TRALAC - Trade Law Centre

US Congressman Says FTA Partners Should Share Benefits With AGOA Countries

Monday, 08 December 2003

Source: United States Congress (Washington, DC)

America needs to implement a new trade policy like AGOA III -- one that is forward-looking for the 21st Century while being grounded in what's best for people and nations and not what's merely expedient -- Democratic Congressman Jim McDermott told those gathered at the 2003 Private Sector Session of the Third U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum.

Speaking December 8 to an audience of ambassadors, ministers and business executives in Washington, McDermott said: "We need to practice international trade policy for a new century that recognizes our leadership as the world's single largest economy. We know a thing or two about how to do it right and how to do it wrong. We have a responsibility to share what we know works and address what we know no longer works."

Until the year 2000, McDermott told his audience, U.S. trade policy toward Africa occurred solely through the World Trade Organization (WTO). "That was good, but not good enough," he said.

"That's why AGOA [the African Growth and Opportunity Act] was created, and I am delighted to have played a role in shaping its vision and shepherding its final passage," as one of its founding sponsors, he said.

"AGOA was meant to chart a course for sub-Saharan Africa that would promote and in some sense engineer equal economic opportunity for the region -- jump start, if you will, real international trading opportunities with the U.S.," he said.

McDermott credited the African Growth and Opportunity Act (AGOA) for helping to support nearly $2 billion a month in U.S.-sub-Saharan African trade and hundreds of thousands of jobs all across sub-Saharan Africa.

"People are better off today because of AGOA," he said, "and we have only just begun."

Just in the last year, exports from AGOA-eligible nations to the United States increased a stunning 59 percent, he said, while noting that U.S. exports to the region during the same period are up 10 percent -- even during difficult economic times in the United States.

While the foundation of AGOA is international trade, he said, its vision is freedom, opportunity and self-determination.

In the context of the WTO and other trade liberalization efforts, he noted, "AGOA's success should demonstrate to Africa and to the rest of the world that sub-Saharan Africa can compete in any market in the world. That fact is no longer in doubt."

McDermott warned, however, that "sub-Saharan Africa can be no more reliant on AGOA that it can rely on foreign aid or colonial protection. AGOA should demonstrate to Africa the value of reducing trade barriers everywhere, whether in the U.S., the E.U., or with their own regional neighbors."

Remarks Before the 2003 Private Sector Session of the Third U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum

Good morning, Ladies and Gentlemen.

Not very long ago, innovations in transportation and communications made it possible for an interested buyer and a willing seller to negotiate directly about product and price, and take delivery in weeks instead of months. Trade blossomed into an international economy from humble beginnings.

International trade grew from the seeds of an isolated local, or at the very least arduous regional journey constrained by the amount of power a horse could deliver, constrained by the challenges of the four seasons, constrained by the physical weight that could be transported, and constrained by seemingly insurmountable obstacles, like the ocean.

Slowly, through innovation, perspiration and communication, the process of trade moved from weeks or even months, to days. Those were heady times and suddenly the world wasn't quite as big as it seemed prior to the invention of ... the telephone.

This technological marvel, along with faster and larger oceangoing ships, the opening of the Panama Canal in 1914 and the dawn of aviation, built the infrastructure upon which trade and trading partners would come to dominate the 20th century.

While we are only moments really into a new century, the Internet has already thrust international trade forward at the speed of light. We need to catch up. We need to embrace, not brace, for a new world that has shrunk yet again but this time into the size of something called a Blackberry (or handheld email device).

I can talk to my daughter who works overseas in real time. She likes that.

I can talk to my staff in real time. They don't like that.

I can reach out to my good friend Henni DeToit in the sub-Sahara in real time. He likes that.

We need to write trade policy for a new century that recognizes the technological wonders before us, but is grounded in what's best for people and nations, not what's merely expedient.

We need to practice international trade policy for a new century that recognizes our leadership as the world's single largest economy. We know a thing or two about how to do it right and how to do it wrong.

We have a responsibility to share what we know works and address what we know no longer works.

