Trump’s tariffs, Africa’s trade and regional cooperation 

TALKS ON TARIFFS IMPOSED by President Donald Trump on goods coming from many countries into the United States recently have dominated many economic and political discussions. Among the complaints are statements like such tariffs will estrange the US, the US will experience higher costs of imported commodities within the domestic market, tariffs will not induce a revitalisation of industries in the US or that such tariffs are preparing the ground for trade wars. Every argument undeniably will have its underlying assumptions. But the leader of a country that is aware that its economy is being undermined under a globalist market is very unlikely to fold the arms in surrender. Following President Trump’s argument during his first term in office, the North American Free Trade Agreement (NAFTA) was a trade agreement between Canada, Mexico, and the US that came into effect on January 1, 1994, eliminating or significantly reducing tariffs and other trade barriers among the three countries as well as facilitating the flow of goods and services. Trump voiced out that the arrangement was unfavourable to the US. He therefore scrapped it and later established a replacement known as the United States-Mexico-Canada Agreement (USMCA). 

The US president would have been expected to channel his tariff battle through the World Trade Organisation (WTO). But, here is a man that has a limited tenure of office and has a lot of promises to fulfill for his country. If President Trump truly wants to reset the US economy through trade as he has promised, the WTO route would be long, winding and will be dotted with many potholes and speed bumps. His impatience could therefore be understandable. With tariffs and trade wars making the headlines and attention focused on the US as the agent provocateur in the present circumstance, it appears the world is overlooking the fact that the WTO has been struggling to effectively regulate large economies over a fairly long period of time. A combination of factors are responsible, including the consensus-based decision-making process, creating its own intrinsic difficulty in rules enforcement against powerful member countries. Moreover, countries’ lack of transparency on subsidies and other economic policies and the enduring debate over special and differential treatment (SDT) for developing countries, including China, constitute causes for apprehension between trading partners. The WTO has been facing a big challenge on reining in subsidies that distort trade and investment. 

If the WTO has been unsuccessful with big countries, its trouble is further compounded when a country like China still tries to argue in favour of SDT despite its humongous international trade volume. Notwithstanding the failure of the Doha Development Agenda — aimed at reforming the international trading system, since 2001 — after many years of trials and experimentations, the WTO still faces constraints related to its ability to fully address the needs of developing countries and to resolve trade disputes effectively. The developing countries still remain disadvantaged. Its dispute settlement system has faced challenges in enforcing its rulings and in adapting to new forms of trade disputes. 

It is doubtful if any of the foremost economies will fully surrender their fate to the WTO to determine for them, especially as the WTO’s rules often lack clarity and transparency, particularly regarding subsidies, which are used by governments to support industries and firms. It could be a significant uphill task to attempt to know what various countries are doing on subsidies, the industries involved or the  extent of their support. These create difficulty in identifying and responding to trade-distorting practices. Apart from the issue of transparency, the process of WTO’s dispute settlement and the mechanism can be cumbersome and time-consuming. Enforcement of WTO’s rulings against powerful members have been historically weak and effective. Some powerful countries — especially China — are alleged to be abusing the SDT, which is expected to give developing countries longer lead times for implementing commitments. China, in particular, has been accused of taking unfair advantage of the SDT for exemptions on certain products despite having risen to become a major global economy although it received some special treatment during its WTO accession. Some argue that its current economic clout makes it inappropriate for it to continue benefiting from SDT rules designed for less advanced players.

The economic cooperation of five big economies, including Brazil, Russia, India, China and South Africa (BRICS) is a major landmark on the global economic landscape. Notwithstanding the interest of other countries, leading to its recent expansion and its promises as an alternative to the present unipolar world economy dominated by the US, there are fears that the benefits will be disproportionately skewed towards China to the disadvantage of others. In particular, the fact that China itself is not as open to the world market as it would want the world market to be open to it constitutes a major dilemma. Although the BRICS economic bloc seems to be gathering some momentum, it remains fraught with some limitations. It is very unlikely that the honeymoon will last ad infinitum as some member countries may have business and economic priorities and experiences that are at cross purposes sometimes along the line. 

