The Habari Network
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By Stephen Lande and Dennis Matanda
Washington, DC | May 18, 2016
United States Trade Representative Ambassador Froman should be lauded for his recent suggestion at the World Economic Forum that viable substitutes for AGOA’s unilateral preferences must be developed well before the program expires in 2025 – just nine short years from today. However, one must realize that it does take quite some time to negotiate and implement whatever new initiative may be decided upon. Since stakeholders need to ensure that duty-free access continues without interruption, it behooves the trade community to agree – in the short-term term – on the framework for a post AGOA program: The framework should (i) ensure that the above-mentioned duty-free provisions continue to give investors the confidence they need, (ii) support Africa’s policy priorities – especially those that promote regional integration and manufacturing – and (iii) could lead to a mega trade agreement between the two parties along the lines of the proposed US-EU TransAtlantic Trade Investment Partnership, and lastly (iv) have provisions reflective of differences in development levels between the U.S. and Africa.
Considering that Froman is the most experienced USTR ever when it comes to Africa, one could read the entrails of his assertion that trade accords between the United States and Africa ought to be mutually beneficial. Simply: a situation where the United States continues to apply AGOA access for nine years while Africa provides preferential access to European products under economic partnership agreements is untenable.
Fortunately, we expect Ambassador Froman to present the U.S. Congress with a comprehensive advisory report by June 27, 2016 – a document containing various options that the next U.S. Administration and Congress can leverage to conclude future bilateral or multilateral trade pacts. Until now, much of the discussion has been for the United States to reach for reciprocal agreements with willing groups of African countries. However, given the current rancor here in Washington, DC, the bilateral approach to trade pacts is DOA meaning that the U.S. may not be able to begin FTA negotiations with any individual or group of African countries in the near future. As pointed out in a recent Economist, free trade has, without a doubt, turned toxic in the United States, and it may take years for an FTA model to be resurrected. Ostensibly, even if the U.S. could enter into such negotiations sooner than currently expected, the current atmosphere would compel the United States to demand such high levels of commitment from partners like those in Africa that African countries would not be quiet as amenable. One must remember that African countries are more amenable to practices both from the Far East and from the West; this may require more policy space than the United States could accept.
Invariably, the United States, unlike the European Union, does not – as a matter of principle – coerce sovereign nations into agreements by, for instance, announcing the withdrawal of preferences by certain dates if countries do not accede to its pacts. This is how the EU coerced African Non-LDCs into signing their respective EPAs either themselves or as part of a group of countries. Because it could not apply the same pressure to the LDCs – under the WTO, it was accepted that unilateral preferences would continue for them – the EU resorted to applying subtle pressure by hints that current or future aid flows would be endangered. Records show that the EU promised to show little flexibility in implementing FTAs even if these disrupted existing RECs with both signatory and non-signatory members. Ultimately, it emerged that the EU showed no interest in reducing the discriminatory impact of EPAs on U.S. exports—in fact we are now aware that the EU pushed for provisions in the EPAs that would have given it veto power over any concession Africa gave to the US.
Harkening back to Ambassador Froman’s June Report, a nascent school of thought suggests that the United States ought to negotiate FTAs with African RECs like ECOWAS and EAC. Because these have made the most progress towards a uniformed trade regime, it appears like a strong option to lead the Froman Memo. We agree; with provisos, of course: On top of the unfortunate timing of this approach, another apparent weakness may be in the fact that it would draw Africa’s scarce negotiating resources away from priorities that could be mutually beneficial to firms in Africa, in both the United States and Europe. Ever since June 2015, African countries have sought to devote resources to completing the Tripartite Arrangement of COMESA, EAC and SADC so that they can eliminate overlapping membership and differing origin rules.
We believe that once the Tripartite FTA is fully operational, the U.S. can go ahead to do business with all 3 RECs at once. Relatively, there’s the argument that one should not add anymore negotiations to the progress that is being made on the continental free trade agreement. A third and glaring weakness of this nascent approach to FTA is that if the U.S. chooses to deal with just the EAC and ECOWAS, what does one do with the shadow RECs and their members – those countries that have active trade relations with the EAC and ECOWAS? One consequence could be that they face even greater trade diversion if the status quo is altered by a scenario where the U.S. and the EAC, and the U.S. and ECOWAS negotiate trade pacts without the participation of other countries. Besides, Ethiopia and Congo, both potential African powerhouses have entered the COMESA FTA and will, thus, be included in the Tripartite and Continental agreements. They will, however, be left out if negotiations with the United States were limited to ECOWAS and EAC partners..
A second and more sustainable path for Ambassador Froman to consider is a duo-strategy option that skirts the selectivity problem and allows for a more ambitious post AGOA initiative. The two-part strategy could call for (i) The United States to delay FTA negotiations until the atmosphere for such agreements improves and that intense focus and resources be expended on current African efforts to complete the CFTA; and (ii) an interim activity where the U.S. and Africa can negotiate what Ambassador Froman referred to as behavioral norms — commitments that go beyond those in the WTO; neither requiring discrimination against non-signatory African countries nor creating impediments to the completion of the continental FTA. The most exciting possibilities are in the areas of services, trade facilitation, mutual recognition of standards and qualifications, streamlined visa procedures, digitalization among others.
Like happened in both the United States and the European Union, attaining an FTA of the CFTA’s stature would be a very solid first step towards an established framework for progressively deepening integration. This will be done through gradual reduction and eventual elimination of non-tariff measures, making customs posts between countries almost obsolete; promoting cross border infrastructure, particularly in transportation and power. An unexpected benefit would be that even though Africa remains a collection of independent and sovereign political entities, the economic coordination will lead to more effective political cooperation, effectively reducing unstable or even undemocratic regimes. Although useful first steps, the advantages of this approach would far outweigh advantages emanating from other initiation such as the widely heralded WTO TFA agreements and African efforts together with donor countries to introduce unified border formalities.
At this juncture, it’s critical for the United States to make a strident case for an economically integrated Africa. Aside from being an option to offset low cost manufacturing in the Far East, the youngest population on earth – Africa’s demographic dividend heralds a future of middle class consumers. Unlike China that is keen to displace the U.S., much of Africa would like to be more equitable partners with the United States. With manufacturing becoming more robotized, there are now even more opportunities for the U.S. to work with Africa’s nascent ICT community simply because they, amongst all other capacity for labor, will remain an important component for many years. to come.
In regard to the CFTA, like Ambassador Froman suggests, if AGOA is to remain in effect for the next nine years, the U.S. one would have to be reassured that its exports would not be discriminated against because of the EPAs. Thus, it is well within the realm of possibility for the implementation of EPAs to be delayed – at least until such a time, as their operationalization does not harm the United States. This is something both Democrats and Republicans can agree upon, and regardless of whoever is elected in November 2016; the United States must not tolerate an uneven playing field in Africa caused by the unsustainable economic partnership agreements.
To surmise the viewpoint, we believe that if America’s president expressed concern about the deleterious effect of EPAs on both Africa and the United States, they’d no doubt receive support not just from some in the trade policy field – leaders such as Germany’s Angela Merkel could make effective bedfellows. So, on top of this June Memo to Congress, the Obama Administration leaves a successor government with the auspices of the TTIP negotiations to address America’s concerns – the EU’s activities in Africa amongst other things. These discussions would actually be the perfect avenue to discuss ways to promote development in Africa – and especially prepare the continent for the kind of future mega trade agreement that could, effectively insert the world’s fastest growing region into global supply chains and distribution networks.
For more information, please contact Stephen via email: stepland@aol.com, or Dennis Matanda on + 1 617 515 3028; dennismatanda@manchestertrade.com
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