UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER
Africa: US/Africa Economic Policy, 04/14/'96

Africa: US/Africa Economic Policy, 04/14/'96

Africa: US/Africa Economic Policy
Date Distributed (ymd): 960414

On February 1, 1996, the Office of the United States Trade Representative released a Comprehensive Trade and Development Policy for the Countries of Africa, in compliance with a 1994 Congressional mandate. Excerpts from this document were distributed on February 24 via our Africa Policy Electronic Distribution List, along with instructions for obtaining the complete text at the US Trade Representative's Web site: http://www.ustr.gov/reports/africa/

The Trade Representative's report constitutes a set of policy proposals which are to be reviewed and amended by Congress on an annual basis. Members of Congress have formed a bipartisan Congressional Caucus on Trade and Investment in Africa to undertake such a review. In response to an invitation by the Caucus to submit responses to the report, the Washington Office on Africa, on behalf of 18 organizational signatories, sent the following letter to the Caucus leaders, representatives Philip Crane (R-IL), Benjamin Gilman (R-NY), Jim McDermott (D-WA) and Charles Rangel (D-NY).

April 11, 1996

Dear Representatives Crane, Gilman, McDermott, and Rangel:

Thank you for your invitation to respond to the Comprehensive Trade and Development Policy for the Countries of Africa, released by the Office of the United States Trade Representative on February 1, 1996. We applaud the formation of a bipartisan Caucus on Trade and Investment in Africa and appreciate the Caucus efforts to promote a thorough and participatory discussion of these vital issues.

We congratulate the original authors and supporters of the 1994 legislation which gave rise to these policy proposals. We concur in their assessment that a coherent and effective US policy towards Africa must encompass a full range of interlocking issues, including trade, development, and investment.

We strongly support the continuing efforts of both Congress and the Administration to formulate an integrated US-Africa trade and development policy. Although we have strong reservations about the current document, we believe that it represents a valuable preliminary step toward the realization of that goal.

In particular, we wish to affirm the document's emphasis on the creation of permanent structures within the Executive branch responsible for coordinating US-Africa trade and development policy and overseeing its implementation. We believe that this will help to raise the visibility of US-Africa relations and encourage a thoughtful and systematic approach to the expansion of US ties with the continent.

We also support the document's attention to facilitating regional coordination in Africa. The proposed provisions relating to the designation of groups of countries for cumulation treatment under the terms of the GSP will create new opportunities for African nations.

Several other strategies mentioned in the document are worthy of further exploration. In particular, we would endorse the development of creative and flexible sources of capital and credit, geared to the needs of small producers, credit unions, and cooperative associations. Similarly, we support proposals designed to increase Africa's access to, familiarity with, and use of electronic networks particularly where these seem likely to create opportunities for grassroots community groups and non-governmental organizations to participate more effectively in defining development agendas.

While we see these as positive aspects of an emerging policy, we believe that the current document ignores many aspects of African realities and disregards well-grounded African analyses of key issues. Instead, it adopts a "one-size-fits-all" approach to development, the many flaws of which have been repeatedly identified by critics in Africa and around the world.

If we are serious about formulating a comprehensive US trade and development strategy that is capable of narrowing the economic gulf between (and within) the US and Africa, establishing a foundation for sustainable development, and addressing our mutual needs for security and prosperity then we must radically revise our policy priorities. We therefore propose that this process recognize the following general principles:

1. Trade programs, debt reduction, aid, and other economic cooperation initiatives should be conditioned on transparent standards applied to recipient governments. But such conditionalities should be developed in open debate, rather than being imposed by donors according to a set of rigid economic prescriptions.

A strategic approach to African development requires explicit discussion of the combined impact of aid, trade, debt, and different structural adjustment policies. The US can most usefully shape its own policies on these complex and related topics only if it is willing to engage in genuine dialogue on these issues within African and multilateral contexts. This should include not only the clubs of Western donors that coordinate policy towards particular African countries, but also a broad range of scholars and representatives of civil society.

