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USA: Africa Trade Bill, 1
USA: Africa Trade Bill, 1
Date distributed: 980317
APIC Document
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+
Summary Contents:
This posting contains a summary analysis of the African Growth and Opportunity
Act as approved by the U.S. House of Representatives, and of concerns about
the bill that may be addressed as the Senate considers its parallel version
of the bill. The next posting contains selected direct excerpts from the
text of the bill and from comments made in presenting an amendment by Rep.
Maxine Waters.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
On March 11, the US House of Representatives approved H.R. 1432, known
as the "African Growth and Opportunity Act," by a vote of 233
to 186. The legislation, which has yet to be considered in the Senate,
has strong support from many African diplomats and business people, but
has drawn opposition from labor, environmental, and human rights groups.
The Congressional Black Caucus split, with 24 voting for the bill and 12
against it. CBC Chairperson Rep. Maxine Waters voted for the bill despite
the failure of two of her amendments to modify it. Within the CBC, Rep.
Jesse Jackson, Jr. was the most outspoken opponent who voted against the
bill.
In comparison with early draft versions of the bill, which tended to
present trade and investment as a panacea which would replace aid, debt
relief and other measures, the bill as passed strongly reaffirms the need
for continued aid and debt relief, affirms human rights and even includes
poverty alleviation as well as growth among the objectives to be pursued.
Critics, however, note that such provisions are in non-binding sections
of the bill, and that the operative "conditionalities" lay heavy
stress on rigid free-market formulas, including cutting government spending,
privatization and barring protection for national industries. While many
critics called for a vote against the bill, others called for continued
efforts to modify the bill in the Senate.
Among the bill's strengths and weaknesses:
Strengths
- Challenges stereotypical images of Africa as crisis-ridden and chaotic
by formally recognizing the continent's economic importance and potential.
- Acknowledges that debt reduction and development assistance are critical
to the success of trade and investment initiatives.
- Reduces certain barriers to US markets, creating new export opportunities
for producers in eligible African nations.
- Facilitates investment in infrastructure.
Weaknesses
- Requires countries to adopt market-oriented economic policies, similar
to those imposed under World Bank structural adjustment programs, in order
to take advantage of new initiatives.
- Provides no additional money for development assistance or debt relief.
- New programs ill-suited to needs of poorest countries.
- Measures intended to promote industrial development do not ensure respect
for core labor and environmental standards.
- Lacks mechanism to ensure that poor households derive direct benefit
from improved infrastructure.
Bill advances in spite of concerns
Originally introduced in April 1997 by Representatives Phil Crane (R-IL),
Jim McDermott (D-WA), and Charles Rangel (D-NY), H.R. 1432 attracted 53
cosponsors in the House and prompted Sen. Richard Lugar (R-IN) to introduce
a Senate companion, S. 778.
The legislation would:
- create a US-Sub-Saharan Africa Trade and Economic Cooperation Forum
to bring Cabinet-level officials together annually to discuss economic
matters of mutual concern;
- expand African access to US markets by extending, for a ten year period,
import tariff concessions under the Generalized System of Preferences (GSP)
and by eliminating US import quotas on textiles manufactured in Sub-Saharan
Africa;
- establish a $150 million equity investment fund and a $500 million
infrastructure investment fund for Sub-Saharan Africa under the auspices
of the Overseas Private Investment Corporation (OPIC);
- initiate planning for the creation of a US-Sub-Saharan Africa Free
Trade Zone; and
- create a Deputy Trade Representative for Africa in the office of the
US Trade Representative.
Although the overwhelming majority of the bill's cosponsors are Democrats
(44 to 9), the measure enjoyed bipartisan support; the Speaker of the House,
Rep. Newt Gingrich (R-GA) was among the most prominent proponents of the
legislation at hearings early last year. Clinton Administration officials
have also testified in favor of the measure.
Last year, the International Relations Committee and the Ways and Means
Subcommittee on Trade reviewed, amended, and approved the legislation.
On February 25, the full Ways and Means Committee endorsed the legislation,
clearing the way for floor action last week. [The full text of the legislation,
including committee amendments, is available from http://thomas.loc.gov.]
The debate in the House covered several of the bill's most controversial
provisions:
Eligibility requirements - Rep. Maxine Waters (D-CA), chair of the Congressional
Black Caucus, unsuccessfully proposed an amendment that would would have
permitted the President to waive the eligibility requirements at his discretion.
Development assistance - Proponents emphasized that the eligibility
requirements would not apply to development assistance programs, so adoption
of the legislation would not cut off aid to any current beneficiaries.
However, by a wide margin (81-334) the House also rejected an amendment,
proposed by Rep. Maxine Waters (D-CA), that would have imposed a ten-year
ban on further cuts in aid to sub-Saharan Africa. [Some critics argued
that the bill would also make development assistance funds subject to the
new eligibility requirements. However, the bill's requirements extend only
to programs authorized by it, which do not include development assistance.]
