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Africa: Trade Issue Brief, 1
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Africa: Trade Issue Brief, 1
Date Distributed (ymd): 951216
APIC Background Paper 004 (November 1995)
The U.S. And Africa's Trade: Prospects for Partnership
by Robert Browne
Robert Browne is currently an Adjunct Fellow at TransAfrica
Forum's Policy Institute. He was formerly the U.S. Executive
Director at the African Development Fund in Abidjan, C“te
d'Ivoire.
Note: Copies of the typeset version of this background paper,
including additional tables and graphs, are available at $2
each, $1.60 each for 20 or more, from Africa Policy
Information Center, 110 Maryland Ave. NE #509, Washington, DC
20002. Add 15% for postage and handling, and include your
check, money order, or institutional purchase order.
The U.S. Stake in African Economic Progress
Africa is a paradox. Largest among the continents in area,
second largest in population, and arguably the richest of all
in terms of natural resources, its people are among the
poorest in the world. Africa's people are hard-working and
intelligent, and the continent can boast of having produced
great civilizations long before today's developed countries
came into existence. But the vast gap between contemporary
Africa's level of economic development and that of virtually
every other area of the world is, in fact, growing.
In today's world, stability is not possible in the face of
massive international economic and social disparities.
Isolationism is not a viable option, even for the U.S. Each
new advance in telecommunications, each new desecration of the
global environment, each new strain of infectious virus, each
new advance in fissionable or biological weaponry, each
corporate decision to relocate a plant overseas, shrinks the
global community and confirms the interrelatedness of all
peoples. Clearly, in today's world, to be one's own keeper one
must be one's neighbor's keeper as well.
If the vast economic disparities between the U.S. and Africa
place the U.S. at risk, then it must be a matter of U.S.
policy to strive to shrink that gap. For half a century,
"foreign aid"(1) has been the principal weapon for attacking
the vast disparities between the developed and the least
developed countries. While the debate over the quality and
quantity of aid will continue, and the need for aid remains
great, the reality is that it is fast diminishing.
The precipitous decline in Africa's economic performance
beginning in the late 1970s led the donor community, directly
and via its international funding agencies such as the World
Bank and the IMF, to exert great pressure on African countries
to restructure their economies so as to render them more
efficient and more market-oriented. A major objective of these
"structural adjustment"(2) programs was to prod the African
countries to revamp their economies in ways which would make
them more viable and more attractive to foreign traders and
investors. After a decade of experimentation, these programs
have shown only mixed results in economic development terms.
But in many cases, they have led to new prospects for using
trade as a means for transforming African economies. An
expanded U.S.-Africa trade relationship deserves high priority
on country agendas on both sides of the Atlantic.
U.S.- Africa Trade Relationships
The African continent is a more significant trading partner
for the U.S. than most people realize, and potentially even
more significant. Both the reality and the potential warrant
much greater attention from policy-makers and the public
alike. The strategic significance of African oil, for example,
should imply much more focused concern with the long-term
future of such countries as Nigeria, Angola and Algeria, each
confronting very different but intense political and societal
crises. The medium-term potential to expand the share of
exports to Africa supplied by the U.S. is significant. The
long-term potential--if the U.S. aids Africa in expanding and
diversifying its exports--is even greater.
The magnitude of U.S.-Africa trade ($23.4 billion in 1994)
comes to almost exactly two per cent of overall U.S. foreign
trade of $1.2 trillion.(3) U.S. exports to Africa come to
almost $9.2 billion. The U.S. imports some $14.3 billion from
Africa, creating a trade deficit with the continent of about
$5.1 billion.
The imports, moreover, are of strategic importance. Two-thirds
of U.S. imports from Sub-Saharan Africa are accounted for by
a single commodity: petroleum, comprising 20 per cent of total
U.S. crude oil imports in 1994. This is mainly the sweet
Nigerian crude oil ($4.4 billion), with sizeable amounts also
coming from Angola, Gabon and Congo. Oil from west Africa is
particularly favored by American users because of its high
quality, but also because its supply has generally been
considered to be more stable by comparison with that from the
Middle East.
Of equal or greater strategic importance are several minerals
for which Africa constitutes a major, if not the major Western
source. In this group are such items as chromium, cobalt,
vanadium and manganese, used in making specialized steel
products. Africa supplies the U.S. with 47, 43, 35 and 25 per
cent, respectively, of its imports of these commodities.
On the export side, U.S. sales to Africa have been in the $8
to 10 billion range for the last four years. The bulk of these
sales are of equipment and machinery. Sales to Sub-Saharan
Africa, for example, in total some $4.4 billion, included $289
million in U.S. aircraft and aircraft parts, $245 million of
oil and gas field equipment, almost $200 million in
construction machinery, and over $100 million each of
computers, motor vehicles, telecommunications and farm
machinery. The other major component was food --- principally
wheat ($250 million) and rice ($107 million). In 1994, the
$2.2 billion of U.S. exports to South Africa alone made it a
larger market for the U.S. than all the countries of Eastern
Europe combined (see table below).
While the U.S. runs a trade deficit with Africa, most European
countries run a trade surplus there. There is, therefore,
ample opportunity for the U.S. to increase its exports to
Africa, especially if these exports are balanced by increases
in imports from Africa as well, so that Africans can earn the
dollars to pay for U.S. goods and services.
Africa's capacity to expand imports on a sustainable basis,
however, is vulnerable not only to the multiple weaknesses of
internal economic infrastructure and management, but also to
its continued dependence on exports of primary commodities.
Countries exporting oil have advantages that those exporting
agricultural products such as coffee or sisal do not have. But
oil producers too can easily be battered by wide price swings.
