The rhetoric of global trade is filled with promise. We are told that free trade brings opportunity for all people, not just a fortunate few. We are told that it can provide a ladder to a better life, and deliverance from poverty … Sadly, the reality of the international trading system today does not match the rhetoric 1 (Kofi Annan, 10 September 2003).
During 1999–2000 no African embassy in Washington, DC opposed the African Growth and Opportunity Act(AGOA) because at last, the United States government would reduce trade barriers – opening the door to the vast American economy. Four years later, African governments found the door opened to only six economies and only a crack. Provisions of AGOA also permit the door to be slammed shut at any time, making it impossible for African enterprises to plan. The first years of the new trade protocol show that it is serving well the interests of the US, especially when the World Trade Organisation (WTO) was again derailed in Cancun in September 2003. However, as recent trade data reveals, it is providing neither growth nor opportunity for African economies.
Free trade theory vs. reality
Almost from the beginning of the Uruguay Round in (1986–1994), data has shown that the African continent would benefit little, if any, from the World Trade Organisation. The prediction was stark:
according to OECD [Organisation for Economic Cooperation and Development] figures, there was only one loser in the Uruguay round, Africa … Africa can expect a contraction of US$2.6 billion per year (van Staden, 1994:18).
Africa's share in world exports fell from about 6 per cent in 1980 to 2.0 per cent in 2002, and its share of world imports from about 4.6 per cent in 1980 to 2.1 per cent in 2002 … More than any other developing region, Africa's heavy dependence on primary commodities as a source of export earnings has meant that the continent remains vulnerable to the vagaries of the market and weather conditions. Price volatility arising mainly from supply shocks and the secular decline in real commodity prices and the attendant terms-of-trade losses have exacted heavy costs (UNCTAD, 2003:ii).
globalisation is not new. Interdependence between North and South is like the interdependence between the cow and its owner. The owner needs the cow because of its milk. The cow needs the owner because he provides it with hay. But when the cow ceases to produce milk, the owner may well decide to slaughter it. The cow cannot do the same to the owner.
… circumstances have confined us to act as producers of raw materials and unprocessed goods for export to the rich countries of the North …
While we are pressed to open up our countries and streamline our methods of doing international business, so that the global economy may sink roots, invisible barriers are still making it difficult to for us to access resources and advanced technological know how. Our manufactured goods can hardly find a place in the rich markets of the North (Chissano, 1998).
The governments have not ignored advice to promote ‘non-traditional’ exports, increasing production of flowers and horticulture, for example, to export during Europe's winter. However, those policies quickly confronted the ‘fallacy of composition’, for as more countries exported flowers or game meat, the increased quantity available reduced prices. This fallacy, where simultaneous expansion of export volumes by several countries actually reduces export revenues, has also hit traditional commodities such as bananas, cocoa, coffee, cotton, tea and tobacco (Akiyama and Larson, 1994:93).
As the African continent has increased its exports, the industrialised countries importing these goods maintained or increased their trade barriers. World Bank economists estimate that if North America, Europe and Japan eliminated all barriers to imports from sub-Saharan Africa, the continent's exports would rise by 14 per cent, an annual increase in revenue of $2.5 billion (Ianchovichinaa and Mattooa, 2001; The Economist, 2001).
One example of increased barriers, allowed under the WTO, are more stringent phytosanitary standards. From the African perspective, those standards have become formidable non-tariff barriers (NTBs). The Dutch, for example, control the European Union (EU) market for flowers and have imposed high standards for producers to receive positive ‘eco-labeling’ on their flowers. Producers must follow detailed standards on crop protection agents, fertilisers, energy use, waste disposal, water use (i.e. collecting rain water, recirculation, drip irrigation). Inspection to pass the requirements may be by EU-based inspectors only, and ‘qualifying’ takes over one year of repeated inspections. Further, participants must keep records of all activities carried out on the farm, including non-floriculture areas of the farm. Handling of water must be done according to Dutch floriculture standards, even on areas of the farm where cattle are bred for a local market. It is perhaps not surprising that thousands of Dutch farmers qualify for the eco-labeling while only a handful of growers in Kenya, Tanzania and Zimbabwe do (personal interview, Heri, 1998).
