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U.S. Charts New African Trade and Investment Relationship

Posted August 27, 2015

In an effort chart a new course for trade under the African Growth and Opportunity Act (AGOA), renewed by Congress for a decade in June, representatives from 39 African countries are holding discussions this week with U.S. officials in Gabon.

Under the deal, first signed in 2000, African exports to the United States rose to $26.8 billion by 2013, but more than 80 percent of that was oil. Despite a decade of rapid growth, sub-Saharan Africa's manufacturing sector remained weak. While exports from the region more than quadrupled to $457 billion in the decade to 2011, manufactured goods accounted for just $58 billion of that.

U.S. Trade Representative Michael Froman says sub-Saharan African countries should pursue an ambitious new trade relationship with the U.S. in addition to receiving duty-free benefits under the AGOA. Ahead of the forum in Gabon, Froman and Millennium Challenge Corporation CEO Dana Hyde argued in an op-ed last week that the U.S. and African countries need to cooperate on trade issues other than just tariffs.

“Today, the chief impediments are supply-side constraints, which require well-designed strategies and capacity-building efforts so that AGOA’s members can take full advantage of the program’s benefits,” they wrote in Project Syndicate. “Making the most of AGOA will also require improvement in the infrastructure – physical and institutional – necessary for promoting investment and facilitating trade. The issues that need to be addressed include the lack of reliable, affordable electricity, high transportation costs, and weak and inefficient trade-related facilities.”

In his opening remarks to the conference, Froman outlined some of the untapped potential of Africa’s opportunities in the future. Over the next five years, sub-Saharan Africa’s gross domestic product is expected to grow 30 percent faster than the rest of the world’s, he said. The region is home to 413 million children under age 15 – nearly as many as in the developed world and China combined; a generation from now, the region will be home to almost a quarter of the world’s workforce. And sub-Saharan Africa’s urban population is expected to grow from 360 million to 1.2 billion by 2050, surpassing the urban population of the entire developed world.

Froman pointed out that by 2025, Africa’s Internet penetration is expected to climb from 26 percent to over 50 percent, and there will be 360 million smartphones on the continent — roughly twice as many as there are in the United States today. Greater connectivity could mean greater access to essential services, from education and medicine to credit and savings accounts. And while much of the developed world is locked into investments in older infrastructure, technological trends, especially in energy, provide an opportunity for African countries to leap ahead and adopt more efficient and sustainable solutions.

“Let me be the first to admit that we don’t have all the answers for the path that we should chart to achieve these goals, but I hope that over the coming days we can begin asking the right questions and identifying the contours of a deeper and more sustainable, post-AGOA, U.S.-Africa trade and investment partnership,” Froman concluded.