28 December 2016

How the EU starves Africa into submission


Over the Christmas week, CapX is republishing some of its favourite pieces. You can find the full list here.

EDITORS’ NOTE: Since the publication of this article, it has been pointed out that its author is wrong to suggest that the EU charges a 7.5 per cent tariff on imported African coffee. Ordinarily, CapX’s editors would discuss such a mistake with the author and ask them to amend their argument accordingly. Unfortunately, Professor Juma recently passed away. Fellow CapX contributor and trade expert Philippe Legrain has therefore kindly provided a clarification, which is available at the bottom of the article.

It is estimated that of all the food items imported by African countries, nearly 83 per cent comes from outside the continent. The rest comes from other African countries.

African leaders are seeking ways to feed their peoples and become players in the global economy.

In the second edition of The New Harvest: Agricultural Innovation in Africa, I argue that Africa can feed itself in a generation. However, efforts to achieve such an ambitious goal continue to be frustrated by policies adopted by Africa’s historical trading partners, especially the European Union.

There are at least three ways in which EU policies affect Africa’s ability to address its agricultural and food challenges: tariff escalation; technological innovation and food export preferences.

African leaders would like to escape the colonial trap of being viewed simply as raw material exporters. But their efforts to add value to the materials continue to be frustrated by existing EU policies.

Take the example of coffee. In 2014 Africa —the home of coffee— earned nearly $2.4 billion from the crop. Germany, a leading processor, earned about $3.8 billion from coffee re-exports.

The concern is not that Germany benefits from processing coffee. It is that Africa is punished by EU tariff barriers for doing so. Non-decaffeinated green coffee is exempt from the charges. However, a 7.5 per cent charge is imposed on roasted coffee. As a result, the bulk of Africa’s export to the EU is unroasted green coffee.

The charge on cocoa is even more debilitating. It is reported that the “EU charges (a tariff) of 30 per cent for processed cocoa products like chocolate bars or cocoa powder, and 60 per cent for some other refined products containing cocoa.”

The impact of such charges goes well beyond lost export opportunities. They suppress technological innovation and industrial development among African countries. The practice denies the continent the ability to acquire, adopt and diffuse technologies used in food processing. It explains to some extent the low level of investment in Africa’s food processing enterprises.

Usually, the know-how accumulated from processing exports such as coffee could be adopted for use on other crops and in other sectors. This in turn would help to stimulate industrial development and generate employment. Being defined as raw material exporters undermines technological innovation in the wider economy, not just in agriculture.

The second example where EU policy undermines African agricultural innovation is in the field of genetically modified (GM) crops. The EU exercises its right not to cultivate transgenic crops but only to import them as animal feed. However, its export of restrictive policies on GM crops has negatively affected Africa.

The adoption of restrictive policies across Africa has been pursued under the pretext of protecting the environment and human health. So far there has been little evidence to support draconian biosafety rules. It is important that the risks of new products be assessed. But the restrictions should proportionate and consistent with needs of different countries.

Africa’s needs are different from those of the EU. There are certain uniquely African problems where GM should be considered as an option. Let us look at the examples of Uganda and Nigeria.

The Xanthomonas banana wilt bacterial disease causes early ripening and discoloration of bananas, a staple crop for Uganda.  This costs the Great Lakes region nearly US $500m annually in losses. There is no treatment for the disease, which continues to undermine food security.

Ugandan scientists at Kawanda Agricultural Research Institute have developed a GM approach but their efforts to further their research in the technology are hampered by opposition to it. Those opposed to the technology advocate the adoption of an EU biosafety approach that would effectively stall the adoption of the technology. In fact, some of opponents using scare tactics against the technology are EU-based non-governmental organizations.

The moth Maruca vitrata destroys about US $300 million worth of blackeyed peas in Nigeria. The country is forced to import pesticides worth US $500m annually to control the pest. Scientists at the Institute for Agricultural Research at Nigeria’s Ahmadu Bello University have developed a Maruca-resistant, GM blackeyed pea variety. Nigerian policy makers are hesitant to pursue a technology that they fear might put them on a collision course with the EU.

Pursuing EU-inspired biosafety policies denies Africa the capacity to leverage biotechnology and use it to meet its own local needs. GM technology has wider application in fields such as medicine and can be used in the development of diagnostics.

Zmapp is an example of an experimental drug for use against the Ebola virus that was developed using GM technology. In this case, EU policies on food safety may have unintended consequences of suppressing innovation in Africa not only in agriculture, but also in healthcare.

There are areas of EU-Africa agricultural trade that on the surface appear to offer hopeful signs. One of them is trade in organic produce. In fact, part of the opposition to GM technology is linked to the perception that it might compromise Africa’s export of organic produce to the EU.

The surge in demand in organic produce around the world does offer parts of Africa the opportunity to increase their food exports. Over the last two decades, Africa’s share of world food exports has dropped from 11 per cent to less than 3 per cent. Thailand exports nearly as much food as all of sub-Saharan Africa.

But boosting food exports is not going to be satisfied by dependence on niche organic markets provided by the EU. Africa needs robust efforts to upgrade its agriculture through technology adoption and not simply reliance on the exploitation of Africa’s “cheap ecology”.

To achieve its technological objectives, Africa needs to partner with countries such as the United Kingdom that have historical knowledge of the continent. But collective EU policies make it difficult for Africa to engage productively with the UK in areas such as agricultural biotechnology.

One of the impacts of the policies has been to nudge Africa towards new partnerships with countries such China and Brazil that have pioneered the adoption of new agricultural technologies. This, in turn, has the long-term potential of eroding trade relations between the UK and Africa. The time has come for the EU to rethink the impact of its policies on African agriculture in general and technological transformation in particular.

A clarification from Philippe Legrain:

Calestous Juma claims that the EU harms African coffee roasters by allowing in imports of “non-decaffeinated green coffee” duty-free while charging a 7.5 per cent tariff on roasted coffee. This is incorrect. 

The EU does charge a 7.5 per cent tariff on imports of roasted coffee from countries to which it does not offer preferential terms. But under its Everything But Arms (EBA) initiative for least-developed countries, almost all African coffee-producing countries can export roasted coffee to the EU tariff-free. Under the Generalised System of Preferences (GSP) for other poor countries, the EU tariff on roasted coffee from Nigeria and the Republic of Congo is a reduced rate of 2.6 per cent.  Far from discriminating against African coffee roasters, the EU gives them privileged access to its market.

Only Gabon, which the World Bank now classifies as an upper-middle income country, is not eligible for either the EBA or GSP preferential rate. And the EU is seeking to negotiate an Economic Partnership Agreement with it and other Central African countries that could offer it preferential terms too.

African farmers benefit from being able to export raw coffee to the EU. While Africa would benefit even more if more coffee was roasted there before export, the EU is not to blame for the fact that it isn’t. Since roasted coffee has a short shelf life, the continent’s poor roads and ports are big impediments. Intermittent electricity and water supplies and high energy costs also make roasting problematic.

Calestous Juma is a professor of the practice of international development at Harvard Kennedy School. He is author of The New Harvest: Agricultural Innovation in Africa.