Open Letter to African Economic and Trade Ministers: There’s a Trump in your future, like it or not
- J Brooks Spector
- 06 Mar 2017 01:42 (South Africa)
Given the new sheriff in town in Washington, and his strong ideas about trade, J. BROOKS SPECTOR believes it is the right time for African nations to come together to define their agenda on trade issues with America – before the Trump administration does it for them.
Over the past several months, many people around the world have been fixated on the surpassingly strange events now taking place in Washington, DC. Not surprisingly, these political shenanigans have occupied first place for many, monopolising the attention of the media and leaders around the world, many of whom must surely be asking, “But what does it all mean?”
After all, it is highly unusual to watch a national leader in a democracy as he picks public fights with virtually the entire mass media of his country – accusing them all of issuing “fake news”, as he squabbles publicly over how many people actually showed up at his rallies and speeches, having his utterances interpreted by his subordinates in their meetings with other world leaders, and spending his time sending insulting and belittling social media messages (complete with their apparently deliberate misspelled words, all caps, and unusual grammatical constructions) to anyone who irritates him.
Moreover, it has been highly unusual for a newly installed head of government to be forced to remove a key adviser just days after being appointed to office – and there is the possibility lurking out there that there will be yet more such embarrassing events in the days just ahead. Truly, events like these have been absorbing attention worldwide, using up all the oxygen in the room and driving from the limelight practically every other world event, regardless of its magnitude. This may not be fair to everyone else, but then the American president – especially one who is just settling into office – is no ordinary world leader. And Mr Trump has been giving us a great deal of evidence that he is no ordinary president.
However, beyond all the unprecedented fun and frolics in Washington, the Trump administration has actually made some decisions that will now have real consequences beyond America’s borders, as opposed to the soap opera playing nightly on television news broadcasts. Unfortunately, most foreign governments, and Americans alike, have probably overlooked those decisions – even though the consequences may be enormous.
Like most of your ministerial colleagues, you have taken reassurance in the fact that the American Congress passed a 10-year version of the African Growth and Opportunity Act (AGOA) last year. This American law – as you undoubtedly understand but as many of your citizens and your nations’ media may not – is not a treaty negotiated between America and the various African nations. That means its passage did not require years of difficult, tense negotiations in a large, unwieldy international forum or in a long and tedious series of drawn-out technical meetings. However, because it is solely US law, it could conceivably be changed by a simple act of the American Congress. And, of course, it will come to an end naturally in 2026. No one in Washington expects it to be passed yet again – Americans are in an increasingly protectionist mood and the most protectionist American of all is their new president.
Its passage gave entrepreneurs and exporters from your continent an unparalleled opportunity to send thousands of products to the US with no tariffs or duties imposed upon them. While many African nations have been unable to make maximum usage of these opportunities, South Africa and several other nations – especially oil producers – have made good use of this part of the American legal framework.
Depending on how one counts such things, I understand that almost $2-billion a year’s worth of exports flow from South Africa to America, duty free, and there are many tens of thousands of well-paying, highly skilled jobs as a result, especially in the processing of high-end agricultural processed goods and the manufacture of motorcars and car parts. Naturally, much more could be exported this way to America, but here, the onus is largely on African producers to make the kinds of products American consumers wish to buy.
Naturally, too, there have been disagreements that have come along that have become associated with AGOA in the minds of many people. In South Africa, for example, there have been some “unpleasantnesses” over American exports of chicken meat, with Americans insisting South Africans had failed to treat American birds equally with those being shipped from Brazil and several EU nations, while South Africans charged that American exporters were trying to “dump” their unmarketable chicken meat in South Africa after strong-arming things.
But, important, this tussle wasn’t part of the actual fabric of AGOA. Rather, by virtue of domestic politics it became a stumbling block that had the potential to prevent South Africans from benefiting from AGOA access, unless some accommodation was made for American chicken exports. (Now, of course, there is a new argument about whether such imports from the EU, Brazil, and now America are starting to cause serious problems for local chicken producers. But maybe such issues – and the economic adjustments that will take place – are all part of the cost of allowing or encouraging one’s nation to participate freely in the global economy.)
Going forward in the Trump era, of course, is the point that protectionism is increasingly going to be part of American trade policy too – and other nations will need to make some adjustments to this. They won’t have all that much choice, given the size of the American economy.
The first real harbinger of this shift has come along just the other day, on March 1, when the Trump administration filed a required yearly report to Congress on its trade policy. The text of this report makes for some sobering reading, if one is a foreign government official, sounding, as it does, very different from the kinds of ideas that were behind the original passage of AGOA.
This report reads in part, “President Trump has called for a new approach, and the Trump Administration will deliver on that promise. The overarching purpose of our trade policy – the guiding principle behind all of our actions in this key area – will be to expand trade in a way that is freer and fairer for all Americans. Every action we take with respect to trade will be designed to increase our economic growth, promote job creation in the United States, promote reciprocity with our trading partners, strengthen our manufacturing base and our ability to defend ourselves, and expand our agricultural and services industry exports.
“As a general matter, we believe that these goals can be best accomplished by focusing on bilateral negotiations rather than multilateral negotiations – and by renegotiating and revising trade agreements when our goals are not being met.
“Finally, we reject the notion that the United States should, for putative geopolitical advantage, turn a blind eye to unfair trade practices that disadvantage American workers, farmers, ranchers, and businesses in global markets.
“In addition to these basic principles, we will focus on the following key objectives:
- Ensuring that US workers and businesses have a fair opportunity to compete for business – both in the domestic US market and in other key markets around the world.
