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Africa Policy E-Journalgiven the difficulty in maintaining up-to-date links in old files. However, we hope they may still provide leads for your research. Africa: Trade Issue Brief, 1 Date Distributed (ymd): 951216 APIC Background Paper 004 (November 1995) The U.S. And Africa's Trade: Prospects for Partnership by Robert Browne Robert Browne is currently an Adjunct Fellow at TransAfrica Forum's Policy Institute. He was formerly the U.S. Executive Director at the African Development Fund in Abidjan, C“te d'Ivoire. Note: Copies of the typeset version of this background paper, including additional tables and graphs, are available at $2 each, $1.60 each for 20 or more, from Africa Policy Information Center, 110 Maryland Ave. NE #509, Washington, DC 20002. Add 15% for postage and handling, and include your check, money order, or institutional purchase order. The U.S. Stake in African Economic Progress Africa is a paradox. Largest among the continents in area, second largest in population, and arguably the richest of all in terms of natural resources, its people are among the poorest in the world. Africa's people are hard-working and intelligent, and the continent can boast of having produced great civilizations long before today's developed countries came into existence. But the vast gap between contemporary Africa's level of economic development and that of virtually every other area of the world is, in fact, growing. In today's world, stability is not possible in the face of massive international economic and social disparities. Isolationism is not a viable option, even for the U.S. Each new advance in telecommunications, each new desecration of the global environment, each new strain of infectious virus, each new advance in fissionable or biological weaponry, each corporate decision to relocate a plant overseas, shrinks the global community and confirms the interrelatedness of all peoples. Clearly, in today's world, to be one's own keeper one must be one's neighbor's keeper as well. If the vast economic disparities between the U.S. and Africa place the U.S. at risk, then it must be a matter of U.S. policy to strive to shrink that gap. For half a century, "foreign aid"(1) has been the principal weapon for attacking the vast disparities between the developed and the least developed countries. While the debate over the quality and quantity of aid will continue, and the need for aid remains great, the reality is that it is fast diminishing. The precipitous decline in Africa's economic performance beginning in the late 1970s led the donor community, directly and via its international funding agencies such as the World Bank and the IMF, to exert great pressure on African countries to restructure their economies so as to render them more efficient and more market-oriented. A major objective of these "structural adjustment"(2) programs was to prod the African countries to revamp their economies in ways which would make them more viable and more attractive to foreign traders and investors. After a decade of experimentation, these programs have shown only mixed results in economic development terms. But in many cases, they have led to new prospects for using trade as a means for transforming African economies. An expanded U.S.-Africa trade relationship deserves high priority on country agendas on both sides of the Atlantic. U.S.- Africa Trade Relationships The African continent is a more significant trading partner for the U.S. than most people realize, and potentially even more significant. Both the reality and the potential warrant much greater attention from policy-makers and the public alike. The strategic significance of African oil, for example, should imply much more focused concern with the long-term future of such countries as Nigeria, Angola and Algeria, each confronting very different but intense political and societal crises. The medium-term potential to expand the share of exports to Africa supplied by the U.S. is significant. The long-term potential--if the U.S. aids Africa in expanding and diversifying its exports--is even greater. The magnitude of U.S.-Africa trade ($23.4 billion in 1994) comes to almost exactly two per cent of overall U.S. foreign trade of $1.2 trillion.(3) U.S. exports to Africa come to almost $9.2 billion. The U.S. imports some $14.3 billion from Africa, creating a trade deficit with the continent of about $5.1 billion. The imports, moreover, are of strategic importance. Two-thirds of U.S. imports from Sub-Saharan Africa are accounted for by a single commodity: petroleum, comprising 20 per cent of total U.S. crude oil imports in 1994. This is mainly the sweet Nigerian crude oil ($4.4 billion), with sizeable amounts also coming from Angola, Gabon and Congo. Oil from west Africa is particularly favored by American users because of its high quality, but also because its supply has generally been considered to be more stable by comparison with that from the Middle East. Of equal or greater strategic importance are several minerals for which Africa constitutes a major, if not the major Western source. In this group are such items as chromium, cobalt, vanadium and manganese, used in making specialized steel products. Africa supplies the U.S. with 47, 43, 35 and 25 per cent, respectively, of its imports of these commodities. On the export side, U.S. sales to Africa have been in the $8 to 10 billion range for the last four years. The bulk of these sales are of equipment and machinery. Sales to Sub-Saharan Africa, for example, in total some $4.4 billion, included $289 million in U.S. aircraft and aircraft parts, $245 million of oil and gas field equipment, almost $200 million in construction machinery, and over $100 million each of computers, motor vehicles, telecommunications and farm machinery. The other major component was food --- principally wheat ($250 million) and rice ($107 million). In 1994, the $2.2 billion of U.S. exports to