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Africa's position in Global trade

Is Africa really Disadvantaged in Global Trade?

The multilateral trading system overseen by the World Trade Organization (WTO) has contributed significantly to the unprecedented economic development that has taken place over the last decades across the world. Trade has allowed developing countries to benefit from the opportunities created by emerging markets, enabling them to integrate into the world market through global value chains.

With the global fluctuation in trade and rapid increment, the structure and pattern of trade vary significantly by-products and regions. Undoubtedly, trade has come with both benefits and daunting challenges to countries involved, especially in African nations, where primary and intermediate merchandise formed a substantial share of exports.

African trade in goods and services fluctuated in value terms over the 2005-19 period and gradually rose. Despite this increase, however, its global share has remained relatively constant at about 3% of both global exports and imports, averaging a total of US$760 billion, compared with $4,109 billion from Europe, $5,140 billion from America, and $6,801 billion from Asia.

With these, it is seen that Africa has performed poorly when global trade is concerned. Nigeria which is the largest economy in Africa with a GDP of $442.98 billion, depends heavily on importation and does little on exportation. As seen from the chart below, Nigeria made over $ 1 trillion on exportation in 2020 and spent almost $2.5 trillion on importation which is doubled the money made from exportation. This reflects the level of participation in global trade of the country.

Import and Export in Nigeria

In spite of the significant reduction of trade tariffs on various commodities and products that African countries have taken advantage of, trade still faces stringent constraints largely because of restrictions and other distorting measures. Despite the fact that the WTO has gained ground in pressuring countries to reduce restrictions, trade policies and rules may have favored developed economies at the expense of frail economies, particularly in Africa.

The South African minister of finance has highlighted that one of the significant challenges hindering trade in Africa High tariffs, but “non-tariff barriers, such as arbitrarily imposed rules on the international standards on the health of and animals plants (sanitary and phytosanitary measures (SPS)), further limits trade in Africa.

Sanitary and phytosanitary (SPS) measures are quarantine and biosecurity measures which are applied to protect human, animal, or plant life or health from risks arising from the introduction, establishment, and spread of pests and diseases and from risks arising from additives, toxins, and contaminants in food and feed. These measures are governed by the World Trade Organization’s (WTO) Agreement on the Application of Sanitary and Phytosanitary Measures (the SPS Agreement), and its Committee of Sanitary and Phytosanitary Measures (the SPS committee). Measures like too high level of Aflotoxins have been used by some developed countries to hampers trade on goods coming

For quite a long while in the late 1990s, for instance, European nations prohibited fish from Mozambique, Kenya, Uganda, and Tanzania due to concerns about these countries’ sanitary standards and control systems. Uganda lost $36.9 million in potential earnings during the ban. In Tanzania, where fish and fish products accounted for 10 percent of annual exports, fishermen dependent on EU sales lost 80 percent of their income, according to reports from the United Nations. Several other health and standards issues relating to products like meats and dairy products have also restricted Africa’s trade to the US and Japan.

These measures only seem to favor the already developed countries, as many developing countries in Africa do not have the money, manpower, or infrastructure needed to abide by the standards created.

On the other hand, although these measures appear to be though, it is important to also emphasize the fact that they are ostensibly aimed at protecting citizens from everyday food hazards because some of these developing countries make products that are harmful to the health and expect them to be purchased by other countries, and when they are not, it leads to a downturn in export which then reflects on their GDP.

The best solution to this hamper in trade for Africa is to trade in Common Terms. Countries at the same level of compliance to the WTO Sanitary and Phytosanitary measures need to do more Intra-African trade with themselves and other similar eternal countries, as this will help ease the burden on them and prevent wastage of locally produced product (e.g, Nigeria’s annual tomato harvest is estimated to total at around 1.5 million tons, 900,000 of which rot as waste each year, thebusinessyear).

With the inception of the African Continental Free Trade Area (Afcfta), trade in Africa was expected to create a boost in intra-trade trade amongst African countries but the organization has made no significant impact since its inception. Although 54 countries have signed the pact and 31 of them have ratified it, only Ghana has traded under this agreement as other countries like Nigeria do not have the capacity and infrastructure for the agreement’s benefits to kick in.

In as much as these sanitary and phytosanitary measures seem intense, it is really not expected of already developed countries to comply with lower measures. Developing countries need to work towards improving the quality of their products as these measures were established to ensure the safety of both parties.

New Release: The African Economic Congress 2020 Report.