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Africa remains left out

Hilke Fischer / sri
February 6, 2015

The EU and the US are negotiating their proposed free trade agreement behind closed doors. Third countries, for instance in Africa, have no say in these talks, although the deal could have a far-reaching impact on them.

Containerschiff Guinea-Bissau
Image: DW/M. Pessoa

It would be the largest free trade zone in the world - The Trans-Atlantic Trade and Investment Partnership between the EU and the US, which jointly account for a third of global commerce. The proposed pact is expected to raise per-capita income worldwide by some 3 percent, according to various estimates.

In Germany, for instance, the deal is projected to usher in an income rise of 3.5 percent. However, not all regions worldwide are believed to benefit from such a development, with per-capita income in many African nations estimated to decline by similar levels.

A crucial role is played in each country's costs-versus-benefits balance from TTIP by the composition of its goods and services exports, and the intensity of its trade ties with Europe and the US, said Gabriel Felbermayr, professor at the Munich-based Ifo Institute.

Felbermayr and his colleagues at the institute have conducted research on the likely impact of the trade deal on developing countries. Whether the deal will have a positive or a negative impact on African economies will be determined by the final wording of the agreement, Felbermayr said.

Kakaoproduktion in der Elfenbeinküste
The impact on the Ivory Coast's cocoa industry depends on the final wording of the dealImage: picture alliance/Photoshot

African value added under pressure

At a first glance, the pact doesn't appear to have an affect on exporters of unprocessed products and raw materials. In a country like Ivory Coast, for instance, exports to TTIP states make up around a quarter of the nation's gross domestic product. The African country's coffee and cocoa, in particular, find their way onto dining tables in the US and Europe. The trade deal may not change this, since neither the US nor Europe grow these products.

The so-called rules of origin, however, could make it hard for countries like Ivory Coast to export processed goods. These rules, for example, require that at least 50 percent of the value added of a product must be produced in a TTIP state, in order to benefit from tariff reductions.

If Ivory Coast processes cocoa beans to chocolate by itself, then it could find fewer customers due to the strict rules of origin. For German companies, it would be cheaper to process cocoa in Europe and then export to the US. "There is a danger that developing countries would either be forced out of Western supply chains, or TTIP would at least make their access to these value chains difficult," Felbermayr told DW.

The gradual industrialization of Africa, which is a way out of poverty for millions, could therefore be jeopardized. The impact spreads across sectors and countries ranging from Ivory Coast's chocolate industry to textiles from Kenya and Ethiopia, and automotive components from South Africa.

Anbau von grünen Bohnen in Kenia
Kenyan green beansImage: T. Karumba/AFP/Getty Images

It would therefore be good for these countries if the negotiation parties were to agree to broaden the rules of origin as far as possible, said economist Felbermayr. It would also benefit many European companies, which have a large part of their production base in countries outside of the EU and the US, he noted.

Avoiding discriminatory standards

Furthermore, it is important that the product standards, which TTIP would harmonize between the US and the EU, should also apply to products from third countries, said Felbermayr, underlining that these standards should not be discriminatory.

"For instance, if Kenya exports green beans and other vegetables to Europe that are in accordance with EU standards – in terms of pesticide exposure, for example – then this compliance with EU standards should suffice for Kenya to export them also to the US," he suggested.

This is, however, not guaranteed, he said, since TTIP - under the current draft of the agreement - mainly looks at whether the product concerned is made in the EU or in the US. Feldmayr stressed that TTIP negotiators should be pressured to also take the interests of third countries into consideration.

WTO is being bypassed

Countries such as Kenya, which with its beaches and national parks lure thousands of Western tourists, could benefit from the deal. When the TTIP leads to increased prosperity in Europe and the US, then people would be more willing to holiday in these places and buy more products from them.

The pact would have both positive and negative effects for Africa, indicated Felbermayr. "There are some countries that are more at risk because of the mix of goods they produce. And other countries that rely more on sectors such as mining and tourism are more likely to benefit," he said.

Fotosafari in Kenia
Increased prosperity in the West could provide a boost to Kenya's tourism industryImage: D. Kitwood/Getty Images

Kenyan economist David Owiro of the Institute of Economic Affairs terms the proposed agreement as "unfair." The deal that the EU and the US are negotiating has a global impact, but the rest of the world has no say in these talks, Owiro said. "These talks should take place in a multilateral framework such as the World Trade Organization (WTO) where developing countries at least have a formal say," he said.

The TTIP can be interpreted as an attempt to circumvent the WTO. Still, it might be possible to influence the ongoing TTIP negotiations for the benefit of Africa, say experts.

"It would be entirely legitimate for developing countries to be involved in the discussions about the positive and negative consequences of the deal, and to be allowed to make recommendations," Owiro told DW.

This view is shared by economist Felbermayr. There should be a right to information for developing countries so that they know what the two sides across the Atlantic are negotiating about. "What is needed is a proper dose of good will on the part of the EU and the US," he suggested.