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India says confident WTO will understand food security concerns
India refused to yield ground on Tuesday on its spat with the World Trade Organisation and said it believed it could convince other members that its need for more freedom on food subsidies was legitimate.
Trade Minister Nirmala Sitharaman did not give details in a statement she made in parliament, but her comments offered a robust and uncompromising defence of the Indian position, suggesting the government planned to dig its heels in on an issue that has isolated New Delhi.
Indian Prime Minister Narendra Modi’s new government vetoed the adoption of a treaty to simplify, standardise and streamline the rules for shipping goods across borders, having previously agreed to its terms at a ministerial conference on the Indonesian resort island of Bali last December.
Most diplomats had expected the pact to be rubber-stamped last week, marking a unique success in the WTO’s 19-year history which, according to some estimates, would add $1 trillion and 21 million jobs to the world economy. India calls these estimates highly exaggerated.
It blocked the text because it wanted more attention paid to its concerns over WTO limits on stockpiling of food which will ultimately hit its subsidised food distribution programme, the world’s largest, targeted at nearly 850 million people.
“I am confident that India will be able to persuade the WTO membership to appreciate the sensitivities of India and other developing countries and see their way to take this issue forward in a positive spirit,” Sitharaman said amid thumping of desks by lawmakers.
After drawing widespread condemnation as the deadline for the deal lapsed on July 31, India has said it is ready to sign the global trade deal as early as next month if other WTO members agree to its demand for concessions on food subsidies, estimated at $12 billion a year.
India fears that once it agrees to trade facilitation – largely seen to help advanced nations – it would have lost the bargaining chip on the subsidy issue.
“India is not standing in way of implementation of Trade Facilitation but seeking equal level of commitment and progress in working on the issue of public stockholding,” Sitharaman said.
“A permanent solution on food security is a must for us and we cannot wait endlessly in state of uncertainty while WTO engages in an academic debate on subject of food security,” she said.
FATAL BLOW
But in vetoing the first worldwide trade reform measure in nearly two decades, India may have dealt a potentially fatal blow to the WTO’s hopes of modernising the rules of global commerce and remaining the central forum for multilateral trade deals.
In the short term, this is a setback for freer commerce. In the longer run, it means trade liberalisation may advance - if at all - among narrower groups of countries, denying dissenters a chance to block progress, experts say.
While the unwieldy Geneva-based WTO will survive as a body for enforcing existing multilateral agreements, smaller clubs of like-minded nations are trying to move ahead faster to update the trade rules among themselves.
“Without a serious shakeup, the WTO’s future looks like that of the League of Nations,” said Simon Evenett, a professor at the Swiss Institute for International Economics. “Perhaps ultimately that’s what some governments want.”
But Sitharaman said India remained committed to the multilateral trading system. “We continue to believe that it (WTO) is in the best interest of developing countries, especially the poorest, most marginalised ones among them and we are determined to work to the strengthen the institution.”
Trade ministry officials say the breakthrough may come once the WTO agrees to revise the base year for calculating food subsidies in line with current prices which will then bring India’s subsidies within WTO’s limits.
India is also ready to give an assurance that the foodgrains it procures from farmers at prices that are higher than the market price will not be dumped in the global market.
Finance Minister Arun Jaitley, a key member of Modi’s team who had originally opposed the Bali accord, said India would not compromise on defending the interests of its farmers.
“Isolation doesn’t matter,” he told NDTV in an interview on Monday night. “Sometimes you can be the only one taking the right stand.”
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Lions go global: Deepening Africa’s ties to the United States
Africa is the world’s second-fastest growing economic region, yet US engagement with the continent is lagging. There’s an opportunity to change that.
The White House has invited some 50 African heads of state to Washington, DC, this week, presenting a historic opportunity to deepen US ties to the continent. But it would be a mistake to assume that the benefits of the US-Africa Leaders Summit will flow primarily to Africa. There is huge economic potential for the United States, too.
Africa is transforming from a continent in need of assistance to a continent of opportunity. Its economic growth is today second only to the East Asia region, which includes China,1 and Africa was home to 8 of the world’s 15 fastest-growing economies between 2000 and 2013. Indeed, the continent’s GDP of more than $2 trillion in 2013 is now larger than India’s (Exhibit 1).
Exhibit 1
Africa’s economic growth accelerated after 2000, making it the world’s second-fastest-growing region.
Investors around the world have taken notice. Private-capital flows to Africa totaled $545 billion from 2003 to 2012, surpassing remittances and official aid. Yet the United States lags well behind Europe, BRIC,2 and the Middle East in terms of the amount of foreign-direct investment (FDI) it sends to Africa. Moreover, the US share of African trade stands at only 4 percent.
This may be a missed opportunity. Africa offers a higher rate of return on FDI than most emerging economies – in sharp contrast to returns that foreign investors earned 20 years ago (Exhibit 2). But to date, economic engagement between the United States and Africa has been limited relative to its potential, and much smaller than Europe’s and Asia’s economic engagement with Africa.
Exhibit 2
The rate of return on foreign direct investment in Africa is higher than in most emerging markets.
Increasingly dynamic economies
After decades of disappointing growth, Africa’s economic performance has improved since the turn of the century.3 Real GDP grew at a compound annual rate of 4.9 percent between 2000 and 2013, more than twice its pace in the 1980s and 1990s. The continent weathered the Great Recession well, and a consensus of mainstream forecasts projects that annual growth will, on average, be 5.8 percent from 2014 to 2019.4 In addition, sub-Saharan economies are growing even faster than the continent as a whole. In 2013, their average GDP growth was 5.2 percent, and forecasters expect average annual GDP growth of 6.2 percent to 2019.
Africa has benefited from the surge in commodity prices since the turn of the century. The price of oil has increased from less than $20 a barrel in 1999 to around $100 a barrel today. Prices for minerals, grain, and other raw materials also soared on rising global demand. However, the continent’s growth has not solely been a function of booming commodity prices. We estimate that natural resources, and the related government spending they financed, generated only one-third of Africa’s GDP growth from 2000 to 2008. Since the global recession dampened commodity prices, they have contributed even less. The majority of Africa’s growth is being driven by other sectors of the economy, including wholesale and retail trade, transportation, telecommunications, and manufacturing. Evidence of the diversification of African countries is the fact that those with and without significant resource exports had similar GDP growth rates.
Africa’s accelerated growth over the past 14 years owes a great deal to improved macroeconomic and political stability and to structural economic reforms. Government action to end armed conflicts, lower inflation, and reduce public-sector debt has created a more stable environment for businesses. A range of microeconomic reforms has energized markets. Governments have privatized state-owned enterprises, increased the openness of trade, lowered corporate taxes, strengthened regulatory and legal systems, and provided critical physical and social infrastructure. Nigeria, for example, privatized more than 116 enterprises between 1999 and 2006, and by 2013 had privatized its entire electric-power sector. Morocco and Egypt struck free-trade agreements with major export partners. Although governments across Africa can do a great deal more to create a business-friendly environment, these important first steps have enabled a private-business sector to emerge.
The fruits of this structural reform have been an African productivity revolution. After declining through the 1980s and 1990s, the continent’s productivity started growing again in 2000, averaging 2.4 percent per annum between then and 2013.5 Productivity gains took place across countries and sectors.
Africa’s growth has also been due to the rising number of households with discretionary spending. According to our research, consumer spending is projected to reach $1.4 trillion per year by 2020, from $1.15 trillion in 2012. Already, more than 100 million households have sufficient income to spend on discretionary goods and services, as well as the basics, and the continent has more middle-class households (defined as those with annual incomes of $20,000 or more) than India.
Africa remains overwhelmingly a rural continent, but its cities are a growing economic force. Today, 40 percent of the continent’s one billion people live in cities – a proportion roughly comparable to China’s population and higher than India’s. By 2030, that share is projected to rise to 50 percent, and Africa’s top 18 cities will have a combined GDP of $1.7 trillion.6 Urban expansion is spurring the construction of more roads, buildings, water systems, and similar projects. Of course, urbanization needs to be managed to avoid creating slums, gridlock, and a deteriorating quality of life as cities grow. And more infrastructure investment is needed across Africa.
In a world where many countries are aging, including China, Africa stands out for the relative youthfulness of its population – a potential demographic dividend. By 2035, the continent is set to have the largest working-age population of anywhere in the world – larger than in China or India. The task ahead will be for Africa’s leaders to bolster education and provide young people with the skills they need to secure employment, and to accelerate job creation. In 2012, only 29 percent of Africa’s labor force had stable, wage-paying jobs.7 The rest were employed in a variety of self-employment and household enterprises, scraping a living from subsistence agriculture or informal jobs in urban areas.
Africa’s global opportunity
Africa’s trade ties with the world are expanding. In 2012, the continent’s flows of goods, services, and finance were worth $1.6 trillion, or 82 percent of GDP, up from just $400 billion, or 60 percent of GDP, in 2000 (Exhibit 3). As in other countries, goods flows are Africa’s largest, with inflows and outflows worth $1 trillion in 2012. Flows of services and finance are smaller, totaling around $300 billion each.
Exhibit 3
Africa’s trade and capital flows grew to 82 percent of GDP in 2012.
Although commodities continue to be a large share of Africa’s exports, they account for less than half of goods exports. Capital-intensive goods, labor-intensive manufactured goods, and knowledge-intensive manufactured goods together comprise the majority of the continent’s exports (Exhibit 4). This is a clear sign of structural change in Africa’s economies, although the shift toward manufacturing and services needs to be accelerated. In many individual African countries, the share of manufacturing in the economy has been stagnant or even declining over the past decade.
Exhibit 4
Natural resources account for less than half of Africa’s exports, and exports of manufactured goods are growing.
Today may present a historic opportunity to boost Africa’s goods flows even further. As wages rise in China, production is shifting to lower-wage Asian economies – and to some African countries. Manufacturing already receives most of the FDI in some countries including Morocco, Algeria, South Africa, Mozambique, and Egypt (Exhibit 5). On current trends, manufacturing is set to create eight million jobs by 2020, a testament to wages and productivity levels that are competitive with other global low-cost manufacturing hubs.8 The evidence shows that the productivity of African workers in well-managed factories is comparable with that in other countries, although overall costs are higher because of poor logistics and infrastructure, as well as cumbersome bureaucratic procedures. Africa can build on this progress and develop industrial clusters in agro-processing industries, such as food and beverage manufacturing, textiles, leather goods, and wood products.
Exhibit 5
The destinations for announced foreign investment in Africa
Still, Africa is not as fully engaged in the global economy as its potential suggests it could be. The new McKinsey Global Institute Connectedness Index ranks countries based on goods, services, finance, people, and data and communication flows. It adjusts for the size of countries, and it reflects both inflows as well as outflows, both of which contribute to economic growth. The index shows that Africa ranks the lowest of any region in the world on its connections to the global economy.9Despite the continent’s low overall ranking, some African countries, particularly those with the most diversified economies, such as South Africa, Morocco, Egypt, and Nigeria, are rapidly becoming more connected to the rest of the world (Exhibit 6).10 South Africa is the African economy most connected to the world across all five flows, even though it ranks only 49th on the global index. Morocco ranks 53rd globally but is the second most connected economy in Africa, having risen 26 places since 1995. Morocco’s rise reflects a growing automotive industry that has attracted foreign investment and generated $2.7 billion of exports in 2013 and expanding tourism, offshore services, and agricultural exports. Along with Mauritius, which gained 28 places on the global index since 1995, it shows that large gains are possible with a concerted effort. Senegal has gained 14 places during this period.
