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Africa: US Trade Report, 1
Africa: US Trade Report, 1
Date Distributed (ymd): 970301
Document reposted by APIC
The second annual report of the United States Trade Representative on
Africa trade and development policy was released on February 20. The full
text is available on the Web at: http://www.ustr.gov/reports/africa/1997/index.html
This posting contains excerpts from the executive summary of the report.
The next posting contains the report's summary of new administration initiatives.
A COMPREHENSIVE TRADE AND DEVELOPMENT POLICY
FOR THE COUNTRIES OF AFRICA:
Executive Summary
The primary goal of the Administration's trade and development policy
for the countries of Africa is to support sustainable economic development
in the region and to quicken the pace of that development, which would
boost U.S. trade and investment in Africa. In response to the economic
and democratic reforms implemented by many Sub-Saharan African nations
in recent years, the Administration seeks to accelerate the pace of development
by: 1) increasing trade flows between the United States and Sub-Saharan
Africa; 2) promoting economic reform as well as the development of the
private sector and infrastructure; 3) improving the investment climate;
and 4) strengthening efforts toward democratic governance.
The United States strongly supports economic and institutional reform
efforts currently underway in Africa. Economic growth across the continent
is manifestly in the U.S. national interest. Increased economic development
in Sub-Saharan Africa will benefit both Africans and Americans and will
contribute to the national and economic security of the United States.
Stronger economies in Sub-Saharan nations will contribute to social and
political stability in Africa and create more export opportunities for
U.S. goods and services and more jobs at home. They will also reduce costs
to the U.S. of emergency humanitarian assistance as countries become better
equipped to manage their own emergencies.
The Administration will continue to use a variety of tools to achieve
its objectives including: bilateral technical and development assistance;
increased government-to-government dialogue; multilateral development bank
and IMF assistance; bilateral and multilateral debt reduction programs,
World Trade Organization disciplines and participation; bilateral trade
and investment agreements; and export promotion and trade facilitation
programs.
A number of Sub-Saharan African countries have made significant progress
in economic and democratization reforms in recent years. Over 30 countries,
with assistance from the World Bank and the International Monetary Fund,
have instituted economic reform programs that entail liberalizing exchange
rates and prices, privatizing state-owned enterprises, instituting tighter
disciplines over government expenditures, ending costly subsidies, and
reducing barriers to trade and investment. Since 1990, more than 25 Sub-Saharan
countries have held elections generally recognized as free and fair. Stable
democracies create a climate in which business can thrive while economic
development increases the chances that democratization will succeed. The
willingness of a number of African countries to enter into regional economic
integration agreements will also contribute to stronger economies.
In spite of Africa's improving economic performance, further structural
reforms are necessary if the continent is not only to achieve sustainable
growth, but also to reduce poverty. Necessary economic reforms include
strengthening public finances by improving revenue collection and reducing
expenses, especially with regard to state-owned enterprises; liberalizing
prices; freeing the markets for foreign exchange and credit; and reducing
trade barriers. Reforms in the trade area have particular importance for
overall growth: recent research suggests that roughly 40 percent of Africa's
slow growth in the 1970-1989 period was due to the fact that African markets
have significant barriers to trade. A major goal of the Administration's
trade and development policies toward Sub-Saharan Africa, therefore, must
be to support African efforts to reduce tariffs and trade-related barriers
so that the region may realize the full benefits of expanded trade and
gain a resulting boost in growth.
Other reforms are also needed to improve Africa's "market infrastructure,"
e.g., modernizing commercial laws that govern domestic business and investment,
strengthening financial institutions that provide the backing for entrepreneurs'
ideas, and renovating the physical infrastructure that expedites domestic
and international trade. Liberalization of investment is also critical
for improving economic conditions in Africa. Foreign direct investment
can transfer valuable technology to Africa, improve competition and galvanize
domestic investment, while also benefiting foreign investors.
This is the second annual report submitted pursuant to the Uruguay Round
Agreements Act (the "Second Africa Trade Report") setting forth
the Administration's comprehensive trade and development policy for Sub-Saharan
Africa. ...
In preparing the First Africa Trade Report, the Administration sought
to identify the many U.S. programs related to Sub-Saharan Africa and set
forth a policy framework structured around five basic objectives: trade
liberalization and promotion, investment liberalization and promotion,
development of the private sector, infrastructure enhancement, and economic
reform. These five objectives remain the framework for the Administration's
trade and development policy for Sub-Saharan Africa and the issues and
initiatives discussed in the current report are organized around them.
Highlights of the Second Africa Trade Report, including a brief discussion
of the issues and progress on the initiatives discussed in the First Africa
Trade Report, are set forth below. ...
I. Economic Reform
- Economic growth in Africa requires continuing macroeconomic stabilization
and structural reform. The success of recent reforms is apparent in the
region's accelerating GDP growth, which reached an average of 4 percent
in 1995 compared to 1.4 percent in 1991- 94. This average, however, conceals
wide variations in country performance, with four countries growing by
over 10 percent and others contracting or growing by less than the population
growth rate. Nevertheless, contrast with the 1980s and early 1990s, the
poor performers now seem more the exception than the rule.
