TRALAC - Trade Law Centre

East Africa: Why the US has joined the rush for East Africa

Monday, 22 March 2010

Source: The New Vision (Uganda)

The recent visit of Deputy United States Trade Representative, Ambassador Demetrios Merantis, marked a re-energising of US-East African Community trade relations. Observers at a formal event that Demetrios addressed in Kampala say his visit signals the US waking up to the reality that there is an emerging strong economic bloc not to be ignored - the East African Community.

Demetrios visit was different in that it was a visit from an official of the US state department in charge of trade and not a privately led initiative of American lobbyists like Rosa Whittaker coming to lure African states into trade partnerships with the US.

Certain things in the US-EAC trade relations are, therefore, expected to change. In his words, Demetrios said trade between the EAC and US "should double in the next five years."

What sparked this new momentum? For most of the last decade, the America's trade volumes at less than $2b with the entire EAC region, had minimal impact.

Statistics indicate that America's trade interest in the region was declining and having a lesser impact compared to Asia and the EU. On the other hand, the EU continued to make in roads into the region.

The 2008 Uganda Bureau of Statistics statistical abstract indicate that the EU commanded 24.3% of trade with Uganda, second only to the COMESA region at 37.9%.

Meanwhile, the exports share for North America stood at 1.8% in 2007. Of this 1.8%, the US took the highest share of 82% for all exports destined to North America in 2007.

The EU is also on the verge of signing the Economic Partnership Agreements with the EAC as a block. This will present one of the biggest trading partnerships for two global trade blocks.

Ofcourse the ramifications of the EPAs may vary with some analysts saying that these agreements are lopsided in favour of the EU. Then there is the onslaught from Asia, especially China who is not only trading in merchandise but also in agriculture and construction. Generally, the Asian continent remained the main source of Uganda's imported products, according to the UBoS report. In 2007, imports from Asia increased by 56.7% to $1,175m from $750m in 2006.

Specific countries that registered remarkable increase in the import bill were China, India and Japan where most vehicles, medical and pharmaceutical products originate. Clearly the US does not feature prominently in these figures. This shift in pattern could not go unnoticed by the world's largest economy, America. There is also the increasing strength of the EAC that can no longer be ignored. The statistics tell.

The EAC has a combined population of over 130 million people with varying levels of economic strengths. Uganda, Rwanda, Tanzania, Kenya and Burundi have a combined Gross Domestic Product of about $70b.

Any single investor entering the region has the multiple advantage of a market with an emerging strong middle class with a strong buying power, a single tariff structure across five states, an increasing competitive business environment and a plethora of resources, both human and natural.

But with all these potential, the US total trade volume with the combined EAC stood at about $1.5b by the end of 2009. The EAC integration process has also demonstrated to the world the unwavering resolve the leaders and people of the region have shown in driving their own integration process and their destiny.

In this, the customs union and the common market have already been accomplished in just 10 years. There is a steady momentum towards the monetary union. The EU with all its sophistications and resources took about 50 years to accomplish just these first three stages. EAC regional leaders have also been the most vocal advocates of trade as opposed to free handouts (aid). When Ambassador Demetrios acknowledged this progress it was succinct: "The EAC has made a lot of progress in a short time." But what took America so long?

Ambassador Demetrios sees the sudden subtle appeal of the EAC to the US in the "centrality of the Obama administration recognising the role international trade plays in driving recovery of the international economy and in making the world a better place."

Africa Growth Opportunity Act (AGOA) has been the most heralded partnership between the US and the poorer Africa, Americas and Asia. But few have benefited. In East Africa, there is very little to document. While most of the reasons for this failure are due to in-country structural challenges like run down infrastructure, insufficient power and failure to meet supply quota, there is little correlating chain support from the US to make AGOA a big hit here. The Bush administration acknowledged this when the programme was extended to 2015 to allow intended beneficiaries harness it.

Even Demetrios concurred: "US-Africa trade has been declining in the past few years, we needed to do more," said Demetrios at a meeting hosted by the US ambassador to Uganda recently.

The US, therefore, could not continue to laze around in past glories as emerging powers like China tear their way through what many perceive as "God forbidden" and unchartered regions. The EAC is no longer an unattractive destination. In this renewed interest from the US, the EAC must hold its best cards closest to its chest. How? By seizing and concentrating on its competitive edge like agriculture and emerging ICTs (Business Process Outsourcing). Priority should be on where the country gets its best trade value. For instance, the intra-regional trade still presents the largest untapped potential.

And when America, China and EU move in, the EAC must position itself to exploit their entry and not be trampled upon. In 2003 the entire sub-Saharan African countries exported $14b worth of goods to America under AGOA, reports indicate. The report account shows that one product accounted for 80% of that total- oil.

Could Uganda's new found treasure in oil spark the real gazetted trade presence of America in Uganda and the EAC?



“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of COMESA's bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.