The primary aim of this chapter is to show how threat to political survival induced diversification and economic transformation in some West Africa countries (represented by Ghana); and furthermore, how the EEC trade system prevented diversification by protecting contemporary economic system in other West Africa countries (represented by Côte d’Ivoire).
In Ghana, the 1961 commodity crisis threatened the position of the ruling political elites and a developmental state was instituted in response. This was an inevitable search for new basis of state rule. However, the military regime, after the Nkrumah regime ended in 1966, faulted the development effort for the economic crisis in Ghana and reversed to the pre-1961 cocoa system. This reversal was made possible by the recovery of cocoa prices in the second half of 1966. The military regime then conducted an election and a new government emerged in 1969. But when a threat similar to the 1961 commodity crisis occurred in 1970, the new government reverted to the Nkrumah development era - suspending investment in cocoa and attempting to diversify (Herbst, 1993: 22). The success of the threat-induced diversification scheme is a different question; the origin of politically induced diversification is my focus. As shown in the theoretical literature, political survival is the crucial motivation of ruling elites (Whitfield and Therkildsen 2011) and this can be threatened by a crisis in the economic basis of their power/ state rule. Such threat will unavoidably provoke changes in a bid to secure ruling position (Doner et al 2005).
The problem with the EEC trade system, exemplified in the case study of Côte d’Ivoire, is its guarantee of contemporary economic formation in West Africa, so that there is a permanent absence of reducing economic basis of state rule. France, and later the EEC, protected the economic system against any crisis by insulating the main export from the vagaries of world market prices. This led to a protection of not only the economic system but also the political coalition/elite. The absence of political crisis in Côte d’Ivoire in the 1960s can, in part, be explained by the EEC trade system. Likewise, the political crisis in Ghana has been explained from crisis in the economic system (Killick 1987). This point is not entirely inessential: the affiliated countries (Côte d’Ivoire, Mali, Togo, Senegal, Niger, Gabon, Upper Volta and Benin) enjoyed more political peace and stability than the non-affiliated countries (Ghana, Nigeria, Gambia) in the 1960s. This is due to the relationship between economic crisis and political crisis.
The divergence between Ghana and Côte d’Ivoire reflects the main development trajectories of West African countries in the first decade after independence: economically and to some extent politically. By 1975, at the end of the Yaoundé trade experiment, the West African countries associated with the EEC (with the exception of Nigeria) had grown more rapidly than their non-EEC affiliated counterparts, with an increase mainly in the market for traditional colonial products. Cocoa, coffee and groundnuts remained the main export products of these countries after independence; no attempt was made to alter this composition. By 1975, all West African countries joined the EEC trade system under the Lomé Convention. As shown in the following chapter, the development trajectories of Ghana and Côte d’Ivoire began to converge in 1975, when the Lomé trade system instituted consistent development practices across Western Africa (with the exception of Nigeria, which became dependent on the exportation of crude oil). Ghana and Côte d’Ivoire implemented almost identical development policies from the 1980s, purely on the basis of products supported in the EEC’s Lomé trade agreement.
Chapter 6: The Lomé Convention and Extraversion
The second EC trade system, established in the Lomé Convention, covered the period from 1975 to 2000. The Lomé Convention diverged from the provisions of the previous trade system: for example, West African countries gained the freedom to use tariffs against France and the EC for the first time in July 1975 (Tuinder, 1987: 99), and the Convention did not require the surrender of policy space. However, this shift to a non-reciprocal trade system (diverging from the colonial model in principle) was ineffective, as demonstrated in this chapter, because the price and market advantages of the Yaoundé Convention were extended and in some cases augmented in the Lomé trade system. As a result, the West African political elites (now including Ghana) continued to use the EC’s trade advantages as the basis for their economic and political survival. The ruling elites in Ghana followed Côte d’Ivoire’s pattern from the mid-1980s; that is, diversifying into products promoted by France in the colonial era and extended in Yaoundé and Lomé Conventions. But the expansion of the ex-colonial members in Lomé convention (the inclusion of former British colonies for example) led to an expansion of the products protected (through tariffs preferences and price support) and this opened space for new development policies (or resource allocation) within the trade system.
There was therefore a relationship between Lomé Convention and resource allocation, best explained by the inclusion of sugar protection in the Convention (not formerly in the Yaoundé Convention), which led to a reallocation of resources in Côte d’Ivoire and other West African countries to sugar production, leading to crisis in a couple of countries. More importantly, the products promoted by the EC in the Lomé Convention were all sub-optimal. For example, the Ivorian attempt to diversify into sugar because it was protected by the EC led to a financial crisis (resource misallocation), and the Ghanaian diversification scheme in the 1980s and 1990s (into products formerly promoted by France) oriented production toward products promoted by the EC that could not be realistically exported outside the EC-protected zone, eventually leading to resource misallocation. Finally, EC protection risked causing intensive production (in cocoa for example) due to the structural ceiling in production systems.
