She applauds Secretary of State Clinton for visiting the strategically important countries of Kenya, South Africa, and Nigeria. She also welcomes Mrs. Clinton's emphasis on women's rights -- a message most clearly expressed near the Rwandan border with Congo in the city of Goma. But, Ms. Frazer is less satisfied that the trip did much to advance "core" US interests: promoting economic growth and trade, combating terrorism, and improving governance.
She offers four policy initiatives that would help to "translate the rhetoric of love into policies that advance the mutual U.S. and African interests." I'm only going to discuss one of her recommendations, which is this: do not extend AGOA trade preferences to a small subset of developing nations that includes some south Asian and some Islamic nations. Ms. Frazer argues: "extending the same trade preferences to hypercompetitive Cambodia and Bangladesh—each of which individually exports more apparel to the U.S. than all of sub-Saharan Africa combined—will undermine the program's success in Africa." Here's a link to the proposed legislation that would expand the trade bill -- it's currently in committee.
But note that the success Ms. Frazer identifies is based on playing favorites. Maybe African producers should be favored over Bangladeshi producers, but on what grounds? A different version of this question would be: "why should African manufacturers be shielded from competition from other developing world producers?"
A policy of favoritism is problematic is because it encourages investment in less competitive African industries. Duty-free products have a "leg up" in the marketplace: they can be sold for a lower price than can products that have an import duty/tax. What Ms. Frazer is saying is that if you take the tariffs off Bangladeshi or Cambodian apparel American consumers will prefer them (because they're now cheaper) and buy more of them which means we'll buy less African-made apparel. This may be true for clothing, but Africans will have an advantage in other industries (eco-tourism, solar energy, telecom) and it is into these industries that investment rand, naira, schillings, etc. should flow if African apparel manufacturers are truly less competitive.
Is protectionism a strategy for creating sustainable economic growth in Africa? No, it's a strategy in which short-term gains in employment and export opportunities are traded for longer-term growth in the form of truly competitive industries. Are there different policies the US could adopt to help promote economic growth and development in Africa? A couple of things: end or limit our own agricultural subsidies to encourage developing-world farmers to compete with US farmers, expand AGOA rules to allow more processed agricultural products to come into the US duty/quota free, and continue to encourage African governments to reduce intra-regional trade barriers. These steps, coupled with much-needed improvements in governance, will help spur economic growth and development in Africa -- promoting favoritism will not.
- Karol
3 comments:
I have been thinking about the best way to give developing countries a leg up ever since Dambisa Moyo's book Dead Aid...One detail that you mention is of particular interest to me: "better governance". What is the role of trade partners / investors in ensuring that "good governance" is implemented?
http://helenzblogue.blogspot.com/
I understand the impulse to make trade preferences "fair and equal" to everyone, but the thing is that Bangladesh and Cambodia are not in any way "equal" to Africa in terms of industrial competitiveness. For example, while African countries' apparel sectors are still developing, Bangladesh's and Cambodia's are global giants. In 2008 those two southeast Asian countries exported over $5.5 billion in apparel to the US-- more than five times as much as all sub-Saharan African countries put together. They just don't need trade preferences, whose entire point is to make an industry more competitive. It's the same reason we don't give trade preferences to cars from Japan or manufactured goods from China.
Paul Collier has come out against this kind of expansion, and Rosa Whitaker has an op-ed better detailing the issue (and how this expansion would really decimate the progress Africa's producers and manufacturers have made in the last several years) here.
That said, I completely agree with your last paragraph on ways US policy towards Africa needs to be improved.
Thanks to Helen and Meg for comments. For Helen's question, there's an interesting paper by John Hewko on the role the private sector/investors and others can play in promoting and improving a rule of law. You can find that paper here: http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=952.
For Meg's comment, let me go back to a question in the post: "why should Africa's investors be encouraged to pour money into a sector in which they are not competitive?" Wouldn't it be better for Africans to identify the areas in which they are competitive and put investment money into those areas: ICT, the service sector, biofuels, organic or processed agriculture, etc.? As Ms. Whitaker points out in her op-ed, last year African apparel exports to the US fell dramatically, and that was with AGOA protection.
Although apparel has been an "entry point into manufacturing" for developing countries, perhaps Africa's path should be or will be different: maybe economic growth in Africa will be driven by an expanding service sector, for example. Protecting one group of African manufacturers from existing competition based on an infant industry argument assumes that that industry will be able to transform itself and become competitive over time. The trade figures from last year, coupled with South Africa's experience in apparel/textiles, suggest that may be extremely difficult.
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