be an ideal, but more thought needs to go into how these could be developed in practice, linking to the context of the current situation in African countries.

Gathii then summarised his stance, addressing the points made by Tan. In terms of the last point, he stated that the discussant was right in that there were huge barriers imposed by the West that prevent many of his proposals. He claimed that this problem was escalated by the fact that African countries fail to negotiate and end up settling with deals that do not benefit them. This is reinforced by the point that the Southern African Customs Union is the only region to reject a template for trade. He continued by stating that the systems often favour developed countries and that he wishes that African leaders were more proactive in deciding not to participate in trade with challenging affluent countries. In the Q&A session, a practicing lawyer in the audience questioned the retaliation system in terms of compensation. Gathii responded with the statement that the treaties are a reflection of interests of the people who wrote them which is unfair as it is favour of developed countries. Developing countries as a collective have the opportunity to take trade into a different direction. This, again focuses on what Africa can do rather than how the West can contribute. Yet the point made that African countries should take power into their own hands is still a strong one and promotes self-sufficiency.

John Harrington concluded with the idea of ‘aid vs trade.’ The current Secretary of State suggested that we should increase aid to promote trade, but this is only to improve British trade. From a Welsh context, Wales is to act in a globally responsible manner. This is a strong conclusion as to be responsible and aware of how are actions affect other countries in terms of global trade is significant in order to ensure that we do not hinder Africa’s development by rigid rules and bias policies. So, a sense of being conscious about the problems of non-western countries is one of the most important things that we can do in order to improve industry in Africa.

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