Africa: US Trade Policy (excerpts), 02/24/'96

Africa: US Trade Policy (excerpts)
Date Distributed (ymd): 960224

The U.S. Congress, in approving the Uruguay Round Trade Agreements in 1994, included a provision that the President should develop and implement a comprehensive trade and development policy for Africa, and present annual reports on its progress over a four-year period. The first report, excerpted below, was presented on February 1. Initial reaction from Congress and from non-governmental organiations has been that the report falls far short of the stated objectives, pointing out that it is mainly a compilation of existing programs, includes an uncritical endorsement of questionable structural adjustment programs, and fails to address the critical issue of Africa's debt.

A bipartisan congressional caucus on Africa Trade and Investment is being formed, which will prepare its own response to the administration's policy over the next few months. The caucus welcomes input from a wide variety of sources on the strengths and weaknesses of the administration policy, as well as new suggestions relevant to presenting a more adequate alternative. Comments should be sent to Charles Williams, Chief of Staff, Office of Rep. Jim McDermott, 2349 Rayburn Building, Washington, DC 20515. Phone 202-225-3106; fax: 202-225-6197; e-mail: not yet available.

The text below includes sections 1 and 2 of the document prepared by the United States Trade Representative's office in the White House, as well as the table of contents for the remaining sections.

Correction: In the Trade Background Paper distributed by APIC in December, it was erroneously noted that the Generalized System of Preferences (GSP) was renewed for five years. In fact the renewal term was changed to only one year when the legislation was incorporated into another bill, which was vetoed by President Clinton. GSP renewal will accordingly be on the congressional agenda this year as well.

A COMPREHENSIVE TRADE AND DEVELOPMENT POLICY FOR THE COUNTRIES OF AFRICA A Report Submitted by the President of the United States to the Congress

I. EXECUTIVE SUMMARY

This report presents a comprehensive policy framework through which the United States will pursue its trade and development strategy with the 48 countries of Sub-Saharan Africa. Increased economic growth in Africa would not only stabilize the region financially and politically, but also create greater opportunities for U.S. businesses and investors and more jobs for Americans.

To seize the opportunity for partnership aimed both at supporting African objectives and pursuing U.S. interests, this policy establishes a framework for supporting and facilitating African efforts to create an enabling environment for the promotion of trade, investment, and sustainable development. To address effectively the wide spectrum of challenges that confronts African development, the policy framework outlined in this report is structured around five basic objectives: trade liberalization and promotion; investment liberalization and promotion; development of the private sector; infrastructure enhancement; and economic and regulatory reform. This report offers a summary of these objectives and the initiatives being pursued in each area. This Administration is also opening a wider dialogue with interested parties in Africa and the United States for the purpose of sharpening the focus of the U.S. role in the years to come. Developing a coherent strategy for promoting trade and development in Sub-Saharan Africa requires a coordinated effort among the Administration, the Congress and the private sector.

The United States recognizes the difficulties African countries have faced in their efforts to develop both human and economic capital. Problems such as overwhelming debt burdens, flawed economic policy choices, poverty and widespread unemployment, weak private sectors stifled by dominating parastatals, environmental degradation and an absence of democratic political institutions have combined in the past to hamper Africa's aspirations for growth and development. However, change has begun to sweep the African continent as countries are increasingly abandoning the discredited statist policies of the last three decades and committing to policy changes based upon democratic political principles and market-based economic reforms. This growing commitment to democracy and structural adjustment inspires optimism about the future of Africa and provides new opportunities for the United States both to support African efforts and to pursue American economic and security interests.

Indeed, African countries have begun to recognize the critical importance of creating a policy environment conducive to investment and growth. A recent World Bank report documents a direct correlation between those countries that have embarked on major policy reforms and those that have experienced the greatest economic growth. In addition, the report shows that bilateral and multilateral assistance have been instrumental in supporting a stable policy environment. This allows reforms the time necessary to take hold and has helped catalyze private investment, which will be the engine of future growth.

The challenge is to promote increased growth, often drawing upon the continent's fragile but rich resource base, in a manner which is sustainable and promotes individual initiative and private investment. Many countries are making significant progress in implementing policies which promote the husbanding of the resource base, however, environmental concerns still threaten many short term growth options.

Between 1990 and 1994, the United States provided $13.6 billion in all forms of bilateral and multilateral assistance to Africa. These funds promoted trade and development, helped develop the private sector, enhanced infrastructure, supported economic and regulatory reform, encouraged democracy, provided technical assistance and food aid, and helped stem environmental degradation.

In addition, multilateral institutions have also played a major role in assisting development in Sub-Saharan Africa: between 1993 and 1995, the World Bank Group provided over $3.7 billion for structural adjustment, private sector development and civil service reform in Africa; the International Monetary Fund had total credit outstanding to Africa of about $9 billion as of June 1995 to promote viable financial and balance of payments positions; and the African Development Bank committed over $13.6 billion to Africa (including North Africa) between 1990 and 1994 to support policy reform and economic development.

However, resources available to the United States Government, multilateral institutions and others providing official development assistance to Africa are in decline. This requires U.S. policy to focus on appropriate allocation of available funds and on successfully attracting more private sector participation and investment. U.S. policy will also seek to increase cooperation among donor nations and multilateral institutions.

