[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
WILL THERE BE AN AFRICAN
ECONOMIC COMMUNITY?
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH,
GLOBAL HUMAN RIGHTS, AND
INTERNATIONAL ORGANIZATIONS
OF THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JANUARY 9, 2014
__________
Serial No. 113-157
__________
Printed for the use of the Committee on Foreign Affairs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.foreignaffairs.house.gov/
or
http://www.gpo.gov/fdsys/
______
U.S. GOVERNMENT PRINTING OFFICE
86-221PDF WASHINGTON : 2014
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON FOREIGN AFFAIRS
EDWARD R. ROYCE, California, Chairman
CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York
ILEANA ROS-LEHTINEN, Florida ENI F.H. FALEOMAVAEGA, American
DANA ROHRABACHER, California Samoa
STEVE CHABOT, Ohio BRAD SHERMAN, California
JOE WILSON, South Carolina GREGORY W. MEEKS, New York
MICHAEL T. McCAUL, Texas ALBIO SIRES, New Jersey
TED POE, Texas GERALD E. CONNOLLY, Virginia
MATT SALMON, Arizona THEODORE E. DEUTCH, Florida
TOM MARINO, Pennsylvania BRIAN HIGGINS, New York
JEFF DUNCAN, South Carolina KAREN BASS, California
ADAM KINZINGER, Illinois WILLIAM KEATING, Massachusetts
MO BROOKS, Alabama DAVID CICILLINE, Rhode Island
TOM COTTON, Arkansas ALAN GRAYSON, Florida
PAUL COOK, California JUAN VARGAS, California
GEORGE HOLDING, North Carolina BRADLEY S. SCHNEIDER, Illinois
RANDY K. WEBER SR., Texas JOSEPH P. KENNEDY III,
SCOTT PERRY, Pennsylvania Massachusetts
STEVE STOCKMAN, Texas AMI BERA, California
RON DeSANTIS, Florida ALAN S. LOWENTHAL, California
TREY RADEL, Florida GRACE MENG, New York
DOUG COLLINS, Georgia LOIS FRANKEL, Florida
MARK MEADOWS, North Carolina TULSI GABBARD, Hawaii
TED S. YOHO, Florida JOAQUIN CASTRO, Texas
LUKE MESSER, Indiana
Amy Porter, Chief of Staff Thomas Sheehy, Staff Director
Jason Steinbaum, Democratic Staff Director
------
Subcommittee on Africa, Global Health, Global Human Rights, and
International Organizations
CHRISTOPHER H. SMITH, New Jersey, Chairman
TOM MARINO, Pennsylvania KAREN BASS, California
RANDY K. WEBER SR., Texas DAVID CICILLINE, Rhode Island
STEVE STOCKMAN, Texas AMI BERA, California
MARK MEADOWS, North Carolina
C O N T E N T S
----------
Page
WITNESSES
Amadou Sy, Ph.D., senior fellow, Africa Growth Initiative, The
Brookings Institution.......................................... 6
Mr. Stephen Lande, president, Manchester Trade................... 22
Peter Quartey, Ph.D., senior research fellow, Institute of
Statistical, Social and Economic Research, University of Ghana. 30
Witney Schneidman, Ph.D., nonresident fellow, Africa Growth
Initiative, The Brookings Institution.......................... 37
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Amadou Sy, Ph.D.: Prepared statement............................. 8
Mr. Stephen Lande: Prepared statement............................ 26
Peter Quartey, Ph.D.: Prepared statement......................... 32
Witney Schneidman, Ph.D.: Prepared statement..................... 40
APPENDIX
Hearing notice................................................... 60
Hearing minutes.................................................. 61
WILL THERE BE AN AFRICAN ECONOMIC COMMUNITY?
----------
THURSDAY, JANUARY 9, 2014
House of Representatives,
Subcommittee on Africa, Global Health,
Global Human Rights, and International Organizations,
Committee on Foreign Affairs,
Washington, DC.
The subcommittee met, pursuant to notice, at 2:13 p.m., in
room 2172, Rayburn House Office Building, Hon. Christopher H.
Smith (chairman of the subcommittee) presiding.
Mr. Smith. The subcommittee will come to order, and good
afternoon.
The African Union, or AU, is in the midst of a long program
to create an African economic community through the eventual
merging of existing regional economic communities. U.S. policy
is to support regional integration in Africa as is enhancing
the success of U.S.-Africa trade by reducing trade barriers and
creating larger markets. This hearing will examine the AU
effort and its potential benefits for Africa as well as the
United States.
A focal point in U.S.-Africa trade policy is the
encouragement of integrated markets in Africa. It makes trade
with Africa more efficient and beneficial for African
businesspeople as well as governments. It is also more
attractive for foreign investors.
The AU, a regional grouping of all countries except
Morocco, was established in 2002 as the successor of the now-
defunct Organization of African Unity, or the OAU. Its
formation was largely motivated by OAU members' desire to more
quickly achieve the goals of the 1991 African Economic
Community Treaty, which was signed by some 51 heads of state.
The treaty is intended to promote African regional economic
integration and socioeconomic development through the planned
creation of a common African market and shared political and
economic institutions.
Make no mistake about it, this is a challenging goal. The
example of the European Community demonstrates the difficulty
even when involving developing nations. The current African
nations were not created to collaborate with one another.
Varying languages, conflicting legal and commercial systems,
and often incompatible transportation infrastructures make this
worthy goal a major challenge, and there are other obstacles
that make this effort even more daunting.
Nevertheless, the eight recognized regional economic
communities have a timetable to which they are generally
adhering to with few exceptions. The Arab Maghreb Union, a
trade agreement comprising Algeria, Libya, Mauritania, Morocco,
and Tunisia, is inactive and frozen due to deep political and
economic disagreements between Morocco and Algeria regarding,
among other issues, the matter of Western Saharan independence.
The Community of Sahel-Saharan States, comprising 28 countries
across Africa's Sahel region, is finding regional integration
difficult because of its members being part of other trade
blocs that are more advanced in their integration.
Meanwhile, the Common Market for Eastern and Southern
Africa, a free-trade area with 19 member states stretching from
Libya to Swaziland, has agreed to an expanded free-trade zone
and is also considering a common visa scheme to boost tourism.
The East African Community, an intergovernment organization
comprising some five East African countries--Burundi, Kenya,
Rwanda, Tanzania, and Uganda--signed a protocol just last year
outlining their plans for launching a monetary union within 10
years.
The Economic Community of Central African States, which
includes 10 countries across the middle of the continent,
formed a customs union with a free-trade area between members
and a common external tariff for imports from other countries
as long ago as 1966.
The Economic Community of West African States, a regional
group of 15 West African countries, is creating a single large
trading bloc to an economic and trading union and serves as a
peacekeeping force in the region, all despite operating
officially with three coequal languages: French, English, and
Portuguese.
The Intergovernmental Authority on Development is an eight-
country trading bloc based in East Africa and has transformed
from an executive group with a focus on development and
environmental control to a larger structure as a regional
economic community.
The Southern African Development Community began as an
anti-apartheid coalition fighting for majority rule in South
Africa in the 1970s, but since majority rule came to South
Africa in 1994, it has become a traditional regional economic
community and, like its West African counterpart, sometimes
engages in peacekeeping operations.
By 2017, a free-trade union and customs union is supposed
to be established in each regional economic community. The
process is still stalled in North Africa and the Sahel,
although there is progress elsewhere. This phase is now fully
enforced in East Africa as well as West and Central Africa.
In today's hearing, we are looking for recommendations on
what the regional economic communities and their member
countries must do to fulfill the AU's ambitious agenda. We also
want to examine what the U.S. Government, other donor
governments, and international financial institutions can do to
enhance their efforts in this regard. Ostensibly, this
assistance has been ongoing for some time now. We want to find
out more about these efforts and why they have not moved
further ahead.
We have with us an extraordinary panel of experts who have
observed regional integration in Africa and, in some cases,
have worked to promote it, for more than a decade. We know what
governments have said about the benefits of regional
integration, and we have heard from the private sector about
their preference for integrated markets. Today we want to hear
from some who can provide and have provided the technical
assistance necessary to make these goals a reality.
We in Congress are currently working on legislation to
extend the Africa Growth and Opportunity Act, and integrated
regional markets will only enhance the success of this trade
process moving forward. We hope today's contributions will
better inform us on how we can be more effectively engaged in
regional integration and the expansion of African markets.
I now yield to my friend and colleague, Ms. Bass, the
ranking member.
Ms. Bass. Well, thank you very much, Mr. Chair. And Happy
New Year. And I want to thank you, as always, for your
leadership in holding today's hearing, which is raising the
question: Will be there an African economic community?
This is a very important question as it relates to Africa's
economic development, and it is critical that we familiarize
ourselves with the strategic roles played by the African Union,
its Commission, member states, and individual regional economic
communities regarding regional economic integration.
As early as 1991, the African Union addressed this issue by
identifying regional economic integration as crucial to
Africa's socioeconomic development, self-sufficiency, and
financial prowess. The AU Commission's prioritization of this
issue and the commitment of AU member states and the RECs to
support this effort was underscored at the 50th summit of the
AU last May, which I had the honor of attending.
