TRALAC - Trade Law Centre

US focusing on high-end to boost export trade with Africa

Tuesday, 10 August 2010

Source: Business Daily (Kenya)

The US is moving higher up the products advancement ladder to keep its share of trade with Africa where competition for the low-end market has intensified with availability of cheap goods from emerging economies such as China and India.

US assistant Secretary of State for Africa Johnnie Carson says America is tightening its grip of the high-tech segment of the market to secure its top position in global commerce that has come under serious attack from the industrialising economies commonly known as BRICs.

“America will not compete at the low-end of Africa’s consumer goods market with Brazil, Russia, India or China (BRIC),” he said on the sidelines of the 2010 Africa Growth and Opportunity Act (Agoa) in Kansas City.

Production and export of cheap toys, mobile phones, radios, television sets and clothes has fuelled China’s booming economy in the past decade, propelling it to the world’s second largest and sparking debate over how best America should respond.

While China’s cheap goods have flooded the streets and supermarkets of all major cities and small towns in Africa, America has deepened its presence in the high-tech goods market such as planes, medicine and medical equipment.

Mr Carson, who is President Barack Obama’s chief advisor on US policies in Africa, shed light on a question that has lingered since the 2000 China-Africa Forum that set in motion “a new era of economic co-operation” between the continent and the Asian nation.

Over the last 10 years, the sales of Chinese goods in sub-Saharan Africa rose more than eight times and Chinese firms have won major construction deals in the region.

China’s main interest in Kenya, East Africa’s largest economy, has been in infrastructure that also helps open untapped markets and vast natural resources tucked away in neighbouring Uganda, Sudan, and parts of the DRC.

Africa-China trade rose nearly tenfold in eight years to $93 billion in 2008, according to the 2010 UNCTAD report.

The United Nations Conference on Trade and Development’s June 2010 report says China now accounts for 11 per cent of Africa’s external trade - and is the continent’s largest source of imports.

The EU is still Africa’s biggest trading partner — as a result of past colonial ties — but has ceded significant ground to the Chinese. EU’s share of African trade reduced to below 40 per cent as per 2008 figures from about 55 per cent in the mid 1980s.

The United States’ share of Africa’s trade has hovered between 10 and 14 per cent in that period, says the report.

But even though you are not likely to find cheap American motorbikes on display the next time you walk into a supermarket, Carson promises one thing: “America will continue to be a major seller of aircraft and engineering products, we know where our competitiveness is.”

In May 2000, when Carson was still on diplomatic duty in Nairobi, former US president Bill Clinton signed into law the African Growth and Opportunity Act.

The AGOA trade policy was a popular legislation that won bi-partisan support of both Republicans and Democrats in America’s legislature.

It offered an unprecedented chance to boost Africa’s economy by allowing more than 6,500 goods into the US market without charging any taxes on them.

AGOA agreement

Ten years later, trade between US and Africa under the AGOA agreement has flourished, putting to work thousands of people across the continent employed in the agro-processing and apparel manufacturing industry.

AGOA exports to America soared to $86 billion in 2008 from $50.3 billion in 2005, according to latest numbers from the US Department of Commerce.

But the sweetheart deal is set to expire in 2015, unless the US Congress votes to extend its life.

Mr Carson, who talks passionately about the trade policy, fears the window could close before achieving its core objective of putting African goods on the global trade map.

“Unfortunately African countries are not doing enough to take advantage of this provision, it was meant to improve their competitiveness in the global markets,” says Carson.