Thursday, January 31, 2013
US-Africa Trade Falters as China Steps Up
Views Expressed Are Not Necessarily Those of AMIP News
Africa’s international relationships are increasingly hinged on trade and investment rather than strategic security and aid, but attitudes in Washington are slow to change.
While many Africans were celebrating President Barack Obama’s re-election victory, arguably a more important leadership shift was taking place across the Indian Ocean. Xi Jinping, chosen by the Beijing elite to lead China for the next decade, may not be a household name outside of his home country, but he will be presiding over what may be Africa’s single most important strategic relationship in the 21st century.
China’s growing commercial engagement with Africa is now well-known. Trade has grown more than tenfold, overtaking U.S.-Africa trade in 2009, and is projected to reach $220 billion this year by some measures, up from around $166 billion in 2011. As other emerging economies such as Brazil, India and Turkey also scale up trade and investment relations with Africa, their focus is overwhelmingly on commerce, not security and aid.
While Europe and the U.S. continue to account for the majority of foreign direct investment to Africa, the gap is narrowing. The likes of Huawei and ZTE of China, Brazil’s Vale and India’s Bharti Airtel and Tata are planting roots across the continent. Washington’s response has been sluggish.
On trade, the landmark African Growth and Opportunity Act in 2000 has helped, providing duty-free entry into the U.S. for most of Africa’s exports. But volumes have fallen sharply recently, in part due to the global economic downturn. For the first half of 2012, total U.S. trade with sub-Saharan Africa was at $48 billion, a decrease of nearly a quarter compared to the same period in 2011. Moreover, many goods exported from Africa to the U.S. under AGOA are, in fact, made in China and transported via African platforms to the U.S. to take advantage of the AGOA framework, which has no “rules of origin” provisions.
Next to China, U.S. trade numbers look like small beer. And while Chinese firms can count on dedicated and focused state support, U.S. businesses are frustrated by what they see as a lack of interest from Washington in boosting trade ties with Africa. “Developing greater U.S. investment in Africa has not been the highest priority of this administration,” Stephen Hayes, president and CEO of the Corporate Council on Africa, told This Is Africa before the presidential elections. “Security-related issues are the highest priority: Somalia, Sudan, northern Nigeria, the Maghreb, and others…[And] the Administration is very serious in its democracy initiatives. I only wish that there were also economic initiatives that fit the need to develop the private sector of Africa, in part through greater US investment…
“There are some within the Administration who have worked hard at this, such as assistant secretary of state Johnnie Carson and a few others. However, overall the attitude to business has been lukewarm at best. It simply is not their priority. The ethos of many in the bureaucracy is that of a traditional development mode.”
Yet the Obama administration knows what it is up against. “The US has been aware for some time of the rising influence of China in Africa,” says Paul Ryberg, president of the African Coalition for Trade. “The difficulty is what can be done to enhance the competitiveness of US companies in Africa when they are often called upon to compete with state-owned Chinese entities, especially at a time when many political groups in the US are calling for less, not more, government involvement in the economy.”
The White House has responded. On the back of the new strategy towards sub-Saharan Africa launched in June, Washington is pushing a ‘Doing Business in Africa’ Campaign. Acting Secretary of Commerce, Rebecca Blank, on a recent trip to South Africa, described it as “an unprecedented, whole-of-government approach to promote more US trade with Africa…The overarching goal is to dramatically strengthen US commercial, trade and investment ties with sub-Saharan Africa – a critical part of the president’s strategy.”
Such assertions will be welcomed by the business community, but while the Obama era has featured much rhetoric, delivery must be closely watched.Over the last two years, the Department of Commerce quietly closed offices in two of Africa’s business hubs – Ghana and Senegal – citing budget cuts. Those closures came despite heightened corporate interest from the US. Groups entering Africa of late include Walmart, which received approval for its $2.4bn purchase of South Africa’s Massmart last June, giving the retail giant a foothold in more than a dozen sub-Saharan African countries. General Electric has announced its plans to turn Nigeria into its hub for the continent. Two of the world’s largest private equity firms, Carlyle Group and KKR, have also recently entered.
The Department of Commerce now insists that it is upping its game. “In conjunction with President Obama’s Africa strategy, the Department of Commerce is actively reaching out to our public and private partners to work on ways to encourage further commercial engagement throughout sub-Saharan Africa,” says Francisco Sánchez, under secretary of commerce for international trade. “Many economies in Africa are growing quickly, and the International Trade Administration is here to help those companies looking to break into or expand throughout the region.”
When it comes to security, though, Africa is a priority region for Washington, especially terrorism and the spread of the al Qaeda network in the Horn of Africa and the Sahel. An interest in strategic oil reserves, primarily in West Africa, is another. Both are concerns more in line with the Cold War politics of the 20th century than the fast-changing dynamics of today.
Mr Obama once chided Mitt Romney’s assertion that Russia constitutes the principal security threat to the United States, with a wry response: “The 1980s called, they want their foreign policy back.” Critics may just as easily point the finger at his Administration for its dated approach to Africa.
The problem is that, when it comes to Africa, presidential weight is needed to get any initiative off the ground. “There’s a lot of competing interests for the president’s time and if they think something is a political loser they won’t go with it,” says Todd Moss, a senior fellow at the Center for Global Development, and a former deputy assistant secretary in the Bureau of African Affairs at the State Department.
“The President’s [Bush Junior] Emergency Plan for Aids Relief (Pepfar) and the President’s Malaria Initiative (Pmi) both had the president’s imprimatur because it’s the only way to get all the agencies to cooperate,” says Mr Moss. “If you don’t have the president putting his personal name on it then it won’t happen.”
That looks unlikely. Mr Obama is busy at home dealing with the dreaded ‘fiscal cliff’ negotiations. Abroad, there is the ‘pivot’ towards Asia, a central theme of Mr Obama’s foreign policy, reinforced by his decision to visit Thailand, Cambodia and Myanmar soon after his re-election. The shift has already been met with scepticism by the foreign policy community in Washington, and spending valuable political capital in Africa may simply carry too high a cost for the president.
But Mr Moss is cautiously optimistic about the second term. “If Africans expect more of the same, well, it would be hard to do less,” he argues. “If they believe that we’ll start to see more personal White House engagement in Africa then it’s possible we’ll see some modest increases.” Mr Hayes, of the Corporate Council on Africa, also hopes there will be “new US initiatives to Africa in 2013”.
The goodwill enjoyed by President Obama across the continent represents a unique opportunity for the US to position itself as a leading commercial partner. Doing so may prove to be in its long-term interest as Africa continues to move into the mainstream of global trade and investment.