The U.S.-Africa Leaders Summit in Washington, D.C. (Aug.5-7) and the African Growth and Economic Development (AGED) Summit in Los Angeles, CA (Aug. 7-9) highlighted the economic potential of African countries. Despite Africa’s high levels of economic growth and positive performance in other areas, U.S.-Africa trade has declined from $104 billion in 2008 to $63 billion in 2013. The EU and China on the other hand surpass that of the United States with a little over $200 billion and $170 billion respectively. A revised U.S. trade policy with Africa is needed to deepen economic ties across the Atlantic.
Current Unilateral Trade Policy with Africa
U.S. trade with Sub-Saharan Africa is governed by the African Growth and Opportunities Act (AGOA), a law signed by President Bill Clinton in 2000 that provides exports from eligible Sub-Saharan African countries. Under the law, special access to the U.S. market is provided to countries that satisfy certain conditions. For example, apparel from the small land-locked country of Lesotho can export unlimited amounts of apparel duty-free to the United States provided that the fabric, yarn and thread come from the United States.
As a result, Lesotho has become a major African garment exporter to the United States. At the same time, the AGOA requirements make it more difficult for African producers to become cost competitive in the U.S. market. Therefore, its share of the U.S. market is minimal. When was the last time you bought an item of clothing from a retailer to find that it was made in Lesotho? The chances of that are probably very slim.
Unlike U.S. trade agreements with countries, such as Canada, Mexico, Colombia, Singapore, and Australia, the Sub-Saharan African countries do not negotiate the terms of AGOA to satisfy their interests. Rather, it is left to the U.S. Congress to determine the “benefits” for African economies and the length of time that those benefits will be offered. AGOA is set to expire in 2015 unless it is reauthorized.
Proposal for a Bilateral US-Africa Trade Policy
Free trade agreements further liberalize trade, increase trade and investment between member countries, and special market access for each country involved. Additionally, free trade negotiations allow for active participation on the part of all beneficiaries whereas unilateral initiatives do not.
The next step in U.S. trade policy toward Sub-Saharan African countries should be to negotiate, sign and implement free trade agreements that benefits all countries. Currently, the only African country that the United States has negotiated, signed and implemented a free trade agreement with is the North African country of Morocco. In 2001, the Office of U.S. Trade Representatives (USTR) named its main Sub-Saharan trading partners as the countries with which the United States would probably sign a free trade agreement–South Africa, Nigeria, Angola, Gabon, Kenya and Ghana.
Furthermore, the USTR indicated the government’s willingness to consider signing a free trade agreement with regional trading blocs such as the Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA), and the West African Economic and Monetary Union (WAEMU).
By 2003, the United States entered into free trade talks with the Southern African Customs Union (SACU), which includes Botswana, Lesotho, Namibia, South Africa, and Swaziland. The U.S.-SACU free trade negotiations collapsed three years later over the question of intellectual property rights. The signing and implementation of a free trade deal had the potential to enhance the benefits enjoyed under the AGOA program. Instead, the United States and SACU signed a Trade, Investment, and Development Cooperation Agreement (TIDCA), which allows for dialogue and serves as a framework for future free trade agreements.
Although the US-SACU talks failed, it allowed the SACU countries to actually negotiate the terms of the agreement. Rather than having the terms imposed upon them, the SACU countries were able to walk away from the negotiating table on those terms that they could not come to an agreement on with the United States.
The fact that SACU played an active role shows the ability for these countries to exert some influence on the outcome of free trade negotiations, unlike with the unilateral programs offered by the United States.
A free trade agreement would emphasize labor standards and rule of law as a way to encourage democratic governance, attract foreign direct investment and promote more trade with Africa. These type of trade deals also allow African governments and business communities to have a say in the agreements pertaining to labor, governance, etc.
In sum, AGOA should be extended in 2015. At the same, it would be useful for the United States to develop a bilateral approach in its economic relations with Africa that would further boost trade ties and that are mutually beneficial.