It is arguably true to say that in the second half of the 20th century the International Political economy (IPE) has witnessed a sweeping and unprecedented transformation under the aegis of technological revolution and globalization which have reshaped the globe into a very compact and integrated whole. Integration of the international financial markets into a single, vibrant market with huge capital transfers is said to be the main feature of the global market today. It has, in the words of Peter Drucker, become a transnational economy, one that is shaped and driven not by production and trade, but by money flows.
For example fifty years ago, the world traded around a billion US dollars every day but today, a billion US dollars is traded every ninety minutes whereas $2 billion US dollars a day move as foreign direct investment (FDI). Again, with communication technology, the possibilities of enormous capital transactions in real time with a ‘click of a mouse’, and the rapid decline in transport and communication costs, have inevitably changed the socio-economic fabric of every society. According to the supporters of the market economy globalization is bound to bring benefits to all. However, available literature provided by UNCTAD, World Bank, and UNICEF over the years suggests that, certain geographical areas and class of people benefit more than others. According to UNCTAD Secretary-General Rubens Ricupero, “ We have entered a new century with a world economy more unstable than at any time since the cold war years, and in which developing countries remain the most vulnerable to external shocks and disruptions". In his view there is need for "collective energies and bold leadership" to redress the imbalances in the globalization process, on both the financial and trade fronts. He could not have been more right. As UNCTAD has cautioned on various occasions in the past, leaving integration exclusively to markets and to competition among structurally unequal countries has prevented globalization from producing benefits for all.
Indeed, what makes the situation even volatile is that globalization is reproducing more backlashes and less benefits if any in developing countries like Ghana. So far the balance sheet of the market-driven globalization points to widening divisions within and across countries The backlashes are overtly manifested in the global trade regime, which to all intents and purposes is the bane of the low level of economic growth and development typical of virtually all developing and Least Developed Countries. For many developing countries like Ghana, policy-making on the part of WTO has made most, hostage to financial markets because, the kind of discipline that the World Trade regime impose on governments is not always conducive to sustained economic growth and human development. This is the line of argument that we want to put across in this article.
World trade issues are very fundamental for the economic growth of Ghana and more importantly in this era where major world policies are greatly influenced by Transnational Corporations (TNCs) some of whom are arguably more powerful than some nation-states. It is said for example that out of the 100 largest economies in the world, 52 of them are not countries but are corporations. Globally, the Triad (European Union, United States and Japan) continues to dominate inward (71%) and outward (82%) FDI flows. The Triad, where 91 of the world's top 100 non-financial TNCs are headquartered, dominate the list, as ranked by 1999 foreign assets. International trade therefore presents a clear picture of the extent of marginalisation of developing countries under the ongoing globalisation process. The terms of trade of developing countries worsened in 1998 and 1999 with a drop in commodity prices reaching levels not seen since the early 1980s. In general, the decline in the terms of trade since 1998 has been particularly severe for the primary commodity exporting and oil importing countries, most of whom are developing or Least Developed Countries. It suffices here to say that by far the main beneficiaries of trade liberalization are the developed countries. Developing countries products continue to face significant impediments in rich countries markets. Basic products in which developing countries are highly competitive are precisely the ones that carry the highest protection in the most advanced countries. These include not only agricultural products, which still face pernicious protection, but also many industrial products from developing countries are subjected to high tariff and non-tariff barriers. This situation has led to persistent unfavourable terms of trade in developing countries. In 1999 for example, terms of trade in Africa declined nearly 6 per cent due to a fall in the unit value of exports (3.2 per cent) and an increase in the unit price of imports (2.6%). Again, according to UNCTAD, it can be estimated that for each dollar of net capital inflow to Sub-Saharan Africa (SSA) from the rest of the world, some 25 cents went back as net payments and profit remittances abroad, more than 30 cents leaked into capital outflows and reserve built-up, while 51 cents made up for terms of trade losses. These figures indeed imply a net transfer of real resources from SSA to the rest of the world. Thus we can infer from the discussion so far that, the present transformation of the global economy reduces many SSA countries to a position of ‘structural irrelevance’. Precisely because the euphoria that, global integration will bring benefits to SSA countries through economic convergence, the building of manufacturing bases sufficiently to compete freely and fairly in the international market place and the lowering of tariff barriers so as to promote trade as an engine of growth has so far not happened. Structurally, Sub-Saharan African countries are still playing the undesirable and unprofitable role of supplying raw materials like copper, tea, cotton, coffee, and cocoa needed to fuel the engine of growth of developed countries. This is the structural irrelevance we are talking about. The Uruguay Round World Trade Organization’s (WTO) agreements insist on the liberalization of developing countries markets but does not enjoin the opening up of developed countries economies for exports from developing countries economies particularly in agriculture and labour-intensive industrialized products where developing countries economies appear to have comparative advantage. These prevailing asymmetries in the multilateral trade arrangements including subsidies and production incentives of agricultural exports from developed countries, tariff discrimination and dumping have further weakened the institutional capacity of developing countries to take advantage of the globalisation process. In fact, one wonders whether the WTO agreements have ever benefited developing countries. The United Nations Conference on Trade and Development (UNCTAD) has intimated that after nearly seven years of implementation of agreements reached in the Uruguay Round of multilateral trade negotiations, a consensus is emerging among African countries that, while the continent has gained little in terms of market access, African Governments are facing extremely heavy multilateral obligations. The competitive edge enjoyed by many African countries under Lome? and GSP schemes is undergoing substantial erosion. As things stand now, African countries are facing a number of extremely serious barriers in terms of access to Northern markets. According to a study conducted by UNCTAD, total transfers by consumers and budgets to agriculture and highly protected industries in OECD countries or developed countries may be estimated at about $470 billion in 1997. Developed countries could safe 2.2 per cent of the GDP annually on subsidies, corresponding to almost 10 per cent of the GDP of developing countries. Total subsidies amount to more than half of developed countries imports from developing countries and 10 times their concessional Official Development Aid (ODA).
