Evolution of Economic and Trade Relations Between Cameroon and France

By Henri Kouam (Download pdf version)

Evolution of Economic and Trade Relations Between Cameroon and France Since 1960

Introduction

Cameroon and France have a secular economic, cultural, and social history. After Cameroon’s independence in 1960, it formalized its relationship with France, and regaining its economic sovereignty involved pegging its currency to the French franc and keeping over 50% of its central bank reserves (Africa News, 2020) at the French Treasury. Although France is Cameroon’s largest trading partner in Europe, Cameroon has not fully leveraged its historical and economic linkages with France due to issues related to the standard and quality of goods as well as packaging.

Meanwhile, the trade between both countries as a percentage of Gross Domestic Product has increased since the 1990s (World Bank, 2021). The economic relationship between France and Cameroon includes trade flows, foreign direct investment, official development assistance, and grants.

However, since Cameroon’s independence, there has been a noticeable divergence between France and Cameroon, which is linked to the structure of the economy and the composition of exports. This article analyzes the developments in Cameroon and Frances’ economic and trading relationship, the structure of Cameroon’s exports, and the complementary nature of aid and innovation in fostering economic development in Cameroon. It concludes with policy recommendations to support and boost the mutually beneficial nature of Cameroon – France Trade.

Developments in Cameroon – France Trading Relationship

Prior to France joining the European Union, Cameroon and France traded independently, based on bilateral treaties. However, this changed after France joined the EU in 1999, whereby monetary policy was centralized at the ECB, and the CFA Franc became pegged to the French franc. This peg ensured that the CFA Franc remained stable during periods of macroeconomic instability such as oil price shocks or sudden changes in global financial conditions. Meanwhile, the majority of Cameroon’s foreign exchange reserves are kept in the French Treasury and are jointly managed by French and Cameroonian Central Bankers.

France’s exports to Cameroon in 2017 were estimated at €537 million, while imports totaled €476 million in 2018. Exports of Cameroon increased from 2,673 million US dollars in 2000 to 7,730 million US dollars in 2019, growing at an average annual rate of 6.81% (Knoema, 2019). As a result, Cameroon has a current account deficit with France as the majority of its trade is driven by primary products that do not compensate sufficiently for its imports. France’s presence in Cameroon is much diversified, with over 100 subsidiaries and some 200 businesses belonging to French nationals. The French Foreign Direct Investment stock is estimated at €796 million in 2016, down from 3.5% in 2015 (Diplomatie, (2021).

Cameroon’s Exports to France Reflects Their Exports to the Rest of the World

In spite of trade agreements such as the Economic Partnership Agreement, Cameroon recorded a trade deficit with France 2020, estimated at CFAF 186,793,643.52 (Wits, 2020). This is a result of the quality of Cameroon trade that is dominated by primary products such as crude oil and agricultural products such as cocoa and coffee that do not add significant value to the Cameroonian economy. (Reuters, 2019) Conversely, Cameroon imports processed foods and manufactured products such as cereal, wine, plant, and machinery, as well as a range of services.

Cameroon’s exports to France reflect the broader structure of its exports with the rest of the world. The way Cameroon’s trade with the world is structured determines the types of goods and services that it can export to France. Cameroon’s ICT exports are estimated at 0.05%, while that of France is estimated at 3.8% (ICT, 2021). Similarly, the value-added from the service sector is estimated at 51.6%, while that of France stands at 71.03%. The share of agriculture in  GDP is estimated at 15.18% in 2020 (Statista, 2021), while that of France is estimated at 1.7% (Trading Economics, 2021).

Figure 1: Comparison of Cameroon’s and France’s Exports

Source: World Bank (2021)

The source for each indicator is hyperlinked:  Agriculture, Service Sector (value-added), and ICT exports

These indicators simply tell us that France is more technologically advanced than Cameroon and that the value-added from its exports are larger than that of Cameroon. As a result, there is a persistent current account deficit that exists between Cameroon and France, as one country exports raw materials and fuels, while the other exports consumer products such as cheese, wine, biscuits, and cereal in addition to intermediate products.

Debt Relief has Served as an Anchor for Economic Development in Cameroon

According to Diplomatie (2021), France and Cameroon signed a debt relief agreement estimated at €611 million in June of 2016. This eight-year contract was split into the fields of agriculture and rural development (€182 million); infrastructure and urban development (€156.5 million); budget assistance (€185 million, part of which will be dedicated to education); governance support (€9.8 million) and cross-cutting and partnership support (€16.38 million). To a large extent, this illustrates that French – Cameroon ties are driven by official development assistance and grants as illustrated in their shared need for debt relief as illustrated with the ‘contrat de désendettement et de développement.’ Meanwhile, there is a reserve of €61.8 million, which will be allocated during the mid-term review.

This development-led approach to engagement with Cameroon ensures that France can continue to benefit from preferential market access in Cameroon, market and sell its products. A mix of trade in goods and services, foreign direct investment, and official development assistance have underpinned Cameroon – France trading relations. An understanding of this relationship is incomplete without a brief look at history.

Cameroon’s Trade With France is Incomplete Without a Brief Look at History

Cameroon’s economy has faced some major structural changes since it gained independence. In 1973, the Green Revolution championed by former Head of state Amadou Ahidjo aimed at making the country self-sufficient in food and becoming the primary food source for its neighbors. However, after his resignation in 1982, the Cameroonian economy took a different turn, which affected its drive for autarky and probable innovation and competitiveness that would have resulted from such an approach. The political crisis that was rooted in Ahidjo’s resignation in 1982, almost caused a severe economic crisis, which negatively impacted Cameroon’s trade with France.

Cameron’s economy, which is still dependent on such exports as cocoa, coffee, and oil, was adversely affected by decreases in the prices of these commodities during the 1980s. By 1980, the country had to rely on financing from the International Monetary Fund and undertake a structural adjustment program. Regardless of the progress that has been made to shift the economy away from primary exports, very little has been done to diversify the economy and bolster its competitiveness.

One thing is clear, Cameroon’s economic relationship with France cannot be disentangled from its history and the structural drivers of the economy. Today, Cameroon’s economy is slowly changing, but it is not changing rapidly enough to address the rising trade deficit with France.

Strategies to Boost Cameroon’s Exports With France

1). Firstly, Cameroon should pursue greater economic and technical cooperation with France to improve technical standards in packaging to improve market access for Cameroonian products in the French market. This will reduce the structural current account deficit and equally ensure that Cameroonians can benefit from higher levels of employment and an improvement in terms of trade. 

2). Secondly, Cameroon should ensure reciprocity for its firms in France across the service sector. For example, Cameroonian companies should equally be able to tender for state contracts to challenge and up-skill the service sector that will have to compete against global companies that are technologically advanced and innovative. Reciprocal market access will be beneficial for Cameroonian firms over the long run.

3). Thirdly, Cameroon has benefited from its trading relationship with France, but it should ensure that investments by French companies generate the most jobs possible. Cameroonian policymakers should apply an employment-intensive approach to ensure that the greatest number of people are trained and employed on projects.

4). Finally, it is important to ensure that Cameroonian workers are trained to boost the technical capacity of the private sector and ensure that skills and technology diffuse throughout the Cameroonian workforce. For example, stakeholders should attempt to quantify and measure the technological and technical know-how that is transferred from French companies to Cameroon nationals.

Conclusion

France and Cameroon have developed a strong economic relationship over the years. Cameroon should take an employment-intensive approach to its trade with France. It should leverage France’s innovation and ensure that technology and skills transfer to the Cameroonian workforce.