Friday, August 7, 2009



David E. Lewis to Stephen, Tony, Charity, Sudha, Bruno, Scott, Scott, Nyokabi, Nicholas, Stephen, Tim, Chris, Paul, Simon, Simon, Karna, Jeffrey, Jeffrey, Keith, Navdeep, Navdeep, Rajeev, Rajeev, Cara, Jean-Yves, Alan
show details 8:36 AM (6 hours ago)

Africa's US sales more important than deal: USTR Kirk
By Helen Nyambura-Mwaura
NAIROBI (Reuters)
August 6, 2009
African nations exporting to the United States under a special deal should boost sales rather than pushing to extend the agreement, U.S. trade representative Ron Kirk said on Thursday.

A total of 38 African countries are allowed to export more than 6,400 goods to the United States without paying duties under the African Growth and Opportunity Act (AGOA).

The deal is due to expire in 2015 and African nations have asked for the term to be extended and listed products increased.

"Time spent worrying about whether AGOA will be extended five years from now versus making the hard decisions that need to be made to help some of our countries become more export successful is time wasted," Kirk told Reuters.

"The reality is that many of our countries are having difficulties that can be solved by their own initiative and have nothing to do with the range of products or the timeline."

U.S. preferential trade programmes with other parts of the world will be expiring at the end of 2009 and will be going through review in Congress, he said in an interview, so Africa is lucky that it still has some time until the next review.

"The most expeditious thing we can do is to make the most use of AGOA in the time we have now, and as we have plenty of lead time to talk about extending it."

Under AGOA, the United States gives full duty-free preference to 98 percent of products from Africa, yet AGOA members take advantage of less than 60 specific items, he said.

Sub-Saharan Africa accounts for a little more than 1 percent of total U.S. exports and only about 3 percent of U.S. imports.

Oil from countries such as Nigeria, Angola and Chad accounted for about 80 percent of the $86 billion in total U.S. purchases from the region last year.

U.S. President Barack Obama's administration has said it is serious about tackling poverty, but has failed to scrap subsidies to its cotton farmers that are choking poor farmers in Benin, Burkina Faso, Chad and Mali.

Kirk reiterated the U.S. stand that a successful completion of the WTO Doha round of negotiations, providing market access for all the parties involved, was the best way forward.

"I welcome and understand those in Africa, particularly about cotton subsidies, but I've invited them to be as forceful in pressing the other members of the WTO to engage energetically in goods and services, in non-agriculture manufacturing so that we can bring this issue to some resolution."

He said it was unfair that the completion of the trade talks depends on the issue of subsidies: "It was a horrible decision to single out one industry in one country and say, 'We'll hold our feet on everything else, we won't proceed' ... but for one country, one industry only."

Kirk said African countries must urgently address bad infrastructure, tariff barriers, customs standardisation, government and legal reforms and corruption if they want to attract more investment from the West.

Some nations have been successful under the AGOA framework, Kirk said, citing the Indian Ocean island of Mauritius.

Speaking in Nairobi at an annual AGOA forum, he said the United States had launched negotiations for a bilateral investment treaty with Mauritius.

He said African states should look at other markets, including more nations on the continent, to expand exports and reform systems to attract more foreign investment.

"The ball is now in Africa's court. If American investors begin to see ... real democratic reforms in government, in justice, in regulatory schemes so that there is predictability, you will see some foreign investment begin to flow."

Kirk Nixes AGOA Product Expansion, Preference Erosion Claims
Inside Trade - August 7, 2009

U.S. Trade Representative Ron Kirk has signaled that he is cool to expanding the product coverage of the African Growth and Opportunity Act (AGOA) and to demands by African countries that the U.S. refrain from extending duty-free market access to other of the world’s poorest countries because doing so could undercut AGOA preferences.

In an op-ed that ran in Kenyan newspapers on Aug. 3, Kirk made it clear that more can be done to expand U.S.-African trade, but insisted that this means making better use of existing AGOA preferences.

“The answer is not expanding the list of AGOA products -- almost everything is already covered -- but in increasing the utilization of AGOA,” Kirk wrote. He said the U.S. is willing to provide trade-related technical assistance, and called on African governments and businesses to develop joint export strategies for specific products.

Some AGOA country officials planned to urge Kirk during his visit to Kenya to extend duty-free, quota-free (DFQF) access for agricultural products, including cocoa, tobacco and peanuts, according to private-sector sources.

The U.S. offers duty-free access for a limited quantity of those three products through global tariff-rate quotas (TRQs) that are open on a first-come, first-served basis, but African countries claim they cannot compete for sales under these TRQs with countries in closer geographic proximity to the U.S., according to private-sector sources. By definition, products covered under TRQs are import-sensitive products.

African countries are not pressing for such access on sugar because there is a split between those who support the U.S. sugar program because it benefits them with its high prices and those that want to get more access even if it will mean a price decline in the U.S. The U.S. maintains the price of sugar by import restraints and marketing restraints for domestic sugar, and five AGOA countries, Congo, Cote d’Ivoire, Madagascar, Malawi and Mauritius, have country allocations under the existing sugar TRQ (Inside U.S. Trade, July 31).

Last year, sub-Saharan countries exported nearly $695 million of cocoa products and more than $32 million of tobacco products to the U.S., according to U.S. Department of Agriculture’s Foreign Agricultural Service statistics. Those countries exported no peanuts to the U.S. due to the low domestic price of the commodity, sources said.