I subscribe to the belief that those who don't know and understand history are doomed to repeat the same mistakes. So, let's take a moment to look at the history of international trade in America.

In the early 20th century, U.S. trade policy was predominately bilateral. By today's standards, bilateral trade was crude and some suggest even cruel in producing unintended consequences.

There are notable historians and economists who suggest that bi-lateral trade in the early 20th century widened the economic imbalance between the then predominately U.S. industrial North and the predominately agricultural South.

Some even produce evidence to suggest that bilateral trade that was more luck than thought so undermined global economic health that it became a significant contributing factor to the worldwide economic depression that started in the U.S. on Black Monday in 1929.

A great President, Franklin D. Roosevelt, led this nation out of the depression and laid the foundation to do everything in his power to ensure that such an economic horror would never happen again.

A cornerstone of President Roosevelt's new economic policy implemented after World War Two was to pursue multi-nation trade. This was a paradigm shift in thinking and it produced a dramatic, even cataclysmic, change.

During the last half of the 20th century, multi-nation trade saw widespread economic expansion around the world, which, in turn, raised living standards in both developed and developing countries.

Surely, not everyone prospered. Certainly, not everyone benefited equally. Absolutely, the world changed forever. Now, we have to change it again.

Until the year 2000, U.S. trade policy toward Africa occurred solely through the World Trade Organization. That was good but not good enough, in my judgment.

That's why AGOA was created and I am delighted to have played a role in shaping its vision and shepherding its final passage.

AGOA was meant to chart a course for sub-Sahara Africa that would promote and in some sense engineer equal economic opportunity for the region. Jump-start, if you will, real international trading opportunity with the U.S.

With AGOA's enactment, we now have a multi-nation trade preference program, and the U.S. is pursuing bilateral and multilateral agreements in Africa. This is quite a sea change that is shifting the dynamics of economies and trade flows throughout Africa.

Let's see how this new paradigm has fared so far.

Congress passed and President Clinton signed AGOA into law in 2000, fitting that the dawn of a new century would mark the beginning of a new recognition of the importance of sub-Sahara Africa to the U.S. and the rest of the world.

AGOA is helping to support nearly two billion dollars a month in U.S.-sub-Saharan African trade. And we have only just begun.

Those dollars created jobs, literally tens of thousands of jobs, across the entire sub-Sahara Africa region.

People are better off today because of AGOA. And we have only just begun.

Just in the last year, exports from AGOA-eligible nations to the U.S. increased a stunning 59 percent. At the same time, US exports to the region are up 10 percent, even during difficult economic times here.

These figures are impressive and the results perhaps are better than we had hoped for. While that is cause for celebration, we are also here today to speak candidly and address thoughtfully other issues, which cloud the future of the good work already done.

I want to directly address what I think today's plenary is really all about -- AGOA in the context of the Bush Administration's approach to trade liberalization.

Cancun failed, and the Doha Round may fail because of the massive agriculture subsidies that the developed world provides to agribusiness. You know it. I know it. And the Bush Administration needs to know it.

The United States cotton subsidies, in particular, are undermining and helping to destroy the economies of the world's poorest countries. Places where the word "fragile" doesn't yet even apply to the development of their economy.

U.S. agriculture cotton subsidies are so generous that no one can compete against U.S. cotton growers.

You may know the expression, if it sounds too good to be true, it probably is. Well, U.S. cotton subsidies are so good that we need to invent a new expression to adequately express just what is happening.

Let's be clear. These subsidies don't affect faceless bureaucrats. These subsidies harm real people. These subsidies preclude real economic opportunity and all too often eliminate hope for African families who are trying to improve their lives through hard work. We've got to do better.

These subsidies are trampling living standards in some of the most vulnerable communities around the world. We've got to do better.

Cancun failed in part because we didn't face and would not address what we know to be true. We've got to do better.

After Cancun, the Bush Administration returned to Washington red-faced, but not because of the sunshine. In plainspoken words, the developing world demonstrated that the Bush Administration's approach to trade liberalization is not fair and not successful. We've got to do better.

