TRALAC - Trade Law Centre

How to boost US-African trade

Wednesday, 19 September 2012

Source: CNN Blog

Many of us in Africa look to the Asian miracle for lessons, one of which is that an ambitious expansion of external trade was key to the region’s social and economic development.

For example, nearly half a century ago, countries such as Japan and South Korea embarked on an ambitious program to boost trade and productivity. Once considered developing countries, these countries now have some of the world’s healthiest, wealthiest and best educated populations.

African trade with the United States and elsewhere has been expanding in recent years. But much of this trade has been based on oil, with African oil now accounting for more than 10 percent of U.S. consumption. It is notable, however, that, while growing steadily, Africa’s non-oil exports to the U.S. have not yet reached their full potential.

Boosting Africa’s non-oil exports will mean jobs and opportunities for millions of Africans, thus providing critical income to feed families and provide an enabling environment for accessing education. But U.S.-African trade will benefit the U.S., too, providing goods for U.S. consumers and jobs for U.S. exporters. With sub-Saharan Africa set for an average 5.5 percent economic growth next year and rapidly growing consumer markets, Africa offers excellent business opportunities for the non-oil sector too. When the U.S. Secretary of State Hillary Clinton made a nine-country visit to Africa last month, she brought with her an impressive delegation of business people, including executives from Boeing, Wal-Mart and General Electric.

So, with such strong common interests, how do we boost this trade?

First, as noted in the recent annual Africa Progress Panel Report, Africa needs to accelerate its plans for regional economic integration. Once economies are integrated, Africa will become a more attractive market for the U.S. and other markets. Africa’s population is set to double in the first quarter of this century, and this means that the continent is set to be the world’s largest consumer market. It goes without saying, therefore, that fragmented country markets are a thing of the past.

But integrated markets can only be a step in the right direction in the best interests of, among others, economies of scale and lower transaction costs for local, regional and global trade.

Indeed, Africa welcomes any U.S. or other expertise as the continent engages in modernizing customs procedures to reduce delays and harmonize trade standards so that market access to one African country could mean access to all 54 African countries.

We also welcome support removal of any other impediments to efficient supply chain operations across the continent. For example, construction of trans-regional roads would significantly reduce the time it takes to transport (precious) cargo.

Still, Africa also needs improved access for its non-oil exports into U.S. markets. The African Growth and Opportunity Act (AGOA) has been a corner stone of the U.S.-Africa trade relationship since 2000, providing preferential duty-free access to U.S. markets for nearly 6,400 product lines from about 40 sub-Saharan countries. Exports from AGOA-countries to the United States have increased from $23 billion in 2000 to $81 billion in 2008.

Besides boosting the volume of trade, AGOA has also supported the diversification of African products away from oil and, in its first nine years of its existence, over 300,000 jobs were created in Africa.

As AGOA is due to expire in 2015, it is important that we are ready, now, with its longer term replacement legislation so that there is continuation of enhancement of trade access for Africa’s agricultural, processed and manufactured products, including the reduction or elimination of tariffs. In particular, AGOA must be seen to benefit more African products and more African countries.

Just as important, Africa needs to understand that access to U.S. and other markets can be boosted by improving productivity. For non-financial trade barriers, in particular, a situation where a product fails to meet key import criteria on hygiene or product quality should be a taboo. This means Africa must build capacity for quality control and certification.

There is also the undeniable fact that Africa must continue to revamp its political, economic and corporate governance for the better. This is key to improving the long-term trade and other relations with the rest of the world.

At the Africa Progress Panel, we do not accept the argument that somehow corruption helps business people to circumvent heavy bureaucracy –corruption damages long term growth and job creation. It is also corrodes political and social stability. Given that any corrupt act has a counterpart, a concerted move to thwart any corrupt act by all concerned will carry the day.

With this objective in mind, the Africa Progress Panel wants to be associated with a call for a widespread implementation of the Extractive Industries Transparency Initiative, the Natural Resource Charter, and the Africa Mining Vision; as well as prosecution of culprits.

In addition, the Panel would urge U.S. investors to keep their supply chain clean as this encourages foreign investors to use as many local resources as possible, especially labor and local suppliers. This helps generate extra jobs and opportunities for Africans.

And finally, with respect to child labor, it is not debatable that it is morally offensive and often dangerous. It keeps children away from schools and reduces their lifetime opportunities. It also has corrosive effects on social cohesion when it diminishes the perceived value of education, especially for young girls. The Panel acknowledges the growing U.S. awareness and concern on this issue. Indeed, a diamond ring loses its beauty when it stops children from going to school; there is no justification for child labor.

Africa promises much. And ultimately, when Africa prospers, the U.S. prospers too.