The Africa Growth and Opportunity Act, sponsored jointly by legislators from both the Democratic and Republican parties, was introduced in the US House of Representatives in April 1997 and passed in early March 1998. The Senate is expected to take it up later this year. By emphasizing trade and investment, the act ostensibly aims to facilitate a transition from development assistance to economic self-reliance for those countries in Africa deemed to be committed to economic and political reform, market incentives and private sector growth.
The act's emphasis on "partnership" -- rather than charity -- is said to have been prompted by recent positive changes in Africa. These have included the resolution of major conflicts and the pursuit of macroeconomic and fiscal policies approved by the Bretton Woods institutions. In addition, there has emerged a layer of African-American and African businessmen and professionals in the US who have sought to draw greater attention to African issues.
The US act, although limited, has been embraced as a positive step by many concerned with Africa. Some, however, caution against unreasonable expectations. How, they ask, can a single act have much of an impact on the lives of sub-Saharan Africa's people, half of whom suffer from illiteracy, lack drinking water, have no health care and live on less than $1 a day?
They also argue that Africa's structural economic problems and high indebtedness are such that few countries will be able to take full advantage of the act's trade concessions or operate as equal partners with the US. Low capacity and labour productivity in the manufacturing sector, for example, prevent many African countries from competing in the global market. African textiles now account for less than 1 per cent of all textile and apparel imports into the US, but even with implementation of the act, this is projected to grow to only 3 per cent over the next decade.
Numerous conditionalities are attached to the act. Its provisions would apply to only those African governments judged to be adequately pursuing market-oriented economic policies, such as privatization of state industries, the elimination of tariff and non-tariff barriers to trade, and the reduction of business and commercial taxes and regulations.
Meanwhile, the US stands to gain from tapping new markets for agricultural and technological products. Currently, US exports to sub-Saharan Africa -- with its vast market of about 600 million people -- already exceed those to the countries of the former Soviet Union and Eastern Europe. The return on investments also is high: according to the US Commerce Department, investments in Africa brought average returns of 31 per cent in 1996, compared with 12 per cent for Latin America, 13 per cent for Asia and 17 per cent for the Middle East.
The legislation calls for the establishment of a US-Africa free trade zone. But Africa's diversity -- 53 countries with different strengths and weaknesses -- is unlikely to provide a solid basis for a single trade zone. A series of bilateral agreements is more likely, and only with those countries that meet the US eligibility requirements. Some critics of the act argue that it may, in effect, further weaken the already slow process of regional economic integration in Africa. They suggest that the US should instead encourage Africa's regional and subregional institutions to advance the protracted process of economic integration and intra-regional trade.
Critics also point to the act's cautious approach to debt relief. It commits the government "to extinguish concessional debt owed to the US by the poorest countries in sub-Saharan Africa that are heavily indebted and pursuing bold growth-oriented policies." Given that Africa's total debt to the US ($26 bn) is relatively low, they suggest the US forgive the continent's entire debt, thus providing an example for other creditor countries.
Beyond economic considerations, political and security factors also appear to underlie the US initiative. As President Bill Clinton has observed, "A stronger, stable, prosperous Africa will be a better partner for security and peace, will join us in the fight against new common threats of drug trafficking, international crime, terrorism, the spread of disease, [and] environmental degradation. We need partners in Africa on every single one of these issues...."
Provisions of US-Africa trade billThe African Growth and Opportunity Act was adopted in March 1998 in the US House of Representatives by a vote of 233 to 186, but must also be approved by the Senate later this year before entering into US law. It focuses overwhelmingly on US trade and investment policies toward Africa, on the premise that "sustained economic growth in sub-Saharan Africa depends in large measure upon the development of a receptive environment for trade and investment." Among other provisions, the bill would extend the range of African products permitted to enter the US market under the tariff concessions of the US General System of Preferences. It would also eliminate tariff quotas on textile and apparel imports into the US, which would directly benefit Kenya and Mauritius, the only sub-Saharan countries able to export in sufficient quantities to even reach the quota levels. The act notes that textile and apparel imports from sub-Saharan Africa to the US amounted to less than 1 per cent of the $45.9 bn in such imports in 1996, and that given Africa's limited manufacturing capacity, the level is not expected to exceed 3 per cent in any year over the decade after the act's adoption. On investment policies, the bill calls for the creation of a $150 mn equity fund to support US investments in sub-Saharan Africa, as well as a $500 mn infrastructure fund, supported by the Overseas Private Investment Corporation, to promote investments in private infrastructure projects, including in privatized state enterprises. African countries are deemed eligible for support under the act's provisions if, among other requirements, they promote the free movement of goods, services and production factors between themselves and the US, treat foreign investors in the same way as national investors, reduce tariff levels within the rules of the World Trade Organization, and encourage "the private ownership of government-controlled enterprises through divestiture programmes." Specific determinations of eligibility are to be made by the President. The act directs the President to instruct his secretaries of the treasury, state and commerce, as well as the US trade representative, to meet with their counterparts in eligible African countries, and for the President himself to meet every two years with the heads of state of those countries. |
