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Remarks by Ambassador Michael Froman at the Opening of the 2016 AGOA Forum

Remarks by Ambassador Michael Froman at the Opening of the 2016 AGOA Forum

Washington, D.C.
September 26, 2016

*As Delivered*

Thanks very much. Good morning esteemed Ministers and heads of delegations from our AGOA Partner Countries, Secretaries-General and Commissioners of the Regional Economic Communities, Honorable Members of Congress, U.S. Government colleagues. It’s great to see so many friends here from the private sector, civil society, from our YALI program, who we have worked so closely with over the last several years. As I have learned from all of you, ‘All protocol observed.’

As we open this final AGOA Forum of the Obama Administration, it is hard not to be reflective.  As we look back at the last eight years, I remember the launch of the Feed the Future initiative that this department and USAID did so much to develop across Africa. There was the partnership that brought the Trade Africa program, started first with the East African Community, and then grew to a broader AGOA community. Power Africa, which started one day in a visit to the Rift Valley in Kenya to see if they could harness the potential of geothermal energy there, and it spurred on and inspired a program to try and electrify Africa. The YALI program, which the Assistant Secretary [Linda Thomas-Greenfield] mentioned. The Doing Business in Africa initiative, which culminated in just last week’s second U.S.-Africa Business Forum with representatives from 26 African countries and 200 business leaders. It has been an incredible period in our relationship, and I am grateful for our partnership with all of you that made that happen.

When we look around the world, there has been an explosion of innovation like virtually never before. Innovation that has changed every aspect of our lives.  In 2000, according to the ITU, there were about 730 million cellular subscriptions in the world.  Now, there are 7.4 billion, including 772 million in Africa alone. 

Google – today, a verb in the Oxford English Dictionary – is experimenting with blimps and driverless cars. Amazon hopes to start using drones to deliver packages. Microsoft is looking at ways to use old telephone towers to bring wireless capacity to rural African districts.  And applications like Facebook, and YouTube, Skype, and Twitter have revolutionized the way people connect to each other and to the rest of the world.

In Africa, home-grown technology has been bringing practical solutions to everyday problems.  In Kenya, for example, the 2007 launch of m-Pesa brought money out from under mattresses and onto mobile phones, empowering people who before were too poor or too remote to enjoy traditional banking. 

In Botswana, the startup Modisar aims to bring livestock management into the digital age.  The South African startup Gradesmatch developed a mobile application that provides educational opportunities and career guidance to South African students in remote areas.  And with more than 90 technology hubs throughout the continent, we know there is much more to come.

Containerization and air freight have made the world smaller than ever.  And, mirroring that, countries are increasingly seeking agreements to reduce the barriers that hamper trade between them. 

Last year, the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC), and the Southern African Development Communi­ty (SADC) launched the negotiation of the Tripar­tite Free Trade Area. 

The year before, three regional groupings – ECOWAS, SADC, and the EAC – concluded “Eco­nomic Partnership Agreements,” or EPAs, with the European Union. 

And now, efforts are underway to complete a Continental Free Trade area.

Here, in the United States, we signed the Trans-Pacific Partnership agreement with 11 Asia Pacific countries and are pressing forward with our negotiation of the Transatlantic Trade and Investment Partnership agreement with the EU.  This builds on the 14 agreements we already have in place with 20 countries.  And our efforts to reinvigorate plurilateral and multilateral processes at the WTO are making good progress.

Against this backdrop, the question that we arrive at today is: where do we go from here?  How can we further deepen and expand the U.S.-Africa trade and investment relationship 16 years into this “new century”?

Certainly, AGOA will continue to be a vital tool for the near future.  The program has had important successes, as the Assistant Secretary said.  It has helped sub-Saharan African countries nearly triple their non-oil exports to the United States and has supported diversification of exports toward manufactured products like textiles and apparel in Kenya and Ethiopia and automobiles in South Africa. And the 10-year extension of AGOA last summer by Congress will provide an added boost by giving businesses and investors an unprecedented period of stability in the trading relationship to step up their sourcing and investment decisions.  The one thing investors everywhere crave is predictability, and the 10-year extension of AGOA provides just that.

But the full potential of AGOA has not yet been fully reached, and we need to find ways to change that. Although sub-Saharan Africa now exports more in absolute terms to the United States than it did in 2000, Africa’s share of U.S. imports is still only one percent.  

AGOA beneficiaries only claim preference on a fraction of the nearly 6,500 el­igible tariff lines.  And only a handful of countries fully utilize its apparel provisions.