Exhibit 6
The Africa global connectedness index
Underlying the expansion of global flows of goods, services, finance, and people is the soaring exchange of data and communication across borders through cross-border Internet traffic and international phone calls. Yet Africa risks being left behind in a growing “digital divide.” More than 720 million Africans have mobile phones, some 167 million people use the Internet, and 52 million are on Facebook. The numbers are rising rapidly, but more than three-quarters of the continent’s one billion people remain unconnected to what is supposed to be a “worldwide” web.11 In fact, the Internet contributes just 1.1 percent of Africa’s GDP overall, compared with 1.9 percent across developing economies. The situation may be changing. Africa’s cross-border Internet traffic grew 70-fold between 2005 and 2013, faster than in China or Latin America. The new undersea cables circling the continent should open up new opportunities, although laying the cables to bring that broadband access inland to cities and countries without easy access to the coast will be challenging. The potential in Africa’s growing cities is very large. A McKinsey survey in 2012 found that 51 percent of urbanites had accessed the Internet in the previous month and that 54 percent own Internet-capable devices.
Improving US engagement
The historic Washington summit is an opportunity to address challenges on both sides – the relatively low levels of economic engagement with Africa on the part of the United States and the unevenness of economic development in Africa despite its enormous potential. The US engagement with Africa lags the rest of the world. It accounts for just 4 percent of the continent’s trade, and that trade is growing more slowly than that with every other region of the world (Exhibit 7). US–African trade is just one-fifth the volume of Africa’s trade with Europe, and 60 percent smaller than Africa’s trade with China. On FDI, the United States ranks as only the fifth-largest source, behind Western Europe, the Middle East, the BRIC nations, and the rest of Asia (Exhibit 8).
Exhibit 7
The United States accounted for just 4 percent of Africa’s trade in 2012.
Exhibit 8
US FDI into Africa is small compared with that coming from other regions of the world.
Summits can too often be mere talking shops and photo opportunities. The importance of this gathering will materialize only with concrete action. The African Growth and Opportunity Act, signed into law in 2000, was aimed at increasing African exports to the United States and is now up for renewal. But to date, too much of the trade and investment between the United States and Africa has been related to oil and other commodities. The range of interactions needs to broaden if Africa is to fulfill its economic potential. If it does, more US businesses could benefit from the continent’s investment opportunities. We offer several priorities for accomplishing this:
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Raising US investment in Africa’s infrastructure from both public and private sources. Power Africa is a 2013 US initiative to double the number of people with access to power in sub-Saharan Africa. It aims to enable public and private capital to expand power generation and help electrify the continent. This initiative could be expanded given the size of the need in Africa. And energy is not the only infrastructure challenge that Africa faces. The McKinsey Global Institute estimates that Africa needs $2.6 trillion in infrastructure investment by 2030, including highway, water, and telecommunications infrastructure.
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Building the next generation of African leaders. Equally important will be measures to help the continent to develop a new generation of business and political leaders. The White House’s Young African Leaders Initiative is a step in the right direction. But more can be done. One useful step would be to dramatically expand the number of African students who can attend US universities for both undergraduate and graduate programs. Shorter-term exchanges, through the Fulbright Fellowship program and other opportunities, can also have impact.
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Improving Africa’s business climate. Greater trade with and investment in Africa from the United States will, to a large degree, depend on confidence about the macroeconomic and business environment. African countries must continue to strengthen the rule of law, ensure the sanctity of contracts, and make arbitration available in the event of disagreements. Foreign investors also want a level playing field with local firms. In practical terms, this requires limiting the preferential treatment of locally owned companies, as well as the removal of withholding tax on foreign remittances and ceilings on the repatriation of profits and capital by foreign firms. There is also more to be done in African countries on simplifying and standardizing business regulations, raising the efficiency of obtaining permits and approvals, and shortening the time it takes for companies to obtain approvals needed to set up operations.
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Facilitating US investment. Several African governments already have investment and trade promotion agencies to facilitate increased global engagement. For their part, African countries can do more to reach out to US investors and companies. Too many US executives are simply unaware of the opportunity. African countries can help them navigate regulations and local customs. Many developing economies have developed explicit strategies for attracting FDI and have created investment agencies that help foreign companies identify opportunities.
Leaders from across Africa will meet in Washington, DC, between August 4 and 6, 2014, for the US-Africa Leaders Summit, the first such event of its kind.
About the authors
Acha Leke is a director in McKinsey’s Johannesburg office; Susan Lund is a partner with the McKinsey Global Institute (MGI) and is based in the Washington, DC, office; James Manyika is a director of MGI and is based in the San Francisco office; Sree Ramaswamy is a senior fellow with MGI and is based in the Washington, DC, office.
The authors wish to acknowledge the contribution of Lohini Moodley and Safroadu Yeboah-Amankwah. This article draws on their work in the McKinsey Global Institute report Lions go digital: The Internet’s transformative potential in Africa.
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Tanzania now allows free flow of capital for EAC
Tanzania will now allow East Africans to freely move capital in and out of the country – a move that is expected to increase cross-border investment and deepen economic integration.
The IMF in its latest disclosure on the Tanzanian economy said that the country had informed it that it had opened its capital account to East African nationals ahead of full liberalisation, which will allow the rest of the world to bring capital in and out of Tanzania with no restrictions.
The changes are part of a wider plan to loosen state control of the economy, which will also see the country allow its currency greater exchange rate flexibility and adopt new monetary tools.
“As a first step, the authorities have allowed for freer flows of capital among EAC residents since June, which they see facilitating trade, financial and investment flows within the region.
The next step would be to extend this with the rest of the world by end-June 2015, in line with Tanzania’s commitments under the EAC Common Market Protocol,” said the IMF.
Under the Common Market Protocol, countries are supposed to open up their economies to allow the free movement of people and capital.
Saada Mkuya Salum, Tanzania’s Finance Minister, in a June letter authored jointly with the Bank of Tanzania (BoT) and addressed to the IMF, notes that the decision to liberalise the country’s capital account to East African Community residents will allow freer movement of capital within the region, facilitate intra-EAC trade, and lead to increased financial flows and investments.
Normally, countries impose capital controls in order to reduce their exposure to external factors and limit capital outflows.
Allowing the Tanzania shilling greater flexibility has been previously cited by the IMF as one of the things that could help increase the country’s competitiveness: “Tanzania is becoming increasingly interconnected with the global economy and a greater focus on international competitiveness is warranted. Accordingly, the exchange rate should fully reflect market conditions,” said the IMF in May.
The BoT said it will now step in only when there is an urgent need for its intervention.
“The flexibility of the exchange rate will be further enhanced to help cushion against adverse external developments. The BoT will participate in the foreign exchange market only for liquidity management purposes and to smooth out short-term fluctuations in the exchange rate,” said BoT Governor Benno Ndulu.
Business leaders said the opening up will help make the country even more competitive.
“Tanzania is one of the leading FDI centres in East Africa. Opening the capital account will further boost the investment inflow into the country... It will now be easier to take advantage of low interest rates and one can better hedge against currency depreciation risk,” said Patrick Mwati, group finance director at Crown Paints, the NSE-listed paint manufacturer with operations in both Kenya and Tanzania.
General Motors East Africa general manager Rita Kavashe said the move will give businesses greater flexibility when sourcing for capital, adding “It’s a step in the right direction.”
Market watchers say the move will help deepen the country’s capital market and offer greater options for regional investors.
“We expect that with the opening up of the capital account, market turnover will go up and help pull up the bourse’s capitalisation,” said Joseph Uiso, manager of research, operations and trading at Tanzanian Securities Ltd.
Current limits
Currently, Tanzania does not place restrictions on East African participation in the equities market but limits ownership in government securities. Under current laws, East African citizens can only own 40 per cent of government securities, with investors from a single country allowed to own a maximum of 27 per cent.
“Depending on how the opening up of the capital account impacts on the shilling, we expect that the BoT will up the quota of government securities that East Africans can own,” said Mr Uiso.
The move is also expected to expand the array of investment options available to East Africans.
“This will enable East African investors from Kenya, Uganda, Rwanda, Burundi and Southern Sudan to diversify their investments by investing in securities listed on the Dar es Salaam Stock Exchange.
East African investors will be able to participate in the economic growth of Tanzania, particularly as the mining, energy and agricultural sectors in Tanzania pick up,” said Peter Mwangi, the Nairobi Securities Exchange chief executive.
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Border teams to boost trade in East Africa – official
The formation of border teams is seen as a key move in enhancing trade and cargo movement across East African, a Tanzanian government official has said.
Mr Kagyabukama Kiliba, Deputy Permanent Secretary in the Prime Minister’s Office, said the formation of Joint Border Committees will ease the operation time between border points in the region.
The teams will ensure quick and enhanced service delivery, a move that Mr Kiliba said will cut costs incurred.
He noted that the committees are streamlining operations at each border with multi agencies conversing on one online platform.
2000 PASSENGERS DAILY
The Tanzanian official was speaking on the sidelines of a meeting in Malaba where he led a delegation from Tanzania in a fact finding mission on smooth operations of the Malaba Joint Border Committee.
The JBCs are a co-operation between government agencies and the private sector involved in the border operations as well as cargo and passenger movement.
The formation of these committees comes after the launch of One Stop Border Posts in East Africa.
Malaba JBC Secretary, Deo Otia, reiterated the importance of creating a hub for exporters to other central African states.
According to Mr Otia, Malaba currently handles an average of 1,600 cargo trucks and 2,000 passengers on a daily basis and the introduction of the JBC system results in movement across the border.
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Presidential Memorandum – Establishing a Comprehensive Approach to Expanding Sub-Saharan Africa’s Capacity for Trade and Investment
In June 2012, I released the US Strategy Toward Sub-Saharan Africa, outlining a comprehensive US policy for the region.
The Strategy builds on many of the initiatives launched during my Administration, and in particular highlights an effort critical to the future of Sub-Saharan Africa: boosting broad-based economic growth, including through trade and investment.
The Strategy outlines a number of actions to help accelerate inclusive economic growth in Sub-Saharan Africa, including: promoting an environment that enables trade and investment; improving economic governance; promoting regional integration; expanding Sub-Saharan African capacity to effectively access and benefit from global markets; and encouraging U.S. companies to trade with and invest in Sub-Saharan Africa.
The African Growth and Opportunity Act (AGOA) is a cornerstone of the trade relationship between the United States and Sub-Saharan Africa. Since AGOA went into effect 14 years ago, exports from Sub-Saharan Africa to the United States have more than doubled and non-oil and non-mineral exports in particular have increased nearly fourfold. The growth of new export industries has supported the creation of hundreds of thousands of jobs in Sub-Saharan Africa.
However, my Administration’s recent review of AGOA has revealed that, while the tariff preferences provided under AGOA are important, they alone are not sufficient to promote transformational growth in trade and investment. For beneficiary countries to be able to utilize AGOA to its fullest, this program must be linked to a comprehensive, coordinated trade and investment capacitybuilding approach with clearly stated goals and benchmarks.
In July 2013, I announced the launch of Trade Africa, an initiative to encourage greater regional integration and to increase trade and investment between the United States and Sub-Saharan Africa by aligning U.S. assistance with governmental and private sector engagements. Trade Africa initially focused on the East African Community, with the intention of expanding over time within Sub-Saharan Africa.
Targeted and strategic trade and investment capacity building is critical to achieving not only the goals of AGOA and Trade Africa, but also other U.S. trade and investment initiatives, such as the Doing Business in Africa Campaign and the National Export Initiative/NEXT.
Executive departments and agencies (agencies) have made major strides in advancing the trade and investment related goals of the Strategy. In order to achieve maximum effectiveness, however, it is important to align agencies’ efforts and resources through a coordinated approach that is data-driven, goal-oriented, and strategic, and that builds on the experience of U.S. Government initiatives such as the President’s Emergency Plan for AIDS Relief, the Millennium Challenge Account, Feed the Future, Power Africa, and Partnership for Growth.
Section 1. Policy. It shall be the policy of the United States to spur trade and investment with and within Sub-Saharan Africa through a coordinated approach involving U.S. Government engagement, assistance programs, and partnerships with the private sector.
Sec. 2. Steering Group. There is established a Steering Group on Africa Trade and Investment Capacity Building (Steering Group), to be chaired by the Deputy National Security Advisor for International Economics or her designee from the National Security Council staff. The Steering Group shall meet regularly.
