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US changes tack to protect grip on African market

FINANCIAL STANDARD
By - John Oyuke | November 6th 2012

By John Oyuke

The US will enter into a major trade and investment partnership with the East African Community (EAC) Partner States in an aggressive move aimed at protecting its regional turf share from being overrun by competitors.

The country is gearing up to launch a trade pact — the first ever in the continent — through which US and EAC government officials would solicit input and advice from respective private sectors later this month.

The decision to establish the first Commercial Dialogue partnership on the Continent — and the only one US has launched on a regional, rather than bilateral, basis anywhere in the world — was reached during a three country East Africa visit by Deputy US Trade Representative, Demetrios Marantis, mid last month.

With the launch of the partnership, the EAC joins a select group of emerging markets — including China, India, and Brazil — with which the US has a Commercial Dialogue.

As a precursor to the deal, the US has agreed to provide up to $10 million (Sh850 million) in additional funding to the EAC Secretariat to support their coordination of the EAC’s regional economic integration.

During his trip to Burundi, Kenya and Tanzania, Marantis met with senior officials, visited African Growth and Opportunity Act (Agoa) beneficiaries and met local members of the American Chamber of Commerce.

Marantis disclosed that during a meeting with the ministers of the five EAC Partner States, as well as with the EAC Secretariat, they agreed on four key elements to the evolving US-EAC commercial partnership.

The first is to implement trade agreements and commitments on specific non-tariff barriers that impose significant costs on African and US businesses and represent the principal impediments to increased intra-EAC trade.  Each EAC Partner State and US have assembled a technical team to focus on improved customs interconnectivity and harmonised procedures at EAC borders, both of which are critical to enhancing two-way trade.

Investment treaty

According to Marantis, the second element is to implement a regional investment treaty. 

Presently, the US has concluded such a treaty with Rwanda, but not with any of the other EAC Partner States. And none of the EAC countries have comprehensive investment agreements with each other.

He said creating a treaty between EAC member States and between EAC and US will not only provide protections to investors, but will also spur progress towards development of an integrated EAC investment regime. It will also help create an integrated investment platform to attract larger investments, and assure potential investors that the EAC’s investment regime is gold standard.

Marantis said the US understands that both of the above elements are quite ambitious and would therefore require it to offer additional resources and technical expertise.

This brings in the third element that seeks to provide coordinated trade capacity building assistance to support its efforts under the Partnership, and hence the provision of $10 million in additional funding to EAC Secretariat.

He said the fourth and final element is the planned development of a commercial dialogue through which US and EAC government officials can solicit input and advice from our respective private sectors.

“Leveraging existing efforts and utilising all of the available tools, the US-EAC Trade and Investment Partnership is a model for future US-African efforts to enhance our two-way trade relationship,” he asserted.

Right timing

“As we look to the years ahead, our goal is clear. The plan to get there is complete, and the timing is right. All that remains is that we maintain the strength of our convictions to make the hard choices success will require,” Marantis said.

The move by US is not an act in isolation though, as it comes when major actors on the global stage are crafting new policies to counter the ever-growing Chinese economic raid of Africa.

“We must also account for global cross-currents that affect our mutual competitiveness,” the US diplomat observed during the meeting with the business community. “Increased inroads into the Continent from emerging markets like China, Brazil, and India should not distract us from the US and Africa’s shared long-term vision of a more competitive and prosperous Africa,” said Marantis.

In so many ways, the emergence of China as a great power in global politics and economy in the late 20th-century continues to re-shape the political and economic configurations of the contemporary world.  China has succeeded in fostering encompassing economic and political influences in Africa over the recent past.

Analysts say some on-going Chinese activities in Africa satisfy China’s quest for Africa’s resources, including its vast raw materials, while untapped African markets serve a magnet for its manufactured goods.  African countries also serve as rich terrains for the investment of Chinese capital, for example, in infrastructural projects.

Rebuild economies

For their part, a number of African countries see the ever-growing Chinese presence as an opportunity to re-build their stagnant economies. They hope to use it as a lever to weaken the economic grip of the former European colonial powers and the ubiquitous international financial institutions.

Marantis said focus must remain on key priorities, such as strengthening African regional groupings, like the EAC, which represent small African nations’ best chance to compete against much larger emerging markets.

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