Kirk was in Kenya Aug. 4 to Aug. 6 for the annual AGOA Forum with Secretary Hillary Clinton and Agriculture Secretary Tom Vilsack, who both highlighted the U.S. contribution to a global agriculture development program.

In advance of his departure to Kenya, Kirk also made it clear that he was cool to the demands of AGOA countries that the U.S. should not extend more preferences to other least developed countries, such as Bangladesh and Cambodia, because that would make AGOA products, such as garments, less competitive in the U.S. market.

“The United States is absolutely committed to strengthen successful relationships with AGOA, but that shouldn’t impair our relationship with other least developing countries that we feel a responsibility to reach out to and build a relationship with as well,” Kirk said in a July 31 press conference.

He said the U.S. may respond to those African demands with “a little bit of tough love,” emphasizing that the “best way” to be competitive is to make necessary reforms in a number of areas. He said these cover investment in infrastructure and people and using the technical assistance the United States offers.

“The reality of being involved in the globally interconnected world is that those countries that are the most innovative, that invest in their people and their education, that reform their laws, invest in their infrastructure, are going to be the most successful,” Kirk said.

He said that while at the AGOA Forum, he would have “honest and candid conversations” about utilizing AGOA that would involve the kind of changes that countries need to make in terms of their infrastructure, he said. In some cases, the countries need to make changes to strengthen their rule of law, Kirk said.

According to Kirk, one of the “biggest challenges” of strengthening AGOA is to get several beneficiary countries to diversify their economies beyond oil. He said that would be the focus of bilateral and multilateral conversations he plans to have with African leaders.

The AGOA Act, which was signed by President Clinton in 2000, grants preferences to African countries with democratic governments and open markets. AGOA expires in 2015, though some AGOA countries and business interests have been pushing to extend the program another ten years.

During the July 31 conference call, Kirk called AGOA a “brilliant tool,” which has transformed the U.S. relationship with Africa “from principally a paternalistic, sort of humanitarian relationship, to one that, frankly, is more balanced around mutual interests and mutual economic interests.”

AGOA and US Policy
Washington Trade Daily - August 7, 2009

African nations exporting to the United States under a special deal should boost sales rather than pushing to extend the agreement, US trade representative Ron Kirk said on Thursday according to a Reuters news service report from Nairobi (WTD, 8/6/09). The deal is due to expire in 2015 and African nations have asked for the term to be extended and listed products increased.

“Time spent worrying about whether AGOA will be extended five years from now versus making the hard decisions that need to be made to help some of our countries become more export successful is time wasted,” Kirk told Reuters. “The reality is that many of our countries are having difficulties that can be solved by their own initiative and have nothing to do with the range of products or the timeline.”

US preferential trade programs with other parts of the world will be expiring at the end of 2009 and will be going through review in Congress, he said in an interview, so Africa is lucky that it still has some time until the next review. “The most expeditious thing we can do is to make the most use of AGOA in the time we have now, and as we have plenty of lead time to talk about extending it.”

US President Barack Obama's administration has said it is serious about tackling poverty, but has failed to scrap subsidies to its cotton farmers that are choking poor farmers in Benin, Burkina Faso, Chad and Mali.

Kirk reiterated the US stand that a successful completion of the WTO Doha round of negotiations, providing market access for all the parties involved, was the best way forward. “I welcome and understand those in Africa, particularly about cotton subsidies, but I've invited them to be as forceful in pressing the other members of the WTO to engage energetically in goods and services, in non-agriculture manufacturing so that we can bring this issue to some resolution.” He said it was unfair that the completion of the trade talks depends on the issue of subsidies: “It was a horrible decision to single out one industry in one country and say, 'We'll hold our feet on everything else, we won't proceed' ... but for one country, one industry only.”

Kirk said African countries must urgently address bad infrastructure, tariff barriers, customs standardization, government and legal reforms and corruption if they want to attract more investment from the West. He said African states should look at other markets, including more nations on the continent, to expand exports and reform systems to attract more foreign investment.

Kenyan Vice President Kalonzo Musyoka, who officially closed the three-day conference whose theme was “Realizing the Full Potential of AGOA through Expansion of Trade and Investment,” said the move would enhance and safeguard the benefits already accrued from the arrangement. “This will certainly require a tenacious resolve to implement bold and effective strategies to promote increased US investment and capital flows to Africa,” Musyoka told the conference that brought together participants from the United States led by Secretary of State Hillary Clinton, and the countries from Sub-Saharan Africa.

Trade Highlights From This Week’s AGOA Forum In Kenya
Inside Trade - August 7, 2009

* The U.S. and Mauritius will begin formal negotiations toward a Bilateral Investment Treaty (BIT) aimed at strengthening investor protections and encouraging market-oriented economic reforms in the African country, according to an Aug. 5 statement from U.S. Trade Representative Ron Kirk and Secretary of State Hillary Clinton. “The proposed U.S.-Mauritius BIT will help reinforce the efforts of one of Africa’s strongest performers on trade and economic reform, and help improve Mauritius’s already favorable investment climate by providing high standards of investment protection,” Kirk said.

