Africa: US Economic Proposals (Commentary)
APIC
Africa: US Economic Proposals (Commentary)
Date distributed (ymd): 970909
Document reposted by APIC
In recent years, US economic policies towards Africa have
become the subject of growing debate. Since 1995, Congress
has required the Executive branch to report annually on its
trade and development policies in Africa. The second such
report, published this February, is available on the World
Wide Web at
http://www.ustr.gov/reports/africa/1997/index.html.
Some members of the US House of Representatives responded to
last year's report by introducing the "Africa Growth and
Opportunity Act," calling for increased US trade with and
investment in African nations. A revised version of this bill
was reintroduced this year in the House (H.R. 1432) and the
Senate (S. 779) and is available from the Library of Congress'
legislative Web site (http://thomas.loc.gov).
The House Africa Subcommittee and the full International
Relations Committee have reviewed and amended H.R. 1432
(amendments which are not yet reflected in the version on the
Web). Among the changes is a condition preventing countries
that have consistently committed "gross violations of human
rights" from participating in the trade and investment
programs outlined in the Act. The full House is expected to
consider the bill later this year.
Meanwhile, on the eve of the Denver Summit in June, President
Clinton unveiled his plans for an "Economic Partnership with
Africa." Its provisions are roughly comparable to those of
H.R. 1432.
Both the legislation and the President's proposals have
received mixed reactions. The Washington Office on Africa and
other US non-governmental organizations have welcomed the US
government's recognition of the need to adopt a range of
measures--including debt relief, development assistance, and
trade and investment--to support African development
initiatives. ) However, they remain sharply critical of many
of the plans' provisions, particularly the package of economic
changes that countries would be required to adopt in order to
take part in new trade and investment programs. See, for
example, the NGO statement to the Denver Summit
(http://www.africapolicy.org/denver/denindex.htm) and the
critique by Oxfam International
(http://www.africapolicy.org/docs97/ox9706.htm).
To date, African responses have come primarily from
government officials, diplomats, and business leaders.
Representatives of African civil society have had less
opportunity to comment on these initiatives. This posting
contains one such commentary, by Oduor Ong'wen of EcoNews
Africa in Kenya. Another, by Tetteh Hormeku of the Third
World Network in Accra, Ghana, publishers of African Agenda,
will be distributed later this week.
*************************************************************
WHY US - AFRICA GROWTH AND OPPORTUNITY BILL FAILS THE TEST
Comments by Oduor Ong'wen
BACKGROUND
The US House of Representative has a new Bill to be known as
Africa Growth and Opportunity Act (HR 1432), ostensibly aimed
at addressing the development crisis in sub-Saharan Africa.
The Bill, which enjoys bi-partisan support in Congress, is
said to aim at providing trade, aid and debt relief incentives
for governments seeking to accelerate economic growth. The
Bill follows recommendations in March 1997 made by
representatives of the American corporate interests.
The group of 68, convened by The American Assembly, a
prominent public policy forum, called for an urgent adoption
of a "Partnership with Africa," a package of trade, aid, and
investment initiatives designed to consolidate democratic and
economic reforms that have taken hold in many of Africa's 54
nations. (See http://www.africapolicy.org/docs97/amas9706.1
and amas9706.2).
It also called for President Bill Clinton to travel to
Africa to help focus attention on the opportunities presented
by recent favourable political and economic trends here. The
group issued its recommendations just as First Lady Hillary
Rodham Clinton began a two-week trip that took her to Africa
- the first by an American First Lady.
"What is required is not withdrawal but, to the contrary, a
far greater and more meaningful engagement with Africa," said
the group after a four-day meeting outside New York City,
chaired by Washington's former ambassador to the United
Nations, Donald McHenry.
The group agreed that presidential leadership was required to
ensure that Africa received its due. "For us to take real
advantage of what is happening in Africa will require
leadership at the highest levels of our government, as well as
other sectors of American society," said David Miller,
chairman of the Corporate Council for Africa who served as
U.S. ambassador to Tanzania and Zimbabwe under President
Ronald Reagan.
The major recommendations of the group, which were mainly
economic, included:
* calls for tax and other incentives to promote U.S.
investment in Africa and help strengthen its private sector.
* a call to Washington to scrap tariffs and other import
restrictions, including textile quotas that hamper Africa's
access to the U.S. market.
* creation of a 300-million-dollar Africa Partnership Fund
earmarked for those countries "that demonstrate leadership in
the consolidation of democratic institutions and the
implementation of market-oriented reforms." The money would
be in addition to the roughly 700 million dollars Washington
currently provides in bilateral development aid to Africa.
* a demand to the Congress to clear U.S. arrears to the
International Development Association (IDA), the World Bank
affiliate that provides almost 1.5 billion dollars a year in
no-interest loans to African countries, and to the African
Development Bank (AfDB) (the US still owes 235 million dollars
to IDA's Tenth Replenishment, which expired last year, and an
additional 800 million dollars this year. The group suggested
that Washington encourage IDA to adopt policies that would
enable it to provide direct support to Africa's private sector
development, among other recommendations)
They also recommended that the US should also work to improve
the terms of multilateral debt reduction proposals for
Africa's most debt-burdened nations, both by accelerating the
time frame by which countries reforming their economies will
be able to reduce their debt and by expanding the number of
countries covered by the proposals.
