This posting contains a statement released today by Africa Action, Oxfam America, and ActionAidUSA, at a briefing for the international and White House press corps on the occasion of the first U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum. The statement highlights four broad policy changes needed for U.S. policy on economic relations with Africa, in the areas of debt, international trade negotiations, development assistance, and U.S./African trade in particular. The groups argue that the present approach, focused on the African Growth and Opportunity Act (AGOA), is too narrowly limited to trade and unhelpful to promotion of sustainable development of African countries.
Another posting distributed today contains selected web links for more information on the issues discussed in the statement, as well as excerpts from a March 2001 U.S.-African Trade Profile with statistics on U.S. trade with sub-Saharan Africa. Despite AGOA, the data make clear, U.S. imports from Africa are still highly concentrated on a narrow range of products (oil and strategic minerals) and a small number of countries.
We, the undersigned groups, believe that a new approach is required toward US-Africa economic relations.
When representatives of the wealthiest country in the world sit down this week with representatives of countries from the world's poorest region, the new U.S.-Sub-Saharan Africa Economic Cooperation Forum should be used to promote a new form of economic cooperation less narrowly centered on trade and more focused on supporting sustainable development of African societies.
Washington should recognize that its limited efforts to promote trade as the principal arena of economic engagement with Africa have benefitted few African countries. Current U.S.-Africa trade policy is limited to the providing market access for low-wage, low-skill, and raw-material-based production for export which due to inherent volatility and structural declining terms of trade simply sustain poverty as opposed to supporting development. Moreover, the U.S. obsession with trade and free market solutions to development challenges in Africa is dangerously misguided at this critical juncture.
Africa is the region most vulnerable to external shocks and with warnings of an impending global economic crisis in the wake of the Sept 11th terrorist attacks on the U.S. it should be evident that Africa requires extraordinary support beyond the prevailing programs of cooperation.
Finally, we call on the U.S. administration to withdraw its unseemly effort to force "fast track" (renamed the Presidential Trading Authority-PTA) through Congress by wrapping free trade in the flag of patriotic duty. Giving the President executive privilege to negotiate binding trade agreements with other countries without for example requiring environmental protection and labor rights guarantees, or other necessary measures, is a recipe for disaster for U.S. workers and African countries alike.
The inauguration of a new forum to regularly discuss and negotiate U.S.-African economic cooperation at this important moment provides the opportunity to forge a more comprehensive approach that joins the instruments of Aid, Trade, Investment and Debt relief together in pursuit of sustainable development in Africa.
Sub-Saharan Africa's massive external debt is perhaps the single largest obstacle to the continent's development efforts and its economic independence. The more than $300 billion which African countries owe to international financial institutions and foreign creditor governments represents an unsustainable burden that undermines Africa's attempts at economic growth. Any serious effort at promoting Africa's economic development must therefore begin by removing the crippling burden of its foreign debt.
The 48 countries of sub-Saharan Africa spend $13.5 billion each year repaying debts to rich foreign creditors. The debts themselves are largely illegitimate, based on their origins and their effects. Repaying these debts diverts money directly from spending on health care and education, and economic development. Over the past two decades, African countries have paid out more in debt service to foreign creditors than they have received in development assistance or in new loans. As a result, throughout Africa, average incomes have declined and conditions of poverty have worsened. The creditors of Africa's external debt, including the US and other governments and especially international institutions like the World Bank and International Monetary Fund, continue to insist that the debts be repaid, despite the economic and social costs of this massive outflow of resources. Africa's debt crisis traps the continent in a perpetual cycle of underdevelopment.
The current international debt relief framework, the Heavily Indebted Poor Countries Initiative (HIPC), launched by the World Bank and IMF in 1996 and "enhanced" in 1999, has failed to provide a solution to the debt crisis. In the 22 countries that have qualified for HIPC debt relief to date, governments still spend more on debt repayments than on health care. On average, these countries have seen only a 27% reduction in annual debt repayments. In two African countries, Zambia and Niger, debt repayments have actually increased since qualification for HIPC assistance.
Despite the clear flaws in this debt relief framework, the leaders of the world's richest countries, meeting at the G-8 summit in Genoa in July 2001, refused either to further enhance the initiative or to acknowledge that it has failed. The reality is that the HIPC initiative is designed to serve creditors by squeezing the maximum possible in debt payments from the world's poorest economies. It does not benefit debtor countries, and it should therefore be considered obsolete. United Nations Secretary General Kofi Annan has concluded that the HIPC Initiative does not provide an adequate response to the debt crisis and has called for an immediate moratorium on debt repayment.
