Edited from a presentation by Dr Kwabena Nyarko Otoo, Deputy Secretary General of the Trades Union Congress (Ghana), delivered at the trade union convening on the African Continental Free Trade Area (AfCFTA) co-hosted by ITUC-Africa and the Labour Research Service in June in Kenya.

In the early 1980s, Ghana had a thriving textile industry, thousands of good, unionised jobs, and strong local production.

By the 2000s, most of it was gone. Why? Because of trade liberalisation – removing tariffs, opening our doors to cheap imports, and following the ‘advice’ of the International Monetary Fund (IMF) and World Bank. Those imported clothes, often second-hand, drowned out local producers, and jobs vanished. This tragedy is common in Africa. The idea that free trade automatically leads to job creation, poverty reduction, or economic growth has proven false.

The comparative advantage trap

Orthodox economics loves to tell us about comparative advantage. It is a fancy way of saying: “Produce what you are naturally good at.” So, Ghana gets cocoa, Kenya gets tea and coffee, and we are told to export that and import everything else. But the real value in trade is not in just digging minerals from the ground or growing raw crops. The value is in the processing, the branding, the technology, and the services. Think about it: Ghana and Côte d’Ivoire grow over 70% of the world’s cocoa, yet they pocket less than 10% of the global chocolate industry’s massive value. This is by design.

Economists like Erik Reinert have called the theory of comparative advantage a strategy for “specialising in being poor”. If you stick to exporting raw materials, you are stuck in a cycle of diminishing returns – prices fall, innovation stalls, and jobs stagnate. This theory, according to Schumpeter, “lacks nothing but sense”.

The ladder was kicked away: How rich nations grew

Every country that has successfully industrialised – Britain, the US, Germany, South Korea, China – did it behind high tariff walls, using protectionist trade policies. They nurtured their local industries and companies, letting them grow strong before opening up to global competition. As Friedrich List observed, when rich countries got to the top, they “kicked away the ladder”. They preached free trade to others only after they had gained a technological edge and built powerful industries. Free trade does not automatically transform a poor, agriculture-dependent country into an industrial powerhouse.

The global trade system is not a fair race. It is more like a hurdle race where the weakest athletes confront the highest hurdle. The International Monetary Fund, the World Bank, and the World Trade Organisation were built on the very premise that free trade is the only growth path. These institutions pushed African countries to open their markets, while richer nations keep subsidising their producers and using new trade barriers. This forces African firms, often small and fragile, to compete with global giants. The result is that imports grow faster than exports, leading to a balance of payments crisis. The solution from the Bretton Woods institutions is to cut spending, limit growth, and reduce jobs.

Trade needs industry, not the other way around

Trade is important. It played a huge role in the economic miracles of Korea and East Asia, and certainly in China’s rise. However, these countries liberalised their export sectors first, using their domestic markets as breeding grounds for local firms to learn and make mistakes before facing global competition.

Without protection, a country whose static comparative advantage lies in, say, agriculture, risks stagnation, according to economist Joseph Stiglitz. Trade can support development, but only if you have something valuable to trade. You do not create jobs by exposing weak industries to unfair competition; you grow jobs by building capacity and giving local firms space to thrive. Bhagwatti (2001), the high priest of free trade admits as follows:

“Those who assert that free trade will lead necessarily to greater growth either are ignorant of the fine nuances of the theory and the vast quantity of literature to the contrary on the subject at hand or are nonetheless basing
their argument on a different premise…”

What about the AfCFTA?

The AfCFTA aims to boost trade among ourselves, build regional supply chains, and open up new markets for producers. It even offers a chance to get around some of the unfair rules of the World Trade Organisation. However, we need to consider regional trade blocs such as ECOWAS, EAC, SADC and COMESA, which have existed for decades. Yet intra-African trade is a meagre 15%, compared to 60% in the European Union. If the continental free trade area is just about liberalising trade without a solid productive base, it could simply shift imports from Europe and Asia to stronger African economies. Weaker countries will be left behind, with their fragile industries facing unsustainable competition yet again. And when that happens, it won’t be governments or economists who bear the brunt; it will be African workers.

Takeaways

• Free trade has often destroyed more jobs than it creates, especially in the manufacturing sector.
• “Comparative advantage” is not a development strategy; it can trap countries in low-value exports and poverty.
• Protectionism is how every industrial economy on earth got started. Africa deserves that same right.
• The AfCFTA will not deliver its promises unless it is backed by strong industrial policies that promote decent work and build regional value chains.
• Trade unions need to push for opportunities to influence trade policy that promotes social justice.

View the full presentation.

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