Trade: 1% increase in Africa’s wealth equals 3 times its development aid

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Many countries in Asia and Latin America “don’t have even one smidgen of Africa’s natural resources — a country like South Korea, for example — yet they are huge players in the global trading system…” Speaking ahead of the 8th Annual African Growth and Opportunity Act (AGOA) Forum, to be held in Nairobi, Kenya, August 4–6, Florizelle Liser, assistant U.S. trade representative for Africa, indicated that trade is the key to long-term, sustainable economic growth and development in sub-Saharan Africa.

“Trade is critically important to economic development. Right now, Africa has about 2 percent of all world trade, which is hard to believe when you think about all of the tremendous resources that they have — oil, diamonds, gold … not to mention all the agricultural products such as coffee, tea, cocoa — and to think that Africa still only has 2 percent of world trade is really incredible. But the power of trade is that if the Africans were able to increase their share of world trade from 2 to 3 percent, that 1 percentage increase would actually generate about $70 billion of additional income annually for Africa,” or about three times the total development assistance Africa gets from the entire world, Liser said.

Intra-African trade

And Africans must begin trading more with each other. “Africans trade the least with each other than all the other continents. It is improving. We are seeing a greater increase in intra-African trade, but,” she emphasized, “the reason that that is important is that you are unlikely to be competitive globally if you are not competitive regionally. So until they open their borders with each other and trade with each other, you are not going to get the level of competition that will allow them to be major providers of any product globally.” Liser also said the United States needs to work with the countries of sub-Saharan Africa in many areas so they can take full advantage of both AGOA and worldwide trading opportunities and send exports to emerging markets such as China, India and Brazil.

For that reason, African countries should be encouraged to develop an “AGOA strategy” based on export promotion and competiveness. “You look at the products you have, and you determine the three or four particular products or sectors [where] you have a comparative advantage,” she explained. “Then you look carefully at what are the challenges that face those three or four products or sectors and what would the country have to do to make them more competitive.” Some countries are employing this strategy and bringing together their trade, finance, transport and energy ministers and investment promotion experts. “You sit all of these people around the table and you have them … determine, step by step, what they have to do to advance the competitiveness of those three or four products or sectors.”

Tanzanian example

Recently, Liser talked to Tanzanians about the AGOA strategy they are developing. Tanzania produces cotton for the Venus Williams line of tennis shirts, which also is manufactured at a plant in Tanzania. “I challenged them. I said you only have one plant. You have all this cotton. You have cotton farmers who would benefit if you could create more of these factories,” which in turn could employ many more people. “The problem is that, as is true with most of the AGOA countries, you have huge potential but you don’t have the investment and the focus on how to take that and duplicate and multiply that.” The apparel industry, she added, is a “gateway to industrialization.”

Africa’s share of the U.S. import apparel market is less than 2 percent. By comparison, she said, depending on the product, Bangladesh exports to the United States three to five times the amount of apparel that is exported to the United States by all sub-Saharan African countries combined. “That shows you that they [the Africans] have huge potential but somehow that is not being advanced.” U.S. imports under AGOA in 2008 totaled $66.3 billion, with $5.1 billion in nonoil trade, a sector that Liser says the United States wants to further expand.


Another issue, she said, is the need for much more domestic and foreign investment on the continent: “Without that investment, these factories that we are talking about building simply will not be built.” She added that “it is not just about foreign direct investment, but also about domestic investment and government investment in the infrastructure that supports trade.”

Acknowledging that there is confusion, Liser said it is important to understand what AGOA really is. “AGOA is essentially a trade preference program which adds about 1,800 products to the list of about 4,600 products that are already eligible to enter the United States duty free under the Generalized System of Preferences. The purpose of AGOA in adding those 1,800 products was to give the Africans a competitive advantage in the U.S. market for additional value-added products. … So AGOA is important because it is one of the major ways that we have to help encourage greater value addition to Africa’s production of agricultural and manufactured products.”

Often, she added, people think AGOA is just about textiles and apparel. It is not. “So … the first thing we need to understand is what it does, and that it is working. We are getting a greater number of value-added nontraditional products entering the U.S. under AGOA. But again,” she acknowledged, Africa is “starting from a very small base. So even though we have seen growth, we have not gotten anywhere near the potential.”

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