Wednesday, 24 July 2013

How Obama Can Make His Africa Trip Worthwhile

President Barack Obama (center) with (left to right) President Macky Sall (Senegal), President Joyce Banda (Malawi), President Ernest Bai Koroma (Sierra Leone), and Prime Minister José Maria Pereira Neves (Cape Verde) in the Cabinet Room of the White House on March 28 in Washington
President Barack Obama (center) with (left to right) President Macky Sall (Senegal), President Joyce Banda (Malawi), President Ernest Bai Koroma (Sierra Leone), and Prime Minister José Maria Pereira Neves (Cape Verde) in the Cabinet Room of the White House on March 28 in Washington
On June 26, Barack Obama is making his second trip to Africa as America’s president. It’s questionable whether the trip is worth it—and not just because, as theWashington Post guesstimated, the trip’s price tag is as high as $100 million, including costs for fighter jet coverage as the First Family tours around. (That’s equivalent to two months of government health spending in Tanzania, a country of 46 million people.) A week of presidential visits to Robben Island and glad-handing local leaders will mean little if the U.S. doesn’t change policies to engage with the region more seriously.

According to the U.S. Ambassador to Tanzania, Obama’s trip to Africa, five years into his presidency, will focus on economic cooperation, strengthening democracy, and “investing in the next generation of African leaders.” Compare that with recent Chinese engagement with the region. Xi Jinping visited three African countries on his first foreign trip as Chinese president this year. Also in 2013, China’s vice premier visited Zimbabwe and Ethiopia, where he spoke during the 50th anniversary celebrations of the African Union at its new $200 million headquarters—which was built and paid for by the Chinese. U.S. Secretary of State John Kerry was at the same celebrations, but was bumped from the official program, which ran long after the vice premier’s speech and one from the president of Brazil announcing the forgiveness of $900 million in African debt. Kerryrecognized why: “China and Brazil have frankly been investing more in Africa than we have. That has to change,” he said.
U.S. foreign direct investment to the whole region in 2011amounted to just $3.1 billion (PDF), less than 10 percent of total FDI to Africa that year. The latest U.S. Trade Representative statistics suggest the stock of U.S. FDI in Tanzania was a pathetic $21 million. U.S. trade with the region as a whole was worth $94 billion—compared with $127 billion in China-Africa trade. America’s comparatively low economic engagement means the U.S. is missing out on trade and investment opportunities in a small but dynamic part of the global economy.
How can Obama’s trip change that?
First, while there, he could say that he’s going to extend and expand the African Growth and Opportunity Act, Clinton-era legislation that provides eligible countries with duty-free access to America’s markets for almost all products (exceptions include sugar, dairy, and peanuts).Center for Global Development economist Kim Elliott notes (PDF), as a result of the act, “clothing exports in 2012 were 50 percent above where they were before Congress approved AGOA and up by multiples of that in Lesotho and Kenya, which are the principal beneficiaries.” The act is up for renewal soon; the president could announce that he wants it extended for the long term, expanded to cover all products, and paired with additional support for trade facilitation programs and investment in trade infrastructure.
What about FDI? The Overseas Private Investment Corp. is the arm of the U.S. government that provides support to American firms investing in developing countries. It’s so successful, it actually makes a considerable profit. But since its founding, only about 3 percent (PDF) of the value of investments that OPIC has supported have been in sub-Saharan Africa. The president could announce that he’ll allow OPIC to support equity investments in Africa alongside its usual debt instruments, and, perhaps, propose that OPIC can support projects in the region if the investment will have no net impact on U.S. jobs (at the moment, OPIC can’t invest if even a single U.S. job might be lost—even if 10 more might be created). And Obama might suggest a partial waiver on the greenhouse-gas cap on OPIC’s portfolio when it comes to energy investments in the region, perhaps as part of a larger energy-for-Africa initiative.
Beyond supporting expanded trade and investment links, the president should suggest how he’s going to ensure a greater movement of people from the U.S. to Africa and in the other direction. Migration has proven one of the most powerful tools for strengthening economic links between countries. Bill Easterly (PDF) points out that many of Africa’s “big hits” in nontraditional exports have been due to the personal connections of exporters who spent considerable time in other countries. For example, Andrew Rugasira, the founder of major exporter Good African Coffee, studied law and economics in London, and Harko Bhagat, the founder of the first fish exporter from Lake Victoria, studied in Canada.
That means the president should provide reassurance about the potential impact of U.S. immigration reform on migration from the region. One of the proposed changes under consideration on Capitol Hill is the abolition of the visa lottery, the route taken by one in five of all Africans who came to stay in the U.S. between 2010 and 2012, compared with less than one in 20 Asians. To help ensure Africa doesn’t lose out from the reforms, the administration could propose expanding opportunities for temporary workers from Africa alongside Fulbright and other scholarships for African students to U.S. universities—on graduation, many could become eligible for green cards.
Finally, President Obama could take the opportunity to put some meat on the bone of promises he made in the State of the Union address this year. He promised to join with allies to eradicate extreme poverty, end preventable child mortality, and realize the promise of an AIDS-free generation. These were, in effect, promises to Africa. The region accounts for about half of the world’s deaths of children before age 5 each year, or a little under 3.4 million deaths in 2011. It’s home to about two-thirds of the people worldwide living with HIV. And by 2030, it’s forecast to account for more than four-fifths of the global population still likely to be living in absolute poverty. This trip would be a good time to outline what the U.S. is going to do to help meet such lofty goals. He might start by committing to an overhaul of the U.S. foreign aid program, so it is actually designed to deliver on such targets. Simply suggesting where the money is going to come from would also help.
It would be a real shame to waste the first visit of the first African-American president to Africa on pleasantries. Even soaring language on liberties and the arc of history seems a bit rich at $100 million. Instead, President Obama should use his trip to make clear how America will engage Africa as a dynamic economic partner while undertaking the moral imperative to support the region in overcoming the remaining—and tragic—human costs of absolute poverty. That would be a presidential journey well worth the jet fuel bill.
Source: BloombergBusinessWeek

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