Biden’s Economic Strategy toward Africa: Room for Better Market Access?
On August 9, 2022, as the U.S. secretary of state Anthony Blinken was touring sub-Saharan Africa strengthening diplomatic ties, the Biden administration released its new U.S. Strategy Toward Sub-Saharan Africa, a highly anticipated report outlying the administration’s vision toward the region. Given the political instability that has plagued the continent in recent years, national security and human rights-related issues were at the center of attention. One of the focus areas of the new strategy is reinvigorating economic ties to strengthen U.S.-Africa relations and spur investment and trade on the continent. How significant is this approach, and does it include bilateral trade frameworks like market access?
Q1: What is the Biden’s administration’s current economic engagement strategy with Africa?
A1: Biden’s economic strategy toward Africa relies on rhetorical statements of principles centering around development finance assistance. The strategy does not provide much detail on specific economic provisions or a longer-term strategy toward the continent. Rather, it lists current U.S. initiatives such as Prosper Africa and Power Africa—both of which focus on development financing with the latter placing an emphasis on energy—and a new multilateral initiative, Partnership for Global Infrastructure and Investment (PGII), through which member states pledge to pour $600 million into development financing.
As noted in a previous CSIS analysis, Biden’s Africa strategy on the economic front is rather slim. Unlike some of his predecessors, the administration has yet to introduce a flagship economic program for the continent. While initiatives to spur energy and economic development are commendable, these policies tend to lack more fundamental forms of economic cooperation, such as market access, despite evidence that countries seek greater market access provisions.
Q2: Where does the African Growth and Opportunities Act fit in with market access?
A2: A key talking point leading up to the announcement of Biden’s Africa Strategy was the future of the African Growth and Opportunity Act (AGOA). AGOA was introduced in 2000 under the Clinton administration with the intention of increasing African countries’ market access to the United States by providing tariff and duty-free treatment for over 1,800 product categories. There are currently 36 African countries party to AGOA. The number of participants has fluctuated over the years, with the United States maintaining the discretion to remove members whose actions it deems unfit. The recent removal of Mali and Guinea due to the coups that occurred in both countries serve as examples. Overall, evidence suggests that AGOA has been a net benefit for participating countries, even adjusting for petroleum exports, which account for a significant portion of trade gains.
African countries desire more market access and seek to participate in free trade agreements, as seen in the African Continental Free Trade Area (AfCFTA). In addition to working to leverage the benefits of this continent-wide trade agreement, the Biden administration should prioritize AGOA as the core of its economic strategy toward Africa. This is even more significant considering that the United States still lags behind when it comes to Africa’s biggest trading partners. China and the European Union take the lead on that front.
Q3: What role do other actors play in giving African countries market access?
A3: When it comes to examining the most influential geopolitical actors on the African continent, China plays an increasingly outsized role. Much of the discourse pertaining to Sino-African relations inevitably entails the Belt and Road Initiative (BRI), a trillion-dollar initiative by government of China. In the African context, this has primarily involved the transport of raw minerals from host countries to China through infrastructure built by China in those countries. Countering the BRI has been one of the main objectives of the United States and its allies; hence the creation of initiatives such as the PGII and Build Back Better World.
However, trade between China and Africa is increasingly becoming a major talking point for all parties. 2021 saw record levels of trade between the two. Furthermore, earlier this year, President Xi Jinping concluded the Forum on China-Africa Cooperation (FOCAC), an initiative which, among other things, gives African countries better market access to China, specifically pertaining to agricultural products. African leaders have been receptive to this initiative, as they have historically called for more market access—as seen in President Xi’s statement, which called for China to provide European-style market access for African products. China hopes to become Africa’s biggest trading partner by 2030, overtaking the European Union. Although initiatives like FOCAC support this plan, the market access China is willing to provide African countries primarily relates to agricultural products and raw materials. This reluctance to liberalize other sectors demonstrates an ongoing tendency in China to protect its industrial and manufacturing sectors; it is also unattractive to African countries as they should seek to diversify exports to higher value-added products in the long run.