- Continuing public sector deficits and low private savings rates will
keep total savings and investment at levels too low to sustain adequate
growth in most Sub-Saharan countries. The World Bank estimates that gross
domestic savings were only 6 percent of GDP in 1994-96, twice as high as
in the prior three years but well below the median investment-to-GDP ratio
of 15-16 percent. Even the latter modest level of investment can be sustained
only by grants and concessional loans from official donors and debt relief,
since Africa's share of global private investment is small. Donors will
be increasingly selective in the countries and projects they support, while
African nations should continue to do more to attract foreign investment.
- In September 1996, 23 Sub-Saharan countries had reform programs in
effect with the IMF, while 31 participated in the World Bank-led Special
Program of Assistance (SPA) for Africa. Reforms typically include realignment
of exchange rates, fiscal consolidation, trade liberalization, privatization,
financial sector reform, and in a few cases, regional economic integration.
There also have been improvements in transparency and accountability. While
fiscal performance is better, management of public finance generally remains
weak and excessive reliance on trade tariffs for revenue hampers efforts
to liberalize trade.
- The region's enormous parastatal enterprise (PE) sector still drains
public resources and constrains private investment. The PEs' poor management,
weak finances, and technological limitations mean that their net developmental
effect usually is negative. While privatization has gained speed, it must
be further accelerated and participation widened if the rate and quality
of investment and growth are to improve. Privatization of utilities offers
especially good opportunities to upgrade essential services while avoiding
new debt.
II. Trade Liberalization and Promotion
- More active participation in regional and global trade organizations
will help Sub-Saharan African countries take advantage of the benefits
of trade liberalization. Protectionist trade policies in Africa were analyzed
in a recent World Bank study that concluded protectionism has been costing
the region as much as $11 billion per year -- equivalent to the total amount
of external aid to the region in 1991.
- The United States has a growing strategic and commercial stake in expansion
of Sub-Saharan African trade flows as the region already exports products
worth $12 billion to the United States and is a growing market for U.S.
goods. U.S. merchandise exports to the region jumped nearly 23 percent
in 1995, to $5.4 billion.
- More than 30 Sub-Saharan countries have become members of the WTO and
an increasing number of Sub-Saharan nations have taken steps toward regional
integration. However, few Sub-Saharan nations were active participants
in the Uruguay Round negotiations. In fact, there was virtually no lowering
of the region's average tariffs in this, the world's most ambitious trade
liberalizing agreement, despite initiatives undertaken by the WTO to make
participation less burdensome for developing countries.
- The United States has encouraged the WTO to re-focus its technical
assistance programs for promoting the understanding and implementation
of WTO obligations to give special attention to the needs of the least-developed
developing countries and to explore avenues for diversification of African
exports.
- The Administration has been successful in obtaining legislation renewing
the Generalized System of Preferences (GSP) that provides duty-free entry
for half of the 9,000 products listed in the U.S. Tariff Schedule and contains
special benefits for least developed beneficiary countries (LDBC). Another
special benefit for the LDBCs is the possible addition of up to 1,895 tariff
line items to the list of articles with preferential duty-free access.
Most Sub-Saharan countries of Africa could benefit from this expansion
of GSP benefits, particularly if Congress renews the program on a multi-year
basis after it expires May 31, 1997.
- The historic Commercial Development Mission to Africa led by the late
Secretary of Commerce Ron Brown in February 1996 visited five countries:
Cote d'Ivoire, Ghana, Kenya, Uganda, and Botswana. Secretary Brown held
discussions with government leaders and private representatives from nearly
40 African countries and more than 150 U.S. firms, resulting in contracts
and agreements for American companies totaling nearly $500 million, with
potential for future sales that eventually could total more than $3 billion
in U.S. exports.
III. Investment Liberalization
- If obstacles that hinder investment are removed, benefits will accrue
to both U.S. investors and the African nations. U.S. investments in Africa
will increase if U.S. investors are assured of being treated as fairly
and favorably as domestic and other foreign competitors and if they are
confident the host country has a stable legal system.
- Most Sub-Saharan African countries actively seek foreign investment
and many have liberalized their investment policies in order to attract
foreign investors. Nonetheless, many Sub-Saharan countries still maintain
restrictive investment policies, inefficient public enterprises, and/or
legal systems that effectively discourage private investment, both domestic
and foreign.
- The Administration is actively promoting U.S. investment in Africa.
OPIC authorized a $120 million private investment fund, the New Africa
Opportunities Fund, that will invest in projects in the countries of Southern
Africa. In addition, during the last year, Eximbank approved over $23 million
in transactions for the gold mining sector in Ghana and an additional $316
million for the hydrocarbon sector in Ghana. Eximbank also financed a major
petroleum project in Angola. Also, TDA has funded 24 technical support
activities and reverse trade missions as well as a major Africa transportation
conference to support infrastructure development in 30 countries in Sub-Saharan
Africa.