Last September, in a keynote address at the Congressional
Black Caucus' braintrust here in Washington, DC, AU chairperson
Dr. Zuma emphasized the importance of regional economic
integration and stressed that achieving this goal would be
socioeconomically transformative for Africa. As a strong
supporter of increased trade and investment between Africa and
the U.S., a component of which is the reauthorization and
strengthening of AGOA, I applaud the AU's objective of regional
economic integration.
I believe the growth in business and investment between the
U.S. and African private sectors is a win-win scenario which
can ultimately expand the growing service sector and contribute
to capacity-building on the continent. It can also develop an
increasing customer base for U.S. business comprised of a
growing African middle class, trends which develop and secure
jobs in Africa and the U.S.
The U.S. Government initiatives, such as Power Africa,
Trade Africa, AGOA, and Doing Business in Africa, help to build
trade and investment partnerships between the U.S. and Africa
by focusing increasingly on partnerships with the private
sector, the involvement of civil society in Africa, as well as
the diaspora community. Feed the Future contributes to
developing Africa's agricultural sector and promoting food
security. The success of the latter is particularly noteworthy
this year, as the AU has identified 2014 as the year of
agriculture and food security.
These government initiatives increasingly work on a whole-
of-government basis and contribute to growth in key sectors of
individual African countries and regions.
Over the past few years, we have witnessed increased AU
member states' commitment to the greater goal of intra-African
trade, promoted by the realization that old barriers to trade
must be eradicated in favor of less complicated commerce-
enhancing alternatives. We have also seen several African
countries identified by the international financial
institutions as having the fastest-growing economies worldwide.
Especially given the reversal of the brain drain, record levels
of remittances from hardworking and successful diaspora
communities, and the expansion of middle-class consumerism,
Africa is viewed as a good investment by several of our
economic competitors.
While this progress is commendable, African and American
economists and observers stress that much more needs to be done
to address ongoing infrastructural and capacity-building
challenges faced by many African countries, particularly those
dependent on the agricultural sector. Uneven income
distribution, price subsidies, poor transportation networks and
infrastructure, rampant unemployment and underemployment of
young people, poor access to electrical power, and, frankly, a
greater need for good governance has resulted in a pattern of
uneven economic development across individual countries and
regions.
Against this backdrop, I welcome our witnesses here today.
I am very interested in hearing from them about how the AU, the
RECs, and individual countries plan to address these
challenges. Secondly, as the U.S. seeks to strengthen trade and
investment relations with Africa, what role should U.S.
Embassies play in the process?
And while AGOA has been very successful in increasing U.S.-
Africa trade in oil and textile industries, which has limited
job creation, frankly, there has been little success in
exporting other AGOA-eligible products to the U.S. that could
be produced by small to medium-size companies. Are AGOA-
eligible countries developing strategies to increase exports of
goods produced by SMEs?
And, finally, in view of current situation in South Sudan,
how does the EAC address Juba's application for EAC membership?
As I have said in previous hearings, we learn as much from
our success as we do from our failures. As we hear from today's
witnesses, our focus should not only cover the broad diversity
of success and the many challenges but the activities that
worked well in addition to those that fail to accomplish their
objectives.
Thank you. I yield back.
Mr. Smith. Thank you, Ms. Bass.
Mr. Marino?
Mr. Marino. I have no questions.
Mr. Smith. Mr. Cicilline?
Mr. Cicilline. Thank you, Mr. Chairman and Ranking Member
Bass, for holding today's hearing on this very important issue.
I would like to offer my gratitude to the witnesses for
their testimony and, more importantly, for the important work
that they are doing.
As one of the most resource-rich regions on the planet,
Africa has always possessed tremendous economic potential. And
while the eight regional economic communities in Africa develop
closer ties and foster greater cooperation, the world will be
watching attentively. It is imperative that the United States
remain a strong trading partner with nations on the African
continent throughout this process and, as Congresswoman Bass
said, learn both from the successes as well as the failures.
As regional integration improves, the African trading
position and economy in general will improve, and I hope that
we will see a correlating reduction in terrorism and political
unrest in the region.
I again thank the witnesses for their testimony, and I look
forward to hearing the testimony.
And I yield back.
Mr. Smith. Thank you very much.
Mr. Weber?
Mr. Weber. I am good.
Mr. Smith. And Dr. Bera?
I would like to now welcome our distinguished witnesses to
the witness table, beginning, first of all, with Dr. Amadou Sy,
who is a senior fellow at the Brookings Institution's Africa
Growth Initiative and currently serves as a member of the
editorial board of the Global Credit Review. He focuses on
banking, capital markets, and macroeconomics in Africa and
emerging markets. Dr. Sy was previously deputy division chief
of the Financial Service Division of the International Monetary
Fund's Monetary and Capital Markets Development. And Dr. Sy has
also held a variety of positions at the IMF for the last 15
years, covering more than 20 countries and all the financial
crises since 1998. He also worked on a project to set up a
trust fund for capacity-building in Africa.
We then will hear from Mr. Stephen Lande. Over his 50-year
career at the State Department, the Office of the U.S. Trade
Representative, and in private sector, Mr. Lande has worked
extensively to expand U.S. trade. He has worked as a Foreign
Service Officer, senior trade negotiator, and an Assistant U.S.
Trade Representative. He has negotiated trade agreements with
countries around the world, and he was instrumental in the
creation of the Generalized System of Preferences, the
Caribbean Basin Initiative, and NAFTA. Mr. Lande continues to
work with African governments and teaches international trade
at Johns Hopkins' School of Advanced International Studies.
We will then hear from Dr. Peter Quartey, who is an
associate professor in development economics at the University
of Ghana. He was formerly the deputy director of the Center for
Migration Studies at the University of Ghana. He is also
currently the board chairman of the University of Ghana's
Cooperative Credit Union. He has published extensively, and his
research interests are private-sector development, including
small and medium enterprises, development finance migration and
remittances, and poverty analyses. He consults for the World
Bank, the Organization for Economic Cooperation and
Development, the Overseas Development Institute, and many
others.
Finally, we will hear from Dr. Witney Schneidman of
Covington & Burling and the Brookings Institution. He is a
senior international advisor for Africa at Covington & Burling.
Dr. Schneidman, a nonlawyer, has a deep understanding of many
of the major African countries as well as uniquely valuable
insights into the recurrent challenges and opportunities across
the continent. He provides strategic advice on the varied
political, economic, social, and regulatory issues that are
critical to companies' success in Africa. Dr. Schneidman's work
focuses on U.S.-Africa relations, trade and investment in sub-
Saharan Africa, and issues related to economic growth and
regional integration on the continent.
So, Doctor, thank you, as well.
We will begin with you, Dr. Sy.
STATEMENT OF AMADOU SY, PH.D., SENIOR FELLOW, AFRICA GROWTH
INITIATIVE, THE BROOKINGS INSTITUTION
Mr. Sy. Chairman Smith, Ranking Member Bass, and members of
the subcommittee, thank you for convening this important
hearing to discuss Africa's progress toward establishing an
economic community.
I appreciate the invitation to share my views on behalf of
the Africa Growth Initiative at the Brookings Institution. The
following views are my own and do not necessarily represent
those of the Brookings Institution.
Mr. Chairman, hoping for their countries to benefit from
integration, 51 African leaders signed the Abuja Treaty in 1991
and established a roadmap toward an African economic community
to be completed by 2028. Mr. Chairman, 23 years later, regional
integration is happening across Africa, but progress is
happening at different speeds.
The eight building blocks of the treaty, the regional
economic communities, have different levels of advancement
across the components of regional integration, such as freedom
of movement for capital and goods, labor mobility, and
unification of currencies. Simply put, four RECs are measurably
progressing at regional integration and four are falling
behind. As of 2013, the East African Community appears to have
made the most progress overall toward the stages of the Abuja
Treaty.
Even within regional groupings, the progress of individual
countries toward achieving convergence target is uneven. The
diversity of countries within the same regional bloc is at
times very pronounced. For instance, the Central African
Republic is the only non-oil-exporting country in the Economic
Community of Central States. In South Sudan, a member of the
Intergovernmental Authority on Development, IGAD, the
humanitarian, political, and economic situation is
deteriorating very rapidly.
There is also significant overlap of membership between
RECs. This is a problem because countries belonging to more
than one regional bloc can find it difficult to prioritize
their policies.
Mr. Chairman, African governments will need to address a
number of challenges to accelerate integration. They will need
to maintain regional peace and security, strengthen common
institutions, and streamline regional integration policies.
Mr. Chairman, increased African regional integration would
create larger markets, improve economies of scale, and reduce
transaction costs for local, regional, and global trade.
Greater U.S. exports to Africa will create more jobs on this
side of the Atlantic as well as on the other side.
And, as you know, there are ongoing efforts by the United
States to support regional integration. In order for the U.S.
to help support regional integration in Africa, I suggest
deepened engagement. Mr. Chairman, I would recommend the
following three actions to support regional integration.
