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Note: This document is from the archive of the Africa Policy E-Journal, published by the Africa Policy Information Center (APIC) from 1995 to 2001 and by Africa Action from 2001 to 2003. APIC was merged into Africa Action in 2001. Please note that many outdated links in this archived document may not work.

Africa: Trade Issue Brief, 2
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.

(continued from part 1)

The Global Trading System Handicaps Africa

As currently structured, the global trading system is not
especially friendly to African exports. The recently
renegotiated General Agreement on Tariffs and Trade (GATT)
Treaty(4) did little to ease the restrictions on the ability
of Africa to export to America and elsewhere. In fact, while
lowering tariffs will have different impacts on different
African countries and sectors, most analysts agree that treaty
implementation will have an overall negative impact on
Africa's trade prospects, by raising prices of imported foods
and removing trade concessions previously granted by European
countries. Those countries most able to take advantage of the
new opportunities will be those with better trading
infrastructures and a larger share in the world market
already.(5)

Tariff escalation, that is the fact that import duties
generally become higher for products with greater proportion
of value added by processing, does considerable harm to
Africa's efforts to industrialize itself. Most African
countries have an under-exploited export potential, which can
be translated into economic growth with virtually no
additional monetary assistance from abroad. Foremost among
such potentials is the option of processing Africa's primary
commodities prior to their shipment abroad. If Zambia could
process its copper, Guinea its bauxite, Ghana its cocoa,
Ethiopia its coffee, the value added to these exports would
provide both employment and vitally needed foreign exchange
for these struggling economies.

The fact that the tariff codes raise the levy with each higher
level of processing of the raw item discourages such
structural changes. So does attaching quotas on the
importation of semi-processed and processed goods into the
developed countries. This can have even more significant
effects in blocking Africa's imports than the tariff
escalation practices.

Another widespread practice, subsidizing U.S. and European
food exports, has discouraged African farmers from growing
wheat and other foodstuffs. To be sure, these subsidized
foodstuffs provide a short-term benefit (lower food prices) to
the African economies, but in doing so they perform a long-
term disservice by driving domestic farmers out of business.

In theory, the latest round (Uruguay Round) of GATT, leading
to reduction of many such trade barriers, should open up new
opportunities for African countries, as for other countries.
In fact, developed countries were well able to fight for
detailed provisions defending their interests in the complex
treaty negotiations, and are best placed to make the
transitions needed.

Many GATT provisions have ambivalent effects when they are
applied to Africa. The Trade Related Investment Measures
(TRIMS)(6), for example, are designed to make foreign
investment more attractive to foreigners, an objective widely
shared by both sides. At the same time, some of the TRIMS
provisions may be viewed as affronts to the national
sovereignty and as unwarranted efforts to repeal local
legislation. Indeed, while attracting foreign investors and
stimulating trade, these provisions may also discourage local
investors and self-reliant development.

Thus, while African countries may open their economies more
widely to imports and investments from other countries, they
may not have the capacity to take advantage of new
opportunities for exports in sectors other than primary
commodities.

Unfortunately, the architects of the global trading system,
including the U.S., display very little sensitivity to these
issues. Aside from its traditional purchases of critical
commodity and mineral imports from Africa, the U.S. commercial
interest in Africa is almost exclusively focused on what it
can sell rather than on what more it can buy. There seems to
be little recognition of the need for Africa to increase its
exports and shift its pattern of exports to enable it to
service its debt as well as to increase its purchases.

Breaking Out of the Colonial Model

Sparked by the severely deteriorating economic situation which
they faced in the early eighties, African countries sketched
out an alternative to the export-led development strategy
inherited from the colonial era. Instead of continuing to use
exports as their engine of growth, they expressed a desire to
place greater emphasis on producing goods for consumption
within Africa itself, and developing strategies which could
shift foreign trade away from the traditional dependence on a
few primary commodities.(7)

One aspect of the strategy was termed "collective self-
reliance," acknowledging the need to create sub-regional
economic entities which could offer economies of scale in both
production and marketing. A number of such sub-regional
groupings were already in existence (COMESA, SADC, ECOWAS, and
others)(8) but were suffering from general neglect by the
Africans and from dismissal as unfeasible by the major donor
organizations. This donor reticence softened over the decade,
however, and in 1991, African heads of state collectively
committed themselves to the creation of an African Economic
Community by 2025, to be built on the sub-regional economic
structures, which hopefully would have matured by then.

