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Africa: US Trade Policy (Commentary),2
Africa: US Trade Policy (Commentary), 2
Date distributed (ymd): 970911
Document reposted by APIC
In recent years, US economic policies towards Africa have become the
subject of growing debate. A number of references to executive and legislative
policy, as well as to NGO commentary and critique, can be found in a previous
posting: http://www.africafocus.org/docs97/eco9708.php
This posting and the immediately preceding one contain a twopart commentary
by Tetteh Hormeku of the Third World Network in Accra, Ghana, publishers
of African Agenda. The previous posting cited above contained a commentary
by Oduor Ong'wen of EcoNews Africa in Kenya.
NEW U.S. TRADE POLICY HELPS ITS TNCs, NOT AFRICA
The basic flaw of the new US trade policy for Africa, according to the
writer, is that the policy measures and their orientation do not make any
attempt to be sensitive to the peculiar demands of economic development
imposed on African economies by their structure and place in the international
economy.
(continued from part 1; second in a two-part analysis of recent US policy
on Africa)
By Tetteh Hormeku
Third World Network Features
Accra: US President Bill Clinton's Denver initiative, like the 'new'
US economic policy approach to Africa of which it is part, is designed
to promote American corporate interests in Africa and to compete with and
supplant Europe. The substance of this approach, both as outlined by administration
officials and as taken up in the bi-partisan Africa Growth and Opportunity
Act being promoted in the US Congress, hinges on three broad elements.
These elements are: expanded access to US markets of African commodities;
promotion of US private investment in Africa; and possible establishment
of US-Africa free trade areas. Proposed interventions in each area are
tied to processes to ensure that the African market is open to American
businesses.
Expanded US market access has two components. First, extension of America's
Generalised System of Preferences (GSP), aiming to raise the number of
African products entering US markets duty-free from 4,000 to about 5,800.
While this is welcome, African experience with Europe under the Lome Convention
shows that duty-free access is one thing; the capacity to produce and supply
the market is another.
Building this capacity in Africa will be undermined by the conditions
attached to the second component of the expanded US market access. This
component, which is about eliminating US quotas for sub-Saharan textile
and leather products, is conditioned upon the readiness of the countries
'to embark on bold trade reforms'.
Basically, this is a requirement that countries should open their economies
to American produce and investment. For instance, the Growth and Opportunity
bill includes agricultural market liberalisation among its 'bold reforms'.
A key aspect of this is the removal of subsidies to agricultural inputs.
African countries which have been compelled to pursue similar policies
under IMF-World Bank Structural Adjustment Programmes (SAPs) have found
that these have undermined their own local production and have ended up
with subsidised US grains being dumped on them. Thus, 'bold trade reforms'
may involve undermining those very sectors which would allow African economies
to develop the capacity to supply to the US market.
The second main plank of the 'new' US policy approach is the direct
promotion of American private investment in Africa. What is striking here
are the sectors of the African economy primarily targeted for such investment.
One of these is commercial and natural resource development projects, to
be leveraged by $150 million of Overseas Private Investment Corporation
(OPIC) funds. Predominant here is the mineral extraction sector, an area
where American capital confronts its biggest competition in the form of
European and Canadian transnational corporations.
In 1995, the US Eximbank approved over $23 million for the gold mining
sector of Ghana, and an additional $316 million for the hydrocarbon sector
in the same country.
The other main sector is 'infrastructure' - that is the privatisation
of utilities and telecommunications. This is to be leveraged by $500 million
OPIC funds. Again, in order to ensure the participation of the US private
sector, the OPIC funds would be directed mainly at the countries 'pursuing
the deepest market reforms'.
The third plank of the new US economic approach is the proposal for
US-Africa free trade area(s).
This is how Larry Summers, US Deputy Treasury Secretary, presented it:
'In the future, as appropriate, the United States will be open to pursue
free trade agreements with the strongest-performing, most growth-oriented
sub-Saharan African countries.'
In a similar fashion, the bi-partisan Growth and Opportunity bill in
the US Congress aims for 'one or more trade agreements' with eligible African
countries - countries that have made substantial progress in thoroughgoing
market-oriented reforms and provide high protection of foreign investment.
In effect, the free trade area project seeks a privileged relationship
between the US and enclaves of successful African economies, constructing
corridors of profitable investment across Africa for American business.
This idea is not restricted to the US. At the moment, Europe too is
contemplating replacing the Lome Convention with a series of agreements
which would deal with Africa's economies in groupings according to economic
strength. Indeed, South African TNCs are already blazing a trail here.
Here again, the motivation of American policy is shaped by competition
with Europe and other trading blocs. The cost is likely to be Africa's
own efforts at continent-wide regional economic integration.
How will these affect Africa?
To be sure, America's heightened interest in Africa may bring certain
short-term and other benefits to African economies. The real issue, however,
is how the series of interventions and the reforms they call for will affect
Africa's ability in the long term to build integrated national and regional
economic capacity.
Take the examples of the specific projects like US private investment
in mining, finance, privatised infrastructure including privatised toll
roads and liberalisation of agricultural markets. While these may bring
benefits like increased revenue, jobs and the like, they risk perpetuating
the skewed and fragmented nature of African production and market structures.
Mining for instance has long been acknowledged as one area where increased
activity does not by its nature generate spill-over linkages with other
sectors of the economy in terms of transfer of technology and secondary
production. With the application of World Trade Organisation rules on foreign
investment, which is part of the American package, African governments
will find it even more impossible to take measures to create such linkages.