Sec. 3. Membership. The Steering Group shall include designated representatives from:
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the Department of State;
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the Department of the Treasury;
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the Department of Agriculture;
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the Department of Commerce;
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the Department of Transportation;
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the Department of Energy;
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the Department of Homeland Security;
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the Overseas Private Investment Corporation;
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the Millennium Challenge Corporation;
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the United States Agency for International Development;
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the United States Trade and Development Agency;
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the Export-Import Bank of the United States;
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the Office of the United States Trade Representative;
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the Office of Management and Budget;
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the African Development Foundation;
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the Small Business Administration;
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the Council of Economic Advisers; and
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such agencies and offices as the Chair may, from time to time, designate.
Sec. 4. Functions. Consistent with the authorities and responsibilities of its member agencies and offices, the Steering Group shall perform the following functions:
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Not later than 180 days after the date of this memorandum, the Steering Group shall report to the President, through the National Security Advisor, recommendations on a comprehensive approach to expanding Sub-Saharan Africa’s capacity for trade and investment, consistent with U.S. trade and investment policy, development policy, and international agreements. The recommendations shall include:
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clearly defined goals and benchmarks for increasing trade and investment in Sub-Saharan Africa, and appropriate and transparent criteria for identifying priority countries, regions, and sectors that have the greatest potential to contribute toward meeting these goals and benchmarks;
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an indication of how the recommendations complement other major U.S. Government initiatives and partnerships focused on related issues;
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an outline of how to utilize programs across agencies to achieve these goals;
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an assessment of how the recommendations complement the activities of other major development partners, including Sub-Saharan African countries;
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an explanation of how the recommendations fit within existing budget constraints and resource requests, with identification of any significant funding gaps; and
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clearly articulated roles and responsibilities of relevant agencies.
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In undertaking these efforts, the Steering Group shall:
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consider a broad range of potential trade and investment capacity building, including: activities that support AGOA utilization; trade-related efforts to enhance regional integration; programs to develop supply chains; support for development of hard and soft infrastructure; and activities to foster a nondiscriminatory environment that enables trade and investment. Such activities include regulatory reform and transparency, trade facilitation and better border operations (including implementation of the World Trade Organization Trade Facilitation Agreement), and implementation of World Trade Organization commitments (including those that relate to science-based sanitary and phytosanitary measures and other technical standards);
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take into account the range of supply-side constraints to trade in Sub-Saharan Africa, growing private sector interest in trade with and investment in Sub-Saharan Africa, U.S. trade policies and interests (including in addressing barriers to U.S. trade and investment), international obligations, and the best means to promote regional integration and support value-added production;
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consult stakeholders, including Sub-Saharan African partner governments, regional economic communities, partner donor countries, the private sector, development banks, non-governmental organizations, and others as appropriate;
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coordinate its efforts with the interagency Trade Policy Committee, which was authorized by section 242 of the Trade Expansion Act of 1962, as amended, and established by Executive Order 11846 of March 27, 1975, and the Trade Promotion Coordinating Committee, which was authorized by statute in 1992 (15 U.S.C. 4727) and established by Executive Order 12870 of September 30, 1993; and
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coordinate its efforts with other U.S. Government initiatives focused on related issues, including Power Africa, Feed the Future, the Doing Business in Africa Campaign, Partnership for Growth, and the Young African Leaders Initiative, to ensure that U.S. assistance supports consistent policies across initiatives.
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Sec. 5. General Provisions.
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This memorandum shall be implemented consistent with applicable law, and subject to the availability of appropriations.
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Nothing in this memorandum shall be construed to impair or otherwise affect:
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the authority granted by law to an executive department, agency, or the head thereof; or
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the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.
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This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
BARACK OBAMA
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U.S., Africa aim to boost trade
Leaders at Summit seek to renew program extending tariff, quota exemptions
U.S. and African leaders meeting in Washington on Monday kicked off a campaign to renew a program that gives exemptions on U.S. tariffs and quotas in an effort to boost trade and stimulate the economies of sub-Saharan African countries.
Leaders in the U.S. and Africa are looking to spur economic ties at a time when trade between the two is sinking and China’s hunger for commodities is boosting Beijing’s influence on the continent.
American officials and lawmakers say extending the 14-year-old African Growth and Opportunity Act, or Agoa, is crucial to preserving trade ties with fast-growing African countries, especially when U.S. trade negotiations at the World Trade Organization and with other major economies have stalled.
China passed the U.S. in imports in 2012 and imported $88 billion from sub-Saharan Africa in 2013, according to the International Monetary Fund. Partly because of increased oil production at home, U.S. imports from the region plunged to $34.5 billion last year, from a peak of $78.2 billion in 2008, with exports showing some gains in recent years.
Agoa is part of a strategy to increase economic ties with a growing Africa – including in trade and power generation – as China strengthens ties on the continent and the European Union negotiates free-trade agreements there. The goal, U.S. officials say, is to replace foreign aid with trade.
Building economic ties could also help contain conflicts that have convulsed Africa, said Erastus Mwencha, deputy chairman of the 54-nation African Union.
But critics point out that the bulk of African trade is oil shipments from West Africa, and U.S. agricultural and textile interests have opposed efforts to expand the list of products eligible for tariff and quota breaks.
President Barack Obama‘s trade policy has faced delays and dogged opposition in Congress, and a similar preferential tariffs program for the developing world was allowed to expire last year.
Still, trade with sub-Saharan Africa is so small that Mr. Obama and other officials say it shouldn’t be seen as a threat to the U.S. domestic industry. Non-oil Agoa trade was only about $5 billion in 2013, still up from just $1.4 billion in 2001, said U.S. Trade Representative Mike Froman.
That is because Africa’s factories and farms still face the same headaches as ever: ramshackle roads, debilitating blackouts, ports that need to be dredged and bureaucracies that process permits at a glacial pace.
Agoa “has not in fact been as powerful a stimulant in growing trade and investment as those who supported wanted,” said Johnnie Carson, former assistant secretary of state for African affairs, in an interview. “Progress is being made – it’s just being made at a much slower rate than many of us had anticipated.”
One way to boost trade with the U.S. further would be to loosen Agoa’s rules for sugar, tobacco and cotton.
“The issue of cotton, of course, remains a key concern of Africa.” Mr. Mwencha told Mr. Froman and representatives of 40 African countries gathered on Monday in Washington, the first day of the U.S.-Africa summit.
The U.S. is looking at make the criteria tougher for African countries to gain certain Agoa benefits, including in the areas of worker rights and rules that block agricultural trade, Mr. Froman said.He urged Congress to act soon to renew Agoa, since some factory owners and other investors need to make decisions a year or more in advance. The act needs to be reauthorized by September 2015.
“Things just take too long – it scares people,” said Cliff Schiffman, director of sales and marketing for Cherry Tree, a Turkish clothing-sourcing company that manufactures in Kenya. “I think deep down, the Congress does want to support Africa. … Unfortunately our legislative process is extremely slow.”
Lawmakers say opening U.S. markets won’t transform economic ties with Africa.
“Barriers to U.S. trade and investment in the region continue to inhibit the full potential of the U.S.-African trade relationship,” a group of Democratic and Republican lawmakers who write trade legislation said in a joint statement on Monday.
Read the FACT SHEET: Investing in African Trade for our Common Future, published by The White House on 4 August 2014.
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COMESA acts on food security
The Common Market for Eastern and Southern Africa (COMESA) has developed an initiative to eliminate intra-regional food import and export bans to improve food security and promote vibrant trade.
COMESA technical advisor Jackson Kiraka said food import and export bans have impacted negatively on access to affordable food in the region.
Mr Kiraka is concerned that countries with food surpluses are unable to export to member countries that may be facing deficits because of haphazard food import and export bans.
He said in a statement in Lusaka yesterday that the COMESA region has failed to leverage better food production in some member countries that can export to countries experiencing food deficits.
“Members of Parliament drawn from 19 member countries of COMESA will meet in Lusaka from August 11 to 13 to deliberate on the issue and come up with policy recommendations,” Mr Kiraka said.
He said there is a persistent concern that Africa’s place at the high table of food security remains unoccupied largely due to a very challenging and unpredictable agricultural trade policy environment.
“The inevitable consequences of this scenario include the frequent spate of food insecurity and poor economic performance in the agriculture sector and when big shocks like the 2008 food price crisis and financial meltdown occur, they only help to reveal the soft underbelly of the national economic systems, further destabilising the majority who depend on agriculture for their livelihoods,” Mr Kiraka said.
He said several studies by the Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA) show that the implications of food import and export bans include market gluts at production level, resort to informal trade channels including smuggling, cases of corruption and ultimately higher transaction costs and consumer prices.
Mr Kiraka said food trade experts are of the view that while governments resort to these options with the good intention of securing food security at the national level, the unintended results are always counterproductive and only help to worsen the very situation that was to be addressed.
He said the initiative will be bolstered by the launch of the Pan African Food Exchange which will be held in October in Kenya.
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US companies missing out on African investments – says ECA’s Lopes
On the eve of the Africa-US Summit to be held in Washington DC this week, Mr. Carlos Lopes, Executive Secretary of the Economic Commission for Africa (ECA) has underscored that with Africa attracting major investments from the BRICS (Brazil, Russia, India, China and South Africa) and other developing economies, it is time for American companies to wake up and participate in the already vibrant and promising African investment terrain.
The Summit is taking place against widespread agreement that Africa has evolved into a dynamic market with a growing middle class. In addition, there is a growing understanding among African leaders and people on economic transformation as an imperative for the continent to sustain growth and foster inclusive development.
Yet, according to Lopes, who will be in attendance, traditional donors, trade partners and investors of Africa such as USA, Japan and those in European economies are “taking a bit of a back seat.”
“In terms of capital stock on investment with Africa, the US has the prized spot,” he says, but cautions that the type of investment it is involved with and the trends moving forward are not very favorable.
He notes that the Summit in Washington should play a critical role in discussing what needs to be done in order for American companies to be convinced that “we are entering a very different stage in Africa's economic situation and that they should be part of it.”
As part of Africa’s engagement with the Summit, the ECA has prepared a poignant Briefing Note on the theme: “Frontier Markets in Africa - Misperceptions in a Sea of Opportunities” in collaboration with the African Union Commission (AUC) and the African Development Bank (AfDB), which identifies the opportunities for investment in Africa, corrects misperceptions about the business environment on the continent and suggests general areas of focus for future partnership between Africa and the United States of America.
“The positive recent characterization of Africa as a rising continent is derived in part from the rapid socioeconomic changes and improvements in governance that have transpired. However, more importantly, it reflects the fact that limited information and long-held misperceptions about Africa don’t match reality,” states the Briefing Note. It outlines several key shifts, and deliberate policies and reforms, aimed at institutional strengthening and improvements in the business environment.
The Briefing note underscores an underlining message: that trade and investment in Africa will continue to grow and that the U.S. can seize the opportunity, and proposes that a mutually beneficial future is possible, “if Africa-US partnerships are focused on areas with high pay offs including: investments; education; and science and technology and innovation.”
And, there are benefits to the existing relationship. For instance, according to an additional White Paper, themed: How AGOA 2:0 Could be Different: Outlining Africa’s Position on the AGOA Review Process prepared by the ECA and the AUC for the Summit, more than 300,000 jobs have been created in the context of the Africa Growth and Opportunity Act (AGOA); this has increased women’s access to the workforce.
Furthermore, transformation examples are not in short supply according to Lopes. Mauritius has the best financial market in terms of performance, Ethiopia has made massive strides in terms of industrialization, Nigeria has increased agricultural productivity and Morocco has mastered the value chain and is integrating its services and its industrial capability. “Countries have different appeals depending on which entry point we are talking about,” he says.
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Africa activists urge Obama to act on extractive industries law
As the three-day U.S.-Africa Leaders Summit got underway here Monday, anti-corruption activists urged President Barack Obama to prod a key U.S. agency to issue long-awaited regulations requiring oil, gas, and mining companies to publish all payments they make in countries where they operate.
