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Remarks by Deputy U.S. Trade Representative Demetrios Marantis at the Third-Annual Africa AmCham Summit
Residence of the U.S. Chargé d'Affaires
October 22, 2012
*As Prepared for Delivery*
“Thank you to the U.S. Chamber of Commerce, representatives of African AmChams, and Kenyan businesses and associations present today for affording me the opportunity to be here. The energy that you bring to your work and the commitment you have to doing business in Africa is what drives the U.S.-Africa relationship forward. The U.S. government is committed to supporting your efforts through policies that will enable your continued success and take the U.S.-Africa trade relationship into the 21st century.
”The other day, I met a woman who embodies the success of U.S. trade policy toward Africa. Her name is Flotea Massawe, and she owns a small handicraft business that exports under the African Growth and Opportunity Act (AGOA). Flotea left school at an early age, leaving her with little in the way of job prospects. Flotea, however, had a skill: embroidery. Working in her living room with a single sewing machine and leftover fabric that she acquired inexpensively from a textile factory near her home, Flotea turned that skill into a business. Soon, Flotea could not keep up with demand. She had to hire employees, buy more equipment, and move into a larger space.
“But Flotea’s initial growth would not last long, as she quickly reached the limits of the local demand for her crafts. To survive, Flotea had to export. And to export successfully, she had to be competitive. So, Flotea took advantage of AGOA and the technical support that the U.S. government offers to help her reach new customers in the United States. Soon after, her business was growing again.
“Today, exports comprise more than half of Flotea’s sales. She employs more than 40 people – the majority of whom are women – and her business is thriving. Flotea has collaborated to make luxury handbags with famed designer Rachel Roy and has had her products sold at Macy’s, one of America’s most famous department stores.
“Flotea’s story happens to take place in Tanzania. But it is one that has been repeated all over Africa by countless other entrepreneurs. We have seen it right here in Kenya where two Kenyan companies, Premier Foods and Frigoken, have taken the U.S. specialty food market by storm, selling their processed vegetables and sauces to major U.S. supermarket chains. We have seen it in Liberia, where the Liberian Women’s Sewing Project gives women who have suffered the atrocities of civil war a chance to earn a decent wage by sewing world-class products for export. We have seen it in Swaziland where Eswatini Kitchens – which employs 500 HIV positive women – exports jams, chutneys, and hot sauce to U.S. store shelves, and supports a youth care program that provides housing, food and education to former street children, many of whom are AIDS orphans. We have seen it in Lesotho where an entire textile and apparel industry – employing 30,000 people – was created from almost nothing by luring foreign investment with an attractive business environment for firms interested in taking advantage of AGOA. And we have seen it in Ghana where women-owned businesses export shea butter-based beauty products to U.S. consumers.
“Flotea’s achievements, and those of all Africans who have realized success through AGOA, are a testament to how U.S trade policy – AGOA in particular – has worked for Africa. For more than a decade, AGOA has provided duty-free access to the most lucrative consumer market in the world for nearly every good produced by 40 of 48 sub-Saharan Africa countries.
“And because we understand that opening the door to the U.S. market is of no use if business owners do not have the capacity or capital to walk through it, the United States has committed substantial resources to trade capacity building – $4.4 billion from 2001 to 2011 – to support African exports under AGOA. Most of those activities are delivered by our three African Trade Hubs, one of which is housed here in Nairobi. From 2006 through 2010, these trade hubs facilitated over $178 million in AGOA exports, provided export capacity building assistance to over 234,000 firms, and trained nearly 660,000 Africans to build their capacity to trade competitively in global markets, including the United States. In fact, all of the success stories I mentioned earlier – Flotea, Premier Foods, Frigoken, Eswatini Kitchen, and the Liberian Women’s Sewing Project – received intensive assistance and support from these trade hubs. That is why just last year, at the AGOA Forum in Zambia, Ambassador Kirk and Secretary Clinton announced the launch of the African Competitiveness and Trade Enhancement Initiative (ACTE), which will commit up to $120 million to ensure that our African Trade Hubs are able to continue carrying out their important work.
“Since AGOA was first enacted, we have seen a three-fold increase in non-oil imports from Africa, which reached $5 billion last year. Those exports support jobs for people like Flotea and millions of Africans like her who, in turn, are now able to provide more for their families and communities. In fact, the African Coalition on Trade estimates that as many as 1.3 million jobs on the continent have been created by AGOA, and that it indirectly supports another 10 million jobs.
“More broadly, AGOA has also enhanced African economic growth and stability, and improved its business environment to the benefit of both African and U.S. firms and investors. Over the past ten years, sub-Saharan Africa has grown into an increasingly promising market for U.S. businesses. Six of the ten fastest growing economies in the world are found here. And this year alone, the region is expected to grow five percent, which would likely exceed that of Brazil, South Korea, Mexico, and the United States. Such impressive growth has created an expanding consumer class: 43 percent of Africans now earn enough discretionary income to qualify as “middle-class” consumers.