This report outlines a comprehensive trade and development policy for the countries of Sub-Saharan Africa aimed at accelerating economic growth. It first notes the policy challenges and the reforms necessary for economic development and social stability. It then offers a brief summary of the critical policy choices the countries of Africa have made. After reviewing both bilateral and multilateral policies and programs currently in operation, this report defines objectives and new initiatives for increasing trade and development in Africa.

II. POLICY STATEMENT

The primary objective of the Administration's Comprehensive Trade and Development Policy is to work with the people and leaders of Africa in the pursuit of increased trade and investment, and sustainable economic development.

Achievement of these objectives would, in turn, enable the countries of Africa to become more fully integrated into the global economy and share in the prosperity enjoyed by participating countries.

The thrust of this policy is captured in the following passage from the Communique from the June 1995 G-7 Halifax Summit which appeared under the heading of Promoting Sustainable Development:

A higher quality of life for all people is the goal of sustainable development. Democracy, human rights, transparent and accountable governance, investment in people and environmental protection are the foundations of sustainable development. The primary responsibility rests with each country but bilateral and multilateral international cooperation is essential to reinforce national efforts. We are committed to securing substantial flows of funds and to improving the quality of our assistance.

As this statement makes clear, the responsibility rests with African countries to commit themselves to these objectives and to make the policy choices that will enable them to achieve these objectives. Help from outside Africa cannot overcome lack of commitment or wrong choices by the governments or people of Africa. However, if the commitment is there and the right choices are made, external assistance can make a valuable difference. The commitment and right choices now being made by a number of African countries give us ample reason to re-energize our efforts and to join with those countries in a partnership to pursue our mutual interests in democracy, political stability and economic growth.

These historic policy changes offer a critical opportunity to the United States. By supporting African countries in the pursuit of their development objectives, many of our own interests -- from the promotion of American trade to international security concerns -- can be advanced simultaneously. Economic development in Africa will mean expanded trade with the United States, resulting in economic growth and new jobs for Americans as well as for Africans. The continued development of democratic institutions in Africa will not only stabilize the environment for this economic growth but will also help counter forces that threaten U.S. security, such as terrorism, refugee flows, narcotics trafficking, humanitarian crises, and environmental degradation.

Strengthening the synergies between trade and development is a major objective in U.S. policy toward Africa. The successful experiences of East and Southeast Asia demonstrate that rapid expansion of trade leads to rapid economic growth and employment. The resulting increase in incomes, in turn, leads to greater foreign and domestic investment and increased demand for foreign goods and services. Foreign development assistance is replaced by increased trade and foreign and domestic private investment. Development then becomes self-sustaining.

Creating a more hospitable environment for private investment is critical to the success of Africa's development. We are in an era of declining official development assistance, both bilateral and multilateral. Future official aid programs will not be large enough to provide all, or even the majority, of the financing needed for Africa's development. Instead, they increasingly will serve to prepare the policy and management context for, and to catalyze, inflows of private capital. The emphasis, whether in aid councils or business development activities, must be on supporting those countries that show a willingness and ability to implement reform.

Given the current fiscal constraints faced by the United States, the Administration will not request any additional funding at this time. Funding for these activities will come from within current budgets. Moreover, since the budgets of the agencies participating in this policy are expected to decline in the short-term, it is probable that current levels of activities may even decline.

The United States will focus its support on those countries in Africa that are pursuing meaningful structural adjustment and economic reform because they have the greatest chance of success. Specifically, the United States will:

* join in multilateral efforts to assist those African countries undertaking meaningful economic and regulatory reform, including debt reduction where warranted;

* support efforts to improve essential government and non-government institutions.

* support efforts to improve physical infrastructure needed in a modern market economy;

* create a more growth-oriented business climate that will attract foreign as well as domestic investment and generate expanded trade in which U.S. firms can participate as effective commercial partners;

* remove barriers to trade in Africa and increase African participation in the world trading system, including the WTO, in the U.S. GSP program, and strengthen intellectual property protection;

* expand advocacy and support programs for U.S. exporters and investors in Africa; and

* promote greater regional integration within Africa.

Table of Contents of Remaining Sections

[Full text available on the Web at the URL's indicated for each section. For information on how to retrieve Web documents by e-mail send a message "help" to webmail@www.ucc.ie.]

III. Background
<URL=http://www.ustr.gov/reports/africa/3.html>

IV. Challenges Facing Sub-Saharan Africa
<URL=http://www.ustr.gov/reports/africa/4.html>

V. African Initiatives
<URL=http://www.ustr.gov/reports/africa/5.html>

VI. Overview of Trade and Development Programs Currently in
Operation
<URL=http://www.ustr.gov/reports/africa/6.html>

A. United States Government Trade and Development Programs for Sub-Saharan Africa
B. Multilateral Programs for Sub-Saharan Africa
1. World Bank Group
2. International Monetary Fund
3. African Development Bank
4. World Trade Organization
5. United Nations

VII. A Comprehensive Trade and Development Policy Framework
<URL=http://www.ustr.gov/reports/africa/7.html>

A. Trade Liberalization and Promotion
B. Investment Liberalization and Promotion
C. Development of the Private Sector
D. Infrastructure Enhancement
E. Economic and Regulatory Reform

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Message-Id: <199602241545.HAA12161@igc3.igc.apc.org> From: "APIC" <apic@igc.apc.org> Date: Sat, 24 Feb 1996 10:40:32 -0500 Subject: Africa: US Trade Policy (excerpts)

Editor: aadinar@mail.sas.upenn.edu