Time to Re-think the EU – Africa Strategy? Exploring the 'sustainable'​ trade dimensions of the European Parliament’s proposal for a ‘new’ partnership

In March 2020, the EU launched its Africa Strategy, identifying “boosting trade and sustainable investments in Africa” as one of its priority action areas. The Strategy also states the Union will provide “political, technical and financial support for the African Continental Free Trade Agreement” and reaffirms the shared interest in “a stable, rules-based multilateral trading system centred on the World Trade Organisation”. Green growth, green finance and sustainable agriculture also feature prominently.

One year later (in March 2021), the European Parliament proposed a new EU-Africa partnership. Building on an own initiative report, the Parliament calls for adjustments in the light of the impacts of the coronavirus.

The EU is Africa’s largest trading partner, representing 30,7% of Africa’s total trade (2019). It has been the largest source of FDIs and together with the Member States, is the largest provider of Official Development Assistance (ODA). The nature of the EU’s trade relations with Africa undeniably has wide implications for the continent. Mapping that trade relationship is relatively complex: the EU has negotiated a series of economic partnership agreements (EPAs) and back in December 2020, political agreement was reached on the Post Cotonou Partnership Agreement. Post Cotonou (which was initialled in April 2021 and the signature of which is anticipated for the end of 2021) focuses on the eradication of poverty and enhancing sustainable development, but also contains provisions on other cross-cutting issues, include climate change and human rights. The EU-Africa Strategy provides context for all these legal agreements.

But is the EU-Africa Strategy still relevant today in the wake of Covid 19? A 2020 African Union Study identified the multiple, potential exogenous and endogenous effects of the pandemic on the continent. Data from the African Development Bank (ADB) states that Africa’s Gross domestic product (GDP) shrank by 2.1% in 2020.

As the world shifts towards securing a green recovery, here’s an overview of some of the changes to the “sustainable trade” deliverables the Parliament is calling for.

Supporting the AfCTA: more targeted support

A flagship project of the African Union, the AfCTA entered into force on 30 May 2019 creating the largest free trade area in the world (measured by number of countries participating) since the creation of the WTO. On 1 January 2021 the 54 parties starting trading under its terms which require the progressive elimination of tariffs and also aims to reduce non-tariff barriers to trade. The second phase of negotiations covers IP, competition policy and investment. The Treaty also establishes a dispute resolution mechanism.

Supporting the AfCTA is one of the core actions identified under the EU-Africa Strategy. The EU earmarked funding to support the implementation of the AfCTA inter alia under the Pan-African Programme and its EU Aid for Trade Programme. It also offers technical assistance.

The European Parliament calls on the Commission to continue its support for the AfCTA whilst emphasising that this should “focus on the development of regulatory frameworks to prevent a ‘race to bottom’ of social and environmental norms”. The Parliament also identifies that the AfCFTA provides a good opportunity to “rebalance the international investment regime so that it becomes responsible, equitable and conductive to sustainable development.” In other words, the Parliament asks for a more targeted approach in line with its general call to move away from the donor-recipient dynamic.

The EU is not the only source of external support for the AfCTA: the United Nations Economic Commission for Africa (UNECA) is playing a role. In March 2021, the AfCFTA Secretariat and the UN Development Programme (UNDP) signed a strategic partnership to promote trade as a stimulus for Africa’s socioeconomic recovery from the COVID-19 crisis.

As to the Parliament's request for a general rebalancing of the investment framework, the EU is also participating in the WTO Structured Discussions on Investment Facilitation for Development and made a proposal back in 2020. The report of a negotiating meeting held on 11-12 May indicates that participating members made good progress, with a view to achieving a concrete outcome at the 12th Ministerial Conference at the end of the year.

Sustainable Investments and Green Finance: restoring momentum

The EU- Africa Strategy indicates that the “EU should partner with Africa on green finance, on sustainable energy and energy efficiency through the launch of a ‘Green Energy’ initiative, building on the recommendations of the High Level Platform for Sustainable Energy Investments in Africa”.

