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Note: This document is from the archive of the Africa Policy E-Journal, published
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USA/Africa: Economic Policy, 1
USA/Africa: Economic Policy, 1
Date distributed (ymd): 011029
APIC Document
Africa Policy Electronic Distribution List: an information
service provided by AFRICA ACTION (incorporating the Africa
Policy Information Center, The Africa Fund, and the American
Committee on Africa). Find more information for action for
Africa at http://www.africapolicy.org
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+
SUMMARY CONTENTS:
This posting contains a statement released today by Africa Action,
Oxfam America, and ActionAidUSA, at a briefing for the
international and White House press corps on the occasion of the
first U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum.
The statement highlights four broad policy changes needed for U.S.
policy on economic relations with Africa, in the areas of debt,
international trade negotiations, development assistance, and
U.S./African trade in particular. The groups argue that the present
approach, focused on the African Growth and Opportunity Act (AGOA),
is too narrowly limited to trade and unhelpful to promotion of
sustainable development of African countries.
Another posting distributed today contains selected web links for
more information on the issues discussed in the statement, as well
as excerpts from a March 2001 U.S.-African Trade Profile with
statistics on U.S. trade with sub-Saharan Africa. Despite AGOA, the
data make clear, U.S. imports from Africa are still highly
concentrated on a narrow range of products (oil and strategic
minerals) and a small number of countries.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
Africa Action
Contact: Salih Booker or Ann-Louise Colgan, (202) 546-7961;
Aisha Satterwhite, (212) 785-1024
http://www.africapolicy.org
Oxfam America
Contact: Severina Rivera, (202) 496-1197
http://www.oxfamamerica.org
ActionAidUSA
Contact: Irungu Houghton
Tel: (202) 835-1240/1242
E-mail: [email protected]
Statement to the first U.S.-Sub-Saharan Africa Trade and Economic
Cooperation Forum
October 29, 2001
We, the undersigned groups, believe that a new approach is
required toward US-Africa economic relations.
When representatives of the wealthiest country in the world sit
down this week with representatives of countries from the world's
poorest region, the new U.S.-Sub-Saharan Africa Economic
Cooperation Forum should be used to promote a new form of economic
cooperation less narrowly centered on trade and more focused on
supporting sustainable development of African societies.
Washington should recognize that its limited efforts to promote
trade as the principal arena of economic engagement with Africa
have benefitted few African countries. Current U.S.-Africa trade
policy is limited to the providing market access for low-wage,
low-skill, and raw-material-based production for export which due
to inherent volatility and structural declining terms of trade
simply sustain poverty as opposed to supporting development.
Moreover, the U.S. obsession with trade and free market solutions
to development challenges in Africa is dangerously misguided at
this critical juncture.
Africa is the region most vulnerable to external shocks and with
warnings of an impending global economic crisis in the wake of the
Sept 11th terrorist attacks on the U.S. it should be evident that
Africa requires extraordinary support beyond the prevailing
programs of cooperation.
We believe that a new framework for economic cooperation between
the U.S. and the countries of Africa must include the following:
- Cancellation of Africa's external debts
- Support for Africa's key positions at the World Trade
Organization
- An increase in U.S. development assistance
- A shift in U.S. trade policy to simplify expanded market access
to the US market for a larger number of African products and to
lift economic conditionalities imposed under the U.S. Trade and
Development Act of 2000
Finally, we call on the U.S. administration to withdraw its
unseemly effort to force "fast track" (renamed the Presidential
Trading Authority-PTA) through Congress by wrapping free trade in
the flag of patriotic duty. Giving the President executive
privilege to negotiate binding trade agreements with other
countries without for example requiring environmental protection
and labor rights guarantees, or other necessary measures, is a
recipe for disaster for U.S. workers and African countries alike.
The inauguration of a new forum to regularly discuss and negotiate
U.S.-African economic cooperation at this important moment
provides the opportunity to forge a more comprehensive approach
that joins the instruments of Aid, Trade, Investment and Debt
relief together in pursuit of sustainable development in Africa.