“The companies need to be held accountable, and we would ask President Obama to also support us in this message,” said Ali Idrissa, the national co-ordinator of Publiez Ce Que Vous Payez (Publish What You Pay, or PWYP), in Niger, a country rich in uranium and iron deposits.
“We need to look at the entire production chain of these extractive industries; we need to continue putting pressure on this industry …so we can fight poverty and corruption and ensure we have a better development,” he added.
Idrissa, one of scores of African activists who have descended on Washington for this week’s unprecedented gathering, was speaking at a forum sponsored by the Open Society Foundations (OSF), Global Witness, Human Rights Watch, and Oxfam America, among other groups, on civil society efforts to promote government and corporate transparency and accountability on the continent.
The activists, whose numbers are dwarfed by the size of official government delegations, most of which are led by heads of state, as well as U.S. and African corporate chiefs eager to explore business prospects, nonetheless claimed at least part of the spotlight Monday.
At what was billed as a “Civil Society Forum Global Town Hall” meeting at the National Academy of Sciences, both Vice President Joe Biden and Secretary of State John Kerry echoed Idrissa’s concerns in general remarks.
“Widespread corruption is an affront to the dignity of your people and direct threat to each of your nations,” Biden declared. “It stifles economic growth and scares away investment and siphons off resources that should be used to lift people out of poverty.”
Kerry also stressed the importance of “transparency and accountability” not only in attracting more investment but also in “creat(ing) a more competitive marketplace, one where ideas and products are judged by the market and their merits, and not by a backroom deal or a bribe.”
While their words gained applause, it was clear from the OSF forum that anti-corruption activists are losing patience with what they see as pressure by the extractive industries to prevent the emergence of tough new disclosure requirements from the Securities and Exchange Commission (SEC), the federal agency that regulates U.S. stock and related markets.
At issue is section 1504 of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, an anti-corruption provision that requires all extractive companies listed on U.S. stock exchanges to publish each year all payments they make to the U.S. and foreign governments in the countries where they operate.
According to the legislation, which is designed to counter the so-called “resource curse” that afflict many developing countries, particularly in sub-Saharan Africa, taxes, royalties, fees, production entitlements and bonuses should all be reported down to the project level.
Eight of the world’s 10 largest mining companies and 29 of the 32 largest active international oil companies would be covered by the Act, which requires the SEC to develop specific regulations to implement its intent.
After nearly two years of consultations with businesses, activists, and other interested parties, the SEC issued draft regulations, but they were immediately challenged in a lawsuit filed by the American Petroleum Institute (API), a lobby group that represents the powerful oil and gas industry here.
The SEC has since reported that it does not plan to resume the rule-making process until March, 2015, a source of considerable frustration for the anti-corruption activists.
In the meantime, the European Union (EU), whose member countries have historically shown much less willingness than Washington to enact legislation to deter bribery and corruption by its companies operating abroad, has adopted and begun to enforce its own tough disclosure measures that go beyond the energy and mining industries to include timber companies as well.
“Until 2000, corruption and bribery by European [companies] was not only legal; it was tax-deductible,” Mo Ibrahim, a Sudanese-British telecommunications entrepreneur and prominent philanthropist for good governance in Africa, told the OSF Forum. “The United States, which has been a leading light on corruption, is now dragging its feet. Do you have a backbone, or what?”
He echoed the concerns of an open letter sent to Obama and signed by the heads of the national chapters of PWYP, an OSF-backed international anti-corruption group, in Guinea, Niger, Tanzania, the Democratic Republic of the Congo (DRC), Chad, Ghana, and Nigeria, on the eve of this week’s Summit.
“It has been more than four years since you signed the Dodd-Frank Act, section 1504 of which obliges all U.S. listed extractive companies to publish the payments they make,” the letter, which was also signed by the African representatives on the PWYP global steering committee. “The law will yield crucial data that can help us hold our governments to account, but it has yet to come into effect.
“We ask you to urge the SEC for a swift publication of the rules governing section 1504 to ensure that they are in line with recent EU legislation and the emerging global standard for extractive transparency,” it said, adding that more also needs to be done to strengthen multilateral rules on taxation and creating a public registry of corporate beneficial ownership information as other critical parts of the anti-corruption struggle in Africa.
Harmonising the SEC regulations with those of the EU is particularly critical, according to Simon Taylor, co-founder and director of London-based Global Witness. “If the SEC gets it wrong, we will then have a double standard,” he noted, suggesting that some European companies could move to the U.S. if the latter’s requirements are less stringent.
API and other critics of the section 1504 have argued that strict rules will put U.S. companies at a disadvantage in bidding for mining or drilling rights, especially vis-à-vis China whose trade investment in Africa, particularly in the continent’s extractive resources, have exploded over the past decade and now far exceeds the U.S.
Beijing has failed so far to join the 12-year-old Extractive Industries Transparency Initiative (EITI), an Oslo-based international organisation that promotes transparency and currently includes 44 governments, as well as extractive companies, civil-society groups, international development banks, and institutional investors.
But Ibrahim said it was “not acceptable for Europeans or Americans to say, ‘We want to be moral and ethical, but we can’t until this guy’” joins. “China is learning; it can understand and can change. They’re trying to find their feet [in Africa].”
George Soros, the billionaire philanthropist who created OSF, as well as a number of other foundations, said it was important to get China on board because “otherwise they are the spoilers. It is so important that I think we have to be willing to reconsider the whole structure of the [EITI which] they consider [to be] a post-colonial invention.
“They have to be involved in the creation of the system that they will abide by. That’s where civil society in Africa can be influential,” he added.
Jim Lobe is the IPS News Agency Washington DC Bureau Chief. His blog on U.S. foreign policy can be read at Lobelog.com.
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It’s time to update our thinking on trade
Our institutions for governing world trade and our thinking about world trade date back to a simpler era. Without a radical rethink, we risk the gradual decay of our most valuable international institutions, loss of extraordinary opportunities to improve global living standards and possibly the sidelining of the West in developing modern institutions.
The GATT and the WTO were devised for a simpler era, when it was possible to think about world trade in the way Ricardo taught – namely that a good is produced in one country and consumed also in a single country. If Portugal was adeptat making wine and England at cloth, it would benefit both to reduce barriers and enhance trade. That two-country model worked relatively well until about 1978, when China started opening its economy by establishing special economic zones across the border from Hong Kong.
By the last decade of the twentieth century, production had become a complex global process. The logic of increasing efficiency by reducing trade barriers remained completely valid, but policy adaptation of that logic to a new era has faltered.
A laptop or a smart phone now is typically made in 15 to 20 countries. When old-style trade thinking is applied to this situation, confusion causes bad policy and gratuitous conflicts. A laptop made in 17 countries might be assembled in China for $2 worth of local wages then exported to the United States, but old two-country thinking leads members of Congress to react as if China had exported $1500 of value to the US. This bolsters protectionism, reduces support for multilateral trade liberalisation and contributes to the fragmentation of the global trade regime.
Because it is difficult to continue the process of trade liberalisation, countries feeling a need for deeper integration form their own regional blocs, inducing further fragmentation.
Regional and bilateral trade negotiations today are focused on ‘country of origin’, by definition a single country or preferential grouping, with the result that it is considered normal to have 500 pages of country of origin rules in a single trade agreement. Since each country has many trade agreements, companies may find the rules so complex that they simply pay high tariffs rather than trying to manage the complex paperwork to prove countries of origin. The complexity of the system discriminates against small, open economies like Singapore, and it discriminates against smaller companies without huge accounting departments. Because it cannot adapt to the globalisation of production, the system is beginning to defeat itself.
Moreover, the addition of over one billion new workers to the globalised workforce entailed very low wages in Eastern countries such as China, flat wages in the West and huge trade imbalances between East and West. This discouraged Western countries from vigorously pursuing the kinds of global agreements that would have eliminated those dozens of separate, conflicting 500-page rule books about countries of origin.
Feeling overwhelmed by Chinese manufactured exports, Western countries have also moved to exclude China from the most important efforts to modernise the global trading system. The proposed Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership agreements (TTIP) both seek to exclude the world’s second-largest economy from potential membership, an arrangement that is both economically untenable and a potential geopolitical disaster.
The geopolitical consequences were magnified by the inclusion of Japan in the TPP agreements, even though Japan’s economy is much less open than China’s and historically has been much less willing to reform in the face of domestic interest group pressure than China has. Given Sino-Japanese tensions, this has come across in Asia as part of a strategy to isolate China.
Magnifying Sino-American differences could make a more inclusive, truly multilateral future trade system much harder to negotiate.
While we still flounder over attempts to come to terms with globalised production, we are heading into globalised consumption. Instead of an era with one billion new globalised workers, we are heading into a world that will contain two billion or more new middle class consumers, mainly in Asia and heavily in China. Chinese wages are rising 13 to 20 per cent a year and total compensation is rising even more. This phenomenon should gradually resolve the most serious trade imbalances and begin to allow Western wages to rise.
But Western media, interest groups and politicians remain obsessed with the problems of yesterday. This could lead the West to squander one of the greatest economic opportunities in world history, namely the extraordinary consumer boom in China, India and other emerging markets. It could also disastrously delay responses to the jobs challenge of the new era: a technology-driven transformation of the workplace driven by robots, other automation, the internet of things and 3D printing that will eventually force billions of workers out of old jobs.
We must begin addressing the world as it is and will be, not the world of generations past. Ironically, in the process the WTO remains crucial to a vibrant world economy. Without the WTO’s dispute settlement mechanism, trade wars will ignite everywhere. By allowing the WTO system to decay, and by blaming globalised trade for problems that are unique to the past generation, we risk going back to pre-World War II trade wars. We need a modern, multilateral structure that updates the WTO, not a degeneration of the global trade and investment system based on a failure to recognise the shape of the new world we are entering.
We are now at one of those great historical turning points. Disillusionment, often misplaced, with existing institutions and obsession with obsolescent problems have allowed the process of trade negotiations to decay so far that TPP and TTIP negotiations could fail or, if they succeed, the exclusion of China could make them Pyrrhic victories. Continued Western failure to address the real issues of our emerging world of globalised production and consumption, and the reality of China’s central role, could lead to trade regimes with the most dynamic markets governed by structures like the Regional Comprehensive Economic Partnership promoted by Asian emerging economies.
William H. Overholt is President of Fung Global Institute and Senior Fellow at Harvard’s Asia Center. The views expressed here are personal and not endorsed by his employers.
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Extraordinary Summit of the African Union on Employment, Poverty Eradication and Inclusive Development: Ouagadougou, Burkina Faso
In 2004, the African Union (AU) Extraordinary Summit on Employment and Poverty Alleviation in Africa held in Ouagadougou in September 2004 adopted a Declaration, Plan of Action and Follow up Mechanism that committed Member states to place employment at the center of their economic and social policies.
The Summit was a culmination of efforts by member states, RECs, tripartite social partners, as well as international partners to address the challenge of employment creation and providing conditions for decent work. It was also a point of departure for more concerted efforts at national, regional and international levels to step up employment creation for poverty alleviation. The Summit adopted three policy documents:
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Plan of Action for the Promotion of Employment and Poverty Alleviation and
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Follow up Mechanism for Implementation, Monitoring and Evaluation
While Member States and RECs are the principally responsible for implementation, UN agencies and other international development partners are expected to adopt greater policy coherence and to increase support for the implementation of the above three policy documents.
In 2011, the 19th Ordinary Session of the AU Executive Council decided to hold a Special Session of the Labour and Social Affairs Commission (LSAC) to evaluate the implementation of the 2004 Ouagadougou Declaration and Plan of Action on Employment Promotion and Poverty Alleviation. The 9th Ordinary Session of the AU LSAC (Addis Ababa, April 2013) decided to convene the Special Session in Windhoek, Namibia, from 23 to 25 April 2014 as prelude to an Extraordinary Session of the Assembly in Ouagadougou (Ouaga+10) in September 2014.
