Second Case Study: Côte d’Ivoire, 1961-1975; EEC and Extraversion

Second Case Study: Côte d’Ivoire, 1961-1975; EEC and Extraversion

To start with, when the colonial system decided to introduce the plantation economy in 1946, which I already touched on from the introduction, numerous problems arose. One problem was population scarcity, leading to a shortage of labour available in the fecund, forested south to cultivate the selected crops. The solution was an open migration policy. According to Jean-Pierre Dozon, the colonial authorities decided to encourage and even force northerners who lived in a savannah region unpropitious for quick exploitation to migrate in large numbers towards the south to aid the plantation economy (McGovern 2001:77). The second problem was the uneven regional distribution caused by the cultivation of forestland. The migrants found it difficult to secure land from local chiefs in parts of the country propitious for the cultivation of cocoa and coffee. The colonial system proceeded to undermine the primacy of local authorities in the western forest area. The state asserted itself as the owner of all vacant land (Losch 1994:25). Clearing and cultivating an unoccupied piece of land conferred the right to ownership. But the authorities never undermined the primacy of the native control of land tenure in northern or other regions of Côte d’Ivoire, which were unsuitable for the cultivation of cocoa and coffee (Boone 2007:73). Both the system of free immigration and the open land policy created resentment, not least among the indigenous ethnic inhabitants of the forestland.

Political power was concentrated in the groups that benefited from the plantation economy, namely the Baule and coffee planters (from the south east) and northerns/ foreigners (who migrated to the South). The two groups held the political power by creating a political party supported by the French colonial system. The ruling party, Democratic Party of Côte d’Ivoire (PDCI), was an outgrowth of a cocoa planter organisation originally formed as an interest group for cocoa and coffee planters. The founder and president of the PDCI, Felix Houphouet-Boigny, who later became the first president of Côte d’Ivoire from independence to his death in 1993, own the biggest cocoa and coffee farms in the entire country. He is a Baule – the ethnic group that embraced cocoa planting in Côte d’Ivoire. The Baule were not populated enough to control a national political party hence the alliance with northerners (and foreigners) who benefited from the open land policy and migration policy. As all political systems contain structures of inclusion and exclusion, the excluded groups from the political system was those excluded from the plantation economy. Ruth Marshall-Fratani observes of the PDCI that “autochthonous western planters and administrative heads were unrepresented, the majority of the adherents were Baule and Dioula” (2006 16). Dioula is a term used to group tribes from the northern part of the country, and their overflow in the countries bordering northern Côte d’Ivoire who also served as migrants. Ethnic groups from the western part shared common resentment towards policies that denied them the right to their ancestral land.

The resistance of the We, Bete and Dan people indigenous to western Côte d’Ivoire, mostly resisting to the encroachment of their accentual land, led to their portrayal as lazy and irredeemably backward, whereas the migrants—the Baule and Dioula people—were portrayed as industrious and civilising (McGovern 2011:77). Therefore, an implicit ethnic favoritism was present in Côte d’Ivoire’s economic and political systems. The excluded groups formed their own political movements, such as the Union des Originaires des Six Cercles de l’Ouest de Côte d'Ivoire, but were unable to gain the followership needed to challenge the PDCI, primarily because the latter was aligned with the French colonial system (Cohen 1974:23). The country was therefore a de facto one party state at the point of independence, but with opposition with grievance over land and immigration policies. A note written by a representative of the Agni tribe (one of the tribes living in forestland propitious for the cultivation of cocoa and coffee) in 1957 provides a nuanced account of the situation: “the colonial administrators favored the disorderly settlement of the anybody, settled the forest disputes in favor of the strangers under the sole justification of the effective exploitation […]. The animosity, the irritation, came that way, sometimes causing pitched fights, sometimes the burning down of plantations, maintaining permanently an atmosphere of hatred towards the stranger, who benefited from the support of the administration” (quoted in Soro and Kouame 2004:15).

The preceding remarks situate the ruling elites in Côte d’Ivoire at the time of independence, by showing how political power was based on a coalition of cocoa and coffee planters. A crisis in cocoa and coffee would have been devastating to the ruling elites beyond the provision of minimum economic performance and altered the political system. Before 1961, Côte d’Ivoire was protected against commodity-price deflation as part of France’s late colonial policy (Campbell, 1978: 77). This started in 1955 when France created the Caisse de stabilisation des prix, a price-stabilisation scheme, to subsidise Côte d’Ivoire’s main exports (World Bank, 1986: 50). The price-stabilisation system was not imposed on the ruling elites; on the contrary, it helped to consolidate and preserve local political power. At the time of the creation of the EEC in 1958, raw materials exported from Côte d’Ivoire to France were priced between 16 and 60 percent higher than world-market prices, depending on the product (Marcussen and Torp, 1982: 50).

