AfDB’s US-Africa Trade and Investment Promotion Initiative
By Calvin Manduna and Olumide Abimbola
Following the US-Africa Leaders’ Summit held in August 2014, the African Development Bank has been scaling up assistance to promote US-Africa trade and investment as a means to enhance African integration into the global economy. Through grant-funding provided under the Africa Trade Fund (AfTra), the Bank is supporting the African Union Mission to the USA and African Diplomatic Corps on US-Africa trade and investment issues. Integrating Africa blog editors Calvin Manduna and Olumide Abimbola sat down with Zenia Lewis, a US-Africa trade expert who is coordinating the Bank’s efforts within the AU Mission to the USA, to discuss current and future developments expected under the project in Washington, DC.
In the follow-up to the US-Africa Leaders’ Summit and the US-Africa Business Forum that took place in August 2014, what are some of the immediate tangible results that you are seeing for the continent in terms of the future growth of US-Africa trade and investment?
Zenia A. Lewis: Well, one of the most obvious results of the Leaders’ Summit is that Africa is now firmly on Washington’s radar as a true business and development partner. The Administration reiterated at the Summit and on multiple occasions its commitment to the renewal of the African Growth and Opportunity Act (AGOA), which expires in September of 2015, and remains the cornerstone of US-Africa trade policy. This continues to be important, as I’ll discuss later, but the many new initiatives and the better coordination of existing initiatives should also be recognized and commended as part of the deepening American interest in Africa.
As far as these immediate tangible results are concerned, during the Summit, President Obama established a new Steering Group on Africa Trade and Investment Capacity Building aimed at aligning US assistance and linking the existing trade and investment strategy – namely AGOA – to become a more comprehensive approach. The Steering Group is to be chaired by the Deputy National Security Advisor for International Economics and will have membership from all the main US departments and agencies involved in Africa trade and investment. The Group has an impressive mandate that includes exploring options to support “African efforts to develop country- and region-specific AGOA export strategies, developing compacts identifying complementary strategies and investments to be made by the AGOA countries, and partnering with companies and trade associations to develop private sector sourcing initiatives.” This new high-level coordination is a pretty impressive move and is something that policy-makers have been encouraging for quite some time.
President Obama also established the President’s Advisory Council on Doing Business in Africa (DBIA), which will advise the President on how to strengthen commercial engagement between the US and Africa with a particular focus on the existing Doing Business in Africa Campaign of the Commerce Department that’s described in President Obama’s Sub-Saharan Africa Strategy paper.
All of this complements previously existing initiatives by the US Government to promote US-Africa trade, investment and economic development such as the Trade Africa and Power Africa initiatives. Trade Africa, currently focuses on the East African Community (EAC) and aims to increase intra-regional trade, US trade with the region and EAC’s trade with the rest of the world through a variety of means, including trade capacity building, public-private partnerships and other new support programs. The US Agency for International Development (USAID) is also planning to transform its Trade Hub in East Africa to become the continent’s first trade and investment hub. It is anticipated that the model used to support trade growth in the EAC will be replicated elsewhere on the continent.
Power Africa is yet another initiative aimed at financing new power generation projects in order to expand access to cleaner, reliable and more efficient electricity in Sub-Saharan Africa. During the Summit, President Obama announced an expansion of Power Africa with new commitments, including additional private sector investment commitments from the Government of Sweden, and project financing from the World Bank and African Development Bank.
These new initiatives are exciting, but one must remember that the timelines under which they are to be implemented demand continued attention in order to progress. Several of the new advisory roles were given about six months to begin, meaning that they need to continue to be on the radar of African countries, businesses and development partners to ensure their progress and effectiveness.
Obviously AGOA is the centrepiece of US-Africa trade relations. What is the status surrounding the legislation?
ZAL: Well, first it should be recalled that AGOA is not a negotiated trade agreement, but unilateral legislation that was passed for a fixed duration, and would need to be renewed again by the US Congress, which makes its status unusually political. Unfortunately, the recent mid-term elections in the US mean that not a whole lot of attention is being focused on the AGOA renewal legislation at the moment.
While its expiration is still 10 months out, now is really when the renewal legislation needs to be formulated and discussed. Private sector firms and importers of African goods under AGOA want stability and predictability when placing orders of African products and such stability requires foresight and a lead time of several months regarding associated trade policy.