* Kirk led a plenary session on Aug. 5 on the impact of the global economic crisis on AGOA and later led a roundtable discussion with African trade ministers, according to USTR. Kirk was joined at the plenary session by Rep. Jim McDermott (D-WA), a member of the House Ways and Means Committee, and Donald Payne (D-NJ), a member of the Foreign Affairs Committee. The session focused on the slowdown in U.S-Sub-Saharan trade amid the financial crisis, according to USTR. The round table focused on utilization of AGOA, World Trade Organization issues and regional trade integration, which Kirk called “key to African competitiveness,” according to USTR.

* Clinton in an Aug. 5 speech said that the U.S. was “exploring ways to lower global trade barriers to ease the burdens on African farmers and producers.” Clinton said that AGOA “has not met its full potential,”and encouraged African nations to diversify the products they export to the U.S. She also announced that she plans to convene a meeting on the margins of next month’s United Nations General Assembly “to advance the global partnership for agriculture and food security.”

* President Obama, in a video message to the AGOA Forum on Aug. 5 said that AGOA has “transformed the U.S.-African trade relationship,” but said it has yet to realize its full potential. “Open markets alone are not enough,” Obama said. “Development requires the rule of law, transparency, accountability, and an atmosphere that welcomes investment. And I encourage every country to set concrete goals for overcoming the obstacles to economic growth.”

Baucus Organizes Staff Delegation To India, Ethiopia On Preferences, AGOA included
Inside Trade - August 7, 2009

A bipartisan delegation of Senate Finance Committee staff members is traveling to Ethiopia and India starting tomorrow (Aug. 8) to meet with government officials, U.S. and local businesses, and non-profit groups to gather information ahead of preference program reform efforts that are expected to ramp up in the fall.

The trip, which was organized by staffers in the office of Finance Committee Chairman Max Baucus (D-MT), will last for more than one week and will likely focus on the African Growth and Opportunity Act (AGOA) and the Generalized System of Preferences (GSP), sources said.

Included in the delegation are staffers from the offices of Sens. Jim Bunning (R-KY), John Kerry (D-MA), John Ensign (R-NV), Jeff Bingaman (D-NM), Pat Roberts (R-KS), Michael Enzi (R-WY), Mike Crapo (R-ID) and John Rockefeller (D-WV), one source said.

No one from the office of Ranking Member Charles Grassley (R-IA) is participating in the trip, although a staffer from that office is attending an AGOA forum in Kenya this week. One key question on preference program reform is the extent to which Grassley and Baucus will be able to form a common approach on the issue.


African SMEs to benefit in new deal between OPIC and ATI
August 6, 2009

NAIROBI, Kenya - The Overseas Private Investment Corporation (OPIC) and the African Trade Insurance Agency (ATI), on Thursday concluded an agreement that will provide underserved micro-, small and medium-sized companies in Africa access to increased technical assistance and foreign direct investment.

Participants in the eighth annual Africa Growth and Opportunity Act (AGOA) Forum, where the agreement was signed, identified SME support as critical to the ongoing success of the 2000 legislation.

ATI Acting Chief Executive Officer Stewart Kinloch noted that African entrepreneurs had for a long time had to pass up economic opportunities because they lacked the capacity to reach their full potential and that the current framework of AGOA though well intentioned, could go further to help local businesses.

“The partnership we are signing is geared towards addressing these hindrances to business growth and even expand on the basic premise on which AGOA is based to support economic development,” he said

He welcomed the move saying it would readily avail finance to those who urgently need it but called on African governments to loosen custom regulations that would make it much easier for the credit to be fully utilised.

“OPIC is a financier in the way ATI is not. OPIC can reach out to exporters in Africa with the provision of finance at SME level which I think is a real bolt on addition to AGOA,” he stressed.

OPIC’s Acting Chief of Staff John Moran said the pooling of resources between the two institutions with a wealth of experience of supporting African investment would generate important benefits on the continent.

He also noted that foreign direct investment in Africa was down by 18 percent this year due to the global economic downturn.

“Restoring confidence in the continent will be critical to reversing that trend, and the agreement we have signed today will provide prospective investors, both African and American – and SMEs in particular – the means to realise their investments,” said Mr Moran.

Mr Moran noted the greatest hurdle for SME’s was drafting proposals that attract financial institutions to hand out credit

A key feature of the agreement is that it will have no standard timeline aimed at make it as flexible as possible to African needs.

The MOU authorises the two agencies to reinsure each other, in order to increase the capacity of each to insure more and larger projects across the continent. It also encourages both parties to focus specific attention on projects in the renewable or clean energy, agribusiness, and housing sectors.

Both OPIC and ATI intend to begin reaching out to African companies and investors with a business development tour and a technical capacity building program targeting banks, insurers, insurance brokers and African businesses.

Africa: Continent Needs To 'Play Smart' in Trade With Asia
Roy Laishley
6 August 2009

AFRICA'S success in avoiding the worst of the economic crisis that has swept the industrialised world has been due in large part to the remarkable growth of trade and investment with China, India, Brazil and other "emerging" developing countries.

In the last three years Africa's trade with China has doubled, reaching US$106,7 billion in 2008. While China dominates in terms of sheer numbers, trade and investment with other emerging markets, such as Brazil, India and Malaysia, has also been rising sharply, reducing Africa's dependence on traditional partners in Europe and the US and fuelling the continent's impressive growth in recent years.