If the world's richest countries and financial institutions are serious about committing themselves to Africa's development, they must cancel the continent's unsustainable burden of debt. They should also consider who bears the responsibility for failed economic policies imposed on Africa, as well as the longer historical reasons for Africa's impoverishment, and ask the question "who really owes whom?".
The US is a both a bilateral creditor of African countries, and the single largest shareholder in both the World Bank and IMF. As such, it holds major influence over the international response to Africa's debt crisis. As the US holds its first annual economic summit with African Trade and Finance Ministers, it must commit itself to the cancellation of Africa's external debt as a first step to true economic cooperation and as a prerequisite to Africa's economic growth.
Economic conditions in Africa remain highly fragile. Only a few countries have combined high growth rates with rising domestic savings and investment. The deregulation of agricultural markets does not appear to have triggered the acceleration of growth. Trade liberalization may have increased the importance of international trade for Africa, but Africa's share of world trade has declined. Africa entered the new millennium increasingly integrated into the global economy at the bottom.
More horrifying for Africa's millions of people living under the poverty line is the loss through trade of over half of all net resource flows to the region as a result of market barriers, declining terms of trade and other external factors. Added to debt interest payments, profit remittances and other capital outflows, this loss is a direct net transfer of real resources from Africa to the rest of the world.
The UN panel on Financing for Development estimates the total cost of trade barriers in the North to Southern exports at more than $100 billion each year. This figure is many times more than the total development aid provided by the developed countries. Dismantling these trade barriers would significantly increase income and assist poverty alleviation in Africa by providing added impetus to economic growth.
Until this happens, understandably, poor people, the general African public and their Governments are wary of new trade relationships that fail to address economic security and net resource transfers in 2001. We share their concerns.
Last month's OAU meeting of African Governments in Abuja, Nigeria reflected on the relevance of a new WTO round for Africa and on the African Growth and Opportunity Act (AGOA), now enacted under the Trade and Development Act. African Governments stressed the need for a rules-based multi-lateral trading system that promotes economic development, facilitates African regional integration, and contributes to the eradication of poverty.
There is an urgent need to support meaningful and effective Special & Differential Treatment provisions, for developing countries in general, and Africa in particular, given the structural weaknesses in their economies and declining share of world trade. These provisions are included in trade agreements to allow for special difficulties faced by developing countries. But such measures are not now strong enough to spare these countries from being forced to implement policies that are only appropriate for much stronger economies, with often devastating effects.
Seattle collapsed under the weight of a lack of transparency and unfair policy privileges in favor of the developed nations. It collapsed because the US and Europe delegations negotiated in a manner that reduced the WTO to a multilateral vehicle for their domestic interests.
Sadly, recent statements by the US, EU and multilateral institutions such as the World Bank and UNDP champion the need for a new round of trade talks without seriously considering the weight of existing legitimate grievances by African and other developed countries with the current rules. Without changing this context, it will be impossible to find common global ground in a democratically oriented international body in the fourth WTO ministerial conference.
The next round must enable flexibility in the Agreements on Intellectual Property Rights and Agriculture to support the rights of developing countries to protect farmers' livelihoods, food security, access to labor, and the supply of essential herbs and medicines. Particularly important is the proposed declaration by African and other developing countries affirming that nothing in existing trade agreements "shall prevent members from taking measures to protect public health."
The United States and other northern countries should eliminate all domestic and export subsidies to agriculture that artificially increase their big agribusiness sectors' competitiveness and crowd out exports from poor farmers in African countries.
The US should support the adoption of a decision at the WTO meeting that makes respect for Special & Differential Treatment provisions for developing countries legally binding on developed countries.
The Economic Cooperation Forum launched today should produce new U.S. support for these key African positions at the upcoming WTO meeting.
Foreign aid (Official Development Assistance) from donor governments is a key source of funding for the development efforts of African countries. The immense social and economic challenges faced by these countries since independence require greater resources than African governments themselves command, and the sources of finance available are limited. The importance of this type of support from the US and other wealthy economies to African countries cannot be underestimated, and such assistance has been in decline during the past decade. In an era of ever-increasing economic globalization, those countries that benefit the most from the world economy must share in the necessary public investment for those parts of the world that bear more than their share of the disadvantages.
The US has a special obligation to provide assistance to African countries for several reasons. As the world's richest country, it is in a position to provide strong financial support to promote economic growth and development in African countries. The US also has a special historical relationship with Africa that brings with it a unique responsibility towards the continent and its social and economic circumstances. Yet the US has consistently failed to devote bilateral aid to African countries that is commensurate either with its obligations or with these countries' needs.
