Africa: Free Trade in Natural Resources Bad for Development

The report, released by the World Trade Organisation (WTO) on Jul 23, showed that fish, forestry, fuels and mining products represented 24 percent of world trade in 2008. Fuels account for three-quarters of this trade and have experienced a rapid growth since 2000.

Intra-regional trade among African states remains at exceedingly low levels – an average five percent – while most of Africa’s exports continue to consist of commodities and particularly energy commodities.

Regions that are rich in natural resources mainly ship these to industrialised countries. In 2008, the natural resources exports of Africa amounted to 406 billion dollars, of which 86 percent was for fuels, which represents 73 percent of the total commodities export of the continent.

The natural resource sector is affected by export rather than import measures, according to Michele Ruta, an economist at the economic research division of the WTO.

Import tariffs in more advanced economies are low — even though they tend to increase with the stage of processing — but large exporters usually impose quantitative restrictions and export taxes, Ruga argued.

“The core focus of the WTO system has been the reduction of import tariffs but in the case of natural resources it is not the big issue. Few countries impose import duties on oil, for example,” said Joost Pauwelyn, professor of international law at the Graduate Institute for International and Development Studies in Geneva.

“Production restriction, export duties and consumption taxes are not all violating WTO law but some are harmful and inefficient. A trade body like the WTO should do something about it. Free trade is more important in natural resources than in other sectors,” he concluded.

IPS