Given minimal success at finding niche markets, the African continent, therefore, remains vulnerable to continuing deterioration in the terms of trade for primary commodities. As the countries increased the quantity of exports, the result of explicit government policies, prices for the exports did not compete with escalating prices of the imports. A scholar from Sweden, depicted the inequity well:
It is claimed that we in the rich world have no great demand for products from Africa. However, Africa's marginalisation within world trade owes more to the fact that we are paying only a pittance for its products, rather than a lack of need for them. Imagine that African farmers were paid for their real productive work in the same manner as a Swedish worker – the price of a kilo of coffee, for example, would increase to some US$200–300.
If we compare the gross national products … fewer than 9 million Swedes produced commodities and services measured at a market value of 30–40 per cent higher than 500 million Africans. Either we in Sweden must have an enormous productive capacity or there is something wrong in this kind of calculation (Narman, 1995:46–7).
The growth of the purchasing power of exports [for developing countries] has constantly been below that of export volumes. Income losses were greater in the 1990s than in the 1980s not only because of larger terms-of-trade losses, but also because of the increased of share of trade in GDP … even those developing countries for which manufactures have been the main source of export earnings have faced terms-of-trade losses (emphasis added) (UNCTAD, 1999:85–86).
Such an approach, whether in the free trade theories or in practice, does not raise the issue of equity. There is little or no discussion of who benefits most easily from reduced controls on the exchange of goods. Throughout the various discussions of the General Agreement on Trade and Tariffs-GATT (starting in with the Geneva Round in 1947 and ending with the Uruguay Round in 1993), there was acceptance of the principle that developing countries would receive differential and special treatment, to protect infant industries and to guarantee food security. By the time of signing in December 1993, the only major differential treatment accorded was a slower pace toward reduction of trade barriers. Although protecting food security is mentioned, developing countries are still forced to remove barriers to grain imports (e.g. maize in Southern Africa, rice in S.E. Asia).
If anything, WTO exceptions benefited the industrialised more than the developing countries. The ‘blue box’ (exemptions for production subsidies) and the ‘green box’ (exemptions for environmental concerns) were written by and for the industrialised countries.2 There is no ‘development box’ in the WTO. As India has persistently pointed out, if reciprocity, let alone preferential treatment for the less-developed, were really on the agenda, then opening one's commodity and financial markets should be matched by opening up labour markets; if goods and capital can both pass freely across borders, why not workers?
Trade not aid
In this free trade environment, the most important role of the state is to negotiate the competitiveness of its own corporate production, which is the overwhelming goal of the USA Trade and Development Act. For over five years, it was debated in Congress as the African Growth and Opportunity Act (AGOA) and suddenly, Caribbean Basin Initiative provisions were added to the bill. It was passed in the US Congress in less than 24 hours, abrogating the requirement that any bill must be presented 24 hours before it is discussed on the floor of Congress.
Since 1993, US aid to Africa has declined precipitously, for many reasons. One official reason often given is that Africa is not of strategic importance to the US, but that explanation is doubtful, given the intense support of the US for apartheid in South Africa until its end, historical support for Egypt, for Morocco, for Mobutu's Zaire (Congo), and more currently, American military bases in Djibouti. What appears to be more operative is that instability (war) does not seem to hinder profits from mineral extraction; wars in Angola, the Democratic Republic of the Congo (DRC), and Sierra Leone did not deter extraction of oil, diamonds, or other minerals (e.g. coltan, another name for columbite-tantalite, used for cell phones and laptopcomputers). Further, US military grants and aid far surpass any development aid on the African continent, and with the increased US training of African security forces, it will continue.3
The many other reasons for declining American aid to Africa range from general reduction in all non-military international programmes (e.g. the decade-long refusal to pay dues to the United Nations required by international law) to failure of US aid programs on the African continent. The US is the lowest aid giver of all the industrialised countries (including Italy, Spain, and Greece), not just to Africa, but to the world (0.11% of gross national income in 2001, down from 0.21% in 1990) (UNDP, 2003:228). Given this refusal to meet repeated commitments, by 1993, the US government changed its foreign policy to ‘trade not aid’, defending the change as transforming aid dependency into trade choices. This policy pursues the logic that trade promotes development, not aid, but does not explain how trade would promote development if 50–80 cents of every dollar earned was for debt repayment alone or if African countries had to export more and more to attain less. While rejecting any responsibility for development aid, the US has also minimised debt forgiveness, regardless if the debt were due to defence against apartheid incursions or drought.
