What Africa needs to boost trade with the US

Ahead of the United States-Africa summit which President
Barack Obama is convening next week, southern African
trade expert Joshua Setipa outlines what he would say if he
was to present Africa's case in Washington.
If I was to go to Washington next week, I would tell the
administration that our relationship with the United States is
one which we as Africa cherish very much, but that it is one
that could use some refinement; that we need to revisit a
few issues to make sure that U.S. priorities and U.S.
aspirations in this relationship are consistent with Africa's
political priorities.
Africa's relations with the United States are of course about
more than trade and investment. There are a whole raft of
issues of mutual interest - security being just one. But if we
are to focus only on trade and investment, I would begin by
providing an overview of where we are now.
If you look at the structure of today’s trade relations
between the U.S. and Africa, it's primarily dominated by the
export of fuel and fuel-related products and - with the
exception of South Africa - the volume of manufacturing
exports from sub-Saharan Africa to the United States is very
limited. So my priority would be to ask the U.S.: how do we
address this together? How do we look at ways of
remedying this and diversifying Africa’s export basket,
because relatively few African countries either export or
have the prospect in the future of exporting petroleum
products.
Then I would also say to the U.S. that we cannot talk about
strengthening our trade relationship without addressing
Africa's infrastructure deficit. This infrastructure deficit -
transport and logistics-related infrastructure being the
obvious example - affects not just U.S.-Africa trade
potential but it also continues to undermine intra-African
trade potential. It undermines the attainment of one of the
key political priorities of Africa, regional integration, which
will benefit from improved infrastructure links between
countries.
Furthermore, I would reaffirm Africa’s continued support for
The U.S.'s African Growth and Opportunity Act (AGOA), the
law which extends trade preferences to qualifying African
nations, and highlight that it has been a very positive
contribution to economic growth - though some countries
have benefitted more than others.
Among the key questions for the future that I would propose
for joint consideration would be: why has there been limited
success in accessing the financing mechanisms that are
part of the AGOA framework? How can the U.S. and Africa
work jointly to enhance incentives that will enhance U.S.
private investments in public infrastructure in Africa? How
can the U.S. enhance its support for the efforts already
being undertaken by the African Development Bank aimed at
mobilizing financial resources for infrastructure finance?
And we should not lose sight of the fact that by
infrastructure we are not talking only about the bricks and
mortar part, nor the highways and bridges – we are also
referring to the “soft” trade facilitation framework issues
including customs modernization and so forth. In fact, the
U.S. and Africa have an excellent opportunity to enhance
their cooperation in the trade facilitation area through the
new World Trade Organization (WTO) Agreement on Trade
Facilitation concluded at the Bali WTO ministerial
conference in December 2013.
Unless infrastructure continues to remain a priority in this
relationship, and new and innovative financing ideas come
into play, we cannot talk about enhancing or broadening the
U.S.-Africa trade relationship. Africa’s political and
economic priority is regional integration, trade is a key
element of this priority and it therefore goes without saying
that Africa’s relationships with strategic partners like the
U.S. will be judged on how they have supported the
achievement of this priority.
After infrastructure, my next priority would be agriculture.
For example, you have 34 countries in Africa that are
competitive in the production of cotton, yet this potential
continues to be undermined by U.S. subsidies for their
cotton producers. We need to address this in a more
meaningful manner than has been done to date. The WTO
Doha Round of trade talks still presents the best
opportunity to address this issue and therefore the U.S.
should reassure Africa of its commitment towards
concluding the Doha Round.
There is a positive story emerging from the Western Cape in
South Africa: the success of the citrus industry in growing
its exports to the U.S. This is a demonstration of what can
be achieved through dedicated cooperation to improve the
capacity of African farmers to export to the U.S.
This support has focused primarily in improving the
capacity of South African farmers to comply with, among
others, American health and safety standards - the “sanitary
and phytosanitary” requirements which need to be met to
sell products to U.S. consumers. This experience can serve
as a model for the rest of Africa so that more African
farmers access the U.S. agriculture market. At present the
reality is that the average sub-Saharan African farmer does
not have the capacity to comply with these kinds of
requirements.