Number one, broaden the Trade Africa initiative to other
RECs. Trade Africa so far focuses only on the East African
Community, and there is merit in expanding it quickly to other
RECs. At a minimum, impending their inclusion in the program,
these RECs could build capacity by adapting to the
harmonization standards being associated to the initiative. A
roadmap for these RECs to join the initiative could be
established.
Number two, expand the Power Africa initiative to include
regional projects. Power Africa so far focuses only on six
countries. The initiative could coordinate with regional and
continental initiatives to address the power deficit in the
continent. This is important since regional projects could
benefit from economies of scale and lay the basis for a
regional energy market.
Finally, number three, strengthen REC secretariats and
commissions. Building strong institutions would help lay the
basis for faster and better-quality economic integration and
potentially for monetary integration. The U.S. could coordinate
with the African Union and the RECs to encourage multilateral
institutions such as the IMF and the World Bank Group to step
up their support to regional integration in Africa. Since
African nations lack representation in these global governance
institutions, support from the U.S. on the multilaterals could
greatly increase support for RECs.
Mr. Chairman, Ranking Member Bass, and members of the
subcommittee, thank you very much for convening this important
meeting.
Mr. Smith. Dr. Sy, thank you very much for your testimony.
[The prepared statement of Mr. Sy follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
----------
Mr. Smith. And, without objection, your full statement and
those of all of our distinguished witnesses will be made part
of the record, and any additional documentation or statements
you would like to have added to your text.
Mr. Lande?
STATEMENT OF MR. STEPHEN LANDE, PRESIDENT, MANCHESTER TRADE
Mr. Lande. When I hear my description, sometimes I think I
should be speaking before the History Channel as opposed to
such an august body. But I very much appreciate that. And
hopefully some of my experience can be useful in terms of our
discussion.
Many people say that Africa is moving too slowly toward
regional integration. May I remind you that the European Union
started their efforts at regional integration in 1951 with the
European Coal and Steel Community, from which they developed
additional members and groups. But it was not until 1992--
which, the way I subtract, 41 years later--that they really
arrived at something that could be called a customs union.
Africa has been at the game, as pointed out by Mr. Sy,
since 1994 when the Abuja Treaty was implemented, and it is
hoped that they will arrive at this particular milestone of a
customs union by 2017. Even if it slips a couple of years, that
is less than 30 years.
So people should remember these are complicated things.
Europe had a lot of advantages. They had trade. They had a
history of being countries. They had a whole group of commerce
that went on for years and years. They had an infrastructure
project proposal. So one should not push too quickly.
I could not believe the timing of this hearing. It was
almost like people were listening in Africa and saying, we had
better show something in terms of regional integration. So
there have been two significant developments in terms of moving
toward free-trade agreements.
Number one, the ECOWAS, Economic Community of West African
States, at an October 16th extraordinary summit, reaffirmed
their decision that their free-trade agreement and customs
union both will become operational as of January 1st, 2015.
This will bring together, as pointed out in your comments, the
Francophone, the Lusophone, the Anglophone, all kinds of
different systems, Roman systems, common law systems. I cannot
tell you all the tsuris and problems you had in putting
something like this together. But this is quite an achievement.
Similarly, the tripartite group, which combines the three
regional economic communities in Eastern and Southern Africa
and so on, they are planning to make operational by June 2014
their free-trade agreement. And then they have plans to further
deepen with things in services, things in common customs
procedures and so on.
These are things that are moving along. You can talk about
eight RECs, but let's be very honest, we are talking about five
that really count in this exercise.
Central Africa is going a little bit slower. We have to
figure out whether they continue alone, whether they join
ECOWAS because they are all mainly French-speaking or not. Some
Central African countries, such as Burundi, Rwanda, the Congo,
Angola, have already chosen to work within the tripartite
group, so they are open. The Union of Arab States, the UMA, or
Arab Maghreb Union, is not really moving in much a direction,
so I don't discuss that. My focus is on sub-Saharan Africa to
see where we are headed and so on, et cetera.
The U.S. should be very proud of the role it has played
because we, ahead of any other countries, even ahead of the
Europe Union, really began pushing regional integration back in
the 1990s. We were the original sponsors, in many ways, of
COMESA. We were the original supporters of ECOWAS and so on.
Today there are many things we do, whether they are the
regional hubs, which have been very effective operating in this
particular environment. USTR has trade and information
framework agreements with almost each one of the regional
economic communities in place and so on. The State Department
has appointed Ambassadors to each of the regional communities.
So we should have a good feeling because of this particular
project that is going on.
The advantages, really quickly put, are: One, you have a
much stronger fabric for political democracy, for maintaining
good government if you do have regional economic communities.
You have a lot more peer pressure to get that done. American
companies need regional economic communities because American
companies are too big to operate within 49 or 54 countries
within Africa. They need that scope in order to develop.
So this is a very important--to be part of the economies of
scale and to include Africa within its own supply chains and
end this annoying reliance on the Far East, and you know what
that means without mentioning any countries' names and so on.
The African countries need them because of infrastructure,
as Donald Kaberuka, the president of the African Development
Bank, suggested that infrastructure projects must go beyond
national borders. And it is pretty obvious that they really
must. So that is the third reason.
And the fourth was mentioned by one of the real icons of
trade policy, Fred Bergsten, who recently retired as head of
the Institute of International Economics, who said, listen, no
one is going to listen to 49 countries in trade negotiations,
54 countries. You may call them cheaters. They are not
cheaters; they are small. But if they were unified, people
would listen to them. So from that interest, too, it is
important in terms of negotiation.
So no one makes any argument, I have never heard, against
regional integration. It is the one area everyone can agree on.
Run through very quickly and so on--make one other point.
No one says that trade negotiations by themselves are going to
get economic development. They are what we call a necessary but
not a sufficient condition for growth. You have must have
complimentary measures.
And, in this case, I really must compliment the chairmen
and the ranking members of this committee as well as any other
committee with a significant involvement in Africa in this
Congress--Ways and Means Committee, the House Foreign Affairs
Committee, the Senate Foreign Relations Committee, and the
Senate Finance Committee--because you guys put together an
unbelievable request for information to the GAO. And it goes
beyond simple trade matters.
So you must look at AGOA as establishing the conditions but
not--of a trade, establishing the conditions, but not assuring
the free flow of goods. For that, you have to have the
infrastructure development, you have to have the capacity-
building, you have to have the rule of law. And your letter
begins to address that. So we very much support this
coordinated venture, and we hope it does continue and so on.
Let me--can I have an extra minute? Thank you.
And I won't do that New York trick of just talking faster
so no one knows a word you are saying. So I will take a breath
and slow up.
Mr. Smith. Take two then.
Mr. Lande. Let me just run through very quickly eight
suggestions that might be useful. Because that is why you go
hearings, to make suggestions and so on.
You need the seamless renewal--and let me emphasize--of a
strengthened AGOA. Simply renewing AGOA by itself is not
sufficient. We have a challenge. It takes time to put together
an enhanced AGOA. We have a deadline called textiles, where
people want that to be enacted very quickly because if you do
not enact it in 6, 7 months before the program expires, you
lose orders. So there seems to be work.
I am an optimist, and I really believe that given the
bipartisan nature of Africa, as represented here, maybe we
could get something finished this year. I won't say we can, but
I want to have it strengthened, enhanced, and related to other
policies and so on, which is extremely important. We must
address some of the agricultural issues, for example. It makes
no sense not to have groundnuts, sugar, and so on in there.
Number two, very quickly, let's think about empowering RECs
in a new and unique way. Why don't we think about designating
regional economic communities for eligibility under AGOA
instead of individual countries? If regional economic
communities want to take on the responsibility of assuring that
U.S. conditions are met for democracy, let's do that.
Number three, you have to look at conditionalities in
general. For example, no one likes what goes on in the Congo,
but the idea of passing a conflict-mineral law that only helps
China and Japan, that adds $6 billion to the cost of U.S.
companies doing business in Africa, throws people out of work
in the very areas we are trying to get stability doesn't make
sense. So we have to come up with a much more targeted area for
many of the things we do, recognizing that we must work with
African peer groups and with other donors. Unilateral U.S.
actions should only be taken as an absolute last resort.
The biggest threat to regional integration is our friends
in Europe. They are pushing for preferential access by
threatening to close the market to African goods while we
continue AGOA. That will not only harm U.S. exports in the most
vibrant and fastest-growing market in the world, but will
also--but will also slow up African integration.
Ethiopia is not in the mood at the moment to open up for
Europe. Maybe Kenya will be forced to, but they export a lot of
products. How do you form a customs union if your major
supplier, Ethiopia, has MFN duties and if Kenya is giving them
zero duty?
We are urging that, perhaps working quietly with Congress,
your parliamentary groups, talking to USTR, remembering that
TTIP must be approved here, the Transatlantic Trade Investment
Promotion agreement, we just suggest that a little bit of
discussion, maybe, may have the Europeans slow up their
deadline. They have an arbitrary date, July 2014. Couldn't be
worse for AGOA, but we can deal with that.
Number five, South Africa, a real challenge. They have a
deal with Europe where we are being discriminated against. They
don't have a deal with us. We are urging that we look at this
issue very carefully. We don't think South Africa should be
graduated. We do think U.S. exports should be protected. We
have the best USTR in years sitting there now. I think he can
deal with this challenge in some kind of a way. It has to be
addressed one way or the other and so on.
