Bill Receives Minimal Attention, Creates Huge Opportunities for Businesses

Economic growth in the emerging markets of Sub-Saharan Africa….leaves Africa poised for long-term investment in infrastructure, energy, agriculture, and services.  Not only does this offer the prospect of continued economic growth in the world’s poorest region, it also creates tremendous opportunities for US investors and businesses. – Fred Oladeinde, AGOA Civil Society Organization Secretariat

Over the last few weeks, the international trade community has been abuzz about the approval of trade promotion authority for President Barack Obama. Today, we are watching the vote on the TPP in the House. However, one important piece of legislation passed but received minimal attention. That is the African Growth and Opportunities Act (AGOA), which is included in ITE’s list of top five trade policies to watch closely this year.

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AGOA, which promotes trade between the United States and eligible Sub-Saharan African countries, was reauthorized toward the end of last month in the Senate under the Trade Preferences Extension Act of 2015. The bill was approved by the Senate with a 97-1 vote.

While some may raise the question as to why we should even consider Africa, the true question is: Why not? A number of African economies have seen greater GDP growth rates than the world average. Many countries have successfully implemented reform measures that make it easier to invest and trade in both traditional and non-traditional sectors.

As I hear some U.S. companies question doing business in Sub-Saharan Africa, other countries and regions are ahead of the game in this growing market. The European Union, China, India and Brazil have been reported as top investors in the region. Just two weeks ago, I was engaged in talks with Canadian investors looking toward the Sub-Saharan African region.

The potential for U.S. businesses in the Sub-Saharan African region is the reason to follow the AGOA policy.

Here are three key things to know about the recent bill reauthorizing AGOA:

1. Extension period – AGOA will be extended for another ten years until September 30, 2025.

2. Efforts to shift toward a reciprocal trade agreement – The United States has not negotiated a free trade agreement (FTA) with any Sub-Saharan African country, making it the only region without an FTA with the United States. The only African country that the United States has signed  a free trade agreement with is the North African country of Morocco. In earlier posts, I have advocated the need to shift away from the unilateral toward a reciprocal trade agreement with Sub-Saharan Africa so that it truly promotes mutually beneficial trade. In May 2015, Senators Chris Coons (D-Delaware) and Jim Inhofe (R-Oklahoma) introduced the Africa Free Trade Initiative Act. The purpose of the bill is to encourage the U.S. President to develop a plan to negotiate and implement FTAs with Sub-Saharan African countries.

3. Third party fabric provision extension period - This provision allows eligible African garment makers to export their product to the United States duty-free, provided that the textiles originate in the United States or the region.  The provision was last  renewed in 2012 until 2015. Now, the AGOA third party fabric provision will be in effect until 2025.

The AGOA legislation awaits a vote in the House. In the meantime, encourage your representatives to vote for AGOA reauthorization and support reciprocal trade with Sub-Saharan Africa. Also, take advantage of the business opportunities that exist throughout Sub-Saharan Africa.

 

Note: Another key issue to follow is the reauthorization of the Ex-Im Bank, which is set to expire on June 23, 2015.

 

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Business Opportunities in the Iranian Market

By

Salman Faghigh Mirzaei

ir-map (1)

Western businesspeople and international traders are watching the likely removal of U.S. sanctions against Iran if a final nuclear deal is reached by the end of this June. Businesspeople have shown an interest in industries such as oil and gas, automobiles and technology. If the Iranian market opens, it is predicted to see a boom in international trade to and from Iran. Airliners and freight forwarders are now following the Iranian market more optimistically than before.

Why are U.S. businesspeople so eager to follow the final results of a nuclear deal? Why are some U.S. businesspeople optimistic about the opening of the Iranian market?

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“Everybody loves us here,” said Ned Lamont, an American businessman and former politician who visited Iran on April 16th with a group of 22 other U.S. businesspeople. This was the first public meeting of businesspeople from the United States held in Iran since Iran’s 1979 revolution. The group included investors, consultants and entrepreneurs.

There were rumors that high ranking American business delegations from different industries have been traveling to Iran since last year, according to a Financial Times report. The April 16th meeting was the first time over the last three decades that business representatives from the United States gathered openly and seriously discussed the potentials of the Iranian market.

“There is no obstacle for cooperation of American and Iranian car makers,” said Mohsen Salehinia, Undersecretary of Iran’s Ministry of Industry. In addition, giants, such as Google and Apple, received legal permission to sell their products (software and hardware) in Iran (see also Why Google brought its app store to Iran, Global Trade Compliance (Apple), and Office of Foreign Assets Control – U.S. Department of Treasury.

Other attractive Iranian markets are oil and gas. [1] Chinese and Russian companies are the only international oil companies (IOCs) currently directly or indirectly involved with developing oil fields in Iran, as described in a U.S. Energy Information Administration report. Many U.S. firms operate in Iran’s oil Industry through a middleman and local front men to operate in the oil and banking businesses.  While Russian and Chinese companies can operate freely, U.S. companies have been unable to take advantage of the opportunities in these industries, due to sanctions imposed by their own government.

In conclusion, with a population of 80 million and nearly a $14,000 GDP per capita (PPP), the Iranian market has the potential to grow regionally and internationally. It is undeniable that there are challenges with investing in Iran, even after lifting the sanctions, such as low rank economic transparency, less developed infrastructure as well as some legal restriction, which are being amended. However, the 18th largest economy of the world cannot be closed off for a long time. In comparison to a country like Cuba, which is also prohibited from trading with the United States, there are much more capabilities. Traditionally, private ownership and the concept of free market have deep roots in Iranian culture and law. If it is possible to trade with Cuba, definitely Iran would be a more profitable and diverse market.

