With rebasing, Kenya loses World Trade Organisation funds

Civil Society Lobby Group representatives's 'Our World Is Not For Sale Campaign, Biraj Patnak, India, protest as delegates leave after negotiation meeting was postponed on friday evening during the first World Trade Organization's 10th ministerial Conference in Africa at Kenyatta International Convention Center, Dec 18, 2015. PHOTO: JONAH ONYANGO/STANDARD.

Africa’s least developed countries (LDCs) have received close to Sh7.6 trillion in aid from donor countries to help boost their trade. This is under the auspices of the World Trade Organisation’s (WTO) Aid-for-Trade initiative which was launched in 2006.

But some countries, such as Kenya and Ghana that rebased their economies and were elevated to middle-income status, will now miss out on this package. LDCs in Africa currently number 34 after Kenya and Ghana were knocked out of the United Nations’ list.

Kenya’s GDP per capita — a measure of the full output of a rustic (GDP divided by the variety of individuals within the nation)— is now $1,269. This has propelled Kenya to the superior class of ‘lower middle income’. The ‘lower middle income’ standing is a World Bank grouping of 53 nations whose common revenue lies between $1,036 and $4,085 (GDP per capita).

Kenya is now part of the league of the highest 10 largest economies in Africa, and has surpassed Ghana and Ethiopia which also rebased their economies.

The nation’s GDP is now $55.2 billion, up from $44.1 billion before rebasing — making it the fourth largest financial system in sub-Saharan Africa after Nigeria, South Africa and Angola.

And with donors pledging another Sh32 billion for the 48 LDCs as replenishment to the Enhanced Integrated Framework (EIF) at the start of the 10th WTO Ministerial Conference in Nairobi, some countries like Kenya are up in arms. The Aid-for-Trade initiative launched in 2006 has so far dispersed about $250 billion (about Sh25.5 trillion) and it has mostly gone to developing countries. This is confirmed by Darlington Mwape, a research fellow at the International Centre for Trade and Sustainable Development.

Levels of poverty

As the money begins to flow  to poorer countries, there will be a level of regret in some quarters. Some  critics have argued that rebasing did not really improve the lives of Kenyans. “We need to rethink and  discuss this particular issue,” said the Chief Executive Officer of the Kenyan Agribusiness and Agroindustry Alliance (KAAA), Ms Lucy Muchoki.

Ghana is in the same boat as Kenya. After rebasing, its economy expanded by 60 per cent. Now Ghana’s services sector accounts for 51 per cent of the economy with the one-time leader agriculture making up 30.2 per cent; and the industrial sector 18.6 per cent.

During one of the sessions of the Trade and Development Symposium on Wednesday, there were complaints from a Ghanaian.

“We just woke up one day and we were told that Ghana had become a middle income country,” said the President of the Association of Ghana Industries Mr Tony Oteng-Gyasi.

“Nothing really changed in the lives of Ghanaians. And now we are told that we cannot access certain funds,” he said in reference to the aid-for-trade funds that are given to LDCs.

Nigeria leapfrogged South Africa to become Africa’s biggest economy after rebasing its economy, but the levels of poverty in Nigeria are much higher than in South Africa.

The categorisation of countries into LDC is something artificial. “But there is quite a lot that could be done by the importing countries. There is nothing that prevents the European Union or the United States from giving the same treatment that they give to LDCs to Kenya,” said Bernard Hoekman, Professor and Director, Global Economics in the Global Governance Programme of the Robert Schuman Centre for Advanced Studies, European University Institute in Florence, Italy. He cited the African Growth and Opportunity Act (AGOA), a United States Trade Act, which gives some sub-Saharan African countries preferential treatment to access its market.

Still, Africa and LDCs must speak with one voice in global trade talks.    “Immediately we start to disaggregate we are giving our negotiating partners room to argue against addressing our demands,” said Mwape.

He also insisted that Africa should be active in the WTO groupings if they want to succeed. The agenda for Africa to integrate deeper is a viable solution for increasing Africa’s trade as it is within our hands as Africans.

“The agenda right now is that we should achieve the CFTA (Continental Free Trade Agreement) by 2017,” said Mr Mwape adding that the agreement will create a common market for Africa when it comes into force. “If we achieve that then we will move our intra-African trade from about 12 per cent currently to more than 50 per cent.”

The International Trade Facilitation agreement (ITFA) is one of the best to have come out of the Doha Round.    Kenya became the 60th country to ratify the ITFA.

Doha Round

“Negotiations for the tripartite free trade agreement are complete which brings together Comesa, SADC, and EAC. Negotiation were launched for the continental free trade agreement that will bring together the ITFA, ECOWAS and other groupings,” said Mwape.

Mwape said African countries have gained from their membership at WTO despite all the failed negotiations. “Trade is now a component of those strategies. Based on that we have reformed our rules and regulations to make it possible to trade with the world,” he said.

African countries have also trained their people to understand the global trade regime and improve the standard of  their products. This has provided easier access to the global market. They have also received technical assistance.

“The sort of market access such as Agoa have been facilitated through the rules of the WTO,” said Mwape.

There have been attempts to adjust the mandate of the Doha so that it carries forward the emerging issues such as climate change and sustainable development. These issues were not in the Doha Round.

But for Africa, a deal in agriculture in the 10th ministerial conference would be paramount. “We need to push for the phasing out of subsidies, both export and domestic. This is the biggest barrier for us to compete globally. Seventy per cent of people in Africa are engaged in agriculture,” he said.