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From: wolda002@umn.edu
Date: Fri Feb 18 2011 - 00:26:59 EST
Pleas read also at the end the page. AGOA never had, and never will have,
an impact on Eritreaís Economy
By Mrs Sofia Tesfamariam
Jan 2, 2004,Trading with the Enemy
http://www.fpif.org/articles/trading_with_the_enemy
By Jason Hickel, February 16, 2011
The last decade has seen a remarkable surge in U.S. economic interest in the
continent of Africa. Policymakers who once considered Africa the languid
backwater of global economics are now rushing in to stake a claim in the
continent’s enormous resource endowment. Most of this effort operates with a
rhetoric focused on “partnership” and “development,” with the vision of
using US trade and investment to lift Africans out of poverty. U.S.
Secretary of State Hillary Clinton exemplified this attitude when she spoke
last year<http://www.america.gov/st/texttrans-english/2010/August/20100803185134su6.467402e-02.html>at
a US-Africa trade policy forum, saying, “Let’s help each other make
Africa all that it can be.”
But a quick look at the trade policy itself shows that this sugary rhetoric
of American benevolence and concern for African welfare is deeply
misleading. It does little more than cloak an agenda firmly rooted in
economic realpolitik. Michael Battle, the U.S. Ambassador to the African
Union, has revealed the blunt
urgency<http://millercenter.org/scripps/archive/forum/detail/5793>of
this agenda in a candid but troubling statement: “If we don’t invest
on
the African continent now, we will find that China and India have absorbed
its resources without us, and we will wake up and wonder what happened to
our golden opportunity of investment.”
The centerpiece of U.S. trade policy for Africa is the African Growth and
Opportunity Act (AGOA). Signed into law by President Clinton in 2000, AGOA
is, according to Congress, “perhaps the most significant American initiative
on Africa in our country’s history.” It provides trade preferences for
duty-free entry into the United States for certain goods from sub-Saharan
Africa, which is touted as a way to boost African business by encouraging
exports. President Bush signed the AGOA Acceleration Act of 2004, which
extends the policy until 2015.
The Big Catch
It’s hard to quarrel with the idea that reduced trade barriers around
American markets would be a boon for African exporters. The quintessential
example is Lesotho, whose textile industry has flourished since joining AGOA
and now exports more than $400 million worth of garment manufactures to the
United States annually.
But there’s a catch. The U.S. president reserves the right to reevaluate
each country for AGOA eligibility on an annual basis; 41 made the cut last
year. In order to qualify, African countries have to meet a specific set of
stringent “conditions.” Topping the list is the requirement that the
beneficiary promote “a market-based economy that protects private property
rights… and minimizes government interference in the economy through such
measures as price controls, subsidies, and government ownership of economic
assets.” In addition – and here’s the big one – the beneficiary must make
progress toward “the elimination of barriers to United States trade and
investment.”
In other words, AGOA eligibility requires not just mild economic
deregulation but the outright destruction of any and all tariff protections,
flinging open African markets to a flood of American goods that inevitably
undermine local industry. And African countries don’t really have a choice
in the matter, for if they refuse to meet these conditions, they effectively
forfeit their access to the American market. For all of the positive spin
that U.S. policymakers put on AGOA, nobody ever so much as mentions these
draconian measures, which are easily as destructive as the dreaded
“structural adjustment” conditions that the International Monetary Fund
attaches to its loans. Essentially, AGOA amounts to a coercive free trade
agreement with most of the subcontinent.
Given that AGOA requires its beneficiaries to eliminate barriers to U.S.
investment, it’s not surprising that the balance of trade comes out strongly
in favor of the United States. Trade data <http://www.agoa.info/> shows that
Benin, for example, has exported almost nothing to the United States since
it became an AGOA member, but has imported some $600 million worth of U.S.
goods that have significantly undercut local producers. Some countries do
actually export a great deal under AGOA rules – but only those with
substantial petroleum and mineral deposits. Take Angola, for instance; 99
percent of all of Angola’s exports under AGOA have been energy-related. In
the Congo, that number reaches closer to 100 percent. The same is true of
Nigeria, Botswana, and every other country with an oil and mineral
portfolio. Indeed, more than 80 percent of all exports under AGOA fall under
this sector.
