Tackling Inter-trade barriers

H.E. Yoweri Kaguta Museveni

PRESIDENT OF THE REPUBLIC OF UGANDA

13TH MARCH, 2019

A paper delivered at the close of The

Africa Now Summit 2019, Munyonyo.

The first barrier we need to tackle is the strategic conception. How are
we going to solve the issue of prosperity? We shall solve the issue of
prosperity through the production and sale of goods and services. The
African leaders need to know that there are two key players in a
modern economy: the producer of a good or a service on the one hand
and a consumer of that good or service on the other hand. If nobody
buys or consumes that good or service that business will collapse.

Of course there are factors that must link the producer and the buyer ─
infrastructure such as roads, railways, harbours and ships; trade
access agreements, etc. It is through the criminal and unfair triangular
trade that Africa liberated Europe from poverty. The Europeans would
bring glass beads, mirrors, etc., to West Africa, exchange these low
value products for slaves, transport the slaves across the Ocean to the
Caribbean and the USA, make them produce cotton, which then, would
be taken to Europe and sold at high prices. Hence, no value would be
exchanged for value (slaves) and that value would be used to generate
more value.

That unfair trade, helped Europe to enter the Industrial Revolution.

With the industrial revolution, production in Europe and the USA grew.
However, by 1929, the disequilibrium between that increased
production and demand could no longer be contained. It caused a big
collapse in the form of the depression of 1929. That is how the
economist Maynard Keynes proposed that it is better to dig a hole and
fill it again so as to pay the diggers so that they could have money in
their pockets that would help them to go to the shops and buy the
merchandise ─ i.e. to stimulate more production by helping the poor to
buy what is stuck in the shops.

All this time, Africa was both building the foundation of capitalism
(through the free slave labour and, later on, the production of cheap
raw-materials for colonial industries) but also lubricating the wheels of
the very same capitalism by providing captive markets to colonial
finished products. I never saw Mercedez Benz vehicles from Germany
or Peugeot cars from France until about 1963, one year after Uganda’s
independence.

Before that, the car market of Uganda was dominated by British cars:
Humber, Morris Minor, Austins, Bedfords, Land-rovers, etc.

In spite of all those unfair advantages, not to mention the Americans

who got massive freed lands that previously belonged to the Red-
Indians, the capitalist system collapsed in 1929 precisely because they
had little market. Recently, in 2007/2008, there was another crush.
What is the reason? Inadequate demand for some of the goods and
services that, eventually, affected the Banks, etc.

If that is not illustrative enough, look at India and China, Each one of
them has got a population of 1.3 billion people. Therefore, their internal
market is huge right from the beginning. Nevertheless, neither of them
could undergo the social-economic transformation we were talking
about yesterday until they opened up, started trading with the world
but also started getting investments from the world. The GDP of China
in 1978 was US$ 149.54 billion. It is now US$12.24trillion. That of
India in 1991 when they opened up was US$278.4billion. It is now
US$2,848 trillion. If China cannot prosper alone with a population of
1.3bn people, if India cannot prosper alone with, again, a population of
1.3bn people, how can Uganda prosper with a population of only 40
million people?

Yesterday, I told you of the different paths taken by the former British
colonies of North America (the USA) compared to the Spanish colonies
of Central and South America. If you start with the year 1776 when the
British colonies expelled George the III authority from what is the USA
today, by 1945 that country had emerged as the most powerful in the
world. The former Spanish colonies up to today, many of them are
mired in under-development, drug wars, etc., with caravans of people
travelling on foot to try and access the prosperity of the USA.

Yesterday, I told you about the unification of the 39 Kingdoms of

Germany in 1871 that propelled that country to the centre of the world
stage as a very powerful country. Unfortunately, that country made the
mistake of trying to compete for colonies with the older imperialist
countries ─ Britain, France, Holland, Spain and Portugal. That is how,
14 years after the unification, Bismarck called the infamous Berlin
Congress of 1884-5 where he demanded the “fair distribution” of
colonial possessions ─ meaning us and the Asians. The older
imperialist countries tried to pacify Germany by offering her
Tanganyika, Rwanda, Burundi, Namibia, Cameroon and Togo.
However, Kaiser Willheriem and Hitler, later could not be satisfied by
this.

