| 2.1 |
Sub-Saharan Africa’s share of world commodity markets has fallen by
54% and that of the Pacific countries by 33% over the period 1975-93, in contrast to a 39%
rise in the share of the Asian developing countries. The ACP countries’ share of
world production of cocoa beans has also fallen by 17%, coffee beans by 45% and palm oil
and kernels by 67% over the same period of time. This, along with falling shares in EU
imports, is often interpreted as evidence of domestic policy failures by the ACP
countries. |
| 2.2 |
But falling shares in world markets in cocoa and palm oil and kernels
occurred despite a 30% and 40% increase, respectively, in ACP production. Declining shares
in world markets were the result of huge increases in production and exports by Indonesia
and Malaysia. |
| 2.3 |
Commodities are subject to low price and income elasticities of demand,
and the excess of world production over demand exacerbated the long run trend of falling
commodity prices and export earnings instability. Over the period 1984-94, real commodity
prices for all ACP commodity exports except tropical hardwoods, copper and manganese, have
fallen (and 1984 prices were 27% below 1977 levels); in the case of coffee and cocoa by
10% to 11% p.a. |
| 2.4 |
ACP countries could try and offset falling trend prices by raising
productivity and there are certainly lessons to be learned from the Asian countries in
achieving this. But, as we have seen, there is a potential ‘fallacy of
composition’ in this argument in that if most major producers follow this strategy,
then world prices will fall even faster and countries will simply ‘invest in
decline’. |
| 2.5 |
A more promising strategy is vertical export diversification, that is,
adding value by processing raw materials. For example, ACP exports of cocoa butter obtain
twice the unit value of cocoa beans, and coffee concentrates etc., two and a half times
the price of coffee beans. |
| 2.6 |
The experience of the ACP countries in exporting processed primary
products to the EU, however, has not been encouraging, despite preferences, with low or
negative growth rates in both volume and value and with significant instability around
these trends (e.g. in coffee and cocoa products, cotton fabrics, veneers and plywood).
PMDT (processing, marketing, distribution and transport) is mentioned several times as an
objective in the Convention, but no concerted action has been taken both to identify
problems and produce practical remedies. This should be a priority in a new Convention. |
| 2.7 |
Sub-Saharan African countries depend on the EU market for an average of
58% of their exports, a much higher proportion than, for example, Latin America on the US
market (23%). On the other hand, it is important to recognise that only ten of the SSA
countries have increased their dependence on the EU market over the period 1970-1993. |
| 2.8 |
ACP exports to non-EU markets have grown more quickly than exports to the
EU; for example, exports of foodstuffs to Japan and in intra-developing country trade,
ores and metals to the US and developing countries, and manufactured goods to the US.
Pacific ACP countries have sharply decreased their dependence on the EU to a quarter or
less of total exports, as have Dominica, Grenada and Surinam in the Caribbean. Thus, while
the EU market will remain important for many ACP countries, they may well be able to
increase the growth of exports by increasingly diversifying to non-EU world markets. |
| 2.9 |
The growth of exports can also be substantially increased by diversifying
exports by product. Contrary to the pessimistic view, the ACP countries have increased the
proportion of non-traditional products in exports. Twenty-five ACP countries have
increased the share of manufactures to 20% or more of non-oil exports. The share of
non-traditional exports in non-oil exports to the EU has increased from 8% in 1987 to
13.5% in 1994, generating substantial increases in employment as well as increasing the
growth of output and the supply of foreign exchange. |
| 2.10 |
But ACP export concentration ratios are still well above comparable
countries. Only 17 out of 42 ACP countries have recorded a decrease of 20% or more in
their concentration ratios over the past 25 years, and only 8 countries have increased the
number of products (3 digit SITC Rev.2) exported. Also, only one or two countries usually
account for over 60% of non-traditional exports to the EU of any given product and export
volumes are often highly variable. |
| 2.11 |
The important conclusion of this analysis for a future ACP-EU Agreement is
that supply side policies need to be considerably strengthened. Even countries like Ghana,
with a good record of implementing structural adjustment policies, have found that while
generally helpful, structural adjustment policies are not sufficient on their own to
sustain export diversification. A new agreement must therefore provide the integrated
framework of assistance required by the private sector in ACP countries. |
| 2.12 |
Where domestic conditions have encouraged exports, then preferences can
provide a useful additional incentive. This has not only taken the form of a price
advantage over less preferred countries, but has also taken the form of total or partial
exemption from non-tariff barriers (notably exemption from MFA quota restrictions). The
development of the clothing industry in Mauritius is a particular example of a
preference-induced rise in exports, but the ACP have also recorded high shares in EU
imports of processed cocoa, fisheries and horticultural products, some fruits and hardwood
veneers, where there has been a useful margin of EU preferences over non-ACP countries. |
| 2.13 |
Systematic analysis of the effects of preferences, however, shows only a
small positive relationship between the growth of ACP exports and the margin of
preferences for fresh vegetables, and no significant relationship for fruit, processed
products, cut flowers, and fisheries products. The most important single factor explaining
the growth of ACP exports of non-traditional products was the growth of the EU market.
Also, non-price factors such as quality and reliability are often more important than the
margin of preference. |
| 2.14 |
The trade, industrial, agricultural, financial, technical and regional
co-operation provisions of a new agreement must therefore be closely integrated to assist
the development of a diversified export capacity in the ACP countries. |