- Breaking down unfair trade barriers in other markets that block US exports, including exports of agricultural goods.
- Maintaining a balanced policy that looks out for the interests of all segments of the US economy, including manufacturing, agriculture, and services, as well as small businesses and entrepreneurs.”
Media reporting on this document began with words like this Reuters article,
“US President Donald Trump’s administration said on Wednesday that it will take aggressive action to combat other countries’ unfair trade practices and may defy World Trade Organisation rulings that it views as interfering with US sovereignty. In an annual trade policy agenda document, the US Trade Representative’s office said the administration ‘will not tolerate’ unfair trade practices that distort markets, including currency manipulation, unfair government subsidies, intellectual property theft and state-owned enterprises.”
This Reuters story went on to note,
“ ‘Unlike earlier presidents, Trump is signalling a willingness to impose import restrictions – especially against a country like China – where the justification under WTO rules for doing so may be highly questionable,’ said Chad Bown, a senior fellow and trade expert at the Peterson Institute for International Economics in Washington [a leading economics think tank]. ‘The downside of the United States going down this path is that it is likely that other countries will follow suit immediately,’ Bown added.”
This is dramatically different from the kind of altruism that was part of the original motivating purpose for AGOA in which it was understood that giving African exporters an extra advantage was good for African economies, and that such benefits would ultimately generate positive impacts for political stability and democratic practice. Once Robert Lighthizer is confirmed as the US Trade Representative, a cabinet-level post whose office is usually the key trade negotiator for the US, you can expect that, as the new report said, “The Trump administration will aggressively defend American sovereignty over matters of trade policy.”
Lighthizer, of course, was a deputy USTR back during the Reagan administration, central in negotiating import quotas on Japanese goods back in the 1980s, with the help of some powerful trade law provisions that have generally been unused after the WTO was launched more than 20 years ago.
All this means that people in jobs like yours are in for some really challenging times. But if you wait until the Trump administration begins to insist on some serious quid pro quos from African nations – or else – on trade, the imbalance of power and economic heft will inevitably be to your disadvantage. (The Trump administration, after it takes on Mexico, China and several other places, may just happen to notice that South Africa runs a trade surplus with the US, for example.)
And so, the crucial task, now, will be for African economic and trade policy officials like yourselves to become much more active – in advance of demands made by the Trump administration – in identifying a continental agenda for dealing with those Americans. President Trump has frequently argued that he dislikes and distrusts multilateral agreements like the proposed TransPacific Partnership, arguing that America has given away far too much in such negotiations and gotten far too little in return (in part, too, because American negotiators were too soft and undemanding in their efforts, as well as the craftiness of their opposite numbers).
But this will be hard work for representatives of the nations in Africa to go toe to toe with the Americans on trade. And it will be much more difficult than at previous times when the prevailing views in America on globalisation and trade were profoundly supportive of such things. Now, any potentially successful agenda for the continent in dealing with America on trade must take into conscious consideration and demonstrate the real potential for tangible, mutual benefits, rather than those useless, flaccid geopolitical payoffs that have just been derided in that most recent USTR report.
The alternative, however, would be increasingly awkward and difficult for the nations of the continent. While it is easy to think this is something that can be safely put off to be dealt with in a few years time – after all, AGOA has nearly a decade left to run – remember that the SACU-EU trade partnership negotiations took almost a decade to achieve agreement and even a South African-Canadian agreement apparently took seven years to conclude. If you and your fellow officials wait for years, things may be too far along the way, given an America in its current protectionist frame of mind, to achieve anything useful – and the Trump administration may simply end up offering “take it or leave it” terms instead.
What’s at stake? Most obviously, there is the continuation of duty-free/tariff-free exports to America by African nations’ growing economies. Then there must be consideration of investment protection and promotion, as well as an effective commitment to protect intellectual property rights. Beyond these, there must be measures to promote greater labour rights and the avoidance of products made by child, prisoner or coerced labour. Additionally, there should be an agenda that focuses on supporting entrepreneurial partnerships and promoting ways of making cross-border trade an essential part of this overall agenda.
The Trump administration is going to be consumed with its economic and trade dealings with China and other parts of East Asia, as well as Mexico and Canada (as the other two members of the North American Free Trade Association that he also wants to renegotiate), at least for a while. Africa will be largely ignored in that period, especially given the many still-unfilled positions in the State Department and elsewhere in government. There is only so much that understaffed offices can cope with.
That means there is a window of opportunity for African nations to develop their own agenda for a trade discussion with America – but only if all the cards are put on the table, and if there are real offers being made. Donald Trump deeply believes he earned his stripes as a top-tier dealmaker in the dog-eat-dog real estate world of New York City and that he will turn this set of skills and instincts towards improving the deal Americans get in their relationships even as all those abroad are eager to take advantage of American generosity – or gullibility.
This means there is a chance for some real deal-making between America and Africa, but only until the Trump administration turns a basilisk eye towards African trade, after jousting with the trading partners he has already called out. And, of course, such an effort would be in the interests of African nations, producers, exporters and everyday citizens. But leaders must move quickly to take advantage of this window of opportunity. DM
Photo: President Donald J. Trump reacts after delivering his first address to a joint session of Congress from the floor of the House of Representatives in Washington, DC, USA, 28 February 2017. Traditionally the first address to a joint session of Congress by a newly-elected president is not referred to as a State of the Union. EPA/JIM LO SCALZO