Under the trade system introduced in 1958, the EEC took over the burden of colonial trade and aid from France (Marcussen and Torp, 1982: 50). To organise its trade provisions, the EEC borrowed from France’s recent colonial trade system (Barnes, 1967: 9-10). In other words, the EEC took over France’s price stability and preferential system in exchange for a market in the colonies (Zartman, 1972: 18). The take-over was announced in 1957/58, but the transitional arrangements were not yet complete when Côte d’Ivoire gained its independence in 1960. As the EEC trade system was established without the consent of the colonies, independence in 1960 amounted to the automatic annulment of the trade system. The recrudescence of the EEC trade system (in the Yaoundé Convention) was slated to occur in 1963. In the meantime, Ivorian coffee exports—formerly subsidised by France and subsequently the EEC—were exposed to world-market prices. In addition, the commodity crisis of 1961 affected Côte d’Ivoire’s second main export crop. This provided the context for a temporary trade agreement in 1961 between France and Côte d’Ivoire. France’s 1961 protocol with Côte d’Ivoire (or the Cooperation Agreement) was an interim trade agreement in place between the annulment of Part IV of the Rome Treaty and the re-activation of the EEC trade system in 1963.

The 1961 agreement maintained the colonial trade system; that is, France offered to pay more for Ivorian raw materials, while in exchange Côte d’Ivoire was required to guarantee the exclusive importation of manufacturing products from France and to place a 35 percent tariff on non-French imports (Campbell, 1978: 82; Alschuler, 1988: 7; Lawson, 1975: 207). As a result, the 1961 commodity crisis did not affect the Ivorian production system. Although France was not the only destination of Côte d’Ivoire’s exports, the market was created and preserved by a system of subsidisation wherein France preferentially imported Côte d’Ivoire’s main products and provided guaranteed export prices (Ravenhill, 1985: 49). According to the World Bank (1963: 10), exports to non-French markets were also indirectly subsidised under the 1961 agreement.²⁰ This trade monopoly was extended to the entire region of French West Africa, and similar cooperation agreements were signed with all French West African countries, with the exception of Guinea (Campbell, 1978: 84).

Among the main results of the 1961 Cooperation Agreement were the persistence of production systems that were broadly uncompetitive in the world market, and an increased market concentration in France. In the crop year of 1962-1963, the second year of the Cooperation Agreement, France reduced the price offered for Ivorian coffee from 3.20 to 2.90 French francs per kg (c.i.f. French ports). The new price was still more than 45 percent higher than world-market prices. According to the World Bank (1963: 10), the world-market price of coffee decreased by nearly 50 percent between 1956 and 1962. At the same time, Côte d’Ivoire’s coffee-producing land and coffee production increased to 500,000 hectares and 150,000 tons, respectively, in 1962, from 300,000 hectares and 85,000 tons in 1956. This was due to the disconnection between world-market prices and local production.

At the end of the 1961 Cooperation Agreement (in 1963), Côte d’Ivoire was more closely tied to France than it had been in 1960. The Cooperation Agreement increased France’s import monopoly from 65 percent in 1960 to 75 percent at the end of 1963 (Tuinder, 1978: 345). The importance of the French market also increased as a result of the declining world-market prices of cocoa and coffee in the early 1960s. As the following pages will show, the first EEC trade system (the Yaoundé Convention) was simply an extension of the French system of colonial monopoly (which was preserved by the 1961 Cooperation Agreement) to other EEC members. At the end of the Yaoundé trade experiment in 1975, the most significant change experienced by Côte d’Ivoire in terms of export destination and import source was the dilution of the French market by other EEC markets. In essence, Côte d’Ivoire was more oriented toward the EEC in 1975 than toward France at the end of the colonial system.

EEC Trade System: Yaoundé Convention

The Yaoundé trade system prevented Côte d’Ivoire from placing quantitative (or qualitative) restrictions on imports originating from the EEC, and mandated a maximum transitional tariff of 0-30 percent. Non-EEC products were subject to higher tariffs, a variety of quotas and a renewable yearly import license. In return, the preferential margins enjoyed by Côte d’Ivoire in the French market before 1958 were extended to the markets of the other EEC countries (Ravenhill, 1985: 59). That is, France’s colonial preferential margins were adopted as part of the Yaoundé Convention. These margins were set at 20 percent for bananas, 9 percent for palm oil and 16 percent for coffee. The margin for cocoa was initially 25 percent, but decreased to 6 percent before the end of the decade (ibid.). As a result, Côte d’Ivoire’s raw materials were more competitive than those of its neighboring countries (notably Nigeria and Ghana, in the case of cocoa) in the entire EEC market (Tuinder, 1978: 99). The immediate effect of this system was a trade shift in the source of the EEC’s imported raw materials (cocoa, for example) from less developed countries towards the Yaoundé associates. Ghana, for example, lost part of its European market to Côte d’Ivoire.