Either trade or investment can be a leading sector to the other. One goal for AGOA is to encourage foreign direct investment (FDI), but in 2002 sub-Saharan Africa accounted for less than 1 per cent of US global FDI.4 According to the United Nations World Investment Report of 2003, inflows of FDI to sub-Saharan Africa from all sources were $8.1 billion in 2002, a 41 per cent decline from 2001. This inflow to Africa represented only 1.2 per cent of global FDI inflows in 2002, a figure similar to Africa's global trade share. For the US, the oil-rich countries of Nigeria, Equatorial Guinea and Angola received 47.5 per cent of the total. South Africa is the leading US FDI recipient accounting for 38.3 per cent ($3.4 billion, 2002). Except for South Africa, almost all of the US FDI follows mineral exploitation.
In relation to the US, therefore, trade remains the only option for African industrial development. Consequently, there were high expectations for AGOA, for there was much room for increased trade. As the chart below shows, US imports from Africa are also dominated by oil and mineral imports (82.4 per cent of total imports from Africa). Textiles, the only sector that exports processed goods, not raw materials, accounted for less than 5 per cent of all imports from Africa.
The highly specialised trade is also restricted to very few countries. Imports from just five countries (Nigeria, South Africa, Angola, Gabon and Equatorial Guinea) comprise 86 per cent of total US imports from Africa. And all but South Africa are overwhelmingly oil imports. Africa buys less than one per cent of US exports, with five countries accounting for 70 per cent: South Africa, Nigeria, Angola, Ghana, Equatorial Guinea (US Dept. of Commerce, 2004:3). In this era of globalisation, therefore, few trading patterns have yet to change: the US is not a market for African goods; nor is Africa viewed as a market for the US.
With corporations accounting for 75 per cent of world trade, they are actively involved in formulating US trade policies. For example, global corporations were the major drafters of much of the WTO provisions (especially those relating to intellectual property rights, IPRs). Representatives of large corporations, such as Bristol Myers, DuPont, General Electric, General Motors, Hewlett Packard, IBM, Johnson and Johnson, Merck, Monsanto, Rockwell, and Time Warner lobbied strongly for trade-related intellectual property rights (TRIPs) during the WTO negotiations. Diplomats in Geneva conceded that the pharmaceutical industry actually drafted much of the text (Dawkins, 1999; Dutfield, 2003).
| Energy-related products | 67.8% |
| Minerals & Metals | 14.6% |
| Textiles & Apparel | 4.7% |
| Agricultural Products | 4.0% |
| Chemicals & Rleated Products | 3.1% |
| Special Provisions | 1.3% |
| Other | 4.5% |
Source: Compiled from official statistics, US Department of Commerce
Many US corporations also supported AGOA, and their goal is increasing imports of low cost primary commodities from Africa's wealth:
significant portions of Africa's wealth and resources remain outside of many of the existing global commodity chains dominated by US based firms … In an era of stagnating profits … cost cutting via access and/or control of lower cost inputs remains a short term alternative strategy for sustaining profitability in this global environment (Mealy, 1999:1).
The American International Group, for example, fully supported AGOA. With a subsidiary in Zimbabwe, it wanted a waiver of Zimbabwean law requiring insurance operators to enter into joint ventures with local firms. When no waiver was granted, it sent a letter to the US Senate Appropriations Committee:
Attached for your review and consideration is draft language of the amendment we discussed … It would cap AID funding to Zimbabwe in FY 1997 at $10 million, roughly a 50 per cent cut from 1996 expenditures, unless Zimbabwe waives the localisation requirement for insurance companies (Public Citizen, 1991).
Also supporting the act were corporations with questionable labour relations in their overseas factories. Caterpillar has been accused of violating US labour laws more than any manufacturer in US history. General Electric was the first company to be investigated under NAFTA (North American Free Trade Agreement) for labour violations. K-Mart has been fined for violating child labour laws. National Labor Committee documentation shows it pays below poverty level wages in Nicaragua, forces overtime, and conducts body searches of employees (Public Citizen, 1999).
The major goal of such global corporations is to remove barriers for accumulation by creating a global market. They expect the US government to negotiate that goal on a world scale (in the WTO) and also, within particular regions such as North America (NAFTA, FTAA) or Africa (AGOA). Because the purchasing power of Africans is so low, the first impetus for the act could not have been to create a market for US goods, but rather, to further access to African resources, including cheap labour.