The corollary question is that what are the implications of all these to the Ghanaian teething economy? Obviously a lot has been done by both the immediate past NDC and the present NPP governments to correct the unfavourable perennial terms of trade syndrome by diversifying exports and also to improve upon the quality of exports in order to add value to it and more importantly fiscal disciplines have been employed by the present government into the system to stabilize the local currency. But like most developing countries, the emphasis on trade liberalization and exports in the past decade has meant an increased importance of international trade in economic activity of Ghana. However despite the increased trade orientation of the present and past governments, our share of world trade has declined because exports have grown much more slowly due to Ghana’s marginalization in world trade, and much importantly the composition of Ghana’s exports continues to be dominated by primary commodities, despite some progress in moving to manufactures. But even with manufactured products, a downward trend in terms of trade with respect to exports of labour- intensive manufactures relative to skill-and technology intensive products has posed an additional problem for the Ghanaian economy which, exports manufactured goods with little technology content. This is surely not the best of news for a “cocoa and gold dependent” Ghanaian economy trying to break away from a cycle of dependency through diversification and exports of manufactures.
What should be done in terms of performance, prospects and policy issues? Indeed, regardless of the assumptions made on the benefits of international trade it is nonetheless very instructive to say that what is needed is a collective initiative and resolve by Ghana and other African leaders as well as policy-decision makers at the global level to counter the trade regime. This in no doubt has been given statement in the New African Initiative (NAI) which has been lauded by both donor nations and multilateral corporations for its emphasis on the ‘need for Africa’s recovery to be based on inter-regional co-operation and infrastructure development’. It should be maintained that what makes the NAI a more pragmatic roadmap for Africa is the acknowledgement of the need to organize regionally and integrate into the global trade and investment arrangement based on the European Union model other than the previous paradigm (the dependency school of thought) which advocated for de-linking from the global economic system. Africa urgently needs to integrate its economies. The go-it-alone approach that has been the norm of many post independence African countries has proved a total failure. Only the creation of regional blocks such as the Southern Regional Development Community (SADC) can bring about the benefits of globalization that African countries desire.
The second objective is that of establishing a self-sustaining process of economic growth and development. As at now, Ghana’s growth depends on world events and on natural phenomena like rainfall. When it rains too much there are floods and food shortage, when it does not rain there is drought and food shortage again. This is the irony of sorts or the cause and effect that governs the relation between rainfall, food security and inevitably economic growth in Ghana. Whenever the world economy suffers a recession with falling demand and prices for commodities like cocoa and gold, Ghana’s growth goes into reverse gear and economic crisis ensues. The slump in gold prices during 1997-98 brought a halt to Ghana’s economic recovery program and points to the unsustainability of economic growth rates based on primary commodities.
Similarly, it must be stressed that Ghana and other African countries should seek to correct the asymmetries shrouded in the Uruguay Round WTO agreement at the next WTO ministerial meeting to be held in Qatar this coming November under the auspices of the G-77, by sending a highly informed, experienced, relevant capacity endowed and high-powered delegation who should be conversant with the nitty-gritty of the negotiations.
Finally, there is still more to be desired under the present circumstances. Ghana for example is yet to take the full advantage of the African Growth and Opportunity Act’ enacted by the US Congress in mid-July 1999 to grant an expanded duty free to US market for certain products including agricultural and textile for certain countries in Sub-Saharan Africa including Ghana. It is incumbent upon us as Ghanaians and Africans for that matter to learn from the experience of the so-called ‘Asia Tigers’ by putting an end to the craze for consumable foreign products which can easily be produced locally and also the leadership ought to be very cautious of leaving the destiny of the economy to the invincible hands of the market forces. Markets do not have a conscience thus they must be regulated. This of course will require an uncorrupt and competent leadership. Beyond economic policies, good and democratic governance in the form of institution building is vital for economic growth. The aftermath of the 11 September terrorists attacks on US has shown us all the primacy of the State in the economy even under market-driven globalization as it took the injection of liquidity into the financial market (the stock exchange) by the US treasury department and other intergovernmental agencies before the US stock market could re-open. This is a lesson the present NPP government should learn from.
