Washington, D.C. — As their export trade develops under the African Growth and Opportunity Act (AGOA) that was enacted into law a year ago, African nations will need spare parts, machinery, and a host of items to develop their economic capacity, says U.S. Trade Representative Robert B. Zoellick. "The things that they need will be exactly the things that we can sell."
Zoellick met with reporters Tuesday to discuss the first of eight annual reports AGOA requires the President to submit to Congress.
The report, which is still making its way into congressional hands, claims that AGOA is creating political as well as economic reform: "Implementation of the AGOA is serving as an important tool in encouraging and supporting countries as they undertake economic and political reforms."
Key points the report highlights:
* Response to AGOA has been "mixed" with results "largely depending on a country's infrastructure, regulatory and political environment, production capacity, and potential."
* AGOA "beneficiary countries are taking aggressive steps to fight corruption and are implementing economic reforms.
* Foreign direct investment in Africa is rising.
* There is more participation in the WTO and other multilateral trade discussions but help with capacity building is needed if Africa is to reverse its declining share in global trade flows.
*The U.S. is Africa's largest single country partner but trade with Africa is "highly concentrated with a few products and a few products dominating exports and imports."
Already, the report states, the AGOA is starting to generate new trade and investment. "This has included new U.S., African, and other investments in manufacturing facilities as well as numerous expansions and rehabilitation of existing factories.
Economic growth has been uneven in Africa, says the report, with rising oil prices in particular helping some nations. But in general, "Corruption and governance issues and inadequate infrastructure, as well as conflict remain major impediments to both domestic and external investment as well as trade. Adding to these issues is the devastating impact of the HIV/AIDS pandemic."
But Africa has great potential said Zoellick, elaborating on the report. "AGOA opens the door for a larger economic strategy in Africa." Among the "key elements" of such a strategy: Open markets for the U.S, building market infrastructure, secure property and legal rights, increased local and foreign investment.
Zoellick who also served as undersecretary of state for economic affairs in the administration of President Bush's father is considered to be one of the "idea men" of the current Bush administration. He stressed that much about the economic idea of AGOA connects to political changes underway in Africa. "Economic liberty starts to create the possibility for political liberty," Zollick said.
Citing a common investor fear about Africa - "You put a bunch of money in and someone shakes you down" - Zoellick said "models of success" were needed. "The real challenge is whether you can help countries create enabling environs, a basic system of law, property rights and contracts."
Zoellick said he thought such models were beginning to develop. Although sub-Saharan African nations generally maintain some of the most protected trade regimes in the world, markets in countries like Nigeria, Kenya, Ghana and Madagascar are reforming both economically and politically.
Drawing his numbers from the report, he cited Kenya as a specific example.There, the document claims, 50,000 direct and 150,000 indirect jobs have come from new investments stimulated by AGOA. In Lesotho new investment totaled $120 million, "four times the amount of official development assistance in 1999." A variety of laws regarding worker rights and child labor are changing. "But this is early," Zoellick cautioned. "This is something that is going to take years to develop fully."
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Of 35 "eligible" African nations, Five nations - Kenya, South africa, Mauritious, Nigeria and Lesotho - have been "certified" for preferential treatment of apparel exports to the U.S.
Asked if the act wasn't creating sweatshops in Africa, Zoellick dismissed the idea: "scare tactics." And U.S. jobs aren't threatened by the act either, because most U.S. jobs are service jobs, not manufacturing jobs, he argues. In any case, says Zoellick, the act sets protective standards for workers, and on children that meets those set by the ILO. "For a lot of the jobs it's not a question of competition with the U.S., but with India or China and other places in Asia."