To give a quick example regarding the importance of prompt renewal, US apparel buyers typically place their orders up to 9 months in advance – meaning that the uncertainty surrounding AGOA renewal has the potential to cause declines in trade from the continent in the apparel sector. Testimony from the African Cotton and Textiles Industries Federation (ACTIF) indicates that while American importers were waiting for the renewal of the third-country fabric provision of AGOA – which was set to end in 2012 and Congress renewed only weeks before its expiration – apparel imports from Africa were down 12% and African apparel producers had to lay off tens of thousands of employees. Such a delay has effects that clearly run counter to the job-creating and economic growth-promoting goals of AGOA.
Congress, unfortunately, does not always renew trade related legislation in a timely fashion. The third-country fabric provision renewal mentioned above is one example, but Congress has also so far failed to renew the Generalized System of Preferences (GSP), which expired at the end of July 2013; the Miscellaneous Tariff Bill, which lapsed in 2012; the Trade Promotion Authority in 2007, which grants the President the right to fast-track legislation; and recently it’s been equivocating over the reauthorization of the Export-Import Bank, which is critical to US international trade efforts. One might argue that this does not bode well for AGOA, but of course, it doesn’t necessarily mean that its fate will be the same.
On a more positive note, Congress has clearly made efforts to push for better understanding of and improvements to the AGOA legislation. At the end of December 2013, the House Foreign Affairs Committee issued a request to the US Government Accountability Office to conduct a thorough study focused on “issues of primary interest to policy-makers,” which include “the effectiveness of AGOA in enhancing economic development in Sub-Saharan Africa, the ability of African businesses to utilize the full range of opportunities available under AGOA, and the efficacy of AGOA in increasing two-way US-Sub-Saharan African trade.” It is anticipated that this study will be released early next year. The Office of the US Trade Representative, which is part of the Administration, also pushed for comprehensive studies and reports about AGOA from the US International Trade Commission. Clearly, both Congress and the Administration appear interested in ensuring AGOA, if renewed, is useful for Africa and the US.
The question now, is if AGOA is to be renewed, then when? Neither the House of Representatives nor the Senate has introduced AGOA legislation and conversations with Congressional staff indicate that the bill is not yet drafted. It is, therefore, unlikely that AGOA renewal will happen before the end of 2014, and it is not clear that AGOA will be the most pressing issue dealt with by the new Congress either. There are a lot of question marks around the legislation. For example, are lawmakers hoping to include significant changes to AGOA? Will such changes delay the bill writing process? But the most important question now is: Will AGOA be renewed and done so before exports and jobs are lost due to delays?
You are providing technical support within the AU Mission to the USA under the Africa Trade Fund (AfTRA). What work will the AU and African Diplomatic Corps be doing over the coming year regarding the AGOA legislation and US-Africa trade and investment?
ZAL: Over the coming year, the African Union Mission to the USA will be working closely with the African Diplomatic Corps to provide training to member country trade experts and attachés regarding trade promotion, and to enhance US-African business ties and promote trade with and investment in the continent.
Our work will be multifaceted and I will be working on behalf of the African Development Bank to provide technical support to the African Union in achieving these goals. We are hoping that we can serve as a focal point of support regarding trade and investment promotion for African member countries through their embassies in Washington and for African businesses. We want to be a resource to them and help provide better understanding on how to navigate US Government and work towards the most mutually beneficial trade and investment policy. In the lead up to the renewal of AGOA we are hoping to host events highlighting and drawing attention to the importance of the legislation, its renewal, and more importantly enhanced utilization of the AGOA preferences. We hope to publish various briefings and fact sheets on US-Africa trade to guide stakeholders from both governments and the private sector. We will also undertake trade promotion and investment promotion training and providing assistance with national AGOA strategies aimed at improving utilization of trade preferences. We believe the latter intervention is key to boosting the US-Africa trade and investment relationship, especially given that the US is a complex market for exporters.
We are also very interested in promoting and deepening US and African private sector ties and we hope to work with firms, trade organizations and private sector organizations as well as the relevant US Government agencies to do this as well.
Building deeper connections between the African Union, African Development Bank and relevant US Government departments and agencies is also a great way to collaborate on our achieving our mutual interests.
We’re looking forward to kick-starting our initiative around US-Africa trade and investment promotion, and I encourage relevant and interested parties to contact me if interested in working together or leave a comment on the this post with ideas to help aid in this effort.
Zenia A. Lewis is a US-Africa Trade and Investment Specialist. She can be reached at firstname.lastname@example.org.
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