About one-third of Africa's total trade is already with markets in emerging or other developing countries. China alone is now Africa's second-largest single trading partner. Although the European Union (EU) as a whole continues to dominate Africa's trade, that dominance is receding, especially in imports: the EU now accounts for only a little over a third of the continent's inward trade.

Analysts hope these new ties will help Africa rebound from the current global slump, but a new UN study argues that African governments and companies must play smart if they are to reap the full benefits of South-South trade: "Whilst some emerging economies have a strategy for Africa, Africa does not have a strategy towards the emerging economies," notes the UN Office of the Special Adviser on Africa (OSAA) in the new report.

Having a strategic approach is vital, the paper says, because Africa is much less important to its new trading partners than they are to Africa, and ending dependence on commodity exports is vital to the region's development goals.

The rapid growth in trade with emerging economies in recent years has not led to a significant change in the makeup of Africa's exports. Raw materials, particularly oil and minerals, still dominate, as they did 10 years ago. A few major producers dominate the continent's trade with the new markets.

Algeria, Angola, Nigeria and South Africa provided 82 per cent of Brazil's imports from Africa in 2007 and 53 per cent of China's, according to the OSAA report. Last year, just 10 countries accounted for 79 per cent of the continent's entire trade with China, the South African Centre for Chinese Studies reports.

China's trade with Africa is driven by the need to secure long-term supplies of raw materials, particularly oil and minerals, to fuel its economic development. The Chinese authorities aim to get 40 per cent of their imported oil from Africa, from the current 30 per cent and they are seeking to do this mainly through "natural-resources-for-infrastructure" arrangements.

In these, African governments agree to long-term supply contracts in exchange for loans to finance the construction (usually by Chinese companies) of power stations, railroads, water and sewerage systems and other projects.

In Angola, China will get oil in exchange for some US$5 billion in loans and other investments to develop everything from houses and farms to ports and railways. China now takes 30 per cent of Angola's oil exports. Guinea and Gabon have struck similar deals to supply iron ore.

China now takes 60 per cent of Sudan's output. The Democratic Republic of the Congo (DRC) has negotiated a US$9 billion swap of copper and cobalt for the development of a new mine, plus a wide range of infrastructural development.

Recently a number of these arrangements have run into obstacles.

The DRC deal has been criticised by the International Monetary Fund (IMF), for example, on the grounds that it may deepen the country's debt burden. The problems come against a background of criticism of the trade and investment practices of some emerging market countries.

An agreement to allow China's Non-Ferrous Metal Mining Company (NFC) to reopen the Luanshya mine in Zambia brought protests by the main opposition party which pointed to a history of labour problems at another mine run by the NFC, where a number of miners were killed in an explosion in 2006.

A 2005 study of the Tanzania construction industry by the International Labour Organisation (ILO) pointed to concerns over employment conditions in Chinese companies. In addition, a number of non-governmental organisations have called on China and other emerging-market investors to stop doing deals in countries with authoritarian governments or widespread human rights abuses.

Some observers, often from the West, have argued that the agreements offer poor long-term returns, since they do little to generate local jobs or bring in new technologies.

China in turn has accused its Western critics of hypocrisy. But at the same time, it is taking steps to change some of its most criticised practices.

Chinese businesses in Angola, for example, are making extensive efforts to hire and train local labour. The DRC deal also includes commitments for local employment and training, as well as using local suppliers. The Chinese government has recently issued "good corporate citizen" guidelines to govern the operations of its companies overseas.

According to Kwesi Kwaa Prah, an academic from Ghana, China's approach to Africa has been mainly positive. But to help overcome the differences that are bound to emerge in such complex relationships, both China and Africa need to pay more attention to "people-to-people relations."

The OSAA report urges emerging country governments to recognize that their long-term access to Africa's natural resources depends on developing non-exploitative, "win-win" outcomes rather than "win-lose" agreements that undermine Africa's development agenda. "Every effort," OSAA cautions, "must be made to avoid Africa entering a new era of debt dependency."

Politics took centre stage in the AGOA forum in Nairobi
An East african perspective

The fire and brimstone anticipated at the AGOA opening ceremony when Hillary Clinton and Mwai Kibaki met did not take place. Hard hitting statements against graft and bad governance were missing.

Even Raila Odinga, who the day before had taken on Western countries to stop lecturing Africa on good governance sounded more reconciliatory. In acknowledging the huge number of distinguished African leaders at the AGOA forum, Hillary Clinton did not miss an opportunity to state the obvious; that USA trade with Africa was crucial but intra-trade within Africa was more crucial.

And to drive her point home, she wondered why African countries were for craving a 300-million people American consumer market across the Atlantic thousands of miles away before utilising a 700-million people African market next door.

Clinton’s speech was telling in more ways than one. It indicted African political and business leadership for its failure to spearhead and accelerate regional integration in Africa. If Africa integrated and opened artificial borders erected by the Berlin colonial conference of 1884, the continent would progress and prosper faster than it is doing now.

This thinking was later reinforced by Raila Odinga when he said that it was easier for a European or Chinese investor to fly to Africa to set up business than a Nigerian or Kenyan to set up shop in any African country. He gave the example of restricted airspace, road travel and lack of cross- border transport system that hindered trade and human traffic.

Looked at locally, these points became glaring enough for East African community members that have been grappling with the Common Market agenda since 1999 when the EAC Treaty was signed.Yes, the entire American market the AGOA strives to open has 300 million consumers.

