Multilateralism Versus Regionalism: Which Path Should African Countries Pursue to Expand Trade and Investment Opportunities?

By Amina Mohamed
UNITED NATIONS, Jan 28 2020 (IPS)

Increasingly, the ability of multilateralism to address
contemporary global issues such as climate change and international
trade is being questioned. In the case of international trade, WTO
Members have thus far not been able to conclude the Doha Round,
which was launched in November 2001. The Round was supposed to have
been concluded on 1 January 2005, but it has been beset by
persistent differences among the WTO Members. Whereas most
developing countries believe that the Round is still active and
have called for the fulfilment of all Doha mandates, several
developed countries are of the view that the Round has run its full
course and overtaken by developments in the global economy. They
note that three out of the ten top economies in the world are
developing countries – Brazil, China and India – and that
several developing economies are also competitive in certain
sectors of the global economy and that by granting significant
flexibilities in the negotiations to these competitive developing
economies, the Round’s mandates are no longer valid and that
differentiation among developing countries should be part of the
broader on-going discussion on WTO reform.

The stalemate in the Doha negotiations has prompted countries to
look at alternative ways to liberalize trade and investment for the
benefit of their businesses and consumers, including negotiating
plurilateral agreements at the WTO among a subset of WTO Members
and negotiating bilateral and regional trade agreements. In the
last five years, concluded bilateral and regional trade agreements
include the United States-Mexico and Canada Free Trade Agreement,
the Comprehensive Economic and Trade Agreement between the European
Union and Canada, the Comprehensive and Progressive Agreement for
Trans-Pacific Partnership between eleven Pacific-rim countries,
including Australia, Canada and Japan, the Pacific Agreement on
Closer Economic RelationsPlus between Australia, New Zealand and
the fourteen Pacific Island Countries and European Union and
MERCOSUR Free Trade Agreement. The scope of these agreements goes
beyond the current WTO Agreement and addresses issues of importance
to businesses such as electronic commerce, competition policy and
investment as well as labour rights and the protection of the
environment.

African countries have also not been idle and have recently
concluded the African Continental Free Trade Agreement (AfCFTA),
which is expected to create a market of 1.2 billion people with a
gross domestic product of USD2.5 trillion. The United Nations
Economic Commission for Africa estimates that trade among African
countries, which is currently around 15 per cent, can easily be
doubled if the current overall average tariffs of 6.1 per cent are
eliminated. The figure is projected to be even higher if the
removal of tariffs is accompanied by the elimination of non-tariff
barriers on intra-African trade. With Africa’s population
expected to exceed 2 billion by 2050, it is envisaged that it would
be a magnet for foreign direct investment by leading multinational
companies. The World Economic Forum estimates that the AfCFTA will
generate USD4 trillion for investments and commercial transactions
of goods and services on the continent.

Dr Amina Mohamed. Photo: Ministry Files

Notwithstanding the immense opportunities the AfCFTA will bring to
the African continent, African countries should not turn their
backs on the rules-based multilateral trading system, which has
contributed significantly to the expansion of the global economy
and in the process lifted several millions of people out of
absolute poverty. Between 1948 and 2019, world trade grew from
USD58.5 billion to almost USD20 trillion and it is estimated that
more than 700 million people have been lifted out of absolute
poverty with much of that happening in China and India. African
countries should show determination and work closely with the
leading WTOMembers, including the United States, the European
Union, China, Brazil and India to strengthen the organization for
the benefit of all countries, particularly African and least
developed countries which have been operating at theperiphery of
the multilateral trading system.

There is agreement among all WTO Members that the WTO Agreement
needs updating considering that the current Agreement entered into
force in January 1995. So much has happened in the intervening
period and WTO rules need to reflect contemporary trends in the
global economy if it is to remain relevant. The task of reforming
the WTO should not be left to a few countries. All countries have a
stake in a well-functioning multilateral trading system and
collective engagement will ensure that all spectrums of views are
considered in the design and implementation of new and effective
multilateral trade rules. The benefits from the AfCFTA would be far
greater if alongside regional liberalization, there is also
multilateral liberalization, especially considering that Africa’s
largest trading partners are the European Union, China and the
United States. The two approaches to liberalization are not
mutually exclusive and can complement each other as various studies
have shown. African countries need not make a choice between the
two approaches and should pursue both doggedly to achieve robust
economic growth and sustainable development.

The world needs a reinforced rules-based multilateral trading
system more than ever to confront the challenges of the
21stcentury. Bilateral and regional trade agreements cannot be a
perfect substitute for the rules-based multilateral trading system,
as issues such as trade distorting domestic support to the
agriculture sector can only be effectively addressed at the
multilateral level. These agreements, including the AfCFTA also
tend to rely heavily on the WTO framework in many areas, including
health and food safety and trade remedies. All WTO Members should
work together to preserve and strengthen this public good.
Compromises will have to be made and the overarching reason why
countries join the WTO in the first place should not be lost on
them. Every country that is a WTO Member acknowledges the role
trade can play in their national economies in creating jobs,
attracting foreign direct investment and lifting standards of
living. Protectionism imposes significant costs and countries
should avoid going down that path. African countries have a role to
play in breaking the impasse at the WTO and they should work
intensively with other WTO Members to reform and strengthen the
institution and the rules-based multilateral trading system, while
they commence implementing the AfCFTA to boost trade and investment
on the continent.

The writer is a Cabinet Secretary, Government of Kenya.
She served until recently as Kenya’s Foreign Affairs Minister in
charge also of international trade. She has occupied several top
positions at the World Trade Organization, including as Chairperson
of the General Council and the Nairobi Ministerial Conference in
2015.

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Multilateralism Versus Regionalism: Which Path Should African
Countries Pursue to Expand Trade and Investment Opportunities?

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Multilateralism Versus Regionalism: Which Path Should African Countries Pursue to Expand Trade and Investment Opportunities?