(1) Cancel the Debt
Sub-Saharan Africa's massive external debt is perhaps the single
largest obstacle to the continent's development efforts and its
economic independence. The more than $300 billion which African
countries owe to international financial institutions and foreign
creditor governments represents an unsustainable burden that
undermines Africa's attempts at economic growth. Any serious
effort at promoting Africa's economic development must therefore
begin by removing the crippling burden of its foreign debt.
The 48 countries of sub-Saharan Africa spend $13.5 billion each
year repaying debts to rich foreign creditors. The debts
themselves are largely illegitimate, based on their origins and
their effects. Repaying these debts diverts money directly from
spending on health care and education, and economic development.
Over the past two decades, African countries have paid out more in
debt service to foreign creditors than they have received in
development assistance or in new loans. As a result, throughout
Africa, average incomes have declined and conditions of poverty
have worsened. The creditors of Africa's external debt, including
the US and other governments and especially international
institutions like the World Bank and International Monetary Fund,
continue to insist that the debts be repaid, despite the economic
and social costs of this massive outflow of resources. Africa's
debt crisis traps the continent in a perpetual cycle of
underdevelopment.
The current international debt relief framework, the Heavily
Indebted Poor Countries Initiative (HIPC), launched by the World
Bank and IMF in 1996 and "enhanced" in 1999, has failed to provide
a solution to the debt crisis. In the 22 countries that have
qualified for HIPC debt relief to date, governments still spend
more on debt repayments than on health care. On average, these
countries have seen only a 27% reduction in annual debt
repayments. In two African countries, Zambia and Niger, debt
repayments have actually increased since qualification for HIPC
assistance.
Despite the clear flaws in this debt relief framework, the leaders
of the world's richest countries, meeting at the G-8 summit in
Genoa in July 2001, refused either to further enhance the
initiative or to acknowledge that it has failed. The reality is
that the HIPC initiative is designed to serve creditors by
squeezing the maximum possible in debt payments from the world's
poorest economies. It does not benefit debtor countries, and it
should therefore be considered obsolete. United Nations Secretary
General Kofi Annan has concluded that the HIPC Initiative does not
provide an adequate response to the debt crisis and has called for
an immediate moratorium on debt repayment.
If the world's richest countries and financial institutions are
serious about committing themselves to Africa's development, they
must cancel the continent's unsustainable burden of debt. They
should also consider who bears the responsibility for failed
economic policies imposed on Africa, as well as the longer
historical reasons for Africa's impoverishment, and ask the
question "who really owes whom?".
The US is a both a bilateral creditor of African countries, and
the single largest shareholder in both the World Bank and IMF. As
such, it holds major influence over the international response to
Africa's debt crisis. As the US holds its first annual economic
summit with African Trade and Finance Ministers, it must commit
itself to the cancellation of Africa's external debt as a first
step to true economic cooperation and as a prerequisite to
Africa's economic growth.
(2) Support for Africa at the World Trade Organization (WTO)
Economic conditions in Africa remain highly fragile. Only a few
countries have combined high growth rates with rising domestic
savings and investment. The deregulation of agricultural markets
does not appear to have triggered the acceleration of growth.
Trade liberalization may have increased the importance of
international trade for Africa, but Africa's share of world trade
has declined. Africa entered the new millennium increasingly
integrated into the global economy at the bottom.
More horrifying for Africa's millions of people living under the
poverty line is the loss through trade of over half of all net
resource flows to the region as a result of market barriers,
declining terms of trade and other external factors. Added to debt
interest payments, profit remittances and other capital outflows,
this loss is a direct net transfer of real resources from Africa
to the rest of the world.
The UN panel on Financing for Development estimates the total cost
of trade barriers in the North to Southern exports at more than
$100 billion each year. This figure is many times more than the
total development aid provided by the developed countries.
Dismantling these trade barriers would significantly increase
income and assist poverty alleviation in Africa by providing added
impetus to economic growth.
Until this happens, understandably, poor people, the general
African public and their Governments are wary of new trade
relationships that fail to address economic security and net
resource transfers in 2001. We share their concerns.