Textile imports - Several speakers expressed concern that reduced quotas
and tariffs on African imports would allow Asian textiles, shipped through
African nations, to flood the US market, destroying domestic jobs. Proponents
say the bill contains a number of mechanisms--including a 35 percent local
content requirement and a stipulation that eligible goods must be "substantially
transformed" in Africa--to thwart significant transshipment of Asian
textiles.
Although the legislation passed the House easily, it has generated far
less enthusiasm in the Senate. To date, only four Senators have cosponsored
S. 778. The Finance Committee, which has jurisdiction over the bill, is
preoccupied with an investigation of Internal Revenue Service practices.
It has not yet scheduled any consideration of the legislation.
Unless the measure attracts more ardent support in the Senate--and a
strong proponent in the Finance Committee in particular--its progress will
remain slow. Even if the bill is reported out of committee, the Senate's
crowded legislative calendar diminishes the potential for final action
before the 105th Congress adjourns for the fall election campaign.
White House has similar package
Many of the bill's provisions can be implemented without legislative
action, however. In June 1997, President Clinton unveiled the "Partnership
for Economic Growth and Opportunity in Africa." This initiative was
spelled out in greater detail in the President's third annual "Comprehensive
Trade and Development Policy for the Countries of Africa," released
in December [The current and previous versions of this document are available
at www.ustr.gov/reports/index.html].
Also in December, Rep. Rangel led a group of members of Congress, administration
officials, and business people on Presidential Mission to six African nations
in order to demonstrate support for the new measures and win backing from
African leaders. President Clinton has made U.S. economic engagement with
Africa a central theme of his March 22 trip to Senegal, Ghana, Uganda,
Rwanda, Botswana, and South Africa.
The main components of the Partnership mirror those of the Africa Growth
and Opportunity Act, and the Clinton Administration has already begun to
launch certain aspects of the plan. In November, OPIC announced the establishment
of a $150 million private equity fund for sub-Saharan Africa. The Office
of the US Trade Representative is in the process of hiring a Deputy Trade
Representative for Africa.
The Congressional and Executive proposals differ primarily in the eligibility
requirements that African nations must meet in order to participate. Whereas
access to all of the programs authorized by the Act would be contingent
on a country's fulfillment of a single set of criteria, the White House
plan envisions three levels of benefits with different eligibility thresholds.
Both Congress and the Clinton Administration want to push African governments
to adopt market-oriented economic policies. The White House, however, acknowledges
that "not all countries are ready or able to take the steps necessary"
to meet all of the criteria contained in the Africa Growth and Opportunity
Act. Consequently, the Partnership would make certain benefits--including
continued access to GSP tariff concessions and OPIC-established investment
funds--available to all sub-Saharan African nations currently eligible
to be GSP beneficiaries (e.g., all sub-Saharan nations except Eritrea,
Gabon, Liberia, Mauritania, Nigeria, and Sudan).
Countries that "are pursuing aggressive growth-oriented reform
programs" would have access to additional benefits, including relaxed
US import restrictions on some goods--although not necessarily textiles
and apparel, as stipulated in the Act. Level two participants would also
be able to take part in the US-Africa Economic Cooperation Forum and could
receive technical assistance to facilitate policy reform.
At the third level, the United States would consider negotiating free
trade agreements with those nations that combine market-oriented policies
with sustained economic growth.
Unlike the legislative package, which explicitly brings the GSP program
for sub-Saharan African nations under the Act's more stringent eligibility
requirements, the Partnership would not terminate benefits under existing
programs for any sub-Saharan countries.
Vital legislation remains plagued by flawed approach
Africa is the only major world region for which the US government has
no clear trade strategy. If adopted, the Africa Growth and Opportunity
Act would be the first formal US recognition of the significance of African
nations as trading partners. Both the Act and the Partnership would help
to combat Africa's perennial marginalization in US foreign policy by requiring
US government officials to devote systematic attention to US economic relations
with nations across the continent. The initiatives have the potential to
alter both the scale and the tone of US public and private sector relationships
with Africa, dispelling the widely held misconception that Africa is economically
irrelevant to the United States and highlighting the continent's successes
and opportunities.
The bill has won enthusiastic support from many African government officials
and business people. Representatives of African grassroots, church, and
labor groups have had fewer opportunities to comment on the initiatives,
and their assessments have been more skeptical (see, for example, the documents
previously distributed by APIC at www.africafocus.org/docs97/eco9708.php
and www.africafocus.org/docs97/trad9709.1.php).
They point out that, in its present form, H.R. 1432 may produce few
concrete improvements in the living standards of ordinary people, either
in Africa or the United States. H.R. 1432 has been portrayed as a strategy
for stimulating African development through the expansion of market opportunities
in the United States. However, it is at least as much about opening African
economies to investment by and imports from the United States. According
to Tetteh Hormeku of Ghana's Third World Network, the United States is
eager not to be crowded out of African economies by preferential trade
and investment agreements negotiated among neighboring states or between
African nations and European powers.
