TRALAC - Trade Law Centre

Food and fabric: Can Obama come through for Africa?

Monday, 20 July 2009

Source: Ratio Magazine

“Brother Barrack Admonishes and Encourages Africa” read one of the headline following President Barack Obama’s much-lauded speech in Ghana last weekend. No speech to Africa by any other old, white American leader could have ever elicited such a summary - can anyone imagine John McCain admonishing the Ghanaian parliament? But even as Ghanaians made quite the show of dancing in the streets and peddling truckloads of Obama merchandise, many said they were trying not to expect too much from the new president.

Critics and activists have been quick to point out that Obama has already broken several of his campaign promises to Africa, and has little time in his overloaded schedule to consider the continent. A few commentators have gone so far as to suggest that the good work done in Africa by former President Bush could be unravelled by a scattered and non-committal Obama administration.

Pragmatism and the End of Aid

For once, I’m going out on an optimistic limb to say these skeptical arguments don’t hold up. Kenyans have already seen how serious Obama is about pressing an anti-corruption policy here. And contrary to the AFRICOM cynics, America’s hard line is not just about oil and terrorism. Yes, the US military has its eyes glued on West Africa, where drug lords, oil smugglers, Al-Qaeda in the Islamic Maghreb, and crime syndicates threaten American interests. And yes, Kenyan stability is vital to US security as Somalia falls apart and Sudan threatens to break back into war. But the Obama administration has also turned its attention to the never-ending conflict and human rights abuses in the DR Congo, wielding stern diplomacy and threats of force to end the fighting there.

Most importantly, the blunt assertion Obama made in his speech that “Aid is not an end in itself. The purpose of foreign assistance must be creating the conditions where it is no longer needed”, proves that he’s paying attention in his trademark pragmatic way. “We are interested not just in foreign aid, but in how we can strengthen the capacity for development internally in these countries,” Obama told AllAfrica just before setting off for Ghana. “Sustainable development” is a buzz word employed ad nauseam in aid circles, and other western leaders have made similar suggestions before. But very little aid is actually sustainable, and not enough substantive discussion has happened at high levels about how to restructure the aid industry with the goal of engineering its own demise. Obama appears refreshingly committed to this idea.

Agricultural Assistance

At the G8 meeting in Italy the president made a personal appeal to bring the amount pledged for food security assistance up from USD15bn to 20bn. Whether the cash will materialise is one thing, but the concept is right: Obama pressed that much of this money should go into agricultural development programs for poor countries, rather than funneled back into the pockets of American farmers who have long provided emergency food aid. Obama wants to support seed and fertilizer provision, technological advances, irrigation and agricultural financing to meet the needs of Africa’s millions of small farmers.

Kofi Annan has already been working on these issues through his Alliance for a Green Revolution in Africa (AGRA), and Standard Bank, Africa’s largest bank by assets, recently launched an initiative to fund small-holder agriculture , there is some question as to whether small-scale agriculture itself is a sustainable approach. It is encouraging to look at past initiatives from the World Bank to support commercial agriculture, which provides thousands of jobs, develops infrastructure, and is much more profitable (and therefore sustainable). World Bank money helped build the Madhvani Group’s Kakira Sugar Works in Uganda, which supports 100,000 people in its community. One would hope that Obama would keep this kind of success in mind. At the same time, Malawi has shown us that fertilizer subsidies aimed at individual farmers can greatly increase a country’s food production capacity.

President Bush made a much meeker suggestion in a similar vein back in 2007 to amend America’s Farm Bill to allow 25% of emergency food aid to be sourced locally rather than shipped from the US. The reform was shot down by Congress, largely at the behest of the powerful agribusiness lobby, which spent USD65m in 2008 ingratiating itself around Capital Hill. These are the same folks who, along with the European farm lobby, prevented African groups from negotiating a reduction in rich country agricultural subsidies at the infamous WTO Doha “Development Round” of trade talks that imploded in Cancun in 2003. Obama is up against these same forces now, and his yes-we-can spirit may not be enough to win the domestic battle. But taking a strong public stance on the issue early on is a brave thing to do.