AGOA, in other words, is designed to pry open new markets for U.S. goods
while making it easier for the United States to extract oil and minerals.
And since most of Africa’s oil and minerals are controlled by Western
corporations like Exxon, Shell, and Anglo-American, this is hardly an
arrangement designed to benefit African businesses.
Dubious Eligibility
If that’s the tragedy, then here’s the farce. AGOA actually does include a
number of progressive conditions for membership. In order to qualify,
beneficiaries must develop “economic policies to reduce poverty,” uphold
“the rule of law, political pluralism, and the right of due process, a fair
trial, and equal protection,” construct “a system to combat corruption and
bribery,” and refrain from “gross violations of human rights.” In addition,
beneficiaries must implement “the protection of worker rights, including the
right to organize and bargain collectively, a prohibition on the use of any
form of forced or compulsory labor, a minimum age for the employment of
children, and acceptable conditions of work with respect to minimum wages,
hours of work, and occupational safety and health.”
In practice, however, none of this actually applies. Countries renowned for
corruption, human rights abuses, and labor law violations are routinely
approved for AGOA eligibility. Indeed, the countries with the most flagrant
abuses are those that trade the most under AGOA, giving blatant lie to the
claim that good governance is a necessary precondition for successful U.S.
investment in Africa. Cameroon, for example, enjoys AGOA eligibility even
though the government there rules an undemocratic, one-party state,
regularly obstructs political meetings, harasses journalists, tortures human
rights activists, and turns a blind eye to child labor. But it has a lot of
oil.
Neighboring Chad also enjoys AGOA eligibility, despite rampant corruption
and a long tradition of arbitrary detentions and extra-judicial killings.
But it has the Chad-Cameroon pipeline – the single biggest US investment in
Sub-Saharan Africa – and Bush and Obama have been devoted to protecting the
project’s U.S. investors. Eritrea is another example. In 2003, the UN named
Eritrea one of the “World’s Most Repressive Regimes.” But it gets AGOA
eligibility in exchange for having joined “the coalition of the willing”
during Bush’s war in Iraq. Burkina Faso, Angola, Swaziland, and the Congo
all benefit from similar double standards.
The issue here is not just that the United States benefits from corrupt and
repressive regimes, but that while AGOA claims to create incentives for
political reform in Africa, it actually does the opposite. By encouraging
the deregulation of oil- and mineral-based economies, AGOA contributes to
the development of “rentier states” that do not have to rely on income taxes
for their revenue. Such states have no incentive to build up a strong middle
class, diversify their economies, or respond to the needs of their citizens
In turn, citizens have no incentive to scrutinize government priorities. As
the social contract between citizens and the state erodes, endemic
corruption inevitably follows, and states become increasingly repressive in
order to maintain their grip on power.
This is what economists call “the resource curse” or “the paradox of
plenty.” An overreliance on huge oil and mineral deposits ends up generating
corruption, inequality, and widespread poverty instead of positive
development outcomes. This pattern contradicts the common assumption that
economic liberalization translates into political freedom or democratic
reforms.
Who Benefits?
Although AGOA purports to leverage exports as a way of boosting economic
development in Africa, it does not stipulate that the exporting companies
must be African. Indeed, most of them are American, Chinese, and Indian.
The vast majority of beneficiaries under AGOA are not impoverished Africans,
but wealthy foreign corporations. Indeed, AGOA’s insistence on the
elimination of local trade barriers allows U.S. companies to bid freely on
things like mineral concessions and government contracts. And given that
these companies have deep capital reserves, they can usually win,
effectively blocking out their African competitors.
