Posts Tagged ‘free trade

21
Apr
09

Question for Presidents Obama, Hu Jintao and or Pratibha Patil ?

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The challenge:

In order to make Africa the best place to be, we still have some homework to do and therefore I am hoping soon to see your questions for those leaders of nations that will impact the African economies probably most, appear on this blog or you can join my discussion board on facebook under the same title, Africa the place to be.

Here is a statement that may be provocative but hopefully will stir up some discussion:

The Global economic crisis according to some, is the result of the imbalance between Capital and Labor, or if you wish company profit ratios and employee wages. Companies have over-invested and wage increases have not followed accordingly and therefore demand fell short on the supply. Governments wanted to portray economic growth at all cost and found Housing as a target to fill the gap of demand, accepting unsustainable debt levels. The US and the UK copied the mistakes that Japan made earlier and after more than two decades is still trying to recover from.Once the housing bubble burst, we found ourselves where we are today.

Now some also say that Companies have been given too much freedom to outsource labor to low cost countries like China and India as part of free trade and globalization without any oversight. Free trade is seen as part of the problem since the lost purchasing power in the developed world is not compensated by the gained purchasing power in the developing countries where companies have outsourced to.

Early in the crisis President Obama’s administration made some maybe premature statements about “Buy USA made products” and the media picked this up as a possible new wave of protectionism. If the developed countries were to embrace protectionism I am concerned that this will worsen the chances for the developing countries on top of all the other effects that this part of the world will have to deal with as a result of economic imbalance between the haves and the have-not. Global warming effects will hit Africa probably more than any other region while those who contribute to the global warming are outside Africa to mention just another challenge we put on the overloaded shoulders of Africans.

Over 1.7 million Australian jobs  are directly or indirectly connected to exports according to the  Asia Pacific Economic Cooperation (APEC)

fta_factsheet_web_map21

The picture illustrates Australia’s top 10 agriculture export destinations.

In Africa on average Agriculture contributes to more than 85 % of the economic output but exports are still marginal compared to the big players.

How many millions of people in Africa would be able to make a living if their agricultural products could reach overseas markets ? What effect would this additional supply have on the current food prices that clearly indicate the shortage in supply with a world population that is still growing too fast.  So finding additional supply resources in agriculture should not be considered a threat to any current suppliers who cannot cope with the demand anyways.

I still am convinced that free trade and free market access is the only incentive to create a higher value chain otherwise Africa will remain condemned to export raw materials and will never be able to develop industries and services.  Cacao Farmers in Ghana pay 8% duties exporting raw cacao beans, and would have to pay 38% duties if exporting cacao powder. Not a great incentive considering cost of freight and all other competitive disadvantages that the farmers in Ghana have to face ?

fta1

Today US labor is outsourced to China, after finding an even cheaper labor force then in India. As you can see from the illustration of the US Department of Labor, free trade agreements are in place with labor provisions but the current picture does not yet include such provisions with China nor with India.

The African leaders who today have found China as a willing investor,  in my view, should also insist in agreements that provide for a fair deal. South Africa has seen a surge in unemployment as a result of cheap Chinese products being dumped on their markets. Dealing with the World Bank and IMF has never been easy for African leaders. The offers coming from China may be very tempting but like always one should be on alert if cheap and easy money is offered as to what the conditions are and how this will ultimately affect people.

Hopefully we will have pictures where the leaders of the developed world will shake hands with the leaders of Africa, like in the above case between the US and Korean presidents at the G20 in April,  to try and reach free trade agreements with proper labor provisions providing a fair deal for every world citizen.

So who wants to give his or her thoughts on how to handle this issue and what would be the best  question to Mr. Obama, Hu Jintao or Prahib Patil ?

Feel free to comment this blog or to participate in the discussing board on facebook at:

http://www.facebook.com/topic.php?topic=7963&post=30586&uid=87956082428#/topic.php?uid=87956082428&topic=7963

© Desi Lopez Fafié


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