Excitement over the bill by various African governments was based on the expectation that the US would reciprocate and open selected markets for Americans to purchase African goods. This increased demand would stimulate African production. The most hopeful promise echoing in the halls of Congress during the five-year discussion was for entry of African textiles into the US market. The final act was more than a disappointment, perhaps a mockery. Only textiles made with American thread and yarn could enter the US duty/quota free if the African country is not ‘less developed’ (e.g. South Africa and Mauritius). Further, if Congress established that the new imports reduced employment in the US, then the act would be revoked (a major violation of the WTO which explicitly prohibits unemployment as an excuse for trade barriers). Finally, the provision for duty-free imports is to be reviewed every year, with the right of the US to revoke the law at any time (full provisions are discussed below). This annual review caused turmoil in the AGOA-country textile industry in mid-2004. During presidential and Congressional election campaigns, Africa was not a priority, causing a delay in the renewal of a ‘special treatment’ clause by the US Congress. Swaziland started firing textile workers, as its Taiwanese factory owners diverted orders to their factories in other countries; Kenya predicted textile doom if the extension were not passed by the September 2004 deadline (The Star, 2 April 2004; The Nation, 17 June 2004). Although the US Congress did pass the renewal of ‘special treatment’ in July 2004, AGOA still requires an annual review for approval of each country's overall eligibility, keeping African trade vulnerable to US politics.
What enterprising manufacturer would seriously invest in factories which might lose their major market in a few months? Even venture capital does not venture into such relations.
Opposition
Many non-governmental organisations (NGOs) opposed the Africa bill from 1997, offering alternative approaches to a comprehensive trade bill for Africa. First, they pointed out, in contrast to extended Cotonou discussions with Africa by the EU, the US government failed to engage African governments in negotiations; this trade act is unilateral, not even bilateral. The NGOs called for a) respect for the sovereignty of African governments in implementing economic policies; b) economic relationships that are mutually beneficial, and c) linking debt relief to trade, because trade alone cannot end the marginalisation of Africa.
Stating that the ‘one-size-fits-all’ approach to liberalisation (SAPs) had proven highly deleterious, they asked for tangible trade benefits for the poorest African economies. Given that relatively better off economies could take advantage of open markets, the American NGOs wanted the bill to acknowledge the least developed, not simply countries like Mauritius which were already globally competitive.
Congressman Jesse Jackson Jr. from Illinois introduced an alternative bill in 1999. It called for substantial debt cancellations as a corollary to trade opportunities, for even if many of the economies earned more foreign exchange, they would be paying back 50–80 per cent of each dollar in debt servicing.
Acknowledging that trade is not the same as aid, Representative Jackson also called for American equity funds to be used for African health services, education facilities, transport – all fundamental services necessary to respond to opportunities for increased production. His bill stipulated that targeted funds go to small, women-owned businesses with 60 per cent African ownership. The US Congressional Black Caucus was split over the two bills, some saying that Jackson's would never receive the support of Congress. Some said the act which was eventually passed was a first step for America engaging Africa in trade; others replied that the step was backwards.
Although no African embassy in Washington spoke against the act,7 civic organisations in Africa were highly critical. COSATU (Congress of South African Trade Unions), numerous other African national labour federations, the Africa Office of the International Confederation of Free Trade Unions (ICFTU AFRO), and the continent wide COASAD federation of development oriented NGOs all opposed the conditionalities.
Conditionalities
Before a country can become a trading partner with the US under this act, it has to fulfil strong and specific criteria; only the President of the US may certify that those stipulations have been met. And what is not often pointed out is that these conditionalities refer only to Africa, not to the Caribbean countries, even though the trade opportunities apply to them equally with Africa. Requirements for African countries to become eligible for AGOA are summarised in Section 104 of the Act:
countries must have been ‘determined to have established, or are making continual progress toward establishing the following’:
- 1.
Market economy, with guaranteed right of private property;
- 2.
Rule of law and political pluralism;
- 3.
No barriers to US trade and investment;
- 4.
‘National treatment’ of foreign corporations;
- 5.
Intellectual property rights similar to stringent US laws;
- 6.
Poverty reduction policies;
- 7.
Increasing availability of health care and education;
- 8.
System to combat corruption and bribery;
- 9.
Respect for internationally recognised workers ’rights;
- 10.
Respect for internationally recognised human rights;
- 11.
Elimination of certain child labor practices;
- 12.
Refrain from activities that undermine US national security.