The Assembly of the AU accepted the offer of the Government of Burkina Faso to host the Extraordinary Session of the Assembly from 3 to 7 September 2014 to assess the progress in implementation of the 2004 Ouagadougou Declaration and Plan of Action on Employment and Poverty alleviation, under the theme “Employment, Poverty Eradication and Inclusive Development”.
The Extraordinary Assembly is taking place at the end of the year-long celebration of the 50th Anniversary of the OAU/AU that commenced in 2013 and during which an African Agenda for the next 50 years is being developed (African Agenda 2063). The Assembly also convenes at a time when the international community is engaged in defining the Post 2015 Development Agenda. For example Goal 8 and Targets of the proposed Sustainable Development for the Post 2015 Development Agenda states: “Promote strong, inclusive and sustainable economic growth and decent work for all” and has clear targets to “halve the number of youth not in employment, education or training by 2020”; and to “achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities by 2030”. Hence, the Special Session could draw from a wealth of contemporary thoughts and information to enrich its outcomes, particularly from the Common African Position on Post 2015, as it relates to human capital development, job creation, social protection and inclusive development.
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Trade barriers hurting Uganda’s competitiveness in EAC market
Trade minister Amelia Kyambadde has said non-tariff barriers (NTBs) are greatly affecting Uganda’s competitiveness in the East African market.
Speaking at the commissioning of the NTB reporting system in Kampala yesterday, the minister said the government is trying to hold talks with its Rwandan counterparts to lift some NTBs on Ugandan traders.
“The government is engaging in talks with Rwanda to sign a Memorandum of Understanding to eliminate NTBs,” she said.
NTBs like police roadblocks, weigh bridges, poor transport infrastructure and high levels of taxes imposed on the Uganda traders in the past, have greatly affected the country’s trade sector.
“In 2005, the East African Community (EAC) member states signed a customs union protocol to ease trade within the countries and in 2012, a common market was created. But despite all these developments, NTBs still exist” said the minister.
“In 2012, we experienced a gain in trade earnings after some NTBs were lifted in the region from Shs4.5 billion to Shs5.5 billion,” Ms Kyambadde added.
She said trade in the East African region contributes 13 per cent against the 87 per cent of the total trade volume from the rest of the world.
The minister also credited Kenya for allowing sugar from Uganda to be sold in its market.
“Kenya promised to give us a licence to allow our sugar into their country,” she said.
Trademark East Africa (TMEA), a partnering organisation with the Ministry of Trade in the elimination of NTBs applauded the EAC trade member’s response to the elimination of NTBs. TMEA country director Allen Asiimwe applauded Kenya for the removal of the 1.6 per cent levy that had been placed on Ugandan goods passing through the region as well as removal of police road blocks along the trade routes.
“In 2012, Trademark East Africa signed a $1.4 million contract with the Ministry of Trade to facilitate in the elimination of NTBs and am glad to see the success of our efforts,” she said.
NTB REPORTING TOOL AND WHAT IT IS MEANT TO ACHIEVE
The non-tarrif barriers (NTB) reporting tool is a result of the 2008 directive from the Trade ministry to put in place a tool for reporting NTBS in the East African region. The reporting system is designed to be used by anyone trading within EAC by use of a mobile phone through the internet and message phone services.
The service will be available for mobile phone users connected to MTN, UTL, Airtel and Orange telecommunications networks. The NTBS reporting tool is meant to eliminate NTBS, harmonising of weigh bridges between Uganda and Kenya, ensuring quality standards and putting in place a one-stop customs programme in the region.
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Agoa: Calls for SA to graduate out of the US trade programme
In addition to SA’s relatively advanced development, the US disapproves of the country for its ‘antagonism’, focus on Brics, and Middle East position.
As African leaders descend on Washington this week for the United States-Africa Leaders Summit, their trade ministers will, on the sidelines, be pushing hard for the extension of the African Growth and Opportunity Act (Agoa).
Despite South African government’s publicly stated expectations that US President Barack Obama will support a 15-year extension of the programme, experts believe achieving this will be no easy feat.
South Africa’s push in particular, is expected to receive a “tenuous” audience in Washington, as it faces calls for its graduation from the programme.
South Africa’s position as one of the most developed nations on the continent is the “spoken reason” for graduating it from Agoa, according to Catherine Grant Makokera, head of the economic diplomacy programme at the South African Institute of International Affairs (Saiia).
There are however other issues at play, she said, including the leverage that calls for graduation could have in getting greater reciprocity for the US, in trade relations with South Africa.
The trade programme is governed by US legislation, rather than a trade treaty, and offers a range of African countries free access to US markets without reciprocal requirements. Operating since 2000, it has been renewed a number of times but its current term ends in 2015.
Qualifying countries must however agree to move towards opening their economies and building free markets, as well as follow the rule of law and encourage democracy.
Most recently, Swaziland, under the rule of King Mswati III, has fallen foul of these conditions, which have seen it stripped of its Agoa status.
SA’s substantial gains
South Africa has gained substantially from the programme. Unlike the leading African exporters to US under Agoa, namely Nigeria and Angola, mineral resources do not dominate the trade between the US and South Africa.
Manufactured goods, particularly motor cars, account for the lion’s share of local exports to the US. According to Saiia data, in 2013 South Africa was the top non-energy exporter to the US under Agoa, with exports worth over $3.5-billion. The programme helps support an estimated 62 395 local jobs.
According to Eckart Naumann, an economist and associate at the Trade Law Centre, South Africa’s push for a seamless, long-term extension of Agoa “is probably the most tenuous in terms of having an audience in Washington”.
Among some factions within the US Congress, there are strong calls for South Africa’s graduation out of Agoa, if not now then within a defined time period, said Naumann.
These same factions, as well as the US state department and officials in the office of the US Trade Representative, believe South Africa “has not always covered itself in glory with respect to its trade relationship with the US and is perhaps considered somewhat of an uncomfortable partner and bedfellow”, said Naumann.
Problems include its “rather antagonistic attitudes” toward the West, support of certain factions in the Middle East conflict, and perceived obstruction in some UN matters and decisions, Naumann pointed out.
Its open focus on the East and Brazil, Russia, India, China, and South Africa, as well as investment-related domestic policies such as the recent private security Bill and the cancellation of a number of bilateral investment treaties in favour of a new promotion and protection of investment Bill have not gone unnoticed.
Economic setbacks against other nations
South Africa’s trade policies, such as the anti-dumping duties it has placed on poultry imports, are also likely to weigh on US lawmakers’ minds, argued Naumann.
Finally, the recent economic partnership agreement signed between the European Union and the Southern African Development Community has been watched very closely by the US, which has been emphasising greater reciprocity and market access for its own goods.
Despite these concerns it is unlikely that South Africa will be graduated from Agoa.
“The US also recognises that graduating South Afica out of Agoa comes with many pitfalls and it may be self-defeating to some extent,” said Naumann.
It would hamper regional integration, he noted, and remove a valuable provider of inputs for other Agoa beneficiary countries, harming both South Africa and other countries using South African inputs to process into export goods.
Crucially, 90% of Agoa exports consist of oil, while South Africa makes up 70% of all non-oil exports under Agoa.
“Take South Africa out, you really shoot down Agoa as anything meaningful in terms of Africa-US trade,” said Naumann. This would be a massive economic and political setback against other nations interested in fostering closes ties with the continent, particularly China and Europe, he added.
Renewal will be ‘a marathon, not a sprint’
While imminent exclusion from Agoa might not loom, Naumann believes a revised Agoa, or whatever programme replaces it, “may be more specific on plotting a path towards a more reciprocal trading relationship with South Africa”.
This might include a review of certain trade policies and protectionism and commitment to tackle the question of more reciprocal trade relations.
“Many of the concessions may however initially happen at the political level and may not immediately translate into an entirely different economic relationship,” he said.
Whatever the outcome, it is unlikely to be finalised immediately.
The fact that Agoa is a piece of US legislation, rather than a negotiated agreement, is one of the key factors likely to stymie a rapid 15-year extension, argued Makokera. “We know American legislatures like to tie their hands on matters like this and Agoa’s traditionally been renewed only for five years.”
According to a Saiia policy briefing by Eric Tamarkin, an independent researcher, and former counsel to the US House of Representatives and the US Senate, the process of renewing Agoa will be “a marathon rather than a sprint”.
The US Congress – made up of the Senate and the house – plays a more central role to the timing and content of the legislation, which is currently fraught with difficulties, according to Tamarkin. “Washington, DC is currently mired in a partisan stalemate: the Democratic Party controls the White House and the Senate, while the Republican Party controls the House. As a result, Congress often waits until the last minute to consider expiring laws and sometimes fails to act before expiration.”
Favourable business climate
In addition, the summit and the Agoa forum take place during a congressional recess when most legislators will be away. On its return, Congress heads into elections in November, meaning most members will be campaigning in their states or districts according to Tamarkin.
The influence of strong US lobby groups is another factor. Ordinarily these groups wait for legislation to appear before Congress, before they mount a campaign to support or defeat it, noted Tamarkin.
However, in the case of Agoa, a range of food and agricultural organisations have already written to congress to oppose a long-term extension to Agoa, he said.
Similarly the US Chamber of Commerce has called for Agoa eligibility to be contingent on whether African countries provide a favourable business climate for American companies and fostered greater two-way trade, according to Tamarkin.
Nevertheless, he pointed out, for now Agoa does enjoy bipartisan support in Congress. Late last year this sparked a request for an investigation by the Government Accountability Office – the investigative arm of Congress – into ways to increase Agoa’s effectiveness.
The requestors wanted recommendations on “enhancing economic development in sub-Saharan Africa, the ability of African businesses to utilise the full range of opportunities available under Agoa, and the efficacy of Agoa in increasing two-way US-sub-Saharan African trade”.
Once the investigation is complete, said Tamarkin, the results will help inform the current bipartisan drafting process.
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US-Africa relations: Southern Africa Position Paper
Executive summary
In view of the upcoming U.S.-Africa Summit in August 5-6, 2014, the position paper conducts an assessment of the US-Africa relations with a specific focus on the Southern Africa Region. The paper aims to provide a concise analysis of the state, evolution, challenges, opportunities and possibilities for mutually beneficial U.S.-Southern Africa relations. More importantly, the position paper identifies key issues to guide policy in fostering sustainable growth enhancing strategic partnerships between the US and Southern Africa and highlights the requisite capacity development priorities that should be integral in the partnership models sought. In line with the scope of analysis as outlined by the African Capacity Building Foundation (ACBF), the recommendations are based on an evidence based assessment of key aspects relating to peace and security; economic (trade, investment, aid, remittances); socio-cultural and governance. The key economic challenges in the region are highlighted with emphasis for an inclusive partnership approach that turns the current challenges in the region into opportunities for strategic developmental partnerships.
The analysis demonstrates that the US has been a major contributor to the economic, social and human progress with development assistance on various fronts in Southern Africa through contributing among others, to education, health and infrastructure development. Countries in the region have significantly benefitted from the aid assistance in the maintenance of peace and security, addressing conflict in their economies and making progress on democracy, governance and accountability. However, although notable progress has been achieved with assistance from the US, sustainable development in the Southern African region given the still prevalent challenges on some sectors such as health, education, agriculture, power and energy, water and the manufacturing sectors requires partnerships between the two regions that would spearhead foreign direct investment flows into these sectors to stimulate direct involvement in the production process and value chain development to create competitive industries in the region.
A major finding in the Southern African region is that the role of the US on trade and investment, considered critical for creating sustainable industrial development and growth remains limited. Partnerships between the Southern Africa region and the U.S. should thus, aim to expand trade with investments into potential export sectors such as manufacturing, services, tourism, textile, agriculture to broaden the export and industrial sector. There is a potential for export expansion in Southern African countries which can also boost regional export performance among regional economic communities of SADC with the US as a potential market. Southern Africa should seek strategic partnerships with the US that will expand trade between the two regions, boost export diversity and enhance industrial development. A number of opportunities exist in Southern Africa in the agricultural, manufacturing, health, education and services sectors where the US can venture into export processing zones and diversify the export base beyond primary exports.