In addition, when it comes to industries like textile manufacturing, AGOA
stipulates that producers must use U.S. raw materials, which effectively
blocks investment in local upstream sectors. Furthermore, because AGOA
requires that goods exported to the United States “originate” in the host
country, Chinese and Indian clothing manufacturers frequently label their
goods “Made in Kenya” and transship them to the United States through Africa
to get preferential treatment. The overall effect, then, is that AGOA does
not create greater market share for African companies but actively
diminishes it.
One might argue that regardless of where the investment comes from, at least
it creates jobs. This may be true. But AGOA does not require that the new
jobs go to Africans. Indeed, many of the extractive industries that benefit
from AGOA import highly skilled labor from developed countries like the
United States.
In Angola, for example, most of Exxon’s engineers are Americans.
Furthermore, the jobs that AGOA *does* create for Africans are often deeply
exploitative. AGOA has encouraged the development of Export Processing Zones
(EPZs) across the continent, where labor laws are nearly non-existent and
wages are rock-bottom in order to attract foreign manufacturers. In the
textile industry, the net effect is that Asian sweatshops relocate to Africa
to take advantage of AGOA incentives. In Kenya in 2006, the average wage of
EPZ workers in Asian sweatshops was a paltry 20 cents per
hour<http://www.pambazuka.org/en/category/features/58271>,
which amounts to barely more than a dollar a day – the lowest wages in the
country. Most EPZ workers – the majority of whom are women and doubly
vulnerable to exploitation – have to work excessive overtime just to meet
their basic needs, and live in constant danger of being laid off without
compensation.
Changing AGOA
It doesn’t have to be this way. With a few thoughtful changes, AGOA could be
used to make trade work for everyday Africans.
First, the economic liberalization condition should be dropped. Rich
countries like the United States, Britain, Japan, and China initially used
tariff protections and subsidies to promote their industries in the early
stages of development; it’s cruel to deny those basic strategies to African
countries desperately in need of development. Second, the political reform
conditions should be taken seriously, and used to leverage best practices in
human rights and labor law. Third, Local Content rules should require that
all U.S. investments in Africa should tier up over a set period to at least
80 percent local labor and local contracts – characterized by genuine
registration – and should require investment in local capacity where it
proves too poor to meet the necessary standards. Finally, targeted quotas
should be used to channel foreign investment to where it’s needed most,
rather than to where the regulations are most relaxed.
But changes of this order are not on the horizon, for – as I have
demonstrated – the United States is concerned less about the well-being of
Africans than about meeting its own energy needs and promoting the interests
of American corporations. We need to cut through the deceptive rhetoric of
U.S. trade policy and ask the tough questions: Who really benefits from
AGOA? Does AGOA enhance welfare and development, or facilitate extraction
and exploitation?
As Ambassador Battle’s statement illustrates, the present trade arrangement
between the United States and Africa is eerily reminiscent of the era of
colonial conquest. In 1875, as Europe set its sights on Africa’s vast
riches, King Leopold II of Belgium wrote to his ambassador in London, “I do
not want to miss a good chance of getting us a slice of this magnificent
African cake.” It’s America’s turn now, and it appears that the Obama
administration – like Bush before him – is driven by a similarly disturbing
vision: a new scramble for Africa.
Foreign Policy In Focus contributor Jason Hickel is an instructor and PhD
candidate in anthropology at the University of Virginia. His research
focuses on trade, development, and political conflict in Sub-Saharan Africa.
Recommended Citation:
Jason Hickel, "Trading with the Enemy" (Washington, DC: Foreign Policy In
Focus, February 16, 2011)
AGOA never had, and never will have, an impact on Eritreaís Economy
By Mrs Sofia Tesfamariam
Jan 2, 2004,
http://www.shaebia.org/cgi-bin/artman/exec/view.cgi?archive=8&num=2268&printer=1
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