Wednesday, March 10, 2010

A U.S.-Africa Trade Disconnect

When I attended the August 2009 African Growth and Opportunity Act (AGOA) Forum in Nairobi, Kenya, I heard complaints from African participants that AGOA was not as effective as it could be because its term needed to be extended, and its coverage of products needed to be expanded. U.S. government officials responded that AGOA had already been extended to 2015 and that relatively few of the more than 6,400 tariff lines were being used currently by Africans. This disparity is the result of a disconnect on the how and why of AGOA that must be corrected.

African producers aren’t taking full advantage of AGOA, but we have made it unnecessarily difficult to do so. The U.S. government has extended AGOA, but what officials see as a long extension is too short for business people asked to make longer-term investments. African governments have been too slow to make the necessary adjustments to enable their producers to better compete on the world market, including trade preference compliance issues and internal trade process issues.

The reason we and other developed nations deviated from the fundamental principles of the General Agreement on Tariff and Trade (and subsequently the World Trade Organization) was that colonialism had crippled the ability of newly independent developing countries to produce and sell world-class products and market them in a globalizing economy.

Some of the developing countries were able to utilize initial assistance and grow their economies, such as the so-called Asian Tigers: Hong Kong, Singapore, South Korea and Taiwan. In Africa, however, obstacles prevented many economies from taking off. These obstacles included continued neocolonial foreign economic interference, disastrous national leadership decisions, the until-recently slow pace of regional economic integration, non-existent or ineffective infrastructure and over-reliance on basic, non-value added products.

The Generalized System of Preferences (GSP) and AGOA, which was built on a GSP foundation, were meant to give a boost to African countries by providing benefits such as special tariff reductions to make them more competitive. However, our efforts, though well-intentioned, have been just enough off the mark that they have not accomplished our desired goal of enabling African countries to become more self-sufficient through more successful international trade. There is joint fault for this incomplete success. Neither the United States nor African governments have done the most effective job of working in concert to achieve our mutually desired goal in this regard.

I think the basis of the disconnect here is that AGOA was presented as a “gift” to African nations: the United States believed enhanced access for African products to be brought into the U.S. market was a significant benefit. While that was a correct and generous conclusion, AGOA was a process that was designed by Americans, protected American businesses and allowed only certain African products relaxed access to the largest consumer market in the world.

In reality, only petroleum and minerals would initially benefit fully from AGOA. Textiles early on benefited significantly until the international Multi-Fiber Agreement expired in 2005, which allowed Asian giants such as China and India, and subsequently developing nations such as Bangladesh and Cambodia, to become major textile producing countries. Manufacturing is taking place in some African nations, but a lack of consistent power is a major impediment.

Again, we too often forget that the colonial powers designed their various African empires to be independent of the rest of the continent. Francophone countries were programmed to trade with and build travel links to other Francophone countries. The same was the case in Anglophone and Lusophone countries. Even within colonial zones there often are no transportation links. A 2009 trade mission from Maryland found no direct connections between Senegal and Cameroon – both in the Francophone sphere.

To make AGOA work, there has to be a realization of the difficulties in removing remaining obstacles to intra-African trade that also limit international trade. American government, business and civil society are increasingly working together to facilitate U.S.-Africa trade, but we need to work with our counterparts to form a similarly cooperative alliance.

Blaming Africa is no solution to this problem. Only more successful cooperation on both sides of the Atlantic will work.


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