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US aims to step up trade activity in Africa

Published date:
Monday, 20 August 2012

President Barack Obama's administration, criticized for not doing enough to boost trade with Africa in the face of rising competition from China, has taken steps in recent months to address those concerns and plans to do more.

After decades of poor performance, Africa is now home to some of the world's fastest-growing economies and China has been signing contracts to lock in long-term access to the continent's huge resources.

"Trade and investment is a critical component of the president's vision for the next five years of US policy towards sub-Saharan Africa," Deputy US Trade Representative Demetrios Marantis told Reuters in an interview.

Obama, in a tough race for re-election against Republican Mitt Romney, in June laid out a "US Strategy Toward Sub-Saharan Africa," which touted the continent's potential "to be the world's next major economic success story" and promised to work with the region to free up trade and investment.

But Stephen Hayes, president of the Corporate Council on Africa, a US business group, said Obama has not done enough to involve the private sector in planning on Africa.

The strategy paper was a positive step, but it contained few new ideas and business was barely consulted, Hayes said.

The US government must do more to help large US companies compete against big Chinese state-owned companies and other foreign firms, he said.

Two-way trade between China and Africa totaled just $8.9-billion in 2000, but grew more than 1 400% over the next decade to $127.3-billion in 2011, according to a US Congressional Research Service report.

Trade between the United States and the more than 40 countries that make up sub-Saharan Africa hit a record $104.1-billion in 2008, but fell sharply during the financial crisis and totaled $94.3-billion last year.

New US investment in the region ran about $3.2-billion in 2010, compared to about $36-billion flowing in from China and the rest of the world, the CRS report said.


US trade policy toward Africa has been guided since 2000 by the African Growth and Opportunity Act, which expires in 2015. AGOA waives import duties on a long list of goods made in eligible sub-Saharan African countries.

Congress recently renewed an AGOA clothing provision, just two months before it was set to expire and as Secretary of State Hillary Clinton was arriving in Africa for a seven-nation tour.

The action allows AGOA countries to continue using fabric from "third countries" such as China and Vietnam to make clothes to sell in the United States duty-free. But the delay in renewing the provision cost African producers many orders since importers book shipments months in advance.

That experience illustrates why Congress should not wait until 2015 to renew the entire AGOA, said Marantis, the deputy US trade representative.

"The closer you get to expiration, the more uncertainty there is for investors and you really do run the risk of investment drying up," Marantis said. "I think we need to start very soon in terms of crafting the next AGOA bill."

Alarmed at the inroads being made by China, some lawmakers have introduced legislation aimed at increasing US exports to Africa by 200% over the next ten years.

"Increasingly I am hearing: 'The US has given up on Africa as a market,'" Senator Dick Durbin, the Senate's No. 2 Democrat, said. "While we're building institutions [in Africa], China and others are building markets and we're being left behind."


Clinton's recent trip included a stop in South Africa where she was joined by executives from big US companies like Boeing, Wal-Mart, Federal Express and General Electric, the first time that has happened on a high-profile Obama administration visit to the region.

But the effort, coming late in Obama's first term, seemed symbolic and so does an expected visit in coming months by acting US Commerce Secretary Rebecca Blank, Hayes said.

Still, one idea that business did welcome in Obama's strategy was a focus on promoting regional integration in Africa by tearing down trade barriers between neighbors. That would create larger markets and boost incentives for investment, Hayes said.

Along those lines, the United States is beginning talks with the five countries in the East African Community - Kenya, Tanzania, Uganda, Rwanda and Burundi - on an investment pact.

It is also close to concluding an investment treaty with Mauritius and considering a similar pact with Ghana.

The US Export-Import Bank announced recently it will help finance as much as $2-billion in US energy exports to South Africa over the next seven or eight years.

South Africa plans to invest around $300-billion in renewable and other energy projects over the next 20 years and "we wanted to respond that we were clearly foursquare in support of that agenda," Ex-Im Bank President Fred Hochberg said.

The bank's portfolio of loans in the sub-Saharan region now tops $5-billion, including a record $1.5-billion so far in the current budget year, he said.

Given the stiff competition from China, the Ex-Im Bank could play an important role in boosting US trade and investment in Africa, Hayes said. But constraints imposed by Congress on the bank limit its use for riskier projects, he said.

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