Number six, going very quickly, that we--and I agree with
the point that was just made, that the OPIC, the MCC have to
have regional programs. My partner, Tony Carroll, suggested
before this body about 2 years ago that maybe we should suggest
to MCC that 20 percent of their funding goes for regional
projects along the way and so on.
And, again, a similar point on Trade Africa, we think is
very good. We know it talks about focusing first on East
Africa, then looking at other regions. We think that it should
really begin to look at other regions now, particularly the
type of support that USAID can give to get these negotiations
finished.
So, in short, what we are saying is that, with the
exception of a challenge in Central Africa, Africa has a
schedule. That schedule calls for 2017 free trade, 2019 customs
union. They may slip a few years, but they are going to make
it. We must make sure that our policies support that, and that
is done through a program that has foreign aid on--that has
support of private sector, everybody on a regional level, and
recognizes the fact that AGOA should be renewed in its current
form, but it should aim for reciprocity, but at the time that
Africa is unified to negotiate as a group.
Thank you very much. I am sorry I speeded up a drop, but
your smile indicated that it was not being wasted. Thank you,
sir.
Mr. Smith. Thank you so much. And after 50 years of
experience, the few extra minutes were well worth it. Thank
you, Mr. Lande.
[The prepared statement of Mr. Lande follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
----------
Mr. Smith. Dr. Quartey?
STATEMENT OF PETER QUARTEY, PH.D., SENIOR RESEARCH FELLOW,
INSTITUTE OF STATISTICAL, SOCIAL AND ECONOMIC RESEARCH,
UNIVERSITY OF GHANA
Mr. Quartey. Chairman Chris Smith and honorable members of
the committee, I thank you for the opportunity to share my
views on whether there can be an African regional community,
with a specific focus on ECOWAS. I approach this topic based on
my 20 years professional experience. Although I work with one
of the leading think tanks in Africa, the views expressed here
are entirely mine.
Mr. Chairman, in addressing the question whether there can
be a regional economic community in Africa, I would like to
focus on the achievements and challenges of ECOWAS, and
hopefully this would inform the discussion on whether an
Africa-wide community is feasible.
ECOWAS, as some of you may know, has created a number of
benefits to its member states, including, first, the
maintenance of peace and security in the region, whereby the
community serves as a peacekeeping force in the region;
secondly, the promotion of free movement of people and goods
between member states. And examples of this includes 90 days
visa-free entry for members, the ECOWAS trade liberalization
scheme and customs union. Mr. Chairman, also the integration of
the agricultural base to promote food security is one of the
achievements of ECOWAS, where we can make mention of the ECOWAS
Common Agricultural Policy, which was instituted in 2005.
We can also talk of the West African Common Industrial
Policy. Creating a favorable business environment is also one
of the achievements. We have what we term the ECOWAS Business
Council, which is a regional, private-sector advisory body to
ECOWAS policymakers. Reducing the procedures for registering a
business, the number of days required to register a business,
and reducing the cost of doing business dramatically have been
the other achievements.
Mr. Chairman, another achievement includes measures to
improve the physical infrastructure. And some specific examples
are the Regional Trade Facilitation Program, where member
states improve the road network linking other member states. We
can also talk about the West African Gas Pipeline project as
well as the West African Power Pool Project, where power will
be shared between energy-deficit and energy-surplus member
states.
Mr. Chairman, I would at this point outline some of the
challenges facing ECOWAS. First, there are threats to regional
peace and security due to political instability and internal
conflicts. Secondly, the monetary integration is farfetched, as
the six member states have been unable to meet the convergence
criteria.
The lack of well-structured and resourced institutions have
also affected the operations of ECOWAS. Limited financial
resources, as well as impediments to trade, and cases of
harassment at the various borders continue. The high cost of
business among member states is also reported as one of the
challenges faced by the ECOWAS community. The ``Doing
Business'' reports, for instance, ranked Ghana 128 out of 189
countries.
Lastly, Mr. Chairman, the poor cross-border infrastructure
and weak institutional and human capacity has affected the
operations of ECOWAS.
So, based on the achievements and challenges outlined
above, Mr. Chairman, I am of the conviction that achieving an
African regional community is possible, but that is an uphill
task.
Promoting integration in Africa will bring enormous benefit
to the region as well as to the region's partners. Integration,
in short, would help Africa better police itself. The United
States will stand to benefit from the collective fight against
instability and terrorism if we promote regional communities in
Africa. Also, Mr. Chairman, U.S. firms already in the region
and potential ones who have a business environment to operate
and secure their investments.
The AGOA initiative as well as other initiatives of the
USAID West Africa Trade Hub are better able to facilitate
businesses in the subregion and access U.S. markets with
greater integration. Mr. Chairman, integration would enhance
the size of the African markets, and U.S. companies already
operating in the region can expand output and employ more
people, including Americans.
In conclusion, Mr. Chairman,promoting regional integration
will enhance the regional markets of African countries, would
promote trade in the region, and facilitate peace and security.
But this will require the support of the international
community, especially the United States.
Thank you very much.
Mr. Smith. Dr. Quartey, thank you very much for your
testimony.
[The prepared statement of Mr. Quartey follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
----------
Mr. Smith. Now, Dr. Schneidman.
STATEMENT OF WITNEY SCHNEIDMAN, PH.D., NONRESIDENT FELLOW,
AFRICA GROWTH INITIATIVE, THE BROOKINGS INSTITUTION
Mr. Schneidman. Chairman Smith, Ranking Member Bass, and
members of the committee, thank you for this opportunity to
address the question, will there be an African economic
community?
It is not possible to know precisely when or even if the
eight regional economic communities that are recognized by the
African Union will fully integrate into one. After all, the
Abuja Treaty of 1991 envisioned the establishment of an African
economic community by 2028. More recently, in January 2012,
African heads of state committed to the creation of a
continental free-trade area by 2017, although the date was
described as ``indicative.''
The decision by the African leaders to bring forward by 11
years the date for the continent's economic integration is
nevertheless important. It demonstrates that regional,
commercial, and economic integration is a priority for the
governments across the region. The accelerated date is also a
recognition that the emergence of regional markets is central
to Africa's integration into the global economy and,
ultimately, the acceleration of job creation and improvement in
the quality of life and the eradication of poverty across the
continent. It is also a recognition of the reality that greater
integration will enhance efficiency and transparency and
strengthen governance more broadly.
In fundamental respects, therefore, an African economic
community is both an aspiration and a tangible goal that is
essential to work toward. Therefore, dates, such as 2017, are
not as important as is our focus on the progress, or lack
thereof, that is being made toward the development of regional
markets and the free flow of goods, peoples, and services.
So where are we in this process? It is apparent that
progress toward regional markets is being made. However, like
other trends on the African continent, progress is incremental,
in many cases measurable, but it is not uniform.
For example, the three regional organizations of North
Africa have yet to harmonize activities and progressively
eliminate tariff and non-tariff barriers. This was supposed to
have been completed in 2007, according to the Abuja Treaty. In
contrast, the East African Community is the only regional
economic community to have achieved a free-trade area and a
customs union among its five members, 3 years ahead of the 2017
date provided by the Abuja Treaty. Moreover, the East African
Community; the Common Market for East and Southern Africa,
COMESA; and the Southern African Development Community, SADC,
have created a tripartite free-trade area which brings together
26 African countries with a combined population of 600 million
and a GDP that is close to $1 trillion.
However, further steps have to be taken to ensure that the
FTA is a reality. For example, an American businessman recently
told me that he would rather pay the extra duty in shipping his
goods from one SADC country to another rather than go through
the paperwork and other delays of applying for tariff
exemptions for which his products qualified.
Against this backdrop, it is unlikely that the continental
free-trade area will be achieved by 2017. Nevertheless, there
can be no dispute about the importance of continuing to work
toward these objectives. For example, a recent study by the ILO
and UNCTAD contends that if an effective continental free-trade
area were created by 2017, the share of intra-Africa trade
would grow by 52 percent over a 12-year period, rising from
10.2 percent in 2012 to 15.5 percent in 2022.
The message here is that the impact of regional integration
on individual countries, regions, and sectors varies. Another
message is that where progress on regional integration could be
achieved, it should be pursued. At the same time, this does not
mean we should give up on the goal of a continental free-trade
area. There is no region in the world where progress is
uniform. It does suggest that African governments should be
held accountable to their commitment to implement trade reforms
and regional economic integration.
For example, 4 years ago, the Governments of Zimbabwe and
Zambia signed an MOU to create a one-stop border post at
Chirundu, on the border between the two countries. As a result,
commercial vehicles now clear the border within hours instead
of days. In fact, on the Zambia side alone, it has been
estimated that tax collection has increased from $10 million to
$20.3 million a month. So one has to ask, why are there not
more one-stop border posts throughout SADC, COMESA, and EAC?
