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India’s Protectionism and Africa’s Economic Opportunities

By: Christopher Moore, Senior Director for International Business Policy at the National Association of Manufacturers

Over 40 African heads of state and government are in Washington this week to discuss ways we can work together to promote economic growth and development in Africa.

But what if working together to open markets and reduce barriers in developing countries turns out to be the best way to promote growth in Africa? With industrialized countries in North America, Europe and elsewhere now largely open to African products, the continent’s greatest chance to drive future export growth may come from reducing high barriers in major developing country markets like India.

The U.S.-Africa Leaders Summit aims to promote economic growth and development by fostering stronger trade and investment ties. The United States has and can contribute much to that goal. Through the African Growth and Opportunity Act (AGOA), it has eliminated tariffs on substantially all African exports. Africa is home to some of the world’s fastest growing economies, and manufacturers in the United States are eager to invest and strengthen economic partnerships across the continent.

Yet overall, some 70 percent of tariffs developing country exporters face are applied by other developing countries, and the protectionist challenge is even greater in particular regions of the world. According to the World Bank, tariffs imposed by India and other South Asian countries on imports from developing countries are frequently five times as high as the rates imposed by industrial countries.

Reducing those tariffs is critical, the Bank says, because nearly 90 percent of the stimulus to developing country exports following past tariff cuts has come from liberalization by other developing countries.

Sadly for Africa, India and others in a position to lead in lowering barriers and contributing to growth and economic development are moving in the opposite direction. A Global Trade Alert study found G20 economies collectively imposed 692 protectionist measures between 2008 and 2010, and India and other emerging markets were among the biggest sinners. Many of those measures harmed the commercial interests of least developed countries – 70 percent of which are in Africa.

Just last week, India single-handedly thwarted a WTO deal that would have drastically cut the cost of moving goods across borders in Africa and around the world. According to the Peterson Institute of International Economics, a successful trade facilitation agreement would have added $1 trillion to the global economy.

Developing countries stood to gain the most. An OECD study found full implementation would have reduced international transaction costs for low and lower middle income countries in Africa and elsewhere by up to 15 percent.

Unfortunately, India seems bent on pursuing policies that are standing in the way of African exports and African development. This week, African countries and the United States have an opportunity to make common cause and to look at ways to work together to reduce trade barriers in India and other emerging markets.

With so much to gain from cooperation, we can’t afford to miss this chance.