Agriculture and food security has been identified a key
priority by the U.S. in its policy towards Africa and this
summit provides an opportunity to review progress and to
identify new ideas to enhance the effectiveness of
cooperation in this sector.
Unless agriculture is addressed in a more meaningful
manner, its potential to drive African economic
empowerment will continue to be undermined. And the
reality is that addressing challenges to the potential of the
African agricultural sector is not limited only to market
access. There is a whole range of issues which require
attention just as urgently, including access to finance and
improving market information flows and trade finance.
Considering the potential contribution of agriculture to
growing the trade relationship - and the number of Africans
who depend on agriculture for a livelihood - if we were to
address these issues in a focused and sustainable manner,
we could realize our mutual objective of delivering real and
sustainable economic empowerment to African farmers. So
agriculture cannot be left out - it has be part and parcel of
the future of this relationship.
Then there is a whole range of other issues and concerns
around AGOA that need to be addressed. It is fair to begin
by recalling that in the U.S., unlike most democracies,
regulation of trade is constitutionally vested in Congress, so
the authority to conclude international trade agreements
lies not with the administration but with Congress. So the
administration will work with Congress to push for a
stronger relationship but at the end of the day it is not
within their mandate to make the final decision.
Despite this limitation, I would say to the administration:
apart from South Africa, quite a number of other countries
also have been able through AGOA to increase their exports
into the U.S., mainly in the form of clothing and textiles. So
how do we ensure that that is not threatened by all the
other processes that are running parallel to this
relationship?
Within the WTO, the Doha Round process continuously
seeks to drive tariffs downwards, eventually eroding the
competitive edge that AGOA gives to beneficiaries.
You also have other bilateral processes that the U.S. is
party to: the Trans-Pacific Partnership, for example, which
will give significant preferential access to countries like
Vietnam and possibly Cambodia. This will present African
clothing and textile exporters with the challenge of
competing with countries that are more competitive and
much closer to the U.S. market than they are.
For example, the case of my own country Lesotho, which is
considered one of AGOA’s success stories, it takes around
25 days to ship a container from Maseru to the U.S.,
compared with around 14 days from Vietnam to the west
coast of the U.S.
Also, continued investment and growth for this sector in
Lesotho is very much dependent on continued AGOA
preferential access, which includes flexible rules of origin
provisions. There are currently around 34,000 employees in
this sector, making it the biggest in our economy. Any
disruption to it will have a devastating social impact.
But we also need to look at AGOA more broadly. Africa
needs not just a simple extension of the law beyond its
expiry in 2015 – we need a more comprehensive revision
that includes an extension of at least 15 years.
This has a direct bearing on investment flows into countries
benefiting from AGOA; if an investor is to make investment
decisions on the basis of guaranteed duty-free, quota-free
market access to the U.S., a much longer time frame than
five years would be of clear benefit.
Finally on AGOA, we need also to say to the U.S.: let's
work together in the WTO to make sure that AGOA is
compatible with the WTO rules and that it is not open to the
threats and challenges that it currently faces, while at the
same time respecting the fact that there are other
developing countries that are also seeking to enhance their
trade relations with the U.S.
To conclude my intervention, I would re-emphasize that to
build a durable, long-lasting and mutually beneficial trade
relationship, the critical issues which need to be addressed
as a matter of priority are: access to finance; financing for
infrastructure; real, targeted financing and support for
agriculture, particularly for smaller farmers; and also how
we can provide incentives for U.S. corporations to invest in
the sectors other than oil and gas to ensure that the growth
we are both seeking to achieve is broad-based and
sustainable.
I would round up by reminding the United States that
everything it does with or in Africa has to be consistent with
the continental economic and political priority of achieving
full regional integration. Through enhanced regional
integration, the full potential of this trade relationship will
be realized.
Joshua Setipa is a former chief executive officer of the
Lesotho National Development Corporation. This column
was developed from a presentation he made to a roundtable
on the summit organized by the South African Institute of
International Affairs and the Graduate School of Business at
the University of Cape Town.