In terms of French direct price support, an annex to the Yaoundé Convention provided for the specific allocation of aid to certain individual states according to the benefits they received from French price stability. This was seen as a gradual eradication of the price support provided in the 1961 Cooperation Agreement (and the preceding late colonial years). With a timetable outlining the dates on which relevant products were to be introduced to competitive markets, $230 million was disbursed to stabilise the prices of vital raw materials (Barnes, 1967: 18). The funds were to be given to the governments of the AASM, who were in turn required to set up systems to administer them. The Ivorian domestic counterpart was the 1964 creation of Price Stability Funds for cocoa and coffee (Alschuler, 1988: 72).

However, the reverse preferences of the Yaoundé Convention were safeguarded by Article 3.2, which permitted Côte d’Ivoire to retain or introduce custom duties or quantitative restrictions on goods originating from the EEC for revenue or developmental needs. Attempts to use this clause required approval from the EEC. As John Ravenhill noted, the Community’s interpretation of the escape clause was very strict. In 1964-65, Côte d’Ivoire requested import restrictions on paints, matches and detergent from the Community. None of these requests were approved. The next year, Côte d’Ivoire requested approval for other imports restrictions, and none were approved (Ravenhill 1985: 63). Therefore, the Yaoundé Convention followed the pattern of the 1961 Cooperation Agreement, and of colonial trade before it, both of which preserved the PDCI and the regime of Houphouet-Boigny. The great relationship that existed between the ruling party of PDCI and France can be understood from this perspective. But it is important to ask how France benefited from the trade system at Côte d’Ivoire’s expense. This requires an understanding of the French colonial trade system.

In the post–World War II era, some French export sectors that were not competitive in the global market sold their products in the colonial market at non-competitive prices (Fieldhouse, 1986: 15; Kahler, 1984: 273; Boone, 1992: 69; Alschuler, 1988: 97; Marcussen and Torp, 1982: 49). These products included textiles, beet sugar, petroleum products, tyres, shoes and certain types of machinery and tools. D. K. Fieldhouse calculated that by 1958, the colonies provided a market for 85.5 percent of France’s sugar exports, 95 percent of its vegetable oil, 83.6 percent of its cotton textile products, 78.8 percent of its clothing, 92.2 percent of its soap, etc. (Fieldhouse, 1986: 15). Cement, metal and engineering products, chemical products and automobiles also found markets in the colonies. Marcussen and Torp (1982: 50) argued that the attempt to safeguard the protected market in the colonies gave rise to the price-support system in the late colonial years. France used the price-support scheme not only to obtain the support of local elites, as Campbell (1978: 81) argued, but also to make itself indispensible in the event of independence. After independence, therefore, the 1961 Cooperation Agreement was inevitable due to the former colonies’ economic dependence on market concentration and price support. The continuation of France’s price-support scheme was conditional on the compulsory importation of its products, as outlined in the 1961 agreement.

Marcussen and Torp (1982: 50) also argued that France constructed the EEC trade system with the colonies in 1958 to diffuse the costs associated with the price-support scheme and capitalise on its gains. At the time of the Rome Treaty, and in the Yaoundé Convention, West Germany argued for a different trade system: one that would not increase the cost to the country of obtaining raw materials (Zartman, 1972: 24). However, as William Zartman argued, “France offered to share the exclusiveness of her colonial market and investment area if the other members will agree to help meet the Associates market and capital needs that France could no longer handle” (ibid.: 12). The result was Part IV of the Rome Treaty, which was extended in the Yaoundé Convention (Bartels, 2007: 722). In terms of the distribution of costs and benefits among the EEC countries, Côte d’Ivoire’s export destinations during the Yaoundé Convention (i.e. cost to the EEC countries) was more rapidly diversified than its import sources (i.e. market gain for the EEC countries). (See table below for more information on direction of trade.) France continued to monopolise Côte d’Ivoire’s import sources (among the EEC countries) due to its colonial history and the familiarity of French firms with the colonial market (Tuinder, 1978: 72). France thus gained at the expense of the other EEC countries.

These gains also came at the expense of Ivorian economic and political development but to the benefit of the ruling regime in Côte d’Ivoire.

