Can African Development Be Accomplished By Trade??

Development Through Trade

Business Day (Johannesburg)
OPINION
6 August 2007
Posted to the web 6 August 2007

By Nkululeko Khumalo
Johannesburg
HIGH-ranking officials, including US Trade Representative Susan Schwab, and representatives from African countries that are beneficiaries of the Africa Growth and Opportunity Act (Agoa), descended on the Ghanaian capital Accra to attend the Sixth Agoa Forum on July 18-19.

Agoa is a non-reciprocal preferential trade scheme whereby the US offers the 38 eligible countries (including all Southern Africa Customs Union member states) duty and quota-free access to its market. The scheme covers more than 6000 products.

The forum is meant to celebrate Agoa’s achievements and seek to help the beneficiaries maximise existing market access opportunities, and involves Africa’s business community as well as the civil society organisations. While Agoa has had a very positive effect since it came into force in 2001, it is high time African countries started thinking about the future of their trade relationship with the US beyond 2015, when the current arrangement expires.

This is imperative, particularly for Sacu countries that are among the biggest Agoa beneficiaries. Though Sacu is the US’s second largest trading partner in Africa (Nigeria, whose exports are mainly petroleum products, occupies the first spot), there is no contractual agreement to guarantee and extend the market access opportunities they currently enjoy.

Further, the current relationship does not include the fastest growing area of trade, namely trade in services. Nor are there legally binding pacts to regulate important issues in bilateral economic relations, especially investment and intellectual property rights.

The US-Sacu free trade agreement (FTA) negotiations that began in June 2003 aimed to address this situation. Through the FTA, Sacu sought to achieve Agoa-plus liberalisation (by locking in and possibly extending current market access); address non-tariff barriers affecting their US-bound exports; spur regional integration in Sacu; and strengthen relations with the US, possibly as an insurance against potential failure of the Doha Round.

The US, on the other hand, aimed to use the FTA to eliminate barriers to its goods and services exports in the Sacu market, strengthen intellectual rights, build alliances for the WTO negotiations, and level the playing field vis-€-vis the European Union, which benefits from the Trade, Development, and Cooperation Agreement they signed with SA.

However, owing to differences between the parties on a range of issues, including the scope and anticipated depth of commitments, the parties finally decided in April 2006 to abandon the FTA in favour of a less contentious and politically palatable piecemeal approach (which they hope will lead to a fully-fledged FTA in future).

In terms of this plan, Sacu and the US will sign a Trade, Investment and Development Cooperation Agreement (Tidca) that would enable them to consult one another with a view to facilitating two-way trade and investment, conclude mutually beneficial agreements , and work towards reaching an FTA. The parties are reportedly making headway and were expected to sign the Tidca on the margins of the Agoa Sixth Forum.

While the Tidca idea seems workable, there is a danger that it may end up replacing the original ambition to have an FTA instead of being a necessary building block towards it. There are concerns that it might simply provide an excuse for failure to resume negotiations when the US Trade promotion Authority is renewed in future.

To be meaningful, the Tidca should have a clear agenda on how the parties envisage the resumption of actual FTA talks. Sacu countries, in particular, should ask themselves whether they intend to wait for Agoa to expire — in which case they will have less bargaining power — before they consider the FTA or not.

In my view, it would be in Sacu’s interest to actually drive the Tidca process to ensure that they lay a solid foundation for an FTA whose terms are favourable to them. The argument that services and trade related issues should be excluded from the FTA because the region does not enjoy harmonised policies is beginning to ring hollow in light of the SADC-EU Economic Partnership Agreement negotiations. All Sacu countries have no objections to negotiating on these issues, barring SA and Namibia. Tellingly, even Lesotho, a least developing country that is not required to make any commitments on services and regulatory issues in terms of WTO rules, is apparently not threatened by them.

Clearly, the Agoa Sixth Forum was a good opportunity for both celebration and deep reflection, especially for Sacu. African countries do not have much luxury to procrastinate — the Doha Round remains semi-paralysed and Agoa and even the Generalised System of Preferences (another preference scheme catering for developing countries in general, not just Africans) are not permanent. Therefore Agoa should not be seen as a viable alternative to a contractual agreement, which typically should have a development component.

Finally, it is not clear which course Agoa beneficiaries will take post-2015, but what is certain is that unilateral preference schemes have an expiry date.