Other conditionalities require respect for human rights, as defined by the US, and respect for workers ’rights, including child labour. Given that the President will judge whether the rights are honoured and given the history of US financing governments with gross violations of human rights, implementation of these conditionalities will vary with how closely aligned a country is with the US (such as Uganda versus Zimbabwe). A report (2003) on the impact of the first years of the Act found sweatshop conditions in several AGOA countries, including gross violations of human rights of workers. Systematic repression of workers in factories set up to respond to AGOA trade opportunities violate the very pre-conditions which the US government says it requires for AGOA partners.9
As part of the conditionalities (Section 104(2)), the US requires that an African country wanting to trade should not undermine US national security or foreign policy interests. There is no mention that the US will reciprocate by supporting the African trading partner's national security. This provision hinders African states ’sovereignty and denies their freedom of association and trade. It is especially problematic, given the intense pressure the Bush Administration put on Angola, Guinea and Cameroon in the United Nations Security Council (February 2003) to support the US invasion of Iraq, in violation of international law.
While the US abrogates aspects of the WTO, such as no reduced employment in the US as mentioned above, this act fast-tracks other parts of the WTO, namely intellectual property rights. At the end of 1999, the African countries in the Organisation of African Unity (OAU) asked that its unanimous resolution against patenting of any life forms be put on the agenda for the WTO Ministerial meeting in Seattle; the US refused. However, South countries have also refused to implement the TRIPs (Trade Related Intellectual Property Rights) provisions of the WTO by the designated deadline of 2000. They asked for time to find alternative protection instruments for their biodiversity; they refused the privileging of plant breeders ’rights over farmers ’or community rights, the latter two which the Convention on Biological Diversity (CBD) protects. With the WTO stalled in implementing its narrow approach to intellectual property protection, which privatises living microorganisms, the US required enforcement for intellectual property rights (IPRs) as a condition for AGOA trade.
If in a scramble to enter a bit of the US market, sub-Saharan African countries accept Section 104(A) conditions, then the impact of strengthened IPRs will increase royalty payments required by the technology holders. Moreover, unless an effective system of compulsory licences is established on the African continent, the technology holders may simply refuse to transfer their technology and thereby block industrial initiatives by third parties. Reverse engineering, and other methods of imitative innovation that industrialised countries extensively used when their economies were not competitive, is made difficult under the TRIPs/WTO agreement; AGOA now makes it almost impossible. How then are developing countries to catch up? The stringent intellectual property rights (IPR) requirements seem to have little or no relation to AGOA trade. It appears this conditionality, therefore, is a means for the US to enforce its national IPR laws on African countries resisting TRIPs of the WTO.
Trading window
If an African country manages to meet the multiple conditionalities (or more likely, have some waived), what new open market is the US offering? Because African/ Caribbean textiles account for less than one per cent of US apparel imports, the new act calls for an increase to 1.5–3.5 per cent. This increase would be worth about $4.2 billion in trade but, for Africa, it will mainly benefit Mauritius and South Africa. For the least developed African economies (defined as annual per capita income as less than $1,500 in 1998), textiles can enter free. If the economy is above that line, then to enter free, the textiles must be made with American thread and yarn. If apparel is wholly assembled in Africa from fabric wholly formed in the region from regional yarn, it is subject to an increasing annual limit. Such detailed restrictions requiring the use of US thread or thread from AGOA eligible countries for duty-free entry abrogates the goal of open markets.
Even these highly restrictive options may not be operative, however. A Congressional Budget Office study (March 1999) suggested that in reality 90 per cent of African textiles would probably be declared ‘import sensitive’ and denied access to US markets.
Finally, by 2005, all quotas on textiles should be removed under WTO and, by 2009, all tariffs. If the US honours the WTO deadline, then any country will be able to compete for the US market. AGOA, therefore, sets up African economies to start new industries for trade with the US, when they will very likely lose out to competition by larger, more experienced producers within five years. It would be difficult to imagine an infant industry in an African country competing with the Indian or Chinese textile industries for a niche in the US market.
Industrial agriculture
During the more than 40 years of discussions for the GATT, finally culminating in the WTO, the US was largely responsible for the agricultural exemptions from liberalisation measures until the 1980s (Dorner, 1979). The US had a propensity to opt for exemptionalism over liberalisation in agricultural trade negotiations. Europe went along because after World War II it was not self-sufficient in food for decades. A major portion of the Uruguay Round was devising the Agreement on Agriculture, an accord to lower tariffs, subsidies and non-tariff barriers on agricultural commodities. Dumping was to cease. Yet agriculture remains a major export sector for the US, second only to armaments. The two together are the sectors which register a positive trade balance, always a dire need given the chronic US balance of payments deficits for over two decades. Agriculture is not just about US food security but about domestic economic security. More than 1 in 3 acres of US crops is exported in bulk or in value-added form. The US Department of Agriculture reported in 1993:
Because the domestic market absorbs a smaller and smaller share of production, US agriculture must compete more and more effectively with other countries for a share of the world market – or else accept a reduction of productive capacity (Watkins, 1999:36).