However, the EAC alone has over 100 million consumers making it a third of the American market just next door that we have yet to exploit with less reduced travel and transport logistics.

Looking at the top delegation of the American team that accompanied the Clintons to the Nairobi forum, one could not help noticing a glaring difference between the United States and African countries.

At the opening ceremony, Hillary Clinton recognised the mayor of Dallas, Texas and three congressmen as leading authorities on international trade that would be engaging the AGOA delegates from the continent. Then I sat back and wondered whether in our delegations we had the mayors and MPs from the continent with the capacity to engage the Americans and remain coherent for a one-hour discussion.

In relaying President Obama’s message to the forum, it was clear that the Accra speech last month was still very much in his mind. His desire to support progress in Africa based on partnership rather than patronage was evident.

However, she was quick to add that partnership with the Obama administration came with responsibility. It would not tolerate a society where greed and graft were the dominant currency.

Clinton acknowledged that a lot of media stories emerging out of Africa were those of gloom, doom and despair. If it wasn’t conflict or famine, it was abject poverty. If it wasn’t corruption and election disputes, it was floods and aids ravaging the continent. He acknowledged that the media tended to downplay a lot of good things taking place in the continent.

Her examples included Rwanda’s tremendous progress so soon after the internal strife that claimed nearly a million people. She praised President Kagame’s policies of putting a premium on professionalism and Dr. Ibrahim Mo’s philosophy of supporting and encouraging good governance practices in Africa. According to Clinton, the Obama administration is determined to double aid assistance to Africa by 2014 but will this time do it differently. Development assistance will be directly linked to trade and growth rather than perpetuating dependency on donor aid. It will pitch for advanced agriculture-led growth to ensure that Africa produces enough food to feed its own people. In so doing, governments must in turn reject bad governance, insecurity and corruption by dealing decisively with the culture of impunity.

It was obvious that the Obama administration expects African leaders to lead their people on the path of progress, prosperity and growth and the starting point on this journey must be transparency and accountability to their people.

Using the imagery of poetry and prose, Hillary Clinton quoted an American congressman who once said that politics is governance through poetry.

However, to explain politics to the people, one must go through the difficult and painful process of explaining in prose—so many words.

In concluding her speech, the Secretary of State reminded Africa of the danger of marginalising its women-folk socially, economically and politically, urging the African leaders that they must deal with this omission because it is unacceptable in the present world. And to show that the continent had capable women leaders, she cited success stories of Prof Wangari Mathai of Kenya and Ellen Johnson Sirleaf of Liberia.

Did Clinton bring any goodies to Africa? No, she only brought challenges that Africans must deal with by themselves!


"David E. Lewis" wrote:

USAID and Africa
Leadership Vacancy Raises Fears About USAID's Future
By Mary Beth Sheridan
Washington Post Staff Writer
Wednesday, August 5, 2009
NAIROBI, Aug. 4 -- As Secretary of State Hillary Rodham Clinton begins a seven-country African trip with a visit to Kenya, the main U.S. foreign aid agency is in limbo, entering its seventh month without a permanent director despite pledges by the Obama administration to expand development assistance and improve its effectiveness in poor countries.

Clinton has backed the use of "smart power" -- employing a full range of economic, military, political and development tools in U.S. foreign policy -- but many aid experts are questioning whether the U.S. Agency for International Development could lose clout under her plans. While Clinton has championed additional personnel for USAID, aid groups worry that the once-autonomous agency could be swallowed up in the State Department, with long-term development goals losing out to short-term political aims.

"Both President Obama and Secretary Clinton have said how important development is. Increasingly, it's a painful contrast between their rhetoric and the reality of having no leadership" at USAID, said Carol Lancaster, interim dean of the Walsh School of Foreign Service at Georgetown University, who served as deputy administrator of the aid agency under President Bill Clinton.

The Obama administration inherited a foreign aid system starved of civilian experts and burdened by a bewildering array of mandates. USAID's full-time staff shrank by 40 percent over the past two decades, but the assistance it oversees doubled, to $13.2 billion in 2008. The agency has a skeleton crew of technical experts, with four engineers for the entire world, Clinton noted recently. Increasingly, USAID has become a conduit for money flowing to contractors, who have limited supervision from the agency.

As USAID has weakened, foreign assistance programs have proliferated across government agencies, especially the military, causing duplication and confusion. Meanwhile, aid budgets have been saddled with presidential directives, "buy America" provisions and congressional earmarks that raise the cost of aid and reduce its effectiveness, development specialists say.

"In the USAID budget, every dollar has three purposes: help build an Air Force base, support the University of Mississippi, get some country to vote our way," said the Rev. David Beckmann, president of the aid group Bread for the World, describing the plethora of political claims attached to aid. The development program, he said, "is a mess."

The waste of billions of U.S. reconstruction dollars in Iraq and the growing role of development in the U.S. strategy in Afghanistan have given new urgency to long-running debates about reforming the aid system.

During his presidential campaign, Obama promised to double overall U.S. foreign assistance to $50 billion and build a "modern development agency." His campaign literature said that "no single person . . . (is) responsible for directing and managing what should be one of our most powerful foreign policy tools."

While development groups and experts have welcomed Obama's boosting of the assistance budget, many are "very, very disappointed" with the lack of progress in reforming the aid system, said Brian Atwood, who headed USAID in the 1990s. The frustration of USAID employees bubbled up at a town hall meeting at the agency that Clinton held last month.