Economic Impact of Yaoundé Association

The guaranteed price offered by France for cocoa in 1962/63 was a third higher than world-market prices (World Bank, 1967: 36). This allowed the government to subsidise continued cocoa production regardless of the world-market crisis. In 1961, Côte d’Ivoire offered a producer price of 94,921 CFA/MT, which is equivalent to 275.77 Ghanaian cedis,²² while Ghana offered 220.46 cedis to its producers. The figure was the same for the two countries in 1962. In 1965, Ghana offered its cocoa producers 151.55 Ghanaian cedis, while the neighboring Côte d’Ivoire offered its producers 519.04 Ghanaian cedis. The producer price in Côte d’Ivoire was at least twice that in Ghana by the end of the decade. As Ales Bulir argued, the producer-price differential between Ghana and Côte d’Ivoire created an incentive for the smuggling of cocoa from Ghana and Côte d’Ivoire (Bulir, 1998: 4). This price differential has been explained as the result of excessive taxation on the part of the Ghanaian government (Bulir, 1998: 4; Radetzki, 2008). However, this explanation is inaccurate, because the government of Ghana subsidised cocoa producers in the early 1960s up to 1965 (World Bank, 1967: 18). The introduction of the Ghanaian cedi in 1965 (as, in essence, a devaluation of the former Ghanaian pound) may also have contributed to the price differential. A more significant factor, however, was the price-stabilisation scheme established under the Yaoundé Convention.

In 1965, for example, the price of cocoa was on average £138 per metric ton (MT) in London and $374.71 in New York. This amounted to 294.94 Ghanaian cedis.²³ The producer price in Ghana was on average 181.88 Ghanaian cedis, which amounted to 62 percent of the world-market price, excluding transportation and overhead costs. With the inclusion of transportation and overhead costs, the government paid 91 percent of its cocoa earnings to producers in 1955 (see Killick, 1978: 119). However, Côte d’Ivoire’s government paid producer prices almost twice as high as those in Ghana.

Table 5. 5 Producer prices in Ghana and Côte d’Ivoire

Average cocoa producer price (CEDIS/MT)
Year Ghana Côte d’Ivoire
1966 151.56 519.04
1967 197.56 472.77
1968 247.91 498.96
1969 278.55 523.78
1970 293.80 485.96
1971 300.47 530.32
1972 360.92 538.60

Source: May (1985: 129)

This huge gap in producer prices cannot be attributed simply to a difference in taxation policy. The government of Côte d’Ivoire deliberately attempted to encourage cocoa and discourage coffee production in the late 1960s, due to limitations on producing coffee after the International Coffee Agreement (World Bank, 1967: 14). The coffee agreement allocated yearly production quotas and markets to coffee-producing countries. Therefore, the government decided to reduce the cultivation of coffee and used price incentives to promote cocoa beans.

The Yaoundé Convention not only provided a protected market for Ivorian cocoa beans, but also continued the French price-support scheme begun in 1961 (World Bank, 1967: 12). The EEC disbursed yearly payments for price support for Ivorian cocoa, and protected the product with a 9-percent tariff wall. This concentrated the Ivorian market in the EEC countries. At the end of the Yaoundé Convention, for example, almost 75 percent of the country’s cocoa beans were sold in the common market, in contrast with its 40 percent market concentration in 1960. This was the case for all of the Yaoundé-associated countries. Ghanaian cocoa planters, for example, were also smuggling harvested products into Togo, another neighboring country that offered higher producer prices due to EEC price support (Parfitt and Riley, 1989: 110).

The main effect of the Yaoundé Convention was the insulation of the Ivorian economic system from any systemic vulnerability and therefore guarantees the position of the political elites. This took the form of (1) The dilution of the French monopoly by markets in the other EEC countries (direction of trade). (2) The activation of production systems on the preferential list (or products supported by the EEC’s aid program due to their presence in other West Africa countries). In 1975, the basic division of labour mapped out in the French monopoly of the late colonial years and the Cooperation Agreement was still in place. The only difference was the replacement of France by the EC. Furthermore, apart from the insulation of the Ivorian economy from the vagaries of world market, (3) another effect of the trade system was industrial contradictions. According to the World Bank, the government of Côte d’Ivoire was so eager to develop the region’s industry (in certain sectors where the government held control; mainly processing of raw material –coffee and cotton) that it implemented policies granting local industries extensive advantages (World Bank, 1978: 48). The implementation of both industrial policies (by which is meant the effort to establish some processing) and the Yaoundé Convention created a contradiction that led to a balance of payment crisis. But the trade system fully insulated ruling elites from any threat.

Direction of Trade

Table 5. 6. Direction of trade, 1960-1975. Export distribution per products

France 40.2 24.8 20.3 12.2

EEC (EF) 26.5 44.0 61.7 61.5

USA 21.8 21.1 15.3 8.7

Others 11.5 10.1 2.7 17.6

Total 100.0 100.0 100.0 100.0

Timber

Country 1960 1965 1970 1974

France 51.7 33.3 20.0 19.2

EEC (EF) 37.9 44.0 52.8 46.2

USA 3.5 7.3 4.3 2.5

Spain ... 4.7 10.2 13.0

Others 6.9 10.7 12.7 18.4

France 54.3 43.6 43.1 37.8

EEC (EF) 8.0 9.7 7.2 23.3

USA 17.5 27.0 40.5 16.8

N. Africa (FS) 17.5 6.9 1.1 8.6

Japan …. 1.2 3.7 2.2

Others 2.7 11.6 4.4 11.3

Total 100.0 100 .0 100.0 100.0

…. = zero or negligible.

