Africa, Development & Aid, Economy & Trade, Headlines, North America

ECONOMY: U.S.-Africa Trade Rises, Falls Under New Deal

Emad Mekay

WASHINGTON, Jan 28 2004 (IPS) - U.S.-Africa trade fell in 2002, weighed down by a decline in U.S. exports of transportation goods and a decrease in energy exports from Africa, according to a U.S. report.

But trade is likely to pick up in coming years because of a deal between Washington and several African nations and a new U.S. energy policy, says the study from the U.S. International Trade Commission (ITC).

In 2002, U.S.-sub-Saharan merchandise trade totalled 24.1 billion dollars, down from 27.8 billion dollars in 2001. In the same year, U.S. exports to the area declined by 12.7 percent, to 5.9 billion dollars, and U.S. imports fell 13.5 percent to 18.2 billion dollars, says ITC.

The commission released its fourth annual report on Tuesday, calling it a tool that President George W. Bush can use to develop a comprehensive trade and development policy for the countries of the region.

The ITC says the controversial African Growth and Opportunity Act (AGOA) could help reverse the decline in U.S.-Africa trade soon. But activists who follow U.S.-Africa relations say the study actually proves AGOA is not living up to its billing.

Congress passed AGOA in 2000 after several years of debate. It eliminates U.S. import barriers on virtually all of sub-Saharan Africa’s main exports to the United States, particularly textiles and clothing.

In the first 11 months of 2001, U.S. imports of AGOA-covered products, excluding oil and other mineral fuels, rose 96 per cent to 1.2 billion dollars, leading U.S. officials to boast that the plan had worked to boost trade.

The Bush administration is hoping that its economic policy in sub-Saharan Africa will serve as a model for its broader approach to development, one that emphasises trade over foreign aid as the surest route to prosperity.

But critics note the administration’s focus on trade with Africa has served to obscure the decline in U.S. foreign aid spending in the continent.

They also say AGOA gives Washington an extra political weapon to wield against governments in Africa that do not toe the U.S. line on a whole host of issues, including Bush’s self-styled ”war on terror”.

Duty-free access under AGOA has done nothing to boost sales of African farm produce, while African farmers are still struggling against import quotas and low world prices, thanks to heavy subsidies that Washington and European governments pay to their farmers.

Critics say the latest ITC report only confirms that trend.

"What strikes me is that when AGOA was passed it was supposed to indicate improved trade with the U.S.," said Bill Fletcher Jr, president of TransAfrica Forum. "But now basically what they are saying is that it has been inconsistent at best".

"What this points out is that AGOA was effectively a bone that was thrown to Africa and that it doesn’t really address the real trade issues."

According to the report, 2002’s drop in U.S. exports to sub-Saharan Africa was primarily caused by cuts in exports of transportation equipment to South Africa and Kenya; the decline in U.S. imports from the area resulted largely from a fall in imports of energy-related products, including a 17.9 percent decrease from Nigeria.

The decline in energy products comes as Washington is trying to diversify its energy sources, which includes replacing Middle East oil with African exports. U.S. officials say that, along with Latin America, West Africa is expected to be one of the fastest-growing sources of oil and gas for the U.S. market.

Total U.S. imports, including oil products, from the countries eligible for the AGOA were almost nine billion dollars in 2002, an increase of 9.9 percent from 8.2 billion dollars in 2001.

The largest share of U.S. imports under AGOA came from Africa’s main energy exporter, Nigeria (60.2 percent), followed by South Africa (14.9 percent) and Gabon (12.7 percent).

Other major suppliers included Lesotho, Kenya, Cameroon, Mauritius, and the Democratic Republic of the Congo (DRC).

These imports were dominated by U.S. purchases of energy-related products in 2002, representing 75.9 percent of total AGOA imports.

According to the report, "as government officials, companies and international firms become more familiar with the advantages of AGOA, sub-Saharan Africa continues to attract investment driven by access to AGOA benefits".

But that growth is uneven, it adds. The textile and apparel sector has received significant investment, but other sectors, such as South Africa’s automobile sector and information technology in Uganda, are only beginning to benefit from AGOA-related investment.

The report forecasts increased foreign investment to the region even as portfolio flows to the region fell from one billion dollars in 2001 to 700 million dollars in 2002.

As in prior years, South Africa accounted for virtually all foreign investment to the area in 2002.

U.S. net direct investment to Africa totalled 861 million dollars in 2002, representing less than one percent of the country’s direct investment abroad.