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Global Trade War: Challenges of a New Reality for Africa

Global Trade War: Challenges of a New Reality for Africa

  • Igor Galo • Specialised Journalist in Latin America and Africa, works at IE UNIVERSITY

The electric car market and other new technologies, such as renewable energies, could reshape the global value chain and trade flows, offering both opportunities and challenges for Africa.

The US has announced an increase in customs duties on Chinese electric cars of up to 100 per cent. This is four times more than the current tariffs. And the increase in barriers to products made in China won’t stop there. Joe Biden also recently warned of an increase in tariffs on other products, such as chips, medical supplies, essential minerals, photovoltaic panels and many other products that will have to be paid for at US customs. The trade war between China and the US, which began under Trump, is intensifying. The US is thus responding to China, which it accuses of subsidising some industries with public money and then flooding the world market with cheaper products than those produced locally and controlling some key markets.

Regardless of how the political and economic confrontation between the world’s two great powers develops, the consequences and reactions in the other markets will soon be felt. Starting with the European Union, the world’s second largest consumer market. If the American market becomes more difficult for Chinese companies, the chips, electric cars or solar panels that can no longer be sold in the United States could head for European ports in search of buyers.

But unlike the ‘made in China’ products of past decades, some of these products compete with economically and socially important and powerful industries in Europe. The old continent is trying to take over chip manufacturing, after having delegated it to Asian factories for years, after realising its strategic nature.

And fearing that the same thing could happen to local solar panel manufacturing, which disappeared in the face of competition from ‘Made in China’, it has already announced that it is investigating possible illegal aid to Chinese car manufacturers, as a first step towards blocking or limiting their sales in Europe. The recent decision by the United States to increase customs duties on certain Chinese products has only added to the pressure on those in power in Brussels.

The consequences for Africa

With a huge production capacity that exceeds their domestic market, Chinese companies will have to look for new markets. Not just for the cheap, medium-tech products they were exporting a decade ago, but also for medium and high-tech goods such as solar panels, chips and electric cars. But also for medium and high-tech goods such as solar panels, chips, electric cars and others. Given the global trade conflict, emerging markets such as Latin America and Africa are becoming more attractive destinations than ever for Chinese companies. And Africans may feel the consequences of these new trade flows and this new technological and economic competition in different ways, depending on their approach as consumers or workers.

In the long term, the region could benefit from better products at lower prices. International competition in general, and some Chinese products that are difficult to market in the United States and Europe, could lead to better products arriving in the region at lower prices, such as electric vehicles, solar panels or chips. African customers, if countries stay out of trade disputes and with lax customs policies, could take advantage of the opportunity for what is often called a ‘leap frog’ or a jump to the latest technology products at a better price, skipping a technological stage. Perhaps many Africans who have never owned a petrol car could switch to the latest technology at a better price, skipping a technological stage.

On the other hand, this would represent a new obstacle to Africa’s industrialisation process and even unbearable competition for the region’s meagre production base. In any case, the reality is that, with the exception of South Africa and, recently, Morocco, which has developed a powerful car export industry, the region is not a producer of these medium and high-tech goods, such as the aforementioned solar panels or electric cars, with which China wants to conquer world markets.

Decisions to be made, the best way to make them is through regional partnerships

There are several dilemmas for African governments: accept the predictable influx of cheap Chinese products to improve the standard of living of the African population and productivity? impose tariffs to safeguard local industry? seek free trade agreements to take advantage of international geopolitical competition and insert themselves into the global value chain through friend and nearshoring?

Africa, with a demography and an internal market that will grow strongly in the coming years, finds itself in a situation with advantages not seen for decades.

The global competition between the economic power of the European Union and the world’s two superpowers, China and the USA, not forgetting the emerging India, is an opportunity for the continent to negotiate on several fronts with the different world powers in order to obtain good trade, economic and investment agreements. And if regional integration agreements such as the UOMEA advance in their coordination and act like a ‘European Union’, Africa’s power and position in the global trade and value chain could undergo a major change in the coming years.

See Also

Chinese car manufacturers, for example, have already announced investments of millions of dollars in factories in the European Union or, for example, Brazil, to facilitate the entry of their products into these markets in exchange for moving part of their production to these markets. Could Africa ask for the same?

Strengthening the various African regional integration organisations, such as UEMOA, SACU and CEMAC, and validating them as interlocutors for their member countries in the face of global potential (Europe, the United States, China, India, etc.) would be a very important step for the region to make the most of the new era of technological, economic and commercial competition that the world is entering.

In a more complex world in which there are several world powers competing to expand markets and influence, Africa can improve its situation, but coordination and action in regional blocs is needed to take advantage of the opportunities and avoid the possible prejudices that the new world panorama can also generate.


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