Suggestions for the Biden Administration on Promoting U.S.-Africa Trade and Investment
The Biden administration has an opportunity to elevate the United States’ economic and commercial engagement with Africa. It is time to move beyond the unilateral trade preference program (the African Growth and Opportunity Act or AGOA) that has served as the centerpiece of the United States’ economic engagement for two decades and adopt a new approach that recognizes that African countries have evolved significantly and are ready for a more strategic partnership. The Biden administration should make its trade and investment programs more sophisticated, recognizing that most companies do not pursue opportunities region-by-region but increasingly sector-by-sector, in multiple places at the same time. The Biden administration will be more successful if it can better integrate regional trade promotion programs with one another and with global sectoral strategies (e.g., 5G coverage) to support a more coordinated and agile approach that better reflects the post-pandemic world. The Biden administration has a lot to build on, including the previous administration’s Prosper Africa initiative to better coordinate U.S. government trade and investment promotion, and interest from African governments and companies in creating a more strategic relationship.
The African Trade and Investment Agenda
At the African Union’s (AU) Heads of State Summit in February, outgoing AU president and South African president Cyril Ramaphosa made it clear that AU leaders support strong economic recovery as a key part of combatting Covid-19. Leaders at the summit prioritized early access to vaccines and reopening economies to restart livelihoods. They were frank about the fiscal challenges countries will face in supporting recovery and the importance of attracting private sector investment from domestic and foreign partners, echoing assessments from the World Bank. There was also a clear recognition that companies need the right conditions to support investments, and leaders committed to accelerating the implementation of the African Continental Free Trade Area (AfCFTA) agreement, along with other important reforms to promote critical job-creation sectors such as the digital economy. Creating a more integrated continental economy with provisions to protect intellectual property rights, facilitate payments, and resolve trade disputes is exactly the kind of evolution that will better enable U.S. companies to partner with African counterparts.
African leaders have stressed they will use the recovery period as an opportunity to better integrate into regional and global supply chains by increasing the value of their exports. While African governments have long targeted this goal, this time may be truly different. African governments need to get millions of people back to work at the same time that global supply chains are reconfiguring themselves and important sectors such as energy generation, transportation, and manufacturing are undergoing seminal shifts in technology and process. This confluence of factors offers African countries the opportunity to fundamentally change their economic narratives.
The Tools at Biden’s Disposal
Having already declared it will prioritize health challenges in Africa in the post-Covid-19 era, the Biden administration should also make trade and investment a key pillar of its Africa policy. The 2025 expiration of AGOA—Washington’s unilateral preferential trade program for the continent and the centerpiece of its economic engagement for twenty years—will require the Biden administration to begin charting a way forward. The Trump administration launched individual programs such as Prosper Africa, announced support for AfCFTA, and expressed a preference to negotiate individual free trade agreements, starting with Kenya. This approach has not met the speed at which African economies will change under AfCFTA, let alone the shifts that are likely to come from post-Covid-19 reorientations of global supply chains. U.S. allies and competitors, first and foremost Europe, are already actively engaging with African leaders on what a reimagined future could look like. The Biden administration does not need to have all the answers immediately but making trade and investment its centerpiece will be a clear signal to African governments and private sectors.
The Trump administration and its predecessors left the Biden administration a number of coordination mechanisms, including Prosper Africa. While not the first regional trade promotion initiative (e.g., America Crece and the Infrastructure Transaction and Assistance Network ITAN are focused on Latin America, East Asia, and the Pacific), Prosper Africa is in some ways the most comprehensive. Announced in December 2018, Prosper Africa brings together 17 U.S. government agencies to expand two-way trade and investment between the United States and Africa. Prosper Africa has been quick off the mark to incorporate new tools from the Development Finance Corporation (DFC), the Export-Import Bank of the United States (EXIM), and the Millennium Challenge Corporation. The Trump administration also set up Deal Teams, formalizing and expanding long-standing support that many U.S. embassies have provided companies on the ground for years. Pioneered in Africa, Deal Teams are a potent and largely under-celebrated vehicle; in its first year, Embassy Deal Teams supported 280 deals worth $22 billion.
Recognizing the importance of improving U.S. government coordination in Washington, former undersecretary of state for economics, trade, and business affairs Keith Krach worked with his counterparts at the Department of Commerce and a dozen other agencies to pull together a D.C. Central Deal Team. This team was designed to provide more coherent and consistent support for the deals embassy teams identified, as well as improved coordination to enlist high-level support for priority deals, including from Prosper Africa and other regional initiatives. To be effective, however, Deal Teams should be more than just a summation of deals in a region. Ideally, they would be grouped by sector and value chain, which would facilitate more effective strategic support from senior U.S. government leadership.
The U.S. government also has a particularly strong private sector consultation mechanism in the President’s Advisory Commission on Doing Business in Africa (PAC-DBIA). This commission is comprised of some of the most active U.S. companies of all sizes on the African continent. It has an admirable record of releasing reports with specific recommendations on how the U.S. government can best promote trade and investment, including a specific focus on sectors of comparative U.S. advantage such as the technology, finance, health, and energy sectors. Moreover, the PAC-DBIA members have been active champions of expanding business with the continent and consult regularly with U.S. government agencies, including providing Prosper Africa specific feedback on the kinds of support that would be most helpful for companies. The administration should also maintain regular dialogues with American chambers of commerce on the continent and with U.S. trade associations (e.g., the Corporate Council on Africa and U.S. Chamber of Commerce, as well as sectoral associations).
