TRALAC - Trade Law Centre

US Rekindles Scramble for Africa as China Pulls in

Wednesday, 12 July 2006

Source: Eckart Naumann / Business Report (South Africa)

Following years of playing hardball during the failed SACU-US FTA negotiations, it seems as if the United States is engaging in a new push for Africa. The latter was hardly on the US policy agenda a decade ago when the original African Growth and Opportunity Act (AGOA) legislation was introduced to Congress in the late 1990’s; since then, AGOA (through clever marketing often seen on the continent as the panacea for Africa’s disproportionately low participation in international trade) has not only changed the way in which the private sector and governments across Africa think about trade, but has likewise awakened a new interest among US policy makers.

A recent trend has seen the US focusing its efforts on concluding preferential trade agreements with handpicked trade partners on a bilateral basis rather than within the multilateral WTO trading system, choosing to follow its own all-encompassing FTA model that goes beyond the tariff liberalisation commitments found in traditional agreements. With SACU countries holding out for a deal that excludes certain sensitive issues (services, government procurement, intellectual property rights and so forth), the US appears to have done an about-turn and is showing renewed interest in cementing its trade relationship with countries across Africa. While still holding on to its desire of achieving – to quote from Deputy US Trade Representative Karan Bhatia opening remarks at the recently concluded AGOA Forum in Washington – “good” agreements with African countries, the US now recognises that “most countries are not yet ready for the US model agreement”.

But where does this recognition originate from? US trade policy, certainly when reading the provisions (contained in the original AGOA legislation) on FTAs with Sub-Saharan African countries, has a declared interest in negotiating trade agreements. But this interest initially appeared to be limited to SACU, which the US no doubt saw as a potentially enormous market for its exports of goods and services, if not intellectual property (think GMOs, think restrictions and licensing, think royalties!). Now suddenly we are seeing the concept of the Trade and Investment Framework Agreement (TIFA) emerging, the first of which was recently concluded with SACU and was followed earlier this month by Rwanda. These TIFAs, however, are such watered-down versions of the usual bilateral trade or investment agreements that one is left to wonder wherein the purpose of this ‘engagement-no-matter-what’ lies; it is submitted that the purpose of such agreements – however meaningless they may appear – is to ensure at least a symbolic foot in the door in what is likely to be a drawn out process towards a more meaningful relationship.

The answer to this trend may at least partly be found in China’s increasing interest and engagement with Africa, which is perceived as a threat to US commercial and political interests. Globally, China is fast emerging as an economic powerhouse. Competitive Chinese goods are flooding world markets, while its economic and population boom is fuelling the country’s appetite for natural resources and materials. Africa’s rich endowment in these has led to a Chinese courtship the magnitude of which was probably last seen during the days of the Cold War, albeit at the time mainly for ideo-political rather than economic reasons (for example when it built the TanZam railway linking Tanzania with Zambia, or stadiums for football matches and political rallies for those African countries demonstrating a socialist orientation).

But Chinese interest has also introduced a new set of rules to the game of international engagement. While the West, and particularly the Bretton Woods Institutions, have engaged with African countries mostly within a conditional moral, institutional and legal framework, Chinese interaction mostly devoid of such constraints. For example, China refuses to link its investment, development aid and loan-finance program to human rights and say democratic principles, or even environmental benchmarks. There is rich irony in the fact that China, itself hardly able to moralize on democracy, has recently built the new parliamentary buildings in Freetown, Sierra Leone or the new State House in Kampala, Uganda.

It is hardly surprising then that China is investing heavily in resource-rich countries including Sudan, Nigeria, Angola, Chad, Sierra Leone and the like, targeting a list of natural resources topped by energy products, and building roads and telecommunications infrastructure to obtain and service these. These developments may have welfare implications, and many African countries long shunned by the West are only too happy to oblige.

While China’s increasing geopolitical clout in Africa has its detractors, the investment flows associated with it have been welcomed by leaders such as Thabo Mbeki, even though he cautioned that both sides needed to “discuss and define” their relationship with each other. China has shown an interest in South Africa’s mining and manufacturing sectors, most recently during Chinese premier Wen Jiabao’s visit to these shores that followed his trek across Africa. In this context, and China’s broader strategic interest in Africa, it is perhaps not surprising that a pact – yet to be ratified by both sides – appears to have been signed that would quantitatively limit Chinese textile and garment exports to South Africa for the foreseeable future. This temporary reprieve, which has already been denounced by some industry players as being distortionary and unsustainable, may be a small price to pay in return for deeper business and trade linkages generally.

This brings one back to the new-found vigour with which the US appears to be engaging with Africa. While some pressure may well emanate from the pending expiry in 2007 of the current Trade Promotion Authority, which allows the US Congress to fast-track bilateral trade pacts, much of the current scramble for Africa must surely be the competing interest shown by China. Given the changing dynamics of the international energy regime and with it the US’ sourcing strategies, political instability elsewhere in the world, stagnation in many first world economies and the vast substantially untapped African market, it would appear that Africa will remain the flavour of the month for some time still. Whether Africa as a whole benefits from these developments depends entirely on how well it leverages its current status, and how well the growing interest shown in it will not only lead to increased trade and investment flows but also catalyse a much broader and fundamental integration into the world economy.

By Eckart Naumann

Naumann is an economist and Associate of the Trade Law Centre for Southern Africa (tralac), an independent organisation based in Stellenbosch

This article first appeared in Business Report.