On the security front, they called for Washington to clear its
arrears-over one billion dollars-to the United Nations, and
especially its peacekeeping operations account. It should also
increase military training and assistance from 10 million
dollars to 30 million dollars, in part to build Africa's
ability to participate in peacekeeping operations, according
to the report, which says that a critical ingredient in
preventing the outbreak of conflict in Africa will be
"strengthening U.S. political will to act."
"Often, the United States has been unprepared and unwilling
to deal in a timely way with serious crises in Africa," says
the report from the meeting, which included prominent
individuals from U.S. business, academic, religious, and
non-profit organisations, as well as senior officials from the
government and the military participating in their personal
capacities.
Africa, according to the group's report, has reached a
critical cross-roads in its history. Down one road, lies a
future of "failed states" and protracted conflict, such as
that which in recent years has afflicted Liberia, Rwanda,
Sudan and Zaire, where President Mobutu Sese Seko's
31-year-old regime is tottering in the face of a rebel
offensive.
The group said that despite some setbacks, political trends
are also more favourable. "We are now in a position to seize
the opportunities provided by the emergence of (a) new,
democratically elected African leadership committed to market
economics, the privatisation of inefficient state industries,
and popularly accountable government," the report says. "These
nascent changes, largely unforeseen a decade ago, are fragile
and need to be supported."
Some of the group's proposals-especially the call to increase
U.S. aid by almost 50 percent to reform-minded African
countries-fly in the face of conventional wisdom in Washington
and Congress, which has sharply reduced foreign commitments,
especially in regions not considered "vital" to U.S.
interests. The annual non-military international affairs
budget, for example, has been cut by roughly 50 percent in
real terms since 1985.
Given the record of its past relationship with the Sub-
Saharan Africa (Egypt as a single country receives more US aid
than the countries of Sub-Saharan Africa combined), US
recognition of the need to address aid, trade and debt
problems within an overall strategy is welcome. So, too, is
the proposed use of investment guarantees to mobilise private
foreign investment for Africa, which currently accounts for
less than one percent of global private capital flows. More
broadly, the US initiative is rooted in a recognition that the
risks posed by Africa's marginalisation are exceptionally
high, with deepening poverty and economic decline intensifying
national and ethnic rivalries, contributing to environmental
problems, and undermining the capacity of governments to
provide basic social services.
OBSERVATIONS AND COMMENTS
Encouraging as the US initiative may be, it is flawed in a
number of crucial areas.
* It sees Africa as one big market for the US corporate sector
to export to without any tangible reciprocal benefit for
African countries. Indeed section 8 (a)(1) betrays the real
motive and declares who the real beneficiary is: "the lack of
competitiveness of sub-Saharan Africa in the global market,
especially in the manufacturing sector, make it a limited
threat to market disruption and no threat to United States
jobs" The next paragraph goes ahead to show that annual
textile and apparel exports to Africa amounts to no more than
1 per cent.
* It will bring into the orbit of trade and development
assistance "partners" a small cluster of countries regarded
by the US President as "success stories", threatening to
undermine region-wide initiatives - such as the UN's Special
Initiative on Africa - which offer a greater hope of success.
Moreover, the US proposals offer relatively minor concessions
on trade, mainly in the form of enhanced preferences, allied
to insignificant additional aid flows. An additional problem
is that pledges of US support for more effective debt relief
rest uneasily with the Administration's efforts to delay
implementation of the IMF-World Bank's Highly Indebted Poor
Country (HIPC) initiative even for Uganda - a country with a
long track record in economic reform.
* The Bill mentions the eradication of poverty as one of the
goals (Sec 3 (1)) yet new development assistance provisions
are absent. In the past three years the US aid budget has been
slashed, with spending on development declining from 0.15 per
cent to 0.10 per cent of GNP contrary to commitments made five
years ago in Rio de Janeiro for ODA to be raised to 0.7 per
cent of GNP. Today, the US is at the bottom of the OECD aid
list, yet the new initiative offers no new aid, even for areas
such as health and education identified as priorities.
* Aid quality issues are also not addressed in the Bill. This
is not an approach to development co-operation which will
underpin a successful international initiative. US was in
Copenhagen and indeed was a party to the Summit's resolution
on the 20-20 commitment which calls for 20 per cent of ODA and
20 per cent of the recipient country's annual budget to be
channelled to social development. In particular, carefully
targeted aid in areas such as micro-finance and rural
infrastructure can help poor people to participate in markets
on more equitable terms. Similarly, investment in health and
education can help to create an enabling environment, in which
vulnerable communities are given opportunities.