In the long term, Africa's potential for trade will depend on
building up productive capacity within the continent for goods
more in demand by the outside world. U.S. trade policy towards
Africa should be consciously aimed at assisting such
structural changes, as well as satisfying the more immediate
needs for imports of primary commodities and export
opportunities for U.S. companies.

Elements of a U.S.-Africa Trade Policy

It is in the long-run interest of all peoples that the yawning
gap between economic conditions in Africa and in the United
States be seen to be closing. That is not the case now. Given
the fact of diminishing aid resources it is imperative that
less costly instruments be found to address this problem.
Trade is one such instrument.

To the extent that U.S. policymakers have focused on trade
with Africa, it has primarily been in the context of
encouraging U.S. exports to Africa. There are indeed many
opportunities in this regard, particularly in South Africa but
also around the continent. The principal barriers on the U.S.
side are the lack of sufficient detailed knowledge of the
opportunities, a gap which both government and private efforts
can help to fill (see, for example, the African Business
Handbook, described below).

In order for trade growth to be sustainable, however, it must
be a two-way street. It would be short-sighted for the U.S. to
concentrate exclusively on immediate export opportunities, and
import of the traditional primary commodities. There are a
number of trade-related routes by which the U.S. could bring
genuine assistance to Africa, and ultimately, to itself. They
need not entail large outlays of money.

In 1994, Congress, recognizing the difficulties Africa faced
in adjusting to the new GATT treaty, mandated the
Administration to implement a "comprehensive trade and
development policy in Africa" and to report annually, for four
years, on the steps taken to carry out this instruction. The
results to date have been extremely limited. The
administration has proposed a program of assistance to U.S.
companies interested in trade and investment in the SADC area
and in four other African countries (Ghana, Gabon, Uganda and
Cote d'Ivoire). But critics feel the plan still falls far
short of a multi-faceted strategy focused on facilitating
development of Africa's trade, and some members of Congress
plan to continue pushing for greater efforts.

The following list, although general in character, indicates
areas which warrant much more detailed attention from policy-
makers.

(1) Encouraging the Production of African Products

The U.S. is well suited to help Africa to identify new
products which it might develop for export, and to provide the
technical assistance to initiate such industries. In some
cases, such as tropical food products, a limiting factor may
be the quality standards required by U.S. importers. Technical
assistance can overcome this problem with a minimum of effort.

(2) Countering Harmful Effects of GATT

The GATT provisions are set until the next round of
negotiations. However, GATT member countries have some
flexibility in implementing some of its provisions and the
U.S. should take advantage of these opportunities.
Furthermore, the World Trade Organization (WTO), the new
organization designated to administer the treaty, is in its
infancy. There will be numerous opportunities for the U.S. to
influence the direction in which it goes, especially with
respect to developing-country relationships.

(3) Liberalization of the GSP

The Generalized System of Preferences (GSP) is probably the
most important legislation which affects African exports to
the U.S. Its intent and purpose was to ease some of the
burdens placed on developing countries' trade by the creation
of GATT. The GSP created the option for exempting certain
developing country exports from the restrictive effects of the
reciprocity provisions of GATT. Each developed country enacts
its own legislation. Under the U.S. system, specific countries
and products are included as eligible when designated as such
by the office of the U.S. Trade Representative, an agency
directly responsible to the president.

In practice, the GSP has been of very limited benefit to the
poorest countries, such as those in Africa. Despite proposals
to reform the program suggested in 1994 and 1995, the GSP was
renewed in 1995 for five years with little change. Even
without legislative reform, however, African countries could
be assisted in taking advantage of the complex administrative
procedures for obtaining exemption for specific products.

(4) Assisting the Regional Integration Process

Regional integration offers Africa its greatest hope for
escaping from its current economic predicament. Achieving it
will be difficult and will require serious financial,
technical and moral support from the U.S. and other foreign
donors. The U.S. could open foreign commercial service offices
at the headquarters of each of the major African sub-regional
entities, such as COMESA, SADC, and ECOWAS, to promote the
sub-regional concept among U.S. investors.