Finally, it is important to note that in the U.S. strategy
toward sub-Saharan Africa that the Obama administration
released in 2012, promoting regional integration is put forward
as a priority. In fact, through Trade Africa, an initiative
announced during President Obama's visit to Tanzania last year,
the administration hopes to launch negotiations on an
investment treaty between the U.S. and the East African
Community. This is a vital initiative that could significantly
deepen commercial relations with East Africa and lay the
groundwork for a deeper commercial relationship with the
continent while also fostering more regional integration.
In Bali last month, members of the WTO reached a very
significant agreement on trade facilitation in which member
states agreed to adopt reforms, especially as it concerns
customs processes and procedures. The U.S. needs to ensure that
enhanced trade facilitation remains a priority in its dialogue
with its partners on the continent, be it in the context of the
East African investment negotiations or the implementation of
AGOA.
My last point, if I may, reflects a spirited conversation
that I had in late December with the leaders of our three trade
hubs from Accra, Nairobi, and Botswana, which are sponsored by
USAID. For the last 10 years, their role has been to help
African companies take advantage of AGOA. Yet times are
changing, as impressive economic growth takes hold across the
continent and Africa's middle class continues to expand. U.S.
exports to the region also continue to grow, last year
exceeding $21 billion, which translates into the support for
more than 100,000 jobs here in the United States.
Our trade hubs increasingly are playing a critical role in
facilitating two-way trade. This is good for American business
in Africa, it is good for regional integration, and it is good
for economic development on the continent. It also helps to
transform the U.S.-African relationship from that of donor-
recipient to one characterized by partnership and mutual
benefit.
Yet, like all good things, resources are required. I urge
you, therefore, to invest in these trade hubs as you and your
colleagues work to fund U.S. priorities on the continent and we
all work together to deepen the U.S.-Africa commercial
relationship and build Africa's economic community.
Thank you.
Mr. Smith. Dr. Schneidman, thank you very much for your
testimony, as well.
[The prepared statement of Mr. Schneidman follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
----------
Mr. Smith. Very useful and very timely suggestions from all
of you, and it really will help us to be more proactive and to
play our role, which we are very earnest to do. And thank you
so much for taking the time to put together such outstanding
testimony and for your service on behalf of humanity and on
behalf of these initiatives in particular.
Let me ask you just a few questions, and I will yield to my
colleagues. We will expect a vote in about 45 minutes, so I
want to make sure, since we have four, five of us here today,
that we all get a chance to ask. So I will lay out my questions
and then ask you to answer and then go to my friend and
colleague, Karen Bass.
With regards to the efforts by the United States Government
to encourage regional integration, what programs have actually
made a measurable difference? Are there things that we have not
done?
I know, Mr. Lande, you gave us a list of some eight
specific things, and I wrote them down. And I am sure all of us
will be looking at how we can, but are there any gaps that need
to be filled right now to ensure the greater probability of
success?
The issue of transportation is always very important. It
was Eisenhower who recognized that superhighways were one of
the keys of very robust infrastructure, creating highways to
get goods to market and to consumers.
Over the many years, you, Mr. Lande, have promoted the use
of the regional Millennium Challenge Account grants, only to be
told that those grants require more accountability than the
regional economic community could provide. And I wonder if you
are seeing any kind of benign flexibility on the part of the
Millennium Challenge Corporation to try to make this work so
that, again, the sooner we get to the point where there is a
very robust infrastructure, economic growth can proceed much
more effectively.
With regards to the rollout of the European Union, we all
watched with some baited breath as the euro came on line and
there was mistake after mistake. Are those lessons learned by
what has happened on the European continent being utilized in
this context of Africa?
And, Mr. Schneidman, you pointed out that reaching the
target date of 2017 is important, but we need to recognize
progress itself; it may slip a few years.
My question would be--a couple of things. One, you
mentioned that the U.S. regional trade hubs in Africa managed
by the U.S. Agency for International Development have had a
positive impact, and you encourage Congress to continue funding
them. The budget is almost done, and I think it is going to
happen. But can you cite me some examples of success that these
trade hubs have achieved so that we have something very
tangible that we can talk about?
Please proceed.
Dr. Sy?
Mr. Sy. If I may answer the questions on the lessons from
the European crisis, I think one key lesson from the European
crisis is that financial integration comes with costs and
benefits.
In most African RECs, we are not yet at that level of high
financial integration. But the key lessons is that, once that
step will be reached to make sure that when financial flows
from rich countries go to poor countries, that those flows go
to productive investments, they increase productivity, and
that, also, fiscal discipline is observed by the members.
So, so far, we can, in the roadmap, when we are
strengthening the institutions for integration, keep these
lessons in mind.
Mr. Smith. Is there a concern, Dr. Sy, that, like in the
European Union, like in the case of the Germans and others who
were providing a great deal of financial assistance to places
like Greece, that Nigeria and South Africa might be less
forthcoming in this whole integration process if they think
they are going to bear a burden?
Mr. Sy. Yes, so this is a good question, because if you
take the case of Nigeria, it is a major oil exporter; whereas,
other members in the RECs are not oil exporters. Nigeria is
much larger. So when there will be basically an arbitrage
between the costs and the benefits of actions by Nigeria, there
will be the need to have a very strong and independent common
central bank.
So strengthening the institutions, the regional
institutions, will be really key. And there will be also a need
for Nigeria to have more fiscal discipline, too.
Thank you.
Mr. Smith. Thank you.
Mr. Lande?
Mr. Lande. You asked a very full set of questions, so let
me respond to a few of them and see if we can be helpful.
Mr. Smith. Okay.
Mr. Lande. First, as to what the U.S. Government can do and
so on.
One, it is very clear to me that there are two separate
levels of regional integration. One is what you call the trade
regime. We talk about a lot for tariffs; we have made the point
that they are moving along very nicely. However, there is never
any credit given to Africa. It is always, to quote one of the
best USTRs we ever had, Bob Strauss, years ago, and so on, when
he said, you can either look at the glass half-full or half-
empty. And these particular dates, the fact that they are set
should receive something, maybe a sense of Congress. I am not
sure what you would do, but at least they should be recognized
they are moving along.
The idea that every single REC is going to be ready for
integration by 2017 won't take place. But what I was arguing
was, if you focus on the trade policy RECs, if you get ECCAS,
Central Africa, somehow involved, you have a shot at making the
deadline, maybe some kind of a derogation for the Maghreb and
then--not the same close integration. So they are possible
there.
Trade involves four things: One, tariffs, trade
facilitation. Witney is 100 percent correct, and let's focus on
it. We now have World Bank money committed, available to
promote trade facilitation. Africa is invited to sign those
agreements. A quick aside, they have no role for regional
economic communities, so they should have one. But that is
sitting there.
Number three is rules of origin is being addressed. And
number four, very quickly, are non-tariff measures. They are
impossible. You know, we even have non-tariff measures in the
States. You try to bring some fruit into California, and I
think Congresswoman Bass might remember that. You know, the
Europeans, you try to bring some French wine into Italy or
Italian wine into France, I mean, it looks like blood on the
street.
So non-tariff measures are slow. Do not judge regional
integration. They have to be removed like teeth, one by one,
with a lot of pain every time they disappear. Maybe you don't
want the remove your teeth. But that is trade, I think, is on a
good thing.
Then the second thing is, how do you do the gaps? Don't
judge African integration because they don't have a
transportation link. They will have that. Let's get the
structure.
Here again, MCC has a problem, Export-Import Bank has a
problem, because their basic rules call for assurance of
capital support, that money will be paid back. None of our
competitors have that when it comes to Africa. Africa will pay
back. Africa pays 19 percent, a much higher rate, but they have
more losses. So somebody has to begin going to Export-Import
Bank, somebody has to begin going to MCC and say, we need
special-purpose vehicles because we are talking about regional
things.
You may have to take a little more risk in Africa. That is
why your letter is so crucial, because you asked that question,
the eight committees. Maybe we have to get Financial Services
in there. But if you could begin to address those problems--
what are our competitors doing, what are we doing--we can make
some progress along the way.
Africans have said transportation, energy, capital markets,
welcoming environment for investment, two or three other
things, yes, they have to be looked at, but let's keep those
issues separate from the trade regimes that we are really
working on to move forward and so on.
Let me stop there, because I can go on, but I think it is
time and other people--thank you.
Mr. Smith. Dr. Quartey or----
Mr. Quartey. Thank you very much, Mr. Chairman.
I would just want to focus on the MCA, the Millennium
Challenge Account, and to what extent is the U.S. intervention
making a marked difference.
Two specific areas can be mentioned in the case of Ghana.
One is we have the George Walker Bush Highway, one of the
excellent road constructions that the country has benefited
from. It has eased trade flows, it has eased traffic, and it
has made livelihoods much better within the community.
Then we can talk of storage out of the Millennium Challenge
Account compact. There was a silo that was built at the airport
to store nontraditional exports, like pineapple, paw paw, and
many others. And it is quite important. It made a lot of
improvements in exports to Europe and other places.
Lastly, good governance. I mean, the condition that there
has to be good governance for countries to benefit from the
compact actually serves as a peer pressure to other African
countries to try to promote good governance within the country.
So I think this is an area that we can talk of tremendous
improvement.
What we want to see would be long-term commitments to some
of these projects that is not--the compacts are more integrated
into long-term development plans of the regional communities so
that we will see much more development. That will also link the
various member states of the regional countries.