South Africa alone made it a larger market for the U.S. than all the countries of Eastern Europe combined (see table below). While the U.S. runs a trade deficit with Africa, most European countries run a trade surplus there. There is, therefore, ample opportunity for the U.S. to increase its exports to Africa, especially if these exports are balanced by increases in imports from Africa as well, so that Africans can earn the dollars to pay for U.S. goods and services. Africa's capacity to expand imports on a sustainable basis, however, is vulnerable not only to the multiple weaknesses of internal economic infrastructure and management, but also to its continued dependence on exports of primary commodities. Countries exporting oil have advantages that those exporting agricultural products such as coffee or sisal do not have. But oil producers too can easily be battered by wide price swings. Even South Africa is highly vulnerable to price shifts in gold and other minerals. The catch-22 for primary commodity producers in the world market is that if everyone produces more, the price may go down, as consumers are oversupplied with cocoa, for example, or manufacturers with raw materials. The only secure route to better trade performance consists in being able to export more highly processed products with greater value added inside the country. The international trading system has historically not helped African countries to make that transition. Current changes may impose even greater difficulties. (continued in part 2) Notes for part 1: 1. "Foreign aid," or "official development assistance" (ODA), is formally defined by the Organization of Economic Co-operation and Development (OECD) as financial flows that (1) "are administered with the promotion of the economic development and welfare of the recipient countries as the main objective" and (2) "are concessional in character," with a grant element of at least 25 percent. Developed country "donors" provided approximately $57 billion in ODA in 1993, the equivalent of 0.3 percent of Gross National Product (GNP), the lowest percentage level since 1973. Among all donor countries, the U.S. provided the lowest percentage of GNP in 1993, only 0.15 percent. 2. While "structural adjustment" programs vary in their particulars, they have mainly been concerned with reducing deficits in financial dealings with other countries and with balancing government budgets. Measures commonly include cuts in government spending, removal of import controls, devaluation of currencies, and privatization of government enterprises. Critics argue that while economic crisis clearly demands "adjustments," the packages imposed often take little account of the damage to human capital and fail to bring about the long-term economic development they promise. 3. These figures refer to the entire African continent. Most easily available statistics separate Sub-Saharan Africa from North Africa, which is generally grouped with the Near East. In this paper, unless otherwise noted "Africa" refers to the entire continent. When statistics are for Sub-Saharan Africa only, that is noted in the text or table. Table: Compared to What? U.S. Trade in 1994 with Selected Regions and Countries, in millions of $ PLACE***********************EXPORTS****IMPORTS****TRADE World total****************502483.6***668584.6***1171068.2 Compare All of Africa with: South & Central America*****41708.4***38461.0***80169.4 France**********************13618.7***16699.0***30317.7 Singapore*******************13019.9***15357.7***28377.6 All of Africa****************9164.9***14033.9***23198.8 Italy************************7182.7***14802.2***21984.9 Hong Kong*******************11441.0****9695.6***21136.6 Compare Sub-Saharan Africa with: Sub-Saharan Africa***********4366.8***11707.5***16074.3 SS Africa (w/o South Africa)*2194.5****9677.0***11871.5 Eastern Europe (inc. FSU)****5301.0****5831.9***11132.9 Former Soviet Union**********3561.6****3847.6****7409.2 Compare African Regions and Countries with: Former Soviet Union**********3561.6****3847.6****7409.2 SADC (inc SA)****************2649.9****4486.4****7136.3 Ireland**********************3418.6****2893.5****6312.1 Russia***********************2578.1****3245.0****5823.1 Nigeria***********************509.1****4429.9****4939.0 South Africa*****************2172.3****2030.5****4202.8 Eastern Europe(w/o FSU)******1739.5****1984.3****3723.8 Norway***********************1267.3****2353.4****3620.7 Egypt************************2854.8*****548.7****3403.5 SADC (w/o South Africa)*******477.6****2455.9****2933.5 Algeria**********************1191.5****1526.9****2718.4 Kuwait***********************1175.9****1457.5****2633.4 Angola************************197.3****2061.3****2258.6 Poland************************625.2*****651.2****1276.4 Definitions of regions used in table: Sub-Saharan Africa: All African countries except Algeria, Morocco, Tunisia, Western Sahara, Libya, and Egypt. SADC (Southern Africa Development Community): Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia, Zimbabwe. Eastern Europe: Albania, Armenia, Azerbaijan, Belarus, Bulgaria, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Poland, Romania, Russia, Slovakia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan. Former Soviet Republics: Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, Uzbekistan. South/Central America - Anguilla, Antigua and Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bermuda, Bolivia, Brazil, British Virgin Islands, Cayman Islands, Chile, Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, El Salvador, Falkland Islands, French Guiana, Grenada, Guadeloupe, Guatemala, Guyana, Haiti, Honduras, Jamaica, Martinique, Montserrat, Netherland Antilles, Nicaragua, Panama, Paraguay, Peru, St. Kitts and Nevis, St. Lucia, Surinam, Trinidad and Tobago, Turks and Caicos Islands, Uruguay, Venezuela. Source: Bureau of the Census, Foreign Trade Division
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