The free trade Utopia may not be that smooth sailing within the BRICS bloc. For instance, very recently, it emerged that the war-weary Russia has — since its war with Ukraine began, three years ago — been losing significantly to China in the global automobiles market. Such a realisation underpins the importance of rational national interest first before a group interest. Economic cooperation, which means collaboration between countries to foster economic integration and development through trade, finance, and other initiatives should not override individual countries’ national interest. Although such cooperation aims to create conditions that facilitate international trade and financial integration, ultimately leading to long-term economic benefits for participating countries, it should not displace any individual country’s uniqueness. Unlike the European Union (EU) in which member countries have surrendered the headquarters of their seven key institutions to four different cities (Brussels in Belgium, Frankfurt in Germany, Luxembourg City in Luxembourg and Strasbourg in France), it is unlikely that China, for instance, will allow its parliamentary headquarters to be in Brazil, nor will India allow its judicial headquarters to operate from Russia. 

African countries’ economies are divided into 54 small compartments, most of them with small trade volumes and small negotiating powers on the global scale. Considering the sizes of Djibouti, Equatorial Guinea, Eswatini, Eritrea, Gabon, Gambia, Lesotho and Togo, they are grossly at great disadvantage if they have to negotiate foreign trade individually. They all need a larger body to boost their strength. Even larger African countries have proved inadequately equipped to negotiate alone. Regional integration, a process in which neighbouring countries cooperate through agreements, common institutions, and rules to achieve shared economic, political as well as social goals, has therefore become an imperative for Africa. This comes at some costs, often involving reducing trade barriers, facilitating the movement of goods, services, capital, and people, and harmonising policies. Among the common examples, whether the EU or the defunct NAFTA, some countries happen to be greater burden bearers. During the NAFTA years, according to President Trump, much more of the burden was borne by the US while the other members shared the benefits. Before Brexit, the UK, Germany and France bore a greater burden. The other two were left to carry more weight after Britain’s exit. Whether or not Germany’s economy is better for it, or if France is doing so well under the EU arrangement remains putative. At least, following the commencement of the Russia-Ukraine war, Germany has been forced to take some key consequential decisions based solely on its EU membership rather than on purely Germany’s national interest. An example is that of the freezing of the Nord Stream 2 Baltic Sea gas pipeline project that was  designed to double the flow of Russian gas directly to Germany. Pandering to the EU, Germany had to shut down such an arrangement, while the EU began to look for gas elsewhere further afield.

The African, Caribbean and Pacific (ACP) cooperation with the EU under the ACP-EU framework has been going through some operational headwinds. From the perspective of institutional challenge, the ACP-EU Economic Partnership Agreement (EPA) has proved to have disruptive effects on trade despite its being designed to promote regional integration. Over time, it has been observed that it can disrupt existing regional groupings within the ACP region, potentially hindering rather than promoting trade and development. This requires analysis in greater details in the next part of this series. While, on paper, the EPA between the ACP countries and the EU should ordinarily provide an opportunity to accelerate ACP global and regional trade integration and as an important tool for development and the eradication of poverty, however, a vast majority of African countries have excessive regulation that hinders them from taking advantage of trade. The Economic Community of West African States (ECOWAS) is crumbling. On January 29, 2025, three members officially left ECOWAS after forming their own confederation, known as the Alliance of Sahel States (AES). That will ultimately hurt the ECOWAS Trade Liberalisation Scheme (ETLS) and will introduce tariffs into the AES-ECOWAS trade relations. To boost individual country’s strengths at the continental level, the African Continental Free Trade Area (AfCFTA) was formed. The AfCFTA Agreement is the treaty establishing the African Continental Free Trade Area and providing for Protocols on Trade in Goods, Trade in Services. The marginal progress trailing the AfCFTA since its commencement in January 2021 goes beyond slow. Since 2021, the AfCFTA has faced several constraints, including challenges with implementation, non-tariff barriers, and the need for robust infrastructure and trade facilitation measures. It still grapples with challenges of external dependencies, the complexity of the agreement, and geopolitical considerations.

Even under the ETLS, Nigeria has been at a great disadvantage as a dumping ground for goods imported through other countries with Nigeria as final destination. This type of trade perversely takes advantage of the provisions and concessions under ETLS to Nigeria’s disadvantage. What then is the basis or rationale for condemning the US tariffs if the Trump administration tries to recalibrate the country’s trade terms with other trading partners? African leaders and analysts have to get their house in order first before voicing disapproval of US trade policies that are formulated and implemented in the country’s interest. It is time for African leaders to move the various trade agreements they have signed from ceremonial stage to implementation stage.

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