Even South Africa is highly vulnerable to price shifts in gold
and other minerals.
The catch-22 for primary commodity producers in the world
market is that if everyone produces more, the price may go
down, as consumers are oversupplied with cocoa, for example,
or manufacturers with raw materials. The only secure route to
better trade performance consists in being able to export more
highly processed products with greater value added inside the
country. The international trading system has historically not
helped African countries to make that transition. Current
changes may impose even greater difficulties.
(continued in part 2)
Notes for part 1:
1. "Foreign aid," or "official development assistance" (ODA),
is formally defined by the Organization of Economic
Co-operation and Development (OECD) as financial flows that
(1) "are administered with the promotion of the economic
development and welfare of the recipient countries as the main
objective" and (2) "are concessional in character," with a
grant element of at least 25 percent. Developed country
"donors" provided approximately $57 billion in ODA in 1993,
the equivalent of 0.3 percent of Gross National Product (GNP),
the lowest percentage level since 1973. Among all donor
countries, the U.S. provided the lowest percentage of GNP in
1993, only 0.15 percent.
2. While "structural adjustment" programs vary in their
particulars, they have mainly been concerned with reducing
deficits in financial dealings with other countries and with
balancing government budgets. Measures commonly include cuts
in government spending, removal of import controls,
devaluation of currencies, and privatization of government
enterprises. Critics argue that while economic crisis clearly
demands "adjustments," the packages imposed often take little
account of the damage to human capital and fail to bring about
the long-term economic development they promise.
3. These figures refer to the entire African continent. Most
easily available statistics separate Sub-Saharan Africa from
North Africa, which is generally grouped with the Near East.
In this paper, unless otherwise noted "Africa" refers to the
entire continent. When statistics are for Sub-Saharan Africa
only, that is noted in the text or table.
Table: Compared to What?
U.S. Trade in 1994 with Selected Regions and Countries,
in millions of $
PLACE***********************EXPORTS****IMPORTS****TRADE
World total****************502483.6***668584.6***1171068.2
Compare All of Africa with:
South & Central America*****41708.4***38461.0***80169.4
France**********************13618.7***16699.0***30317.7
Singapore*******************13019.9***15357.7***28377.6
All of Africa****************9164.9***14033.9***23198.8
Italy************************7182.7***14802.2***21984.9
Hong Kong*******************11441.0****9695.6***21136.6
Compare Sub-Saharan Africa with:
Sub-Saharan Africa***********4366.8***11707.5***16074.3
SS Africa (w/o South Africa)*2194.5****9677.0***11871.5
Eastern Europe (inc. FSU)****5301.0****5831.9***11132.9
Former Soviet Union**********3561.6****3847.6****7409.2
Compare African Regions and Countries with:
Former Soviet Union**********3561.6****3847.6****7409.2
SADC (inc SA)****************2649.9****4486.4****7136.3
Ireland**********************3418.6****2893.5****6312.1
Russia***********************2578.1****3245.0****5823.1
Nigeria***********************509.1****4429.9****4939.0
South Africa*****************2172.3****2030.5****4202.8
Eastern Europe(w/o FSU)******1739.5****1984.3****3723.8
Norway***********************1267.3****2353.4****3620.7
Egypt************************2854.8*****548.7****3403.5
SADC (w/o South Africa)*******477.6****2455.9****2933.5
Algeria**********************1191.5****1526.9****2718.4
Kuwait***********************1175.9****1457.5****2633.4
Angola************************197.3****2061.3****2258.6
Poland************************625.2*****651.2****1276.4
Definitions of regions used in table:
Sub-Saharan Africa: All African countries except Algeria,
Morocco, Tunisia, Western Sahara, Libya, and Egypt.
SADC (Southern Africa Development Community): Angola,
Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa,
Swaziland, Tanzania, Zambia, Zimbabwe.
Eastern Europe: Albania, Armenia, Azerbaijan, Belarus,
Bulgaria, Czech Republic, Estonia, Georgia, Hungary,
Kazakhstan, Kazakhstan, Kyrgyzstan, Latvia, Lithuania,
Moldova, Poland, Romania, Russia, Slovakia, Tajikistan,
Turkmenistan, Ukraine, Uzbekistan.
Former Soviet Republics: Armenia, Azerbaijan, Belarus,
Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania,
Moldova, Russia, Tajikistan, Turkmenistan, Ukraine,
Uzbekistan.
South/Central America - Anguilla, Antigua and Barbuda,
Argentina, Aruba, Bahamas, Barbados, Belize, Bermuda, Bolivia,
Brazil, British Virgin Islands, Cayman Islands, Chile,
Colombia, Costa Rica, Cuba, Dominica, Dominican Republic,
Ecuador, El Salvador, Falkland Islands, French Guiana,
Grenada, Guadeloupe, Guatemala, Guyana, Haiti, Honduras,
Jamaica, Martinique, Montserrat, Netherland Antilles,
Nicaragua, Panama, Paraguay, Peru, St. Kitts and Nevis, St.
Lucia, Surinam, Trinidad and Tobago, Turks and Caicos Islands,
Uruguay, Venezuela.
Source: Bureau of the Census, Foreign Trade Division
*******************************************************
This material is produced and distributed by the Africa
Policy Information Center (APIC). APIC's primary objective is
to widen the policy debate in the United States around African
issues and the U.S. role in Africa, by concentrating on
providing accessible policy-relevant information and analysis
usable by a wide range of groups and individuals. APIC is
affiliated with the Washington Office on Africa (WOA), a
not-for-profit church, trade union and civil rights group
supported organization that works with Congress on
Africa-related legislation.
*******************************************************
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