On the African continent, the US has dumped large quantities of food, mainly grain, often disguised as food aid. In the 1980s, during the height of the Renamo onslaught in Mozambique, the US government provided the overwhelming majority of food aid to Mozambique (at the same time, it did not discourage private religious and right-wing foundations from funding and arming Renamo). The Government of Zimbabwe, always faced with importing wheat, now offered to ship its surplus white maize to neighbouring Mozambique in payment for wheat purchased from the US. This triangular trade/aid deal would provide Mozambique with preferred white, not yellow, maize and would greatly reduce transport costs. The US Department of Agriculture rejected the triangular exchange, with the explanation that they were trying to create a taste for yellow maize among Mozambicans, to create a market for the US (Thompson, 1991).
During the 1991–92 drought in Southern Africa, Zambian farmers were able to produce some wheat because of irrigation schemes. Because Zambia had opened up its agricultural markets under a structural adjustment programme, the US could dump wheat in landlocked Zambia at a selling price cheaper than the Zambian farmers ’break-even price. Zambian wheat, which should have elicited premium prices because of the drought, could not be sold. The US price had little or nothing to do with ‘cost effective, competitive production’, but rather reflected the high rate of subsidy (Thompson, 1993).
In 1997, Ugandan Vice President, Specioza Kazibwe, noted that after her country started trying to market significant maize surpluses in neighbouring Kenya,
tonnes and tonnes of yellow maize, very cheap, were dumped into Kenya by the United States … Where is the equity in this issue of global liberalisation? (Harsch, 1997:10).
In the real world, agricultural production and trade are determined not so much by comparative advantage as by comparative access to subsidies (Watkins, 1999:33).
The first five years of the WTO was so disappointing that President William Clinton admitted just before leaving office (December, 2000):
If the wealthiest countries ended our agricultural subsidies, levelling the playing field for the world's farmers, that alone would increase the income of developing countries by $20 billion a year.
In 2002, members of Congress from farm states proposed one of the largest subsidies ever. That most of these proponents profit personally from the subsidies was duly reported in the American press, but the elected officials are exempted from conflict of interest accusations by the ruling that subsidies affect an entire class, not just them personally. The 2002 plan offered subsidies of $15–17 billion per year over five years and guaranteed 80 per cent of qualified farmers’ income, no matter what they grow and offers further incentives for conservation (New York Times, 2001). Further, this income support scheme violates the WTO, thereby exposing US Congressional duplicity in demanding ‘free market’ agriculture from African countries, and across the globe, while maintaining protection for the American agricultural industry. ‘Trade not aid’ is a hollow slogan if subsidies prohibit either free or fair trade.
By 2003, rich countries were spending some $300 billion a year on farm subsidies, about six times more than on development aid. The World Bank estimates that abolishing these subsidies would give a 17 per cent rise in global agriculture production, adding $60 billion a year, or six per cent, to the rural incomes of low and middle-income states (Cobb, 2003). Instead of eradicating this ‘double standard’ of requiring open markets of African economies, while subsidising American farmers, AGOA legalises this practice. Section 409(b) outlines US agricultural trade objectives by giving ‘highest priority’ to other countries ’‘expeditious elimination of all export subsidies worldwide’ while ‘preserving United States market development and export credit programs’ (both of which are forms of subsidies). This section also affirms WTO Sanitary and Phytosanitary measures while at the same time saying that labeling cannot be used as a disguised trade barrier. It also requires that other countries eliminate ‘price-depressing surpluses’ (i.e. strategic grain reserves), with no provision for reciprocity by the US, even with its vast quantities of grain surpluses in most years.
Impact of the first years of AGOA
At the end of 2002, President George W. Bush declared that 38 sub-Saharan African countries had gained eligibility for trade preferences under the Act, which went into effect in October 2000. According to the US government, AGOA is conducive to promoting economic relationships between African countries and the US that are based on ‘shared values’ and equal responsibilities.11
In contrast to the glowing official US government interpretations, empirical findings demonstrate the positive impacts of AGOA as narrow (6 countries), ephemeral (until 2005), and an impetus for increased inequalities on the continent. Of the 37 eligible countries, only six countries have significantly increased exports, mainly in the textile and apparel sectors: Kenya, Lesotho, Malagasy Republic, Mauritius, Swaziland, and South Africa. As the Table 2 shows, only in Kenya and South Africa did exports substantially rise in other sectors, primarily in agricultural products: Kenya by 235 per cent and South Africa by 173.9 per cent.
