Year Trade system Partners Features 1957/58 Rome Treaty Members of the EEC Six and collective colonies. (a) Essentially an extension of French colonial monopoly to EEC colonies (b) 1963-1975 Yaoundé Convention EEC and ex-colonies A reciprocal trade system that extended aspects of the French Protocol and the late colonial system (price support, for example) and denied policy space. 1975-2007 Lomé Convention The EC and ex-colonies, including hitherto excluded countries Non-reciprocal preferential system with a price-stability scheme and a commodity protocol 2007- Cotonou Agreement (Economic Partnership Agreement, EPA) EU and the Economic Community of West African States (ECOWAS) (c) Free-trade system under which 75 percent of ECOWAS imports from the EU are to be liberalized over 20 years The EEC Six were the founding members of the European Economic Community (Belgium, France, Italy, Luxembourg, the Netherlands and West Germany). As France had the most colonial assets, the inclusion of former colonies into the EEC as part of the European integration project under the Rome Treaty primarily entailed the inclusion of French colonies. The EEC’s trade system with former colonies is fundamentally an extension of French trade monopoly to other EEC countries (see Marcussen and Torp, 1982, Chapter 3; Zartman, Politics of Trade Negotiations between Africa and the European Economic Community, Chapters 1 and 2). Indeed, this was the submission of the General Agreement on Tariffs and Trade (GATT) working group commissioned to investigate the trade system installed under the Rome Treaty (Barnes, 1967). ECOWAS is the regional body of West African countries. Whereas the previous trade systems were negotiated by the ex-colonies as a group, EPAs are negotiated regionally rather than by all of the former colonies, which include members from other regions. (Note: European Economic Community [EEC], European Community [EC] and European [EU] are used interchangeably in this thesis according to timeline).
Heterodox economists such as Erik S. Reinert and Ha-Joon Chang have argued that economic transformation moves the economy away from an asset-based system running on unskilled labour towards a knowledge-based system running on skilled labor. Again, however, there is a manufacturing bias in this submission: the emphasis on technological and knowledge bases requires a separation of agriculture from manufacturing, because the two sectors respond differently to technological changes. According to Erik Reinert, technological innovation in agriculture or products with perfect competition is more likely to reduce prices for consumers than to increase benefits for producers (Reinert, 2005, xii). In contrast, price making in imperfect competitive activities increases the likelihood of producers’ gaining from technological advancement. Furthermore, agricultural activities eventually reach a point of diminishing returns, after which it becomes difficult to improve productivity and input increases relative to output. Speaking of the theoretical contributions of new-trade theory (which basically delineates sectors), Krugman argued that “[i]t’s possible to conjure up examples in which countries are worse off with trade than without, in a way that isn’t possible in pure comparative advantage models.” He concluded that “the clear presumption is that trade is a good thing under increasing returns” (Krugman, 2008, 340; italics mine). Nations that trade products with diminishing returns in the international market will reach the point of intensive production due to the exhaustion of the vital resource(s) needed to cultivate the product in question. Exchanging products produced using intensive methods (an increase in labour or other input), which do not reflect price changes, amounts to a loss from trade. Earlier development economists such as Arthur who arguably created the sub-discipline of development economics in his influential article “Economic Development with Unlimited Supplies of Labour” (Lewis, 1954), followed this separation of sectors in his development model. In the “Lewis model,” also known as the “dual-sector model,” development and structural change are explained in terms of a labour transition between two sectors – capitalist and subsistence. Development occurs when labour (and other production factors) is reallocated away from the subsistence sector to the capitalist sector. Outside the mathematized region of neoclassical economics, there is something of a silent consensus that
so that the gradual suppression of local weavers will result” (quoted in Bassett, 2001: 63; italics mine). What followed was a ban on the sale of raw cotton to local weavers, ultimately leading to the demise of Côte d’Ivoire’s weaving industry (see Bassett, 2001: 27-85). The entirety of French-controlled West Africa was structured to supply France with raw materials to support its industries, confirming Kautsky’s thesis. West African countries were forced or encouraged to abandon long-established modes and systems of production, and to develop crops needed by the colonial power. From the perspective of the colonies, the main outcome of colonialism was a fixed pattern of specialisation in West Africa. To conclude: the reconfiguration of Africa in the era of the new imperialism or the ‘scramble for Africa’ (1870 onward) was a response to changes in Europe’s political/economic system. Although this reconfiguration was accompanied by a language of humanitarianism (inflected toward “civilisation”), the economic outcome was to forcibly direct West Africa’s specialisation toward raw materials needed in Europe. This pattern re-emerged in the post-war A new “partitioning” of Africa following changes in the political/economic atmosphere of post-war Europe was instituted with the same language of humanitarianism (this time inflected toward “development”), and the outcome was a fixed pattern of specialisation in West Africa. Thus for all the talk of a benign ‘civilising mission’ the reality was that Africa was carved out and re-organised ultimately to meet the needs of capitalism in the European core. The second part of the chapter addresses the inflection in the development theory of history from cultural to economic progress. Part 2. The Replication Development Theory of History: Economic Development Why did the colonial system cease to use civilisation as the justification for colonial rule? The short answer is that racist implications underpinned the civilising mission, and Hitler had given racism “a bad name” (Easterly, 2013: 81; Six, 2009: 1105). Clemens Six explained the change as follows: ‘the experience with National Socialism and its race-based ideology discredited colonial racism” (Six, 2009: 1105). Furthermore, the civilising mission directly conflicted with the