(5) Reducing African Debt

To service its enormous debt obligations, Africa owes in
excess of $ 35 billion annually to the developed countries and
international financial institutions. This obligation swamps
whatever surpluses Africa may have in its trade balances.
Although the debt is not being fully serviced. it should be
forgiven or scaled down to a level which is manageable, so
that Africa can move ahead with its development. It is
particularly urgent to consider Africa's debt to the
international financial institutions as well as bilateral
debt.

(6) Increasing the Provision of Credit

With the decline in aid monies, Africa is in urgent need of
financing for its necessary imports of U.S. goods, and for
making capital investments. The Export-Import Bank, a leading
U.S. agency charged with this mission, is currently inactive
in most of Africa. This void should be reversed. Other U.S.
capital-providing agencies, such as the Overseas Private
Investment Corporation (OPIC) and other specialized government
programs for promotion of trade and investment, should be
widely represented in Africa as they are in Eastern Europe.

Selected Information Resources

The third bi-annual African Business Handbook, for 1995-1996,
is due out in December 1995. This extensive compilation of
general background, statistics, and contact information for a
wide variety of government agencies, companies and other
groups, costs $35 and is published by 21st Century Africa,
Inc., 818 18th St. NW, Suite 810, Washington, DC 20006. Tel:
(202) 659-6473; Fax: (202) 659-6475.

Africa Can Compete! Export Opportunities and Challenges for
Garments and Home Products in the U.S. Market. Tyler Biggs et
al. World Bank Discussion Paper 242 (June 1994). 84 pages.
ISBN: 0-8213-2838-7. $7.95.

More information on the impact of GSP, and the failure to use
it to benefit African countries, is available from the
Environmental and Energy Study Institute (EESI), 122 C St. NW,
Suite 700, Washington, DC 20001. Tel: (202) 628-1400; Fax:
(202) 628-1825; E-mail: eesi@igc.org.

Notes for part 2:

 4. GATT is the international agreement which has regulated
most world trade since 1947. In the Uruguay Round, lasting
from 1986 through 1994, negotiators eventually agreed on new
rules for tariff reduction, the formation of a new World
Trade Organization (WTO), and other measures aimed at
liberalizing international trade.

 5. See Wall Street Journal, Aug. 15, 1994, "Sub-Saharan
Africa Is Seen as Big Loser in GATT's New World Trade
Accord,"Congressional Research Service, Africa: Impact of
the Uruguay Trade Round Agreements, Oct. 3, 1994; U.S.
International Trade Commission, Posthearing Brief in INV.
No. 331 362, "U.S. Africa Trade Flows and Effects of the
Uruguay Round Agreements and U.S. Trade and Development
Policy," Aug. 2, 1995.

 6. TRIMS are measures to regulate investment, such as by
requiring a certain proportion of local content in
manufacturing or a certain percentage of local ownership.
The United States, arguing that such measures could have a
negative impact on trade, pushed strongly and successfully
to include language against such restrictions in the
agreement. Developing countries have up to five years, and
developed countries up to two years, to eliminate TRIMS
which are not in conformity with the agreement.

 7. See Africa's Problems ... African Alternatives (APIC,
1992)for an abridged version of the 1989 African Alternative
Framework to Structural Adjustment Programs. Other sources
introducing these issues include Adebayo Adedeji et al.,
eds., The Challenge of African Economic Recovery and
Development (London: Frank Cass, 1991); Robert S. Browne and
Robert J. Cummings, The Lagos Plan of Action vs. the Berg
Report (Lawrenceville, VA: Brunswick Publishing, 1984); and
James Pickett and Hans Singer, Towards Economic Recovery in
Africa (London: Routledge, 1990).

 8. SADC stands for Southern African Development Community;
ECOWAS for the Economic Community of West African States.
For lists of member countries in 1994, see the table in part
1. Mauritius was admitted to SADC as its 12th member in
1995. COMESA (Common Market of East and Southern Africa) is
the new name for the PTA (Preferential Trade Area), which
overlaps with SADC but also includes the countries of East
Africa and the Horn.

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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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