Trade not Aid

Obama’s pragmatic approach to development also includes a commitment to the increasingly popular maxim: Trade not aid. Again from his Ghana speech: “America can also do more to promote trade and investment. Wealthy nations must open our doors to goods and services from Africa in a meaningful way.” Kenya is set to host the Eighth Annual Africa Growth and Opportunity Act (AGOA) Forum this August. AGOA has certainly had its problems since it was enacted by President Clinton in 2000. Critics say the preferential market access on offer comes with unnecessarily strict conditions and has not been widely accessible.

But Kenya’s textile industry has profited greatly from the duty free, quota free access to America’s USD500bn a year apparel import market. At the height of those benefits, nearly 40 textile factories were set up here that employed 37,000 people. Asian companies relocated to Kenya to take advantage of the preferences that gave Kenya a 40% edge on its competitors. AGOA benefits even outshine those provided by the EU under the Economic Partnership Agreements, because Europe’s tariffs are generally lower and preferences provide less of an advantage. But then came the end of the Multi Fibre Agreement (MFA). “In 2005, the world of textiles changed, and it changed forever,” said Jaswinder Bedi, managing director of the Nakuru-based garment manufacturing company, Bedi Investments, speaking at a recent AGOA Forum preparation press conference in Nairobi.

The MFA had imposed quotas on apparel exports from developing countries to the West. AGOA exempted African countries from these quotas, and gave them an advantage over their South Asian competitors. MFA’s expiration in 2005 opened the floodgate for textiles and apparel exports out of China and India, and nearly destroyed Kenya’s budding industry. Twenty of those 40 factories closed down, taking 17,000 jobs with them. This, compounded by falling demand and declining prices as a result of the global recession, has pushed Kenya’s textile industry to the brink of extinction. Kenyan apparel exports for the first quarter of 2009 are down to just USD60m – about half of what they used to be.

Not Much More to Ask For

This dismal picture will dominate discussion at the August forum, which is expected to draw at least 1,000 delegates including Secretary of State Hillary Clinton, US agricultural and commerce secretaries, the US Trade Representative, and policymakers and industry leaders from across Africa. So what will industry leaders be asking of their American partners in development? Not much, according to Bedi. He thinks the US has done all it can to provide good market access, and can’t be held responsible for Kenya’s competition problems.

Betty Maina, CEO of the Kenya Association of Manufacturers, wants to see a better variety of Kenyan goods exported to the American market. “There is some possibility of expanding our trade with the US,” she said at the same press conference. AGOA offers some 6,000 potentially eligible products, of which Kenya only exploits about 30. Maina hopes for a more diversified focus on exports that Kenya retains a comparative advantage in: Tea, coffee, horticulture, vegetables, and wool, cashmere and leather products. Maina also intends to lobby for a more nuanced classification of lesser developed countries that receive preferential access to Western markets. She argues that most African countries cannot compete with states like Vietnam and Cambodia on apparel exports, and should not be expected to.

Bedi’s focus is on increasing competitiveness at home by somehow amending the high cost of doing business in Kenya. He puts this task to the Kenyan government, to provide support such as electricity subsidies. Certain subsidies are illegal under the WTO, but India, China and Egypt are already increasing export subsidies to counteract falling demand. “African countries are not [politically] strong enough to support any form of subsidy that goes against WTO regulations. But the question is, if the rest of the world is doing it, why isn’t Africa doing it?” Bedi adds: “If we don’t have support from the government, it will be very difficult and all the [apparel manufacturing] jobs could be lost.”

What Bedi does want from the Obama administration is a bit of diplomatic match-making: if the US could encourage just one retail giant like Walmart to source from the Kenyan market, the industry’s woes would disappear. Beyond that, the ball is in Kenya’s court. As Brother Barrack says: “We must start from the simple premise that Africa’s future is up to Africans.”