Washington, DC — As U.S. Treasury Secretary Paul O'Neill begins a ten-day tour of African countries to see their economies at close quarters, the spotlight is on trade relations between the rich countries of the world and some of the poorest.
The U.S. argues that decades of aid to Africa have failed to deliver development and the emphasis should now be on trade. The Bush administration points to a pro-active policy under AGOA, the African Growth and Opportunity Act (signed into law by President Clinton) designed to remove barriers to the importation and sale of African products in the U.S. market.
In an interview with allAfrica.com this week, the Assistant U.S. Trade Representative for Africa, Rosa Whitaker says that more than 92 per cent of African products are now entering the U.S. on a duty-free basis and that AGOA has resulted in over $8bn-worth of imports from Africa and another billion dollars in investment.
But the international NGO Oxfam in a report last month entitled "Rigged Rules and Double Standards" attacked rich countries for failing to remove barriers to African trade. Oxfam's Senior Policy Adviser, Kevin Watkins talked to allAfrica.com about whether the U.S. was doing enough.
The US argues that through its AGOA programme, it is doing what's important to restructure trade between Africa and the US. How far does AGOA answer the criticisms leveled in your report?
Well, I think what AGOA has done is to provide some market opportunities for a relatively small group of countries across a relatively small range of products. That's not to deny that there has been significant benefits for countries like Lesotho, Malawi, Madagascar, to some degree, but there are some serious problems.
To cite one problem, this is a unilateral provision at the discretion of the US Trade Representative which can be withdrawn at any time. And I think we all know, unilateral provisions are a potential disincentive to investment because of the uncertainty that surrounds them.
There are serious problems with product coverage. A number of agricultural items are excluded. And, it's all very well to say that over 90% of produce from sub-Saharan Africa enters the United States duty-free - the European Union says exactly the same thing - but that's partly because there are very significant barriers to entry in other areas.
To take one illustration, if you take a sector like textiles, a number of exporters in West Africa and East Africa are trying to access American markets, there's a 'rules of origin' provision which says that you can only access the American markets if your manufacturing cloth is made from imported American yarn or you are supported by investment from the United States. Now for a country that's supposed to believe in globalization, that's a peculiarly mercantilist approach to international trade.
And, of course, all of this is before we talk about the heavy burden of conditionality that comes with AGOA. The eligibility requirements include that you enforce US intellectual property rights, that you open your doors to foreign investment, that you liberalize your market for US goods and services. None of this is designed in the best interests of sub-Saharan Africa and potentially all of those provisions have very adverse implications for poverty reduction in Africa.
So you'd argue that what's being done under AGOA is skewed in favor of the United States; you'd say that while it may be benefiting some African countries, in some ways, a much fairer system would be achieved if change was delivered through the WTO and applicable across the board instead of on a bilateral basis?
Well, I think the U.S. could clearly do far more in terms of improving market access to sub-Saharan Africa and it is not just a question of opening borders. It's a question of supporting production, of increasing aid and infrastructure to enhance the supply capacity of sub-Saharan Africa, but it's also about looking at trade in an integrated way because what we're talking about here, in the last analysis, is relatively small opportunities on the export side, as I said, for a small group of countries.
We've got the United States pushing through a farm bill which is going to increase subsidies to agriculture by between 17 and 20 billion dollars a year which is going to perpetuate massive over-production and subsidize export dumping by the US which is going to destroy markets for Africa exporters.
Just to take one example - exporters of cotton are losing about $250m a year because of US agricultural subsidization. You know, it's this sort of practice of giving with one hand and taking away with another that has got this sort of initiative bad press in sub-Saharan Africa.
But the Africa Trade Representative Rosa Whitaker argues that those subsidies that you see in the farm bill are not "trade-distorting" subsidies.
Well what she means by that is precisely what the European Union means when they use the exact same terms. They mean that the subsides that we choose to use don't count because it doesn't suit our vested interest to count them as subsidies.
I don't think any credible economist in the world would look at the U.S. farm bill and the levels of subsidisation that are attached to it and would say 'this is not going to have a significant bearing on production'. This is fantasy-land economics, if she actually believes that.
These are real subsidies that are going to result in real transfers to farmers that are going to influence production decisions and are going to generate over-production, destabilize and depress international prices. There are some very, very big vested interests that will benefit from it, large-scale American farmers, big agricultural agro-processing industries and cereals exporters; please let's not pretend that this has anything to do with the interests of developing countries or that we're not talking real subsidies, because we are.
So when the U.S. says it and other governments are working with the WTO to level the playing field and broaden out the benefits gained from AGOA, do you just take that with a pinch of salt? Or do you acknowledge that there could be a process going on which will lead to a fairer global trade system?
Well, I think what you see in international trade is a lot of use of this metaphor of a level playing field and the reality is a playing field which slopes downhill all the way from Europe and the United States because these are the world's economic superpowers and they're rigging the rules of the international trading system in their own interests.
You know we see the United States attempting to take textiles and garments out of the liberalization process in the WTO. We see the United States and European Union colluding in effectively taking agriculture out of any sort of discipline under the World Trade Organization and these are two areas in which developing countries stand to lose the most if there's not a good deal in the WTO.
And at the same time, in areas like foreign investment, intellectual property rights, services and procurements, where there are very large-scale corporate interests involved in the United States and European Union, there's an extremely aggressive liberalization agenda being pushed which is going to force developing markets to open their markets in a way which is clearly not in their best interest.
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So, this is an unequal bargain. It's a bargain in which developing countries are being told, if you want to export garments to us, you give us access to your banking sector and it's a bargain which is ultimately going to exacerbate poverty, not reduce it.
So, say an African trade minister says to you, 'but look, we've got completely flat growth here. We need their investment. We need to be able to have something to sell. We've got to do it on whatever terms they offer and we'll just try to wriggle out later - we can't sit and wait here for a perfect world.' What do you say to that?
Well, I don't think anyone's arguing that you have to sit and wait for a perfect world. There's no question that the international trading system does offer real opportunities to sub-Saharan Africa and developing countries. It does have a potential to reduce poverty.
But in order to take advantage of the opportunities provided by international trade, developing countries need two or three things. They need better access to northern economies. They need to better regulate their own economies - and that includes foreign investment and imports into their own economy in a manner that's in the best interest of poverty reduction.
You know, developing countries are not in the same position as industrialized countries when it comes to adjusting to international trade pressures. So, rich countries have to take into account the special circumstances of developing countries and they need to reflect that in their approach to negotiations at the WTO. What they currently do is to enforce rules that skew the benefits of trade away from Africa and other developing regions towards the rich world.