Thank you very much.
Mr. Schneidman. Thank you, Mr. Chairman. Let me respond to
some of these questions.
What programs have actually made a difference? I think
there have been a number of programs that have focused on
computerizing border crossings, programs that I would say are
incremental. What we haven't seen is transformational programs.
And I think that is the critical difference.
And, for instance, in my testimony I referred to the one-
stop border post. And so I think the challenge in front us is
how do we get behind one program that really will be
transformational and how do we set goals so in 5 years we know
that there will be 40 of these one-stop border posts throughout
this region and we can measure the difference that it makes.
Secondly, I am very interested in your reference to
President Eisenhower and the development of our highway
network. It is a very important question and analogy. But
remember, that was within one country. I think what we are
talking about is cross-border. And there comes the sovereignty
issue.
The World Bank has had a very difficult problem with this.
You can take the example of Tanzania, which has received an
$850 million compact. But Kenya is not an MCC country, Uganda
is not an MCC country. So there are constraints.
And so I think what Steve was referring to, can we be
creative, can Congress and the administration come up with
mechanisms and criteria that would enable these programs to
address cross-border roads or cross-border rails or cross-
border power and utility services, I think that really has to
be part of our conversation.
In terms of the lessons of the euro, I think the European
experience is being overshadowed, frankly, by these economic
partnership agreements which the EU is trying to jam down the
throat of many African governments. I don't think there is any
other way to put it than that. And I think, you know, Africa is
really struggling to come to terms with that, and that is all
they can see. And it is a really important issue for the U.S.
as we go to think about the renewal of AGOA, as well. And in
terms of citing examples of the trade hubs, with my colleague
Zenia Lewis at Brookings, we did a study in 2012 where we have
data on the amount of trade that has been increased. And I will
make sure that you get a copy of that.
Suffice it to say that these trade hubs are important. Not
only have they increased trade, but some of them have done
something else that is important. In West Africa, the trade hub
is sort of a backbone for a framework of trade initiatives that
reach out through the region. And I think they have provided a
blueprint for the way forward--a way forward to deepen our
knowledge of African markets, our access to African markets,
and to start providing two-way assistance, not only for
Africans exporting to the U.S., but for U.S. companies coming
into the regional market.
Ms. Bass. Thank you very much.
Actually, I would like to continue on with the trade hubs.
And you mentioned that more investment was needed, and I wanted
to know what you meant by that.
And then, also, if you could--you know, the trade hubs, to
me, are a little bit of a mystery. In looking at some of them
and seeing that USAID essentially has contracted with
businesses, it is just not clear to me exactly what they do,
what they are. And maybe you could focus on one specific
example.
Mr. Schneidman. So the trade hubs were created with the
African Growth and Opportunity Act and are part of the funding
mechanism. There are three, as you know and as I referred to.
Part of the problem is that, up until now, you are right,
they have contracted out to different consulting agencies. And
the trade hubs are doing three different things, really. There
is not a uniform--up until now, there has not been a uniform
strategy for these hubs. I think that is changing, but it bears
watching very closely.
The reason I say that it deserves more investment is that,
traditionally, investments in the economic and commercial
programs in Africa are at the bottom of the barrel. Obviously,
health has been a critical factor, education has been a
critical factor. But, again, times are changing, and I think we
need a fresh look.
We have to ask, do we need to invest more in our capacity
to serve American business on the continent? And I would argue
that we do for many reasons. First off, when you look at China,
they have some 150 commercial officers across the continent.
How many do we have? I don't even think it is at 10 these days.
So what is the forward point of our commercial engagement?
It is these trade hubs. You know, Commerce has sort of receded
from a presence in the region over the last decade, and the
trade hubs provide a framework for serving U.S. business, for
continuing to work with African companies as they seek to trade
throughout the African region and export to the U.S.
And I think the Foreign Service Nationals there who work in
these trade hubs know these markets better than anybody else
and, I think, are a real resource that can be tapped into. And
that is why I emphasize it.
Ms. Bass. So if I go to an Embassy, there is a sign there
that says ``Trade Hub''----
Mr. Schneidman. No.
Ms. Bass [continuing]. And there is a person there?
Mr. Schneidman. No. In Accra, you would go to the Trade
Hub.
Ms. Bass. And that is an office, and it is called U.S.
Trade Hub.
Mr. Schneidman. It is a dedicated office. And in Nairobi it
is a dedicated office, and in Botswana it is a dedicated
office.
Ms. Bass. And there is a person in there who, if I want to
go in and I want to start a business, I don't know,
manufacturing houses, modular houses----
Mr. Schneidman. No, they would not be able to help you with
that. Because their charter, to now, has just been to help
African companies export to the U.S. under AGOA. To understand
how to build houses there, you would have to go to the Commerce
Department or the Commerce official in Nairobi, South Africa--
--
Ms. Bass. So I don't go to that office, I go back to the
Embassy?
Mr. Schneidman. Yeah, you go back to the Embassy.
Ms. Bass. Uh-huh.
Mr. Schneidman. So what I am saying is that we need to
harmonize this stuff.
Ms. Bass. Right.
Mr. Schneidman. We need a one-stop shop. We are talking
about one-stop border posts? We need a one-stop shop for U.S.
trade facilitation and investment facilitation in Africa.
Ms. Bass. And so I go to this trade hub, this office, and
who monitors the contract that I have? I am running the trade
hub now. Who is monitoring me to make sure that I am doing what
I am supposed to do?
Mr. Schneidman. USAID is.
Ms. Bass. And am I obligated to produce, what? Am I
obligated to have, you know, 20 businesses from the U.S. do
business on the continent? Or what is the measurement?
Mr. Schneidman. Well, again, helping U.S. business is not
part of the mandate of trade hubs.
Ms. Bass. Oh, I am sorry. Okay.
Mr. Schneidman. But, yes. I mean, I think they want to look
at--well, for instance, in the West Africa trade hub, which
clearly has helped African companies export to the U.S., there
would be indicators there.
I think the Southern Africa trade hub has really focused on
regional integration. So I am sure they are measured against a
set of criteria that determines whether or not that has been
achieved.
Ms. Bass. Do you know what the average size of a contract
would be? If I am running a trade hub, how much money do I get
from the U.S. Government?
Mr. Schneidman. I am sure you get a couple million dollars
to do that.
Ms. Bass. Ooh.
Mr. Schneidman. And I am sure that there are about 10 or
20--you know, 10 to 15 people that are working under that
contract in that trade hub to do that.
Ms. Bass. So would you support the idea--when you were
talking about that a better investment needs to be made, would
you support the idea of expanding the number of trade hubs that
we have?
Mr. Schneidman. I would support the idea of using, sort of
building on the West Africa model, of using those trade hubs in
Accra, for example, to start interacting with Cote d'Ivoire, to
start interacting with Dakar, to start interacting with
Ouagadougou. Nigeria is a little bit of a separate issue. But I
think we should use those trade hubs to really be catalysts for
regional trade and investment. And I think we need to approach
our increased commercial engagement from a regional point of
view as opposed just to a country point of view.
Ms. Bass. Well, it seems like a regional point of view, but
it also seems like we need to have, like you said, Commerce
there. I mean, if they can only do one thing, which is to help
export to the U.S., it seems like we would want--I mean, who
facilitates U.S. businesses doing business on the continent?
That is Commerce.
Mr. Schneidman. Right. So I think in these trade hubs, it
really needs to be not only the USAID contractors but Commerce,
as well as representatives from Ex-Im, from TDA, from OPIC, so
all our commercial agencies are working together so you do have
a whole-of-government approach. Because now we sort of have a
no-government approach.
Ms. Bass. Right.
Mr. Schneidman. And I think that is really what we have to
change.
Ms. Bass. And are there reports online that I could see to
see what the three trade hubs have done? I understand you said
they report to USAID, but can I find out?
Mr. Schneidman. I mean, each of the trade hubs has Web
sites, each of the trade hubs do quarterly reports.
Ms. Bass. I looked at the Web site.
Mr. Schneidman. Yeah, so----
Ms. Bass. I didn't see much there.
Mr. Schneidman. I have not.
Ms. Bass. Okay.
Mr. Schneidman. I would welcome a joint investigation. And
I think we at Brookings could help you do that, a fuller
assessment. Because I think it is essential to do as we move
into this AGOA review period so we can make these
recommendations to understand what is being done successfully
and what needs to be done better.
Ms. Bass. And I do know that USAID is looking at----
Mr. Schneidman. Yes.
Ms. Bass [continuing]. These trade hubs and what to do.
Thank you.
Mr. Schneidman. But I think USAID needs to know that we are
looking at them looking at that.
Ms. Bass. Yes. Yes. We will make sure they know.
Mr. Schneidman. Thank you.
Ms. Bass. Dr. Lande, you talked about Ex-Im and MCC special
purpose vehicles, and I wanted to know if you could explain
what you meant by that.
You also talked about a potential sense of Congress. First
of all, I appreciate you, you know, making the comparison with
economic integration in Europe and talking about how long that
took. I think that is really important, that we manage our own
expectations.
So could you elaborate on those two points?
