The G8 and Africa: A new hope or another false dawn?

The British Chancellor of the Exchequer, Gordon Brown, has thrown down the gauntlet. He has unveiled a three-pronged plan, a so-called “Marshall Plan for Africa” which consists of providing better trade access to African countries, increased aid and a cancellation of all Africa’s multilateral debt owed to the World Bank and the International Monetary Fund (IMF). He would like all developed countries to do the same.

The Chancellor’s challenge will be put before leaders at the gathering of the G8 – the group of highly industrialized countries’ summit – in July this year in Britain.

But a meeting of finance ministers of the G7 countries over the weekend seemed to have pulled the rug under the feet of Brown and his Prime Minister Tony Blair who have put their heads on the block with a high profile campaign to rid Africa of poverty.

The British plan – debt cancellation, increase in aid and more trade access – is actually the main pillars on which poverty reduction in African rests if only the developed countries can muster the political will to follow it through.

The U.S gives cold shoulders

But in spite of the full moral weight of Nelson Mandela who traveled to London to make a personal appeal to the ministers, the US treasury undersecretary John Taylor pointedly told the gathering the US was not interested in Brown’s International Finance Facility (IFF) – the scheme which calls on the developed countries to bring forward aid flows by raising money from financial markets and to pay from later aid budgets. If accepted the plan would have raised an extra $100 billion dollars aid funds to the developing countries, according to Brown.

But it now appears that one plank in Brown’s scaffold has been knocked off by the US refusal to approve it. However, the other plank – the cancellation of debts of the HIPC countries was approved by the G7 finance ministers. "We are willing to provide as much as 100 percent debt relief on all multi-lateral debt for individual HIPC (Highly Indebted Poor Countries)," said Brown, reported in the Guardian Newspaper. The devil is in still the detail. Since the US has also blocked a proposal to revaluate IMF gold reserves to pay off the cost of debt cancellation.

Debt cancellation would be much welcome news for the 42 countries initially promised debt relief under the HIPC initiative in 1996. Even though the initiative ran into the sand, so far results have shown that debt cancellation works, according to Jubilee Research, a think tank working on debt issues. A study carried out by the organization on ten countries that received debt relief in 1998 indicated that spending on health and education had increased substantially. Prior to debt cancellation these countries were spending a total of $929 million on education, less than on debt service but today these countries are paying a total of $1306 million on education. Similarly spending on health has risen to over 70 per cent and is a third of what was previously spent on debt servicing[1].

EU might spoil Blair’s party

The aspect of Brown’s proposal, namely increased trade access to African countries will equally bring potential benefits but is also likely to end up with a similar fate as a proposal for increasing aid, but this time it would be the EU which is going to be the main obstacle. The EU is the biggest trading partner of African countries and holds the key to reducing farm subsidies which has been at the core of trade negotiations in the WTO.

At the World Economic Forum in Davos, in January Tony Blair called on western countries to cut subsidies on what he called “even controversial commodities such as cotton and sugar” in order to provide competitive edge to Africa in these commodities in world trade. But so far the EU has been intransigent in coming up with a deadline to eliminate farm subsidies that it lavishes on its farmers whose surpluses are then dumped on African countries. In 2001 the EU provided $3.3 billion dollars subsidies to its farmers, only a fraction of what it gives as aid.

The EU is also at the moment locked in negotiations on economic partnership agreement (EPAs) with African Pacific and Caribbean (APC) countries. This will replace the previous Lome Agreement. Under the new arrangement the ACP countries will no longer benefit from concessional trade but are to reduce tariffs in all goods and services with the EU by 2008. The agreement will adversely affect manufacturing industries in these countries since it allows the EU to flood their markets.

So while the G8 is expected to accept a watered-down version of Brown’s proposal in July, it is unlikely that the EU would provide any trade concessions, at least no definite agreement will be forthcoming until the WTO ministerial in Hong Kong in December.

So while this year’s G8 summit is being touted as mainly focusing on Africa, observers fear it might end up the way of a similar one in Kananaskis, Canada three year ago where similar promises ended in anticlimax. The African countries were promised $6 billion dollars while $20 billion was lapped onto Russia to get rid of its nuclear weapons.

"We're extremely disappointed by this wasted opportunity. They're offering peanuts to Africa - and recycled peanuts at that," said Phil Twyford, Oxfam's international advocacy director at the time.

Would the British plan offer a new hope for African or another false dawn?

[1] Relief Works. A report from JubileeResearch. African proposals for debt cancellation – and why relief works. August 2002. www.jubileeresearch.org