US-Africa Trade will be dominated by the “growing rivalry with China” in the short term, with the current US administration trying to preserve its African ties, even though the continent “is not a policy priority”, the Economist Intelligence Unit (EIU) says.
“We continue to expect US-Africa trade to be dominated by geopolitical rather than commercial concerns, in particular growing US rivalry with China, over the 2020-21 forecast period”, the EIU states in its most recent analysis report on African economies.
On 03 September, former US officials from the African Growth and Opportunity Act (AGOA) Action Coalition submitted a letter to the US Congress, warning that proposed changes to the US Generalised System of Preferences programme (GSP, which provides duty-free treatment for goods from designated beneficiary countries) could jeopardise fundamental provisions of the AGOA, which provides special access to the US market for garments made in accredited Sub-Saharan African (SSA) states.
AGOA, which provides special access in return for SSA countries’ commitment to establishing greater democracy, free trade and the rule of law, is aimed at establishing preferential trading relations with SSA countries before its expiration in 2025, but needs to be renewed by end-2020, and US apparel importers are lobbying for the programme to be modernised.
They propose to do this by extending the duty-free tariff treatment that has (until now) been reserved for AGOA SSA states to all countries that are beneficiaries of the GSP programme, “including dominant Asian garment exporters such as Indonesia or Pakistan, who can currently easily out-compete smaller African countries”, the EIU reports.
According to the EIU, the GSP programme has traditionally excluded preferential treatment for textiles and apparel, allowing US policymakers to cultivate trade relations on an individual or regional level with other states by offering specific exceptions and the AGOA has allowed many SSA states to invest in their textile and clothing sectors.
“At a time when SSA countries are already struggling under the disastrous impact of the coronavirus (Covid-19)
pandemic, driving many African apparel producers out of business would push up unemployment and weaken political stability in many fragile states (such as Madagascar), where one wage earner often supports an extended family”, the report adds.
According to the EIU, “Africa is not a policy priority for the current US administration”, but “weakening US trade ties
to the continent would run counter to the administration’s efforts to compete with China globally for influence, a central element of the foreign policy (and re-election strategy) of the president, Donald Trump”.
Given the current administration’s nationalistic views on global trade, “it seems unlikely that it will allow AGOA to be undermined if doing so would open Mr Trump up to domestic criticism over China, hostility to which is an increasingly bipartisan stance in US politics”, the EIU adds.