Mr. Lande. I am happy to elaborate, but only within my
knowledge more as a trade man. There are many people who really
are experts on financing and so on. And I am thinking of Mr.
Pittman as one name who is very active in this work. And I
think we can get you a better answer than what I am going to
give.
But the basic way that I understand it is that the World
Bank has funds, and you need to develop some kind of special
purpose vehicle because you can't count on sovereign guarantees
if you are building a project whose profit depends on the
operations in more than one country. So you develop these
special purpose vehicles with the World Bank, perhaps with U.S.
financial institutions and so on, and perhaps now with venture
capital funds, as you know, sovereign wealth funds.
So without going too much over my head, the only point I
would make is that, very often, the restrictions on Export-
Import Bank, MCC does not allow them to go into these new
areas, because their emphasis is always, we want to have a 1-
percent fail rate. We don't want to go to Congress if we have a
3-percent fail rate.
Ms. Bass. Right. Right.
Mr. Lande. But if you are going to be competitive in
Africa, I think you very much have to mention that.
With MCC, I think it is a decision that Congress has to
make. Because people work within congressional guidelines; I
mean, they just don't decide.
And I have two problems with our attitude toward MCC. One
is there is a need for U.S. involvement in infrastructure
development in Africa, which may not only be in,
quote, deg. ``those very good countries who can qualify.''
Ms. Bass. Right.
Mr. Lande. It is in the U.S. commercial interest, and it is
in Africa's interest. We should have a very active
infrastructure program in Angola. I am not saying they are
going to be MCC-eligible. So there has to be some thinking
whether we want our whole infrastructure effort to be through
MCC.
And then when you focus on relieving poverty, you have this
debate, should I spend money on these local rural roads, which
are important, feeder roads that enable farmers to get their
products to markets, or should I be focusing on these
transcontinental developing corridors which really----
Ms. Bass. Uh-huh.
Mr. Lande. Again, MCC, they have poverty. I mean, there is
nothing wrong with fighting poverty, let me be clear, but that
should not be our only limitation.
And, two, of course, is this national guidelines. So they
don't have an ability where a REC can come and say, hey, look
at everything we have done. So maybe in drawing up and
considering MCC, maybe you should say, okay, we will come up
with some REC guidelines that will enable you to go across the
border. So I would make that point.
Ms. Bass. Another statement you made, in terms of us
holding countries accountable to AGOA standards, good
governance and all, I think you said that you thought that the
RECs should be responsible as opposed to us holding individual
governments. Did you say that?
Mr. Lande. Yes. And let me----
Ms. Bass. So, yeah, maybe you could give an example,
especially considering how we have sanctioned some countries or
pulled them out of AGOA.
Mr. Lande. Let me take a step back, because we discussed
this the last time I appeared before your committee, and I
think you asked me a question. And I am not sure; I think I was
a little remiss, not getting back.
The idea that every time there is a problem you should
devise a sanction to deal with it and make that sanction a
trade sanction has a problem. Because no one is going to get
up, no U.S. company is going to get up and say, ``I believe in
conflict minerals,'' ``I believe in gender inequality.'' I
mean, it is not going to happen.
So what we were thinking at Manchester Trade--and let me
just put this idea out on the table, and I am going to get to
the peer pressure in a moment--that the way you deal with
sanctions, you come up with some guidelines, maybe out of this
committee, and you say, first, you have to say what is the
problem, okay? Secondly, what impact does the U.S. have in
solving this problem alone? Is it effective? What is the
collateral damage? What effect does it have on local groups,
particularly women?
If we took the sanction in Madagascar, I think Madagascar
is returning to democracy now, but for 12 years women have been
out of work. I mean, what have we accomplished? So we have to
look at the collateral damage, both to U.S. competitiveness--if
China keeps on working, keeps on trading, it doesn't help
anybody, except it harms U.S. workers who want to supply
products there and so on, et cetera.
So what we are basically suggesting is that one of the
ingredients, in addition to the ones I mentioned, is let's talk
to our African partners.
Africa has a way of punishing people who have what they
call ``aberrant behavior''--I think that is always a cute term,
``aberrant behavior''--where they say, ``I am sorry, you can't
come to our next meeting. You can't share in our next decisions
we are making on our development programs. You are out.'' They
do not take economic sanctions, because their argument is that
affects somebody who is working in the fields. I mean, that is
not what we want to do. But they have their own program. So if
they are willing to--COMESA isn't set up so much. SADC and
ECOWAS has much more of a political thing, so they can be more
effective.
But I would say that if Congress works on good guidelines
for these measures to be taken, and if we begin to talk to the
regional communities and say yes--can you picture? We are going
to designate all the COMESA members eligible. We want to do
that. We want to have this inter-trade. ``COMESA, these are our
problems. Can you talk to your member states and see whether
you can deal with them?'' Let me just simply say that I think
that that is so much more effective than the current, what I
call the ``feel good.''
Do you know we took Niger off of AGOA?
Ms. Bass. Right.
Mr. Lande. And then we put it back on? In the meantime,
what was going on was probably worse, in terms of the
government. We took the Congo off. I don't think the Congo even
knew they were off, but they did know when a U.S. businessman
came in to do business that they were mad at us and so on. And
we know the Madagascar example because I have stated that. You
know, it has been going on forever, and at the end of the day,
we will put them back on.
So the only issue which I really say is that, given the
responsibility of your committee, I think this could be one
particular area that you might be able to work on very nicely.
Ms. Bass. And maybe Dr. Sy and Quartey could respond to
that, as well.
So, you know, our approach right now, if a country has had
a coup or whatever, we will pull them out of AGOA. How do you
think it should be handled? Maybe both of you could respond
quickly.
Mr. Sy. Well, I think it is a matter of basically who will
bear the brunt of the sanctions.
An alternative is, if you have the sanctions, to find a way
to still address the needs of the most vulnerable segments of
the society, so you could still have humanitarian aid targeted
and have the sanctions at the same time.
So there are a variety of ways to go. And I think it is a
matter in any case of having in mind the cost, the burden on
the most vulnerable segment of society.
If I may, it is like subsidies. Right now, for example,
there is a lot of push to remove subsidies in many countries on
oil because they benefit mostly the rich. But that problem is
then how to target the subsidies to the poorer segments. So the
analogy is useful.
Mr. Quartey. Yeah, I would want to add that when there is a
coup, you know, you want to punish. Perhaps you use the
regional economic communities to restore good governance. There
could be peer pressure, which sometimes works better than trade
sanctions, which might have serious implications on women and
many other people.
Thank you.
Ms. Bass. Thank you.
Thanks for making the copies available of the report.
I yield.
Mr. Smith. Mr. Marino?
Mr. Marino. Thank you, Chairman.
Good afternoon, gentlemen. Thank you for being here.
I want to change the tone a little bit and change the
direction in which we are traveling here. And I like what you
had to say about what we need to do to increase a relationship
with the continent of Africa, the countries within the
continent.
But I have some significant and severe concerns about Iran,
China, and, to a lesser extent, Russia doing business on the
continent of Africa. I don't think anyone has touched on that
yet, and I would like to hear some insight from you.
I am going to just pose some factual information that I
have been--China and the Middle East have always been a study
of mine. I am not an expert, by any stretch of the imagination,
but I am aware of, through my readings over the years, what
takes place.
So, for example, Iran is the second-largest oil producer in
OPEC. Even though the continent has supplies of oil, it still
needs the byproducts from oil, it needs refineries, and it
still needs oil, to a certain extent. What does Iran get in
return? Well, first of all, a trading partner with no
sanctions. Iran gets uranium, and we all know what that issue
sets in the future for us. They want ores from Africa, and Iran
tries very hard and continues to build that relationship with
the countries within the continent of Africa.
China, on a larger scale. China invests billions and
billions of dollars in Africa. The Chinese call Africa ``the
galloping lion.'' They know what resources are available there.
Chinese give Africa money, in addition to very, very soft and
low-cost loans for billions of dollars. The Chinese Government
builds refineries, the biggest investment in--I hope I am
pronouncing this right--Bagamoyo, a big investment there.
Chinese need, in return, food, energy, natural resources, and
even negotiate for some fishing rights. They build hospitals.
They build schools. China is the largest investor in South
Sudan by far, using billions of U.S. dollars--not using the
yuan, using U.S. dollars.
Now, Africa has 40 percent of the global reserves of
natural resources--40 percent--60 percent of unused farm land,
and a plethora of low-wage workers. China is building three oil
refineries in Nigeria, and China will cover 80 percent of the
cost of those.
There is a great deal of corruption that is taking place.
There are even investigations and accusations about high-
ranking officials in Africa taking millions of dollars from
China.
So my simple question is based on these facts. And if you
want me to cite, I will later on, if you request where I get
these facts. What do we do about China and Iran? How do we
persuade the countries within the continent of Africa to do
business with us when, pretty much because of regulations
internationally and that we have, our hands are tied and China
walks in with virtually no debt, tons of money, and helps a
continent that is so poverty-stricken, for the most part, at
virtually no cost to those countries? How do you defeat that?
And, gentlemen, if anyone is willing to make a statement on
my little dissertation here, jump in.
