United States House of Representatives
Subcommittee on Africa and Global Health
Donald M. Payne (D-NJ), Chairman
Thursday July 12, 2007
"Beyond Oil and Gas: African Growth and Opportunity Act's Benefits to Africa"
Stephen Hayes, President
The Corporate Council on Africa
Testimony
Mr. Chairman,
Distinguished Members of the Committee, Fellow Witnesses'
Distinguished Guests:
Introduction
Thank you for inviting me to present before you this morning and to provide the private sector perspective on the African Growth and Opportunity Act's (AGOA's) benefits to Africa. The subject of today's discussion - analyzing the U.S.-Africa trade relationship beyond the oil and gas sector - is appropriate. While the U.S.-Africa energy partnership is of vital and growing strategic importance, such partnership cannot be sustained and made secure if it is not buttressed by sustainable development in key sectors such as agriculture and infrastructure, for example, on which the majority of African country citizens depend for their livelihood. Diversification has rightly come to be recognized as an essential element of AGOA's present and future success. Indeed, together with the Government of the Republic of Botswana, I will be co-chairing a working session on Strategies for Diversifying the African Manufacturing Sector at the sixth annual AGOA Forum in Accra, Ghana from July 18 to 19, 2007.
Non-oil AGOA trade accounted for just 8 percent of total AGOA trade in 2006. Non-oil AGOA trade was however up 8.9 percent over the 2005 position, reaching a total of $3.2 billion in 2006. While this is encouraging, non-oil AGOA trade has not as yet rebounded to the 2004 position, when it totaled $3.5 billion. Quite obviously, the 2005 decline in non-oil AGOA trade was largely due to the inability of African countries to successfully compete with fast-growing competitors such as China after the ending of quotas on textiles and apparel under the Multi-Fiber Arrangement at the World Trade Organization. Textile and apparel producing African countries have shown some resilience over the past year but these gains have not matched the trade numbers of previous years. Surely, textiles and apparel trade has generated much needed jobs in the African market. At the same time, however, it should be clear to all of us that we need develop our non-oil trade beyond this highly competitive sector. I believe that AGOA will not meet the hopes many had in its passage and subsequent amendments until we address the challenges of Africa in a more comprehensive manner. I especially believe we must address agribusiness and infrastructure development, capacity building, and financing if AGOA is to meet its goals. I also believe that we must develop a more comprehensive means to allow the US private sector to more readily engage itself in Africa, and especially in those countries that are making progressive changes and that are vital to US security interests. We cannot protect our own interests through military and economic assistance alone if the citizens of the nations of Africa are without jobs, and only the private sector can develop sufficient jobs to decrease unemployment, poverty and alienation. Governments need private sector development as much as the private sector needs stable and open governments. In this regard, I believe we need to view AGOA not only as an economic development tool, but as an opportunity for investment from the US private sector.
To date, under the AGOA framework, African countries have demonstrated competitiveness in adding value to products primarily in the following sectors: textile and apparel, automotive products, and floriculture products such as cut flowers. Areas with room for growth include: agribusiness products, including processed seafood and juices; leather products; wood and furniture products; along with many other products that have potential for domestic consumption as well as for regional and international export. The effective development of each of these sectors requires a concerted effort to implement trade capacity building assistance. Why you may ask is the "Aid for Trade" agenda important to a U.S. business and policy audience when these countries, once made competitive, could compete directly with our domestic businesses? The truth is that presently African countries combined account for less than 2 percent of total global trade in goods and services. The threat of direct competition in the U.S. market is far off. However, the opportunity for fostering stability in African countries and for engendering development is substantial. Stable, growing markets in Africa, in fact, create more opportunities for U.S. business - both in terms of investment and trade. Trade capacity building assistance, in my opinion, is the key to building sustainable non-oil trade in African countries. Today, I urge the United States Congress to consider and encourage stronger options to improving funding that supports trade capacity building in Africa. As long as many countries of Africa lack trade capacity, AGOA as an important component of our overall relationship with Africa, will not meet the expectations and hopes that it has created throughout the continent. I believe many recognize this and are seeking other ways to improve trade with Africa.
For instance, at this point in time, there are members in Congress who are seeking to more fully expand access to the United States market by the world's least developed countries through a new Duty Free/Quota Free legislative proposal. The draft legislative text is said to include equal market access opportunities for least developed countries (LDCs) such as Bangladesh as for African LDCs. While I am fully supportive of increased market access, such a proposal could negate some of the gains made by African countries under AGOA if certain benefits that are enjoyed, especially in the textiles and apparel sector, are not guarded. The effect in the short-term could actually be job losses in Africa. At same time, the legislation will seek to improve access in the agriculture sector, which could be of much significance for African producers. When the House of Representatives comes to consider this legislation, I urge you to ask the following pivotal questions:
What is the extent of trade capacity building assistance for African LDCs that is built into the legislation, and is this assistance targeted at sectors that possess the greatest potential for growth?
What is the potential impact on the textiles and apparel industry in Africa and have the appropriate steps been taken to safeguard some of the gains made in this sector?
Does the legislation take into account private sector needs, and does it emphasize value-maximizing incentives that go beyond traditional market access preference legislation implemented in the past?