A recent edition of the Economist put it bluntly, "Failure is really too kind a word for this squalid mess. Some may defend the policy as an instance of robust unilateralism, but the failure of the administration's multilateral and regional initiatives was not a price that had to be paid to defend America's interests ... on the contrary, those failures directly harm the American economy. ... In all this, America has gained nothing, and lost much; unless the rot is stopped, it will lose a lot more."

What does the failure of Cancun mean for Africa and for AGOA?

Some have suggested that the U.S. should demonstrate to Africa that there are costs associated with not supporting the United States at the WTO, noting that AGOA is a trade preference program that is temporary and can be eliminated at any time.

Let me emphatically state that there should be no retribution of any kind because Africa did not support U.S. positions at the WTO.

AGOA is good economic policy, regardless of what occurs at the WTO -- or any international organization for that matter.

If anyone in the Bush Administration argues differently, it will only prove what the Economist said. As I said at the outset, those who refuse to learn from history are doomed to repeat its mistakes. We've got to do better.

It's been suggested that global trade liberalization through the WTO doesn't serve the interests of sub-Saharan Africa because it dilutes the benefits that AGOA provides. Nothing could be further from the truth.

The concerns that many in Africa have put forward about the bilateral trade agreements that the U.S. is pursuing with the Southern African Customs Union (SACU) and Morocco demonstrate the importance of a multilateral, rules-based trading system.

In fact, since the Uruguay round, developing-country exports have grown 50% faster than world exports. This occurred predominately because of agreements produced as a result of multilateral negotiations, not because of bilateral agreements, or temporary trade preference programs.

At the same time, let me say that I am dubious about the recent proliferation of bilateral trade negotiations. The criterion that the Bush Administration uses for selecting free trade partners remains a mystery to me, to the U.S. Congress and private sector.

And I am concerned about the proliferation of bilateral trade negotiations to produce FTAs (Free Trade Agreements), because they work to diminish the role of the WTO (World Trade Organization) and other endeavors that have a greater impact on the global trading system.

When the United States -- the biggest market in the world -- picks countries to pursue free trade agreements with, make no mistake about the implications. We promote winners and demote losers.

I'm a capitalist, but I also recognize that free markets often fail people.

That's why I believe that when the United States negotiates trade agreements with developing countries, we should be very thoughtful about what the implications are to countries in the region that are not a party to an agreement.

For this reason, the AGOA III Act, legislation I recently introduced, calls on the U.S. Trade Representative to include provisions in the trade agreement to allow our FTA partners to use AGOA products to meet the rules of origin requirements. This will spread the benefits of an FTA throughout the region.

Why is this so important?

I understand that there will be countries in Africa that will have a more difficult time attracting foreign investment if they are forced to compete against countries that have a trade agreement with the United States.

Our trade policy needs to balance America's need to reduce trade barriers, because after all, 90 percent of consumers live outside of the United States.

The United States must work to eliminate trade barriers around the world, but we can do so thoughtfully by staying true to the values that make our country strong.

The foundation of AGOA is international trade, but the vision of AGOA is freedom, opportunity and self-determination.

In the context of the WTO and other trade liberalization efforts, AGOA's success should demonstrate to Africa and to the rest of the world that Sub-Saharan Africa can compete in any market in the world. That fact is no longer in doubt.

However, ultimately, Sub-Sahara Africa can be no more reliant on AGOA that it can rely on foreign aid or colonial protection. AGOA should demonstrate to Africa the value of reducing trade barriers everywhere, whether in the U.S., the E.U., or with their own regional neighbors.

AGOA has demonstrated that international trade can indeed create jobs and raise living standards in Africa. But, we've got to do more. That's why we are here. AGOA's success illustrates the importance of reducing trade barriers not just in America, but also around the world. But we've got to do more. That's why we are meeting, talking and planning.

AGOA can remain the important economic paradigm shift in the Sub-Sahara, but only if we do better...if we understand history and learn from it and if we remove our own barriers to thinking so that trade may flow not as history dictates, but as the 21st Century demands.

Thank you.