The eminent expiry of AGOA which has contributed to textile sector in the region and major avenue for trade between the US and African countries should be extended and broadened for the US market to offer more market opportunities to other sectors of the region. It is also the position in this paper that the Southern African region should seek a revision of AGOA to ensure more inclusiveness, accessibility and permanence, so that the benefits extend beyond a few countries and products.
Progress on the exploitation of trade benefits by Southern Africa still remains limited despite current support initiatives from the US and other development partners. This is clear from the limited export and trade profile among Southern Africa countries and other trading partners. Capacity constraints and technical expertise have been a major constraint to countries in the region to fully benefit from AGOA and other trade agreements. Trade capacity development should thus be given prominence in US-Southern Africa partnerships and future trade initiatives and form a priority for consideration and continued support in the region. Trade capacity building and technical assistance designed to help the member countries of Southern African Countries in regional economic communities such as SADC, SACU is key to take full advantage of benefits not only under AGOA so that they can effectively participate in the global trading system and the World Trade Organization (WTO).
Overlapping memberships in the region requires capacity building for regional countries. Capacity is requisite in, trade negotiations, implementing commitments and taking advantage of new trade opportunities. Linked closely is the need to increase and facilitate trade in the region. Expanding international exports and intra-regional trade is seen as a key component of increasing sustainable economic growth and reducing poverty in the region.
Trade expansion and investment initiatives which take advantage of current regional integration dimensions are quite critical to foster regional integration in the region. Therefore, more focus should be in partnerships that reinforce the current regional integration objectives of regional economic communities such as SADC in the Southern African region. A number of challenges in the region require a regional approach in policies for example the social, political, democracy and accountability to attain peace and security in the region. Trade and investment policies will be effective if they take a regional approach to broaden the growth and development process in the region especially in addressing the high poverty and unemployment rates among Southern Africa countries.
Further, although the US is a major investor worldwide, investment inflows from the US into the region remains low. Investment inflows in the Southern region from the US also remain limited compared to other investors such as Brazil, Russia, India, China, and South Africa (BRICS). Recommendation is therefore for investment partnerships particularly in major sectors to stimulate further industrial development. This is important for sectors which constrain Southern Africa’s development process where major investments are required. The strategic partnerships between the US and Southern Africa should specifically be focused on infrastructure development, water, sustainable energy generation and power supply. Specific partnerships should also focus on information communication technology (ICT) development, its availability and access to enhance efficiency, productivity and competitiveness which also plays a significant role in creating conducive business environments. ICT features among the major constraints to foreign direct inflows and production efficiency in the region.
Trade and investment are avenues that more mutually beneficial partnerships with the US can be modeled upon to attain sustainable growth in the region. Their expansion is central to addressing current challenges facing many African regions including Southern Africa particularly those of high unemployment, poverty rates and inequality. They also serve as a vehicle for transforming the competitiveness of Southern African countries particularly through gains from productivity. Strategically, trade and investment are pathways to the attainment regional integration objectives, sustainable development and attainment of long term goals such as those of the Millennium Development Goals (MDGs)
The overriding position for the Southern African region partnerships (at various levels, sectors and industries trade and investment, capacity development) emphasises a shift from aid dependence as a mode of developmental intervention to more beneficial sustainable development partnerships as requisite. The existing economic, social and institutional challenges present opportunities for investment partnerships and strategic sector and industry development approaches that can enhance the growth process in the region while also benefitting the US economy with potential returns to investments. The other pertinent partnerships should focus on capacity for institutions and human capital development to support the growth process as well as on infrastructure development which is fundamental to support the investment, trade and business environment which is a limiting factor to private sector development and the competiveness climate in the region.
Capacity to strengthen the local actors and institutions that are ultimately responsible for transforming the Southern Africa region is key. This calls for capacity building partnerships and support in the context of Southern Africa to create stable economic and political environment which is required for investment in the region. Partnerships and supportive initiatives should aim to strengthen state institutions and improving their capacity to provide security and development, based on principles of good governance and the rule of law to entrench lasting peace and improve living standards of citizens. This is an area that requires capacity building support for institutions in Southern Africa and this should be emphasised in partnerships for institutional capacity building for good governance, democracy and accountability.
Partnerships should be inclusive to address current economic, social and institutional capacity development gaps which constrain the development process in the Southern African region. An inclusive approach to successfully attain broad based growth and transformation in the region should integrate and embrace job creation, poverty reduction, human skills, rural development, institutional capacity development as imperatives. Consideration of existing challenges and turning them into opportunities for investment and other partnerships provides for an inclusive approach to unlocking the growth potential in Southern Africa which would be beneficial to the US as well.
Partnerships for investment and industrial development should embrace employment creation elements to address the current challenges of high and persistent unemployment, poverty, inequality in the region. The development of the private sector, entrepreneurship and the SMME sector are key in job creation and should be given prominence among priority potential opportunities which can directly contribute to addressing poverty, inequality and rural development. Other capacity building support should be focused on capacity building of institutions to promoting business environment and competitiveness which offer the supportive environment for investment and trade strategies.
Background
Emanating from the Addis validation workshop on regional Position papers on US-Africa relations
Recognized as the fastest growing region in the world with enormous natural resource potential, Africa offers vast opportunities in terms of new technologies, investments, access to potential markets, and new types of consumers. This explains the growing interest of countries such as China, India, Malaysia, Turkey, Brazil, etc. which have recently increased their presence and investments in the continent. The U.S has been relatively slower to react to the potentialities and new developments happening in Africa. However, recently, there has been a change in the dynamics: Africa now plays an increasingly significant role in supplying energy, preventing the spread of terrorism, etc. and is recognized as a strategic partner. The Africa Growth Opportunity Act (AGOA) and the various Bilateral Investment Treaties (BIT) are a witness of the growing interest and willingness to partner with Africa.
The US-Africa Leaders’ Summit will offer Africa’s leadership an opportunity to engage with President Obama, his Cabinet, and other key leaders, including business executives from across the U.S., members of Congress, and members of civil society. For a beneficial, effective and well-thought engagement, African leaders need to have up-to-date information and sound knowledge on the state of the relationship, the priority areas that need special attention and the way forward for mutually beneficial US-Africa relations.
It is in recognition of the strategic importance of the Summit and the potentialities offered by a mutually beneficial US-Africa relation Africa relation that the African Capacity Building Foundation collaborated with six of its supported think tanks to draft position papers on US-Africa relations. The main rationale for the position papers was to interrogate US-Africa relations from a regional perspective in order to provide a nuanced analysis of the state, evolution, challenges, opportunities and possibilities of US-Africa relations in Francophone West Africa (French); Anglophone West Africa; East Africa and the Horn; Southern Africa; North Africa (French); and Central Africa (French). Click here to download the regional Position Papers.
Download the Southern Africa Position Paper and the Framework for a Common African Position below.
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Analysis: Ten reasons for saying ‘no’ to the north over trade
India’s decisive stand last week not to adopt the protocol of amendment of the trade facilitation agreement (TFA) unless credible rules were in place for the development issues of the South was met with “astonishment” and “dismay” by trade diplomats from the North, who described New Delhi’s as “hostage-taking” and “suicidal”.
It obviously came as something of a shock for representatives of Northern interests that any party should have the brass neck to place the interests of its constituents on the negotiating table.
After all, why should such banal issues as food security and poverty get in the way of a trade agenda heavily weighted in favour of the industrialised countries?
In fact, it was India’s firm stand for permanent guarantees for public stockholding programmes for food security that turned this trade agenda upside down at the World Trade Organization (WTO) last week, putting paid to the adoption of the protocol of amendment for implementation of the contested TFA for the time being.
India and the United States failed Thursday at the WTO to reach agreement on construction of a legally binding decision on a “permanent peace clause” that would further strengthen what was decided for public distribution programmes for food security in developing countries at the ninth ministerial meeting in Bali, Indonesia, last year.
The Bali decision on food security was one of the nine non-binding best endeavour outcomes agreed by trade ministers on agriculture and development.
For industrialised and leading economic tigers in the developing world, the TFA – which would harmonise customs procedures in the developing world on a par with the industrialised countries – is a major mechanism for market access into the developing and poorest countries.
The failure to reach agreement came during a closed-door meeting between India and the United States organised by WTO Director-General Roberto Azevedo in an attempt to break the impasse between the world’s two largest democracies.
New Delhi was demanding nothing more than credible global trade rules to ensure that “development,” including the challenges of poverty, in the countries of the South take precedence over the cut-throat mercantile business interests of the transnational corporations in the North.
Trade diplomats from several developing and poorest countries in Africa, South America, and Asia say India’s “uncompromising” stance will force countries of the North to return to the negotiating table to address the neglected issues in the Bali package concerning agriculture and development.
These issues are at the heart of unfinished business in the Doha Development Agenda (DDA) negotiations, the current round of trade negotiations aimed at further liberalising trade.
“It is important to keep the battle alive and India has ensured that the big boys cannot simply walk away with the trade facilitation agreement (TFA) without addressing the concerns on food security and other major issues,” one African official said.
The industrialised countries and some rising economic tigers in the developing world are unhappy that they cannot now take home the TFA without addressing the problem raised by India and other developmental issues in the Doha Development Agenda negotiations.
Many developing and poor countries in Africa and elsewhere were opposed to the TFA but they were “arm-twisted” and “muzzled” by the leading super powers over the last three months. African countries, for example, were forced to change their stand after pressure from the United States, the European Union and other countries.
The TFA was sold on false promises that it would add anywhere up 1 trillion dollars to the world economy. During the Bali meeting last year, the Economist of London, for example, gave two different estimates – 64 billion dollars and 400 billion dollars – as gains from the TFA, while the International Chamber of Commerce gave an astronomical figure of 1 trillion dollars without any rational basis.
“Those predicted gains [from TFA] evaporate when one looks at the assumptions behind them, such as the assumption that all countries in the world would gain the same amount of income from a given increase in exports,” said Timothy A. Wise and Jeronim Capaldo, two academics from the Global Environment and Development Institute at the U.S. Tufts University.
At one go, the TFA will provide market access for companies such as Apple, General Electric, Caterpillar, UPS, Pfizer, Samsung, Sony, Ericsson, e-Bay, Hyundai, Huawei and Lenova to multiply their exports to the poorest countries.
It would drive away scarce resources for addressing bread-and-butter issues in the poor countries and direct them towards creating costly trade-related infrastructure for the sake of exporters in the industrialised world.
Here are ten reasons why trade diplomats from the developing and poorest countries say India’s stand will bolster their development agenda:
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India’s stand on food security brings agriculture, particularly unfinished business in the DDA negotiations, back to centre-stage.
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The Doha trade negotiations were to have been concluded by 2005 but remain stalled because a major industrialised country put too many spanners in the negotiating wheel.
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Major industrialised countries have been cherry-picking issues from the DDA which are of interest to them while giving short shrift to core “developmental” issues.
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Issues agreed in the Doha negotiations, such as the ”July package” agreed on August 1, 2004, the Hong Kong Ministerial Declaration of December 2005 and the un-bracketed understandings of the December 2008 Fourth Revised Draft Modalities for Agriculture, have all been pushed to the back burner because one major country does not want to live up to them.
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he Fourth Revised Draft Modalities for Agriculture provided an explicit footnote to enable the developing countries to continue with their public stockholding programmes for food security. That footnote was the result of sustained negotiations and a compromise solution among key WTO members such as the United States, the European Union, India, Brazil, Australia and China, but the United States refused to accept the footnote because of opposition from its powerful farm lobbies.
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Trade-distorting practices in cotton which are harming producers in Benin, Burkina Faso, Mali and Chad are supposed to be addressed “ambitiously”, “expeditiously” and “specifically” by the distorting countries in the North. But cotton is now being swept under carpet because a major industrialised country does not want to address the issue because of its farm programme.
