U.S. Commercial Diplomacy and Implications for Africa
U.S. Commercial Diplomacy and Implications for Africa[1]
Mzukisi Qobo
It has been over six months since the U.S. and Kenya initiated discussions on a free trade agreement. These negotiations that began in July 2020 were to serve as a template on how the U.S. would forge comprehensive trade agreements with African countries beyond the lifespan of the current Africa Growth and Opportunity Act cycle that ends in 2025. When the two countries knuckled down in July 2020, it was still a matter of speculation whether or not Donald Trump would win the presidential elections in November 2020. At the time, it was difficult to discern what would likely be U.S. foreign policy focus on Africa beyond the Trump administration.
Still, there is a process that the U.S. and Kenya began to conclude a trade deal that would be the most comprehensive ever an African country would sign with outsiders. It is worth taking a closer look at the negotiating framework and its potential implications for the African continent under the Biden administration. There is an imperative for the African continent to look beyond AGOA, and prepare itself for a mutually beneficial trade agreement that has more certainty for consumers and exporters. Trade negotiations are tough precisely because of the commercial interests involved. They offer negotiating parties an opportunity to think more strategically about promoting their sectors of the economy. They force countries to have clarity on the sectors of the economy they will give more priority to, and which sectors to open up to the international competition. There are both costs and benefits to free trade agreements: they can generate technology spillovers through imports, force countries to be competitive, and possibly create a business climate that encourages foreign direct investment.
The costs lie in the displacement of jobs in import-competing sectors that are labour intensive. Depending on the scope of the negotiations, these types of bargains among the unequals could force developing countries to undertake regulatory measures that are costly and for which they do not have the capacity. Trade agreements between developed and developing countries are usually weighted in favour of the former, mainly due to asymmetries in the technical resources deployed in the negotiations. Significant political economy interests in the US are active in shaping the government’s approach to the negotiations. On the other hand, African governments have a weak relationship with – if not aversion for - the private sector; this posture weakens their negotiating positions vis-à-vis developed countries. The dominance of US interests was palpable in the structure of the negotiating framework that guides the US-Kenya FTA negotiations. This framework could likely serve as a template to other African countries or regions that, in the future, may negotiate with the U.S.
It is worth underlining that AGOA is America’s foreign policy instrument with trade objectives. It lends the U.S. power to shape the political and economic preferences of partner countries. When these talks began in July 2020, Kenya was keenly aware that after 2025, the U.S. would most likely not renew AGOA in its current form. The Trump administration had already signalled that it might not continue with the renewal of AGOA post-2025.
In entering these negotiations, Kenya predicated its interests hoping that it would secure further market access in the U.S. beyond AGOA. Besides, Kenya hoped to attract more U.S. foreign direct investment to improve its competitiveness and catalyse value chain diversification. Much of this is wishful thinking. There is little doubt that if this agreement is concluded successfully, it will most likely serve as a framework for negotiating similar trade agreements with other African countries.
While some things might change or slowdown under the Joe Biden administration, some things are likely to remain the same. The U.S. has a history of aggressively negotiating trade deals, especially since George Bush Jr. The U.S. will likely set its sights on achieving a more comprehensive and reciprocal trade-relations with African countries beyond AGOA. It will be interesting to see the approach the Biden administration will adopt - whether it continues where Trump left off in pursuit of a network of agreements across the African continent; or, it will revert to a strategy that was popular in Obama years in the quest of mega-regionals, in which case the U.S. would look to forge a trade agreement with the African Continental Free Trade Area (AfCFTA) or more realistically with sub-regions as the European Union did with the Economic Partnership Agreements (EPAs).
A trade deal with AfCFTA is a less probable path since regional integration in the continent is gradual and may take years to deepen. Moreover, there are still complexities around the rules of origins and other technical matters. Besides, AfCFTA negotiations on Phase II issues are relatively new and may take a while to conclude. Phase II negotiations in the AfCFTA encompass adoption of protocols for investment, competition policy, and intellectual property rights – or what in trade negotiations parlance is referred to as ‘new generation issues’.
Under Biden administration, the US is likely to go for broader coverage of trade issues, for example, the new generation issues, including aspects of trade in environmental goods, e-commerce, and disciplines on state-owned enterprises. Whatever path the U.S. chooses in the end, African countries should prepare to negotiate comprehensive trade deals with the U.S. and avoid being caught off guard as happened with the EPA negotiations with the European Union. The AfCFTA Secretariat may also need to consider creating a platform to support African countries or sub-regions negotiating trade deals with external actors. There are plenty of lessons to learn from the EPA negotiations and the U.S.'s abortive attempt to formalise a free trade agreement with the South African Customs Union in 2003.
There are important lessons that come out of the US-Kenya FTA negotiations that offer clues to the likely level of ambition the U.S. will pursue in its negotiations with the African countries. The U.S. negotiating position covers 24 chapters that include trade in goods which would encompass both tariffs and non-tariff goods to enhance market access for U.S. industrial and agricultural products; technical barriers to trade, including sanitary and phytosanitary measures; customs and trade facilitation; rules of origin to support production capacity; standard-setting processes that could constitute technical barriers to trade; regulatory harmonisation; trade in services including telecommunications and financial services; digital trade in goods and services and cross-border data flows; investment rules; intellectual property; regulatory standards on state-owned enterprises; labour standards; and various other technical issues.
For its part, Kenya adopted almost all the U.S. negotiating objectives. From these negotiations, Kenya expects to gain benefits such as technical and capacity-building support to aid its full participation in the FTA and enable its economy's competitiveness. As such, it enters this negotiation aware of power imbalances, which will inevitably produce outcomes skewed in U.S.’s favour. Rarely does technical assistance yield benefits for diversifying the structure of the economy. More substantive benefits can be gained by pushing for market access for diversified products. Importantly, African countries should negotiate generous transitional periods for liberalising sectors designated infant industry, insist on technology transfers and joint ventures, and secure concessions for certain levels of localisation.
African countries or regions negotiating a Free Trade Agreement with a developed economy will need to have a well-developed strategy that links the negotiations to their development interests and industrial policies. Further, African countries would do well to negotiate as a group, using existing sub-regions to aggregate their bargaining capacity. They should also avoid complicating current trade commitments to their regions and undermining the objective to create a single African market under the AfCFTA.
[1] I would like to thank Dr Tinashe Kapuya for his comments on an earlier version of this article.