U.S. hones in on developing trade with Africa

08/10/2015

US Develops Trade in Africa

US Develops Trade in Africa

The Obama administration in the U.S. is intent on developing closer trade relationships with African countries, as evidenced by a recent trip partly funded by the U.S.-sponsored International Trade Association to the continent in mid-September.

As part of the delegation, 108 American companies, including both small businesses and larger corporations, accompanied the association to the following countries: Angola, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Africa, and Tanzania.

During the trip, the delegation secured deals thought to be worth more than $14 billion in total, the U.S. Under-Secretary of Commerce for International Trade Stefan Selig said.

This is up from $7 billion in commitments to African commerce made at the U.S.-African Business Forum and the U.S.-Africa Leaders Summit in 2014.

U.S.-Africa trade is already growing rapidly

Goods exported by the U.S. to the African continent have increased by almost 60% since 2009, Selig said in a statement.

Total amount of U.S. trade with every African country is roughly equal to our [U.S.] trade relationship with Brazil.

The U.S. can make the greatest impact on African markets by investing in areas most in need of capital, which includes infrastructure and energy, one South African trade official said.

The American government is interested in increasing its trade relationship with African states for several reasons, among which is the end of the Agreement on Textiles and Clothing, part of an agreement under the auspices of the World Trade Organization.

The agreement limited the amount of textiles developing governments could export to developed countries. As a result of the lifting of the regulation, African states found themselves in more intense competition with countries in Asia and Latin America.

Another is to increase the American presence in African markets, which are now largely dominated by China.

AGOA is providing a stumbling block for future growth

While the trade mission recorded a successful trip, the U.S. trade agreement known as AGOA (African Growth and Opportunity Act), signed in 2000, is hitting an impasse as the U.S. is reconsidering South Africa’s inclusion in the pact.

AGOA is a trade deal with 39 African countries, renewed on a 10-year basis, most recently in June.

But debacles over poultry have caused a months-long rift between the U.S. and South Africa.

As it stands, the South African minister responsible for trade insists that South Africa has done everything necessary to meet the conditions of the trade deal, while the American side said there are still major unresolved issues.

The two sides had reached an agreement on poultry in June, but this accord suffered a setback shortly afterwards when avian flu was reported in the U.S.

Foreign ownership a major source of contention

South Africa exported $7.5 billion in shipments under the trade deal in 2014; of this, 75% was comprised of equipment for transportation. According to the USTR, the five largest exports from South Africa in 2013 were platinum and diamonds; automobiles; iron and steel; ores, slag, and ash; and machinery.

Poultry accounted for $24 million of U.S. exports to South Africa in 2013.

Poultry is not the only issue of dispute in the U.S.-South Africa rift.

Other stipulations require African countries to allow the U.S. to remove all barriers to investment and trade, which runs counter to proposed plans by the South African government to limit foreign ownership of companies operating in the private security sphere to 49%.

Such a regulation would violate the terms of AGOA, and would force Florida company ADT Corp. to give up control of its subsidiary in South Africa.

While other African nations have been kicked out of the trade program, South Africa is perhaps the most visible, if only second largest, economy of the nations participating in the agreement, and therefore has a reduced likelihood of being booted from the accord.

According to UN publication AfricaRenewal, exports from South Africa accounted for 13% of all exports under AGOA in 2011.

Could doing business in this growing market be part of your global growth strategy?

Disclaimer: The opinions expressed in this article are those of the contributing author, and do not necessarily reflect those of the Forum for International Trade Training.

About the author

Author: Jacqueline Côté

I am a working journalist, with experience as SNL Financial’s Canadian correspondent for its Mining and Metals vertical. I also served as the Managing Editor for Central Asia Newswire – covering daily economic and investment news in the region – as well as Features Editor for the Washington-based Magharebia.com, which covers developments in the North Africa region. I have been published in The Montreal Gazette, The Guardian (UK), The New Statesman (UK), Red Pepper (UK), Geopolitical Monitor and CNN.com.

disqus comments