EEC (EF: excluding France) = West Germany, Belgium, Italy, Luxembourg and the Netherlands. This designation does not include the United Kingdom, Denmark or Ireland, even though these countries became members of the EEC before the end of the period under study.

N. Africa (FS) = French-speaking North African countries

Source: Tuinder (1978: 344-45)

Table 5. 7. Distribution of total exports, 1960-1975

Country 1960 1965 1970 1974

France 51 38 33 26
EEC (EF) 15 23 30 36

USA 14 16 19 7

O.D.C 4 9 9 12

C.F.A.O 6 4 4 7

Other (FZ) 5 5 2 5

Others 5 5 3 7

EEC (EF: excluding France) = West Germany, Belgium, Italy, Luxembourg and the Netherlands. This designation does not include the United Kingdom, Denmark or Ireland, even though these countries became members of the EEC before the end of the period under study.

CFAO = Communauté Économique de L’Afrique de l’Ouest

Other (FZ) = other countries in the Franc Zone

ODC = other developing countries

N. Africa (FS) = French-speaking North African countries; Algeria, Morocco and Tunisia. Source: Tuinder (1978: 344-45)

By the end of the Yaoundé experiment, the EEC (excluding France) had become the dominant market distributor of cocoa and timber in Côte d’Ivoire. The EEC (including France) had absorbed more than 73 percent of Ivorian cocoa by the end of this period, compared with France’s 40-percent market concentration in the late colonial years. The distribution of timber showed a similar trend. In terms of market concentration, Côte d’Ivoire’s exports were more closely affiliated with the EEC at the end of the Yaoundé experiment than with France at the end of the colonial experiment—especially as cocoa had become Côte d’Ivoire’s main exported product by 1975.

With a 40.5-percent market concentration in the United States, coffee had a more diversified market than any other product in 1970 (Tuinder, 1978: 344). The market was also diversified in the east, as Japan absorbed 8.6 percent of Côte d’Ivoire’s coffee in 1973 and 3.7 percent in 1970, mainly due to the exclusion of coffee from the EEC trade system (ibid.). In 1964, the production figures and market allocation for coffee came under the International Coffee Agreement, an agreement made between producing and consuming countries to prevent price drops by assigning a quota to all producing countries. The agreement allocated yearly production quotas and markets to coffee-producing countries. In 1965, for example, coffee production averaged 222,000 tons, of which 140,000 tons were shipped under the International Agreement while the rest was sold illegally through Liberia (World Bank, 1967: 14). It soon became difficult for the government to market “illegal” coffee. For example, the disposal of almost 100,000 tons of coffee in 1968 due to over-production led the government to curb coffee production and expand its trade in cocoa.

The EEC also cut into the French monopoly on imports, but the pattern was less severe than that for exports. The value of imports from the EEC (excluding France) increased from 3.2 billion CFAF in 1960 to 40.4 billion CFAF in 1974. The latter was half of the value of imports from France, namely 89.4 billion CFAF in 1974.

Table 5. 8 Sources and value of imports in billion CFAF, 1960-74

Country 1960 1965 1970 1974

France 20.9 35.9 49.8 89.4

EEC (EF) 3.2 7.8 24.2 40.4

CEAO 1.3 1.9 3.3 4.8

Other (FZ) 1.7 3.4 7.1 8.6

USA 1.1 3.2 5.8 14.6

…. . = zero or negligible.

EEC (EF) = West Germany, Belgium, Italy, Luxembourg and the Netherlands. The United Kingdom, Denmark and Ireland are not included, despite becoming members of EEC before the end of the period under study.

Other (FZ) = other Franc Zone countries. Source: Tuinder (1978: 344-45)

France supplied 64.5 percent of Côte d’Ivoire’s imports in the 1960s (increasing after 1963 due to the compulsory import clause in the 1961 Cooperation Agreement), but only 46.2 percent in 1970. Meanwhile, the percentage of imports from the EEC (excluding France) increased from 9.9 percent in 1960 to 22.5 per cent in 1970. France’s share reduced further, reaching 38.5 percent in 1974, while that of the EEC continued to increase at a slower rate.

