AFRICA ACTION
Africa Policy E-Journal
October 13, 2003 (031013)

Africa: Trade and Markets, 1
(Reposted from sources cited below)

The annual Trade and Development Report released by the United
Nations Conference on Trade and Development, just before its
meeting in Geneva October 6-17, calls for a "policy rethink" on the
effects of market-driven free-trade policies on developing
countries. The report notes particularly disadvantageous results
for Africa, with further entrenchment of dependence on primary
commodities with volatile prices.

This posting contains a general press release from UNCTAD, brief
excerpts from the Trade and Development Report, and the executive
summary and introduction from a separate study of issues in
Africa´s trade performance prepared for UNCTAD. Another posting
today contains additional excerpts from the Africa-specific report.
Both reports and additional background information are available on
the UNCTAD website [http://www.unctad.org].

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United Nations Conference on Trade and Development

Press Release October 2, 2003

UNCTAD/PRESS/PR/2003/95

DEVELOPMENT RECORD OF MARKET-DRIVEN GLOBALIZATION POINTS TO URGENT
NEED FOR POLICY RETHINK, UNCTAD STUDY CONCLUDES

For more information, please contact: Press Office T: +41 22 907
5828 E: [log in to unmask]

For the past two decades, the search for sound economic
fundamentals in poorer countries has been all about replacing a
state-driven inward-oriented growth strategy with a market-driven
outward-oriented strategy. Much has been promised, but according to
the Trade and Development Report 2003, released today by UNCTAD,
the policies pursued to eliminate inflation and downsize the public
sector have often undermined growth and hampered technological
progress. As a result, "the current economic landscape in the
developing world has an uncanny resemblance to conditions
prevailing in the early 1980s", when many countries slipped into
deep crisis, says UNCTAD Secretary-General Rubens Ricupero in his
Overview to the Report.

The target level of investment for catch-up growth - estimated by
the Report to be in the range of 20-to-25% of GDP -- has eluded
most countries undergoing rapid market reforms. By contrast, policy
continuity in East Asia after the debt crisis produced a strong
investment performance, growing manufacturing value added and
employment and a rising share of manufacturing exports. With
productivity and technology gaps with leading industrial countries
closing quickly, the region´s integration has come from a position
of strength. Elsewhere, the Report finds a less encouraging record:

* Industrial progress has halted in much of the developing world;
only eight of 26 selected countries succeeded in raising the share
of manufacturing value added in GDP between 1980 and the 1990s,
together with a rising share of investment;

* In economies with lagging industrialization and a declining share
of investment, the share of manufactures in total exports has also
been stagnant or falling, while exchange rate depreciation and wage
restraint have been the basis for bolstering trade performance;

* The production structure in much of Latin America and Africa has
seen a notable shift away from sectors with the greatest potential
for productivity growth towards those producing and processing raw
materials; and

* Where trade and investment have risen in the context of
international production networks, the tendency has been for an
apparent increase in the technology content of exports without a
similar increase in domestic value added.

The Report documents a world of industrial difference across
developing regions. In Asia, a handful of "mature industrializers"
have shifted to a high-tech and service-heavy development pattern,
leaving neighbouring countries more room to use their natural
resources and labour reserves in support of rapid
industrialization. By contrast, declining shares of manufacturing
output and employment ("deindustrialization") have accompanied
rapid liberalization in many Latin American and African countries.
"Enclaves" of industrialization linked to international production
chains have dotted this landscape, without in most cases
translating into more broad-based investment, value added and
productivity growth.

A wide range of macroeconomic, financial and trade policies were
used in East Asia, the Report shows, to stimulate investment,
target industrial upgrading and encourage exporting. In much of
Latin America and Africa, by contrast, big-bang liberalization has
led to inconsistencies among macroeconomic, trade, FDI [Foreign
Direct Investment] and financial policies that have skewed
structural changes and stunted technological progress. The Report
also finds that some of the more successful sectors in Latin
America have benefited from precisely the kind of selective policy
interventions alien to the neoliberal model.

The Report is doubtful that a "second generation" of neoliberal
reforms will start to put things back on track. But nor will
harking back to the easy industrialization policies of the past.
Rather, as Rubens Ricupero notes in his Overview to the Report,
"Rethinking options requires a candid assessment of the economic
record of the past two decades and of the experience of the more
successful cases of industrialization and development. It also
requires a move away from generalized approaches to accommodate the
diversity of conditions and challenges facing the developing
world".

***************************************************************

Trade and Development Report 2003
United Nations Conference on Trade and Development

Excerpt from pages 14-15

The short-term prospects for Africa do not suggest any significant
divergence from recent growth trends. There is now a growing
consensus that, as a result, it will be impossible to meet the
Millennium Development Goals.

