While You Were Sleeping: Leveraging The Old Trade Order

The UK just signed a mega £1.2billion pound free-trade deal with Ghana. The resource-scarce nation has been signing a frenzy of trade deals post Brexit (The Britain’s exit from the EU). The deal will give Ghana instant tariff-free access, especially for the products it exports most.

According to an official release from the UK Department of International Trade, Britain transacted £1.2 billion in trade with Ghana in 2019, so the deal is not increasing trade, but removing tariffs. Of that trade, the UK exports 652 billion in goods and services to the UK as Ghana exports £299 million in goods. That figure will likely remain unchained, except without the additional tariff.

The UK is not alone in its pursuit of free trade with continental actors. Unfortunately, and quite obviously, free-trade with the rest of the world will nullify the purpose and impact of a continental free trade pact in Africa. Especially where value-added and refined products and services are concerned. For example, Ghana exports Cocoa, mineral fuels, meat/fish seafood preparations, agricultural fruits and vegetables as well as wood articles and charcoal to the UK. All of these products are not refined, processed or value-added, and now with the advent of the 2021 UK/Ghana Free Trade Pact, they will also fail to bring tariff revenue. Ghana has definitely gotten the short end of the stick.

Ghana is not alone, recently Kenya is in talks with the UK on a free trade agreement. The British Parliament has issued warnings that the deal could topple the balance of the East African Community (EAC). While the UK continues to deliberate its trade status nation, Kenya is also moving forward with a free trade agreement with the United States and Mauritius signed a free trade deal with India in February 2021. It is unclear how these nations see the benefit in creating free trade deals with some of the largest economies in the world when Intra-African trade barely reaches 20 percent.

Free Trade deals however are a great move for the UK who is struggling to create resource pools from which it can draw in a changing world economy. Western nations have begun a decided pivot to African states to buttress its flagging economies in the face of Asia dominance in both China and India. Western nations are playing catch-up with BRICS nations who have been forging better trade relationships on the continent.

Kenya has continued its free trade negotiations with the United States. Talks as late as February have centered on environmental regulations, while some see the new negotiations as a way for the West to gain access to the AFCTA through key players.

Trade continue to be a key factor in the global economy, and post-Covid it may create real battle lines for primacy. The US continues to seek to be a player in the oil market, surpassing Saudi for the first time according to recent reports. However, a threat to the US’s delicate oil balance may be Russia and Iran. Most recently, the US has Iran in its sites, as that nation’s oil exports to China make controlling oil prices and primacy tricky for the West–most noteably, the US in its fracking capacities. Venezuela was another dicey spot for syndicated who traditionally controlled oil markets. Be assured, it is not just geopolitical changes that are effecting trade and key makers like crude and precious minerals, but also the discovery of new sources by unlikely players.

New discoveries in oil and other resources as well as new more efficient trade mechanisms (like the AfCTA) make it difficult for traditional players in the global market to maintain the current world order. When new unanticipated trade deals are forged older players are less able to control the narrative and most importantly, the flow of resources and finance.

Less savvy stakeholders who make poor trade deals that compromise local econonies, jeopardize new trade pacts and leave populations without real growth or progress will pay a higher price in the new more competitive global econony. Even the US will likely struggle in the coming years to maintain real growth as its lowwer classes remain poor and unemployed unable to wield its purchasing power. The nation may likely have to instate monthly or periodic stimulus checks so that the local economy doesn’t fall into total ruin while it seeks to revamp the economy.

Additionally, recent 2021 Sino-US trade talks in Alaska in March revealed that US leadership was united behind an anti-China trade and human rights agenda that transcended American political party affiliations. The tense meeting highlighted the new importance of trade dominance. The US continues to translate Sino growth through a zero-sum lense.

Spain has also launched a new regional trade initiative with Africa, Horizonte Africa. It was announced in summer 2020, as an attempt to increase its footprint in African in trade, investment, technology and security.

It is likely free trade agreement requests will proliferate the continent. The West has been keen to broker such deals–and that makes sense. Many former developing economies in Asia, the Middle East and even Latin America are growing more sophisticated and gains are growing faster than the world had anticipated. This means economies that once struggled, may now dwarf those battling decadence. Essentially, somewhere along the way, the world got savvier.

Even the AFCTA is evidence of a more savvy world. Therefore, the opportunity to leverage their old colonial relationships with Africa and Asia before the playing field has been completely changed remains a principal endeavor.

China and now India stands as a prime example of how the West missed all of the cues that the a former colonial charge had outgrew its old parameter. Now, itvis not only in Asia, but many nations now pose a real and present danger to the old trade order.

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