US-Africa Trade

President Obama to host U.S.-Africa Summit

President Obama has invited African leaders for a summit in Washington D.C. from August 4-6 next week. More than 200 business and political leaders from both the U.S. and Africa will be attending the summit which will focus on the continent’s development and the U.S. role in partnership and investment.

Obama invited all African nations that are currently in good standing with the United States or are not suspended from the African Union. Leaders from Egypt, Madagascar, Sudan and Zimbabwe will not be attending.  Egypt, is not eligible to attend as it is currently suspended from the African Union.  There will also be no invitation for Sudan, whose president, Omar al-Bashir, has been indicted by the International Criminal Court (ICC).  The United States has sanctions against the Zimbabwean government of Robert Mugabe and his key officials over human rights abuses, political intimidation of opposition parties and role back of democracy.

Guinea-Bissau and Madagascar will not be attending the summit as well. The U.S. has concerns over the subversion of democracy in both nations.

One notable inclusion is Kenya, where President Uhuru Kenyatta is currently awaiting a delayed trial at the ICC on charges related to violence after an election in 2007 that left 1,000 people dead.

A White House statement said the trip would “advance the administration’s focus on trade and investment in Africa, and highlight America’s commitment to Africa’s security, its democratic development, and its people.”

U.S. Commerce Secretary Penny Pritzker when speaking to the Wall Street Journal, said deals worth billions of dollars would be reached at the meeting, adding that more money would be advanced to Africa for various development projects.

First Lady Michelle Obama, and former First Lady Laura Bush and the Bush Institute, will host a day-long spouses’ symposium at the Kennedy Center focused on the impact of investments in education, health, and public-private partnerships as well.

Throughout his years in office, President Obama has held numerous conferences and events focusing on building partnerships and investment for African nations. This upcoming summit is a continuation of that policy.

More information about the event can be found at the White House’s website.

Agoa’s 10th anniversary

Ambassador Ron Kirk spoke at the opening ceremony of the Ninth U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum last week, better known as “the AGOA Forum.” In attendance werecabinet ministers and senior officials from the 38 sub-Saharan African countries that benefit from the African Growth and Opportunity (AGOA) trade preference program, as well as representatives of African regional economic communities, the American and African private sector, and civil society.

During his remarks, Ambassador Kirk observed that AGOA has helped support African economic development by opening the U.S. market to a greater diversity of African products, including value-added and processed goods.“President Obama and this Administration are committed to a partnership with Africa that is commensurate with Africa’s vital and growing role in the global community, and that reflects past, present, and future ties between African nations and the United States,” said Ambassador Kirk. “The progress and potential of African economies are reflected in reduced inflation, lowered trade barriers, growing intra-African trade, rising foreign capital flows into Africa, and the creation of substantial new business opportunities.”

Enacted into law in 2000, AGOA is the U.S. government’s trade preference program for Africa.

Ambassador Kirk said trade between the United States and Africa has more than doubled during the first decade of AGOA.

“I think AGOA has been a success by any measure. Two-way trade between the U.S. and Africa usually ranges between $64 and $70 billion a year. Exports from Africa to the United States have, in some cases, quadrupled, and our U.S. exports to Africa have doubled,” Kirk said.

While AGOA over the last 10 years has led to increased trade between Africa and the United States, it has yet to achieve its full potential.

US officials have been frank in some of the shortcomings of AGOA.

US officials were frank about its failures. Hillary Clinton, secretary of state, told delegates: “We all know, despite the best of intentions, Agoa has achieved only modest results and has not lived up to the highest hopes of a decade ago . . . Petroleum products still account for the vast majority of exports to the United States and we have not seen the diversification or growth of exports that Agoa was supposed to spur.

Making clothing is often the first step on the road to prosperity for developing countries. But while African textile and garment exports to the US under Agoa rose by 52 per cent by 2009, according to a report by the US government accountability office, they were still barely more than 1 per cent of total US imports. An initial burst of exports was not sustained, and was concentrated in a small number of countries including the middle-income nations. Part of the reason is the breadth and depth of the agreement, shaped by political pressures in Washington. Economists say even a more generous programme would have struggled to overcome the real constraints to African exports, which are more to do with infrastructure and other supply-side problems on the east side of the Atlantic than trade barriers on the west. In the case of Agoa, the US Congressional Black Caucus pressed hard to focus the scheme on the continent. But the US clothing and textile industry lobbied to circumscribe the garment provisions to shield itself from competition.

The “rules of origin” – which determine how many inputs from other countries African nations can use to make exports to the US – are generous compared with other trade preference schemes, such as those for the European Union. But US clothing manufacturers insisted on more stringent rules for garments. The rules require special congressional renewal in 2012, three years earlier than the rest of the programme. Such political uncertainty restricts investment in garment production in Africa.

More generally, development experts say the scheme also shows the limits of what can be done with trade policy. Todd Moss, a fellow at the Center for Global Development in Washington, says: “Market access to the US was originally seen as the big problem. But what became clear was that lack of infrastructure at the African end was far more important.”