At the end of 2019, Congress passed the Championing American Business Through Diplomacy Act, which directs the secretary of state to set up an interagency coordination committee and develop a joint strategic plan, in consultation with the private sector. The secretary of state is also directed to work with government colleagues, particularly at the Department of Commerce and the Small Business Administration, to increase awareness of opportunities among U.S. companies. This act requires the General Services Administration to report no later than December 2021 on how the administration is performing on its directives.
Making Our Engagement Strategic
U.S. government agencies have upped their game and deployed new tools while improving their collaboration and coordination through mechanisms such as Prosper Africa and the U.S.-Kenya FTA negotiations. They also have an active High-Level Dialogue with the African Union and important bilateral economic discussions with countries such as Nigeria. Embassy Deal Teams in many places are actively generating prospects. The Biden administration can make these tools even more effective by taking a few additional steps to better link these tools with existing policies and strategies.
- Upgrade interagency coordination in Washington to better support Embassy Deal Teams. Given that multiple Embassy Deal Teams are likely to develop opportunities in the same sector, rather than treat each trade lead as a unique event, it would help to stand up interagency Sector Support Teams (or Task Forces, as the Atlantic Council suggested) to evaluate opportunities from multiple deal teams. Gathering the right experts on a regular basis will highlight trends and suggestions on how to improve tools and processes to support a particular sector. Setting up Sector Support Teams would also make it easier and more effective to implement U.S. government strategies in priority sectors (examples include the Strategic Ports Initiative, the U.S. Trade and Development Agency’s (USTDA) Access Africa Initiative, the Digital Connectivity and Cybersecurity Partnership, and initiatives in the mining sector). A strong set of Sector Support Teams would help balance the current focus on promoting trade and investment region by region. While it does make sense to capture unique regional opportunities and nuances, overreliance on a regional focus can obscure important trends in industries, particularly telecommunications and finance. Sector Support Teams would also better match the way companies tend to perceive opportunities, which is increasingly multiregional.
- Continue to modernize U.S. government tools. Washington has significantly updated and improved its set of tools to support trade and investment, including through passing the Better Utilization of Investments Leading to Development (BUILD) Act that transformed the Overseas Private Investment Corporation into the DFC; reauthorizing and providing additional flexibilities to EXIM; and allowing the Millennium Challenge Corporation to consider regional projects. PAC-DBIA has made several specific recommendations for further improvements, including allowing DFC and EXIM to partner in some cases (e.g., infrastructure) with state-owned banks. The next few years are likely to require even more agility, as African governments integrate their markets and pursue more advanced participation in regional and global value chains. Setting up an annual review, based on input from private sector partners and input from Embassy Deal Teams, would help keep U.S. government tools current while also pointing out potential for accelerating and simplifying project support requirements.
- Improve communication from both the public and private sector. Many U.S. companies, even those with significant international experience, lack a clear concept of how an embassy can help them, let alone the potential scope for broader U.S. government support. Prosper Africa produced a guide (modeled on a booklet prepared for an Asia-Pacific Economic Cooperation summit) summarizing the U.S. government tools available for companies. Prosper Africa’s Roadmap is a helpful overview of the potential opportunities that currently exist in specific countries and sectors. To really achieve its potential, however, the U.S. government will need to prioritize publicizing and creating compelling narratives around new investments. Gathering success stories in a common format in a single place would do a lot to illustrate common themes and areas for follow-up by both government and the private sector. It would also be helpful to have one portal for companies across sectors and regions, rather than forcing companies to go region by region.
- Create a robust network of private sector associations instead of relying on contractors. The U.S. government should bring companies together to discuss potential opportunities and then have a robust, agile system in place to support them as needed (e.g., through USTDA, EXIM, or DFC). In the long term, trade and investment with Africa should be as easy for U.S. companies as it is with Europe. PAC-DBIA provides a good example of just how dedicated and effective the U.S. private sector can be as a partner. Some U.S. allies and competitors (e.g., the European Union and individual EU member states) have been even more effective in standing up associations with support, which in turn have made their government outreach efforts more effective. It is very much in the United States’ interest to have a more robust network of U.S. business organizations (e.g., AmChams) on the continent linked to trade associations in the United States (e.g., the Corporate Council on Africa and the U.S. Chamber’s Africa Business Center) as well as sector-specific trade associations (e.g., the American National Standards Institute).
- Embrace the Championing American Business Through Diplomacy Act. Convening the secretarial-level committee and drafting a strategy, as set out in the Act, would improve execution of various sectoral strategies (e.g., 5G) and would better match opportunities developed by Embassy Deal Teams. This committee could also better match evolving strategic opportunities. U.S. foreign assistance funding currently requires forecasting such needs years in advance, and many of the agencies involved in these whole-of-government efforts lack funding to support international engagements. Agencies need support more quickly to seize opportunities as they develop, such as supporting the AfCFTA or bilateral trade agreements. Gathering agency heads for one day twice per year would also create a new platform from which to engage U.S. and foreign private sector leaders and create a constructive format to engage Congress on priorities for the coming year.
Laird Treiber is a senior associate (non-resident) with the Africa Program at the Center for Strategic and International Studies in Washington, D.C.
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