The ongoing predominance of French industrial products in the Ivorian market was due to the presence of numerous French industries and professionals in Côte d’Ivoire. From independence to the end of the Yaoundé years, the number of French industries and professionals more than doubled. The European (mostly French) population of Côte d’Ivoire increased from 15,000 at independence in 1960 to 50,000 at the time of the first census in 1975 (Tuinder, 1978: 124). This increase in the European population and the number of foreign-owned firms was the combined result of the Yaoundé Convention and the government’s new development strategy (see Section 3 for a summary of the problems with the government’s industrial policy). Most ISI companies in Côte d’Ivoire at this time were subsidiaries of French companies. According to the World Bank, this explains the continued dominance of French imports. The other EEC countries increased their sales of equipment through EC aid related imports (ibid.: 103).

Export Composition—EEC-induced Diversification

The EEC was primarily responsible for funding the extended development program in Côte d’Ivoire (and other countries in the AASM). The government of Côte d’Ivoire established an autonomous agency, the Société pour le Développement et l’Exploitation du Palmier à Huile, to develop the region’s plantations to support palm-oil production. This agency was largely financed by EDFs on a grant basis. The agency originally aimed to achieve 44,000 ha by 1971, of which 36,700 ha would be financed by an European Development Funds (World Bank, 1969: 2). In 1969, the government took out a World Bank loan of 186 million CFAF (the 1969 equivalent of US$29.1 million) to further finance the extension of the palm-oil development program. Palm oil became the government’s largest investment in the 1960s (Hermann, 1981: 120).

There is evidence to suggest that the EEC promoted palm oil in response to a precipitous increase in demand for the product in the 1960s, creating concerns about supply (Martin, 2003: 201). By the end of the Yaoundé Convention in 1975, the European Community had consumed more than 85 percent of the OECD’s entire imports of palm oil, and more than 85.1 percent of the Community’s imports had been supplied by the AASM (Ravenhill, 1985: 25).

The preceding analysis has shown that the Yaoundé Convention protected the contemporary production system in Côte d’Ivoire and thus secured the position of local ruling elites. As a result, Côte d’Ivoire experienced no significant political crisis or challenge from the excluded group in the political settlement, which cannot be said of Ghana and Nigeria. The interaction between the Yaoundé Convention and political elites’ quest for survival led to political and economic stability at the cost of change or diversification during the decade-long commodity crisis. As well as securing an expanded market for traditional exports and investing in new EEC-financed sectors, Côte d’Ivoire’s government sought to germinate processing industries—regardless of the closed policy space. This led to a serious inconsistency between elites’ industrial policies and the Yaoundé provisions. The following account shows that the Yaoundé Convention not only preserved the position of ruling elites, but served as a neo-colonial tool for economic dominance.

Yaoundé and Industrial-Policy Contradictions

Although all through Yaoundé convention Côte d’Ivoire concentrated on existing colonial export, there was an attempt by the government to institute processing industries within the existing economic system: for cocoa, coffee and textile for. The inconsistencies between the government’s local industrial policies, which was directed at establishing processing capacity for certain raw material, and the Yaoundé Convention first became evident in 1967, when the Ivorian Ministry of Planning calculated that its industrial policy was economically benefiting the EEC (mostly France) but incurring a loss of income to the state (World Bank, Part 4, 1970: 17). Later, in 1968, the Banque Ivoirienne de Développment Industriel identified the same need to redirect the region’s industrial strategy (Campbell, 1978: 99).

The Yaoundé Convention required Côte d’Ivoire to give preferential treatment to EEC industrial imports, which restricted the government’s strategy-making; it could not impose quantitative restrictions on EEC imports, and only a restrictive tariff could be applied. To circumvent these requirements, Côte d’Ivoire granted extensive privileges to domestic processors of raw material to render the EEC’s imports less advantageous in clothing for example. An unmodified tariff structure was provided for the import-replacement industries, with an average effective-protection rate of 1.42 (Tuinder, 1978: 48). Effective protection is the amount of protection necessary to give local industries an advantage over imported products; the effective rate of protection given to an import-replacing industry or firm is equivalent to its value added divided by the net loss to customer revenue resulting from its existence. An effective-protection rate of 1.42 translates to a 42-percent incentive, according to World Bank calculations, with protective tariffs varying by industry.

At the same time as according domestic privileges, the Ivorian government made no objection to the establishment of EEC firm subsidiaries in Côte d’Ivoire, this led to the contradiction. Title III of the Yaoundé Convention granted all EEC firms the right to establishment in the former colonies. The first and most obvious problem lay in the establishment of “light” industries in Côte d’Ivoire to exploit existing privileges and market advantages. These industries (mostly French-owned) claimed all of the market advantages and repatriated all of the resulting profits. Observing this, the Ivorian Ministry of Planning concluded that the government’s industrial policy was economically benefiting the EEC (primarily France) but incurring a loss of income to the state extra prices local consumers were required to pay by the virtue of protection (World Bank, Part 4, 1970: 17).