In many African countries production costs are raised by expensive and intermittent power supply, weak transport infrastructure and corruption. African garment manufacturers struggle to compete against powerhouses such as China.

Ron Kirk, US trade representative, says: “We have textiles that flood in to the US from all our preference programmes. I don’t know if the answer to Africa’s long-term growth is yet more textiles.”

Secretary of State Clinton was in attendance also. She delivered some remarks.

Secretary Clinton said, “I must say that my trip across Africa last summer offered me an opportunity to meet with leaders and citizens from all walks of life. And for me, that visit was a really important turning point, because coming as it did on the heels of President Obama’s very important speech in Ghana, it was a reaffirmation of this Administration’s commitment to appreciate Africa even more fully in its promise and its potential for the future.”

She continued, “Under President Obama’s leadership, the United States is taking a new approach in Africa rooted in partnership, not patronage. That means we are looking for sustainable strategies that help nations build capacity and take responsibility, that give people the tools they need to help themselves and their communities, that empower problem-solvers at the local and regional levels, be they entrepreneurs, NGOs, or governments themselves. We are also working to integrate our trade and development strategies with greater emphasis on bottom-up, locally driven solutions, fostering regional markets within Africa, boosting trade and aid effectiveness, and working with partner governments to promote structural reforms and gradual market liberalization.”

Secretary Clinton also spoke to the challenges confronting Africa. The Secretary said, “AGOA was founded on the premise that export-driven growth would provide Africa with sustainable economic development and wider prosperity. Today, we still believe in the value of exports, but we better understand that the development of domestic and regional markets is a necessary prerequisite to taking full advantage of global opportunities. Many of Africa’s major challenges — from inadequate infrastructure to political instability to corruption — also present opportunities for market-based solutions, creative partnerships, and responsible government action.”

In closing, Secretary Clinton said, “Everyone understands that opportunity and responsibility go hand-in-hand. That tomorrow’s future depends upon today’s choices. The United States can and will be a partner. We’re here for the good times and the bad. We want to work toward the day when every child born in Africa has the opportunity to live up to his or her God-given potential. That is our goal and that is our pledge.”

Her full remarks can be seen here.

Although Agoa hasn’t lived up to its full potential, none the less it still has been good for Africa.

Agoa has helped to encourage the diversification of Africa’s trade with the United States. What has happened under AGOA is we have a number of stories in terms of the increase in non-oil trade. That has doubled in the 10 years of AGOA. And, in the meantime, U.S. exports to Africa have also grown.

It  has created more than 300,000 jobs in Africa and also brings in about $300 billion in export earnings and nearly $30 billion in non-oil exports to Africa at a minimal cost to United State (US) taxpayers.

This will only go up, increase trade and economic opportunity for both the US and African nations, especially with the renewed interest and understanding of the Obama administration, which has doubling US exports as one President’s main goals.

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Agoa’s New Policy Under Obama Administration

Agoa’s architects unveil new policy under Obama administration:

Ten years after the enactment of the African Growth and Opportunity Act (AGOA), a coalition of its original architects and supporters on Monday unveiled a comprehensive new trade and economic policy to be presented to the Obama Administration that would build on AGOA’s successes and expand the growing trade relationship between Africa and the United States.

The new policy proposal, entitled Enterprise for Development: A New Policy Approach Toward Africa, calls for the continuation of AGOA’s exclusive duty- and quota-free access to the US market for African goods, as well as policies to strengthen and grow indigenous enterprises in Africa and measures that support job creation, export promotion and prosperity in both the US and Africa.

At an AGOA Leaders Forum in Washington, DC, hosted by a coalition of AGOA’s US supporters, and attended by African Ministers of Finance and Ambassadors, as well as other AGOA stakeholders and business and policy leaders, Ms. Rosa Whitaker, chair of the AGOA Action Committee and President and CEO of The Whitaker Group, the premier US trade consultancy facilitating trade between the US and Africa, hailed the success of AGOA over the past decade in creating more than 300,000 jobs in Africa and bringing about $300 billion in export earnings and nearly $30 billion in non-oil exports to Africa at a minimal cost to US taxpayers.

“Over the past decade, we have learned that AGOA should be just one tool – albeit a critical one – in America’s arsenal to support Africa as it grows its own prosperity. We have learned that what Africa needs from the United States is a concerted, multifaceted trade and investment policy that brings together the trade preferences of AGOA with trade capacity building, strategic development assistance and incentives to spur greater foreign direct investment by U.S. businesses in Africa,” she said.

Mr. Thahane emphasized that Africans are not saying that the US Congress should not grant special trade preferences to LDCs in Asia, but that legislators should provide preferences that would help struggling sectors in those countries, rather than benefit sectors that are already successful. “Preferences for Bangladesh and Cambodia should not be at the expense of sub-Saharan Africa,” he said…

Even without duty-free and quota-free access to the US market, Bangladesh and Cambodia export over $5 billion in apparel each year to the United States – more than five times the total of all clothing exported to the US by all 48 SSA countries combined.

