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US Seeking New Trade Pacts With Africa

Published date:
Monday, 26 June 2006

After calling off negotiations on a Free Trade Agreement (FTA) with five Southern African countries last month, the US has indicated its intentions to negotiate new trade arrangements with several African countries including Kenya, Mauritius, Mozambique and Ghana.

The last two, which are significant recipients of US aid in Africa, have already approached Washington, confirming the seriousness of their intention.

The new strategy signals a radical shift in US approach towards Africa, which has previously not featured significantly in the US trade offensive largely confined to North America, Latin America and, lately, SouthEast Asia.

Until now, US trade with Africa has been principally managed under the Africa Growth and Opportunity Act (Agoa), which allows 37 African countries to export products to the US under preferential terms.

With Agoa due to expire in 2015, US business is reportedly keen on transforming the arrangement into an FTA.

This would result in African countries lowering tariffs for US exports to Africa. Industrial manufacturers and pharmaceuticals are the most vocal proponents of the FTA call.

But the US has not hidden its intention to get a slice of the African market. At this month's Agoa forum in Washington, US Secretary of State Condoleezza Rice urged the Agoa countries to open up their markets to US firms by reducing the high transaction costs of doing business on the continent.

The forum announced that a high level US trade and investment mission would tour East Africa from September to "help advance [US] goals to reduce trade barriers and increase trade between the US and East Africa, creating new job opportunities for all our citizens," according to US Agriculture Secretary Mike Johanns.

The renewed interest by Washington in Africa indicates a shift in strategy following the recent collapse of trade negotiations with the Southern African Customs Union (SACU).

Last month, the Bush administration suspended negotiations for a Free Trade Agreement with the Southern African Customs Union over what was seen as unwillingness by SACU countries to assume onerous obligations on trade liberalisation. SACU, the world's oldest trading bloc, formed in 1889, comprises Botswana, Lesotho, Namibia, Swaziland and South Africa.

Since calling off the SACU negotiations, which began in June 2003 but faced a rough patch over most of 2004 and 2005, the US appears set to make inroads into Africa.

It intends to launch a new work programme on trade and investment issues targeting several African countries though details remain scanty. This would take the form of bilateral investment treaties and trade and investment framework agreements (TIFAs).

Early this month, Rwanda joined South Africa as the second African country to sign a TIFA with the US covering intellectual property protection and investment.

It is widely believed that under the new arrangements, African countries would be required to open up key sectors to US firms under favourable terms that facilitate competition with their local counterparts.

But this is a hurdle that the US may find hard to surmount, with most countries wary of competition from the relatively more competitive US firms.

It is common knowledge that the collapse of the SACU talks is largely attributed to these concerns.

The SACU countries were unwilling to commit to any comprehensive agreement on liberalisation of services, rules on foreign investment and intellectual property protection. South Africa fended off demands by US business to dispense with the requirement for foreign investors to grant equity ownership to black business partners.

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