Safeguarding Fairness in US-Africa Trade

 

After threatening to remove Ethiopia from the African Growth and Opportunity Act (AGOA) since November of last year due to human rights violations in the country’s Tigray region, the Biden administration finally announced the move on the first weekend of the new year, adding Mali and Guinea to the list of AGOA suspensions because of their recent coups.

"The Biden-Harris Administration is deeply concerned by the unconstitutional change in governments in both Guinea and Mali, and by the gross violations of internationally recognized human rights being perpetrated by the Government of Ethiopia and other parties amid the widening conflict in northern Ethiopia," the U.S. Trade Representative (USTR) said in a statement.

"Each country has clear benchmarks for a pathway toward reinstatement and the administration will work with their governments to achieve that objective," the USTR statement added. 

The suspensions of Guinea and Mali come as no surprise since the Biden administration has strongly condemned the coups in both nations.  Unrest continues in both, which makes the conditions for trade untenable at this point.  The same holds true for Ethiopia, which had been mired in a civil war for more than a year now.

According to the original AGOA legislation in Title 1 of the Trade and Development Act of 2000, the U.S. Congress supported:

  •   encouraging increased trade and investment between the United States and sub-Saharan Africa;
  •   reducing tariff and non-tariff barriers and other obstacles to sub-Saharan African and United States trade;
  •  expanding United States assistance to sub-Saharan Africa's regional integration efforts;
  •   negotiating reciprocal and mutually beneficial trade agreements, including the possibility of establishing free trade areas that serve the interests of both the United States and the countries of sub-Saharan Africa;
  •  focusing on countries committed to the rule of law, economic reform, and the eradication of poverty;
  •  strengthening and expanding the private sector in sub-Saharan Africa, especially enterprises owned by women and small businesses;
  •  facilitating the development of civil societies and political freedom in sub-Saharan Africa;
  •  establishing a United States-Sub-Saharan Africa Trade and Economic Cooperation Forum; and
  •   the accession of the countries in sub-Saharan Africa to the Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

               As someone who has worked on AGOA since its inception, even prior to the introduction of the original legislation, I know that the point of this legislation was to ensure that conditions for mutually beneficial commerce existed.  However, rather than being seen as a business-to-business matter facilitated by governments, AGOA has been seen as a diplomatic tool to punish countries that violate international law and norms.  Therefore, removing these three countries under the terms of AGOA’s original intent makes sense.  Unfortunately, this move demonstrates two principles sadly lacking in the management of AGOA policy over the last two decades.

                First, there have been too many instances where governments that did not abide by the terms of AGOA remained in the process as a reward for matters not involving trade.  For example, Angola has long had issues with corruption, but because that government was among President George W. Bush’s Coalition of the Willing supporting the Iraq War, its violations were ignored.  I have strongly supported Angola’s economic progress, but the fact of its corruption has never been properly accounted for in U.S. trade policy. The Department of State, which operates in foreign countries, uses its vote on which Africa countries are a part of the AGOA process to maintain recalcitrant governments to observe its diplomatic goals.  All too often, it does not fully consider the impact on businesses in the African country in question or American businesses attempting to operate in Africa.

                That brings me to the second point, which is that suspending an African country from AGOA is seen as punishing that government, but more than any other impact, it punishes the businesses in that country that lose very important economic benefits.  The duty-free, quota free treatment participating African governments receive makes trade with the U.S. more economically viable for African companies competing with countries from Asia, Europe and elsewhere.  When Zimbabwe was excluded from AGOA from the start, Zimbabwean countries that had lucrative contracts in the United States saw them lose these deals and become uncompetitive.  Some moved to neighboring Zambia to qualify, but others couldn’t make such a move.

                Conversely, not suspending or at least pressuring noncompliant African countries puts American companies operating in Africa at a tremendous disadvantage.  Under the terms of AGOA, African governments are supposed to treat foreign companies fairly in commerce, but that doesn’t happen in many AGOA beneficiary countries.  Consequently, American firms are caught in situations in which governments arbitrarily change or interpret laws and contracts, such as what happened last year to SL Mining in Sierra Leone.  That company’s dispute was resolved after American pressure, including by the U.S. embassy, was exerted, but AGOA provides tools for more generally addressing commercial environment anomalies and not having to deal with such issues on a case-by-case basis.

                So, while there is ample justification for suspending these three countries from AGOA benefits at this moment, that decision hurts companies in those nations more than the governments.  Very little thought has been given to how to continue the commercial relations between American and African companies when the African companies in question violate the terms of AGOA.  There are companies in all three nations, especially Ethiopia, that are more than capable to doing honest, effective business with American partners.  It undoubtedly makes U.S. officials feel they have taken a strong step in condemning the situation in those three nations, but little thought apparently has been given to either the short-term or long-term impact on those countries’ businesses or on American buyers of products from those locations.

                There is, for example, a robust market for Ethiopian goods in the United States.  If the removal of AGOA benefits interferes with the import into the United States of these products, it will not lead to an end of the conflict in Tigray, largely because it seeks to punish only one party to the conflict.  Tigrayan and Amhara militants and the Eritrean government are not a party to AGOA as is the Government of Ethiopia, so they have no incentive to end their part in the conflict just because Ethiopia’s government is suspended from this trade process.

                Africa has of late been rife with coups and other major violations of the international order for which governments are responsible – by direct action or by failing to act.  So, what will Congress do to safeguard U.S.-Africa trade for companies on both sides of the Atlantic Ocean during the remaining three years of AGOA?  In the current period of COVID-19 economic dislocations, the suspension of AGOA benefits hurts those who can’t force their governments to do the right thing, but who then must suffer for what their governments do or don’t do.

                Some of us saw this contradiction early in the AGOA process, but we couldn’t convince enough people in the U.S. government of the need to make the reform of assisting African companies in this matter.  If we truly want to use AGOA to help in the development of African societies, we must find a way not to hurt the innocent in pursuit of punishing the guilty.

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