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Letter from Washington: AGOA hostage to party political manoeuvring

Letter from Washington: AGOA hostage to party political manoeuvring
Simon Barber [Credit: Africabusinessconference2014.com]
Published date:
Thursday, 26 March 2015
Author:
Simon Barber

The African Growth and Opportunity Act (Agoa) will be renewed before it expires in September. That’s a solid bet. When, exactly? For how long? And will SA be treated the same as other African beneficiaries? Those are questions awaiting an answer.

Holding things up is strong opposition from most Democrats, and some Tea Party Republicans, to giving US President Barack Obama "trade promotion authority" (TPA). He needs this to conclude his Trans-Pacific Partnership (TPP), a trade pact with 11 "like-minded" nations — China is not on the list — that rim the Pacific on both sides.

Republicans are using Agoa as a hostage to obtain the Democratic votes they need to give TPA to Obama, with whom on this they are in rare agreement. Without TPA, there will be no TPP. Japan, New Zealand and other partners have said they will not make final offers without assurances that whatever Obama gives them in return will not be tampered with by Congress.

The Democrats may be in the minority in both the House of Representatives and the Senate, but because of dissension within their own ranks, Republicans need help from the Democrats to give Obama what he wants. They have yet to get it.

The American Federation of Labour and Congress of Industrial Organisation, a labour federation, blames stagnant incomes and rising inequality on too much free trade. It has promised to withhold campaign money from any Democrat who votes for TPA. For some, the threat is serious enough: there is no upside. Come next year, business is going to fund their Republican opponents whatever they do.

Senator Elizabeth Warren, the new Pasionaria of the Democratic left, is sounding a lot like SA’s Trade and Industry Minister Rob Davies in her opposition to the proposed TPP investor-state dispute mechanism that takes matters out of countries’ own jurisdictions.

House minority leader Nancy Pelosi says she won’t support TPA until she’s seen the final agreement. Ron Wyden, ranking minority member of the gatekeeping Senate finance committee, wants a clause that will allow Congress to make changes to any agreement before approving it.

It’s hard to judge what will happen to the Agoa hostage. Will it be released if the TPA standoff hardens into deadlock? There is plenty of precedent for things going down to the wire in September, by which time Agoa-dependent clothing exporters such as Lesotho stand to have lost orders worth hundred of millions of dollars.

The renewal legislation is still being drafted. Between the administration, most Democrats and the beneficiaries, the consensus is for a 15-year extension. Republicans want less, perhaps five years, for the sake of fiscal hygiene. There is also a view that long-term renewal of nonreciprocal access to the US market lowers incentives for African countries to open their own markets in return. That could be taken care of by putting beneficiaries on notice, with deadlines, that Washington requires real progress towards reciprocity from countries that wish to remain eligible for Agoa. Care would have to be taken that this did not interfere with regional integration.

As the cornerstone of Obama’s Trade Africa initiative, foundations are being laid for a free-trade agreement with the East African Community. This could set the standard required of everyone else.

US policy makers have never entirely rid their nostrils of the smell of skunk that lingers from the failure of the negotiations on a US-SA free-trade agreement encouraged by the original Agoa. Complaints from US multinationals that they now face higher tariffs in SA than their European Union competitors have not helped clear the air.

Then there is the chicken matter, with its noisy champions in the Senate, along with niggles over beef and pork. And let’s not overlook the Obamacrats’ irritation with SA’s refusal to give up its stockpile of weapons-grade uranium, which could put it athwart Agoa’s national security clause.

Nor to be overlooked is the sophistication of SA’s economy, or its much-vaunted membership of Brics (Brazil, Russia, India China, SA), or the ruling clique’s concomitant contempt for the US, or that no one saw Agoa being used by locally subsidised German car makers to improve their US margins. All told, there’s a case to be made to treat SA differently in the new act.

The good news is that US companies are lobbying hard for SA’s continued inclusion. The rest of Africa is largely supportive as well. Botswana sells leather to those German car makers.

 

• Simon Barber is a freelance journalist

 

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