The US Trade Representative's policy proposals are premised on the assumption that statist economic regimes are primarily responsible for a failure to deliver sustained increases in prosperity for the peoples of Africa. The policy points with approval to the rapid growth achieved by many Asian economies over the past three decades without acknowledging the central role which the governments of these countries played in orchestrating the development process, protecting growth industries, and ensuring social investment in education and agriculture. At the same time, the document presents an unambiguously favorable depiction of structural adjustment policies, ignoring the very grave objections which have been raised by African analysts and which are receiving increasingly serious consideration within the World Bank. As a result, the policy states flatly, "A successful development strategy must be trade-led and market-oriented."

In fact, the experience of most African countries demonstrates that this rigid formula has been equally unsuccessful in generating "sustained increases in prosperity" for Africa's poorest households. Unregulated markets hold few rewards for those who approach them with little or no economic clout. Nevertheless, the dominant policy-making trend of the past decade has been to demand that more and more economic relationships be governed by the market. This model has obstructed the efforts of African leaders, United Nations agencies, and many non-governmental organizations to identify and to implement programs more consistent with "sustainable development."

Ultimately, public sector vs. private sector debates obscure much more important questions: questions about what policy choices are being made, about how the fruits of growth and development are distributed within a society, and about the extent to which policy-makers are accountable to the people whose lives they affect. Similarly, a narrow focus on macroeconomic indicators (such as aggregate economic growth) disguises more localized, but equally important, dynamics (such as the differential impact of development across gender, class, ethnicity, etc.).

US policy should not aim to impose market-oriented solutions on Africa, especially when these involve efforts to constrain, indiscriminately, the role of government. Instead, US trade and development strategies should be components of a broader policy agenda which recognizes a useful and legitimate regulatory role for government, promotes the public accountability of government officials, encourages greater incentive-orientation in all economic relationships, and facilitates the efforts of African public, private, and voluntary sector organizations to identify and implement new economic initiatives suited to local needs and conditions. Access to US development assistance and preferential trade and investment programs should be conditional not merely on the beneficiary's adoption of sound and appropriate economic policies, but also on a demonstrated commitment to sustained social investment, to principles of open and democratic administration, and to the full recognition of basic human rights (including, in particular, the rights of women, youth, landless households, and other historically marginalized groups).

2. Any comprehensive policy must address Africa's enormous debt burden.

The current proposals only mention Africa's debt burden in passing. They include no substantive recommendations for a systematic program of debt reduction. Sub-Saharan Africa's debt grew from $84 billion in 1980 to $223 billion by the end of 1995. Twenty-eight sub-Saharan countries have amassed debts which total more than twice their annual income from the export of goods and services. Partly in the interests of enhancing the ability of these nations to service their onerous debts, G-7 nations and Bretton Woods Institutions have promoted export-led growth. As a result, sub-Saharan economies have made little progress toward self-sufficiency while periodic over-production has weakened commodity prices and diminished the purchasing power of their exports.

Overwhelming debt service obligations prevent most African countries from embarking on any integrated and effective development plan. US policy must acknowledge this situation and address it through the introduction of systematic measures to reduce Africa's bilateral and multilateral debt. Africa's bilateral debt to the US is less than 3 percent of its overall debt burden. But the US can and should press for revision of the so-called "Naples Terms" that currently govern bilateral debt restructuring. These terms are inadequate in addressing Africa's enormous bilateral debt, primarily to European governments. For example, Uganda was granted only 2 percent reduction of its $3 billion debt under the Naples terms, despite its strong compliance with economic adjustment programs.

In addition, the US should vigorously support efforts for a comprehensive approach to Africa's debt to multilateral institutions. Any solution should provide additional funding, rather than divert scarce resources from development aid, and should give priority to countries committed to poverty reduction.

3. A top priority for US trade policy should be the establishment of fair trading terms. Congress is right to recognize trade's potential as a tool for the promotion of economic growth and development, both in the US and in Africa. In order for it to fulfil that potential, however, US policy must do more than simply expand US exports to Africa. Trade growth will only be sustainable if it is bidirectional and if it meets the needs of both partners. Fair terms of trade are a prerequisite for such durable partnerships.

The provisions of the GATT treaty, which govern international trade, generally favor industrialized nations. Most African countries have less capacity to take advantage of the new trade opportunities expected to flow from the Uruguay Round agreements. The US should enter into a regular dialogue with a broad cross-section of Africans in order to define more equitable trade terms and to work for their eventual incorporation into existing agreements. In the interim, the US should endeavor to minimize GATT's negative impact on African trading partners by making full use of provisions designed to assist developing countries (such as the Generalized System of Preferences). It should also increase its technical assistance programs to facilitate regional integration and economic diversification.

