April 17, 2012
Chairman Smith, Ranking Member Bass, and other distinguished members of the subcommittee, thank you for the opportunity to speak with you today about the Obama Administration’s trade policy to increase U.S. exports to Africa. I welcome your interest in this timely topic. We agree with the stated premise of the proposed legislation that growth in U.S. exports to Africa would have a positive effect on the U.S. economy in terms of U.S. exports and supporting jobs, as well as advancing economic growth on the African continent. U.S. businesses face many challenges in exporting and doing business in African countries including poor business climates, small and fragmented national markets, and a variety of tariff and non-tariff barriers. USTR is an active and critical part of the Obama Administration’s efforts to address these challenges, level the playing field for U.S. companies, and promote two-way trade (exports and imports) with our African partners.
Through our interagency process, and as an office within the Executive Office of the President, USTR is responsible for coordinating the development and implementation of U.S. trade policy for Africa.
We lead the interagency engagement with our sub-Saharan partners on trade and investment issues, including under our eleven Trade and Investment Framework Agreements (TIFAs) with individual countries and regional organizations in sub-Saharan Africa. TIFAs are important tools for strengthening economic relations with key countries and regional organizations. They provide a formal mechanism to address bilateral trade issues and to help enhance trade and investment relations between the United States and key sub-Saharan African trade and investment partners. The United States currently has eleven TIFA partners in sub-Saharan Africa: Angola, Ghana, Liberia, Mauritius, Mozambique, Nigeria, Rwanda, South Africa, the East African Community (EAC), the Common Market for East and Southern Africa (COMESA), and the West African Economic and Monetary Union (UEMOA). Six of these TIFAs were launched since 2001. The Administration is using its TIFAs with sub-Saharan African countries to encourage new trade and investment by implementing country- and region-specific strategies that promote two-way trade and investment.
Similar to a TIFA, we have a Trade, Investment, and Development Cooperative Agreement with the five countries of the Southern African Customs’ Union (SACU)—Botswana, Lesotho, Namibia, South Africa, and Swaziland.
We also have bilateral investment treaties (BITs) with six sub-Saharan African partners and we are currently in the process of negotiating a seventh (with Mauritius). Investment is critical for Africa’s development, and U.S. BITs help protect U.S. investment and promote economic growth by advancing important reforms, supporting foreign investment, and encouraging the adoption of liberal policies that make doing business in Africa easier for U.S. businesses and others. Our BITs establish a framework of reciprocal protections that include nondiscriminatory treatment; free transfer of investment-related funds; prompt, adequate, and effective compensation in the event of an expropriation; and transparency in governance. U.S. BITs also give investors the right to bring investment disputes to neutral, international arbitration panels.
In addition to our traditional tools such as TIFAs and BITs, we are developing with the East African Community (EAC) a new trade and investment partnership that we hope to replicate with other regional organizations in Africa. This new accord will go beyond our usual TIFA model by bringing together, under one umbrella, the exploration of a regional investment treaty, creation of trade enhancing agreements in areas such as trade facilitation, targeted trade capacity building assistance to address challenges in selected sectors, and a commercial dialogue. We believe this new model will generate new trade opportunities for both U.S. and East African businesses. This new model would introduce a number of innovations to address the challenges to trading and doing business with African countries, including for the first time ever outside of an FTA applying our BIT model with a regional grouping; institutionalizing direct private sector engagement between U.S. and East African firms through the commercial dialogue; and building the foundation for a more comprehensive trade agreement in the future.
Finally, USTR leads interagency implementation of the African Growth and Opportunity Act (AGOA). As part of that process, among other things, we annually review the 48 countries in sub-Saharan Africa for compliance with the AGOA eligibility criteria, which includes their making progress on eliminating barriers to U.S. trade and investment. In 2012, 40 countries in Africa are eligible for AGOA benefits.
U.S.-Africa Trade Policy
The Obama Administration is committed to building a strong partnership with Africa that reflects the continent’s vital and growing role in international global trade and that is mutually beneficial. The Administration seeks to create new trade opportunities, expand markets for U.S. goods and services in sub-Saharan Africa and facilitate efforts to bolster African economic development through increased bilateral, regional, and global trade.
At the heart of our engagement with sub-Saharan Africa is AGOA. For three Administrations, AGOA has defined our trade relationship with the continent and been responsible for expanding and diversifying African exports to the United States.
