G8: How the rich world short-changes Africa

Norm Dixon

The mass media hype about ``a new deal between rich and poor", in
response to the powerful Group of Eight industrialised countries' plan
to cancel multilateral debts owed by 18 mainly African countries, has
led many people to believe that a new era of international social
justice has dawned. The deal is expected to be ratified by G8 leaders in
Scotland on July 6-8.

The uncritical endorsement of the plan by large international aid
agencies like Oxfam, the driving force behind the Make Poverty History
(MPH) coalition of non-government organisations, and big-name
celebrities like Bob Geldof and Bono, has reinforced this hope.

Across the globe, there has been a genuine outpouring of popular
solidarity and sympathy with the people of Africa, symbolised by the
tens of thousands who attended, and the millions who watched, the Live 8

Unfortunately, celebrations to mark what British deputy PM Gordon Brown
described as ``the intention of world leaders to forge a new and better
relationship between the rich and poor countries of the world'' are

The G8's promises fall far short, and contradict important aspects, of
MPH's demands as detailed on its web site
(<http://www.makepovertyhistory.org/whatwewant/>) - ``Trade justice'',
``Drop the debt'' and ``More and better aid''.

MPH demands that ``the unpayable debts of the world's poorest countries
should be cancelled in full'' and ``poor countries should no longer have
to privatise basic services or liberalise economies as a condition for
getting the debt relief they so desperately need''. Yet, the much
publicised British government-brokered deal only cancels the
multilateral component of the debt of 18 of the world's poorest
countries (with another 20 that may become eligible in the future). But
this ``relief'' comes with the very strings that MPH opposes -- strings
that will ensure that poor countries remain trapped in dire poverty.

As the grassroots anti-debt coalition African Jubilee South explained on
June 14, eligibility ``involves the implementation of stringent free
market reforms such as [health and education] budget cuts, financial and
trade liberalisation, privatisation'' and, as the G8 states explicitly,
``the elimination of impedients to private investment, both domestic and

(For a detailed critique of the G8 debt and aid scam, visit

      Trade justice?

MPH calls for rich countries to stop imposing trade rules that prevent
poor countries from choosing ``the best solutions to end poverty and
protect the environment''. ``These will not always be free trade
policies'', MPH notes. Yet, even as Brown, Geldof and MPH were lauding
the G8's ``historic'' debt decision, rich-country governments were
pushing ahead to impose ``trade liberalisation'' on African and other
Third World countries.

The European Union is now negotiating bilateral ``economic partnership
agreements'' (EPAs) with the 77 African, Caribbean and Pacific (ACP)
countries. These will replace the existing agreement that gives ACP
countries some preferential access to EU markets. Under the new free
trade agreements, the EU insists that ACP countries throw open their
markets to EU products.

The British advocacy group Christian Aid in April warned that, ``with
their diverse range of products and muscle in the marketplace, European
producers can outstrip ACP rivals in their domestic markets. European
producers have enjoyed decades of subsidies, support and protection from
their governments and have built strong, lean, competitive industries.
ACP countries ... stand to lose existing industries and the potential to
develop new ones as products from Europe flood their markets.''

The US government too is pushing for bilateral and regional trade
agreements with African countries to gain greater access for US

The EU, US and other Western countries spend billions every year to
subsidise their capitalists' agricultural exports, which are often
dumped in African and other Third World markets at ridiculously low
prices. This practice lowers world commodity prices, upon which poor
countries depend for survival.

In 2003, governments in the 30-member Organisation for Economic
Cooperation and Development (OECD), another rich-country dominated club,
subsidised farm exports to the tune of $350 billion (compared to
providing just US$22 billion in aid to Africa). That's almost $1 billion
a day! The EU gives its agribusinesses around $100 billion a year in
subsidies and grants. The obscene scale of this comes into focus when
you consider that each European cow gets $3 a day in subsides, while 50%
of Africa's people must live less than $1 a day.

The US government in 2002 alone provided $3.7 billion in subsidies to
its cotton agribusiness, three times the entire US aid budget for Africa
at the time. It is estimated that African cotton-producing countries --
which include Benin, Burkina Faso, Chad, Togo, Kenya and Mali -- in 2004
lost up to $400 million in potential export revenue as a result. In
2003, Malian cotton farmers received just 33 cents per kilogram for
their cotton, whereas subsidised US cotton producing corporations
received $1.45.