Because trade benefited mainly the textile and apparel industries, some will applaud this result noting that the textile industry has historically been the impetus for further economic growth. As stated above, however, the Multi-Fiber Agreement (MFA) will expire on 1 January 2005, according to WTO rules; this expiration will allow textile and apparel industries in China, India and other Asian countries to compete freely in the US market with these minuscule and nascent industries in AGOA countries. If this competition occurs, AGOA will have encouraged only short-term, ephemeral (2–3 years) industrial production. De-industrialisation in textiles is not new on the African continent, often resulting from liberalisation requirements of structural adjustment programs (e.g. Tanzania, Zambia, Zimba-bwe).12 After 2005, AGOA may have reinforced, not reversed, this trend.
| Kenya | Lesotho | Malagasy | Mauritius | SA | Swaziland | |
|---|---|---|---|---|---|---|
| Agricultural Products % change | 235 | 0 | −60.40 | −35.80 | 173.90 | −70.30 |
| Amount | 899 to 3,016 | 0 to 0 | 6,276 to 2,484 | 15,825 to 10,162 | 28,754 to 78,750 | 1,812 to 6,487 |
| Textiles/Apparel % change | 79,217 | 12,952,200 | 15,430 | 49,172.20 | 1,714.40 | 100 |
| Amount | 65 to 51,556 | 1 to 129,523 | 596 to 92,558 | 79 to 38,925 | 1,853 to 33,621 | 0 to 8,195 |
| All Sectors % change | 361.10 | 12,952,200 | 943.20 | 149.50 | 105.30 | −41.60% |
| Amount | 12,767 to 58,873 | 1 to 129,592 | 9,308 to 97,105 | 21,633 to 53,975 | 449,813 to 923,243 | 25,290 to 14,770 |
Source: compiled from US International Trade Commission. www.usit.gov; see Ahmed et al. 2003:6.
As the investigative report documents (Ahmed et al. 2003), most of the enterprises invested in textile and apparel manufacturing are from Southeast Asia, especially from Taiwan, Hong Kong, and Singapore. Among the African countries, South African companies have investments in Lesotho, and Mauritius invests in the Malagasy Republic; companies from the US, France, China, India, Bahrain and Israel also have investments in textile and garment factories since AGOA, taking advantage of the national treatment requirement discussed above. Because they are producing mainly in export processing zones (EPZs), the foreigners pay little or no taxes and they offshore profits. Often the state is required to provide infrastructure (i.e. sufficient water is an issue for textiles), even when it cannot deliver adequatehealth care or education for the workers. Foreign ownership, with corporations paying no taxes and providing sweatshop oppression for workers, might increase GDP, but it does not promote human development. Economic growth with less than a living wage increases corporate profit only – ignoring human survival, let alone national development. Such production for trade provides ‘growth and opportunity’ not to Africans, but to foreign owners.
Some attribute the success of AGOA to increased employment. The small states of Swaziland and Lesotho see AGOA providing jobs. Swaziland credits AGOA with the creation of more than 28,000 jobs (Lucke, 2004:2) and employment in textiles has surpassed that in government for Lesotho (Ahmed et al. 2003:9). Yet the employment, as stated earlier, is in sweatshops offering no labour rights. Further, this increased employment is highly contingent upon sustaining AGOA provisions.
AGOA has facilitated both Mauritius and South African investment in other AGOA-eligible countries where labour is even cheaper than in their own countries. Some will argue this expansion promotes regionalism. Others will note that such expansion exacerbates South African and Mauritian regional economic domination, assisting the strongest economies. This result is not unusual for ‘free trade’ relations, which privilege stronger economies.
AGOA seems to have redirected trade away from traditional markets, mainly the EU, toward the US. It appears this result was an original goal of AGOA, reinforced with the new negotiations for a USA/SACU free trade area (FTA) (Verbeck et al. 2004).
African rejoinder & activism
Many African NGOs have joined in a coalition with US NGOs to discuss how to transform the Act. One coalition is the Africa Grassroots Response Initiative (GRI; see also Washington Office on Africa) whose goal is to build a mutually supportive relationship between social justice leaders in Africa and America. When US NGOs protested and lobbied against passing the act, as discussed above, they were told by the US Congress that they were misrepresenting Africa's interests because all the embassies had declared support for the bill. What was not mentioned by the Congress was the fact that many components of African civil societies, as mentioned above (trade unions, human rights groups etc.) were against the bill. Coalitions such as this one, therefore, prioritise public education and lobbying of each government about the social justice dimensions of trade. They are networking across countries to demand incorporation of equity and basic human rights issues in public policy, both in the US and in African countries.