Last month's OAU meeting of African Governments in Abuja, Nigeria
reflected on the relevance of a new WTO round for Africa and on
the African Growth and Opportunity Act (AGOA), now enacted under
the Trade and Development Act. African Governments stressed the
need for a rules-based multi-lateral trading system that promotes
economic development, facilitates African regional integration,
and contributes to the eradication of poverty.
There is an urgent need to support meaningful and effective
Special & Differential Treatment provisions, for developing
countries in general, and Africa in particular, given the
structural weaknesses in their economies and declining share of
world trade. These provisions are included in trade agreements to
allow for special difficulties faced by developing countries. But
such measures are not now strong enough to spare these countries
from being forced to implement policies that are only appropriate
for much stronger economies, with often devastating effects.
Seattle collapsed under the weight of a lack of transparency and
unfair policy privileges in favor of the developed nations. It
collapsed because the US and Europe delegations negotiated in a
manner that reduced the WTO to a multilateral vehicle for their
domestic interests.
Sadly, recent statements by the US, EU and multilateral
institutions such as the World Bank and UNDP champion the need for
a new round of trade talks without seriously considering the
weight of existing legitimate grievances by African and other
developed countries with the current rules. Without changing this
context, it will be impossible to find common global ground in a
democratically oriented international body in the fourth WTO
ministerial conference.
We support the unified position of African Governments that a new
round should only take place when there is agreement on a new and
specific development and poverty eradication agenda, as well as
more equitable, transparent and accountable procedures for
negotiating. The following three demands are central to this:
- The next round must enable flexibility in the Agreements on
Intellectual Property Rights and Agriculture to support the rights
of developing countries to protect farmers' livelihoods, food
security, access to labor, and the supply of essential herbs and
medicines. Particularly important is the proposed declaration by
African and other developing countries affirming that nothing in
existing trade agreements "shall prevent members from taking
measures to protect public health."
- The United States and other northern countries should eliminate
all domestic and export subsidies to agriculture that artificially
increase their big agribusiness sectors' competitiveness and crowd
out exports from poor farmers in African countries.
- The US should support the adoption of a decision at the WTO
meeting that makes respect for Special & Differential Treatment
provisions for developing countries legally binding on developed
countries.
The Economic Cooperation Forum launched today should produce new
U.S. support for these key African positions at the upcoming WTO
meeting.
(3) Increase Development Assistance
Foreign aid (Official Development Assistance) from donor
governments is a key source of funding for the development efforts
of African countries. The immense social and economic challenges
faced by these countries since independence require greater
resources than African governments themselves command, and the
sources of finance available are limited. The importance of this
type of support from the US and other wealthy economies to African
countries cannot be underestimated, and such assistance has been
in decline during the past decade. In an era of ever-increasing
economic globalization, those countries that benefit the most from
the world economy must share in the necessary public investment
for those parts of the world that bear more than their share of
the disadvantages.
The US has a special obligation to provide assistance to African
countries for several reasons. As the world's richest country, it
is in a position to provide strong financial support to promote
economic growth and development in African countries. The US also
has a special historical relationship with Africa that brings
with it a unique responsibility towards the continent and its
social and economic circumstances. Yet the US has consistently
failed to devote bilateral aid to African countries that is
commensurate either with its obligations or with these countries'
needs.
During the Cold War, US foreign aid to developing countries was
dictated less by the actual needs and capacities of recipient
countries than by strategic concerns. For much of this period,
development assistance was used for political patronage. When the
Cold War ended, over a decade ago, the changed global context
meant that aid could be directed towards true development
objectives. However, in the post-Cold War era, levels of
development assistance have fallen in a consistent downward trend,
and US spending on foreign aid has declined, relative both to the
size of the US economy and to the federal budget.
While the world's richest countries, represented in the
Organization for Economic Cooperation and Development (OECD), have
repeatedly promised to devote 0.7% of gross national product (GNP)
for official development assistance to poorer countries, only five
small European countries now meet that target, and the US ranks at
the very bottom. The US provides only 0.1% of GNP for development
assistance, and sub-Saharan Africa receives only about one-tenth
of this. The total of Official Development Assistance from all
sources to Sub-Saharan Africa has fallen by 29% since 1990.