US rice growers receive a US government refund of 72 cents in every
dollar they spend to produce rice, according to the British Financial

The Financial Times on June 22 reported that the Mozambican sugar
industry, which employs 26,000 people, is in jeopardy due to the EU
subsidies and tariffs. This is despite the fact that Mozambique can
produce cane sugar for between $108 and $144 a tonne, whereas European
beet sugar costs $577 a tonne to produce. The EU gives subsidies to its
big sugar companies, such as British multinational Lyle and Tate, of
$990 million a year.

The EU imposes import tariffs of more than 200% on non-EU cane products.
This impacts harshly on sugar-producing African countries like
Mozambique, Ethiopia, Malawi and Zambia. On top of this, European
overproduction of sugar results in 5 million tonnes being dumped on
world markets, driving prices down, in many cases to below the cost of
production in Third World countries. A small amount of sugar is bought
from poor countries at preferential prices, as a result of a 2001
agreement, but the EU wants to slash the price it pays by 40%.

In 1990, many Senegalese made a decent living growing tomatoes. After
the introduction of ``free trade'', prices farmers got for their crops
were halved and production tumbled from 73,000 tonnes in 1990 to just
20,000 in 1997. The market was flooded with cheap bottled European
tomato products, which caused local factories producing tomato paste and
other value-added products to close.

In Ghana, the local poultry industry collapsed, impoverishing 400,000
small farmers, after the market was flooded with cheap, subsidised EU
and US frozen chickens, which sell at half the price of fresh local
chooks. In 1992, local farmers supplied 92% of the market; by 2001 their
share had plummeted to just 11%. Ghana's attempt to raise tariffs to
prevent this dumping has been blocked by the IMF and WTO. The EU gives
annual subsidises its poultry producers of $52 billion a year. Cameroon
and Senegal have also had their markets flooded with cheap EU chooks.

      Real cost of 'free' trade

On June 20, Christian Aid released a study
(<http://www.christianaid.org.uk/indepth/>) that revealed that the last
20 years of trade ``liberalisation'', a condition for aid, loans and
debt relief, have made sub-Saharan countries a massive $272 billion
worse off than they otherwise would have been. The figure represents the
income lost as a result of being forced to open their markets to heavily
subsidised imports from rich countries.

This amount is about the same as sub-Saharan Africa has received in aid
during the same period. It could have paid off much of the region's $300
million debt, or allowed all of its children to go to school and be
vaccinated against major diseases, Christian Aid notes.

In 2000 alone, sub-Saharan Africa lost income worth $28 billion, enough
to halve the number of people living on $1 day, based on United Nations
estimates. While in 2000, Africans lost almost $45 per person due to
trade liberalisation, aid per person was just $20.

The Christian Aid study found that contrary to promises of the advocates
of free trade, when poor countries phase out measures such as tariffs,
quotas and import duties designed to protect their local industries and
consumers, imports climb sharply and local producers are priced out of
the market by cheaper, often subsidised, Western goods. This also
depresses prices.

Demand for the things that African countries export -- cash crops, raw
materials and minerals -- tends to stay relatively constant. Income from
any small increase in exports is lost via ever-falling prices. For
example, from 1980 to 2000, the world price of sugar has fallen 77%,
cocoa by 71%, coffee by 63% and cotton by 47%. So the overall impact is
less local production and less income. This simply compounds poor
countries' debt problems as they have to borrow because they must spend
more than they earn.

After 14 years of ``free trade'' policies, Ghana's GDP in 2000 was
almost $5 billion. Christian Aid estimates that without
``liberalisation'', its GDP would have been $850 million higher. Ghana
has lost $10 billion since 1986, which works out at $510 per person.

Between 1991 and 2000, Uganda experienced a total loss of $5 billion.
Christian Aid found that, without liberalisation, its 2000 GDP of almost
$6 billion would have been more than $735 million higher than it was.
That's more than its combined health and education budget for that year.
In 2000, aid to Uganda amounted to $35 per person; it lost $32 per
person that year through ``free trade''.

Mali's GDP in 2000 was $191 million less than it otherwise would have
been without trade liberalisation,; $191 million is more than Mali's
annual health budget. Losses since 1991 add up to $1.4 billion.

 From Green Left Weekly, July 6, 2005.