WATH Tradewinds - Winter 2011

The magazine of the USAID West Africa Trade Hub Winter 2011

Tradeis Aid

with Multiple Impacts 4driven by International

Brands 6Changing Lives 8

through AGOA 11tackling trade barriers with

Borderless 13

Plus Rosa Whitaker on AGOA’s

first 10 years 10Dr. Dan Bromley on making West

Africa’s economy hum 15

Winter 2011 | Tradewinds

TRADE

Aid for Trade initiatives are helping countries compete successfully in world markets by training them in meeting international standards for products and in properly using trade preference programs like AGOA

Last August an apparel maker in Cameroon was having trouble exporting T-shirts to an American

buyer. The company needed to make sure the documentation accompanying the order was correct – if it wasn’t, customs officials in the U.S. would not know that the order should be tariff-free thanks to the African Growth and Opportunity Act.

The company’s manager was par-ticularly concerned because the order, if successful, would be the first from Cameroon to take advantage of AGOA’s

trade benefits – the act eliminates tariffs on over 6,400 products imported to the U.S. T-shirts are on the list.

“Competition is fierce in the U.S. mar-ket,” said the company’s manager, Balle Diack, recalling the situation recently. “The elimination of tariffs that AGOA al-lows contributes to a reduction in price compared to products coming from elsewhere. It’s an important advantage.”

But having a law like AGOA on the books is one thing – taking advantage of it is quite another. Trade preferences do not mean much if countries do not

or cannot take advantage of them: The Cameroon Customs service and the buyer in the U.S. thought the T-shirts did not fall under AGOA.

Exporting goods is not as simple as it looks and will not just happen given even robust incentives. Companies and countries have to have the proper infrastructure to trade, be aware of and understand how to use trade policy and regulations and actually have the productive capacity to make the goods competitively. The Aid for Trade initiative launched by the World Trade

TradeAid?

Aid for Trade?how about

is

2

USAID West Africa Trade Hub

Organization in 2005 is a global effort to address these issues.

Exporting makes companies more productive, they expand and create jobs when they successfully compete in world markets. More and more, govern-ments, development assistance agen-cies and advocates for the world’s poor are working to make trade an engine for development.

“Economic growth is a major solu-tion for poverty alleviation,” said Erin Thornton, policy director at ONE, the

international campaign against poverty and disease. “Overcoming the supply side barriers countries has to be a prior-ity for everybody.”

Development projects have recog-nized this and now target assistance to develop trade just as they would to raise the literacy rates or improve health care delivery. The initiative is dubbed Aid for Trade.

Regional economic integration is essential, the WTO Deputy Director-General Valentine Rugwabiza told delegates to an ECOWAS Aid for Trade meeting in 2010.

“West Africa’s regional integration is unfortunately limited by inadequate infrastructure and burdensome regu-latory procedures,” Rugwabiza said. “There must be a regional commitment to address these constraints – without that commitment we will not move forward.”

Developing trade is critical to im-proving the livelihoods of West Africans, delegates agreed. For too long, the world of trade and the world of devel-opment might as well have existed on different planets, they said.

“An important part of aid for trade is about alignment – to align develop-ment policies to trade strategies,” said Patricia Francis, Executive Director

of the International Trade Center. “By aligning trade development to overall national/regional development strate-gies, the issues of poverty reduction can actually become part of the engine of development.

“When development is seen as sepa-rate from trade policy or trade devel-opment strategies, we make decisions which do not yield the expected results.”

Helping a company figure out how to get the proper documentation for its shipment – and how to have its coun-try’s customs officials implement the proper procedures – is just one way aid could help trade.

“Aid for Trade is wonderfully catchy, but it can blind us,” said Daniel Bromley, the Anderson-Bascom Professor of Applied Economics at the University of Wisconsin-Madison and a Trade Hub consultant. “Aid conjures up handouts – as in disaster relief. Given the long and uneven history of development aid it can even suggest permanent reliance – dependence.”

Trade Hub Director Vanessa Adams takes the terminology even further.

“When you say aid for trade you get the idea that aid from development organizations should go to develop trade,” Adams said. “But the reverse is just as true, if not more so. I call it ‘Trade is Aid,’ because trade means aid – in-creasing exports creates the jobs and increases the incomes that eradicates poverty, which is the objective of many aid programs.”

“The overall picture is positive,” the WTO reported in its 2009 report on the intiative. “But maintaining momentum

will be challenging.” While stories like the export of the

T-shirts from Cameroon help clarify the importance of understanding trade policy and regulations, explaining that to the ordinary person so that aid for trade initiatives receive support is dif-ficult.

“It’s a problem you hear about when you’re on the ground,” said Thornton of ONE. “But I don’t think we’ve figured out a way to clarify this problem to people. Still, it’s a key priority for anyone serious about alleviating poverty.”

Trade for aid may sound nonsensical, but aid for trade initiatives can be much more effective when the private sector is a partner to the effort.

Increasing productive capacity is key for companies seeking to compete in international markets.

“Business is an integral piece of the puzzle,” said Francis of the ITC. She said private sector companies had roles to play not only as beneficiaries to aid for trade initiatives but also as partners in implementing the activities and advocates that will make the greatest impact.