They wanted a “bigger share of us”. Hence, the 1st and 2nd World
Wars, that, fortunately, helped us to, eventually, get our freedom. Those
wars so much weakened the imperialists that they no longer re-assert
themselves in the colonies ─ but not for lack of trying.

The big farmers in Prussia, known as the Junkers, could not accept the
continued fragmentation of the Germanic peoples. They needed a
unified market among the Germanic speaking peoples. By 1936, Hitler
had gone further and incorporated Austria into the German Reich.

Henri Cavour of Piedmont worked for the unification of Italy for the first
time since the collapse of the Roman Empire in 450AD. He achieved
this in 1860, i.e. 1,410 years after the collapse of the Roman Empire.

I am quoting all this to make one point. Failure by some of the political
and intellectual classes to know that, with modern economies, you
cannot guarantee the prosperity of your people if you do not work for
access to big markets, either through alliances like the Asian countries
of South East Asia allying themselves to the USA or integration like the
EU, is the first barrier to intra-African trade. There will be no prosperity
without realizing this.

Once you realize this like I did in 1963 as a student leader, you cannot
rest but work for this integration so as to avoid the continued
marginalization of our people or even their future re-enslavement if not
worse.

Once we know this, then we must accept the free movement of goods
and services by removing taxes (tariffs) and non-tariff barriers (border
restrictions, road-blocks on trade routes, complicated licensing
procedures, etc). It is only when the goods produced by the factories
access big markets that they can make profits. Again, it is basic
economics. There are fixed costs ─ a building, machinery, etc. The
investor has already spent money on those. If he uses them to produce
a few items because the demand is small, he may make losses. Hence,
the more items that are produced through fixed assets, the better for
the business. Many factories are opening up in Uganda now. Why? It
is because Uganda has got alot of raw-materials of all types
(agricultural, minerals, forest products, etc.); it is peaceful; other than
some parasite public officials that try to get bribes from investors, the
business atmosphere is very friendly with a fully convertible currency;
the work force can easily learn; we now have enough electricity and we
are working on making it cheaper, we are working on the issue of the
lowering the transport costs; etc., etc. Uganda can, therefore, take off
quickly. Therefore, the issue of market access is now becoming critical.
I told you about the motor-bike tyres and tubes factory that is
producing 10,000 pieces per day but Uganda only consumes 3,000 of
that. The shoe factory is producing 20,000 pieces and the local market
consumes only 3,000 per day. The blanket factory produces 10,000
pieces per day, but, again, only sells 3,000 pieces in Uganda. The steel
factory which capacity to produce 4,000 pieces of steel per day is now
producing at half the capacity (i.e. 2,000 pieces per day) because of
cheaper steel imported from outside the region. Even Uganda only
consumes 20%.

East Africa needs to help us in this by imposing taxes on similar

products coming from outside the EAC. Therefore, the free movement
of goods and services is a matter of survival for Uganda, East Africa and
Africa.

In 1986, Kenya was exporting to Uganda goods worth US$200million.

Uganda was only exporting to Kenya goods worth US$12million. Some
of the Ugandan leaders started talking of blocking Kenyan goods. I
rejected that line because it is suicidal for Africa.

Supporting one another’s prosperity by buying one another’s goods and

services is the correct way. With our united market, we can, then,
approach third parties such as the USA, China, India, etc., for
additional market access to their markets, just like they have been
selling in our markets for centuries.

Once we deal with the concept, deal with freedom of movement of goods
and services, remove the tariff and non-tariff barriers, we, then remain
with two barriers to deal with. These are: the free movement of people
and dealing with the transport bottlenecks – the roads, the railways, the
water-ways, the airlines, the internet backbone, etc. On the issue of the
free movement of people, our party, the National Resistance Movement
(NRM), supports the total free movement of Africans in Africa. We only
need to advise on two things in this respect. All Africans that are to
enjoy that facility should be biometrically registered just for the sake of
security. Secondly, all governments to undertake by treaty never to use
that freedom of movement of people, never to ever operate behind the
back of the host countries. The freedom of movement of people should
only be for the transparent activities of trade and for nothing else.

The issue of infrastructure needs little elaboration. We need the

railways linking the East with the West, the South with the North. The
same for the roads, the waterways where applicable etc.

May be the last, there is the issue of the quality of safety products.
Those standards must be harmonized, so that people’s lives are not at
risk.

The future is bright, let us act right.

Date:

Wednesday, March 13, 2019