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Africa Must Liberalize Internally

Trade matters, and fair trade matters in particular. The British economist Paul Collier took time to talk with Alexandra Schade and Michael Kröber about trade liberalization and the merits of economic sanctions.

The European: How fair is fair trade?
Collier: First of all, it is very sensible for anybody concerned with development to be concerned about trade. Trade really is more important than aid. And so getting the basis for trade right is indeed a very important thing to focus on. I think there has been a tendency of the fair trade movement to sometime focus too much on particular issues. Fair trade coffee obviously did not increase the demand for coffee. It just switched it from one type of coffee to another type of coffee. The demand of coffee which has been registered as fair trade goes up. The demand of coffee which has not been goes down. So the price of fair trade coffee goes up whereas the price of other coffee goes down. Now that is okay depending on who is actually producing all this coffee. The essence of fair trade is to certify a chain of transaction. So be to credible it has to happen in an environment where governance is good enough to be trusted. Fair trade is a very worthy goal and I don’t want to be too critical of it, but anything to do with the economics of trade can be a bit tricky.

The European: So, if those farmers who produce fair trade products get higher prices for their products, would that not lead poor farmers to actually try to produce fair trade products as well?
Collier: Well, let’s hope. The danger is that all that takes such a long time that in the meantime they are actually poorer. But all this is a diversion from the much larger issues of trade policy where we really need a fair trade movement to get involved. I mean the centerpiece of Europe’s trade policy towards Africa is the economic partnership agreements. So far that has been a euphemism because there have not been many signs of partnership. Africans have been very hostile to what Europe has offered them. Some of that hostility is pretty understandable because the economic partnership proposals from the European Commission really need to be improved. In particular, what they have been demanding is that Africa liberalizes its import tariffs preferentially in favor of Europe. If Europe manages to bully Africa into doing that, it will be very bad news for Africa.

The European: What would that mean for Africa?
Collier: Suppose a European firm is competing with a firm from South Korea and they are both selling the same product. And suppose that the European product is more expensive. But now the South Korean firm would have to pay tariffs when the good was sold in Africa but the European firm would not. So the Africans would end up choosing the European product even though it costs more. And that would be very bad for Africa’s terms of trade. I don’t think you will find a single academic economist supporting that idea that Africa should liberalize preferentially in favor of Europe. But that is what European Commission trade officials have been demanding – ostensibly on our behalf – and we need to tell them that they should not be doing that.

The European: In your opinion, what way is there to improve the economic partnership between Europe and Africa?
Collier: What Europe should be offering to Africa is to say: “Yes, we give you better market access into Europe but in return you Africans should follow the European model and deepen economic integration amongst yourselves.” Africa has been very slow in liberalizing internally. Very often the barriers of trade within Africa are bigger than the barriers facing outsiders. And that is what fair trade should be all about. It is unfair of Europe to demand from Africa that it worsens its terms of trade by giving Europe preferential access. That is the message to the fair trade movement. Trade really matters and fair trade really matters. Right now, the European Commission trade officials are negotiating with Africans and trying to force them to accept the worse for their terms of trade. They are doing that on our behalf and we should stand up and say we don’t want that.

The European: The war in Libya has often been cited as a humanitarian military intervention. Especially in Europe there was the desire not to repeat the mistakes of the Rwanda conflict. Do you think that the term humanitarian intervention in general is appropriate? What is the economic and political incentive for foreign governments to actually intervene in humanitarian conflicts?
Collier: Obviously, that is a complicated area in which on the one hand we want to avoid another Rwanda and on the other hand we want to avoid another Iraq. I think that in the end Libya was pretty well judged. If you remember the start of the military intervention was in response to the very public and murderous threat by Gaddafi that the opposition would be killed if it were found. If we did nothing, we would end effectively being complicit in that very public threat to murder the brave people who are trying to force a little change in Libya. What we did was to say we are not sending in any troops. We are just going to neutralize the huge military advantage that Gaddafi’s army and air force had over the rebels by preventing Libya’s air force from operating and trying to neutralize the army’s heavy weaponry. Once that we had done that, all the people within the Libyan army who did not want to fight for Gaddafi were able to defect. The Libyan army was not defeated, it fell apart. I think that is quite a good model. And in fact, the main intervention in Libya was not military at all, it was financial.

The European: You mean the freezing of Gaddafi’s money?
Collier: That’s right. Libya was not the first example of that. The first example was Gbabgo in Côte d’Ivoire. The former president had lost the elections, refused to accept the results and was then ousted. That was very much led by the African Union and the Central Bank of West Africa. All the money was cut off Gbagbo’s government and hence cut off his army. There was no international military intervention but because the money was cut off, his army basically refused to fight for him. He got a much bigger army than this little Force Nouvelle in the north, but the Force Nouvelle easily won because Gbagbo’s army refused to fight. To my mind, the lesson from this is: if you get the financial sanctions right, you don’t need much military opposition in order for the army itself to gradually defect. That is a much more encouraging scenario then the choice of whether to send troops in or not.

The European: In your book “The Bottom Billion” you describe a 40% chance that a post-conflict situation might lead to further conflict within a decade. Speaking of Syria and Libya and the Arab Spring: how do you estimate the chance of the Arab Spring revolutions to establish lasting peace and prosperity?
Collier: This 40% risk of return to civil war is much more pertinent in South Sudan. That is where you might want to really worry. The striking thing of the North African revolutions is that there was actually very little fighting. Tunisia was a peaceful transition; Egypt has been a peaceful transition. I would hardly call Libya a civil war – very rapid implosion of the regime forces, no people rushing to join Gaddafi’s forces. What it has been through is a transition to democracy and we know that those can be very messy. Democracy takes a long time to get established because first of all it is not about elections. It is about institutions and institutions take a long time before they become credible. I expect North Africa will have a long and messy process of trying to build real credible democratic institutions. None of these countries had long periods of civil war, Algeria did but is has not been through the transition. The civil war context is much more relevant for South Sudan; it is more relevant for Iraq which is basically still in conflict and for Afghanistan which obviously never got out of it.

The European: How do you build up these institutions?
Collier: I don’t think that there is any fast track way of building credible institutions. People have got to come to believe in these institutions. I think there are three components, all of which have to happen. One is rules, one is institutions to implement the rules and one is a critical mass of people who understand the rules and therefore support them. The rules you can get in through laws. You need laws for independent election commissions; you need laws which give minorities rights. Then you need dedicated institutions, like independent election commissions whose job is precisely defined and well understood. They implement the laws. But then the whole thing fails unless you build a critical mass of citizens who understand why those rules and those institutions matter for democracy. The good news from North Africa is that it is really possible now for ideas to reach a lot of people, a critical mass of people.

The European: What would a critical mass be? That sounds very vague.
Collier: There is a minimum number of people needed to make these institutions function. Now what is that minimum number? It varies according to the power structures in each society. In Egypt the power now seems to be somewhere between the army and the street. All those people who forced the Egyptian revolution in the street, they need to understand what is meant by democracy. And it’s not just getting rid of the army. It is also rights for minorities for example. That seems to be a really important issue in Egypt at the moment where you got the Coptic Christians very much being victimized. And the Islamic parties have to face the issue that the discourse of democracy means rights for Coptic Christians. And that needs to be inserted into the debate but at the moment I am not hearing that.

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