AGOA utilization strategies, which the USAID Trade and Investment Hubs, the African Development Bank, and others are developing with beneficiary countries, can help.  Through these strategies, and continued efforts to coordinate assistance to address supply-side constraints, we can work to prioritize sectors and products for AGOA trade and plan ways to boost competitiveness. 

But we should also challenge ourselves to think more broadly about the future of our relationship. That is the subject of the report that President Obama unveiled last Wednesday, entitled Beyond AGOA: Looking to the Future of U.S.-Africa Trade and Investment.   

The report makes the case that both the United States and sub-Saharan Africa have much to gain from deepening our ties.  For example, with its huge youth population, sub-Saharan Africa will need to look to export-led growth strategies, as Asian countries did in the 1990s, in order to create urban jobs, raise rural incomes, and reap a demographic dividend.                          

The McKinsey Global Institute estimates that manufacturing output is set to rise significantly in Africa, and create an estimated $643 billion jobs over the next decade.  Africa will also need a more diversified export strategy – with greater reliance on manufacturing, value-added agriculture, and new online industries – and outreach to a larger mix of regional and global markets to reduce its vulnerability to external shocks. 

For the U.S.’ part, Africa’s large and growing consumer, commercial, and industrial markets hold great potential for exporters across a wide range of industries.  Africa’s imports are likely to grow faster than the rest of the world, as Africa settles into a period steadier economic growth.  Interest in increasing U.S. participation in African markets will also grow as competitors begin locking in preferential access to those markets.

It is thus in our mutual interest to find ways to adapt our trade and investment framework to the times.  As more countries gravitate toward free trade arrangements, the competitive advantages that developing countries derive from tariff preferences may well erode.  Decisions about where to source and where to invest will increasingly be based on other factors, such as the overall cost and ease of doing business, as well as considerations of sustainability and reputational risk.

Moreover, the barriers facing exporting companies are changing.  Let’s go back to the technology example.  A technology startup in Nairobi is less likely to be concerned about tariffs than about access to services markets, balkanization of the internet, limits on data flows, and forced technology transfer.

Against that light, the “Beyond AGOA” report explores the advantages and disadvantages of various trade policy instruments that American and African policymakers have used in the past to increase trade and attract investment – including preference programs, free trade agreements, and cooperative agreements like those that we have negotiated with the East African Community and are extending to others under Trade Africa. 

In conducting this analysis, following a year of outreach to stakeholders in the United States and on the African continent, we deliberately chose not to prescribe a particular outcome. 

We believe firmly that the contours of the path forward can only be defined through our work together over the coming months. 

But we are also convinced that the need to do that work is urgent, and should be guided by a number of general principles:

1. We should account for the diversity of Africa and the different levels of readiness and capacity across the region.  Some countries are eager to find new horizons in our trade relationship.  Others need more time to get there.  As the EU experience with the EPAs suggests, a “one-size-fits-all” approach to all countries is likely to meet with difficulties.

2. We should continue to support Africa’s efforts at regional integration even as we accommodate Africa’s diversity.  One way forward may be to identify regional champions, who are ready and willing to serve as trailblazers and to help bring their regional partners along over time.

3. Any future framework should incentivize reforms across a broad spectrum of issues. That will improve the “enabling environment” and support sustainable and inclusive growth.  The Beyond AGOA report explores a spectrum of scalable policy “building blocks” that could serve as the basis for reforms.

4. Any future framework should support value-added production on the continent and promote diversification of exports.  We should take a fresh look at all of the possible tools – including capacity building, rules of origin, and other factors – that could provide incentives.

5. We should move toward greater reciprocity.  This is the trend in Africa, the United States, and the rest of the world.  The demand for a more reciprocal approach will intensify as other such agreements take effect.

6. Finally, and very importantly, our trade policy framework should promote African integration into the global trading system.  Limited participation in plurilateral and multilateral initiatives freezes sub-Saharan Africa out of important markets and deprives them of a voice in the debate.

We don’t pretend these are the only relevant principles.  And we look forward to a robust debate about the way ahead today and in the coming months. 

This is the start of a vital conversation. 

Marveling at the ways countries shaped the lives of each other through trade, Dr. Martin Luther King talked about “an inescapable network of mutuality, tied into a single garment of destiny.” 

Our destinies are, indeed, tied together and the decisions we make now will have implications for generations into the future.

Thank you very much.