Campbell (1975) clearly captured the contradiction between the Yaoundé Convention and the government’s industrial policy in her study of a single sector: the textile industry. After receiving minor textile protection rights from the EEC, the government of Côte d’Ivoire adopted a quota and an inflated tariff system—La Valeur Mercuriale (VM)—to protect the local market for developing textile producers. The most strict protective measures were directed against products originating from the EEC, due to their advantages as accorded by the Convention. Côte d’Ivoire used the VM tariff to calculate the value of imported textile products according to the production costs of the local competing textile industry, thereby passing on higher prices to local consumers during the learning period. This effective protection, as observed by Campbell (1975: 48), provided local textile producers with “a complete monopoly of the Ivorian market.” Fortunately, French textiles were grossly uncompetitive in the world market at this stage (see Basset, 2001: Chapter 5).²⁴

After instituting these protective measures—that is, from 1964 onward—the government offered attractive and stable prices to producers of cotton to boost local cotton production (Basset, 2001: 105). Through the activities of La Compagnie Française pour le Développement des Fibres Textiles (CFDT), a cotton-promotion agency, the government shared seed with peasants, employed local chiefs to promote the crop within their respective villages of influence, and sent out agents to promote the cultivation of cotton in northern Côte d’Ivoire. According to Basset, the massive promotion of cotton production reflected the government’s aim to “[supply] cotton fiber to [the] national cotton industry” (ibid.: 113). A traditional weaving industry had existed in Côte d’Ivoire even before the advent of the French colonial system and cotton production was part of the French colonial policy in the Northern part of the country. The post-independent textile industrial program was calculated to revitalise the local weaving industry. One reason for the interest in cotton/textiles was to bridge the income gap between southerners (cultivating cocoa and coffee) and northerners (where cotton was cultivated). The number of cotton growers increased rapidly; between 1963 and 1965, the area of land used for cotton cultivation increased fivefold, from 2,518 ha to 11,768 ha. By 1968, as much as 48,000 ha of Ivorian land was used to produce cotton, with 68,000 planters in the northern part of the country (ibid.: 112).

In line with the general policy of targeting local textile for development, the government of Côte d’Ivoire also permitted the duty-free importation of raw materials and semi-finished goods for local weavers, in addition to providing extensive tax advantages. Weaving tools and other necessary equipment could be imported completely duty-free. However, the Yaoundé Convention altered the meaning of “local industry,” as Title III of the Convention provided for the free movement of EEC capital agencies, branches and subsidiaries. French colonial trading houses, which originally supplied the colonial market with finished textile products, took advantage of the protected market by setting up “local” production units. To benefit from the duty-free importation of semi-finished products and the related tax advantages, these firms limited their activities to the finishing stages of textile production, namely the printing and dying of semi-finished imports that were already worth more than 50 percent of their final value (Campbell, 1975: 49). As a result, locally produced cloth became grossly uncompetitive, despite being produced under complete protection.

Campbell (1975) calculated that at one point, local cloth produced under complete effective protection cost an average of 86 francs per meter, and the equivalent imports from the Far East cost 55 to 57 francs per meter; however, the effective tariff duties of 77 francs per meter (calculated according to the VM tariffs and local advantages) made imports from the Far East uncompetitive. French local firms importing semi-finished products took over the market, used the concessions on export taxes to create an export market, and started to supply cloth to Côte d’Ivoire’s neighboring countries. Although consumers paid extra for the finished cloth, due to the extra costs associated with protection, there was little integration or firm linkage, and the profits were repatriated back to France.

The case of the textile industry is characteristic of Côte d’Ivoire’s entire sector after the institution of the Yaoundé trade convention. By 1966, Côte d’Ivoire’s industries—almost exclusively in the hands of foreigners and heavily dependent on internal demand/protected markets—had enjoyed an average annual growth of 12 percent since the Yaoundé Convention (World Bank, 1967:6). From 1965 to 1970, the average growth rate of the country’s ISI industries (controlled by France) was 20.7 percent. This growth was accompanied by a sharp increase in the net factor income transferred abroad, which more than doubled (increasing from about 6 billion CFAF in 1960 to 15 billion CFAF in 1965). By 1967, the net transfer of profits abroad largely exceeded the net inflow of foreign and domestic investment (Alschuler, 1988: 84), which in turn led to a foreign-capital shortage.

The profits repatriated from the ISI industries became by far the largest drain on foreign exchange, outstripping the net inflow of investment from the mid-1960s to the end of the Yaoundé years. By 1973, these profits represented 14 percent of Côte d’Ivoire’s total commodity-export revenue; 6 billion CFAF was repatriated in 1960 (World Bank, 1967: 7), compared with 40 billion per year between 1970 and 1974 (World Bank, 1978: 22). This high level of decapitalization led to foreign-exchange shortages and thus an increase in government borrowing, which in turn increased debt servicing. The region’s debt grew as decapitalization increased: the percentage of export earnings made up by debt service payments increased from 7.4 percent in 1970 to 10.9 percent in 1975 (Tuinder, 1978: 87). In a famous 1967 study, Amin argued that a future debt crisis was inevitable in Côte d’Ivoire due to the exportation of a large proportion of national savings. According to Amin, the resulting foreign-capital shortage and loan-repayment process would lead inexorably to crisis.