2. Africa remains relatively insulated from global trends

Performance in Africa was largely independent of the impact of the
downturn in the United States in 2001 and more closely linked to
demand conditions in Europe. Like Latin America, the region
benefited little from the upswing in 2002. Climatic and political
factors continued to have a major impact on economic performance.
Eastern and Southern Africa were adversely affected by drought,
which created severe food shortages, and by depressed export
prices. In these subregions, growth remained well below the African
average. Conditions in Nigeria and Zimbabwe were dominated by
political tension. The conflict in C"te d´Ivoire had an adverse
impact on trade in the neighbouring landlocked countries, Mali,
Burkina Faso and Niger, which had to rely on port facilities in
other West African countries as the Nigerian facilities were no
longer accessible. Trade in the subregion has been seriously
disrupted with a consequent loss of income, in part because of
longer transportation routes for both exports and imports. It has
also had a direct impact on cocoa prices.

The strength of oil prices in 2002 underpinned a 5 per cent growth
rate in Angola. Among the subregions, the highest rate (5.0 per
cent) was achieved in the Horn of Africa, reflecting relatively
good performance in Ethiopia and Sudan. Similarly, growth in the
Great Lakes region exceeded 4 per cent (compared with 2.3 per cent
2001) following efforts to restore peace and the concomitant
recovery in the Democratic Republic of the Congo, where growth
reached 3.0 per cent in 2002 (compared with a fall of 2.0 per cent
the previous year). Expansion continued strongly in the United
Republic of Tanzania and Uganda, which grew at 6.0 per cent and 6.6
per cent, respectively. In North Africa and Central Africa, growth
was close to the regional average.

Despite the relatively stable performance, with 15 countries in the
region reaching growth rates of 5 per cent in 2002, only six
(Angola, Chad, Equatorial Guinea, Mali, Mozambique, and Rwanda)
achieved rates of 7 per cent or more, which are required every year
if the goal of halving poverty by 2015 is to be reached. Indeed,
there are very few countries that have been able to maintain rapid
growth for long enough to have a tangible impact on reducing
poverty. Only three countries (Chad, Equatorial Guinea, and
Mozambique) met this target in both 2001 and 2002, and only
Equatorial Guinea has done so since 2000.

The short-term prospects for Africa do not suggest any significant
divergence from recent growth trends. There is now a growing
consensus that, as a result, it will be impossible to meet the
Millennium Development Goals for the region, particularly that of
halving poverty by 2015. A durable improvement in African economic
performance will depend on success in the fight against the
HIV/AIDS pandemic and other diseases such as tuberculosis and
malaria, and on resolving the deep-seated problems related to weak
and unstable commodity prices, declining levels of aid, the
continued debt overhang and political instability. Even though
improvements in domestic policies, institutions and governance hold
the key to sustained growth, progress on many of these fronts
depends primarily on action by the international community
including faster and deeper debt relief, increased and better
quality aid, and improved access to the markets of the developed
economies.

***************************************************************

United Nations Conference on Trade and Development

TD/B/50/6 - 28 July 2003

ECONOMIC DEVELOPMENT IN AFRICA:
ISSUES IN AFRICA´S TRADE PERFORMANCE

Report by the UNCTAD secretariat

Executive Summary

Africa´s share in world trade has been falling consistently since
1980. The continent remains heavily dependent on the export of a
few primary commodities, most of which have suffered a secular
decline in prices leading to large terms-of-trade losses. Unlike
other developing regions, the continent has by and large not been
able to diversify into manufactures or market-dynamic products and
has even lost market shares for its traditional exports.

Market-oriented policies have not been able to reverse the
situation. In addition to the provision of better market access and
reductions in subsidies for products competing with African
exports, external resources are required to compensate for losses
and to fill the resource gap in order to ensure adequate investment
in the development of human and physical infrastructure,
institution building and diversification.

Introduction

1. The emphasis on trade liberalization and export orientation in
the past decade has led to a phenomenal growth in world merchandise
trade, which has consistently grown faster than output. Africa has
also witnessed some increase in its trade relative to GDP, despite
the general assertion that Africa is trade-averse. Trade
(merchandise imports plus exports), as a share of GDP for Africa
(excluding South Africa and Nigeria), increased from 45 to 50.4 per
cent between 1980/1981 and 2000/2001. However, on the whole,
Africa´s share in world exports fell from about 6 per cent in 1980
to 2.0 per cent in 2002, and its share of world imports from about
4.6 per cent in 1980 to 2.1 per cent in 2002. This phenomenon has
as much to do with the structure of international trade as with the
composition of merchandise trade of Africa, the trade policies
applied in the continent in the past 20 years, and market access
and agricultural policies in industrial countries.

2. More than any other developing region, Africa´s heavy dependence
on primary commodities as a source of export earnings has meant
that the continent remains vulnerable to the vagaries of the market
and weather conditions. Price volatility arising mainly from supply
shocks and the secular decline in real commodity prices and the
attendant terms-oftrade losses have exacted heavy costs in terms of
incomes, indebtedness, investment, poverty and development.
Previous UNCTAD reports on economic development in Africa have
discussed extensively some aspects of these issues, including
capital flows and debt, overall economic performance and prospects
of the region, and adjustment and poverty alleviation.

+++++++++++++++++++++Document Profile+++++++++++++++++++++

Date distributed (ymd): 031013
Region: Continent-wide
Issue Areas: +economy/development+

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