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World Bank urges Africa to reject EPAs with EU

posted 16-November-2012

The Chronicle, Ghana

World Bank Urges Africa to Reject EPAs With EU

By Masahudu Ankiilu Kunateh

14 November 2012

The World Bank’s Chief Economist for Africa, Shantayanan Devarajan has added his voice to the call on African countries to reject the Economic Partnership Agreements (EPAs) that the European Union (EU) is currently trying to force on them.

He, however, said African countries including Ghana should rather sign migration agreements with the EU that have the effect of benefiting both parties equally.

The World Bank’s Chief Economist for Africa told participants, at a well attended African Economic Conference in Kigali, Rwanda.

"When a low-skilled African moves to Europe, their productivity and their earnings quintuple. The other fact is while Africa’s young population is growing, Europe’s is shrinking. This seems like a no-brainer," Devarajan told a plenary session discussing youth employment for inclusive growth.

The World Bank estimates remittances by Africans citizens living mostly in Europe and North America to have reached $40 billion in 2010. "But the true size is believed to be far larger," according to a World Bank study on remittance markets in Africa.

Remittances, the study added, "are associated with reduction in poverty, improved education and health outcomes, and increased availability of funds for small business investments. Remittances represent a positive and relatively noncontroversial outcome of migration."

According to Devarajan, "You can quintuple the productivity of low-skilled Africans and have them do the jobs Europeans need because there aren’t that many young people to do it in Europe. It is a win-win [situation].

So let’s get the European Union, instead of signing EPAs, to sign migration agreements to bring low-skilled Africans to Europe to do the jobs that need doing."

The EU has presented EPAs as replacements for previous non-reciprocal agreements such as the Lomé Conventions and the Cotonou Agreement, which expired in 2007. However EPAs have come under fire for being unfair to African economies, with critics arguing that EPAs will only succeed in exacerbating the bulging youth unemployment that African countries have yet to devise effective strategies to deal with.

"Africa must pay attention to these economic partnership agreements that the EU is forcing on Africa because that is another major job killer," Prof. Chukwuma Charles Soludo, the Chairman of the African Heritage Foundation, warned participants.

"Europe says that policy is not good for the poorer European countries and that’s why they are not being subjected to the same policies, but Africa has to sign on them. We are worrying about rain that beat us yesterday, but look another one is looming," he added.

According to Prof. Soludo, what’s more worrying about EPAs is they don’t have any significant net benefit to Africa.

"Already 33 out of the 47 countries are LDCs [least developed countries] and therefore qualify to export ’everything but arms’ to the EU with 100 per cent duty-free and quota-free. So, what is the additional benefit to these countries?" Prof. Soludo wrote in an analysis of EPAs he published earlier this year.

"For the remaining 14 non-LDC countries, it is curious why the EU cannot accede to the request by the African Union to treat Africa as the world’s archetypical LDC region and grant the same EBA to all of the countries.

"Or, alternatively, there are several proposals about benchmarking and sequencing the conditionalities/liberalization to synchronize with economic advancement of these remaining 14 countries.

So far, these proposals have not been accepted by the European Commission even for discussion," he adds further in his analysis.

However, closing the door on EPAs is only part of what Africa will need to do to find jobs for its young people, whom the African Development Bank’s 2012 African Economic Outlook estimates will be a billion strong in the labour market by 2040.

African countries will have to, according to Soludo, "design national job strategies and plans where most of the public policy is actually designed to focus on the job-creating capacity of each policy be it public procurement, be it in the area of a special type of targeted industrial policy actions."

Moreover, they will also have to focus on how to improve the productivity of the informal sector rather than to try to cripple it, added the World Bank’s Devarajan, because not only does it employ a high number of people as it is, the majority of young people are headed into this sector.

"The policy towards the informal sector should not be to try to make them formal," Devarajan argued. "In fact the only policies we have right now are policies that say let’s try to formalize them. All that will do is create even more informal firms. So you really need to target the productivity of the informal firms rather than just to try and make them formal."

The seventh African Economic Conference brought together approximately 500 leaders and scholars from Africa and around the world to debate the continent’s prospects for sustainable and inclusive growth in the context of the international economic crisis.

Organized by the African Development Bank, in partnership with the United Nations Development Programme and the Economic Commission for Africa, the conference is the most comprehensive event held each year on Africa’s economy and development.

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