"When will we be getting political leadership in our agency?" an employee asked Clinton. "And I think we'd also like to hear from you why it's taking so long. I think you know we're very concerned about this."

Obama administration officials say the lack of a USAID leader does not indicate a lack of attention to development. The administration has requested in next year's budget 350 new positions for the agency, which currently has a full-time staff of 2,200.

In the next few weeks, the White House plans to bring together the roughly two dozen government agencies involved in assistance in an effort to shape development policy, a senior administration official said, speaking on the condition of anonymity to discuss internal deliberations.

And during the recent Group of Eight summit in Italy, Obama secured pledges totaling $20 billion for food and agricultural aid for the world's poorest countries.

"It's a landmark initiative. It happened during the first six months of this administration, working with the existing USAID leadership," said Mike Froman, the deputy national security adviser for international economic affairs, referring to career staff members.

Many aid organizations endorse Obama's campaign idea of a single point of contact for development programs. Before the election, a coalition of prominent experts called for the creation of a Cabinet-level department to coordinate development, as many other Western countries have. Two of them, Mike McFaul and Gayle Smith, went on to key jobs on Obama's National Security Council staff.

But Clinton, who has a deep interest in development, has moved to keep USAID inside the State Department. She recently launched a quadrennial review, modeled after the Pentagon's strategic-planning exercise, to draw up a blueprint for more closely integrating diplomacy and development.

With no permanent USAID leader in place, however, some development experts are concerned that the agency has little say in the blueprint. Fears of being absorbed into the State Department run deep at USAID, which lost control of its budget and its policy office under President George W. Bush's administration.

"AID and State are like oil and water," said Andrew Natsios, a USAID administrator under Bush. He and two other former directors of the agency wrote an article last fall in Foreign Affairs saying that the "semimerger of USAID and the State Department has not worked." They cited differences in missions, personnel systems and timelines, with development workers focused on longer-term goals and diplomats on shorter-term political crises.

"State doesn't realize it, but the more they absorb AID, the more dysfunctional it [AID] will become," Natsios said.

He and another development expert, who spoke on the condition of anonymity, said the uncertainty over the fate of USAID within the State Department had discouraged some candidates from pursuing the agency's top job.

At the town hall meeting last month, Clinton said, without giving details, that the position had "been offered." But she said some qualified individuals were so put off by the arduous White House vetting process that they dropped out. "The clearance and vetting process is a nightmare. And it takes far longer than any of us would want to see," she said. "It is frustrating beyond words."

Several development experts said the top candidate in recent weeks appeared to be Paul Farmer, a charismatic doctor who has built hospitals for the poor in Haiti, Rwanda and other countries.

Senior State officials say the concerns about USAID being swallowed up by their department are overblown. Greater integration of diplomacy and development will give the aid mission more importance, not less, they said.

"This is not about subverting development to diplomatic ends," said Anne-Marie Slaughter, the State Department's director of policy planning. Instead, she said, Clinton sees development as central to solving political problems such as those surrounding Iraq, Sudan or global epidemics. "Those issues can't be addressed without a really strong development component, because they have to be bottom-up. You can't negotiate a treaty and think that's going to stop a global epidemic," Slaughter said.

Atwood, who led USAID under President Clinton, said Hillary Clinton was a major ally when she was first lady, working behind the scenes to help the agency's top officials.

"That's why I have so much confidence in her doing the right thing at USAID," he said. But without a director, he said, "she's had her hands tied behind her back."


US and Africa: AGOA Forum 2009
WTD - Aug 6, 2009

US Secretary of State Hillary Clinton said the US was committed to maximizing opportunities created by its trade preference programs with Africa and would pursue further reductions in barriers on agricultural produce, Bloomberg news service reported from Nairobi (WTD, 8/5/09). “We are exploring ways to lower trade barriers to ease the burdens on African farmers,” Clinton said, without announcing any specifics. She pledged to create “stronger and more sensible links” between US trade policies and development.

The US African Growth and Opportunity Act, which aimed to boost trade with the world's poorest continent, had not met its full potential, Clinton said. The nine-year-old law, due to expire in 2015, allows about 6,500 products from Africa to enter the US free of duties or quotas. She called on Sub-Saharan African to boost regional trade, while pursuing exports to Europe and the US.

“It may be important for the US to go an extra mile to facilitate enhancement of the core goals of AGOA,” Kenya's Prime Minister Raila Odinga said at the forum. He called on the US to allow Kenya to include more imported materials and parts in goods that it then exports to the US, so-called third-country provisions. Odinga said yesterday that Sub-Saharan African nations should focus on boosting trade with each other to hasten economic growth rather than hard-to-penetrate US and European markets.

Clinton echoed that call, calling on the continent's leaders to dismantle trade barriers between them. “The single biggest opportunity that you have right now is to open up trade with each other,” Clinton said. “The market of the US is 300 million people. The market of Africa is 700 million plus.” Africans trade among each other less than any other region in the world. “That makes it very difficult to compete effectively. Of course keep focused on markets like the United States and Europe but simultaneously work to tear town trade barriers among” yourselves, Clinton said. Clinton urged African nations to create “favorable investment” conditions through better governance. It was a message echoed repeatedly this week by U.S. officials and by President Barack Obama himself who addressed the AGOA forum via a taped video message. While, the US will do what it can, it is “only Africans can unlock Africa's potential,” Obama, himself of Kenyan heritage, said. “Only Africans can ensure the good governance and strong institutions upon which development depends,” Obama said. “Open markets alone are not enough. Development requires the rule of law, transparency, accountability, and an atmosphere that welcomes investment.”