Consequently, the Act aims to push African governments to adopt market-oriented
economic policies, such as the privatization of state industries, the elimination
of tariff and nontariff barriers to trade, and the reduction of business
and commercial taxes and regulations. The desired policy changes are spelled
out in detail in the eligibility requirements the Act would impose on would-be
participants.
Relying on markets and the private sector as the primary engine of development
presents at least two major problems. First, unregulated markets do a poor
job of reducing poverty and promoting even development. Wealthy individuals,
companies, and nations typically enjoy an advantage in free markets. Second,
market deregulation diminishes the scope for governments to use economic
mechanisms to achieve public policy goals. While certain checks on government
economic intervention may be desirable, the relentless pursuit of free
markets jeopardizes the capacity of Africa's emerging democratic institutions
to realize any popularly-defined development agenda. To have economic policies
prescribed by a foreign power as a precondition of access to vital development
resources is a further affront to accountable government and national sovereignty.
Is trade replacing aid?
Preliminary proposals circulated prior to the introduction of H.R. 1432
saw expanded trade as a substitute for development assistance. Rep. Rangel
and Africa advocacy organizations argued that increased trade would not
automatically benefit Africans. Not only are trade patterns important--increasing
unprocessed mineral exports, for example, is far less likely to produce
sustainable economic growth than would the expansion and diversification
of industrial production--but trade enhancement programs must also be linked
to effective poverty reduction, social investment, debt eradication initiatives,
and accountable government if they are to achieve long-term success.
As introduced, H.R. 1432 appeared to go some way towards addressing
these concerns. It expressed Congress' desire to support governments committed
to the eradication of poverty, the recognition of the importance of women
to economic growth and development process, and the establishment of accountable
government. Sections of the bill acknowledge the importance of foreign
aid and debt relief. It calls for continued funding of development assistance
as well as for deep and rapid debt relief under the Heavily Indebted Poor
Countries (HIPC) initiative of the World Bank.
However, the legislation does not advance these objectives in any concrete
way. It does not appropriate additional resources for development assistance,
nor does it constitute a binding commitment to future funding of aid and
debt relief programs. In an era when Congress slashes the already small
US foreign assistance account on an annual basis, such rhetorical endorsements
have little meaning.
Proponents of the bill point out that there must be limits to the scope
of any single piece of legislation. However, a press release issued on
February 25 by Rep. Crane, H.R. 1432's primary sponsor, reveals that this
is not merely a strategic omission. "This is the first step in replacing
aid with trade," the statement declared in response to the Ways and
Means Committee's approval of H.R. 1432.
Human rights, workers' rights
The original version of H.R. 1432 used strictly economic criteria to
assess a country's eligibility to participate in the bill's programs. During
the committee process, a number of amendments were made to the eligibility
requirements, including the addition of two clauses intended to promote
recognition and respect for human rights. Countries that engage in gross
violations of internationally recognized human rights or fail to provide
equal protection under the law and rights to due process and a fair trial
would now be excluded from participation.
The bill's textile provisions have generated some of the most heated
controversy. The legislation would repeal the current limits on textile
and apparel imports from Kenya and Mauritius and would enforce a "no
quota" policy on similar imports from other eligible sub-Saharan nations
for the duration of the current international Agreement on Textiles and
Clothing. A recent study conducted by the US International Trade Commission
(www.usitc.gov/wais/reports/arc/w3056.htm)
concluded that the this action would have no significant affect on the
domestic textile industry. But US labor unions warn that if manufacturers
in these countries are not required to adhere to basic labor and environmental
standards, US companies might relocate plants to Africa in search of lower
production costs and higher profits. The result, they say, would be loss
of jobs in the United States, extreme exploitation of African workers--particularly
women, and environmental damage. Labor groups have urged that quota reductions
and any future free trade agreements be contingent on the recognition of
fundamental workers' rights and environmental protections.
Some critics have also expressed concern that manufacturers in other
parts of the world might transship textiles through Africa in order to
obtain tariff concessions on sales to the US. The Ways and Means Committee
adopted an amendment to H.R. 1432 intended to strengthen the anti-transshipment
language already in the bill.
Any further effort to address the objectionable aspects of the legislation
must occur in the Senate. The President's trip to Africa could provide
an opportunity for administration officials to consult with a much more
representative range of Africans--including leaders of church, labor, and
grassroots organizations--and to solicit additional comments which could
help to inform the Senate debate.
[For additional US commentary on the Africa Growth and Opportunity Act,
see the US-Africa Trade Policy Working Group's letter to Congress at
www.africafocus.org/docs97/trad9710.php
and the collection of documents available at
www.citizen.org/pctrade/Africa/finalfac3.htm.
For further background material on US-Africa economic relations, see the
Africa News archive at www.africanews.org/econ.]
This material is produced and distributed 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 providing accessible
policy-relevant information and analysis usable by a wide range of groups
individuals.
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