* Eligibility requirements for qualification under section 4
of the Bill is conditional upon countries implementing
economic reform measures deemed acceptable to the US
President. These include:
1. promoting free movement of goods and services and factors
of production (does this include labour?)
between US and SSA
2. rapid trade liberalisation,
3. the withdrawal of trade barriers which protect local
agriculture, and
4. incentives for investment.
5. reducing high import and corporate taxes
6. foreign investment issues, such as the provision of
national treatment for foreign investors
7. the protection of property rights, such as protection
against expropriation, etc.
In practice, these correspond to the economic reforms promoted
under structural adjustment programs, and the proposals made
under the Multilateral Agreement on Investment (MAI)
compliance with which is likely to serve as a litmus test for
good practice. The reality is that compliance with these
programmes is associated with slow growth, a poor record on
investment and, in many cases, failure to protect social
investment.
* The trade incentives envisaged under the Act focus on
improvements to the US's Generalised System of Preferences,
with a commitment to reducing tariffs and enlarging product
coverage to include sensitive items such as textiles. As one
element in an integrated trade and development strategy,
enhanced preferences could yield important benefits. However,
experience under the GSP confirms that African countries have
been unable to seize existing opportunities because of supply
side constraints, including high transport costs and poor
infrastructure. Implementation of the Uruguay Round agreement,
under which general liberalisation and the phasing out of the
Multi-fibre Agreement (MFA) will erode preferences, will have
the effect of eroding the already limited advantages of
preferences. Failure to address the deeper structural problems
associated with Africa's dependence on primary commodities is
another source of concern in the US proposal.
* The failure to address the question of coherence between
aid, trade and debt policies is another issue. According to
Oxfam International, subsidised agricultural production and
export dumping by the US and other industrialised countries
continues to undermine market opportunities for African
producers. The same practices result in African smallholder
producers seeing their markets ruined and household incomes
decline as a result of cheap imports. Even with the rise in
agricultural prices in 1996, the OECD countries spent the
equivalent of $166 billion on agricultural subsidies, with the
US spending over $7 billion in subsidies for cereal producers.
* While the eligibility criteria are very emphatic on
privatisation and unleashing of the market forces in the
economies of sub-Saharan Africa, the same is contradicted by
the central role of the executive in the US where the Bill
seeks to invest the US president with sweeping powers in
directing trade. Why doesn't the Bill just leave the US
private sector and Africa's business community to strike their
own balance?
* It should also be noted that efforts to promote private
investment will not be successful as long as Africa's debt
crisis persists. Yet the US continues to use its influence to
delay implementation of debt reduction under the IMF-World
Bank framework for Highly Indebted Poor Countries (HPIC),
which though we find to be a move in the right direction,
still fails to address the debt problem of majority of the
countries of Sub-Saharan Africa.
* Use of tariff and non-tariff barriers to restrict market
entry in areas such as textiles, apparel, leather and
agriculture further erodes opportunities for the development
and growth of indigenous entrepreneurs as well as
possibilities for joint ventures in Africa. The visa problems
cited in the case of Kenya and Mauritius (Sec 8(c )(1)) should
be discussed on a government-to-government and case-by-case
basis than rather than being left to the executive whims of
Washington.
* The US and other industrialised countries need to look
beyond aid to an integrated and coherent strategy for bringing
their trade policies into line with the objectives set for
development co-operation, particularly with regard to poverty
eradication. The Bill is loudly silent on how the US is going
to leverage poverty reduction and wider social development
measures on its trade and investment regime.
* In Sec 7, the Bill calls for the creation of a
US-Sub-Saharan Africa Free Trade Area. A casual glance at the
records from NAFTA, particularly Mexico's experience make this
a scaring proposal.
* The Bill is silent on what opportunities and concessions
will be accorded to Africa to export manufactured, processed
and semi-processed goods into the US nor whether the US will
open itself to importing services from SSA. It thus only
succeeds in reinforcing stereotype compartmentalisation which
relegates SSA as a market for US (and other industrialised
countries') manufactures and services and a source of cheap
raw materials and labour.
For more information: Oduor Ong'wen, EcoNews Africa, P.O. Box
76406 Nairobi, KENYA; Tel 254 2 721076/721099/721655; Fax 254
2 725171; E mail:ong...@iconnect.co.ke.
************************************************************
This material is being reposted for wider distribution by the
Africa Policy Information Center (APIC), the educational
affiliate of the Washington Office on Africa. 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.
Auto-response addresses for more information (send any e-mail
message): africapo...@igc.apc.org (about the Africa
Policy Electronic Distribution List); apic...@igc.apc.org
(about APIC); woa-...@igc.apc.org (about WOA). Documents
previously distributed, as well as the auto-response
information files, are also available on the Web at:
http://www.igc.apc.org/apic/index.shtml
To be added to or dropped from the distribution list write to
ap...@igc.apc.org. For more information about material cited
from another source please contact directly the source
mentioned in the posting rather than APIC.
For additional information: Africa Policy Information Center,
110 Maryland Ave. NE, #509, Washington, DC 20002. Phone:
202-546-7961. Fax: 202-546-1545. E-mail: ap...@igc.apc.org.
************************************************************