AGOA should best be viewed as an essential piece of a broader framework for building a more sustainable U.S. trade relationship with Africa. Other equally important building blocks include: The U.S. Millennium Challenge Corporation and the work being done through its Compact Agreements with African countries; the President's Emergency Plan for AIDS Relief; and the work being carried out in Africa by the various U.S. Government Agencies including Commerce, USAID, and USTDA, for example. In conducting each of these efforts, I urge that U.S. business presence and participation be encouraged through the formation of sound public-private sector partnerships. Government can open the door for engagement but the presence of the U.S. private sector is the surest means for ensuring that trade and future development take place. In this regard, AGOA could and should be an incentive for greater US investment in Africa, yet this has not been the case. We cannot compete internationally, and especially in Africa, if we limit ourselves in our ability to invest abroad. We need to develop stronger and more confident mechanisms to support US investment in Africa. We need to view AGOA as a tool for US investment, not only as a means to build trade capacity, but as a means to strengthen American outreach into Africa as a partner and investor with a fledgling private sector in African nations.
AGOA is also part of a global trade development framework. Like the United States, the majority of African countries are members of the World Trade Organization. The U.S. has an essential role to play in meting out a favorable trade development policy through the Doha Trade Development Negotiations. That more progress has not been made on the multilateral front is unfortunate, particularly as regards Western agricultural subsidies reform, which must be addressed for the future sustainability and growth of agricultural development in Africa. The U.S. through the Congress, Senate, and the Executive Office of the United States Trade Representative should be encouraged, despite present bottlenecks, to continue to work on negotiated outcomes in trade openness at the multilateral level.
Regional trade is another essential pillar for AGOA's continued success. It makes little sense to speak of market access and trade in the international context, when domestic and regional regulations in Africa flout market access practices. Change is taking place in regional integration efforts in Africa and such change must be supported. I commend the Common Market for Eastern and Southern Africa (COMESA) of which my fellow witness is a member for the broad-reaching efforts its members are taking to form an integrated customs union and to network regional trade supporting infrastructure such as transportation and customs services. U.S. private sector businesses stand behind the principles of the New Partnership for Africa's Development (NEPAD) and regional trade blocks such as COMESA in their efforts to push for integrated infrastructure projects that build sustainable markets in Africa and which greatly improve the opportunities for trade among countries in these regions. I believe that the American private sector needs to more actively engage with regional trade organizations, just as the regional organizations need to encourage the US private sector to be more engaged in regional projects.
The Corporate Council on Africa remains committed to AGOA's core objective to promote valued-added exports from African countries to the United States market. Our role includes improving the visibility and prevalence of the U.S. private sector in Africa. It also includes engendering new opportunities for trade and partnership between private sector businesses from both Africa and the United States. Our key vehicles for achieving these goals are our conferences and programs. We are pleased to report to the Honorable Members of the House of Representatives that, for the first time, we will take our biannual U.S.-Africa Business Summit to Africa, when it will be held in Cape Town, South Africa from November 16 to 19, 2007. Immediately preceding the Summit we will hold our second annual U.S.-Africa Infrastructure Conference, which will take place in Washington, D.C. from October 8 to 10, 2007. Both conferences offer an unprecedented opportunity for targeted engagement between the U.S. public and private sectors and the public and private sectors in Africa. Momentum for both conferences is growing and we are confident that each event will raise the profile of U.S.-Africa trade and foster new businesses opportunities for both sides.
It is also important to note that immediately preceding and following the US-Africa Business Summit in Cape Town, CCA and many of the leading Africa-focused organizations in America are now planning for simultaneous trade missions to at least thirty African countries. This is historic and will send the message to the world that not only is Africa open for business, but the United States of America is ready to compete for business in Africa. In this regard we need strong public-private sector cooperation in order to be successful, and we need the leaders of Congress to work with the private sector to develop a unified and comprehensive approach to US-Africa relations. Imagine if we had at least one business from every Congressional district in America as part of these trade missions. Imagine the message this would send not only to Africa, but to the rest of the world about America's resolve to work with Africa. Although we often find ourselves in a highly polarized society, I believe that the challenges in building a stronger US-Africa relationship is an area in which we all can find common ground.
The Corporate Council on Africa also remains committed to its Africa-focused development programs and initiatives including the South Africa International Business Linkages Program (SAIBL), which is one of the most successful USAID programs in Africa, and which works to develop market opportunities for primarily black and women empowered companies in South Africa; the CCA HIV/AIDS Coalition which is working to develop effective business coalitions to address HIV/AIDS prevention in sub-Saharan Africa; and finally, CCA's Public Private Agribusiness Initiatives Program (PPAI) which is working to build new linkages between U.S. agribusinesses and regional economic communities in Africa.
Honorable members, while we have made substantial progress in the years since AGOA's passage, the task is far from over, especially in the face of mounting competition from new actors in Africa. The U.S. has traditionally been an innovative, supportive trade partner in Africa. We encourage you to expand on the trade development agenda in 2007, particularly as it relates to capacity development, and market access that can foster and grow diversified export-led trade in Africa. I also believe it an exigency for the sake of African economies as well as our own that we encourage the US private sector to be much more engaged in Africa. AGOA and the programs necessary to increase its effectiveness should not be viewed as simply assisting African development. These programs must rightly be seen as assisting our own security and economic development as well. Africa and the United States need one another and unless we are ready to act now to build this relationship more effectively at the trade level, we risk being left behind as other nations move forward in investing in and trading with Africa. I think the consequences for America would be tragic, but clearly this need not be. We need not view Africa-United States relationships from the perspective of our fears, but from the perspective of what the relationships can be, and realize that we have the power to fulfill the vision of AGOA and the hopes of Africans and Americans alike as partners now and into the future.
Thank you.
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