Africa is faced with the biggest
dilemma in its history after the Cancun talks failed
to make any significant impact at the World Trade
Organization.
All African member countries are
lobbying for increased access of both raw and value
added products to markets in rich nations. This
comes at a time when Africa's economic activity is
estimated to have risen by 5 per cent in 2005 and is
predicted to increase by another percentage in the
next two years.
The increase in Africa's economic activity is partly
attributable to the entry of China and India as
major players in the global economy. China's
creation of a market for African raw materials has
raised fears that the continent might remain stuck
in raw-material export driven economy. Europe, on
the other hand is jealously seeking to maintain her
old sphere of influence by pushing for a series of
Economic Partnership Agreements (EPAs) with African
countries.
The trade dilemma arises from the fact that both
Europe and the Asiatic countries seem not keen to
stimulate a value added type of trade relations with
Africa.
The upcoming E.U. - Africa summit in Brussels in mid
November points at how strategic European policy
makers are keen to ensure that they do not loose out
on trade issues with or without the WTO.
On the other hand, it's quite evident from the
responses of African policy makers that they did not
have plan-B when they travelled to Hong Kong for the
W.T.O meeting. The fire fighting strategy employed
by COMESA members when pushing for inclusion of
'strong development component' in order to accept
EPAs, and when African countries such as Kenya,
employ huge amounts of resources to keep cheap China
products out is sure indication of lack of sound
strategy.
Little effort has been employed to maximize
diversification of African private sector. African
governments have failed to invest in strengthening
their business environment and lowering costs of
production.
Kenya, which by African standards is among the top
ten of the most diversified private sector, has
remained stuck on the less than 17 points on the
index of diversification for the last 10 years.
Tanzania scores 21.7 ahead of Kenya and Uganda 7.3
in the 2003 index.
African policy makers ought to recognize the fact
that all trade deals with both the emerging and
developed economies are done purely for purposes of
promoting existing business interests. Africa
nations cannot have effective trade talks when they
exclude the business community in their strategies.
One cannot rely on ill equipped civil servants with
nothing to lose, politicians with votes to look for,
and Non Governmental Organizations that are agents
of Western countries to draw a strategic plan on
trade talks. The African business community must
wake up and take an active role in suggesting
approaches that their civil servants ought to carry
whenever they go out to negotiate trade issues.
An illustration of the poverty in long term
strategic thinking can be demonstrated by the
African Growth and Opportunity Act (AGOA). Kenya,
Uganda and Madagascar are some of the chief
beneficiaries in the COMESA group. A closer analysis
of the World Clothing Trade shows that Sub Sahara
Africa contributes only 1%, Europe 32.2% and China
23.3%. African negotiators gained in the short run
in clinching the AGOA deal on trade in clothing and
apparels. But in the long run, they put the cotton
industry, and future trade deals in a vulnerable
position in the sense that they have to keep
lobbying for extension of preferential treatment.
China and India's aggressive entry into the
competition will make
Africa should be extremely cautious when negotiating
with the E.U. and Asiatic countries if it has to
diversify industrially and in its exports.
Africa can move out of the present trade dilemma by
focusing on the long-term in all its decisions.
It is important that African businesses take active
interest in trade negotiations to arm African civil
servants with sufficient data and strategies to
engage the international community. It is also
important that African business people seek an
active role for economic integration of Africa
instead of leaving such a noble quest to
politicians. Africa should invest in economic
integration prior to political integration.
IMPORTANT
ACTION ON AGOA POTENTIALLY AFFECTING INVESTMENT
OPPORTUNITIES IN AFRICA FOR US COMPANIES
Washington, DC. – September 26,
2006
The Corporate Council welcomes
the introduction of H.R. 6142 encompassing
the African Investment Incentive Act (AIIA), which
contains several important amendments to AGOA. We
compliment Chairman Bill Thomas on the creative and
trailblazing nature of a number of provisions in the
bill and will work to support its passage before the
current Congress goes into recess.
We are especially pleased that
the bill includes, for the first time, a tax credit
for US investment in manufacturing and agricultural
activities in AGOA beneficiaries. We believe it is
the best national interests of the United States as
well as the nations of Africa to increase US
investment opportunities in Africa. We note that
this is the first US preference program that
includes such tax provisions. The timing is
particularly auspicious since it coincides with the
first African Infrastructure Conference being
convened under the auspices of the Corporate Council
on Wednesday-Friday (September 26-29.)
We also note with pleasure that
the bill not only provides a short-term extension of
the current textile provision allowing the
incorporation of third-country fabrics, which
accounts for almost 90% of current apparel trade
under AGOA, but it also includes new provisions
designed to promote vertical integration in the
African textile-apparel industry, which is essential
to its long-term competitiveness and
survival. Finally, we note that African home
furnishings (linens, towels tablecloths), textile
luggage, wall hangings, etc. are also eligible for
duty-free treatment under the bill, a measure that
will also attract new investment to this important
sector.
As we applaud Chairman Thomas's
initiative, we are disappointed that the bill has
been temporarily withdrawn from the suspension
calendar as Congress rushes to complete actions
before adjourning for the fall election campaign. We
urge the House leadership to schedule timely action
on the bill so that we can join other friends of
Africa in celebrating the passage of the bill well
before the end of the year.
Sincerely,
Stephen Hayes
President
Corporate Council on Africa