Many African economists are not convinced that trade automatically leads to development, for often the lack of development creates supply problems. A 2001 UNCTAD study challenges the ‘export led growth hypothesis’ (ELGH) as a development strategy. In a study of Costa Rica, 1950–1997, it concluded that such an approach is beneficial to only a limited extent for only certain economies. A less developed economy cannot always respond to favourable trade opportunities or if it does respond, cannot sustain the production and delivery (Medina-Smith, 2001). The final version of AGOA did concede a bit to Representative Jackson's idea of equity funds for infrastructure, authorising $500 million (which has to be approved in annual budget allocations).
In an area where one might imagine that Africa would concede to its ‘inability’ to compete on a global scale, a Batswana spoke out strongly for regulation, even in the context of Botswana open markets for over a decade. The following quote underlines the different perspectives of those involved in competition versus simple pronouncements about open markets. At an International Air Transport Association (IATA) meeting, an Air Botswana general manager called the ‘open skies’ multilateral regime, where firms could operate where and when they pleased, a ‘thugs charter – the usual self interested gospel of the strong when dealing with the weak.’ He elaborated:
We are not frightened by competition, but such competition must have rules, and we do have legitimate interests related to national development which we cannot abdicate to bottom-line decisions in boardrooms in London, Atlanta and Dallas … Commercial aviation to us is a vital and essential national resource. We understand the saying, ‘get out of the kitchen if you can't stand the heat’, but we also insist that we are entitled to some right in our own kitchen … From this will emerge a world dominated by a very few enormous and monopolising carriers, based outside Africa and with little concern for our domestic and regional aspirations. Our legitimate interests will be swept aside 13 (Financial Gazette, Harare, 25 November 1993).
African NGOs have organised campaigns to spread awareness among the African governments and people regarding AGOA. For them, instead of bringing any meaningful change to African economies, it will not only destabilise African economic initiatives, but also buttress the iniquitous measures in the World Trade Organisation rules. The People's Forum, organised by 30 organisations within Mauritius civil society for other African civic organisations, is one of the most outspoken; referring to the US-financed Second AGOA Forum held in Mauritius (January, 2003), they stated:
We have come together because we ALL oppose the conditions (technical, political and economic) of the AGOA which we consider colonial, anti-democratic and economically disastrous for Africa. 14
We oppose all the overt and hidden conditionalities in AGOA which lead directly to increased poverty and social inequality and which undermine social and economic human rights of our people;
We denounce the USA failure to ratify most of the ILO Conventions and the UN Declaration on the Rights of the Child;
We oppose the USA for its leading role in imposing globalisation worldwide, in part through its own military force and in part through the Washington-based IMF and World Bank;
We oppose the USA for its constant work to erode the sovereignty of other states.
Odour Ong'wen, Chairperson of the NGO Council of Kenya, and Professor Yash Tandon of Uganda countered, that ‘African governments have let their people down by signing treaties that bind them to perpetual hardships.’15 They maintain that the crisis is not in Africa but among developed economies which seek to exploit low-priced African resources through unilateral treaties (e.g. AGOA, and the EU's ‘Everything but Arms’ trade implemented in 2001).
Except for South Africa, trade union movements are not strong in African countries. Currently, labour movements are increasing their strength in Lesotho with international attention and support. Because of workers ’weak organisations as well as the governments ’and sweatshop owners ’unwillingness to implement labour laws, trade unions are unable to implement labour rights and fulfil their demands. Although exports increase from sub-Sahara Africa to the US, factory labour practices violate US law. Trade unions will continue to raise the issue internationally that the practice of AGOA trade violates the human rights provisions of AGOA law.
Conclusion
In contrast to laudatory official reports about AGOA, empirical findings demonstrate the positive impacts as narrow (mainly one sector in 6 countries), ephemeral (until 2005), and inequitable (favouring the stronger economies and foreign textile companies). AGOA neither impacts the macro-economies of African countries in a positive manner nor brings any meaningful change in the economic conditions of the workers. The results of AGOA's first years question reliance on trade as the primary means for equitable or sustainable growth. Living in an extremely wealthy continent, but with the majority in abject poverty, the peoples of Africa must benefit from the export of the wealth, or trade will never lead to development.