“More African consumers are good for both Africa and the United States. A growing base of African consumers with the means to purchase additional goods and services presents tremendous opportunities for U.S. firms and investors. A recent McKinsey study found that Africa offers the highest rate of return on FDI of any developing region, and has for some time. Consequently, FDI in Africa is rapidly approaching $80 billion a year and private investment flows to Africa now substantially exceed foreign aid. These trends suggest why the United States is committed to helping ensure that trade and investment continue to play an increasing role in Africa’s economic growth relative to aid and assistance.
“While the U.S.-Africa trade relationship advances and evolves, we continue to face key challenges in our efforts to promote the development of an open, transparent, predictable, and rules-based business climate in Africa that will foster increased U.S.-Africa two-way trade and investment. For example, Africa’s exports to the United States have grown and diversified under AGOA, but utilization of the market access AGOA provides remains low. The reasons are the same as those limiting intra-African trade: a range of supply-side constraints, including limited capacity to produce diverse, value-added products for competitive global markets; inadequate infrastructure; high energy and transportation costs; and customs and other barriers to cross-border movement of goods.
“These constraints hurt both African and U.S. businesses. U.S. businesses will invest more in the African market, increase partnerships with African firms, and introduce critical inputs and expertise that will stimulate more economic activity on the continent when, for example, the issues of transparency, governance, regulation, and corruption are addressed; when they can trust that there is sanctity of contract; and when market-based partnerships with African businesses can replace arbitrary local content laws. According to the World Bank Doing Business report, some African nations have significantly improved their business climate affecting trade and investment. However, many African nations still score towards the bottom of the Doing Business rankings.
“We must also account for global cross-currents that affect our mutual competitiveness. Increased inroads into the continent from emerging markets like China, Brazil, and India should not distract from the United States and Africa’s shared long-term vision of a more competitive and prosperous Africa. We must remain focused on key priorities, such as strengthening African regional groupings, like the East African Community (EAC), which represent small African nations’ best chance to compete against much larger emerging markets. We must also ensure that Africa invites the right kind of business and investment, the kind that will yield Africa secondary benefits, such as technology transfers, information exchanges, and the introduction of new innovative processes and techniques.
“Making progress on these issues will require African policymakers to make difficult choices. And many leaders throughout sub-Saharan Africa are doing just that. In recent years, more and more African policymakers are demonstrating a willingness to make bold choices to ensure political stability, improve the African business climate, and make critical economic reforms opening markets to two-way trade and investment. For example, here in Kenya, the clearance process at the Port of Mombasa was streamlined through the efforts of a public-private partnership that included banks, the police, and agricultural inspection units, among others. By working collaboratively, Kenyan leaders were able to reduce container layovers at the Port from 12 days to five. In Botswana, small businesses are no longer required to register or obtain trade licenses, reducing costs and increasing efficiency. In West Africa, initiatives like the Borderless Alliance – a public-private partnership – have been successful in addressing bribery, delays, high taxes, and inefficient procedures occurring at hundreds of checkpoints along West Africa’s primary trade corridors. By doing so, the Alliance has boosted trade, reduced high transportation costs, and improved the overall business environment.
“In the same way, the United States needs to rise to the changes and the challenges that have taken place in Africa over the past decade. On trade and investment, we need to realize that the Africa that existed when the U.S. Congress first passed AGOA is very different from the Africa that exists today. We need to realize that opportunities to grow our relationship exist not just in women like Flotea, but in U.S. companies that want to export to Africa and invest in its future.
“President Obama’s new strategy for U.S. engagement in sub-Saharan Africa reflects and responds to the realities of Africa today. The President’s strategy – premised upon the recognition that Africa is vital to U.S. long-term strategic and economic interests – outlines a multi-faceted, inter-dependent and mutually reinforcing approach. It seeks to strengthen democratic institutions; spur economic growth, trade, and investment; advance peace and security; and promote opportunity and development. President Obama has tasked my boss – the U.S. Trade Representative, Ron Kirk – with focusing primarily on the trade and investment pillar. And to implement President Obama’s vision, we are focused on a number of important priorities.
“Let’s start with AGOA, which has been a centerpiece of our success. We will continue our work to enable African exporters to fully utilize the market access AGOA provides. We have already taken a critical step in this regard by working with our Congress to extend AGOA’s third country fabric provision until 2015. That extension – long sought by our African partners – will enable exporters across the continent to continue to make use of one of AGOA’s most fundamental provisions. Kenyan apparel exporters are already making rapid gains in expanding their exports to the United States and Kenya may soon become sub-Saharan Africa’s largest apparel exporter.
“But one thing we learned in seeking this extension was the need for certainty and predictability. We came perilously close to seeing this provision lapse before our Congress acted. That is why we are committed to seeking a seamless renewal of AGOA as a whole before it expires in 2015. And that is why we have already started to imagine how a post-2015 AGOA should look.