The minister also pointed out that unlike Bangladesh and Cambodia, both of which have agricultural resources, resource-poor Lesotho, Africa’s top apparel exporter, has few other alternatives. “Extending preferences to these countries might kill that industry that started in Lesotho 10 years ago,” he said. “Let us look at AGOA in an open and strategic manner. There are people [in Africa] who have been making a living out of access to the US.”

AGOA has demonstrated that if we have the market opportunities, Africa can respond, it can produce, it can deliver. Give us a break and we can deliver,” Mr. Thahane added. “African governments are trying to reach larger markets through regional integration, but we have to have the infrastructure and we also need the skills. The entry point has been AGOA and let us not dilute it, let us expand it and make it global.

Dr. Collier described AGOA as so successful that it should be replicated by the European Union and Japan. “There is a real opportunity for AGOA to go global. If we had a Super AGOA that included Europe and Japan, it would make life so much easier for Africa,” he said, describing the trade preferences offered by AGOA as the “pump priming mechanisms” that are helping African nations to break into manufacturing and the global market.

“We know where trade preferences should go, and where they should be kept out,” he said. “If we give them to one huge manufacturer [like Bangladesh], it would cut out all the little manufacturers. These big manufacturers must be kept out because they are not entrants into manufacturing. Bangladesh doesn’t need privileged access. There are many ways to help Bangladesh because it is still poor but [giving preferential trade access to its apparel sector] is not the way to do it.”

The proposals that were recommended were to include:

  • Making AGOA permanent and exclusive to Africa and expanding duty- and quota-free access to more African products.
  • Extending tax incentives and credits for US investors in Africa, and supporting regional integration through AGOA.
  • Developing an effective plan to work with African nations to revitalize the region’s agricultural sector, support local processing and value-addition for Africa’s agricultural products, support increased sourcing of African agricultural products from initiatives such as the World Food Program and support technology transfers, technical assistance and assistance to African agricultural exporters to meet US sanitary and phyto-sanitary requirements, and boost overall US support for a Green Revolution in African agriculture.
  • Reform the US foreign aid program to focus more on trade capacity-building initiatives, extending loans to African businesses in the same way that the Marshall Plan rebuilt Europe’s business sector following World War Two, and supporting regional development and energy and infrastructure development in Africa.
  • Expanding and reforming the Millennium Challenge Corporation (MCC) so that it focuses its resources on building African energy and transportation sectors and gives top priority bidding to US and African companies and procurement projects.
  • Increasing financing for US exports to Africa through the US Export-Import Bank.
  • Increasing support to the Overseas Private Investment Corporation (OPIC) to enable it to support African equity and infrastructure funds, increase assistance to small- and medium-sized companies in Africa, and more funding for the African Technical Assistance Initiative.

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Obama’s lean toward economic connectivity over democracy: a very smart strategy?

Once again I find myself in complete agreement with the Obama administration’s focus on economic connectivity and its prioritization relative to the democracy agenda:

After the imprisonment of Egyptian opposition leader Ayman Nour in 2005, the Bush administration suspended plans for free-trade agreements with Egypt. The Obama administration has now effectively reversed this policy just ahead of Egypt’s May parliamentary elections.

During a March 21-23 visit to Egypt, US Trade Representative Ron Kirk said the United States hoped to double trade with Egypt over five years. In a departure not only from President George W. Bush’s approach to the Middle East, but also a break with President Barack Obama’s speech in Cairo last year, Kirk omitted any linkage to “freedom” and “human rights.”

Kirk instead said that Washington’s commitment to freedom, democracy, and human rights make the US “an even more attractive environment for investment and partnership.” He added that the “partnership between the United States and Egypt in promoting peace and stability in the Middle East is a great foundation on which to build a much stronger economic and commercial relationship.”

The Obama administration also seeks to import more goods from so-called Qualified Industrial Zones (QIZs).

These operate under an arrangement according to which goods made in designated industrial areas in Egypt and Jordan, using Israeli inputs, gain duty-free access to the US market.

“We believe [that importing more goods] serves the United States’ interest for the reasons that the QIZs were initially put in place, and that it helps provide stability when people have access to gainful employment,” Kirk explained.

Nothing will make the Egyptian people more willing to ditch Mubarak’s “emergency rule” than rising incomes, a growing economy, and a widespread sense of self-mastery.

Side note: In 2009, exports to Egypt totaled $5.3 billion. The top export categories in 2009 were: machinery, aircraft, cereals (corn and wheat), mineral fuel and oil, and miscellaneous grain, seed and fruit (soybeans). Top U.S. exports of agricultural products in 2008 totaled $2.1 billion, the 8th largest U.S. agriculture export market. Leading categories include: wheat, coarse grains and soybeans.(Office of US Trade Representative)

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