Economic policy options for African economies in advent of Brexit, Trump

Sunday February 19 2017

US President Donald Trump speaks during a

US President Donald Trump speaks during a conference at the White House in Washington, DC, on February 15, 2017. PHOTO | SAUL LOEB | AFP 

By ZADDOCK SYONG'OH
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There are interesting coincidences in the Brexit and “America first” movements. First is their timing and ideological convergence, second is the affinity between their prime movers, and third is that the three men —  Mr Boris Johnson and Mr Nigel Farage of Brexit, and President Donald Trump of “America first” — all share German ancestry.

The Brexit and “America First” movements are driven by ideological impetus that is isolationist and inward looking. In both the UK and USA, traces of nationalist discriminative stances against the “foreign” manifest in several policy areas but most prominently in regard to migration.

Strong anti-migration sentiments were evoked during the Brexit campaigns with claims that migrant workers from the rest of the European Union were taking away jobs from British citizens.

President Trump and his followers not only claimed that migrants had “stolen” jobs from Americans, but also that migrants and migration per se are phenomena that threat national security; avenues for foreign terrorist attacks.

Ideological rhetoric to fan populist emotions against foreigners and migrants worked excellently both for Brexit and Mr Trump’s presidential election.

Matters have, however, mutated and gone beyond migration policy, to encompass trade, market access and cross border investments. The spill-over has broader effects on foreign policy; international relations and national “sovereignty”.

Emanating from the original campaign rhetoric, the new US and British administrations are now under pressure of political expediency to adopt near extremist nationalism; an inward looking world view that appeals to the aroused appetites for change among their constituencies, hence the clarion calls like “Brexit means Brexit” and “only America first always”.

TRADE ARRANGEMENTS

Ms Marine Le Pen who promises to “make France great again” by leading her out of the EU (Frexit) has a good chance of becoming France’s next President. If it happens, her victory would add momentum and critical mass to an emerging worrisome ultra-nationalist ideology, among the world powers.

From an economic standpoint, this will put into jeopardy the very essences of multi-lateral (World Trade Organisation) rule-based trade and regional economic community regimes.

In their place, “domestic self-sufficiency” and two-way “scratch my back, I scratch yours” bi-lateral frameworks will emerge as preferred trade arrangements.

A new world economic-order is in the offing, putting utopian dreams of globalised free trade and borderless movements of labour and capital in limbo.

Nothing underscores better the emerging “new normal” than President Trump’s pledge to revoke and renegotiate the North American Free Trade Agreement, with neighbouring Mexico and Canada, the Transatlantic Trade and Investment Partnership, between the US and EU and the Trans-Pacific Partnership proposal between Asia Pacific region states that include the USA.

Where does all this leave Africa, and how should Africa respond?

Firstly, the foundational principles of post-Uruguay WTO trading system, anchored on trade without discrimination (most favoured nation-MFN) rules; the principle of national treatment, (treating foreign and local goods and services equally); fair competition, (regarding highly contested retention of protectionism on farm subsidies by developed economies); all are in suspense.

QUALITY CHALLENGES

Of particular interest to Africa (and other developing economies) is that the WTO Development (Doha) Round launched in 2001, that focuses on helping developing countries overcome their supply side constraints in respect to production costs, and both quality and quantity challenges is on its death bed. As of June 2012 the future of Doha Round remained uncertain.

With Brexit and “America first” we can as well forget further progress on the Doha agenda and WTO re-negotiations on Uruguay Round set-rules. Brexit and likely Frexit will also put in suspense ongoing East Africa Community negotiations with EU on Economic Partnership Agreements. Given that EU is also the biggest funder of African Union troops in Somalia, Kenya should be concerned.

Secondly, international trading nations will henceforth focus more on domestic markets and bi-lateral trade deals negotiated outside the multilateral (WTO) frameworks.

For Africa, however, in addition to bi-lateral trade arrangements she also ought to embrace regional economic communities and ensure Common Markets’ Customs Unions work.

In this regard Africa must acknowledge that unlike developed economies, most AU member economies lack domestic consumer numbers and purchasing power to generate beneficial economies of scale for trade-production and investment.