US Trade Representative Ron Kirk led a plenary session on the effects of the global economic crisis on AGOA. Joined Reps. Jim McDermott (D-Wash) and Donald Payne (D-NJ), as well as African Development Bank President Donald Kaberuka, Mr. Kirk discussed current slowdowns in US-sub-Saharan trade and investment, and the need to restore global trade for the sake of worldwide economic recovery - as well as to increase regional trade within Africa to boost economies there. He also reiterated the United States' commitment to a balanced and ambitious conclusion of the Doha round of WTO talks, and sought African ministers' perspectives on the round, AGOA, and other trade issues.

The United States and Mauritius announced yesterday they will begin formal negotiations toward a bilateral investment treaty (WTD, 8/3/09). US Trade Representative Ron Kirk and Secretary of State Hillary Clinton announced the launch of the BIT negotiations during the African Growth and Opportunity Act Forum in Nairobi, Kenya.

“The proposed US-Mauritius BIT will help reinforce the efforts of one of Africa's strongest performers on trade and economic reform, and help improve Mauritius's already favorable investment climate by providing high standards of investment protection,” Mr. Kirk said in a statement. The Administration is conducting a review of the US model BIT, which is expected to conclude this fall. This ongoing review is intended to ensure that the US model BIT is consistent with the public interest and the overall US economic agenda, USTR said. Talks between the United States and Mauritius before the conclusion of the review will proceed at the technical level.
The two countries have had a Trade and Investment Framework Agreement since 2006. Total two-way trade between Mauritius and the United States was valued at $227.7 million in 2008. Leading Mauritian exports to the United States include textile and apparel, cut diamonds and jewelry, live animals, prepared fish, optical and medical instruments, and perfume. The leading US exports to Mauritius include wheat, diamonds and jewelry and machinery.

Congressman McDermott says expand US-Africa trade deal
By Helen Nyambura-Mwaura
NAIROBI (Reuters) - August 5, 2009

The architect of a programme allowing African nations to export products to the United States without
paying duties said the deal should be extended to other poor nations around the world.

"Clearly there are a lot of countries that are very, very poor. There are some of them in Asia," Jim McDermott, a U.S. congressman viewed as one of the founders of the Africa Growth and Opportunity Act (AGOA), told Reuters.

"We mustn't leave out other countries. If you're poor, it doesn't make any difference if you're Asian or South American. You really need opportunity. We are opening to other countries -- but not at the expense of Africa."

U.S. trade with sub-Saharan African countries remains low, despite AGOA's duty-free treatment for 6,400 products. Sub-Saharan African countries accounted for just slightly more than 1 percent of total U.S. exports and about 3 percent of total U.S. imports in 2008.

AGOA was passed into law in 2000 with the hope that it would bring Africa into global trade, McDermott said on Tuesday during a visit to Kenya.

"There is no reason Africans can't compete with the world, but they needed to have the United States reach out and draw them in because we are the biggest market."

There had been no specific U.S. trade policy for Africa before AGOA, McDermott said, but 38 nations are now eligible to export to the United States. Most exports have so far been oil.

"We want it to be a two-way street," the congressman said.

"We want Africans to sell to us and get their economy going and get foreign exchange and to do things inside their countries. But we also want them to have money to buy things from us."

African exporters to the United States have been clamouring to have the 2015 deadline for AGOA extended indefinitely. But U.S. officials believe the time limit will remain unchanged and that it is up to Africa to make the most of the deal as it is.

McDermott, however, backed Africans who want AGOA extended, saying U.S. buyers would be reluctant to make commitments with only a short time left for the end of the deal.

"You need continuity and certainty to get things really rolling. One of the problems with AGOA is that it has been year by year by year."

Africa-U.S trade has remained skewed in favour of the superpower,but McDermott said he was happy with the increased flow of merchandise from the continent to his country.

"It doesn't happen instantly. I would like it to. I wish I can wave a magic wand and make everything better, but the process is working."

Africa: Expand Scope of Trade Pact, Urges the AU's Mwencha
4 August 2009

Nairobi — The African Growth and Opportunity Act (Agoa) should be reformed to make it a true investment tool for Africa, the African Union has said.

Maintaining that the current trade pact lacks the investment element, AU Commission deputy chairperson Erastus Mwencha said, adding that it was time to make Agoa permanent, predictable and transparent to make it "investor friendly."

Mr Mwencha said the current structure discourages potential investors from thinking long-term because they are aware that any breakdown in communication with any of the 39 Agoa eligible African countries will hurt the private sector.

"One of the best ways to provide a conducive environment is through legislation so that investors in the US can change in the way they look at Africa," he told delegates yesterday at the ongoing 8th Agoa Forum at the Kenyatta International Conference Centre.

The Agoa is set to expire in 2015. Such a move would enable the continent to counter the perception that Africa is a high risk investment destination.

Noting that many African countries are landlocked, have small economies and limited competitiveness, Mr Mwencha also said Agoa should be extended to include infrastructure development, especially in energy and transport.