Mr. Sy. So, if I may, maybe I can look at this question
through the angle of how regional economic communities can also
help.
But through our conversations with many businessmen--and we
just had the CEO of the U.S. Chamber of Commerce on Africa just
yesterday--it seems that the biggest advantage that China has
over the U.S. is speed, that the Chinese companies and the
Chinese Government can deliver very quickly what Africa is
asking right now. And sometimes it can have long-term costs.
Mr. Marino. Of course, because China doesn't care about its
environment.
Mr. Sy. Yes. For example, so if you are a minister right
now and your country is facing severe power outages and you
know that elections are coming up and you have people in the
street, well, the cheapest and the quickest way to have a power
plant is to use coal, and the Chinese can do that very quickly.
Mr. Marino. Yeah.
Mr. Sy. If you were to deal with a U.S. company, it will
take you a much longer time and it is a more complicated
process. So that is one advantage, I think, that other
countries have to keep in mind when they look at China in
Africa: Speed. How do you really compete with the speed that
China has?
But this said, coming to how regional economic communities
can help, in the area of governance, integration again creates
some common institutions that can help improve economic
governance. They have convergence criteria, they have fiscal
targets, and they have peer political governance, they have
these peer reviews and so on. So one way would be really to
strengthen these common regional institutions to really put
basically the pressure on the countries to really have in mind
the benefits of their citizens and go exactly like the EU and
so on.
The other one is, also, you are having lots of countries
discovering oil, oil discoveries are increasing, but also
regional infrastructure. And maybe that is one way also to
approach the problem of China, is to think about regional
infrastructure rather than these bilateral projects. They are
needed. Like, if you are South Sudan, you need pipelines to
sell your oil, and the pipelines go through Sudan, or there is
a project to go through Kenya. So, again, this regional
infrastructure, that is one way to see the problem and address
the problems.
Mr. Marino. Okay. My time is limited, and I just wanted to
see if anyone else wanted to respond.
So, please, go ahead.
Mr. Schneidman. Let me respond, if I can, on the Chinese
side. You know, let me start with your last question: ``What
can we do to get U.S. business there?'' I mean, the reality is
that the U.S. doesn't show up to do business in Africa, which
has created a vacuum. And that is problem number one.
But if you went to any African Government and said, who
would you rather do business with, there is no question they
would rather do business with a U.S. company. Why? Number one,
we are going to hire local people, we are going to train local
people, we are going to create jobs, we are going to invest in
communities, we are going to have clear, transparent deals. And
that is the big difference.
So I think, you know, from my point of view, the big
problem with China is not so much, you know, their presence; it
is the nature of their presence. Chinese come, they bring their
own workers, they don't train anybody, they stick to
themselves. And that is a problem.
Mr. Marino. Point well-taken.
We have 7 minutes to get over there and vote, and if you
can be very brief, sir.
Mr. Lande. Very quickly, the U.S. has many advantages, in
terms of working, and I won't go beyond that: The school, the
reputation, U.S. goods mean a lot, and so on. We don't have the
problems.
However, having said that, your question is absolutely the
correct one. But the answer isn't to say only what should China
do. I think it behooves the Congress to sit down and to say,
why do we take so long to approve our Export-Import Bank?
I remember a discussion about a year ago before the
rechartering of the bank. And they have Mr. Angevine, they have
a very dedicated person. And working in Africa, working in
Africa exporting, he quadrupled their loan--beautiful job. But
during our discussion, we said, can you create some special
facilities? ``Oh, no, we can't change the charter. Oh, no, the
charter is in place. God forbid we touch it.'' And, in fact,
you know, a lot of people think Export-Import Bank is a form of
corporate welfare.
So what I am saying to you and my response is--and I would
love to have more time to discuss with you and so on--I can go
through seven different things the U.S. can do if Congress
would give more flexibility to the agencies, risking perhaps
some problems, but will better enable us to compete against
China.
But our real answer is exactly what was just said by
Witney, and that is we have to be what we are, high-quality
people. But there are things--and I am sure the responsibility
is with Congress, as well as with other people.
Thank you.
Mr. Marino. I couldn't agree with you more.
Mr. Quartey. Thank you very much. Let me try to be very
quick.
I think we have two issues here, an issue of speed versus
ensuring good economic and political governance. China comes
with the speed in delivery, but on issues about governance,
environment, et cetera, it is challenged.
What we need to do is to strike a good balance by ensuring
that the USA and the other OECD countries, bring China to the
negotiation table. There has been some initiatives to bring
China to the negotiation table and ensure that some of these
issues are streamlined, and I hope we pursue that line of
action.
Thank you.
Mr. Marino. Chairman, thank you. I wish we could continue
this. We could be here for several hours on that issue.
Mr. Smith. Thank you, Mr. Marino.
Let me just conclude. I do have one final question, and
perhaps we will run out of time. But, you know, in monitoring
the AGOA, it has become clear that national labor protection
systems are often weak or nonexistent. And I am wondering how
you might recommend that the regional economic communities
address the need to establish and enforce standards to protect
the rights and health of workers.
I would note parenthetically that a couple years ago I was
part of an effort to cite China and its unfair trading practice
in terms of the exploitation of its labor force, and the USTR
never took it up. We have been trying to get them to take
something up ever since. But when they pay 10 to 50 cents per
hour, there are no OSHA regulations, 130,000 people-plus die
every year on the job in China--all these egregious practices
are engaged in, employed by so many factories in China. And
with China's ascendancy economically in Africa, those bad
practices, just like bad governance practices, the use of
secret police and the like, could easily, you know, for a
dictatorship, become very attractive.
But how do we make sure that as this regional cooperation
effort gets further under way that these ILO-type standards,
OSHA-type standards, they don't have to be exactly like the
U.S. or whatever, but something that really protects people on
the job, health and safety? It is something I think we should
build into it. We do to some extent, but I am wondering what
your thoughts might be on that.
Mr. Schneidman. Mr. Chairman, I agree completely. I think
this really has to be part of our bilateral dialogue with AGOA
beneficiary governments. And I think it has to be part of our
Embassy going out and monitoring what is happening in these
factories.
I would like to think that there are some resources to
invest in training and showing examples, helping business
leaders from the region come to the U.S., perhaps, and see what
good standards are all about and how they can be replicated at
home.
And I think we have to take a proactive approach to this
and not see it as punitive, but see it as something that is
going to enhance productivity.
Mr. Smith. I appreciate that.
And I also would include, because it would come under the
rubric of health, but environmental standards. I mean, I
remember in New Jersey when--you know, I grew up right near
Woodbridge, in Woodbridge, Iselin--I woke up with Chevron smoke
in my house, and that effluent, that smell. We didn't know what
clean air was.
And we hate to see that replicated, because we know what it
does in terms of health, and not just the workers. My father-
in-law worked in DuPont and died of leukemia. He was around
resins. You know, so there are huge downsides health-wise, that
if you get the environmental piece right, as more factories
build up, it could be an enormous positive for the Africans.
Yes?
Mr. Lande. Three very quick points--well, one quick
comment. I don't know if Woodbridge is near Exit 9 on the New
Jersey Turnpike, but----
Mr. Smith. Exit 11.
Mr. Lande. Thank you. My wife knows it very well, and she
puts a mask on when she goes there.
But, seriously, one, the whole idea of moving away from
unilateral sanctions--because that is what is in our bill now--
and working with the regional economic communities, working on
the ILO standards, fortunately Africa has not had the problems
that we have seen in Bangladesh, has not the had the problems
we have seen in China. A lot has to do with the fact,
particularly in the former British colonies, that there is a
lot already in place.
So my view is, if you work with them, if U.S. unions would
be willing to participate, as they have particularly in Latin
America, to develop these standards and so on, I think it
works. But it does not work if it is done, excuse me,
punitively. ``We are going to save the worker by taking away
his job.'' Well, that doesn't work. Obviously, you have to be
cleverer than that.
So that is kind of my very short comment, that you should
look at modifying the conditions but really work with them in
the context. And this could be a perfectly good job for the
trade hubs. The administration has already committed to involve
Commerce in trade hubs. It is already in their position. Let's
get Labor involved, too.
Thank you, sir.
Mr. Smith. Thank you.
Mr. Sy. Well, I would just maybe broaden the debate and say
that this is also one important element of good corporate
governance practices. And in Africa also, if you are a
business, it is very difficult to avoid a government as a
customer, as a partner. So the issue of corporate governance
and public governance together is something that should be
pursued, because at the end of the day it is good business and
it is good for everybody.
Mr. Smith. Thank you.
Dr. Quartey?
Mr. Quartey. Just a quick one. I would want to add that we
need to harmonize labor standards and laws within the regional
economic communities. That will ensure that some of these
unfair practices are minimized.
Thank you.
Mr. Smith. Thank you.
We are out of time because there is a vote on the floor and
we are down to 30 seconds or so, I am told. So I thank you so
much for your testimony, for your insights.
And please, you know, pick up the phone, send us an email
if there is something that you think we should be doing. You
have made excellent recommendations, and we will act upon them.
Thank you so much. The hearing is adjourned.
[Whereupon, at 3:46 p.m., the subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Record
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[all]