The High Level Platform was created back in 2018. The EU is currently supporting sustainable energy projects through a range of schemes (see here) including by financing projects under the Africa-led renewable energy initiative (AREI).

Yet investment, especially FDI, has taken a dive in the context of the Pandemic. LDC’s appear to be the worst affected. The Committee for Development Policy (CDP)’s April 2021 Comprehensive study on the impact of COVID-19 on the LDCs in April 2021 highlighted that according to the latest IMF estimations, in 2020, the net FDI flows per capita are projected to decline in 22 of the 29 sub-Saharan LDCs. A 2020 UNECA survey on the impact of Covid 19 on African Trade Finance likewise indicates a widening of the trade financing gap.

The European Parliament points out that “private investment and public-private partnerships are essential for achieving the SDGs”. The Resolution also notes that “raw materials accounted for 49 % of total EU imports from Africa” and that “the extractive sector is the most important driver of foreign direct investment in Africa”. Promoting investment should stay high on the agenda.

The European Parliament is not alone to try to restore momentum. The Declaration from the May 2021 Summit on the Financing of African Economies emphasised the need to build on existing initiatives. Likewise in a Communiqué of 5 May 2021, the G7 Foreign and Development Ministers’ Meeting reaffirmed their “commitment to working with developing partner countries, especially in Africa, to achieve a green, inclusive and sustainable recovery from COVID-19, aligned with the 2030 Agenda and the Paris Agreement…”

Sustainable Food Systems: challenging times

The EU-Africa strategy recognises that “trade between the EU and Africa plays an instrumental role supporting opportunities for sustainable food systems.” Balancing consumption and sustainable production is a known challenge for the continent, which confronts long-standing issues relating to food availability and food access. The negotiated text for the Post-Cotonou Agreement also includes provisions to promote inclusive and sustainable growth in agricultural production and productivity, efficient value chains and actions on adaptation to climate change and variability throughout food production value chains.

The European Parliament “stresses the importance of promoting agroecology, agroforestry, local production and sustainable food systems” whilst calling on the EU to “work together with African partners to create synergies between the EU-Africa strategy and Green Deal policies, in particular the external dimension of the farm to fork strategy”. It highlights the extent to which COVID-19 and the ensuing economic crisis have shone a spotlight on the vulnerabilities of the global food system.

On 3 June 2021, the FAO reported that global food prices rose in May at their fastest monthly rate in more than a decade. The index, which tracks monthly changes in the international prices of commonly-traded food commodities, reached its highest value since September 2011 and only 7.6 percent below its all-time peak in nominal terms.

Surges in agricultural prices in the context of the global economic effects of COVID 19 is not unanticipated. A 2015 Study found that real agricultural prices surged during and after the 2008 financial crisis, disrupting the functioning of markets and causing an inflation in malnourished and poor households, especially in developing countries heavily dependent on agricultural imports. But this phenomenon impacts some parts of the world more than others, and Africa bears a heavier burden.

Involvement in the WTO and other multi-lateral fora: broadening the scope

The EU-Africa strategy recalled the EU’s support for the African Union to have enhanced observer status in the WTO and acknowledged the role of multi-lateral engagement, including through the UN. The purpose of observer status for international intergovernmental organisations in the WTO is to enable these organisations to follow discussions therein on matters of direct interest to them. The African Union has observer status on an ad hoc, meeting-by-meeting basis in a number of the Committees.

Of course, individual African Countries are Members of the WTO – in some cases accession was facilitated by the AU in the broader context of negotiating the AfCTA. Members are active in a number of ongoing discussions, including the highly topical discussions on fisheries subsidies.

The EU Parliament also supports securing the relationship with the WTO and adhering to a rules based system. The European Parliament also wants the EU to support Africa’s request to expand the UN Security Council “in order to include permanent representation for the continent”. So greater involvement on the international scene.