Oil Still Dominates African Trade With US, Talks Ahead

Nigeria oil platform. Business Day reported that production during Feburary 2010 was the largest in Africa. During 2009 Angola outstripped Nigeria for overall production from the continent., a photo by Pan-African News Wire File Photos on Flickr.

May 13, 2011, 1:36 p.m. EDT

Oil still dominates African trade with talks ahead

By Charles Mead of Medill News Service

WASHINGTON (MarketWatch) — A women’s sewing project in Liberia, craftsmen in Ghana carving wooden stools and specialty food exports from Swaziland are perfect examples of the Obama administration’s efforts to bolster trade ties with African nations, says deputy U.S. Trade Representative Demetrios Marantis.

But despite a decade of trade and investment under the Africa Growth and Opportunity Act, the real driver of trade between the U.S. and sub-Saharan economies, which surged 32% between 2009 and 2010, remains oil.

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The U.S. has struggled to catalyze economic growth in industries other than petroleum in Africa since the legislation, known as AGOA, was passed in 2000 to give preferential access to some countries in the region until 2015. While U.S. imports of the region’s goods reached $65 billion last year, crude oil comprised more than 80% of the trade. Petroleum sales may boost revenues, but some officials say other areas of the economy are left stagnate.

“Despite growth rates of 5%, 6%, and 7% for African countries over the last decade, Africa remains the poorest part of the global community,” Johnnie Carson, assistant secretary of state for African affairs, said Friday.

Marantis and Carson spoke to a group of about 100 trade and Africa experts nearly a month before Secretary of State Hillary Clinton and U.S. Trade Representative Ron Kirk travel to Zambia to promote trade and investment at an annual AGOA forum. The question for U.S. policy makers remains how far to extend liberal terms of trade with some of the poorest parts of the world.

President Bill Clinton first signed AGOA into law in 2000, and President George W. Bush extended the law to 2015. It expands duty-free access to U.S. markets with items such as apparel, wine and steel. Thirty-seven countries are eligible for AGOA benefits.

“It was the only continent that had nothing” in terms of a trade agreement, said Rep. Jim McDermott, D-Wash., who helped pen the legislation. “We are still struggling to get going.”

Despite “impressive” exports of oil and gas from Africa, Carson said, Africa still accounts for less than 2% of global trade.

AGOA eligibility has not propelled member countries to adequate levels of wealth, according to trade experts, because many exports are constrained to natural resources and food products without much added value.

“The fact that Africa constitutes or has only a very, very tiny share of global trade has to do with the fact that you have to have products to sell that are competitive,” said Florie Liser, assistant U.S. trade representative for Africa. “They have been selling things that are at the bottom of the value chain.”

Non-fuel AGOA imports to the U.S. increased 18% last year, driven mostly by chemicals, minerals, metals and agriculture, according to the Commerce Department. Meanwhile, U.S. textile and apparel imports from sub-Saharan Africa — which includes countries such as Botswana, Chad and Kenya — dropped by 20% last year. Imports of machinery-related products dropped by 44%.

“You cannot export cotton from Africa to the United States,” said Mark Neuman, a global trade policy adviser for the retail industry. It takes about 10 cents to produce a pound of cotton in Africa versus more that $1 in the U.S., Neuman said, but “hidden” subsidies block market access for AGOA countries.

“There is no arbitrage because the American market is closed,” Neuman said.

The most pressing issues for the AGOA forum in June, said those who spoke at the Center for Strategic and International Studies event, should be extending the trade pact as well as expanding apparel provisions that would allow AGOA countries that buy raw materials from elsewhere to retain duty-free access to U.S. markets.