Trade and its Discontents

If you live in Nairobi and you have observed keenly, you may have noticed a sudden influx of visitors to the city this week. You may also have noticed certain areas that have been discreetly cordoned off, and others where the cordons are more overt. The World Trade Organisation 10th Ministerial Conference starts today in Nairobi, and thousands of delegates are in town to take a stab at the intractable issues of trade, agriculture, market access, trade in services and the like.

On the whole, a global conference coming between Jamhuri Day and Christmas, which mostly involves foreigners, and whose process and language is often impenetrable, bypasses most of us. This is especially when the working document includes language such as this: ‘The G33 has submitted two papers on the SSM in the context of MC10. These are contained in documents JOB/AG/44 and JOB/AG/49 dated 19 October and 18 November 2015, respectively. These proposals seeking a ministerial outcome on the SSM specifically touched the following four areas: (i) special dispensation for LDCs and SVEs; (ii) product coverage; (iii) remedies breaching pre-Doha bindings, and (iv) application and duration of volume SSM.’ Even seasoned negotiators’ eyes may glaze over, but these talks are important for very many reasons, and the fact that they’re happening here in the capital city should give us an opportunity to look at trade issues much more carefully.

Global trade is the glue that holds the world’s economic system together. There is no single country in the world that can produce all the goods and services that its citizens need to survive, thrive and develop. Autarky – where a country can produce all it needs within its borders – has often been the fantasy of extremist politicians and economic planners, but it doesn’t happen in reality, and even countries such as North Korea lean heavily on China for their economic survival.

The problem with global trade is that every nation tries to secure an advantage for itself, and the attempt to do so has natural limits. In addition, different constituencies within the country’s economy have different reasons to distort global trade – to either ask for protection from the world, or to demand that other markets be prised open for them.

Lest you think this is all esoteric, we were given the perfect lesson about global trade back in June and July this year, when there was an explosion of political sentiment around sugar imports. Setting aside who was right and who was wrong, and whether all sides were putting out verifiable truths, what happened then was the perfect micro-lesson in global trade theory, in all its intractable glory.

First was whether Kenya was right in allowing sugar from other countries into its markets. Under trade rules drawn up by the Common Market for Eastern and Southern Africa, a body in which Kenya is one of the strongest members, sugar was supposed to be imported freely into the country, as long as it was manufactured in another member state. Kenyan farmers had sought protection from this free flow, arguing that they needed time to ensure that they would be as efficient – and thus as low-cost – as producers from countries such as Sudan and Uganda. When President Kenyatta announced that sugar from Uganda would come into Kenya under these open rules, the outcry was deafening, and included accusations of his attempt to kill the livelihoods of an entire group of peasant producers. These complaints would be familiar to any observer of agricultural politics. Farmers in France have made it an annual tradition to barricade Paris with their tractors, often spilling milk in the streets and becoming a nuisance to protest any attempt at removing farming subsidies, and thus opening them up to genuine global competition.

The other issue exposed was whether Kenya, a net exporter to the region (primarily in manufactured goods), and thus a beneficiary of more open trade, could afford to close off one part of its markets. How could the country increase its standing in regional trade, while still taking into account, and protecting the rights of, vulnerable farmers? The issue was never properly resolved. Only last week, the country received a one-year extension of COMESA protections, meaning that farmers had another twelve months to enjoy the coddling of a closed market, while hopefully working furiously to ensure that when the barriers are removed, they can compete on the same cost base as producers from other countries.

The issues negotiators will be dealing with in Nairobi for the next four days are of similar nature, except they are much more intractable, of much longer standing, and with much more powerful constituencies and forces behind them. Inasmuch as the global economy depends on resolution of these issues, don’t hold your breath for a comprehensive deal come Friday afternoon.

So expect to see our bright-eyed visitors on the streets of Nairobi looking progressively more haggard as the week goes on. But in true Kenyan fashion, make them feel at home.


Also published in the Daily Nation on 15 December 2015 

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