Nkululeko Khumalo is senior researcher: trade policy at the South African Institute of International Affairs.

Op/Ed: Three Hard Truths About the World’s Energy Crisis

Three Hard Truths About the World’s Energy Crisis

East African Standard (Nairobi)
OPINION
7 August 2007
Posted to the web 6 August 2007

By Jeroen Van Der Veer
Nairobi
When it comes to the future of energy, the world needs a reality check.

Contrary to public perception, renewable energy is not the silver bullet that will solve all our problems. Indeed, in the decades ahead, three hard truths will generate turbulence in the global energy system.

We all know that global demand for energy is growing, but the reality of how fast has not really sunk in. The first hard truth is that demand is accelerating. Energy use in 2050 may be twice as high as it is today or higher still. The main causes are population growth, from six to more than nine billion, and higher levels of prosperity.

China and India are entering the energy-intensive phase of their development. This is the point when people buy their first television set or car, board a plane for the first time and start to consume much more transport fuel and electricity.

And most people in China and India have never boarded a plane! The pace of change is startling. Last year, China enlarged its electricity capacity by roughly the equivalent of Great Britain’s entire stock of power stations.

The second hard truth is that the growth rate of supplies of ‘easy oil’, conventional oil and natural gas that are relatively easy to extract, will struggle to keep up with demand.

Just when energy demand is surging, many of the world’s conventional oilfields are going into decline. The problem is not the availability of resources as such. Overall, the International Energy Agency believes that there could be roughly 20 trillion barrels oil equivalent of oil and natural gas in place.

This includes conventional and unconventional resources, such as oil shale and sands. In theory, this is enough to keep us going for about 400 years at the current rate of consumption.

Carbon emissions unacceptable

In practice, though, less than half can be recovered with existing technology. The world now produces 135 million barrels oil equivalent a day of oil and natural gas. We could still raise that number with new technologies, but only gradually and certainly not indefinitely.

The third hard truth is that increased use of coal will cause higher carbon dioxide emissions possibly to levels we deem unacceptable. The IEA believes that coal use could grow by around 60 per cent in the next 20 years.

The main reason that countries turn to coal is energy security. China and India will continue to exploit their domestic coal reserves to be less dependent on oil and gas imports. So will the US, which now generates more than half its electricity with coal.

But burning coal for electricity generates twice as much carbon dioxide as burning natural gas. Gasifying coal, instead of burning it, reduces emissions, but still this is not enough to solve the problem.

In our battle against greenhouse gas emissions, taking the carbon dioxide out of fossil fuels, especially coal, is crucial. It will be a huge challenge: To keep greenhouse gases in the atmosphere well below 550 parts a million, the upper most bound of where science tells us we should be.

Shell works with models that assume carbon capture and storage is installed at 90 per cent of all the coal and gas-fired power plants in the rich countries by the year 2050, and at 50 per cent in non-OECD countries.

Time is short: It will take a decade to test the technology in pilot projects before we can move to larger-scale projects. So what about renewables such as wind and solar energy?

The share of renewables in the global energy mix could go up from its low base of about one per cent to about 30 per cent by the middle of the century. The number of wind turbines, for instance, may grow from about 30,000 today to one million and their capacity will be significantly larger than the ones we have built.

This assumes that the hunt for technological breakthroughs to make renewables cheaper will be successful. But even then, fossil energy will still make up most of the remaining 70 per cent.

However, this is out of sync with what opinion polls show that most Americans and Europeans believe that renewable energy will have replaced most fossil energy by 2050. As the hard truths make clear, this simply is not going to happen.

That is why energy efficiency is important. More than half the energy we generate every day is wasted. In an average car, about 20 per cent of every unit of petrol goes into moving a car forward, the rest is lost as heat.

For an aircraft during take-off, the figure is eight per cent. Only 35 per cent of burnt coal in a power plant becomes electricity, the rest is lost as heat. What is the point of producing more energy if we continue to waste most of it?

Instead, we should aim to become twice as efficient in our use of energy by the middle of the century. That is entirely feasible, provided that the will is there.

The world’s energy system is entering a turbulent phase, and the only question is: How turbulent? A unified world could respond more effectively than a fragmented one.

The writer is the Royal Dutch Shell Plc CEO