“Who trades? It’s the private sector that trades,” she explained. “The private sector needs to be an advocate, out there saying what the opportunities are, narrowing the options down from a lot of blah blah to where the real action is.

“We need to move from the menu to an action program.”

TRADE

Aid for trade funding levels continue to rise. Source: World Trade Organization

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TRADE

MultipleimpactOn the surface, a business transaction has two parties: a buyer and a seller. But in reality, a sale affects many people. A new study by the USAID West Africa Trade Hub offers some idea of how profound the impacts are – exports generate economic development that is transforming West Africa.

A simple example illustrated the case at the Salon International de l’Artisanat de Ouagadougou

recently. SIAO is the world’s largest African handcrafts fair, attracting hundreds of thousands of people to the capital of Burkina Faso. The USAID Trade Hub collaborated with SIAO 2010 to present a series of seminars for exporters, and among them was Oumar Cissé, a handcrafts producer and exporter in Mali. Cissé told participants at one seminar that he was getting lots of calls from artisans in Mali.

“They are all asking me, are there new purchases, will we have more work?” he told an audience at the USAID West Africa Trade Hub-SIAO seminar series that provided information on exporting to international markets to hundreds of handcrafts producers and exporters at the show.

The artisans’ calls to Cissé demonstrate how many more people are affected by exporters’ business transactions. The new study looked closely at these effects in West Africa’s economy, tracing the impacts to determine what economists call

a “multiplier effect” of increased economic activity in a given area: increases in the number of jobs and incomes.

The research determined the economic multipliers in four value chains: cashew, shea, hand-woven

baskets and wood artisanal products. Dr. Daniel Bromley, the Anderson-Bascom Professor of Applied Economics at the University of Wisconsin-Madison, conducted the study in collaboration with economists at the University of Ghana and with data collection support from U.S. Peace Corps Volunteers.

“These sectors hold enormous potential to drive economic growth in West Africa,” Bromley said. “Increasing sales of these products would have

FromOct.1,2009toSept.30,2010,theUSAIDWestAfricaTradeHubfacilitatedUS$12.3millioninexportsandUS$15.7millionininvestmentsbyprovidingdirecttechnicalassistanceandexpertconsultingto631companies,243ownedbywomen,andotherstakeholders.Increasedexportsledtothecreationof962jobs-including252forwomen.

• 2,112peopleweretrained,787ofthemwomen• 515companiesfrom13WestAfricancountries

participatedin22internationaltradeevents-establishinglinkswith2,817professionalbuyersandindustryresources

FromthelaunchofBorderless,aregionalpartnershiptoremovetradebarriers(p.13),toaregionalconferencetotrainexportersinICT(p.14),totheopeningofthreeAGOAResourceCenterstoservebusinessinBenin,CameroonandMali,theUSAIDTradeHubmakestradehappen.

Tradewindsispublishedmonthlyonline.Sendanemailtoinfo@watradehub.comtosubscribe!

Coming up...

• New York International Gift Fair - Jan. 29-Feb. 3 in New York City, USA

• Sustainable Seafood Summit - Jan. 31-Feb. 2 in Vancouver, Canada

• Ambiente gift fair - Feb. 11-15 in Frankfurt, Germany

• MAGIC Apparel Show - Feb. 13-16 in Las Vegas

• in-cosmetics - March 29-31 in Milan, Italy

• Shea 2011: Sustainable Solutions April 6-7 in Accra, Ghana

For all Borderless events, go to www.borderlesswa.com

See the complete calendar at www.watradehub.com

A US$1,000 increase in sales of Bolgatanga baskets leads to 160 new jobs and an additional US$580 in household income.

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TRADE

PRODUCER

The producers saves or spends the money earned

Savings Spending on imports

Some money is spent on local products and services – Grass and Dyes are purchased for the basket weaving company while food and clothes are bought for the family.

In turn, these local businesses save or spend money earned

And the process repeats chaneling money back into the local economy

INTERNATIONAL BUYER

sells baskets to

a significant impact on rural poverty, particularly among women.”

Simply put, the study shows what happens when, say, $1,000 of raw cashew nuts are sold by farmers for export. Generally, increasing exports brings more money into an economy and creates more jobs. But the extent of the impact had not been determined for these nontraditional export sectors.

“If an additional $1,000 of raw cashew nuts produced by farmers is then exported, create 120 new jobs in West Africa,” Bromley explained. “Household incomes in the region would be increased by approximately $2,430—the first $1,000 going to the cashew farmers, and the remaining $1,430 going to others in the economy.

The people earning that new income then spend it to buy locally made goods, say, fufu prepared by a local woman, or services, say, a haircut from a local barber. Economists call this the multiplier effect.

But a greater impact could be realized if raw cashews purchased from farmers were processed in West Africa, he said. For every $1,000 purchased from farmers, processors would spend an additional $822 on wages and salaries and this would increase household

incomes by an additional $1,175.“I found that being able to process

just three-quarters of the 2006 cashew crop – about 36,000 metric tons – would have produced new household incomes that are almost identical to the entire export value of raw cashew nuts in 2006,” Dr. Bromley said. “Most of the raw cashew nuts are leaving West Africa unprocessed – and that’s where the jobs and incomes are.”

