3 - the influence of economic factors on the development of two or more countries Flashcards
how have protectionist policies affected african exports
major destinations for African exports, particularly the EU, have employed protectionist policies for their own industries. By subsidising their internal means of production and increasing costs for external imports, they have supported themselves by altering free market conditions.
how does the cap influence africa
Agricultural industries in Africa may well be able to produce dairy products much cheaper than the EU. However, with the subsidy of $2.60 per cow, per day, farmers are at a serious disadvantage to be able to compete in the world market.
in 2010, mark perry said each cow is richer than 1.2bn people on the planet
how have tariffs altered development
- Roasted coffee attracts a tariff of 7.5% into the EU. As a result, Africa tends to sell unroasted green coffee.
- In 2014, all African countries earned $2.4 billion from coffee sales to the EU.
- Germany alone earned $3.8 billion by processing the coffee and re-exporting it.
how have quotas altered development
- The SSA region produces about 7.5 million metric tonnes of sugar annually. About a fifth is exported to the EU.
- However, in 2017, new quotas were imposed to try to help less productive sugar beet production in Northern Europe.
- The amount SSA can sell to the EU therefore declines, even though their product is cheaper.
examples of other tariffs on SSA countries
the EU charges SSA producers a 30% tariff on processed cocoa products (such as chocolate) and a 60% tariff on other refined products containing cocoa.
This has kept potential growth suppressed and allowed the terms of trade to be controlled by the rich.
how has African innovation even been protected against in the EU
EU policy undermines African agricultural innovation is in the field of genetically modified (GM) crops.
The EU exercises its right not to cultivate transgenic crops but only to import them as animal feed. However, its export of restrictive policies on GM crops has negatively affected Africa.
risk to nigerian economic development
The moth Maruca vitrata destroys about US $300 million worth of blackeyed peas in Nigeria. The country is forced to import pesticides worth US $500m annually to control the pest.
Scientists have developed a Maruca-resistant, GM blackeyed pea variety. Nigerian policy makers are hesitant to pursue a technology that they fear might put them on a collision course with the EU.
what is an example of a trade agreement boosting development
The African Growth and Opportunity Act (AGOA) provides duty-free treatment to goods of designated sub-Saharan African countries (SSAs). The program dates from 2000 and has the goal of promoting economic growth through good governance and free markets.
how do SSA countries benefit from intra-regional trade
Africa does have its own trading blocs.
In Cairo (2015) an agreement was signed to amalgamate the SADC (Southern Africa Development Community), EAC (East African Community) + COMESA (Common Market for E+S Africa) as the
new Tripartite Free Trade Agreement (TFTA).
benefits of the TFTA
- larger market whose free flow of goods and services will help to maintain economic growth at 6–7% per year. At this rate the combined GDP of Africa is projected to reach $29 trillion by 2050 and help reduce poverty/inequality
- will boost investment in Africa’s cross-border infrastructure
- prospects for the larger markets and supporting infrastructure will spur industrial development. This will not only create jobs but it will also have the added advantage of diversifying Africa’s economies that are largely dependent on raw materials = new industries
- the signal of larger markets will also help to stimulate trade in services. The first beneficiary is likely to be the financial sector
- by being part of larger markets, small African countries will no longer be restricted to producing their traditional products
what is OPEC
OPEC (Organisation of Petroleum Exporting Countries) is a cartel that produces 40% of global crude oil output. It has 4 African members (Nigeria, Angola, Algeria + Libya), who account for 8.8% of OPEC’s proven reserves, whilst Saudi Arabia alone accounts for 22.1% of all proven reserves.
what is africas role in OPEC
There is a feeling that whilst OPEC brings wealth to African oil producing countries in times of high prices, the 4 countries wield little power within the organisation and the decisions taken by Saudi Arabia alone decide actions.
how have oil developments affected africa
- has bolstered the continent’s economy and improved the wellbeing of the citizenry
- however the wealth gap has increased dramatically, poor has seen little to no wealth benefit
how has oil discovery in chad affected its development
- The exploitation of oil wealth has exposed Chad to aspects of the “resources curse”: nonproductive public spending, corruption, weak external competitiveness, sharply rising public indebtedness, low non-oil taxation, rentier state behavior, and risk of conflict.
- oil discovery attracted mnc development, Exxon mobil
what is the resource curse
sometimes known as the “paradox of plenty” refers to the fact that often poorer countries with an abundance of non-renewable resources tend to experience less economic growth and less democracy than countries that actually have fewer natural resources.
which country hasn’t suffered from resource curse in the same way other SSA countries have
Only one natural resource-rich country in the region, Botswana, has succeeded in becoming an upper middle-income country using its natural resources, making the possibility of replication of this achievement difficult.
which policy helps get rid of the resource curse
The Extractive Industries Transparency Initiative (EITI)—a global initiative established in 2002 that seeks to improve the management of natural-resource wealth in implementing countries through increased transparency—is one of the international initiatives currently being implemented in many Sub-Saharan resource-rich countries.
why do resource rich countries develop slower
resource-rich countries often do not pursue sustainable growth strategies.
They fail to recognize that if they do not reinvest their resource wealth into productive investments above ground, they are actually becoming poorer.
Political dysfunction exacerbates the problem, as conflict over access to resource rents gives rise to corrupt and undemocratic governments.
how is nigeria suffering from a resource curse
- Weak institutions of state and poor governance in managing the vast revenues have led the country to fail to realise its full potential
- corruption = redirecting resources from the poor to the wealthy, inflating business costs, discouraging foreign direct investment (FDI), draining public expenditure, misdirecting aid and undermining equitable national development.
effects of resources on liberia
in a resource curse because:
- corruption and rent seeking by officials
- volatility in world prices
- the dutch disease (problems associated with a rapid increase in the production of raw materials (like oil and gas) causing a decline in other sectors of the economy.)
how many mncs in nigeria
about 40
eg Shell, Unilever and KFC
advantages of MNCs
Employment and new skills.
Money is spent in the economy, creating a positive multiplier effect.
Local infrastructure and education improve.
Smaller and medium sized local companies can benefit and grow.
Export revenues are earned.
disadvantages of MNCs
Local workers are often poorly paid.
Working conditions are often very poor.
Management positions are often taken by foreign employees of the MNC.
Economic leakage as profits are taken abroad.
Government funding to attract MNCs could have been invested in industry.
advantages of shell in nigeria
Major contributions in taxes and export revenues are made.
65,000 workers are directly employed and 250,000 workers are employed in related industries by Shell.
91% of Shell contracts go to Nigerian companies.
The energy sector has experienced rapid growth.
