Session IV - The U.S.-Africa Trade and Investment Relationship: AGOA and Beyond

Photo - From L to R: Katrin Kuhlmann, New Markets Lab, Jaswinder Bedi, Kenyan Export Promotion Council, Karen Bosman, Wesgro, Pierre Borjesson, H&M, H.E. Ambassador U.S. Dwarka-Canabady, Foreign Ministry of the Republic of Mauritius, Andrew Mold, United Nations Economic Commission for Africa 

 

On February 12, the Corporate Council for Africa (CCA) and the US Mission to the African Union co-hosted the U.S. – Africa Trade and Investment Forum in Addis Ababa. More than 300 people attended from more than 30 countries, including senior government representatives from the United States, the AU, Egypt, Madagascar, Rwanda, Mauritius, Sudan, Ethiopia, Niger, South Africa and Benin. Senior executives from more than 50 U.S. and African companies also attended.

 

Katrin Kuhlman of New Markets Lab began by noting that we have a new model to integrate the African market, led by Africa, and asked the panel to forecast what the future relations with the U.S. might look like. Companies active on the continent noted that access to the U.S. market under AGOA was a critical part of their commercial strategies. One company said the scale of its presence and activity will depend on AGOA’s status. African government representatives said AGOA is critical for them, and has allowed several countries to expand from sectors like textiles into medical devices. BREXIT has shown the value of trade agreements in creating the predictability and certainty that companies and countries need. African countries need to leverage AGOA into jobs.

 

Several panel members noted that the textile sector is just one of several undergoing significant restructuring worldwide. The fundamental market organization of the last three decades is changing as Asian consumers gain more money, and become a bigger part of the world market. As Asia increasingly produces to fill the Asian market, those companies will no longer be supplying European, African or American markets. While this opens up enormous opportunities for African firms, there are also significant challenges. One of those is that the very nature of the consumer is changing, in that they no longer look to buy their clothes off the rack at a store in the mall. Instead, they will increasingly expect to be able to order special-made self-designed products delivered to their doors in days, if not hours. They cautioned African governments not to negotiate a trade treaty in the AfCFTA that meets the needs of the market structure of the last decade, but to look forward to the coming decades. One panel member suggested that the future really won’t depend on trade preferences. The task for African countries is how to make African countries and companies more competitive against global competition and cautioned against simply trying to replace the Chinese textile industrialization model from the 1980s.

 

UNECA expects that implementation of the AfCFTA will boost trade volumes for the EAC by $1 billion per year. Greater integration is a very compelling case because of a number of economic and commercial trends. There are concerns, however, that the EAC may be losing momentum, as 2013 was the peak year for inter-regional trade within the EAC, after which it has declined 20%. There is wide disparity, however, within the EAC in terms of use of AGOA benefits.  Kenya has roughly $400 million in annual exports under AGOA, versus its neighbor Uganda at $1 million. Why has the EAC failed to respond to various changes and opportunities over the last 25 years? Part of the problem has been the impermanence of the AGOA provisions, and the uncertainty about its future. The panel expected that the AfCFTA will do a lot to boost EAC trade between members, which starts from a low base (to cite one example, Kenyan trade today with Ethiopia is only $90 million). The panel encouraged countries to find some way to conclude an agreement with the U.S. to hold onto the benefits of AGOA, while also applauding the AfCFTA, which should increase FDI.