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Protectionism a scourge? Maybe not in Africa

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Washington, United States | AFP | 

World economic leaders gathered in Washington this week to defend globalization, delivering a single message in unison: Protectionism will not save you.

But this glosses over the plight of Africa, which is sinking further into poverty despite years of free trade.

According to the International Monetary Fund, which held its annual meetings this week with the World Bank, growth in Sub-Saharan Africa is in free-fall this year, with a growth rate of 1.4 percent, down from 3.4 percent in 2015, its lowest in a quarter century.

The regional economy will therefore grow more slowly than the population, at the risk of deepening poverty in a region already home to more than half of the 766 million people on earth who live on less than $1.90 a day.

“I am actually concerned about Sub-Saharan African countries,” said IMF Managing Director Christine Lagarde.

As the most rarified circles of economists gathered this week to ponder globalization’s failures, the African region seems to offer a prime case in point.

Despite opening its economies and the explosion of trade with China, Sub-Saharan Africa is the only region in the world to have actually seen the number of people living in extreme poverty rise since 1990.

“The growing number of the poor in Sub-Saharan Africa stands out as an exception,” the World Bank said in a recent report.

With a recession in Nigeria, ravaged by the collapse of crude prices, virtual stagnation in South Africa and a booming Ivory Coast, where this year’s growth rate is forecast at 8 percent, circumstances of course vary widely depending on the country.

Climate, security situations and political instability can also weigh heavily on economic outlooks.

Failure 

But, according to NGOs, the region’s general prognosis primarily reflects the failure of full-borne free trade, brought in by the structural adjustment plans of the 1980s and 1990s and the World Trade Organization.

“Africa did well in recent years because prices for oil and other raw materials climbed higher,” Antonio Gambini, of the National Center for Development Cooperation, told AFP.

“But prices have collapsed and with the free trade imposed on them these countries spiraled downwards because they were unable to diversify,” he added.

Contrary to the traditional prescriptions, a dose of protectionism could help African countries shore up their economies, sheltered from foreign competition.

“If we want to see a more inclusive global growth than it has to have a space for protection,” said Max Lawson of Oxfam GB.

“It’s just not as simple as more free trade mans less poverty,” he added.

Some Asian countries, such as Vietnam, South Korea and Taiwan, built their own economic expansions on strong exports and severe restrictions on imports to protect their domestic markets.

On the African continent, Ethiopia, which is forecast to see strong growth in 2016 of 6.5 percent, has jealously guarded its own telecoms and financial sectors.

Makhtar Diop, World Bank vice president for Africa, still has no faith in inward-looking trade policies.

“In times of crisis, there’s a protectionist reflex because we think it’s the answer but all the evidence shows that international trade has been a factor in development,” he told AFP.

According to Diop, a former Senegalese finance minister, the region’s persistent poverty is tied to poor revenue redistribution policies, particularly when oil was above $100 a barrel.

Once in place, protectionist barriers are hard to remove because they are supported by interest groups seeking to preserve their advantages, he said.

“We have to find a middle ground,” he said, particularly by allowing nascent industries the time to size up foreign competition. But the priority, he said, is to strengthen trade, particularly among African countries.

“Sometimes it’s cheaper to export a product out of Africa than to a neighboring country,” he said.

 

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