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Trade facilitation was one of the Doha issues but not the main item of the agenda at all. It was actually dropped from the Doha agenda in Cancun, Mexico, in 2003 and was brought back in 2004 due to pressure from the United States and the European Union. The core issues of the Doha agenda were agriculture, services and developmental flexibilities.
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A major industrialised country which pocketed several gains during the negotiations refuses to engage in “give-and-take” negotiations based on the above mandates and has turned the Doha Round upside down.
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Industrialised countries along with some developing countries have formed a coalition of countries willing to pursue what are called “plurilateral” negotiations, only to undermine the DDA negotiations which are multilateral and based on what is called a “single undertaking” (that is, nothing is agreed until everything is agreed). Currently, these countries are negotiating among themselves on services, expansion of information technology products and environmental goods even though these issues are being negotiated in the Doha Round.
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Delay in the adoption of protocol will pave way for a healthy debate to reinvigorate the multilateral trading system which is being undermined by those who created it in 1948. The developing and poor countries want credible and balanced multilateral trading rules to replace what was agreed over 25 years ago in order to continue their “developmental” programmes with a human face.
Herein lies the crux of the issue – are the major powers of the North prepared to go along with a global trading system that puts the interests of the majority of the world’s people before their own interests?
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Swazi products no longer given tax-free access
Swaziland’s agricultural sector and not just the country’s garment industry stands to suffer as Swazi products are no longer given tax-free access to the US market under the African Growth and Opportunities Act (AGOA).
The citrus growers of the Lubombo Region hope to export to America, and have already filed an application with the US Government to start the process.
“Swaziland does not have access to the USA and so no fruit is sent there at the moment. South Africa only has access from the Northern and Western Cape,” said Justin Chadwick, CEO of the Citrus Growers Association (CGA) in Durban.
The CGA markets citrus grown in South Africa, Swaziland and Zimbabwe, finding new markets and conducting research on transportation and trade laws. Citrus growers pay a fee to CGA and are assisted to expand their business. At present, the CGA is lobbying Washington to extend AGOA beyond the year 2015 when the trade pact must either be renewed or end. Swaziland was de-listed from countries that are eligible for participation in AGOA in May.
“Expulsion was a setback,” Chadwick admitted.
“Both Swaziland and the rest of South Africa that are no longer shipping to the US have sent in market access applications (to Washington),” said Chadwick. Southern African citrus is sold worldwide. The main markets are Europe, the Middle East and Russia. Because citrus is harvested in winter – June and July are the peak shipping months for Swazi citrus – this means Swazi citrus can fill the gap when it is summer in the US. Currently, the US imports most of its fresh citrus from South America, where like Swaziland it is winter when it is summer in America.
Approval
Swaziland’s citrus growers may get approval to sell citrus in the US. However, they will have to pay import duties. AGOA allowed Swazi products to be imported duty-free. Because these costs are passed on to the buyer of the citrus, Swazi citrus will be more expensive and lose a price advantage it had under AGOA.
Swazi growers had intended to expand operations once they can sell to America. Now they will reassess those plans. It is not known how much the agriculture sector stands to lose, or the exact number of jobs that will not be created. This comes at a time when Swaziland’s citrus industry is facing declining productivity and sales.
In its most recent annual report, the Central Bank of Swaziland noted that the size of areas devoted to citrus cultivation declined “significantly,” from 1 770.6 hectares in 2011 to 1 402.2 hectares in 2012, resulting in citrus production ‘plunging’ one third from 78 418 tonnes in 2011 to 53 013 in 2012. Not even a cheaper lilangeni which makes Swazi exports less expensive to buy overseas helped sales much. Export volumes dropped by one-fifth to 28 741 tonnes in 2012, which the bank describes as a ‘massive fall.’ Export revenues dropped from E103.5 million in 2011 to E87.7 million in 2012.
“We were pinning our hopes on the US market to boost sales. The loss of AGOA does not mean we cannot sell Swazi citrus to the US but we don’t have the price advantage anymore,” said one grower.
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Statement by the Minister of International Relations and Cooperation, Ms Maite Nkoana-Mashabane, on international developments, 01 August 2014
Ladies and Gentlemen,
Our briefing this morning will focus on the upcoming United States-Africa Leaders’ Summit, which is scheduled to take place in Washington DC, United States of America, on the 5th and 6th August 2014.
His Excellency President Jacob Zuma will lead the South African delegation to the United States-Africa Leaders’ Summit convened under the theme: “Investing in the Next Generation.”
President Zuma’s delegation will include the Ministers of International Relations and Cooperation, Trade and Industry as well as Transport.
The US-Africa Leaders’ Summit (USALS) is one of the outcomes of the visit by the President of the United States, His Excellency Barack Obama to Africa in June-July 2013.
During his visit to three African countries, which included Senegal, South Africa and Tanzania, President Obama made an undertaking to African leaders that the US would host a US-Africa Leaders’ Summit to discuss issues of mutual interest.
The Summit will include, amongst other things, a Congressional Reception, the AGOA Ministerial Meeting, CEO Dinners and a Business Forum, culminating in the Heads of State Meeting on the 6th of August.
Preceding the US-Africa Summit, was the Young African Leaders Initiative (YALI) Summit, which also took place in Washington DC, at which Summit President Obama honoured the late former President Nelson Mandela by renaming this initiative the “Mandela Washington Fellowship for Young Leaders”.
The theme of the Leaders’ Summit, which is “Investing in the Next Generation”, is intended to generate debate on how the USA and Africa can together sustain and advance Africa’s transformation. The Summit will therefore focus on Trade and Investment, the promotion of sustainable development, peace and security issues, the sustenance of good governance and the advancement of human development.
The main outcomes envisaged from the Summit are:
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Renewal of the Africa Growth and Opportunity Act (AGOA) for another 15 years;
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Increased support and capacity building for Africa’s Defence Architecture at regional and continental levels;
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The establishment of US-Africa Infrastructure Development Fund of $100 Billion with a 50/50 contribution from Africa and the US in support of regional integration and Africa’s industrialisation;
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Increased support for Africa’s energy projects to overcome the energy deficit in Africa;
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Consultative process with African countries in the selection of participants in the newly launched “Mandela Washington Fellowship” to reflect the Human Resource needs of the Continent and the spirit of Mandela; and
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Continued development support for HIV, food security, and to ensure continued momentum for sustainable development goals.
Relations between South Africa and the United States have been very positive during the administrations of President Zuma and President Obama.
These relations were strengthened following the successful Official Visit by President Obama to South Africa in 2013, at the invitation of President Zuma.
The two Presidents held bilateral talks in Pretoria and discussed, amongst others, the status of bilateral relations; health; education; energy; safety and security cooperation; development assistance; as well as peace, security and development cooperation in Africa.
South Africa is looking to establish win-win partnerships which will help build the country skills base; transfer technology; create decent jobs; help create value-added exports; address inequalities in the country; promote inclusive growth and promotes regional integration.
We consider our bilateral relationship with the US as one such win-win partnership. Over the years, this partnership has been rapidly growing towards what we can regard as a strategic partnership.
The Obama Administration has expressed its willingness to partner with South Africa both domestically and regionally - and to support Africa-led initiatives.
In this regard, South Africa has impressed upon the United States the fact that successful economies have done so on the back of industrialisation. In our case, our economy needs to industrialise in order for us to achieve the goals that we have set for ourselves as outlined in the National Development Plan. The industrialisation of the economy is one of the priorities of the current term of government, with a focus on the following:
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Attracting investments in labour-absorbing manufacturing, which is central to our export strategy based on value-added and job-creation potential. South Africa is open and ready to do business with the US.
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Infrastructure development by leveraging our National Infrastructure Plan. Our investment in infrastructure development is continuing under the leadership of the Presidential Infrastructure Coordinating Commission chaired by the President.
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Energy: the regulatory framework for investments in renewable energy has been improved in line with the Integrated Resource Plan for Energy to attract investments in solar, wind and biomass. In addition, nuclear energy and shale gas exploration will be fast-tracked. In this regard, South Africa welcomes the investments by entities such as Solar Reserve in the Northern Cape. In return, we have also invested heavily in the US through the SASOL Gas-To-Liquids plan that we are putting up in Lake Charles, Louisiana.
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Mining and agriculture are key job-drivers for South Africa. In the period ahead South Africa will increasingly focus on value-added agricultural exports, which will also provide opportunities for entrepreneurship.
The industrialisation of the South African economy is therefore a major strategic element of our overall policy thrust to re-set the trajectory of the economy on a higher plane: one which attracts investments of the sort which will transfer skills, create quality jobs, stimulate local manufacturing and increase value-added exports.
On the trade side, we continue to advocate for the speedy re-authorisation of the Africa Growth and Opportunity Act (AGOA). The AGOA framework is a central plank in both South Africa and Africa’s industrialisation strategies.
AGOA’s renewal for a period of 10-15 years will provide Africa with the necessary stability, predictability and market access that is so crucial for our industries and small businesses to become competitive and sustainable.
South Africa’s graduation from AGOA would serve to undermine not only our domestic efforts at re-basing our economy to become a manufacturing and export hub in the sub-region, but also impede Africa’s broader regional integration strategies aimed at stimulating inter-Africa trade.
Africa is a Continent on the march towards realising economic development and prosperity for its citizens. The USA can help to fast-track this process by supporting Africa’s development plans and strategies which are coordinated through the African Union (AU) and its goals as outlined in our Agenda 2063 vision.
One component of the AU’s regional integration strategy, for example, is the Tripartite Free Trade Area (FTA) which will combine the three major regional economic communities of SADC, the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC), comprising 600 million people and a combined GDP of USD$1 trillion.
As I conclude, I would like to reiterate that South Africa welcomes the holding of the first USA-Africa Leaders’ Summit. African nations and the USA have much to offer each other and all are striving for a more peaceful and democratic world in which justice and equity prevail and where poverty and underdevelopment are tackled in a substantial and results-oriented manner.
I thank you.
ISSUED BY THE DEPARTMENT OF INTERNATIONAL RELATIONS AND COOPERATION
OR Tambo Building
460 Soutpansberg Road
Rietondale
Pretoria
0084
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G20 to add extra 2% growth
South Africa and the other members of the Group of 20 (G20) global forum will submit plans to the forum’s summit in November on how to grow their combined economies by 2 percent above current trajectories over the next five years.
Dr Heather Smith, Australia’s G20 “Sherpa” (organiser) said at a seminar in Pretoria last week that an extra 2 percent growth would boost the collective G20 economy by over $2 trillion (R21 trillion) and create millions of new jobs.
Australia is the G20 president this year and will host the 2014 summit in Perth.
“This kind of goal is a first for the G20, and it helps drive our ambitions,” she said at the seminar organised by Unisa and the Institute for Global Dialogue.
“It builds in accountability in a very political way into the G20.
“We will deliver on this growth ambition through a combination of measures on trade, investment and employment, captured in growth strategies, which each country is preparing and that collectively aim to achieve our goal.”
Smith said the world economy was recovering “sluggishly” from the 2008 global financial crisis. The International Monetary Fund (IMF) expected it to grow by only 3.6 percent this year, “and the forecasts are likely to go down”, – compared with an average of almost 5 percent per year over the five years prior to the financial crisis.
The International Labour Organisation had estimated last year that the crisis cost the world 62 million jobs.
“The WTO (World Trade Organisation) predicts a growth rate of 4.7 percent in global trade for 2014, still below the pre-crisis average of 6 percent per annum from 1980 to 2007.”
The slow recovery was having a serious social impact, raising inequality, within countries even more than between them, Smith said.
Despite Africa’s impressive recent economic achievements, boosting its middle class to 350 million people, the numbers of Africans living in poverty had also increased, from 376 million in 1999 to 413 million in 2010.
“While some causes of inequality are matters of domestic politics, the G20 can have an impact through its strategies to improve growth and implementing measures to ensure good business conduct,” Smith said.