The same applies to investment in financial services, which in African
economies have been related primarily to import-export. With privatisation,
mainstream investment-financing has moved even further away from supporting
domestic production networks, rural and urban.
Privatised infrastructure highlights another dimension of the problem.
Beyond the commercial centres, most African road and (where they exist)
rail networks only connect primary commodity export locations, like mines,
to the ports. Privatised toll roads are likely to re-emphasise this, since
the most profitable lines will be precisely those linking primary export
production. The cost will be the systematic development of networks of
roads connecting even the least export-generating parts of the country,
but which are necessary to promote the domestic economy.
In short, the proposed sites for the investment of American capital
are the enclaves of high-profit-yielding sectors, with no direct linkages
to other sectors of the economies. Admittedly, it may be up to African
governments themselves to adopt strategies to ensure that such linkages
are derived from the increased economic activities in these sectors that
are likely to come with American investment.
But it is precisely in this regard that the totality of the policy prescriptions
contained in the American package is decidedly subversive. The most outrageous
of these are in the bi-partisan Growth and Opportunity bill in the US Congress,
especially the criteria for eligibility established for the African countries
to 'benefit' from its programmes.
According to the bill, an eligible country must have established, or
show progress in establishing and enforcing a range of measures. These
include: transforming commodities and non-traditional products for export
through joint venture projects between African and US companies; promoting
free movement of goods and services and factors of production between it
and the US; ensuring appropriate, that is WTO-based levels of, protection
of intellectual property rights, and opening up government procurement.
Furthermore, the country must enter into bilateral investment treaties;
provide national treatment for foreign investors, that is treat foreign
investors in the same way that it will treat its local investors; and remove
restrictions on foreign investment, and minimise government intervention
in the market. It must also reduce import and corporate taxes, and enter
into treaties to avoid double taxation.
As if to make sure that it does not leave any loophole, the bill adds
further general requirements. The first is that the country be a member
of the WTO and, if it is not, be actively pursuing membership. Secondly,
it must bind its tariffs in the WTO and assume meaningful binding obligations
in other sectors of trade, in accordance with WTO rules. Finally, it must
be in material compliance with its programmes and obligations to the International
Monetary Fund and other international financial institutions, with the
World Bank in the lead.
Each of these measures will, in a particular way, take away from African
countries the very mechanisms available to them to develop strategies which
ensure that foreign investment does not undermine but rather helps the
development of local industrial and general economic capacity. To take
a few examples:
Opening up government procurement to international bidding means that
contracts for supply go to foreign and not local contractors. National
treatment for foreign investors implies that any incentives that a government
may give to a local investor to promote a particular sector, say rural
banking, must go to foreign companies, thus undermining that particular
strategy. Removing restrictions on foreign investors means that they cannot
be appropriately regulated both in terms of where and how to invest to
derive maximum benefit in accordance with a national strategy of development.
Free movement of goods, services and factors of production from the
US to Africa at low or zero tariffs means in effect the dumping of cheap
US products on the local markets to the detriment of local production -
the same effect achieved in agriculture with agricultural market liberalisation.
Double taxation treaties routinely lead to the home country of a TNC (here
the US) taking the larger share of personal and corporate taxes that should
have been available to the host country. Compliance with World Bank commitments
is simply a means of prolonging the devastating effects of intrusion of
these institutions into the policy-making arena of African countries, and
so on.
In fact the list of reform measures is simply a dizzy shopping basket
of the measures that the US has been seeking to impose (with varied success)
in various international economic fora, like the WTO, and sub-regional
groupings of which it is a member in Latin America and Asia Pacific. The
purpose of all these is to remove what it has described as the obstacles
working against US-based TNCs. In all these fora, developing countries
have resisted the measures on the ground that while they may apply in the
competition between the advanced capitalist countries, they are not appropriate
for them.
This really is the basic flaw of the so-called new US policy for Africa.
Designed to promote US business in Africa, where its main competitors are
European TNCs, the new policy measures and their orientation do not make
any attempt to be sensitive to the peculiar demands of economic development
imposed on African economies by their structure and place in the international
economy.
The cruel irony of it all is that key African institutions seem in a
hurry to buy into this against all the evidence of their own analyses.
At a recent brain-storming session on trade hosted by the Organisation
of African Unity (OAU), one of the conclusions which ran against all the
other conclusions and analyses was support for the Growth and Opportunity
bill. The US may thus have found new proxies to promote policies which
perpetuate the overall structural problems of Africa's economies and take
away from the Africans and their governments the very instruments for addressing
them.
It is the age-old formula for intervention to undermine Africa that
is being replayed anew. - Third World Network Features
-ends-
About the writer: Tetteh Hormeku is economic researcher at the Africa
Secretariat of the Third World Network in Accra.
When reproducing this feature, please credit Third World Network Features
and (if applicable) the cooperating magazine or agency involved in the
article, and give the byline. Please send us cuttings.
For more information, please contact:
Third World Network 228, Macalister Road, 10400 Penang, Malaysia.
Email: [email protected]; [email protected]
Tel: (+604)2293511,2293612 & 2293713;
Fax: (+604)2298106 & 2264505 1642/97.
Third World Network-Africa can be reached at P.O. Box 8604, Accra-North,
Ghana;
tel: 233-21-224069; fax: 233-21- 773857; e-mail: [email protected].
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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