Froman: US rethinking trade approach to Africa

America’s approach to trade with Africa needs to focus more on reciprocal agreements and less on trade preferences, U.S. Trade Representative Michael Froman said Tuesday.

Froman said U.S. trade interests are doing a comprehensive review ahead of a renewal of the African Growth and Opportunity Act (AGOA) and the Generalized System of Preferences (GSP) to determine what changes should be made.

{mosads}“As we look to the next chapter of U.S. trade and investment relations with Africa, and as Africa itself furthers its efforts to deepen its integration — first as regional economic communities and ultimately in the context of a continent-wide free trade area — we need to think through how our trade relationship with Africa might evolve from one built around a unilateral preference program to a more reciprocal set of arrangements over the medium and long-term,” he said.

He said that Africa’s complementary agreements with Europe and Canada are already changing the trading landscape on the continent.  

“As Africa enters into reciprocal trade arrangements with the EU, for example, trading relationships begin to change,” he said Tuesday at the National Press Club during an event that was hosted by The Brookings Institution.

“European companies have preferential access to Africa’s markets while we are giving African firms preferential access to the U.S. market.”

He said the EU and Canada have each revised their GSP programs to adjust to the rise of emerging markets and those developments need to be taken into account as the U.S. considers its approach going forward.

U.S. leaders, large and small businesses, academics, think-tanks and NGOs are working together to determine what has worked well and what needs to be changed, Froman said.

The push comes ahead of next week’s first-ever U.S.-Africa Leaders Summit in Washington, which is expected to include talks with 50 African heads of state and government.

“For too many African businesses, regulatory complexity, weak infrastructure, and other capacity challenges have kept the prospect of exporting under AGOA out of reach,” Froman said.

He said with such high stakes it is time for the United States to reexamine the relationship between trade and development and recommit to a trade policy that will “drive broad-based global growth in the 21st century.”

Since AGOA went into place 14 years ago, total exports from sub-Saharan Africa to the United States have tripled and, as AGOA countries improved their business and investment climates, the stock of U.S. foreign direct investment has almost quadrupled, he said.

In the past 13 years, non-oil, non-mineral exports under AGOA to the United States have increased almost four-fold, but at only $5 billion, meaning there is much room for growth, Froman said.

Among the upgrades being considered to AGOA are simplifying the rules of origin to make it easier for African firms to export to the United States while promoting further production in Africa, Froman said.

He also said that any revised AGOA would improve eligibility criteria and review processes to ensure that standards are being raised and there is greater flexibility to enforce those standards.

After more than a decade, Froman said it is clear that for sub-Saharan Africa to become an emerging economy, “we must deal with the supply-side constraints that infringe on Africa’s ability to compete and integrate successfully in the global trading system.””

“Tariff preferences are not enough, we must address the impact of surrounding constraints.”

But he said in seeking that development, it is not enough to push just for increased growth.

“We must seek development that is broad-based and inclusive,” he said.

“We must seek development that is sustainable. And that’s why raising standards is a key objective of our trade policy.”