Africa needs healthy trade

Good news abounds for some people in some malarial countries. Delegates to the recent WHO Southern African Malaria Control (SAMC) meeting in Lusaka Zambia heard how indoor residual spraying with DDT and other insecticides is dramatically reducing malaria cases in Zambia, South Africa, Swaziland, Mozambique and several other southern African countries.

The key now is to scale some of these programmes up so that everyone living in a malarial area can be protected. Apart from saving lives and reducing illness, controlling malaria is essential in order to foster economic growth and development. The disease imposes enormous economic burdens on Africa and drives investors away. Jeffrey Sachs, the Columbia University economist with almost celebrity status reckons that Africa’s GDP would be 30% higher now if malaria had been eradicated in the 1960s.

There is no doubt that malaria locks countries in poverty and hampers development. But bad government and misguided economic policies are far more effective at keeping people sick and poor than any disease. Government protectionist policies, for example, support local industries by imposing import tariffs and providing export incentives. These measures ensure that consumers in Africa pay more for goods and services than they would otherwise have to. Public funds go towards helping out vested interests where they could be spent on more worthy projects, such as health and education (or better still, left in the taxpayer’s pocket).

Yet many delegates to the SAMC conference (and at various other health conferences I have attended) strongly believe that protectionist policies will help in the fight against malaria. Many insist that drugs, insecticides, insecticide treated bed nets and other health equipment should be produced locally. The argument is that by fostering these industries, a government kills two birds with one stone; reducing malaria cases and creating employment and development at the same time. However, these views are strong on sentiment and weak on economics.

Comparative advantage is a concept that has been lost on so many health officials around Africa. Surely it makes sense to buy the inputs for a public health programme from the cheapest possible source. If Taiwan is better and cheaper at producing bed nets than Namibia, then buy from Taiwan. This leaves Namibia free to concentrate on what it does well, agriculture, tourism, minerals and so on.

According to Junaid Seedat from the health advocacy group, Massive Effort, 26 African countries still tax insecticide treated nets. Taxes and tariffs on medicines and other essential healthcare products abound ensuring that we all pay more for life saving treatment and disease prevention. It is an outrage for any government to claim, as many do, that they want to increase access to essential drugs, while they keep slapping on these taxes.

While the practices of the developing countries are patently counter-productive, the developed countries of the North provide advocates of free trade with a more serious problem. Supposedly champions of free trade, they are the most protectionist of all. European farmers hide behind protectionist policies that cost the European taxpayer around €50 billion every year. The US and Japan are not much better and all of this means that Africa’s farmers have hardly any opportunity to sell their products in these lucrative markets. The EU has made a half-hearted attempt to reduce agricultural subsidies, but there are so many opt-outs that it means almost nothing to African farmers.

Yet just because these hypocritical countries protect their industries does not make African protectionism right. Barun Mitra from the New Delhi based Liberty Institute argued at the recent Commonwealth Business Council (CBC) trade forum in London that poor countries should harness the EU’s subsidies. If European taxpayers are daft enough to allow their governments to tax them to the hilt and then use that money to encourage an over-production of food that is then dumped in poor countries, we should sit back and enjoy it. Mitra argues that African consumers should revel in the cheap butter, chickens and other farm products that are available, paid for by some European taxpayer. Yet what is good news for consumers would be bad news for the unfortunate African farmers that are put out of business.

There will always be some vested interests that will lobby government arguing for special treatment and protection. Yet when the government itself is that vested interest, prospects for open and free trade look bleak. At the same CBC forum, the Malawian Minister of Trade and Industry argued that it was impossible for African governments to reduce import tariffs as this was an important source of government revenue.

The Minister is wrong. Reducing those tariffs would give many millions of Malawians access to cheaper goods. It would allow Malawian industries to capitalise on their comparative advantage instead of draining the economy. The ongoing research by both the Heritage Foundation and Fraser Institute shows that open economies and lower barriers to trade foster higher economic growth and improved living standards. With higher growth, the Minister would find his precious tax revenues increasing without imposing unnecessary taxes on his citizens.

Given the indisputable evidence that trade barriers are economically detrimental, all governments have a duty to stop interfering with mutually beneficial trade between their citizens and the citizens of other nations. In September the World Trade Organisation will hold its Ministerial meeting in Cancun, Mexico. For the sake of Africa’s poorest and most vulnerable, and especially for those with malaria, let’s hope progress is made towards freeing up trade.

Author: Richard Tren is a director of Africa Fighting Malaria, a health advocacy group based in South Africa. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Free Market Foundation.

FMF Feature Article /29 July 2003 - Policy Bulletin / 10 November 2009

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