The argument of this chapter is that the interaction between the Lomé Convention and political elites’ search for grounds for survival produced an economic system in which EC market advantages determined the economic specialisation of West African countries. Lomé convention led ruling elites to promote problematic forms of specialisation and the main focus and thesis of this chapter is the problematic nature of the sectors promoted by ruling elites due to their protection by the EC: sugar, cocoa, pineapple, banana and processed fish etc. Without the EC trade system ruling elites will search for survival through promoting other sectors. While the previous chapter focused on ruling elites, this chapter is a sectoral (and micro) analysis demonstrating the problematic nature of the sectors prolonged or instituted by the EC through the mechanism of the trade system.
The chapter is structured as follows. The first part of what follows contextualizes the Lomé Convention by showing that the shift to non-reciprocity was due to a change in EC market requirements, and that EC-West Africa trade thus remained neo-colonialist and instrumental. Next, the impact of Lomé is explored in the following three dimensions. (1) Resource misallocation or failed extraversion attempts (using the example of the problematic reorientation toward sugar sector, which was promoted in West Africa by the trade system). (2) The danger of moving beyond the point of diminishing returns in products promoted by the trade system (as demonstrated in a detailed case study of cocoa sector). (3) The convergence between Ghana and Côte d’Ivoire in terms of sub-optimal sectors (of bananas, pineapples and fisheries sectors). In conclusion, the Lomé Convention is shown to have directed specialisation in West African countries toward problematic colonial-like sectors.
The chapter retains the centrality of African ruling elites agencies without in-depth analysis into it as in the previous chapter and instead it is sector focused.
The Context of the Lomé Convention
The overall argument of the thesis is that the ruling elites of West African countries used the EC’s trade and development system to ensure their own political survival in a process that complemented with Europe’s neo-colonial ambition. While the theoretical language is based on political survival of ruling elites, the EC’s neo-colonial ambitions is also part of the story. This part contextualizes the Lomé Convention by showing that its provisions, though was suitable to ruling elites’ survival, was in response to EC market requirements at a particular moment in history. The replacement of the Yaoundé trade systems occurred at a seeming watershed. The commodity crisis of 1973-75 created the appearance of a power shift toward commodity-producing countries (Taylor, 2010: 102). The crisis increased the price and reduced the supply of commodities, which is generally believed to have influenced the negotiation and outcomes of the Lomé trade convention (Ravenhall, 1980: 150; Gowland et al., 1985: 81; Adebajo, 2012: 89; Torrent, 2012: 239). The crisis originated with the oil crisis of 1973. The dollar price of crude oil rose by less than 2 percent per year on average between 1947 and 1967 (Hammes and Wills, 2005: 502). However, a coalition of southern oil producers used an embargo to produce an energy crisis in a bid to punish the supporters of Israel in the 1973 Yom Kippur War.26 As a result, prices rose from $3 to $12 per barrel. For the first time, the southern countries created a crisis in the industrialised world simply by withholding raw materials. This caused unprecedented concern in both the United States and Europe over the future security of raw materials (Ravenhill, 1985: 96).
This concern led to price growth in other commodities; the prices of sugar, cotton, palm oil and cocoa all increased by more than 100 percent during this period (World Bank, 1986). As Vincent Mahler has shown, the focus of the sugar conferences shifted for the first time in 1973 to the security of supplies for consuming countries as opposed to prices for producing countries (Mahler, 1984: 717). The crisis created the appearance of a power shift; some southern countries, for example, attempted to replicate the oil embargo by controlling the supply of other commodities. Gamani Corea, a Sri Lankan economist and in 1974 the Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), an organisation known for its southern focus, proposed a plan for the creation of a new international agency that would stockpile multiple commodities to regulate prices (Toye, 2014: 1765). The program was not successful, but the general atmosphere suggested a change in bargaining power to the advantage of the global South.
The change in the global trading environment oriented industrialised countries toward securing channels for commodity supplies. For example, it has been argued that the later food-security policy employed by the US and the EU—stimulating excessive production through subsidies—was conceived in this period (Paula and Pessali, 2014: 319). The negotiations that led to the Lomé trade system were greatly influenced by the commodity crisis. Joseph McMahon, for example, argued that the EEC entered the Lomé negotiations with one thing in mind: “securing raw material” (McMahon, 1988: 298). The Lomé discussions began at the point of the oil crisis in 1973, which significantly affected the position of both the EEC and the ex-colonies (Raffer and Singer, 2001: 100). According to some writers, the initial Lomé trade document (signed in 1975) reflected the EEC’s anxiety about the future security of raw materials (Woertz, 2013: 121; Meléndez-Ortiz et al., 2009: 117). But the document also reflected extraversion on the part of the ex-colonies. The EC’s attempt to secure raw material merged with Africa’s leaders attempt to secure price and market advantages.
The negotiations began in 1973 after Britain’s accession to the EC. In its original form, the Lomé Convention was a trade and aid system between nine EC members and 46 members of the African, Caribbean and Pacific Group of States (ACP). The term “ACP” was adopted in the Lomé Convention to denote the inclusion of former colonies from Africa, the Caribbean and the Pacific region. The size of both the EC and the ACP increased with each remodeling of the trade system—in 1979, 1984 and 1989. By 2000, the number of former colonies participating in the Lomé Convention had increased to 78.
