Last year, the US Biden administration announced plans to increase two-way trade and investment between the United States and Africa. The starting point was a revamp of the Trump-era “Prosper Africa Initiative”. As US Secretary of State Antony Blinken visits three African countries – South Africa, the Democratic Republic of Congo and Rwanda – Kefa Otiso and Francis Owusu provide insight into US-Africa trade relations and what is planned to improve them.
What type of trade arrangement does the United States offer?
In July 2021, the Biden-Harris administration launched the Prosper Africa Build Together Campaign.
The idea was to elevate and energize the United States’ commitment to trade and investment with countries on the African continent.
The revamped Trump strategy includes a focused, long-term effort to connect American and African businesses to new trade and investment opportunities.
The main sectors targeted are clean energy and climate-smart solutions, health and digital technology.
Through this initiative, the United States promises to help attract billions of dollars of investment to Africa and to work towards equitable access to the benefits of trade and investment. It also plans to harness the power of small businesses, especially those run by women and members of the African diaspora.
What should a good business pact look like?
This is a difficult question to answer, given the many possible configurations of a possible trade pact.
Nevertheless, we propose two key elements of such a trade pact.
First, it should be truly multilateral unlike, for example, the current US-Africa trade agreement, the African Growth and Opportunity Act (AGOA) – which is a unilateral policy of the US government. A true multilateral compact would recognize African leaders as equal partners and ensure they have the opportunity to properly engage in U.S.-Africa trade negotiations.
Anything less than that would be counterproductive for one or both parties. For example, a bad trade pact could worsen US trade deficits, while for Africa it would amount to a missed opportunity for much-needed structural economic transformation. Furthermore, it would force African countries to compete directly with the much stronger US economy, to the detriment of their local businesses and industries.
Second, whatever agreement is reached must increase the ability of African countries to trade with the United States. While a free trade agreement between the United States and Africa would be ideal, it is unlikely to work well for many African countries. Countries with technological and economic weaknesses would be easily overwhelmed by the mighty US export machine.
So, instead of a free trade agreement, a good-for-Africa compact should be designed to boost trade and investment between the United States and Africa while gradually increasing the ability of African countries to to be globally competitive in the production of high-value non-traditional products.
While the exact details of the Prosper Africa Build Together campaign are yet to be defined, we are cautiously optimistic that it will deliver on its promises. Unlike AGOA, it has a holistic and long-term view. And because of the need to counter the influence of Europe, Russia, and China, the United States will likely be more motivated to engage Africa both economically and geopolitically.
Africa can only get good trade pacts if it negotiates for them. African countries must therefore invest in building the capacity and training of their trade negotiators, as well as hiring, retaining and empowering the right people for these roles.
What arrangement is in place at the moment?
The current trade agreement between the United States and Africa is the Africa Growth and Opportunity Act. It was signed into law in 2000 and is set to expire in 2025 unless the US Congress prorogues it.
The act has been central to U.S. economic policy and commercial engagement with Africa since 2000. It provides eligible sub-Saharan African countries with duty-free access to the US market for over 1,800 products. This is in addition to more than 5,000 other products eligible for duty-free access under the Generalized System of Preferences program.
Currently, 36 countries on the continent are eligible for AGOA benefits.
Did he achieve his goal?
To some extent, yes. The legal framework has helped provide beneficiary countries in sub-Saharan Africa with liberal access to the US market. In addition, he has increased trade and investment ties between the United States and sub-Saharan Africa. It has also created more than 300,000 jobs in the region, particularly in the clothing sector. As of 2021, US non-oil imports under the deal (a major source of its job creation value) have been on 4.8 billion US dollars.
However, not all sub-Saharan African countries have benefited from AGOA and their manufacturing sectors remain weak. Most of Africa’s exports under AGOA are still dominated by clothing products. In addition, many of AGOA’s beneficiaries are foreign companies that use Africa as a front to access the US market.
Read more: We looked at 20 years of US-Kenya trade: some lessons for Africa
In 2020, President Trump and his Kenyan counterpart Uhuru Kenyatta announced the start of negotiations for a post-AGOA agreement between the two countries. The Trump administration claimed the deal would serve as a model for other African countries.
Conceived against the backdrop of Trump’s preference for bilateral trade deals, the pact was to be concluded within 10 months. But that was not the case. Otherwise, it would have given the United States a replicable model for future trade deals with Africa. In the end, the expiry of Trump’s mandate caused the negotiations to fail.
This US-Kenyan pact would have been the first bilateral agreement of its kind between the United States and a country in sub-Saharan Africa. Currently, the only African country with a free trade agreement with the United States is Morocco. Called on Morocco Free Trade Agreementit was signed in 2004.
In the case of Kenya, such an agreement would have elevated its preferential access to the US market under AGOA to a reciprocal pact. similar to those that the United States has with 20 other countries in the world, including Morocco.
In conclusion, it is important to realize that the commercial relationship between the United States and Africa is on a dynamic continuum that includes Bill Clinton’s AGOAby George Bush African Initiative for Global Competitivenessby Barack Obama Africa tradethat of Donald Trump Prosperous Africa Initiative and now that of Joe Biden Prosper Africa Build Together Campaign.
These business initiatives have enduring ties to broader U.S. values and interests in Africa. Future trade pacts are therefore unlikely to deviate much from previous ones, even as the United States strives to thwart European, Russian and Chinese influence in Africa. African states should likewise fight for their own interests in such trade engagements.
Two key pressures are likely to shape future trade pacts between the United States and Africa.
First, should the United States negotiate with individual African countries or with the continent as a whole? Second, should future US trade pacts with Africa be unilateral like AGOA or involve African leaders in defining their frameworks? In light of the 2018 African Continental Free Trade Area agreement, which encompasses most of Africa, we believe that future trade deals between the United States and Africa are likely to be more multilateral and more complete.