Trade and Investment will play a critical role in the COVID recovery and has the potential to concretise the EU’s ambitions to deepen EU-Africa partnerships, write Barry Andrews, Soraya Rodriguez, and Charles Goerens.
Barry Andrews, an MEP with Renew Europe, is a member of the Committee on International Trade and of the Delegation for Relations with South Africa. Soraya Rodriguez ( MEP, Renew), is a member of the Committee on Women’s Rights and Gender Equality and the Committee on the Environment, Public Health and Food Safety. MEP Charles Goerens is the Renew Europe coordinator in the Committee on Development.
One striking element of the EU’s new trade policy is its emphasis on a renewed partnership with the African continent. The Commission’s communication published in February, which outlines this new strategy, makes 29 references to Africa compared to just 11 references to China, two to the US and one single reference to the UK.
The EU already has strong trading relations with the African continent, which stem from our historic links. The EU is the largest export and import partner for trade in goods with Africa, accounting for 31% of exports and 29% of imports.
In Northern Africa, the EU has free trade agreements with Algeria, Egypt, Morocco and Tunisia and in sub-Saharan Africa 14 countries are implementing Economic Partnership Agreements (EPAs).
Others benefit from unilateral schemes, which give privileged access to the EU market such as the Generalised System of Preferences (GSP), GSP+ and the Everything But Arms (EBA) scheme. Finally, in December of last year, negotiators reached a political agreement on the new Partnership Agreement that will replace the Cotonou Agreement.
This EU-Africa partnership will be more important than ever in the post-COVID context.
The public health crisis is being experienced differently in the two continents, with Africa seemingly escaping the worst of the health effects initially, but suffering greatly from the secondary effects of the pandemic (unemployment, rising food insecurity, poverty etc.)
The same will be true of the economic recovery, which is why anticipating these disparities and acting pre-emptively to prevent further inequality is crucial.
As Pamela Coke-Hamilton, Executive Director of the International Trade Centre told the INTA committee last month, for every per capita dollar spent on stimulus in LDCs, developed countries spend $580, and development trajectories have been set back by decades in some cases.
One of the consequences of the pandemic is that global foreign direct investment (FDI) flows have plummeted. Whilst the decline is steepest in developed countries, the decline in developing countries is hugely significant and will have long lasting repercussions.
For example, in 2020 FDI flows to Africa fell by 18% according to the United Nations Conference on Trade and Development’s (UNCTAD) Investment Trends Monitor. Furthermore, this trend is expected to continue with a sharp reduction in greenfield project announcements (- 63%) already being observed.
This is deeply concerning as this type of investment is crucial for the development of infrastructure and production capacity, and therefore for Africa’s recovery prospects.
This makes the Commission’s proposed sustainable investment initiatives in the Trade Policy Review particularly timely.
These initiatives are expected to take the form of stand-alone investment agreements or as part of the modernisation of existing trade agreements, and could cover a wide range of investments, in sectors ranging from manufacturing to financial and business services.
They will also be designed together with development cooperation tools such as the External Investment Plan.
Here, the combination of financing and technical assistance is expected to induce reforms, which will lead to the improvement of the business environment and investment climate. This will be done with a view to promoting cross-regional integration and closer EU-Africa trade relations as the AfCFTA advances.
The 6th European Union – African Union Summit is due to take place later this year. The Heads of State and Government in attendance should seize the opportunity to further strengthen their partnership based on shared values and shared interests.
An economically strong Africa is good for Europe and vice-versa, providing markets and opportunities for sustainable growth and recovery.
The aim of the trade relationship between the two continents must be to ensure that the benefits of trade are shared evenly and that trade cooperation goes hand in hand with efforts to achieve the Sustainable Development Goals (SDGs).