IV. Private Sector Development
- Development of Africa's private sector is critical due to its central
role in the development of national economies. U.S. assistance to the private
sector includes: (1) developing the human resource base for both the work
force and managers; (2) expanding access to capital, both working and investment
capital; and (3) building institutions to support the private sector.
- USAID is expanding its financial markets programs in certain African
countries. Micro-enterprise lending is a particularly strong component
of USAID's financial sector activities, and funding has been provided to
such programs in Kenya, South Africa, Guinea, Mali, Zimbabwe, Senegal and
Uganda. Its $100 million Southern Africa Enterprise Development Fund and
smaller national funds in South Africa and Zimbabwe target that region.
- Under the auspices of the Agriculture Committee of the U.S.-South Africa
Binational Commission, over 20 bilateral agricultural projects are underway
in the areas of market access, technology development, institutional and
human resources development, and sustainability issues, including soil
conservation and rural development. V. Infrastructure Enhancement
- Improving infrastructure is critical to expanding intra-regional and
international trade. There is a pressing need for development of transportation,
water and energy resources, and telecommunications in Sub-Saharan Africa.
At the same time, to ensure that such development is sustainable, the creation
or further development of an adequate environmental infrastructure is required.
- Governments in Sub-Saharan Africa continue to dominate the provision
of infrastructure in telecommunications, power, transport, and other sectors.
All too often the result of this dominance has been under-investment, poor
maintenance of finished projects, and lack of responsiveness to business
and household end-users. For instance, the continent's average telephone
density of about 0.4 lines per 100 inhabitants is the lowest in the world.
- One of the most promising short- and medium-term sectors for private
investment in Africa is telecommunications. Technological changes such
as satellite and microwave systems erode the old network-based monopoly
in telecommunications and make competition possible. Similarly, in power
generation and distribution, technological advances and improvements in
regulatory frameworks are making power-generation more attractive to domestic
and foreign private investors.
- Some efforts to coordinate regional infrastructure investments are
already occurring in Sub-Saharan Africa. For example, the Commission of
East African Cooperation, founded by Kenya, Tanzania, and Uganda in March
1996, has an ambitious plan to coordinate electrical power projects.
- In May, the Administration promoted the principles of the Global Information
Infrastructure (GII) at a major conference in South Africa, and formally
announced the five-year "Leland Initiative" to improve access
of 20 African countries to the Internet.
- Eximbank issued $1.3 billion in letters of interest in Africa last
year and has used escrow accounts to limit risk for infrastructure projects
in less credit-worthy markets. The Department of Energy is providing policy
and technical advice that facilitates private investment in water and power
generation.
Working Together in the Administration
In the First Africa Trade Report, the Administration detailed the wide
array of activities that federal agencies were undertaking to promote trade
and development in Sub-Saharan Africa. This Second Africa Trade Report
provides new information on the progress made during the last year in implementing
these programs and on new initiatives that agencies are undertaking to
achieve this goal. In addition, the first and second annual reports prepared
by the U.S. International Trade Commission, both entitled U.S.-Africa Trade
Flows and Effects of the Uruguay Round Agreement and U.S. Trade and Development
Policy, contain valuable information on U.S.-African trade and investment
flows, and detailed information on the trade and development activities
in Africa of the federal agencies.
Working Together with Congress on Legislation
Some policy makers in the United States and other developed countries
have assumed in the past that in order to promote economic development
in Sub-Saharan Africa, foreign assistance and unconditional access to industrialized
markets must precede the implementation of internal economic and structural
adjustment programs by the Sub-Saharan nations. In light of the recent
experience of a number of developing countries in which successful market-opening
reforms as well as trade and investment have significantly contributed
to development, the Administration recognizes that a more balanced approach
to promoting development in Sub-Saharan Africa is required. Budgetary constraints
also provide a further impetus to such an approach.
The Administration seeks to work closely with Members of Congress in
the coming months on an approach that is aimed at assisting African development
through trade, investment and access to international financial and technical
assistance. Sub-Saharan African countries should expect that the benefits
of increased trade, investment, and closer economic relations with the
United States will be linked with their own efforts to open their markets
to competition and investment, the protection of intellectual property
rights, and the implementation of the economic reforms that are necessary
for development.
The Administration seeks to promote trade, investment and increased
development in Africa by, among other things, encouraging U.S. firms to
play a more active role in the region. The Administration shares these
objectives with the sponsors of the proposed "Africa Growth and Opportunity:
The End of Dependency Act of 1996" (HR 4198) and hopes to work closely
with Congress in the coming months to develop legislation that places due
priority on building and enhancing the partnership between the U.S. and
Sub-Saharan African private sectors in order to spur economic growth and
development in Africa and to expand U.S. trade with and investment in the
region.
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.
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