Advancing the US–Africa Trade and Development Agenda: Aligning US Policy Tools to Address Core Competitiveness Constraints

August 07, 2014

On July 29, 2014, senior fellow and director of CGD’s Rethinking US Development Policy Initiative Ben Leo testified before the House Ways and Means Subcommittee on Trade at a hearing about the future of the African Growth and Opportunity Act (AGOA) .

From the testimony:

" Next week, Washington will host roughly 50 African heads of state, hundreds of cabinet-level ministers, and over a thousand American and African business leaders and investors. The African delegations are expected to deliver a unified message – they want to generate more trade and attract more US investment into their economies.

Within this broader strategic context, my testimony will focus on four interrelated points: (1) African firm-level competitiveness is influenced primarily by business climate constraints, small market size, and collusive political economy dynamics. Addressing these factors, even on the margins, will have a greater impact on US–Africa trade flows and private-sector-based development than expanding AGOA’s preferential market access provisions. (2) Despite explicit criteria, AGOA country eligibility decisions by successive Administrations have not reflected whether African governments are establishing market-based economies and favorable business climates. Congress should consider conditioning preferential access to the $17 trillion US economy on demonstrable business environment reforms. (3) Congress and the Obama Administration should bring greater focus, coordination, and scale to US trade capacity building programs in Sub-Saharan Africa. This will require the establishment of a centralized policy body, with appropriate budgetary authority, to focus US trade-related programs on core competitiveness constraints. (4) The US government should stop investing in ineffectual Trade and Investment Framework Agreements (TIFAs) and start investing in legally binding Bilateral Investment Treaties (BITs). Such action will promote greater investment to the continent while also positioning US investors on equal footing with European, Chinese, and other investors who benefit from BIT protections.”

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