[1] Iran holds the world’s fourth-largest proved crude oil reserves and the world’s second-largest natural gas reserves.

Salman Faghigh Mirzaei, M.A. International law, is currently a student at UCLA Extension in the International Trade and Commerce program.

The views expressed in this piece are solely those of the author and do not necessarily reflect the opinions of International Trade Examiner.

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Five Things You Need to Know About Trade Promotion Authority

The 89th Annual World Trade Week began this week in Los Angeles. During some of the events that I attended, members of the audience were asked to encourage their congress members to support three words–Trade Promotion Authority (TPA). What is TPA? Why is TPA so important?

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Trade promotion authority is significant, because it gives U.S. Congress the authority to establish guidelines that the Executive branch must follow as it pursues free trade agreements.

Here are five things that you need to know so that when you meet a bunch of a trade policy wonks like me, you will have the conversation under control.

  1. TPA was first established under the Trade Act of 1974 and was last renewed from 2002-2007;
  2. U.S. Congress offers guidance to the President on trade policy priorities and negotiating objectives;
  3. The Administration is given the power to enter into and negotiate free trade agreements;
  4. U.S. Congress can only vote up or down on free trade agreements following negotiations but cannot amend them;
  5. The Bipartisan Congressional Trade Priorities Act of 2014 was put forward by Senator Max Baucus and Rep. Dave Camp to renew TPA for President Obama so that current trade negotiations can conclude successfully.

Although President Obama does not have trade promotion authority, the United States still entered into negotiations for two large trade deals–Trans-Pacific Partnership (TPP) and Trans-Atlantic Trade and Investment Partnership (T-TIP).

So if trade promotion authority is so important, why are some less eager to support it? Find out in my next blog post.

Updates:

[Note: This blog post has been revised from its original posting on January 30, 2014.]

 

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What’s Your Business Story?

International Trade Examiner (ITE) invites its readers to become active participants in the content that appears on the blog. You will be able to offer your own perspective on issues relating to international trade. (ITE does not pay for guest blog posts.)

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As an invited expert, you will benefit by:

1. Sharing the platform with other experts,

2. Having your work reach ITE’s followers via Facebook, Twitter, Google+ and e-mail combined, and

3. Engaging the community in issues pertaining to international trade.

Instructions for Guest Bloggers:

Word count: 250-600 words

Submission guidelines:

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All work must be the original ideas and research of the author. Any work or image that has been copied directly from another source without permission will not be accepted.

All articles must be relevant to the blog and well written. A piece that is well-written is one that:

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Any piece that does not relate to international trade, consists of numerous spelling/grammatical errors, fails to provide facts to support an argument and includes disrespectful and foul language will not be considered for publication.

Related Topics (not limited to these topics):

  • How your business has been impacted by international trade
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If your piece is accepted, we will inform you via e-mail along with the expected publication date. (Note: Guest posts in which business owners discuss how they have been affected by international trade will also appear in the Global Research Institute of International Trade’s newsletter – www.griit.org.)

Thank you for your interest in contributing to ITE. I look forward to collaborating with you. You can contact me at tradeexaminer@gmail.com with any questions and/or concerns.

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Freight Forwarding plus Online Innovation Equals a Win/Win Outcome

By Salman Mirzaei

Port of Los Angeles

Port of Los Angeles

“I fear the day that technology will surpass our human interaction.” – Albert Einstein[1]

Fast growing digital technology can help many industries such as freight forwarding and logistics. However, a Silicon Valley initiative to create internet-based forwarding for overseas shipping is causing concern within the freight forwarding industry. Freight forwarders fear that the increased dependence on online processes might lead to competition with a competitor who does not have a substantial amount of experience and expertise.

For example, Kuehne + Nagel Chairman Karl Gernandt said in an April 2015 interview with Journal of Commerce, “This kind of innovation is bringing competition from people that maybe don’t have an expertise in forwarding but who understand digitized processes and might grab business from us.”

The day has come that technology is surpassing human interaction. Nowadays, technology is taking part almost in every aspect of our life from legal issues,[2] to banking, online shopping and virtual education. International trade, particularly in the area of freight forwarding, is not an exception.

There are online platforms for placing air freight orders, which decrease the time spent for obtaining quotes, placing bookings and tracking shipments such as KN Freightnet, which was developed by logistics provider Kuehne + Nagel. According to Gernandt, KN Freightnet reduces administrative procedures from a period of days to five minutes, thus saving shippers a considerable amount of time. “You can imagine how much efficiency gains could be harvested if you started to concentrate more on this process. The more efficient we can make that, the more efficient it will be for our shipper customers,” said Gernandt in the same Journal of Commerce interview.

To sum up, in the age of speed, there is no way for a company to survive if it does not upgrade its technology and go online. In the words of investor Warren Buffett, we have to “fight off the ABCs of business decay, which are arrogance, bureaucracy and complacency.” Time consuming bureaucratic procedures in international trade will only result in a company not being able to compete.

Online innovation should not be viewed as a threat. Rather, online innovation should be seen as an opportunity for cooperation between freight forwarders and new technology that can only lead to a win/win outcome.

 

Salman Mirzaei is currently a student in the International Trade and Commerce & Import/Export program at UCLA Extension. He received his M.A. in international law from Islamic Azad University Central Tehran Branch.

 

[1] Albert Einstein is credited with saying this quote, although some question whether Einstein actually made this statement. Either way, the saying resonates with the trends that we are seeing today, as discussed in this piece.

[2] There are a lot of Online Dispute Resolution (ODR) websites that deal with different legal issues.

The views expressed in this piece are those of the author and do not necessarily reflect the opinions of International Trade Examiner.

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