I would like to reassure the members of this sub-committee that our efforts to help spur growth and development in sub-Saharan Africa through programs like AGOA do not impede our drive for promoting U.S. exports to the continent. Not only has AGOA been good for Africa, but it has also been good for U.S. businesses. By providing incentives and support for African economic reforms, AGOA has helped to foster an improved business environment in many African countries that has attracted investment and enabled U.S. exports to the region to more than triple since 2001. Through our bilateral engagement with these countries within the context of the annual AGOA country eligibility review process, we have also been able to resolve some U.S. commercial disputes.
Sub-Saharan Africa presents many opportunities in emerging markets for U.S. exports. We work in coordination with other U.S. government agencies to ensure that our African partners remove barriers to trade and investment for U.S. businesses, farmers, and producers, and to expand our market share in the region. And by helping to promote economic and political reforms and to create business-friendly environments, AGOA has helped increase the demand for U.S. products in the region. As African businesses seek to take advantage of trade opportunities under AGOA, they are seeking U.S. inputs, expertise and joint-venture partnerships. U.S. merchandise exports to sub-Saharan Africa continue to rise, growing by 23.2 percent in 2011 from the previous year, with notable gains in agricultural goods, machinery, and transportation equipment. These exports support thousands of U.S. jobs and help African countries to modernize their economies. For instance, last year alone the United States made over $1.5 billion in aircraft sales to African countries like Ethiopia, Angola, South Africa, and Rwanda. Africa’s growing middle class is increasingly demanding high quality U.S. products ranging from motor vehicles, where U.S. exports to sub-Saharan Africa increased last year by over 40% to $3.5 billion; to poultry products, where U.S. exports increased by nearly 50% last year to nearly $400 million.
Renewal of AGOA’s Third Country Fabric Provisions
As an urgent, immediate term priority, we hope to work closely with Congress to renew AGOA’s Third Country Fabric (TCF) provisions, which expire in September 2012. AGOA’s performance, effectiveness, and success are closely tied to the TCF provisions. These provisions are crucial to the continued survival of Africa’s textile and apparel industry. The majority of AGOA’s apparel trade depends on these provisions. Failure to extend these provisions is already affecting the competitiveness of Africa’s apparel industry, because global sourcing decisions for apparel are typically made up to nine months in advance, imminently threatening significant job losses and factory closures throughout Africa in the coming months. AGOA’s TCF provisions are also important for the United States because they provide American retailers with an incentive to diversify their supply chains away from other foreign textiles sources, and provide low-cost sourcing options for our apparel retailers and consumers.
Coordination of U.S. trade policy
Much of what has been accomplished and that we continue to undertake in terms of enhancing U.S.-Africa trade is a result of significant coordination among a number of U.S. government agencies. USTR leads the Trade Policy Staff Committee (TPSC), which manages the everyday responsibilities of coordinating U.S. trade and investment-related policies and ensuring that U.S. business interests are reflected in all of our trade negotiations and initiatives – including those in Africa. There are, in fact, several TPSC subcommittees that focus on Africa. The Trade Promotion Coordinating Committee (TPCC) and the Export Promotion Cabinet (which consists of more than a dozen Cabinet officials and heads of agencies such as the Overseas Private Investment Corporation and the Export-Import Bank of the United States) have developed a National Export Strategy and are together implementing the National Export Initiative (NEI) –as part of the Administration’s efforts to double exports. And the Trade Advisory Committee on Africa (the TACA) – established by Congress in AGOA legislation – consists of Presidentially-appointed individuals from the U,S. private sector, NGOs, and academia who provide advice to the U.S. Trade Representative specifically on key U.S.-Africa trade and investment issues.
In our TIFA meetings with African partners, a number of U.S. agencies participate and help take action, as appropriate, to increase two-way trade and eliminate barriers to U.S.-Africa trade; and as part of our TIFA meetings, we sit down with U.S. businesses to learn what their experiences are and to address any concerns they have in exporting to or operating in TIFA partner countries.
Outside of these mechanisms, staff from many U.S. government agencies regularly travel to African nations to help advance our trade and investment agenda, discuss existing and explore new opportunities for U.S. businesses, and lead trade missions with participants from the U.S. private sector. There are far too many examples to mention in this testimony, but USTR would be happy to provide the Members and subcommittee with information on how U.S. businesses are expanding their presence in rapidly growing African markets as a result of these efforts.
In conclusion, I would like to thank this subcommittee for your thoughtful consideration of critical U.S.-Africa trade issues – particularly how to support more American jobs through greater exports to Africa. We look forward to working with you to promote U.S. exports to Africa and ensure that our trade policy continues to support jobs and export opportunities for America.