Secretary Clinton Addresses AGOA Forum and Talks of New Approach

AGOA Has Achieved Only Modest Results

Clinton stated that the AGOA partnership has helped a growing number of African businesses build on this success at home and reach new markets abroad. Major international corporations are opening new offices in African capitals and noticing the continent’s investment potential. However, AGOA has achieved only modest results and has not lived up to the highest hopes of a decade ago. The U.S. is working to increase trade with Africa in non-petroleum goods, but there is a long way to go. Petroleum products still account for the vast majority of exports to the U.S., and the U.S. has not yet seen the diversification of growth of exports that AGOA was expected to spur.

U.S. is Taking a New Capacity Building Approach to Africa

The U.S. is taking a new approach in Africa rooted in partnership, not patronage. That means the U.S. is looking for sustainable strategies that help nations build capacity and take responsibility, that give people the tools they need to help themselves and their communities, that empower problem-solvers at the local and regional levels, be they entrepreneurs, NGOs, or governments themselves. The U.S. is also working to integrate its trade and development strategies with greater emphasis on bottom-up, locally driven solutions, fostering regional markets within Africa, boosting trade and aid effectiveness, and working with partner governments to promote structural reforms and gradual market liberalization.

Examples of New Approach Include Feed the Future Initiative

The "Feed The Future Initiative" is an example of the Obama Administration’s new focus on local solutions and greater regional integration. It is a comprehensive effort to address the root causes of hunger and poverty by investing in country-led plans such as those in Rwanda and Ghana that are completing the African Union’s comprehensive agriculture development program process. Regional integration makes it easier to shift food from areas that have a surplus to those with shortages, increasing availability and reducing volatility of prices. And greater regional market access for things like seeds, fertilizers, and crops also increases producers’ incentives to make sustained investments in agricultural technologies.

Major Investments also Being Made in Global Health Initiative

The U.S. is also making major investments in its "Global Health Initiative" with an emphasis on women and girls because it is their health which has the biggest impact on families and communities. The U.S. is also emphasizing access to safe drinking water, sanitation, and hygiene to help save lives that are being lost to preventable diseases.

U.S. also Pursuing Investment Treaties

The Administration is also pursuing Bilateral Investment Treaties (BITs), which encourage market reforms and set conditions for continued growth. A treaty with Rwanda is pending before the Senate. Last year, Clinton launched formal negotiations with Mauritius. And initial discussions have occurred with Gabon and several other countries. The success of Mozambique’s BIT, which entered into force in 2005, demonstrates how effective these agreements can be for spurring reform and growing the economy. Mozambique passed new reforms protecting intellectual property rights, combating corruption, and making it easier to start new businesses and trade across their borders. While more needs to be done, the country has seen a significant growth in investments and exports as a result.

Africa Needs Both Trade and Aid

The Administration believes AGOA can be a powerful engine for growth if its trade preferences are coupled with effective development programs and reforms that build the capacity for African businesses to succeed in international markets. The old debate between trade versus aid is out of date. Both trade and aid are needed, and particularly aid that supports trade. And the expansion of this conference demonstrates the broadening of our approach.AGOA was founded on the premise that export-driven growth would provide Africa with sustainable economic development and wider prosperity.

Infrastructure, Political Stability, Good Governance, Regional Trade Also Goals

While the U.S. still believes in the value of exports, the Administration thinks that the development of domestic and regional markets is a necessary prerequisite to taking full advantage of global opportunities. Many of Africa’s major challenges -- from inadequate infrastructure to political instability to corruption -- also present opportunities for market-based solutions, creative partnerships, and responsible government action.

First, infrastructure: Africa’s infrastructure investments were one of the largest factors in its economic growth of the last decade. But significant needs remain. Just 30 percent of the African road network is paved. Air travel is slow, and in many cases, impossible. It takes three times longer to fly from Dakar to Kinshasa than it does to fly from Dakar to Brussels, even though the distance is the same. And much of the continent still lacks sufficient access to electricity. If an outdated electric grid can’t support a small business owner’s laptop, it won’t support a new factory or business center. Advancements in agriculture will mean little if there is no highway to bring crops to market or no port to export them.

Second, political instability and inclusion: Over the next two years, more than two dozen African nations will hold elections. These elections are important markers for a continent that has seen too many young democracies fail to take root. They present opportunities to consolidate progress and attract investment if they are free, fair, and transparent. The economic success of Liberia underscores the benefits that can follow from political reconciliation, democratic reform, and social inclusion. And the U.S. stands ready to help governments and societies do the same.

Third, good governance: Businesses and investors in Africa are no different there than anywhere else in the world. They seek a clear and consistent regulatory environment, a transparent and even-handed judicial system. Businesses need to know what the laws are and how they are interpreted and enforced. Corruption costs Africa an estimated $150 billion a year. It scares away investment, stifles innovation, and slows trade. The exploitation of Africa’s mineral and energy wealth continues to be a particularly persistent source of corruption, which is why the U.S. is supporting the World Bank’s Extractive Industries Transparency Initiative and why the U.S. is taking a strong stand on conflict minerals.

And finally: regional integration. Regional integration has gotten too little attention within the AGOA framework, but it should be at the top of the agenda. The nations of Africa trade with each other less than any region of the world. High tariffs -- on average 50 percent higher than those of comparable countries in Latin America or Asia --border officials who demand bribes for permitting goods and people to cross, cumbersome customs procedures, inadequate infrastructure all hamper trade among African countries. It takes about a day and a half to clear exports out of Namibia but then it takes an additional 29 days for them to enter neighboring Angola. The lack of regional economic integration compounds the weaknesses of individual African markets instead of consolidating their strengths. And it prevents African businesses from building the foundations they need to fully and effectively participate in global trade.

For landlocked nations, regional integration can provide access to ports, lowering costs and opening markets. And for all countries, integration offers a chance to share the cost of developing new infrastructure and achieving economies of scale.

(See ITT's Online Archives or 08/05/10 news, 10080503, for BP summary of President Obama telling African leaders to lower trade barriers, improve infrastructure. See ITT's Online Archives or 06/18/10 news, 10061871, for BP summary of Clinton's emphasis on regional trade stemming from her 2009 AGOA Forum speech.)