"Agoa should provide a solid platform for infrastructure development," the former Common Market for Eastern and Southern Africa (Comesa) secretary general said.

The AU official said the law should be linked to other global trade pacts such as the World Trade Organisation, G20 and G8 and its focus on agriculture enhanced to include new cash-crops.

Africa: Continent Wants U.S. to Review Agoa Pact
George Omondi
5 August 2009

Africa will be pushing for a comprehensive revision of key provisions of US legislation to remove hidden barriers to trade, delegates to the Africa Growth and Opportunity Act conference said.

Trade experts said the law, popularly known as Agoa, is fraught with stringent conditions that continue to prevent producers in Africa's agro-based economies from accessing the world's largest market nine years since it was enacted.

Erastus Mwencha, the African Union deputy chairman, said stringent quality and lengthy certification processes had prevented many African producers from exporting to the United States under what has been described as the most lucrative trade preference legislation ever passed by the American Congress.

"We intend to use this forum to press for improvement in quality certification processes, especially in sanitary and phytosanitary (SPS) assessment," said Mr Mwencha.

US International Trade Commission (USITC) data indicates that trade between Africa and the world's largest economy is still dominated by export of natural resources.

That reality has left four oil-producing countries with more than 90 per cent of the $56 billion that Africa earned from the sale of goods and services to the US under the Agoa pact last year.

The USITC data shows that Africa's export of crude oil, precious metals, medicinal chemicals, oil seeds, steel grew steadily under Agoa while exports of motor vehicles and parts, computer peripherals, consumer electronics, lumber and apparel dropped.

On Tuesday, participants at the Nairobi conference called for modification of the Act to promote trade in value added products from Africa.

Kenya, which has more than six thousand product lines to sell to the US under Agoa, has mainly exported textile and apparel, a crowed segment with more than 27 players from Africa alone.

East Africa's biggest economy also has a comparative advantage in fresh produce that has made the leading exporter to Europe but traders said slow process of clearing agricultural products destined for the US has discouraged them from pursuing the market.

Kenya holds the right to export pastries, mango juice, avocado, fish, crafts, animal and leather products under the quota-free and duty free instrument but textiles still account for 96 per cent of the country's exports to the US.

Trade officials said the push for sale of value added products to America is a long term one citing difficulties in passing the necessary legislation.

"Most US companies in the business of value addition control budgets that are more than half the average GDP of an African state. Their level of lobbying is such that even congressmen who side with Africa in the push for trade in value added products risk losing their seats," said Mr Joseph Kosure, the EPZ Authority's acting CEO who once worked as the Kenya's trade representative to the US.

Ms Phyllis Jones, the president and CEO of Elan International and a former US Assistant trade representative told journalists at a video conference last week that America would not lower its vetting processes in favour of Africa because of strong pressure from consumers.

Concern has been growing over the decline in the value of Kenya's Agoa exports in past five years and the country's inability to open new lines of trade with America.

The value of Kenya's exports to the US has decline from $277 million in 2004, $270 million in 2005, $262 in 2006, $ 249 million in 2007 and $246 last year.

"Most of buyers are unwilling to set up the necessary infrastructure in Africa referring to Agoa as a temporary legislation that cannot support long term plans," said Jaswinder Bedi, the chairman of African Cotton and Textile industries.

"We'll be pushing for a permanent framework of engagement," he said.

Mr Bedi said that Kenyan producers had significantly reduced factory costs and are also working with the government to cut labour and energy costs, there was need to attract long term infrastructure that can reduce time and cost at which products get to the market

Exporters have also blamed slow clearance of goods by custom officials and the long route that merchandise spend in the high seas to reach America as factors that have impeded growth of Agoa exports.

"Our new campaign is to create awareness among government officials that textile products are also perishable, you cannot deliver winter clothing in summer. That can make any exporter lose market in America for good," Mr Bedi said.

But America insists that poor governance and a breakdown in the rule of law continues to undermine trade relations between the US and Africa.

Intricate link
Political turmoil in Zimbabwe has earned the country suspension from Agoa.

It is feared that Madagascar, where the military staged a coup against an elected government might suffer a similar fate.

US ambassador to Kenya Micheal Ranneberger told delegates to the Agoa forum that Africa must appreciate the intricate link between economic development and strong democratic institutions.

He said the US foreign policy is to assist 'responsible individuals and responsible institutions'.

That policy has seen countries such as Kenya that suffered post election violence and borders chaotic Somali classified as risky for trade with US.

African delegates however pointed to the positive rating that oil producing countries have continued to enjoying despite persistent political and economic turmoil.

Critics point to Nigeria, the continent's leading oil producer and has retained its position as a leading exporter to the US under Agoa despite its ranking below Kenya in the World Bank's index of competiveness.

Shifting goals
Kenya's Prime Minister Raila Odinga accused the Americans of shifting goals for African governments and urged Africans to reject the wave of protectionism that is spreading across the globe in the wake of an economic recession.

"America doesn't have to lecture us on good governance because just the other day, during cold war they embraced dictator who pledged support to their campaign against communism," he told delegates.


Dr. David E. Lewis
Vice President
Manchester Trade Ltd.
International Business Advisors
1710 Rhode Island Avenue, NW - Suite 300
Washington, DC 20036
Tel 202-331-9464
Fax 202-785-0376