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Date: Wed, 19 Jul 2000 17:45:30 EDT
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Subject: [AfricaMatters] Africa and Globalization
Africa and Globalization
By James Mutethia
No other region has suffered during this period of globalization as Africa
has. African countries now face all the usual problems associated with this
world economic phenomenon. Problems range from heavy debts to unfavorable
trade and all the bad conditions imposed by the International Monetary Fund
(IMF) and the World Bank. African people from South Africa to Algeria are now
starting to fight back. And their leaders are complaining about these
problems.
Options narrowed
In a recent meeting in Egypt of 15 developing countries, leaders condemned
the developed world for ganging up against the rest of the world. The
Nigerian President, Olesugen Obassajo, put it more bluntly when he stated:
"Our societies are overwhelmed by the strident consequences of globalization
and the phenomenon of trade liberalization. The options open to us have
narrowed as our increasingly shrinking world imposes on our countries a
choice of integration or the severe conditions of marginalization and
stagnation."
"It is obvious that developed countries are ganging up against developing
countries." Said the Prime Minister of Malaysia, Mahathir Mohamad. All
policies they have are directed at exploiting developing countries, he
stated. There is a need to bring at least one group of countries together to
take a similar stand, he added.
The summit issued a communiqué that said the promised high living standards
were yet to be realized. It said: "This has not materialized. We are
convinced that it will not until international community redresses the
asymmetries and imbalances in the global economy."
Similar sentiments were expressed at the World Economic Forum Africa Summit
in Durban. South African President, Thabo Mbeki criticized the Group of
Seven, G7, developed countries for not keeping their promises to cancel some
of Africa's debt. The Forum demanded that at least $ 100 billion of African
debt be cancelled to allow the continent to deal with AIDS, other diseases
and poverty.
Cheap exports
Even before the era of globalization Africa faced unfair trade relationship
with the developed world. One problem that remains the same is that African
Countries mostly import manufactured goods and export raw materials, mainly
agricultural and mineral products. The prices of African exports have
continued to fall while the value of imports has continued to rise.
Furthermore, the markets for African goods continue to shrink as the
developed countries use all types of barriers, tariff and non-tariff. This
has been made worse by the fact that the developed countries use World as
well as Regional Trade Organizations to their own advantage.
With low prices for their products and fewer markets, African countries are
forced to borrow in order to pay for the imports. But this problem is
complicated further by the fact that they already have huge devastating debts
owed to the western countries. In most cases these countries are left to
borrow to pay existing debts with little capital left for development.
Just like the Cairo meeting said, the promises, the agreements and other
relationships with the developed world amount to nothing other than attempts
to yet again maneuver and take advantage of the poor countries. The problem
is not likely to change soon despite the promises and agreements signed with
different developed countries or blocks of developed countries.
Attaching unfair conditions
Take for example the recent African Growth and Opportunity Act signed by the
US government and offered as an opportunity for African Countries to sell
their products to the Big American market. Critics say it offers nothing new.
Two professors of economics, Jagdish Bhagwati of Columbia University and
Arvind Panagariya of the University of Maryland recently argued that the Act
only goes to benefit the US businesses and not Africa. In an article
published in the Financial Times of London, June 29, 2000 the professors
said: "The Act reads superficially as if it were an 'aid package', a one-way
grant of free trade to the poor countries in Africa. But this gift horse is
actually a Trojan horse. The tariff preferences in the Act are contingent on
preferential purchase of inputs from the US. For example, for duty-free
access, shirts assembled by the qualifying African country must be made from
fabrics formed and cut in the US. In addition, the fabric must be made from
US yarns. This forces on Africa imports from the US, displacing cheaper
imports from elsewhere."
To illustrate their argument about the US interest in Africa they point at
the recent controversy over AIDS drugs in South Africa. Due to the relative
high number of people with AIDS, the South African Government wanted to make
cheap generic drugs that can limit the effects of the disease and also import
cheaper drugs from the neighboring country of Botswana. The US used all types
of threats, including the suspension of aid to persuade South Africa from
pursuing these policies. Again under the African Growth and Opportunity Act,
all interested lobby groups in US are empowered to challenge the actions of
African governments from everything from intellectual property to labor
standards. All these are mechanisms used to wrestle economic concessions from
the poor countries while claiming to maintain standards.
The US is not alone in seeking to take advantage of Africa.
Take the recent signing of the Cotonou Agreement. This is the accord that
replaced Lome Convention, a trade pact between the European Union and nations
from Africa, the Caribbean and the Pacific. With the old agreement, the
European Countries used barriers to block goods from their agreement partners
from the Third World. Now they are using the new global rules to gain even
more advantage. They make all sorts of excuses to gain economic concessions
such as demanding that the countries in the Caribbean, the Pacific and Africa
uphold rules of good governance, as defined by the European governments.
Again even with a new agreement, the European governments are not willing to
remove tariffs on the Third World goods. They merely promise to phase them in
a period of 15 years.
But it is not only in trade that the rules of globalization are being used
against African countries. We see the same thing now being played out on the
question of debt. African countries are being asked to impose austerity
measures on the populations, to sell state-owned enterprises to foreign
multinationals and give up more and more of their political independence.
Those who accept these conditions are offered some more loans and shown as
good examples to the rest. Those who do not are subjected to more subtle
economic pressure.
Some of the measures directed at the Third World countries are meant to
prevent them from presenting a united front in their fight against the debt.
The debt burden is one the worst problems weighing on the African continent.
It slows down the fight against AIDS, delays economic development and
devastates African societies.
Loan Conditions
Just consider the situation of Zimbabwe, Nigeria and Kenya.
In order to qualify for more aid and loans the governments in the three
countries have implemented one austerity measure after another. The
governments have only refused to implement more measures when it became
politically explosive with workers organizing protests and strikes. Note the
recent strike in Nigeria. Yet the International Monetary Fund has argued that
they have not done enough. The upshot of the austerity measures has been that
these governments have diverted money from development and expenditure on
social services to debt payment. But the debt continues to grow.
In Zimbabwe the government has been asking for an IMF and World Bank Loan.
For almost five years now, these institutions have demanded that the
government cut food subsidies, reduce expenditure on education and collect
more money through taxation. As well the government is asked to privatize
state owned factories and mines. Another demand has been that the government
withdraw troops from the Democratic republic of Congo. They were sent there
at the request of the Congolese government. As well, the government is told
not to proceed with the planned confiscation of white owned land and
redistributing it to land-less Blacks.
The same story is repeated in Nigeria. Here the government has been asked to
reduce fuel subsidies, cut spending on schools and hospitals and speed up the
privatization of state owned companies, especially the oil industry. Nigeria
has been required to allow foreigners to monitor the sales and revenues of
its oil. When the government went ahead and cut fuel subsidies and raised
fuel prices by 50%, the workers and students organized a week -long strike
and forced president Obassanjo to lower the increases to 10%. Now the public
sector workers have gone on strike demanding more wages.
A similar situation has occurred in Kenya where the government has imposed a
wage and hiring freeze on teachers. Health care has been hit by cost sharing
programs.
Yet even with these tough measures no aid has been given to these
governments. In the London Financial Times of June 14, 2000 a Harvard
professor, Jeffrey Sachs criticized the demands made on Nigeria. He wrote:
"Until now, the US and Europe have insisted on stringent International
Monetary Fund-led measures, including massive debt servicing ($1.5bn, or 4 %
of GDP), a denial of debt cancellation, crumbs of aid, and demands for the
elimination of fuels subsidies that, as we have seen during the past few
days, are a guaranteed trigger of violence."
James Mutethia can be reached at [log in to unmask]
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