“When the pie is not growing, and people’s living standards are not rising, achieving better outcomes for the world’s most vulnerable people becomes all the more difficult – it has a direct impact on our ability to lift people from poverty, and provide the welfare and employment services that they need.
“This is why Australia has prioritised growth rather than seeking to address a multitude of worthy issues. It’s critical we stay focused so we can deliver real economic outcomes.”
The G20 was the right forum to tackle sluggish growth and rising unemployment and inequality because it had the right mix of advanced and developing countries, representing over two thirds of the world’s population – including two thirds of its poor – and producing about 85 percent of global gross domestic product (GDP) and three quarters of world trade.
The G20 had proven itself by containing the global financial crisis and resisting the push for trade protectionism. It now faced a bigger challenge in some ways – how to enable sustainable growth.
And so Australia was focusing the G20 agenda around three key areas:
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Promoting strong economic growth and employment by empowering the private sector.
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Making the global economy more resilient to future shocks.
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Strengthening global institutions and ensuring their continuing relevance to the global economy of the 21st century.
The role of the private sector would be crucial to the success of the G20’s plans.
“At the same time as we create an environment that enables businesses to invest and employ people, we need to ensure that business is doing its share as a good corporate citizen. That is why support from both business and governments to improve the stability of the global financial system is so important, as well as proposed measures on tax and transparency reform.”
Smith said the reforms that the G20 was pursuing to reach the collective 2 percent extra growth target over five years would focus on trade, employment and infrastructure.
The G20 was re-thinking trade measures in a complex new environment.
“In an era when goods and components often crossed national borders many times before ending up in the hands of the final consumer as a result of global value chains, the traditional calculus of trade negotiations changes; the ability to import becomes as important as the ability to export.
“Goods are no longer produced in one country and sold in another – goods are ‘made in the world’.
Between 30 percent and 60 percent of G20 exports consist of imported inputs or are used as inputs by other countries.”
And so the G20 was discussing ways of improving global value/supply chains to drive growth.
Smith said it was vital for individual G20 countries to streamline trade and free up services, to give businesses, especially smaller ones, access to regional and global markets.
The G20 trade ministers had just met when they agreed that it was important to implement the Trade Facilitation Agreement, which had been adopted at the WTO Bali ministerial conference last December.
Robert Milliner, the Sherpa for the B20 group of business people supporting the G20, said reducing supply chain barriers could increase global GDP by $2.2 trillion – more than removing all existing tariffs on trade in goods, which would increase global GDP by $360 billion.
Removing trade barriers and delays at borders could also increase food security in developing countries by reducing food wastage and lowering costs to consumers.
Milliner agreed, saying about 30 percent of traded food was lost “between farm and fork” through wastage, including through poor transport infrastructure.
Higher growth was the best way to create employment, Smith said, but the G20 was also focusing on measures to increase the employment of youth and women, including by improving their skills.
Fuller participation of women in the economy would boost global growth substantially.
Smith said the G20 members were also working to address the estimated 2030 global infrastructure gap of $70 trillion as another key measure to boost economic growth.
The best way to achieve this was by removing impediments to private sector investment in infrastructure and to make better use of multilateral development bank resources – especially for developing countries.
She said just as the G20 should help money come in, it also needed to ensure it was shared around, including through better domestic taxation, to ensure the sustainability of the system.
It was working to reform the outdated international tax system to ensure that multinationals paid tax in the countries where they made their profits instead of elsewhere.
It was also working to boost the revenues that countries received through remittances by reducing the costs of moving this money. While the average cost of sending remittances to and from G20 countries was above 8 percent, the costs in sub-Saharan Africa were the highest in the world at over 11.5 percent.
She said global remittances totalled $400bn in 2012 and were expected to rise to $700bn by 2016.
G20 countries were also making good progress in implementing primary financial regulatory reforms to prevent another financial crisis.
This included building resilient financial institutions, ending “too-big-to-fail” institutions, addressing risks associated with the shadow banking sector and making derivatives markets safer.
She noted, though, that the G20’s important decision to reform the IMF by giving emerging and developing countries a greater say had still not been implemented because of opposition in the US Congress.
It was up to the US to remove that obstacle, but she did not think it would happen this year.
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Africa in China: New knowledge-sharing effort kick-starts collaboration in agricultural productivity
Stories about “China in Africa” abound, and regularly make headlines. Now, thanks to a new push, an “Africa in China” narrative has begun to take root with a group of 40 African farmers, equipment producers, policymakers, scientists and researchers visiting China. Their objective: see first-hand that nation’s legendary successes in transforming its agriculture sector, including attaining food self-sufficiency, for adaptation back home in Africa.
The numbers are compelling, and speak both to the severity of the challenge facing the agriculture sector in Sub-Saharan Africa (SSA) as well as the opportunity for transformational change.
Currently, because of low technology, lack of irrigation and power, African farmers are able to provide only five percent of all cereals consumed on the continent. Yields on African farms are one-third those achieved by Asian and Latin American farmers. Thailand exports more food products than all SSA countries combined. In comparison, China is a remarkable success story: it feeds over 20 percent of the world’s population using only seven percent of the arable area. To unlock the untapped potential of African agriculture, greater Africa-China cooperation is vital.
The knowledge exchange, billed as a “South-South” sharing of experiences, brought the African visitors to the Chinese Academy of Agricultural Sciences (CAAS), China’s pre-eminent agricultural research and development agency.
“We came to see, to listen and to learn from China’s remarkable success story in meeting the food needs of its people,” said Francis Wachira, Deputy Executive Director, Association for Strengthening Agricultural Research in Eastern and Central Africa (ASARECA). “What became clear to me and my fellow visitors is that China’s achievement did not come from a single intervention or overnight results. Rather, it is the result of decades-long commitment to bringing the benefits of modern science to the rural economy and clear recognition at the highest levels of government about the potential of agriculture to alleviate poverty and improve people’s lives.”
China’s dramatic experience in scaling up agricultural technologies along the value chain – with a focus on rice, wheat, maize, vegetable production as well as conservation agriculture technologies – and the associated use of small scale mechanization is a remarkable achievement. The African visitors were impressed by the rapid evolution of the agriculture sector in China which experienced a profound transformation in less than 30 years due to strong and sustained political commitment, significant investments in capacity building and technology generation, and land tenure reform.
The tour featured visit to research fields, in-depth discussions with CAAS scientists and researchers, many of whom are grappling with the same set of issues as the African visitors. All the visitors are involved in implementing the three regional agricultural productivity programs financed by the World Bank – WAAPP, EAAPP and APPSA – which support agricultural research and technology dissemination across 19 African countries.
Toward Transformational Change
The study trip grew out of a series of discussions on possible Africa–China partnerships. An earlier visit to China in 2013 by Makhtar Diop, Africa Region Vice President led to discussions between the Bank, sub-regional African agriculture R&D organizations and project counterparts about possible areas of collaboration. Chinese and African partners thought China’s experience in technology development and adaptation within smallholder agricultural systems would be particularly well suited for sharing lessons of experience.
Following the signing of agreements between the Chinese Academy of Agricultural Sciences and ASARECA, Center for the Coordination of Agricultural Research and Development in Southern Africa (CCARDESA) and West and Central African Council for Agricultural Research and Development (known by its French acronym, CORAF) – the three sub-regional organizations that facilitate implementation of the regional Bank projects – the first 10 day South-South learning and knowledge-sharing sharing event was launched.
“We are taking a continental approach to achieving transformational change in Africa’s agriculture sector,” said Severin L. Kodderitzsch, Practice Manager for Southern Africa in the new Agriculture Global Practice. “We were delighted that representatives from the three sub-regional organizations leading the agriculture-for-development charge in Sub-Saharan Africa took part in the study visit which will be helpful for a new push to disseminate knowledge and ideas gleaned on the trip.”
Participants identified a large stock of technologies which can be adapted and transferred to Africa and discussed the way forward for collaboration with China. In his closing remarks, Professor Zhang Lubiao, Director of the Department of International Cooperation of CAAS commented on China’s strong interest in seeing this collaboration continue through different ways. He said that, as one example, a concrete next step would be to implement a capacity-building program to train young African scientists in agronomy at the Graduate School of CAAS.
“The study visit turned out to be a two-way exchange benefiting both parties,” said Abdoulaye Toure, Lead Agriculture Economist, Agriculture Global Practice and Task Team Leader of the West Africa Agricultural Productivity Program. “It helped Africa to learn from China and for China to learn from Africa.”
The visit concluded on June 13, 2014.
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The African Dream
The dream that the twenty-first century will be the “African Century” is powerful and intoxicating. It is also becoming reality. As African officials gather in Washington, DC, on August 4-6 for the first US-Africa Leaders Summit, it is worth considering the basis – and the limits – of the continent’s progress.
While conflict and poverty remain serious problems in many African regions, our continent is not only more stable than ever before; it is also experiencing some of the highest economic growth rates anywhere on the planet. Over the past decade, tens of millions of people across Africa have joined the middle class; our cities are expanding rapidly; and our population is the most youthful in the world.
But Africans must not take it for granted that their time has come. Words are cheap, and, despite the continent’s positive momentum, we know that history is littered with squandered dreams – nowhere more so than in Africa.
So there is much that we in Africa must do to seize our opportunity. Building bigger, more integrated sub-regional markets that are deeply embedded in the global economy is one of the most urgent tasks that we are facing. After all, from the European Union to the Association of Southeast Asian Nations to the North American Free Trade Agreement, we see how geographic regions can create conditions for shared growth and prosperity by removing barriers to commerce, harmonizing regulatory norms, opening labor markets, and developing common infrastructure.
That is precisely the vision that we are working to realize in our own part of Africa, under the banner of the Northern Corridor Integration Projects. In the past 18 months, Kenya, Rwanda, and Uganda, joined by South Sudan and more recently Ethiopia, have launched 14 joint projects that will integrate East Africa more closely and make our region a better, easier place to do business.
There are already concrete results. We have put in place a single tourist visa valid in all three countries. We have established a single customs territory, slashing red tape and removing non-tariff trade barriers. A standard-gauge railway from Mombasa to Kigali and Juba via Kampala is being designed, and financing for the first segment has been secured from Chinese partners.
Taking these steps has required going against decades of entrenched practice. Unfortunately, across Africa, national borders have tended to be chokepoints rather than enablers of intra-continental cooperation on trade, security, labor, and environmental issues. Too often, Africa’s economies exchange goods and coordinate policy among themselves less than they do with countries outside of the continent.
We are determined to change this. Under the Northern Corridor initiative, for example, each of our governments has accepted responsibility for shepherding key projects.
Uganda is securing investors for a new oil refinery and is spearheading the development of regional infrastructure for information and communications technology, which will lead to the elimination of cellular roaming charges among our countries.
Kenya is tasked with developing a regional commodity exchange, improving human resources through education and consultancy services, and building both crude and refined oil pipelines. Kenya is also exploring ways to expand regionally focused power generation and transmission.
Rwanda is charged with aligning immigration laws and promoting freedom of movement for both citizens and visitors. Other coordination duties include regional security (through the East African Standby Force), coordinated airspace management, as well as joint tourism marketing.
We know what success will look like for our region’s citizens. And we know what needs to be done. Progress will be achieved not by building monuments for politicians or holding summits, but by lowering the costs of doing business and raising the incomes of our people.
Bureaucracies move slowly, sometimes because they are institutionally programmed to subvert change. The framework of the Northern Corridor Integration Projects is designed to generate and sustain the political will necessary to get the project done.
The United States has always been an important partner for our countries, but the path to solving our problems is not through handouts from American taxpayers. Only we, together with our business sector, can do the job. As we do so, we look forward to a deeper and more “normal” relationship with the US, focused on what we can do together rather than on what Americans can do for us.
Africa has always had what it takes to rise. Together, we can make it happen.
The writers are Presidents of Rwanda, Uganda and Kenya respectively.