Alschuler (1988: 94) used the example of La Compagnie Africaine de Préparation Alimentaire (CAPRAL) to illustrate the process of decapitalization in a single sector. CAPRAL is an agro-industrial subsidiary of Nestlé, established as a processor of coffee. Its investment grew from 50 million CFAF at the time of investment in the mid-1960s to 1 billion CFAF in 1975. By 1970, CAPRAL had accumulated 950 million CFAF from customs and tax exceptions granted to local firms. But it was not local in any real definition of the term (Alschuler, 1988: 94). There is a marked disarticulation of such local industries from local factor employment.

The disarticulation of the industrial sector from local factors can be viewed from two perspectives: employment and intermediate products. In 1971, Europeans held 87 percent of the region’s managerial, professional and technical positions and 48 percent of its supervising jobs (Tuinder, 1978: 236). They accounted for 4 percent of the region’s employed workers and received 41 percent of the industrial wage bill (Tuinder, 1978: 237). The proportion of Ivorians in the manufacturing sector was 50 percent in 1965, but increased slightly in 1974, reaching 64 percent. In the same year, only 17 percent of Côte d’Ivoire’s intermediate input came from the industrial sector; the primary sector supplied 25 percent, and the remaining 58 percent was imported. In 1966, imports made up as much as 63 percent of the country’s intermediate input (Tuinder 178:231). Industrial processes in import-based industries are limited to the final stage of production, which explains the low level of industrial integration in Côte d’Ivoire—especially given the concessions granted to local firms by the government’s industrial policy.

According to the World Bank, the problems in Côte d’Ivoire’s industrial sector were caused by poor education and a lack of viable intermediary products. However, this argument is inaccurate. After the government’s economic calculations in 1967, the World Bank argued in a 1968 report that the government should invest more in education to increase local employment in domestic industries. Accordingly, the government took out loans as part of its updated development strategy of 1967 (see below) to focus on education. By 1973, the country had spent more on education worldwide than any other country in the world (32.6 percent of its budget, compared with a worldwide average expenditure of 18.2 percent and a minimum of 3 percent) (Tuinder, 1978: 75).

The problems of repatriated profits and industrial disarticulation in terms of intermediate goods were emphasised in the government’s policy-making after 1967, once its economic calculations had revealed the benefits to the EEC and losses to Ivorian consumers incurred by the investment provisions of Yaoundé convention. In 1968, when the Ivorian Development Bank and Ministry of Planning diagnosed these problems, there were only two surviving Ivorian industrial entrepreneurs, and Ivorians made up only 6 percent of the region’s managers, engineers and other staff (World Bank, Part 2, 1971: 56). At the end of 1968, Ivorian private capital was worth less than 300 million CFAF, compared with the total estimated capital of 42 billion CFAF (ibid.). This discovery led the government to increase the taxes on domestic industries to 33 percent, noting that many “domestic” firms were actually foreign-owned. An exemption was granted only if firms agreed to reinvest or not to repatriate their profits (World Bank, Part 2, 1971: 53).²⁵

In conclusion, the main effect of the Yaoundé trade convention was to replace France with the EEC in the international division of labour; this was evident in the dilution of the French market concentration by the EEC, and by the EEC’s sponsorship of selected products, such as palm oil, for diversification, and the EEC provision of price support to the main Ivorian export products. The expanded EEC market, which was protected against non-AASM members, gave the country an advantage over products from these countries. Therefore, Côte d’Ivoire’s cocoa exports displaced those of Nigeria and Ghana in the EEC market. Côte d’Ivoire’s unprecedented growth in the first 15 years after independence was tied up with the market advantage and price support scheme offered by the EEC. Côte d’Ivoire’s political stability, despite the fissiparous nature several policies (free land and immigration policies for example), was also tied up with the market advantage and price support scheme offered by the EEC. The minimum economic performance was secured, as did the position of the ruling elites.

In contrast with the situation in Ghana, where ruling elites felt threatened by a reduction in minimum economic performance and thus instigated a diversification scheme (away from cocoa), the EEC trade system was used by Côte d’Ivoire’s ruling elites to guarantee their survival by protecting the contemporary economic system. The next chapter will show how the emphasis of elites’ interaction with the EEC trade system shifted from the protection of the existing economic system to the allocation of resources. First, however, the divergence between Ghana and Côte d’Ivoire is mapped out in the context of the entire West African region.

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