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US should shift focus in Africa from aid to trade, analysts and officials say

Friday, 23 February 2018

Source: InsideTrade (Subscription)

The U.S. needs a new approach to Africa that is focused more on developing commercial ties and less on providing aid, analysts and government officials said Friday.

Speaking at a Center for Strategic and International Studies event, Erin Walsh, assistant secretary of Commerce for global markets, said it was critical for the U.S. to pivot from a focus on aid to Africa to one of commercial engagement with African countries.

To that end, she said, the President’s Advisory Council on Doing Business in Africa, which is led by Commerce Secretary Wilbur Ross, will visit the African continent in the coming months.

“President Trump signaled in his letter last month to African leaders that this administration will continue to build on this engagement, as indicated through Secretary Ross’ ongoing leadership of the President’s Advisory Council on Doing Business in Africa, and we are currently planning a trip to Africa with the [PAC-DBIA] team in that capacity to several African countries in the next few months,” Walsh said.

The PAC-DBIA was created by President Obama in 2014 to connect American and African businesses and foster trade and investment.

In addition, Walsh said Secretary of State Rex Tillerson will embark on an “extended visit” to the continent next month.

Florie Liser, president and CEO of the Corporate Council on Africa and a former assistant U.S. Trade Representative for Africa, said that Ross’ visit to the continent was important -- and added that it should not be the only one.

“We should be having regular, high-level, Cabinet-level trade missions to Africa,” she said.

Seydou Kabore, Burkina Faso's ambassador to the U.S., said the effects of the African Growth and Opportunities Act -- passed in 2000 and renewed in 2015 -- have been “mitigated.” AGOA, set to expire in 2025, provides preferential access to the U.S. market to eligible sub-Saharan African countries.

Kabore said the vast majority of U.S. businesses in Africa have been focused on crude oil production. As U.S. domestic production has increased, African exports have fallen, he said. “There is not real trade between the United States and Africa,” he said, calling for a paradigm shift from the focus on aid, which he said cannot create real wealth and jobs.

Kabore said that while Chinese business investment grew from $10 billion to more than $200 billion between 2000 and 2016, U.S. investment remained stagnant. But the U.S. retains advantages in sectors like agriculture, technology, finance and pharmaceuticals, he said, adding that the U.S. must be on the ground in Africa focusing on integrating African countries into global value chains.

“[Americans] can do better, but for that they have to really know what is in Africa, they have to know what [is] the real potential in Africa, they have to go there” he said. “You can’t stay here and say that you want to work with Africa; you have to go on the ground.”

Liser and Walsh, along with other panelists at the event, stressed a need for greater U.S. investment in Africa and noted fierce competition from China in the region.

“For each person that we have on the ground, China has 40,” Walsh said. She added that the administration was working on a whole-of-government approach to helping U.S. businesses in the region.

Liser said export financing agencies -- including the Export-Import Bank -- must be fully supported, staffed and funded.

Del Renigar, executive director for global government affairs and policy at General Electric, said the U.S. must use financing tools to compete not only with China, but with Europe and Japan as well. “It’s absolutely outrageous that we’re approaching three years without Ex-Im Bank,” he said.

Many lawmakers and business groups in the U.S. are pushing the Senate to confirm four nominees for the Ex-Im Bank’s board, which would provide a quorum needed to allow the bank to approve deals of more than $10 million. A vote on the nominees is being blocked by Sen. Pat Toomey (R-PA), a critic of the bank. The bank has been without a quorum since 2015.

In a radio interview last month, U.S. Trade Representative Robert Lighthizer said the U.S. would soon select an African country for a “model” free trade agreement.

Following the event, Liser warned against the use of the Trump administration’s preferred bilateral approach in Africa because of existing regional trade pacts.

“If you’re talking about bilateral free trade agreements in Africa, it’s going to be a challenge,” she said. “Why? If you want to deal with Kenya, Kenya is in a customs union, right, and has common external tariffs with all of the other [East African Community] countries, five of them, right? So if you work with Kenya you’re going to have to also work with Tanzania and Uganda and Burundi, etc.”

“It’s good if you start with countries that are ‘champions,’” she added. “But with the understanding that you’re going to move to the other countries that are a part of the regional group. The U.S. cannot, in my view, go in and undermine African regional integration. That is not something that we should do; we’ve always supported regional integration in Africa.”

Liser said trying to deal bilaterally with all of the countries would amount to a “lowest common denominator” approach. She said the U.S. should “start with champions in each region, then you set the standard high and then you invite the others to join you at a high standard for regional trade and for trade with the United States.”

“If this administration is talking about picking off ... one African country here and one African country there and one African country somewhere else and trying to do completely bilateral FTAs -- it’s not going to work, it’s not going to work,” she said.

An Obama administration report on trade with Africa issued in Sept. 2016 suggested the possibility of a “mega-regional” FTA building on regional trade deals in Africa. The Trump administration, however, has so far eschewed a multilateral approach to trade. The report also suggested allowing African countries to “dock” onto existing FTAs such as the U.S. FTA with Morocco and allowed for the possibility of an FTA with one country or a regional group, though it noted that would “require significant periods of time for negotiation, especially with respect to disciplines that have not previously been included in African agreements or at the WTO.”

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