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Africa’s Issue: Focusing on the Wrong Kind of “International” Trade

When most people hear ‘international trade,’ what typically comes to mind are jet-setting international businessmen, enormous oil and transport tankers sailing thousands of miles of ocean, or multi-billion dollar deals between large, multinational corporations. While these examples do represent international trade, in truth they represent only the more “glamorous” side of this diverse field, a mere façade for the complexity which lies beneath. What makes up the backbone of international trade is not necessarily deals inked between countries that are split up by oceans or seas, but instead transactions made right in a country’s backyard. In other words, even with such rapid expansion of globalization, thanks to improvements in transportation and communications, geographical proximity is still a dominant factor in trade.

For instance, Canada and Mexico are by far the U.S.’s top two trading partners. Last year, exports to Canada totaled $230.3 billion, making it the largest bi-lateral trading partnership in the world. In the European Union (EU), the World Trade Organization (WTO) estimates that trade between its members will represent 60% of that region’s total.

A recent report by the World Bank highlights a glaring problem: how African nations approach trade. Looking at Europe and North America, inter-regional­ transactions make an effective approach towards international trade — something Africa severely lacks. Thomas Mun aptly stated, “If [we exchange] amongst ourselves, the commonwealth cannot be enriched thereby. And if we exchange with strangers, then our profit is the gain of the commonwealth.”

The problem is that African nations trade with the wrong strangers, those who do not give much consideration to issues of environmental or social welfare. Chinese companies backed by the state have been swarming Africa, promising considerable Foreign Direct Investment (FDI) and workers to build needed infrastructure projects like roads and schools. In return, these multinationals usually get exclusive, long-term deals to the country’s oil. Essentially, the continent’s vast natural resources are being given away with little in return.

Another example of exploited African resources are minerals, such as coltan and colbalt – used to make today’s technological gadgets – copper and gold.  Huge international corporations (or their subcontractors) are currently mining these resources, creating considerable conflicts like the ones  seen in the Democratic Republic of Congo. The famous stories of “blood diamonds” in Sierra Leone and Liberia also come to mind.

True, African countries are recognizing their relative advantages by producing and selling their abundant natural resources more efficiently and cheaply to hungry nations like China or India. The advent of the 2008 financial crisis supports this point. That year, the African continent actually saw increased GDP growth, fueled by exports of minerals to developing countries, like China, who came out of the Great Recession stronger than before. However, while African countries are theoretically doing the right things according to such academics as Ricardo, they are effectively continuing a long tradition of exploitation. The mercantilist policies of the Europeans from the 16th to the 18th century, and later, the colonization of African states, has effectively caused a sort of economic dependence on foreign powers. While today Africans no longer experience the outright burdens of colonialism, they are still shackled economically to the demands of nations overseas.

Africans must cue from their North American and European brethren and look inwards in order to establish a more sustainable and meaningful economy for the future. In other words, Africans should trade more with other Africans. They should create an inter-regional trade scheme recognizing that geographic proximity is more conducive to lasting economic growth.

However, in order to become reality, there must be a strong political will for tighter economic integration within the continent. American-Canadian trading relations are healthy thanks to a mutual understanding of the benefits from trade. They have understood the true nature of Ricardo’s comparative advantage to produce mutual benefits from trade, like Canada’s export of softwood lumber oil to fuel the United State’s abundance of capital. The North American Free Trade Agreement (NAFTA) dramatically increased trade by removing border restrictions, allowing easier capital flows and FDI. Similarly, in Europe, the long and more complex path of close economic integration is highlighted by the 1992 Maastricht Treaty’s goal of a single market under a single currency. Even though today the Euro is facing significant difficulties, the long process of freeing up trade restrictions between EU members has generally been positive and certainly brought the countries closer politically.

Economic integration between African nations would provide the continent with a much needed source of export diversification that is not dependent on large international players thousands of miles away. Today the continent faces inefficient border restrictions and tariffs that hinder trade. There is clearly a problem when a truck needs to be armed with over 1600 pages of legal documents in order to cross a border with basic goods. Yet, a recent (and bold) goal by the African Union to create a cross-continent free trade zone by 2017 is a great start towards economic integration. This quasi-federal system certainly both mimics the early ideals of a tighter Europe and will allow African nations to break free from the glitzy, yet detrimental side of international trade with faraway foreign powers.

–  Alexander Gardinier

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