One trading block that is more comprehensive in its market access provisions toward Africa is the European Union. The European Union has long had preferential market access toward Africa. The two flagship programs, the Economic Partnership Agreements (EPAs) and the Everything But Arms (EBA) scheme, were launched in the early 2000s. The EPA is a holistic initiative that fuses trade and development for countries in Africa, the Caribbean, and the Pacific, while the EBA focuses primarily on market access, removing tariffs and quotas on all goods aside from weapons and ammunition. Consequently, the European Union is Africa’s biggest trading partner to date, and although it mostly imports primary goods like raw materials and minerals, it still imports a higher share of manufactured goods compared to other trading partners. The European Union itself acknowledged this number is still a fraction of total African exports to the European Union and thus stressed the need to ensure increased diversification of African exports, especially considering the volatility in commodity prices in recent times.
Q4: Does the Biden administration have bilateral free trade agreements with African countries?
A4: The United States currently does not have a free trade agreement (FTA) with any African country. This stands out given the United States has an FTA with at least one country from every other inhabited continent. AGOA was meant to be a partial solution to this, as it has been argued that giving market access provisions to a group of countries is more inclusive than focusing on a bilateral FTA with a single country. Conversely, as stated in previous CSIS analysis, bilateral FTAs offer more than just market access—they also convey a tangible sign of economic partnership between two parties and establish a model for future FTA negotiations.
The United States began negotiating a bilateral FTA with Kenya in 2020, and earlier this year, on July 14, 2022, both parties launched the Strategic Trade and Investment Partnership, a cooperative mechanism with the aim of “increasing investment [and] promoting sustainable and inclusive economic growth.” This proposed agreement, like the Indo-Pacific Economic Framework and the Trade and Technology Council, is not a typical trade agreement that includes market access provisions. Rather, it streamlines the harmonization of standards on issues like agriculture, digital trade, and anti-corruption.
While market access remains the long-term objective for Kenya in this FTA—especially considering the uncertainty of AGOA—recent comments suggest the United States does not rule out this possibility either. The United States’ House Ways and Means Committee chairman Richard E. Neal (D-MA) said this initiative would lay the groundwork for a “comprehensive free trade agreement that includes market access.” Deputy Trade Representative Sarah Bianchi also acknowledged this view, stating that future talks could encompass a broader deal with Kenya.
Q5: Which concrete steps should the Biden administration take in pursuing the next generation of economic engagement strategies with Africa?
A5: There has been a plethora of economic policies directed toward the African continent in recent years. Market access measures is one framework historically used by the United States and the European Union. Notwithstanding the relevance of other economic policies emphasized by the Biden administration, market access measures such as AGOA should still be at the forefront of the United States’ economic strategy toward Africa.
Therefore, the first step the Biden administration should take is to renew AGOA. Furthermore, a renewal of AGOA provides the opportunity to reinvigorate it, providing additional trade stipulations and enhancing market access opportunities that can make it a more robust and durable economic initiative over time. Although the administration has generally been hesitant when it comes to providing market access, renewing AGOA conveys much more than just a market access provision; instead, it reinforces the United States as a major partner to Africa, provides a standard to deter adversaries like China, and assures an economic framework for future collaboration. Both China and the European Union are making strides when it comes to ensuring market access provisions, and the former is especially concerning. Given that the United States is only now trying to catch up to China’s development assistance in the region, letting China become a predominant trade partner would only make the United States more insignificant in the region.
A new market access program in AGOA should also incorporate current development initiatives with other agencies such as the U.S. Export-Import Bank, U.S. Development Financial Corporation, and the U.S. Agency for International Development to help diversify African exports to the United States. African export diversification is something countries still struggle with; even the European Union does not have a concrete policy to address this problem. This is even more important given that non-commodity-dependent countries in Africa are the most diversified in their exports. On this note, African exports which have no tariffs from the United States tend to be primary goods like petroleum and diamonds, for example, while on more processed goods like jewelry, the tariff rates tend to be higher.
There is a recognition that for more export diversification, advanced industries like telecommunications need to be developed. While Africa is home to some of the world’s fastest financial technology and telecommunication companies, exports in this sector are slim compared to both the share of total exports and other regions like the Middle East. Therefore, while the United States has done well in facilitating investments in the information and communication technologies (ICT) sector through agencies like the U.S. International Development Finance Corporation, there is still room for greater cross-agency collaboration with agencies like the Export-Import Bank to facilitate exports of industrialized goods.
In short, there is ample room for growth in Biden’s economic strategy towards Africa. Market access, in tandem with existing and emerging economic programs, should be a key focus of a long-term trade strategy with the African continent.
Kaycee Ikeonu is an intern with the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C. William Reinsch holds the CSIS Scholl Chair in International Business.
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