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Guest Column: The 2011 AGOA Forum - Is this the year that Africa is ready?

Published date:
Saturday, 04 June 2011
Submitted by: Victor Mroczka

From June 8-10, U.S. and African stakeholders will attend the 2011 U.S.-Africa Trade and Economic Cooperation Forum, better known as the AGOA Forum, in Lusaka, Zambia. This event comes at a very opportune time, as both sides are looking to advance the U.S.-Africa trade relationship.*

The United States is increasingly seeing its market share erode and commercial presence recede throughout Africa at the expense of industry expansion and investment from Brazil, China, India, and others. These countries are also increasingly becoming a favored export destination for African goods, offering duty-free, quota free treatment for almost all originating goods. Therefore, there is much at stake for the United States at this year’s event.

At the same time, Africa continues to be plagued by the same old constraints – poor infrastructure, extended customs clearance times, high transport and energy costs, and limited regional cooperation. The situation has gotten so bad that domestic manufacturers cannot even access their own markets because it has become too cost prohibitive to do so.

In order for the event to be a success, both sides need to bring something meaningful to the table and lay the groundwork for a deliverable.

For its part, the United States is putting out some strong signals that it is willing to go to the next level and enhance its trade relationship(s) with Africa. The United States is sending a high level delegation consisting of, among others, U.S. Secretary of State Hillary Clinton, Assistant Secretary of State for African Affairs Johnnie Carson, and U.S. Trade Representative Ron Kirk. The U.S. government has already begun to work with the U.S. Congress on a legislative effort to extend two vital elements of AGOA – (1) the third country fabric provision, which is set to expire in 2012 and is critical for African textile exporters and its related investors to continue to do business, and (2) AGOA itself, which is currently set to expire in 2015. In fact, Assistant Secretary Carson recently stated that he would like to see a 10-year extension of AGOA to establish the type of certainty investors are looking for to determine whether to dedicate financial resources within a specific region or country. In addition, officials within the U.S. Export-Import Bank have stated a willingness to spend approximately $1.5 billion on infrastructure development in AGOA-eligible countries.

African government representatives now have to do their part and demonstrate that they are willing to act as equal partners in enhancing its trade relationships with the United States. But what can be done? For starters, these representatives need to engage both the U.S. and African private sectors in the process. Both private sectors want to do business together, but there needs to be some appeal to make it all worthwhile. African leaders should demonstrate that they are willing and committed to addressing issue such as infrastructure, whether through mechanisms such as that offered by the Export-Import Bank or through other means. This commitment should include an improvement in roads (and not the Chinese-build roads that wash away at the first sign of rain either), efforts to reduce delays in customs clearance, and increase resources to combat corruption at all levels of government so that any business transactions that do take place can have cost certainty from production to delivery.

Another way to appeal to the private sector (and invite the investment that it brings) is to show that there is a willingness to look beyond just national borders and look at the relationship from a more regional perspective. Investors want big markets for their products and, for them, a big market is more a regional than a national one (see Wal-Mart’s plans for the Massmart acquisition). Therefore, African governments need to increase the integration of economic regional blocs, as the East African Community (EAC) has recently done. By presenting itself as a bloc, with reduced trade barriers and improved infrastructure within the bloc, investors are increasingly exploring opportunities within the EAC. It is no coincidence that one event follows the other. This can serve as a model in other parts of the continent, creating investment and business opportunities where none existed previously.

Finally, African representatives should also help themselves out and be ready to tell the U.S. delegation what it is that they value most in its trade relationship with the United States. Some hint of this already can be found in a recent communication to U.S. legislators. In March, the African Group of Ambassadors presented to the U.S. Congress a list of policy options to be considered to further enhance trade relations with the United States. Among the options listed were the extension of the 2012 and 2015 AGOA deadlines to provide certainty to existing and future enterprises in the region, duty-free/quota free access for agricultural products such as that already enjoyed with other trading partners, expansion of certain products currently excluded by AGOA to continue Africa’s diversification of its exports to the United States, maintaining certain anchor countries (e.g., South Africa, Nigeria, Ghana, and Kenya) within AGOA as they play a critical role in developing intra-regional trade, and trade-related capacity building assistance to address some of the existing supply-side constraints identified above.

There are many commonalities between the two sides and the upcoming AGOA Forum presents an interesting opportunity to enhance the U.S.-Africa trade relationship if both sides are willing to do so. Time will quickly tell if these trade desires can be turned into trade reality.

* Victor Mroczka is Counsel at the law firm of Hughes Hubbard & Reed LLP. The views of Mr. Mroczka are his own and should not be attributed to any of his clients or his firm.

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