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Africa Growth and Opportunity Act Passes House; Efforts to Oppose Economic Conditionality Defeated; Opponents Focus on Senate

Association of Concerned Africa Scholars Briefing Paper
19 July 1999

The House of Representatives in mid-July approved the Africa Growth and Opportunity Act (H.R. 2489), legislation that if it became law would link new trade preferences for Africa to structural adjustment reforms and IMF style conditionalities. The ACAS Executive Committee believes the legislation approved by the House is worse than no bill at all and we recommend members urge their Senators to vote against the bill when it comes for a vote in that body.

Supporters of the Africa Growth and Opportunity Act (AGOA), including the Clinton administration, most business groups, Africare, the African American Institute, a majority of the Black Caucus and the entire African diplomatic corps in Washington, argue the legislation is a long overdue recognition of U.S. interests in Africa and an important first step in promoting U.S. trade and investment. The conditionalities in the legislation, argue supporters, are modest and in most cases are subject to the presidential discretion. But opponents such as Representatives Jesse Jackson, Jr., Maxine Waters and 12 other members of the Black caucus as well as the 13 million member AFL-CIO trade union federation, TransAfrica, the Sierra Club, Public Citizen, COSATU and a coalition of African NGOs argue the legislation imposes economic policy prescriptions without providing meaningful development for the poorest continent in the world. (For a full list of opponents see the Public Citizen web site at http://www.citizen.org/pctrade/Africa/opponents.htm). Although the South African government now supports the legislation, Nelson Mandela's first reaction to the legislation was to call it "unacceptable." An alternative trade bill proposed by Rep. Jesse Jackson (and cosponsored by 75 other members of Congress), that would expand trade preference, call for debt cancellation and insist on minimal levels of continuing development aid, was not even brought to a vote. Its provisions should be reconsidered by the House and Senate.

What AGOA Does

The legislation approved by the House offers African countries a series of rewards, including expanded duty free access to American markets for certain products, equity and infrastructure funds to support U.S. investment, and establishment of a mechanism to promote and review U.S. trade policy toward Africa. Yet to receive these benefits, African governments must remove restrictions on foreign investment, reduce corporate taxes and privatize state owned companies.

The benefits of these programs are, moreover, minimal. The House bill would in theory allow duty free imports of textiles, primarily from Kenya and Mauritius, if the textile imports do not damage U.S. companies. But a March 1999 Congressional Budget Office study suggested that in reality 90 percent of African textiles would probably be declared "import sensitive" and denied access to U.S. markets. The Senate version of the bill, which has been approved by the Senate Finance Committee but not by the full Senate, allows imports only of textiles made with U.S. cloth and thread.

The legislation also provides authority for the president to provide "duty free" access to U.S. markets for certain African goods under a trade provision known as GSP. Yet according to the Deputy U.S. Trade Representative, more than 29 African countries already have GSP trade status and the real effect of this provision is simply to encourage the president to consider allowing "enhanced GSP" status for certain African products if they will not damage U.S. manufacturers. Each decision on each product would have to first be reviewed by both the U.S. Trade Representative and the International Trade Commission.

Supporters argue the real value of the bill is not so much in the specific lifting of trade restrictions, but in the framework it establishes for promoting trade with Africa including the call for a free trade agreement between the U.S. and Africa and the establishment of annual forums at which trade and finance ministers from Africa and the U.S. meet. Efforts to strengthen U.S. ties with Africa are indeed welcome, and the Clinton administration has already established a special trade office for Africa and the first ever meeting of African and U.S. trade and finance ministers was held in Washington in early 1999. But what are the benefits to those who do not attend meetings of government officials and other elites?

The Wrong Framework, the Wrong Symbolism

A closer examination reveals that the Africa Growth and Opportunity Act approved by the House establishes the wrong framework and is a step in the wrong direction. The legislation passed by the House establishes a framework that might at best help a few more economically advanced countries-but will bring few if any benefits to the majority of people in Africa. Indeed at its core are policies now proven to increase poverty and decrease the provision of public goods such as health care and education.

At the core of the Act is another attempt to force African governments to prioritize a series of free market principles, including cuts in government expenditures, privatization of government corporations, new rights for foreign investors to buy African natural resources and state firms without limits, deep cuts in tariffs, and membership in the World Trade Organization. (See the attached excerpts from the bill for a list of the conditions.)

Labor advocates did manage to force the sponsors to add a provision raising the issue of labor rights and there is a reference to the importance of respect for "internationally recognized human rights," but eleven of the twelve items on the checklist used to determine "eligibility" for benefits under the legislation are designed to open markets for U.S. investment and trade.

Such priorities were made starkly clear in the debate on the House floor in mid-July, when the sponsors of this legislation used a parliamentary maneuver to defeat an attempt that would have allowed countries to import generic, lower cost drugs to deal with national emergencies such as the HIV/AIDS crisis. At the moment, the U.S. is vigorously threatening South Africa with trade sanctions in retaliation for the South African government's efforts to obtain low cost, generic alternatives to drugs necessary for combating AIDS.

These policies are not new. The World Bank and IMF have been imposing these policies on poorer countries in the world for decades, but even the multilateral institutions have acknowledged that these policies have not improved conditions for the poorest segment of the world's population. In fact, according to a new report by the United Nations Development Program, the poorest countries have actually gotten poorer in the last decade and that same report notes that 29 of the 34 poorest countries in the world are in Africa.

In summary: the Africa Growth and Opportunity Act passed by the House is a step in the wrong direction. This legislation is an attempt to force African countries to prioritize macroeconomic policies that are not appropriate for the level of development in Africa.

An Alternative Vision

Congressman Jesse Jackson, with the assistance of labor, citizen and environment groups, drafted an alternative piece of legislation-the HOPE for Africa Act (H.R. 772)--that sought to focus U.S. Africa policy on debt relief, development assistance and social programs. That legislation, however, was never brought to the floor for a full debate (For a full comparison of that legislation with the Africa Growth and Opportunity Act, see the Public Citizen comparison on the web at:

http://www.citizen.org/pctrade/Africa/HOPE/comparison.htm ).

Defeat AGOA in the Senate

The Africa Growth and Opportunity Act must now be approved by the Senate. The ACAS Executive urges members to write to your senators and express your opposition to this legislation, and urge a new, fairer deal for Africa-as proposed in key provisions of the Hope Act.

July 19, 1999

The Association of Concerned Africa Scholars

For more information contact:

Email: ACAS@prairienet.org