This decline in aid comes at a time when Africa needs financial
support more than ever. Throughout the continent, the burden of
external debt, the massive health crisis, and the effects of
failed economic policies often imposed by foreign creditors have
left countries facing overwhelming challenges. Development
assistance is critical to enabling African governments to address
these difficulties. Further lending to poor countries is
inappropriate as a primary method for funding development when it
only exacerbates the debt crisis and entrenches economic
dependency. Prior to the G8 meeting in Genoa, Italy, President
Bush suggested that the World Bank should provide development
grants rather than loans to poor countries.
Recent polls in the US have also shown that the American public
believes that the US has vital interests in Africa, and that
foreign aid forms an important part of how the US promotes mutual
interests with Africa. If the US and other wealthy countries are
serious about promoting sustainable development in Africa, they
must dramatically increase the levels of development assistance
they provide. It is in their own interests to do so, because
social and economic development in Africa will ultimately promote
greater stability at an international level. The U.S.-Africa
Economic Cooperation Forum must place increasing development
assistance prominently on its agenda.
(4) Reform the African Growth and Opportunity Act
On May 18, 2000 former President Bill Clinton signed into law the
Trade and Development Act of 2000, which contained both the
African Growth and Opportunity Act (AGOA) and the US-Caribbean
Basin Trade Enhancement Act. Many American and African officials
said that AGOA symbolized a new American political-economic
partnership with Africa.
With the evolution of bilateral, regional and multilateral trade
liberalizing initiatives, international trade has become the
latest "mainstream" dimension of international development. In the
case of Africa, neo-liberal based arguments suggest a causal
relationship between Africa's poverty and African societies being
marginalized in an increasingly globalized world economy. From the
premise that African economies are poor because of they are
relatively "closed" to the wonders of free trade and capital
flows, trade liberalization and export orientation are offered as
viable development policy prescriptions. However, these policies
also link national economic growth to increasing volatile global
capital expansion and developed nation import growth. Based on
this flawed premise and inadequate analysis of the structural
causes of Africa's poverty and complexity of development
challenges, US economic policy under AGOA concentrates on
increasing Africa's integration into the global economy. However,
such policies tie national economic growth and development to the
inherently volatile boom and bust logic of global capital flows
and rich nation import growth.
AGOA is fundamentally a U.S. policy tool for liberalizing the
structure and orientation of the "playing fields" governing trade
and investment activities between African societies and America.
AGOA is not trade and investment agreement per se, it is a
framework for negotiating future economic relations. AGOA
represents a pro-active, bilateral example (in tandem with other
multilateral trade and development approaches in the WTO, IMF and
World Bank) of how US Government policy and institutions are
utilized as instruments to re-create or perpetuate the economic
rules of the game, often at the expense of Africa's development
needs.
The failure of AGOA to address the structural sources of Africa's
poverty and constraints on development, raise questions about its
ability to serve as a source of total net resource transfers for
supporting sustainable growth and development in Africa societies.
Even with the technical adjustments in the AGOA textile provisions
now being considered as "AGOA 2", this approach will have limited
positive impact.
An alternative approach to US economic policy would seek to: help
Africa reverse its declining terms of trade; remove the burden of
foreign indebtedness; support gross domestic capital formation;
increase levels of effective demand, domestic consumption and
purchasing power; provide technical assistance to address human
and productive capacity constraints; provide market access to
African agricultural products; and permit African nations greater
authority to utilize national and regional trade, investment and
industrial policies as strategic tools for governing national
resources, markets and factors of production to support internally
oriented development processes.
We support the call of African Governments that AGOA provisions be
amended to encompass a wider range of African products and the
simplification of rules to match the industrial capacity of
African countries. We further call for the elimination of
eligibility criteria that impose economic policies on African
countries and undermine their sovereignty and democratic control
of development policies.
This material is distributed by Africa Action (incorporating the
Africa Policy Information Center, The Africa Fund, and the
American Committee on Africa). Africa Action's information
services provide accessible information and analysis in order to
promote U.S. and international policies toward Africa that advance
economic, political and social justice and the full spectrum of
human rights.
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