Aid for trade and the green economy in Africa
by Willemien Viljoen, tralac Researcher*
African countries are faced with a variety of environmental challenges which can hamper the current developmental path of these economies. Agriculture, tourism and fisheries are among the largest sources of employment, economic growth and exports on the African continent and also the sectors which are the most vulnerable to climate change and other environmental risks. The lack of energy security and self-sustainability is also problematic for sustainable development, while the potential of renewable energy generation for economic growth and development is yet to be recognised.
However, the conditions in many African countries create the opportunity for a new economic growth path and development; addressing environmental challenges by moving to a green economy based on investment and policy measures focused on enhancing the livelihoods of the poor, employment creation and the overall reduction of poverty.
The green economy
A green economy can broadly be defined as an economy that results in improved human well-being and social equity while significantly reducing environmental risks and ecological scarcities which can play a pivotal role in the economy of most African countries. Apart from increasing the value the poor can derive from agricultural, fisheries and forest activities; reducing the vulnerability of the poor to the impact of climate change and creating opportunities for new innovation; a green economy can also provide energy to rural communities; increase the sustainability of agriculture; enhance eco-tourism opportunities and lead to sustainable urbanisation.
By shifting African economies towards green economies it is possible to enhance current economic growth and human development by creating the opportunity for green growth and employment without exposing future generations to significant environmental risks. However, an important question remains – how can African countries shift their current economic activities to those associated with a green economy without burdening the current generation with high transformation costs?
International trade is seen as one of the most important tools in a strategy which is aimed at sustainable development and the transition to a green economy, however, enhanced market access opportunities on its own are not enough, requiring financial and technical assistance through Aid for Trade initiatives to increase Africa’s participation in international trade while strengthening environmental goods and services trade-related infrastructure and supply-side constraints.
Aid for trade
Aid for Trade initiatives are development assistance programmes offered by developed countries to support the development of basic economic infrastructure and tools developing and least-developed countries need to expand trade and participate more effectively in the global trading system in order to enhance economic growth and development. The aim of Aid for Trade is to enhance the capacity and capabilities of suppliers in developing countries to improve their competitiveness in international markets, enabling developing countries to reach their developmental goals and harness the potential of trade as an engine for economic growth.
Aid for Trade supports trade liberalisation through technical assistance to improve the capacity of developing countries to export by utilising efficient infrastructure and institutions; without reducing existing supply-side and infrastructural constraints prevalent in developing countries the potential positive impact international trade-related reforms and improved market access conditions can have on economic development and poverty alleviation are limited.
Of the six categories traditionally covered by Aid for Trade initiatives, programmes to shift the African economies to a green economy model can mostly be classified under the improvement of trade-related infrastructure:
Trade policy and regulation, including assistance with the implementation of trade agreements and institutions required to comply with rules and standards;
Trade development like trade finance, business facilitation and trade investment promotion;
Trade-related infrastructure which includes all forms of physical infrastructure like roads, transport and storage, communications and energy but excludes water supply and sanitation;
Building productive capacity entails any activity which contributes to improving a country’s ability to produce goods and services;
Trade-related adjustment which are measures that mitigate the economic cost of trade liberalisation; and
Other trade-related needs
Utilising Aid for Trade in a move towards a green economy in Africa
For any Aid for Trade initiative to be successful in pushing African economies towards green economies the initiative must ultimately create trade conditions which will lead to sustainable development, focused on environmental improvement and poverty alleviation. This can be achieved by assisting African countries to maintain their existing market share, but also to open up new export markets for African economies in environmentally-friendly goods and services.
Aid for Trade programmes can be provided in different sectors of the economy and take on various forms:
Capacity building initiatives to develop an analytical framework to assess the impact of trade agreements and policies on all areas of the economy, including the environment and the natural resources of a country;
Developing productive capabilities in specific green economic sectors;
Building the necessary capacity to support sustainable production and process methods in African countries;
Assistance in identifying viable and feasible markets for environmentally-friendly goods and services;
Building the technical capacity of countries to meet the standards, regulations and requirements applicable to trade in environmental goods; and
The investment in specific sectors like renewable energies, agriculture, tourism and forestry.
Specific areas of the African economy in which Aid for Trade programmes can make a significant contribution in greening the economy, include agriculture, water resource, energy and ecotourism. Aid in these sectors can mainly be utilised under the improvement of economic infrastructure and the building of productive capacity. Economic infrastructure, which can be associated with a green economy, includes increased energy resources through hydropower and renewable energy development programs and the enhancement of water resources through the building of dams and modernising water distribution systems. Programs applicable to agriculture and the development of ecotourism can be classified under productive capacity building. Aid can be utilised for agricultural research, soil rehabilitation, changes in crop mix, the development of climate change resistance crops and the development and promotion of eco-tourism services.
Eco-tourism, seen as tourism in the natural surroundings, can be a very important source of green growth for African countries seeing that most African countries are endowed with rich natural resources which can be utilised for this purpose. Eco-tourism is generally built on community-led tourism activities and operations which preserves the natural eco-system while generating employment for unskilled labourers in rural communities. However, these activities normally do not require vast capital outlays and investment, making it an ideal industry to foster economic growth in African countries with natural resource abundance and capital scarcity.
These Aid for Trade initiatives recognise the complex relationship between trade and the environment. Trade and trade-related policies can have a significant impact on the environment, but the environment can also have a severe impact on trade, especially in African economies due to their high dependence on exports of natural resources and agricultural products as a source of economic growth and development.
Concerns in the transition to a green economy
Although shifting to a green economy has various potential benefits for countries in the region, there are some obstacles inherent to the nature of African economies which might pose a challenge to attaining the goal of green growth and development. The challenge of moving to a green economy faced by all African countries is improving employment, wealth and social services while lowering countries’ absolute utilisation of and dependence on natural resources and fostering a greater reliance on less carbon-intensive and renewable energy sources.
Due to the uneven distribution of natural resources through the different African countries in the region the shift to a green economy will need to take place without a regional displacement of resources. A transition to a green economy requires a significant investment to facilitate structural changes in the economy, including a change in the production function, improving infrastructure and enhancing technological capacity and capabilities. These challenges create the gap for aid for trade initiatives by developed countries.
The structural constraints of African countries, including their high dependency on agriculture, limited access to energy and low economic diversification must be addressed in order to facilitate the shift towards a green economy. Trade-related challenges which must also be evaluated to ensure a smooth transition include environmental regulations, standards, labelling and certification standards applicable to the trade in environmentally-friendly goods; unilateral border tax adjustments to protect domestic firms in the importing market and green subsidies and domestic support measures. African countries need to enhance their ability to address these measures to fully benefit from new market access opportunities available due to a greener economy.
Lessons to learn
Developed and developing countries can utilise lessons learned from previous experiences with aid for trade initiatives to ensure success in future green economy programs. Aid for Trade initiatives in other sectors of the economy have shown that there is no one-size-fits-all design to incorporate Aid for Trade in African economies with differing economic structures, institutions, economic growth rates and stages of development. Programs must complement any country’s national development and economic programs, future plans and structures; being fully integrated into the overall development and poverty alleviation strategies of the country.
Any initiative must create clear and transparent criteria for monitoring the attainment of goals, targets and timelines. Initiatives must be strictly needs-based, building integrated analytical and assessment capacities, stakeholder participation and policy-making and implementation capabilities. One of the most important factors required for a successful transition to a green economy through Aid for Trade is an enabling domestic environment, including supportive domestic regulations, legislation, financial assistance and technological advancement.
* This article was originally published in the Bridges Trade BioRes Review (Volume 5, Issue 3)
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