During the Cold War, US foreign aid to developing countries was dictated less by the actual needs and capacities of recipient countries than by strategic concerns. For much of this period, development assistance was used for political patronage. When the Cold War ended, over a decade ago, the changed global context meant that aid could be directed towards true development objectives. However, in the post-Cold War era, levels of development assistance have fallen in a consistent downward trend, and US spending on foreign aid has declined, relative both to the size of the US economy and to the federal budget.
While the world's richest countries, represented in the Organization for Economic Cooperation and Development (OECD), have repeatedly promised to devote 0.7% of gross national product (GNP) for official development assistance to poorer countries, only five small European countries now meet that target, and the US ranks at the very bottom. The US provides only 0.1% of GNP for development assistance, and sub-Saharan Africa receives only about one-tenth of this. The total of Official Development Assistance from all sources to Sub-Saharan Africa has fallen by 29% since 1990.
This decline in aid comes at a time when Africa needs financial support more than ever. Throughout the continent, the burden of external debt, the massive health crisis, and the effects of failed economic policies often imposed by foreign creditors have left countries facing overwhelming challenges. Development assistance is critical to enabling African governments to address these difficulties. Further lending to poor countries is inappropriate as a primary method for funding development when it only exacerbates the debt crisis and entrenches economic dependency. Prior to the G8 meeting in Genoa, Italy, President Bush suggested that the World Bank should provide development grants rather than loans to poor countries.
Recent polls in the US have also shown that the American public believes that the US has vital interests in Africa, and that foreign aid forms an important part of how the US promotes mutual interests with Africa. If the US and other wealthy countries are serious about promoting sustainable development in Africa, they must dramatically increase the levels of development assistance they provide. It is in their own interests to do so, because social and economic development in Africa will ultimately promote greater stability at an international level. The U.S.-Africa Economic Cooperation Forum must place increasing development assistance prominently on its agenda.
On May 18, 2000 former President Bill Clinton signed into law the Trade and Development Act of 2000, which contained both the African Growth and Opportunity Act (AGOA) and the US-Caribbean Basin Trade Enhancement Act. Many American and African officials said that AGOA symbolized a new American political-economic partnership with Africa.
With the evolution of bilateral, regional and multilateral trade liberalizing initiatives, international trade has become the latest "mainstream" dimension of international development. In the case of Africa, neo-liberal based arguments suggest a causal relationship between Africa's poverty and African societies being marginalized in an increasingly globalized world economy. From the premise that African economies are poor because of they are relatively "closed" to the wonders of free trade and capital flows, trade liberalization and export orientation are offered as viable development policy prescriptions. However, these policies also link national economic growth to increasing volatile global capital expansion and developed nation import growth. Based on this flawed premise and inadequate analysis of the structural causes of Africa's poverty and complexity of development challenges, US economic policy under AGOA concentrates on increasing Africa's integration into the global economy. However, such policies tie national economic growth and development to the inherently volatile boom and bust logic of global capital flows and rich nation import growth.
AGOA is fundamentally a U.S. policy tool for liberalizing the structure and orientation of the "playing fields" governing trade and investment activities between African societies and America. AGOA is not trade and investment agreement per se, it is a framework for negotiating future economic relations. AGOA represents a pro-active, bilateral example (in tandem with other multilateral trade and development approaches in the WTO, IMF and World Bank) of how US Government policy and institutions are utilized as instruments to re-create or perpetuate the economic rules of the game, often at the expense of Africa's development needs.
The failure of AGOA to address the structural sources of Africa's poverty and constraints on development, raise questions about its ability to serve as a source of total net resource transfers for supporting sustainable growth and development in Africa societies. Even with the technical adjustments in the AGOA textile provisions now being considered as "AGOA 2", this approach will have limited positive impact.
An alternative approach to US economic policy would seek to: help Africa reverse its declining terms of trade; remove the burden of foreign indebtedness; support gross domestic capital formation; increase levels of effective demand, domestic consumption and purchasing power; provide technical assistance to address human and productive capacity constraints; provide market access to African agricultural products; and permit African nations greater authority to utilize national and regional trade, investment and industrial policies as strategic tools for governing national resources, markets and factors of production to support internally oriented development processes.
We support the call of African Governments that AGOA provisions be amended to encompass a wider range of African products and the simplification of rules to match the industrial capacity of African countries. We further call for the elimination of eligibility criteria that impose economic policies on African countries and undermine their sovereignty and democratic control of development policies.
This material is distributed by Africa Action (incorporating the Africa Policy Information Center, The Africa Fund, and the American Committee on Africa). Africa Action's information services provide accessible information and analysis in order to promote U.S. and international policies toward Africa that advance economic, political and social justice and the full spectrum of human rights.