The U.S. Trade Representative’s goal of negotiating a “model” bilateral deal with an African country could be hampered by a nexus of regional trade deals and undermine continental integration.—Inside U.S. Trade
U.S. Trade Representative (USTR) Robert Lighthizer told the Senate Finance Committee last month that he was “seriously” looking at a free trade agreement with an African country, adding that such a deal would be negotiated quickly. Staffed with newly confirmed deputies, Lighthizer said, the agency would begin in late March to assess which countries the U.S. should target for bilateral talks.
Modest gains
Commerce Secretary Wilbur Ross, who leads the President’s Advisory Council on Doing Business in Africa, is slated to visit the continent in the coming months. According to sources, the visit has been pushed back to the end of June or early July and will include stops in 4 countries – Ethiopia, Ghana, Ivory Coast and Kenya.
Despite the administration’s vocal preference for negotiating deals bilaterally, analysts believe such an agreement would result in very modest gains for the United State while potentially disrupting the network of regional – and even continent-wide – agreements to which many African countries are parties. The most notable example is the recently signed African Continental Free Trade Area (AfCFTA), crafted to cut tariffs on 90 percent of goods.Countries have not yet agreed to the list of products that will be covered under the pact. AfCFTA is being cited as the largest free trade agreement since the creation of the World Trade Organization (WTO).
On March 21, 44 African countries signed AfCFTA. The deal will enter into force once ratified by 22 members, but the two largest African economies – Nigeria and South Africa – have not yet signed on.
The deal represents a culmination of efforts by African countries to advance regional integration, which a bilateral deal with the U.S could undermine.According to Stephen Lande, president of Manchester Trade Limited, the AfCFTA does not preclude members from negotiating a bilateral deal with the U.S.. Manchester Trade Limited is a DC-based trade consulting group.
“They are free – other than their obligations already existing within their regional economic communities,” he said. Lande said African countries negotiating with the U.S. would also require extensive resources, which some might prefer to use instead to further regional and continental integration.
Florie Liser, a former assistant USTR for Africa who is now the president and CEO of the Corporate Council on Africa, welcomed Lighthizer’s comments, saying there was “a recognition in the Trump administration that we need to be looking at Africa as a place of opportunity, a place where we want to enhance our trade and investment relationship.” However, she also warned of the challenges the regional trade pacts posed.
Liser said countries in customs unions with common external tariffs are bound by those obligations and have a limited ability to negotiate concessions beyond those granted to other union members. She acknowledged that many African customs unions do not cover 100 percent of trade and said there were some sectors in which countries would be free to negotiate, but added that the regional pacts could add “baggage” to negotiations with the U.S.Lighthizer has said that a bilateral deal, “if done properly, will become a model” for other countries in the region.
Liser suggested using the U.S.-Morocco free trade agreement, the last FTA the U.S. struck in Africa, as a template for other agreements. She said the U.S. should start with what she called “champions” – countries that are ready to pursue a high-standard deal with the U.S. – and then move to other countries that are part of the regional bloc.
According to Liser, supporting regional integration is in part a messaging exercise. Accordingly, the U.S. should argue that “We are starting with country A, but we recognize that country A is in a customs union with B, C, D, E. And we want to set the standard really high and we think that this country will work towards doing that, and we’ll set it high and then we expect the other countries in that customs union to meet us at that level.”
On the other hand, Liser said, if the U.S. were hypothetically negotiating with South Africa, a member of the Southern African Customs Union (SACU), and said, “‘Okay no, Lesotho can’t come in the room – Botswana, Namibia, Swaziland we don’t want you there’ – that I think would probably raise some concerns and issues for not just SACU but for Africans generally.”
Enormous Potential
“If I were advising Ambassador Lighthizer, I would say, ‘Great that you are looking at Africa, great that you are ready to do an FTA and urge you as you launch that to make it clear that we’re not undermining regional integration,’” she added.
Lighthizer in January said he saw “enormous potential” in Africa.“We are only a few years away from that being the population center of the world, and if we don’t figure out a way to move them right, then China and others are going move them in the wrong direction,” he said. “So there are several issues, a lot of challenges. It’s extremely important, and it’s something that we are very much focused on.”
The size of the U.S. economy would make a deal attractive for African countries even if a bilateral agreement could run afoul of regional commitments, according to Dennis Matanda, head of government relations for Manchester Trade Limited.
If the U.S. picked a country like Kenya, Matanda suggested, and insisted on a deal, Kenya likely would not refuse even if it risked violating its regional commitments. He noted that when Kenya, a member of the East African Community (EAC), signed an Economic Partnership Agreement with the European Union, Tanzania sued it, another member of the East African bloc. He added that South Africa, as a member of the Southern African Customs Union, would violate its commitments if it negotiated a bilateral deal with the U.S.
Matanda said it would be difficult to find any country that was not a member of a regional community. Algeria was the lone example he gave of a country that could do a deal without disrupting regional architecture.
