TRALAC - Trade Law Centre

Investments between Angolan and US Businesses can Improve

The African Growth and Opportunity Act (AGOA) is "definitely working" to enhance and expand trade between the United States and Africa, but to fully benefit from that historic trade legislation, each AGOA-eligible country must develop its own AGOA Action Plan.

Assistant United States Trade Representative for Africa Florizelle Liser made that point March 9 while addressing a forum organized by the Women in International Trade (WIIT) group in Washington.

To illustrate her point on AGOA's success, Liser told her audience that 2003 trade imports to the United States from the 37 AGOA-eligible countries totaled about $14.1 billion -- up about 55 percent from 2002.

"That is good news," she said, but she quickly reminded everyone that $14.1 billion is a "rather small part" of an $11 trillion U.S. economy -- especially when one realizes that much of those African trade export numbers are made up of petroleum products.

"There is so much more for AGOA-eligible African countries to take advantage of -- and to use that duty-free access to the U.S. market to solidify their position, not only in this market but in the global economy generally."

Operating in the U.S. market can have many advantages for African countries, Liser told her audience of trade specialists, lawyers, and business executives, including a number of Africans.

"If you can do well in the U.S. market, generally speaking, that means you can do well in other markets. Through the African Growth and Opportunity Act (AGOA), we are encouraging all of the eligible sub-Saharan countries to use that as a vehicle to not only support economic reform but to also use it as an opportunity to attract investment and build their businesses and business opportunities so they can indeed use it as a platform for economic development and poverty alleviation -- which is one of our key goals as we look at AGOA.

"So yes, AGOA is working," she said resolutely. "There is expansion of trade from the African countries to the U.S. We would like to see it increase even more."

To increase trade between Africa and the United States, Liser said, African countries must address "supply-side constraints," such as the lack of efficient transportation systems, an energy supply that is costly or unreliable; poor telecom or high telecom costs and an overall lack of capacity to support private business and investment.

"It is not just on the other side of the ocean that you can start to think about how to get your exports in [to the United States]. You might open up a door, but still you have to make the steps and be capable of walking through that door," she said.

The United States is very interested in helping Africa address its supply-side constraints, she said. As part of that effort, she added, each AGOA-eligible country should have its own AGOA Action Plan.

"Just because you have told your business community that they have duty-free access to the U.S. market ... does not mean they are going to be able to just rush out and take advantage of it," she counseled her audience. "A trade or commerce minister cannot do it. He or she has to work with other stakeholders in the country -- ministers of energy, ministers of transport and the export promotion and investment-promoting authorities."

Each country must develop a plan of action, she said, identifying the top three, four or five products in which it is competitive or could be competitive. At that point, she said, African countries must talk about what they need to do to actually start moving those products in large quantities into the U.S. market under AGOA.

"Somebody has to sit down and come up with a comprehensive plan to do that. Otherwise we find out it does not happen on its own," she counseled.

"The countries that are doing the best under AGOA -- putting petroleum exports aside -- are those that have actually sat down and done that. So we encourage that," she said.

Besides discussing AGOA, Liser also took time to comment on the ongoing U.S.-Southern African Customs Union free trade agreement talks, which were launched in June 2003.

Liser reminded everyone that the talks are the United States' "first-ever negotiations with sub-Saharan Africa to negotiate a free trade agreement -- a step from one-way preferential market access under AGOA to a full two-way trade partnership between the United States and the five SACU countries -- Botswana, Lesotho, Namibia, Swaziland and South Africa.

The Southern African Customs Union, she noted, "is our largest export market in sub-Saharan Africa," when its member countries are considered as a group, importing about $2.9 billion worth of U.S. goods and services in 2003.

SACU is the oldest customs union in the world, she said, and as such has done a tremendous job of integrating their economies in such a way as to enjoy a common external tariff. This, she said, makes it easy for them to sit down and negotiate a trade deal as a regional block.

Additionally, Liser said, all five SACU countries are presently doing well under AGOA. "They, collectively, have been able to take greater advantage under AGOA ... so we thought it would be a good chance to start with them. We see the FTA (free trade agreement) with the SACU countries as perhaps a model of how we can negotiate future free trade agreements with other blocs of countries on the continent but also with other developing countries."

A fourth round of SACU talks has just been completed, she said, with five more rounds expected. Liser said that a free trade agreement will be completed by December 2004.

Liser said the process should result in a "full-fledged trade agreement in all areas," including services, labor, environment, investment, intellectual property and government procurement. A mechanism for settling disputes will also be part of the agreement, she added.

"We see a SACU agreement as a key opportunity for these five countries to build on what they have already been doing under AGOA to attract more investment and to develop a broader, deeper relationship with the U.S. in terms of trade, investment, services ... ."

The goal, she said, is expanding trade and increasing market access on both sides.

"We want to make sure, for example, that the kind of market access that the EU has now to that region," that American business enjoys the same level of access. "We want to level the playing field for U.S. exporters of goods and services," she said.

"On the other hand, ... we recognize that this could be a springboard for the SACU countries to really increase and enhance their exports of their goods and services to the United States. We also see it as an important way to stimulate investment in that region.

"What often happens when such trade agreements are negotiated," she explained, "is that the lesser-developed country in any trade group will often get the most investment."

An additional benefit of the agreement, she said, is increased regional integration among country groups such as SACU. "To date they have not had common investment, telecom or financial sector policies," but, she said, that may now change if a new trade agreement is reached.

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