| |
Contributions from
the Column
Tribune
Research for humanity
Youth in the fight against poverty
Bitter sugar politics
In fear of Asian competition
1/2005
|
|
[ South-South trade ]
In fear of Asian competition
South Africa is rapidly increasing imports from China and expanding diplomatic cooperation with Beijing. When it comes to trade policy, however, Pretoria is more interested in global solutions in the WTO framework than in new agreements with poor countries. Doing business with rich countries seems promising while there is reason to be afraid of Asian competitors.
[ By Johannes Dieterich ]
The invasion began in the EP Shopping Center in the Ellis Park neighborhood of Johannesburg. At one point in time, a small Chinese shop selling shoes and acrylic blankets was set up in the unpretentious concrete block. A little later, it was joined by a second shop, which has plastic ware and other petty items on offer. Within a year, the entire complex was taken over by Asian traders who sell goods from the People’s Republic.
Ellis Park was just the beginning. Today, Chinese traders are well established in South Africa and other states of the continent. According to South African authorities, 577 Chinese companies are currently operating in 49 African countries and the majority of them are involved in the export and import sector. In the past decade, trade between South Africa and China alone showed annual growth rates of around 30 percent.
In 1993, the year before apartheid was abolished in South Africa, China delivered goods to the value of approximately 125 million Euro to the Cape of Good Hope. Last year, the volume amounted to two billion Euro. The growth rates of South African exports to China were just as high. However, given the small initial base, in 2003 the total value was only 32 million Euro.
In fact, the expansion of trade is largely a consequence of the economic awakening of the East Asian giant, which recorded growth rates of ten percent per annum for many years in a row. Development experts hope that similar successes could also come about elsewhere. Apart from China, India, Brazil, the South-East Asia’s emerging economies and – to a limited degree – South Africa are considered countries likely to gain from international trade.
Barely six months pass without high-ranking diplomatic meetings between China and South Africa. In Pretoria last summer, on his first visit abroad, the Chinese vice president Zeng Qinghong praised the close ties with Africa: “We fought for our freedom together.” In his view, there was “no gap to be closed.” In everyday life, however, fraternisation does not flow quite so smoothly. In the EP Shopping Center in Johannesburg, tensions between the Chinese traders and their African clientele and staff are obvious. Peter Ngubane works for a merchant from Shanghai, who pays him a pittance of less than 100 Euro per month. The Zulu makes no attempt to conceal his aversions: “We have a hygiene problem here; these people never wash.” Ngubane does not approve of immigration. “I sometimes ask myself how many more of them want to come here…”
The same question – worded somewhat more carefully – also troubles the South African government. Beijing wants to sign a bilateral free trade agreement with Pretoria in order to further accelerate the exchange of goods. Pretoria, however, is already burdened with an annual trade balance deficit of around 1.2 billion Euro. The government, therefore, commissioned think tanks to investigate the impact of a new agreement – and their findings were rather bleak.
According to Dirk van Seventer of the Johannesburg Institute for Trade and Industrial Policy Studies (TIPS), China would gain most from a free trade agreement. While South Africa currently supplies the Asian giant predominantly with raw materials (for which only minimal tariffs are imposed), manufactured products such as electric appliances, toys, clothes or shoes come from China. South Africa still imposes tariffs of up to 40 percent on such goods. Without this protection, South Africa’s textile industry would be wiped out from one day to the next.
South Africa’s concerns show that trade between emerging and developing economies does not take place without pain. Nonetheless, many see opportunities in South-South trade. “The South is far too concerned with talking the North into making concessions,” says Bhagirath Lal Das, former Indian ambassador at the General Agreement on Tariffs and Trade (GATT), the precursor of the World Trade Organisation (WTO). As far as he is concerned, trade agreements between developing countries make more sense.
In fact, South-South trade has increased substantially in recent times. While it only amounted to 219 billion dollars in 1990, the volume had almost tripled eleven years later, to 640 billion. The share of developing countries in international trade increased by 4.2 points to 10.7 percent from 1990 to 2001 – and the upward trend continues. Brazilian president Luiz Inacio Lula da Silva is already speaking of “a new trade geography.” So far, the industrialised nations have predominantly been driving the global economy. Increasingly, however, the dynamism of emerging markets also determines the state of the global business cycle.
Former Indian trade diplomat Das suggests that the Third World could show the North the cold shoulder. Its countries should support each other by reducing tariffs reciprocally. Along with China, India – the second nation of a billion people – would particularly profit as it already posesses diversified industries.
Political structures for the expansion of the South-South relationships already exist. In 1982, the Group of 77 (consisting of non-aligned developing countries) founded the Global System of Trade Preferences (GSTP). Initially made up of 40 members, this club of nations intended to reduce the tariffs among one another in order to stimulate the exchange of goods. However, the initiative had only limited success. Although the tariffs in the Third World did indeed sink, they are still considerably higher than in the OECD countries, where the average rate of duty is only six percent. African states on average levy 18 percent duty on imported products. In the case of India the figure is as high as 30 percent. China and South Africa, on the other hand, are already relatively unprotected with average rates of around ten percent.
The systemic competition between developing countries is proving to be the biggest obstacle to the success of the GSTP. Most members produce raw materials, depend on agriculture, and low wages are their main competitive advantage. In some respects, it is actually easier to bridge the differences between North and South, whose capacities complement one another, than to find mutual trade interests among poor states. “It does not make much sense to concentrate exclusively on South-South cooperation or the collective self-sufficiency of the developing countries,” judges Norwegian trade expert Jarle Møen.
Faizel Ismael, South Africa’s chief negotiator in trade matters, considers the political term “South” to be a “myth which, at best, is good for polemic debates but not for trade negotiations.” Faizel explicitly warns against neglecting the WTO in favour of regional or bilateral agreements: “The growing integration of the global economy and the resulting reciprocal dependence of the nations rule out any chances of simply abandoning the multilateral trade system regulated within the framework of the WTO.”
Most experts do not dispute the fact that the liberalisation has to go on. “Perhaps the Chinese economic miracle is not necessarily due to the liberalisation of trade,” says Peter Draper, economist at the Witwatersrand University of Johannesburg. “But without free trade, all that would remain of this miracle today would be the memory.”
Paradoxically, communist-ruled China has become the champion of free trade in the Third World. Beijing has opened its markets like hardly any other government. “Now the Chinese expect the other nations to follow suit,” Draper asserts. South Africa’s textile workers hear this with horror. Nevertheless, the government in Pretoria knows that the days of protected markets are numbered.
Trade expert Draper suggests that instead of desperately clinging to less than competitive economic sectors, Pretoria should have a rethink about which lines of business South African companies can succeed in internationally. Services, particularly banking, are something South Africa could look into. China has kept this sector protected to date, but there should be new opportunities once the projected reforms come into effect. As the example of India shows, however, it is above all cooperation with the service industries of rich nations that opens up attractive possibilities for disadvantaged nations – especially if their educated elites speak good English.
Websites:
South African Institute “Trade and Industrial Policy Studies” (TIPS):
http://www.tips.org.za/research
South African Institute for International Affairs (SAIIA):
http://www.saiia.org.za
Johannes Dieterich
lives in Johannesburg and
works as a correspondent for
the Frankfurter Rundschau.
dieterich@gonet.co.za
|