Analysts also said the gains from a bilateral would be negligible for the U.S., Matanda likened a bilateral deal to “swatting a mosquito” and said U.S. companies would benefit little from an arrangement with a single country. Instead, he said, the U.S. should try negotiating a more significant deal with the new African bloc similar to the Transatlantic Trade and Investment Partnership with the European Union (EU).
Instead of doing a deal with a tiny country, Matanda said, the U.S. could do one with the largest free trade area in the world. Lande concurred. “It makes much more sense for the U.S., in my view, to allow the Africans first to create this zone and then to negotiate,” he said. If the U.S. does end up doing a deal, Lande said the U.S. should “go slowly” and provide flexibility to African countries by delaying its implementation to allow for regional integration as well as giving credit to countries for promoting integration.
Kim Elliott, a visiting fellow with the Center for Global Development, said she does not see Africa as a priority for the Trump administration. Echoing other analysts, she warned that a U.S. bilateral could undermine regional integration and said the best move would be for the U.S. to do a deal with a larger bloc, such as the AfCFTA.
Elliott added that she would not be surprised if the U.S. threatened to withhold African Growth and Opportunities Act (AGOA) preferences to add pressure to trade negotiations. AGOA, set to expire in 2025, provides preferential access to the U.S. market to sub-Saharan African countries that can meet certain conditions.
Liser said that the 2006 extension of AGOA to 2015 undermined U.S. efforts at the time to negotiate a deal with the Southern African Customs Union. “What the South Africans started saying to us in meetings openly was ‘Why should we pay you for what we are going to get free?’” she said. Though Liser contended it was unlikely that the U.S. would use the threat of pulling AGOA benefits solely as leverage to negotiate an FTA, she said a trade deal was in the best interests of African countries so they could avoid being at the mercy of the annual AGOA review.
“Every year the Africans will have to deal with that under AGOA. That’s the nature of AGOA. That’s what Congress wanted. However, in our free trade agreements, once you go through the process of negotiating a free trade agreement, nobody is going to sit you down every year and say, ‘Are you meeting the criteria?’” she said.
“I personally think it puts them in a better position,” she added. “You are sitting at the table as an equal and you are not in some unilateral preference program where someone can basically take your benefits from you unilaterally.”
Analysts across the board said they believed the U.S. should be doing more to support regional integration, which would not preclude it from negotiating a bilateral deal. Noting that the U.S. has Trade and Investment Framework Agreements with a number of the regional units, including the EAC and the Economic Community of West African States (ECOWAS), Liser said the U.S. has previously supported regional integration in Africa.
“We should be able to say that we are supporters of regional integration; the big question mark is ‘How would you move forward in negotiations with an individual country?’” she said. “How would you move forward with them so that people understand that you’re not trying to undermine regional integration?”
“I think we should be excited for Africa, I think this is a major accomplishment, I think that it has taken a long time for Africa to get to this point,” Liser said. “We should be proud of Africa, and we should be cheering them on; at the same time we should also be pushing them, urging them, encouraging them to finish the work.”
Rosa Whitaker, another former assistant USTR for Africa who now heads the Whitaker Group, said the U.S. is not doing anything to support African regional integration. She blasted USTR for not issuing a statement of support for the AfCFTA, which she said other major powers like the EU have done. Whitaker also said the U.S. should be providing technical support to help the deal come to fruition. “I think it’s great time for Africa and I think that it’s a shame that America is not on board,” Whitaker said.
Speaking to Inside U.S. Trade from Ghana, Whitaker hammered the Trump administration for lacking a policy for African trade. “I think fundamentally where the U.S. should start is to have a coherent Africa policy which nobody believes exists,” she said. “How do they reconcile a bilateral agreement while the continent tries to integrate?”
Whitaker challenged the USTR to publicly name the countries it considered for an FTA. Liser suggested the countries identified in a forthcoming U.S. International Trade Commission report on Sub-Saharan Africa, which is set to be released at the end of this month. Those countries include Cameroon, the Ivory Coast, Ethiopia, Kenya, Mauritius, Nigeria and South Africa. Other analysts added Botswana, Ghana, and Rwanda to the list of potential targets.
Whitaker, once hailed as the “mother of AGOA” by former USTR Ron Kirk, said she also believed the recent U.S. decision to suspend AGOA preferences for apparel products from Rwanda would be perceived by African countries as a form of bullying and could lead some countries to sour on the idea of a deal with the U.S. She pointed out that the president of Rwanda is now the chair of the African Union.
Whitaker also noted that previous administrations had rejected the petition that started the process, filed by the Secondary Materials and Recycled Textiles Association because it lacked merit. “It comes across as arrogant, it comes across as bullying, and we are further ceding Africa to China,” Whitaker said.
Whitaker said she was so dismayed by the administration’s trade policy – including the failure to recognize the AfCFTA and the move to “slap” Rwanda with sanctions – that she called on Lighthizer to resign. “I think he should return to his law firm,” Whitaker said.
USTR declined to comment on this story and did not respond to a request for comment on Whitaker’s call for Lighthizer’s resignation.
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