Navigating the Trade Imbalance: Increased Cooperation with China Benefits Uganda and Africa

by Admin (Posted on December 21, 2023)

By Shemei Ndawula

Recently, the European Union(EU) Parliament issued a formal complaint against the Chinese People’s Republic regarding its trade deficit with China. This complaint has sparked global debate about the nature and impact of China’s economic engagement with the world especially with  developing nations. While the EU’s concerns are not without merit, in the new multipolar world, the continental body seems to often fallen short of the economic flexibility that previously made it an economic powerhouse.

In this Uganda presents a contrasting perspective; a nation often lauded as the most entrepreneurial in the world,  the potential of China’s unique approach to development in bridging Africa’s infrastructure gap and fostering inclusive economic growth could be the defining factor for our nation’s economic prosperity for the coming decades.

Trade Deficit: A Stepping Stone, Not a Stumbling Block

Uganda’s trade deficit with China is undeniable, with imports significantly exceeding exports. However, unlike the European Union, Uganda’s situation presents a unique opportunity where we can leverage China’s infrastructure development focus to accelerate our  own economic progress.

The Eurocentric model of development aid, often plagued by bureaucratic hurdles and limited tangible outcomes has proven largely ineffective in addressing Africa’s critical needs. In contrast, China’s investment in infrastructure projects like the Kampala-Entebbe Expressway and the Karuma Hydropower Plant directly improve Uganda’s transportation network, energy security, and overall economic activity. These investments create skilled jobs, stimulate local businesses, and lay the foundation for long-term economic growth.

To maximize the benefits of our relationship with China while minimizing the trade deficit, Uganda should adopt a multi-pronged approach by making strategic investments especially in these key areas;

We should further explore our economic diversification by moving beyond the current dependence on exporting raw agricultural commodities and minerals. This can involve processing agricultural goods locally, focusing on value-added products, and exploring latent potential in sectors like tourism in which we are abundantly gifted. With China’s success at poverty alleviation, it provides a potential tourism market of more than a billion people.

Additionally, we should comprehensively develop our national industrial capacity. China owes it’s rise to prowess in manufacturing and industrial development. This prowess through technology sharing can be leveraged to build Uganda’s own industrial capacity.Attracting Chinese companies to establish production facilities in Uganda can also create jobs, facilitate knowledge transfer,and reduce reliance on imported goods.

We will also need to strengthen trade facilitation which is the backbone of bilateral trade.The custom procedural process in the country needs to be streamlined with our foreign embassies and ambassadors. There’s hundreds of Ugandan importers in China facilitating the export of tons of Chinese made goods to the continent every day. The reason this is not two way traffic is because of the bureaucratic and expensive export process within the country. We will certainly need to streamline the export process if we ever hope for our goods to reach the Chinese markets.

The win-win approach which defines China’s foreign policy methods has already seen several Chinese companies setup shop in Uganda an outstanding example being the Chinese industrial hubs in Kapeeka and Mbale catalysing joint ventures between Ugandan and Chinese businesses can unlock new opportunities for both sides. Sharing expertise, resources, and market access would lead to innovative products, improved services, and increased trade flows.

A Balanced Approach: The Key to Success 

While Uganda and other African nations must capitalize on the benefits of their relationships with China, adopting a balanced approach is crucial. Diversifying partnerships beyond China, ensuring fair and transparent trade practices, and promoting responsible investment are essential to safeguarding Africa’s long-term economic interests.

The debate surrounding China’s economic engagement with developing nations is complex and multifaceted. While concerns about trade imbalances tend to look at the traditional indicators imports and exports, Uganda’s experience demonstrates the potential of China’s unique approach to development. By strategically leveraging this partnership, Uganda and other African countries can accelerate their economic growth, bridge their infrastructure gap, and create a more prosperous future for their citizens. Ultimately, the key to success lies in a balanced approach that acknowledges both the benefits and challenges of China’s economic presence while ensuring that Africa’s long-term economic interests are protected and advanced.

Shemei Ndawula is a Research Fellow at the Development Watch Centre.

 

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