4. Development assistance should continue for the foreseeable future. Carefully targeted development assistance can complement trade and investment growth to accelerate economic transformation. Moreover, the US must share responsibility for Africa s problems. Many of Africa's present problems are directly attributable to the Cold War which made countless African nations battlegrounds for US-Soviet competition and to the continent's long and negative experience of precolonial and colonial engagement by Western powers. The US should be as active in addressing the consequences of these struggles as it was in perpetuating them.

At the same time, the US must radically reassess its assistance strategies and priorities. We cannot afford to squander funds in the pursuit of short-term economic objectives, on well- intentioned projects which are peripheral to the needs and interests of their ostensible beneficiaries, or on the cultivation of fragile alliances with governments which do not enjoy the support of their citizens. US assistance must be aid that works. It must advance America's interests in long-term peace and security by promoting sustainable and equitable development. African assistance programs should emphasize investment in both physical infrastructure and in human resources. Social investment is especially important, not only because it puts people at the center of the development process, but also because it enhances the potential for rapid and equitable economic growth.

Focused efforts to prevent humanitarian crises are also priority assistance investments, given their potential to avoid more costly crisis-relief expenditures later. And humanitarian aid needs to be rethought so that it lays the groundwork for long-term development rather than only addressing immediate disasters.

In conjunction with the reorientation of its funding priorities and the other initiatives discussed above, the US should renew its commitment both to bilateral aid programs and to multilateral institutions, including UN agencies and the IDA facility of the World Bank. US assistance programs should achieve a rough balance in their support for public, private, and voluntary sector initiatives. US aid could be particularly valuable in encouraging national and regional dialogues on trade and private sector development by engaging a cross section of the society (men and women; rural and urban; employed, self-employed, unemployed, and under-employed; public, private, informal, and voluntary sectors; etc.) in discussions related to these topics.

Finally, we recognize that this is an evolving policy which is scheduled to be reviewed annually over the next four years. We welcome the opportunity to be involved in this process on an ongoing basis. We also encourage the Caucus to seek out a variety of African perspectives and advice as frequently as possible.

Sincerely,

American Committee on Africa
Jennifer Davis, Director
Bread for the World
David Beckmann, President
Constituency for Africa
Mel Foote, Executive Director
Evangelical Lutheran Church in America, Lutheran Office for
Governmental Affairs
Mark Brown, Assistant Director for Advocacy
Global Ministries of the United Church of Christ and the
Disciples of Christ, Africa Office
Rev. Dan C. Hoffman, Area Executive, and Mr. Erich
Mathias, Program Associate
Inter-Church Coalition on Africa, Economic Justice Programme
John Mihevc, Programme Officer
Maryknoll Justice and Peace Office
Terence W. Miller, Director
Mennonite Central Committee
Jim Shenk and Eric Olfert, Co-Secretaries for Africa
National Council of Churches, Africa Office
Willis Logan, Director
Presbyterian Church (USA)
Rev. Jon T. Chapman, Area Coordinator for Southern Africa
Presbyterian Church (USA), Washington Office
Elenora Giddings Ivory, Director
Progressive National Baptist Convention, Home Mission Board
Rev. Archie LeMone, Executive Director
Society of African Missions
Stephen G. Price, Office of Justice and Peace
Society of Missionaries of Africa
William C. Dyer, Justice and Peace Officer
United Church of Christ, Office for Church in Society
Rev. Jay Lintner, Director, Washington Office
United Methodist Church, Africa Office
Doreen Tilghman, Assistant General Secretary
United Methodist Church, Women's Division
Anna Rhee, Executive Secretary for Public Policy
Washington Office on Africa
Rev. Dan C. Hoffman, Chair, Board of Directors

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Message-Id: <199604141755.KAA28949@igc3.igc.apc.org> From: "Washington Office on Africa" <woa@igc.apc.org> Date: Sun, 14 Apr 1996 13:53:11 -0500 Subject: Africa: US/Africa Economic Policy

Editor: Ali B. Ali-Dinar

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