“Second, we must redouble our focus on two-way trade. That is why we have launched the ‘Doing Business in Africa’ campaign as part of President Obama’s National Export Initiative (NEI). Our efforts to increase U.S. exports to Africa, as part of a broader program to double U.S. exports by 2014, has so far yielded successful outcomes for major U.S. exporters like Boeing, which has begun selling its new 787 Dreamliners to Ethiopian Airlines. And it has also helped small-and medium-sized U.S. businesses – many of whom are owned by women, African diaspora members, and other minorities – establish joint ventures with African businesses.
“Increased U.S. trade and investment in Africa is good for the United States, but it is also good for Africa. U.S. businesses in Africa do more than just spur economic growth and competitiveness on the continent, they provide real opportunity for Africans. Take, for example, Rita Kavashe, the Kenyan-born Managing Director for General Motors East Africa. Like some of you here this evening, Rita represents a new and ever-growing cadre of African nationals who are playing major roles in American-based companies operating in Africa. Rita and others like her demonstrate the success that can arise from the merger of U.S. business and African talent.
“Third, the United States is committed to supporting Africa’s efforts at regional integration, including efforts to establish the Tripartite Free Trade Area, which would create by 2014 a common market comprising the EAC, the Common Market for Eastern and Southern Africa (COMESA), and the Southern African Development Community (SADC). The United States also supports African efforts to eventually create a Continental Free Trade Area.
“Facilitating intra-African trade will also promote global trade. By reducing or eliminating tariffs and working to minimize non-tariff barriers across the African continent in the context of regional integration, African governments can ease the flow of people and goods across borders. This will create larger markets, enable economies of scale, and promote local, regional, and global trade, which, in turn, will foster a dynamic environment for economic growth across the entire region from which African and U.S. businesses will benefit.
“U.S. trade policy toward Africa has evolved to reflect this emerging dynamic and that is why, here in East Africa, we have launched the U.S.-EAC Trade and Investment Partnership. By supporting the EAC’s regional goals, we hope to help create a business environment in the EAC that is conducive to trade and investment both among the five EAC Partner States and between the EAC and the United States.
“On Friday, I met with the ministers of the five EAC Partner States, as well as with the EAC Secretariat. Together, we are laying out a partnership that is ambitious in its goals, yet pragmatic in its approach. Its success will benefit both African and U.S. businesses, making it an ideal model for future U.S.-African engagement on trade across the continent, as well as bilaterally.
“We agreed with the EAC Ministers on four key elements to our partnership. The first is to implement trade agreements and commitments on specific non-tariff barriers that impose significant costs on African and U.S. businesses and represent the principal impediments to increased intra-EAC trade. Trade facilitation is our initial area of focus, as we believe it is fertile ground for quick progress. Specifically, each EAC Partner State and the United States have assembled a technical team to focus on improved customs interconnectivity and harmonized procedures at EAC borders, both of which are critical to enhancing two-way trade.
“The second element is to implement a regional investment treaty. At present, the United States has concluded such a treaty with Rwanda, but not with any of the other EAC Partner States. And none of the EAC countries have comprehensive investment agreements with each other. Creating a regional treaty between the EAC member states and between the EAC and the United States will not only provide protections to investors, but also spur progress towards development of an integrated EAC investment regime, help create an integrated investment platform to attract larger investments, and assure potential investors that the EAC’s investment regime is gold standard.
“We understand that both of the above elements are quite ambitious and will therefore require the United States to offer additional resources and technical expertise. That is why the third element is to provide coordinated trade capacity building assistance to support our efforts under the Partnership. To that end, in our Joint Statement from Friday’s ministerial meeting, we announced that the United States would provide up to $10 million in additional funding to the EAC Secretariat to support their coordination of the EAC’s regional economic integration.
“The fourth and final element is to develop a commercial dialogue through which U.S. and EAC government officials can solicit input and advice from our respective private sectors. This is incredibly significant for the United States. It marks the United States’ first Commercial Dialogue on the continent and the only one the United States has launched on a regional, rather than bilateral, basis anywhere in the world. In late November, when the dialogue is formally launched, the EAC will join the company of only a handful of emerging markets – including China, India, and Brazil – with which the United States has a Commercial Dialogue.
“Leveraging existing efforts and utilizing all of the available tools, the U.S.-EAC Trade and Investment Partnership is a model for future U.S.-African efforts to enhance our two-way trade relationship. As we look to the years ahead, our goal is clear, the plan to get there is complete, and the timing is right. All that remains is that we maintain the strength of our convictions to make the hard choices success will require. To do so, we need only remember stories like Flotea’s – stories that remind us that trade is not about roads, or treaties, or containers of goods. Trade is about people. It’s about jobs. It’s about a better life for both Africans and Americans. Our people deserve every opportunity to realize their dreams. I look forward to working with you to ensure that they have it.”