U.S.-Africa Trade Legislation Needs Updating

As Congress debates the extension of the African Growth and Opportunity Act, it can increase American competition in Africa.

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A yacht passes a cargo ship loaded with freight containers as it approaches the port of Durban, South Africa, Friday, June 18, 2010. Durban on Saturday will host a Group E World Cup match between Japan and the Netherlands.

Stephen Hayes is president and CEO of the Corporate Council on Africa.

The African Growth and Opportunity Act was passed in 2000 to major fanfare in both Africa and America. It was the first major trade legislation by the U.S. Congress ever enacted between the continent and the United States of America, and it represented then a new stage in the relationship between the United States and the countries of sub-Saharan Africa. To Africa, the legislation represented a commitment of the greatest nation in the world to their economic development beyond the supplicant-donor relationship and into a new era of partnership. In symbolism alone, the law was the most important act of Congress ever passed on behalf of Africa. Today, the African Growth and Opportunity Act remains the mainstay of our policy towards Africa, if for no other reason than that there has been no further major U.S. trade legislation applicable to the continent.

Essentially, the African Growth and Opportunity Act gives to many African countries duty-free or low duty access to the American market, and it does so without reciprocity. At its onset, the law was expected to be a major development tool, particularly as an incentive, for most African nations. Some likened it to the North American Free Trade Agreement  of U.S.-Africa relations. However, it was not exactly like NAFTA. The African Growth and Opportunity Act was and is also an instrument of political incentives. Essentially, show progress in democracy, human rights, and other areas, and a country was and is awarded with the legislation's status. Go in the opposite direction and a country loses the law's status. The African Growth and Opportunity Act has been as much a status symbol for African countries as it has been an economic development tool. In fact, one could argue that it has been more useful as the former than the latter.

[See a collection of political cartoons on the economy.]

Unfortunately, many countries simply have not benefited from the African Growth and Opportunity Act. This is a poorly kept secret and is being talked about more openly over the past five years especially. There are several reasons for this, but a primary one is that many countries still lack the infrastructure necessary to get products to the market at low cost. The African country that has benefited most from the law is South Africa as it has a well-developed infrastructure, a highly rated port system, and a largely trained workforce that few others on the continent have. To use the African Growth and Opportunity Act effectively one must have a certain stage of development in its infrastructure and a country also needs a trained work force. Many African countries simply did not and still do not have that trained work force necessary to use the law effectively. In the passage of the legislation there was not a commensurate act that would strengthen the capacity of African nations to effectively benefit from the African Growth and Opportunity Act. Even though there are thousands of products that are duty-free, if nations do not have the capacity to make these products, the list is not especially useful. It matters not how many widgets can be sold to the U.S. market if no one makes widgets to U.S. specifications and quality needs. What Africa did and does produce in nearly every country is agricultural products, but the U.S. market is far less open to African raw products. Furthermore, the time needed to get produce from field to the U.S. market also makes this impractical if not impossible.

The African Growth and Opportunity Act was seen as a temporary measure, with an expiration date of 2015. By then it was thought that Africa would develop enough in 15 years that the law would no longer be necessary. That has proven to be unrealistic. The issue now is what is to become of the legislation, as the deadline for its extension is nearing. There are many reasons that the decision about what to do with the African Growth and Opportunity Act needs to be made sooner than later. The global economic climate has changed dramatically since 2000. China had not entered the African marketplace to the extent it now has. Africa is also now seen as the most important investment destination on the planet. The infrastructure needed by Africa is being built by China and other countries, and Africa is not looking to the American market with as much hope and expectations as it was 15 years ago. For this reason, the law is also losing its effectiveness as an incentive for improvement in governance and citizen rights. China, for one, does not ask a nation for political reforms as a trading partner. Yet the African Growth and Opportunity Act remains one of the very few legislative bridges we have in our relationship with Africa's countries.

[See a collection of political cartoons on Congress.]

The newest challenge to the African Growth and Opportunity Act is our own doing and has nothing to do with the capacity of Africans to use the law. With the new export initiatives set down by the White House and supported by Congress (as much as Congress supports anything coming from the White House), one asks how the law helps American companies to sell to the rapidly developing market in Africa. Because there was no reciprocity built into the African Growth and Opportunity Act, there is no incentive for Africans to buy American products, let alone open their markets to U.S. products. African countries were allowed to keep up barriers to international products while we eliminated barriers for Africans to the U.S. market. In some countries like South Africa, which has benefited very significantly from the law, there is strong resistance to any trade agreement with the United States that would help U.S. companies enter their marketplace. They need to give nothing to the United States, when they already have he African Growth and Opportunity Act. Yet, Europe is negotiating Economic Partnership Agreements with many African countries. These agreements give Africans access to European markets but only if the Africans give preference and access to European products in the African countries. If these agreements are signed, it will be doubly difficult for American companies to compete in many countries in Africa. So far, Africa has resisted these agreements for good reason, since in addition to preferential access for Europeans, the European Partnership Agreements also hinder regional integration of African markets.

But it is not simply the Europeans we must worry about. The Chinese are now the largest investors in Africa and with those investments come agreements to trade more with China. The same can be said of the Russians, the Brazilians, the Indians, and many of the Gulf States. As we continue to debate the extension of the African Growth and Opportunity Act, perhaps we would be also well-served by seeing African nations as equal trading partners and not simply as supplicants in need of the largesse of preferences. The rest of the world views Africa as a marketplace and new trading partner. Africa is changing, and we are slow to realize that change and even slower to adapt to a rapidly changing economic landscape. We cannot help others by weakening our own economy. There is ample room for greatly expanding trade and investment in both directions, and we should redouble our efforts to take mutually beneficial advantage of Africa's growing opportunities.

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