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Africa: We need a new US trade framework

Published date:
Wednesday, 23 February 2011

As the White House scrambles to keep pace with the fast changes taking place across North Africa, the administration should reassess another vital aspect of U.S. policy toward the continent – preferential trade.

For more than a decade, the African Growth and Opportunity Act (Agoa) has been the cornerstone of commercial and trade relations between the United States and sub-Saharan Africa. By providing African countries with non-reciprocal access to the American market, Agoa was a bold effort to employ trade as a stimulus for economic development.

The story of Agoa, unfortunately, is that of a promise unfulfilled.

The United States and Africa should move beyond the arrangement toward free trade agreements when Agoa expires in 2015, especially with middle-income African nations. Meanwhile, more can be done to enhance U.S.-Africa commercial relations.

Of the more than 6,000 products that can be exported to the United States duty- and quota-free under Agoa, only 50 of the exempted categories have been utilized. For the last decade, petroleum products have accounted for more than 90 percent of all U.S. imports under Agoa.

Thirty-eight countries in sub-Saharan Africa are Agoa beneficiaries, but only a few have taken meaningful advantage of the trade legislation. These include South Africa, Lesotho, Swaziland, Kenya, Mauritius and Madagascar (which was suspended in 2009).

Agoa is credited with creating some 300,000 jobs on the continent. Measured against a labor force of over 300 million, however, and with half of Africa's youth unemployed, Agoa has not created sufficient jobs to make the intended impact.

As someone who worked to formulate and implement Agoa - both while serving in the administration of Bill Clinton and, more recently, through private sector work – I do not advance these conclusions lightly. But this is the true picture, as I see it.

To complicate matters further, the United States is in the process of being shut out of the African market.

China has overtaken America as Africa's largest trading partner, and its trade with Africa has expanded 30 percent annually for the last decade. During the last five years, China has invested over U.S.$43 billion in the region and has signed bilateral trade deals with 45 African countries.

As significantly, the European Union has initiated or concluded Economic Partnership Agreements (EPAs) with a similar number of countries, guaranteeing European companies preferential treatment. South Africa's trade and industry minister, Rob Davies, expects the Southern Africa Development Community, representing a regional market of over 200 million people, to finish an EPA by mid-2011.

The administration of George Bush spent three years trying to negotiate a free trade agreement with the Southern African Customs Union. The effort failed, in part due to South Africa - the largest Agoa beneficiary. South Africa concluded that the cost of granting reciprocal access to its markets made no sense given the unilateral benefits the country enjoys exporting into the U.S. market.

So how does the administration of Barack Obama build on Agoa and create a more sustainable relationship that benefits both Africa and the United States?

First, Washington needs to broaden its engagement in Africa beyond crisis diplomacy and such development initiatives as Feed the Future and Millennium Challenge Compacts, as important as those are. The town hall meeting convened by the White House in August with youth from 40 African countries to celebrate Africa's half-century of independence was a welcome show of support for the continent's future leaders.

The administration should now engage broadly with Africa's current leaders. There are regular U.S. summits with Europe, Asia and Latin America. Similar sessions with Africa would enhance cooperation at the highest levels and promote partnerships around common priorities, from conflict resolution to global warming and trade and investment.

More immediately, the Obama administration needs to energize the U.S. commercial presence in Africa. With 300 million middle income consumers, a rate of return on foreign investment higher than any other developing region, and a regional economy projected to grow at annual average rate of seven percent over the next 20 years, according to Standard Chartered Bank, the United States cannot afford to ignore the African market.

An initial step should be to step up our commercial diplomacy. Almost a decade has passed since a secretary of commerce visited the region. The new White House chief of staff, William Daley, led one of the last trade missions to the continent when he served in former president Clinton's Cabinet in the late 1990s.

Work should also begin on a free trade agreement with the East African Community, made up of Kenya, Uganda, Tanzania, Rwanda and Burundi, and to include South Sudan after it formally becomes a nation in July.

The region is a market of 126 million with a combined GDP of $80 billion - roughly the size of Vietnam. With an annual growth rate of five percent for the last decade, East Africa represents an attractive American trading partner.

The reality is that doing business in Africa does not even qualify as an afterthought for most American companies. Yet it is a market with more consumers than India.

A larger U.S. commercial presence would bolster progress in governance and economic growth and would positively impact other U.S. interests such as access to natural resources, deepening democracy and transparency, and accelerating economic development.

Last month, the White House said that President Obama is "quietly but strategically" stepping up his engagement in Africa. It is a strategic U.S. interest not to be sidelined on a fast-growing continent.

It is also in American as well as African interests to develop commercial policies that encourage and enable American companies to take advantage of Africa's expanding opportunities – in agriculture, infrastructure, services, retail, finance and other sectors.

And President Obama should make a lot of noise doing it.

Witney Schneidman was deputy assistant secretary of state for African affairs and is president of Schneidman & Associates International. He is the author of "Engaging Africa: Washington and the Fall of Portugal's Colonial Empire" (University Press of America, 2005).

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