Features of the Lomé Convention
The two main features of the Lomé Convention were (1) preferential market access and (2) a commodity price stabilisation/support scheme. First, the ACP countries were granted duty-free and quota-free access to the EC market, except in products governed by the Community’s Common Agricultural policy (CAP).27 According to the provisions of the Lomé Convention, the ACP countries were under no obligation to reciprocate by opening their markets to products from the EC. Their only obligation was to ensure that the members of the EC were not treated less favourably than other developed countries in the ACP markets (Arts 7 Lomé I; 9 Lomé II; 136 Lomé III; 174 Lomé IV; and Annex V, Art. 5 Cotonou). The trade agreement contained a safeguard clause permitting the EC to take appropriate measures if imports from the ACP threatened domestic producers.28 For selected commodities, the nature of the preferential market access was spelled out in special commodity protocols, as follows.
The Lomé Convention contained separate protocols for sugar, bananas, beef, veal and rum. The Sugar Protocol was an extension of the British CSA of 1951. Under the Sugar Protocol, the EC undertook to import a specified quantity of sugar from sugar-producing ACP countries at favorable prices. The refusal by a number of sugar-producing countries to fulfill the 1973-75 quota mandated by the CSA, thereby exploiting higher prevailing world-market prices (due to the commodity crisis), resulted in a shortfall of 325,336 tonnes of sugar in Britain (Ravenhill, 1985: 228). In the Sugar Protocol, the EEC responded with the mandate that any ACP country incapable of fulfilling its quota, or unwilling to do so, would lose a proportion of its quota in subsequent years. The Banana Protocol operated differently from the Sugar Protocol. It privileged ACP bananas through a tariff and quota system. Whereas the Sugar Protocol was borrowed from British colonial policy, the Banana Protocol was borrowed from French colonial policy. As a result, resources were cross-allocated by the British and French ex-colonies. That is, the former British colonies attempted to diversify into banana production (promoted by the French colonial system through quotas, subsidies and preferential market access), while the former French colonies diversified into sugar (promoted by the British colonial system). The protocols on beef, rum and veal took the form of duty reductions.
In addition to preferential market access, the EC provided the ACP states with financial and technical assistance through various schemes. A commodity price stabilisation system, STABEX (from the French Système de Stabilisation des Recettes d’Exportation), was instituted in the form of price support. In principle, STABEX provided export-earning stabilisation for several commodities. Tibor Palankai (1977) argued that STABEX was a product of the commodity crisis, citing Hans Michael’s 1973 report in which the EC declared that any trade system with the third world must take into account-projected shortages in food and raw materials (see also Frey-Wouters, 1980: 80). Similarly, numerous writers have viewed STABEX as a defensive response to the fear of raw-material shortages provoked by the commodity crisis (Brown, 2002: 57; Taylor, 2010: 210). But STABEX can also be viewed from the perspective of political elites in Africa as a strategy of extraversion.
Initially, the threshold of dependency on a given commodity relative to the economy’s total exports was set at 7.5 percent—later scaled down to 6 percent—as the condition of eligibility for inclusion in the STABEX scheme. This provided the semblance of price security for Côte d’Ivoire’s and Ghana’s main exports—as had been the case since the late-colonial period in the French colonies. A slight drop in coffee and timber prices in 1976 led the government of Côte d’Ivoire to claim 15,000,000 CFAF before 1977 (EEC, 1984: 62). Other countries claimed benefits under STABEX before a major price slump in the 1980s (Lister, 2002: 127). Despite meeting all legitimate requests between 1975 and 1978, the shortcomings of STABEX had become obvious by 1980, when its resources covered only 53 percent of requests. By 1981, it was able to fulfill only 24.7 percent of requests, and by 1984, it covered just over 10 percent (UN, 2005: 9). With reference to STABEX and related issues, John Ravenhill argued that “nothing in the relationship [was] guaranteed.” The Convention was riddled with escape clauses, as STABEX and other funding was provided at the EEC’s discretion (1985: 310).
The history of the Lomé Convention after 1979 was characterised by a continuous rollback of the advantages formerly provided (cf. Raffer, 1998, 1999; Raffer & Singer, 2001). For example, the EC introduced a test of democracy and human rights to subsequent refinements of the trade system. Lomé III contained a preliminary reference to human rights, and Lomé IV contained a provision for human-rights obligations and structural-adjustment conditionality in line with the IMF’s mandates. Some writers have argued that the EC slowly removed the advantages originally conferred in the Lomé Convention (by reducing STABEX funding, for example) because the commodity crisis that produced the initial Lomé trade system had ceased before the late 1970s (Ravenhill, 1985: 310; Edye and Lintner, 2002; Babarinde, 1995: 475; Raffer, 2003: 3).29
Regardless of the changes to the Lomé Convention, including the successive withdrawal of advantages, the Convention provided a backdrop for development plans in several West African countries. The disproportionate support of cocoa and coffee under STABEX, for example, perpetuated their production, and the Sugar Protocol, which offered sugar prices double those of the world market, provoked diversification in several countries. Support for several other crops (such as bananas and pineapples) led to diversification along similar lines. In short, the Lomé Convention determined the specialisation trajectories of West African countries.