the Lomé Convention affected only incentive structure, without directly influencing the economic system, its role in specialisation has rarely been specifically analysed. The sugar case study shows that the interaction between the Lomé Convention and ruling elites’ pursuit of political survival created a misallocation of production resources and eventually a financial crisis. As stated in the introduction, this chapter focuses on the problematic nature of the sectors produced or preserved by this interaction. A detailed case study of cocoa cultivation in Ghana and Côte d’Ivoire is presented in the next sub-section. Although the Lomé Convention and the cocoa sector were not directly connected, the link between the trade system and political elites’ incentive structure affected West African cocoa production because the sector is centralised and thus controlled by political elites. Therefore, the trade system indirectly affected the government’s policy on cocoa cultivation. Case Study of Diminishing Returns in Cocoa This case study illustrates the risk of intensive production (and increase in poverty among cocoa planters) in Ghana and Côte d’Ivoire following the exhaustion of the production factor of forestland Cocoa beans are the main export product of Ghana and Côte d’Ivoire, and the product most vigorously promoted in the Lomé trade experiment (Hewitt, 1983; Aiello, 2002; Martin, 2002: 26). In addition to the market advantages offered to ACP cocoa producers in the EC market (e.g., 6.1 percent protection for cocoa paste, 4.2 percent for cocoa butter fat and oil, and 2.8 percent for cocoa powder), cocoa and coffee accounted for the greatest part of the scheme (EEC 1984; European Commission, 1997: 8). This is according to the negotiations of ruling elites with the EC. Côte d’Ivoire and Ghana are the two main global producers/exporters of cocoa. Between 1975 and 1989 (Lomé I to III), 51 percent of STABEX funding (the price stabilisation scheme of Lomé convention) was allocated to cocoa and coffee, and Côte d’Ivoire alone received more than 20 percent of the entire STABEX from 1975 to 2000 (among 71 ACP countries) due to the country’s concentration in cocoa (Martin, 2002: 26). The EC also financed cocoa-development projects in Côte d’Ivoire and Ghana through its European Development Fund (EDF) series of National Indicative Programs/Country Strategy Papers (NIPs/CSPs).
domestic political elites’ pursuit of survival, the first part of the chapter demonstrate how the EU used political survival of ruling elites to impose the EPA on West African countries. That is, unlike the Yaoundé Convention and the Lomé Conventions, in which ruling elites used provisions like price support to safeguard existing economic systems, the EU’s EPA proposal (which initially met with opposition from ACP elites) is based on the threat that the continued protection of minimum economic performance is based on the signing of the EPA. The second part of the chapter assess the main impact of EPA on (1) market access to the EU (including its protection of existing economic systems or minimum economic performance) and (2) economic diversification in West African countries. To start from the second objective, the main impact of the EPA, under the Cotonou Agreement, there was a major shift in the patterns of trade between the two regions: for example, the EU’s abolition of price support and quotas (for products such as sugar, banana and pineapple) reduced the means of gaining trade advantages (or securing minimum economic performance) to tariffs alone (e.g. zero tariffs as opposed to 20 percent under the Generalized Scheme of Tariff Preferences (GSP) for bananas). This exposed West African sectors to possible competition in the EU market – if, for example, the EU were to sign FTAs with more competent suppliers. Such competition can only be avoided in products in which West African countries are dominant in the global market and which also have a tariff advantage (e.g. cocoa beans). In Ghana and Côte d’Ivoire, products such as bananas and pineapples, which have been produced exclusively under EU protection since independence, might be in the process of erosion (however, signing the EPA is predicated on maintaining their advantaged position in the EU market). The argument regarding market access is that the historical market preferences offered in the trade agreements have shrunk. Ordinarily, the erosion of these preferences would be a positive development, because Ghana and Côte d’Ivoire are not competitive in such products, and halting their production could provoke factor reallocation through threat to ruling elites. However, I argue that the EPA (which amounts to a liberalisation of 75 percent of West Africa’s imports from the EU) in itself prevents diversification in two ways: first, by reducing policy space; and more importantly, by restructuring West African countries towards similar diversification schemes (regional obstruction).
so, there is an argument to be made that Nkrumah’s development effort was not exactly a failure, as it is generally conceived. As documented in Chapter Five, there was a sharp disconnection between the policies of Nkrumah and his military replacement, in that the military government was devoted to proving the failure of the Nkrumah regime (partly to justify the military coup and their ruling position). The military government, for example, expelled foreign technical advisers manning the factories and mechanised farms created under the diversification scheme (1,100 Russians and 430 Chinese), such that even a minor breakdown of equipment brought factories to a halt, especially in the 1,205 mechanised farms established as part of the diversification scheme (Dunbabin, 1994, 282). It was this calculated attempt to undermine Nkrumah’s diversification effort that rendered the effort a failure. To return to the issue: Ghana joined the trade system in the Lomé Convention (1975), which marks the end of the comparative study. In the Lomé Convention, ruling elites in West African countries sought to guarantee existing economic systems by obtaining a promise from the EC to institutionalise price stabilisation for existing export products (through STABEX) and to continue the preferences of the Yaoundé Convention. However, as former British colonies joined the trade system in 1975, products that were not part of the Yaoundé Convention became part of the protection scheme under the Lomé trade system. The inclusion of new protected products under the Lomé Convention affected resource allocation in former French colonies (Ravenhill, 1985). Sugar is the example used in this study. A sugar protocol was created under the Lomé Convention, comprising a quota system wherein the EC promised to pay more than world-market prices for ACP sugar. Whilst this protocol broadly reflected the extraversion policy under the Yaoundé Convention and French colonial policy in the late 1950s, the introduction of the sugar scheme (borrowed from the British Commonwealth sugar program) was new to the former French colonies. Therefore, only three years after the Lomé Convention, 66 massive sugar complexes were in construction in ACP, of which six were planned in Côte d’Ivoire. The allocation of resources to sugar production turned out to be an instance of misallocation, causing crisis in Côte d’Ivoire. The sugar case shows the distortion of economic incentives in
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