In shea, the sale of $1,000 of shea nuts for export generates about $1,580 in additional household income—the first $1,000 to shea producers, and the remaining $580 to others in the

Tracing the impacts of increased sales

regional economy.The story in the basket industry is

similar. For $1,000 of sales by basket makers, 160 jobs are created and others in the regional economy earn $580 of household income. And in wood, increased sales by producers of $1,000 lead to 100 jobs and about $2,150 in additional household income ($1,000 to the producers and $1,150 to others linked to wood producers).

Bromley, who has studied developing economies for more than three decades, said the study could be interpreted in different ways – but made it plain that the sectors are engines of economic growth.

“Policy makers may note two

“Increasing sales of these products would have a significant impact on rural poverty, particularly among women.”

- Dr. Daniel Bromley fundamental constraints: high transport costs and access to affordable credit for producers,” he said. “Reducing transport costs would increase the prices farmers and other producers get for their products. That would encourage production, helping to ensure food security.”

The private sector, for its part, should come together to advocate for reform, he said.

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a.org

taste

africa

now.

com

globa

lshea

.com

africa

-now

.org

watra

dehu

b.com

/irtg

repo

rtsafr

icanc

ashe

wallia

nce.c

om

EXPORTS

In 2005, 24 public and private sector partners, including the Trade Hub, founded the African Cashew Alliance. Today, the organization has more than three times as many

members and its brand is internationally recognized. Its logo may even be coming to consumer products.

“The alliance truly represents the industry, that’s one reason why its brand is so strong,” said Carlos Costa, former president of the ACA. “The ACA brand is now internationally recognized and has given the industry a voice in the global cashew sector.”

Industry brands do not get as much attention as product brands but they can be crucial to the success of an industry. The Trade Hub’s work in targeted sectors is using industry brands to attract business to West Africa and, in the case of its work on trade policy, using social branding to inspire behavior change.

“As our brands gain recognition, they’re helping people see the opportunities in West Africa as opposed to the constraints,” said Trade Hub Director Vanessa Adams. “Those opportunities are more numerous than most people know.

“The brands draw international buyers and investors while building regional stakeholder coalitions. The goal is to support West African entrepreneurs leapfrog their daily struggles to compete.”

Coffee and cashewsIn 2005, not everyone was convinced that an alliance

would help the cashew industry. But because it would not cost much to try the idea, some skeptical donors were won over to the idea.

“No one could explain to me how exactly the ACA would increase exports and create jobs,” said one donor who wished to remain anonymous. “But for $15,000 or $20,000 in seed money, I was willing to take it on faith.

That faith has ben rewarded - but the ACA’s success is not a big surprise to many.

“This approach has proven to be effective in the past, as evidenced by the work done on Columbian coffee globally and almonds through the Almond Board of California in the U.S.,” said Kraft Food’s Vice President for Social Responsibility, Steve Yucknut. “The ACA brand has the potential to represent a sustainable and very positive image of the African cashew industry.”

Yucknut was referring to the National Confederation of Coffee Growers of Colombia’s efforts to promote Colombian

Industry brands are increasing the visibility of West African products in international markets, leading to more sales and greater awareness of the region as a source of high quality products.

Brands Help African BusinessBuildIdentities

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coffee.About 40 years ago, the

confederation used a fictional coffee grower, Juan Valdez, and his donkey, Conchita, to promote Colombian coffee with the tagline, “the richest coffee in the world.” The pair appeared in countless ads and consumers bought into the idea that Colombian coffee is the best.

It worked spectacularly, earning Colombian farmers premium prices on the world coffee market, according to Taylor Clark’s Starbucked: A double tall tale of caffeine, commerce and culture. In the almond industry, the California Almond Board has achieved similar success for almonds.

Industry brands have a variety of positive uses. The ACA brand has represented industry stakeholders sharing information and resources to promote processing of cashew in Africa. In other sectors, the USAID Trade Hub has worked with partners to introduce industry brands that represent similar values.

The Global Shea brand, for example, has demonstrated with a few conferences and trade shows the potential force that speaking with a united voice would bring to the shea industry over time. The Global Shea Alliance, co-founded in October 2010 by the USAID Trade Hub with stakeholders across the industry reflects the success of that

EXPORTS

idea.“The shea industry’s challenge was

to find common ground in order to build a brand for stakeholders,” said Peter Lovett, the USAID Trade Hub’s shea sector advisor. “The launch of the alliance is a big step toward bringing the industry together to promote shea internationally and address issues affecting all stakeholders.”

In the home décor & fashion accessories sector, the USAID Trade Hub worked with partners to develop AfricaNow!. The brand has attracted interest from international buyers. AfricaNow! represents quality and authentic products that come with a story and are produced professionally.

At the 2010 Salon International de l’Artisanat de Ouagadougou, stakeholders pledged to develop an alliance in 2011, which would drive the AfricaNow! brand.

Jim Thaller of Talier Trading Group has used Taste of Africa, a brand the Trade Hub developed with partners, to promote food products from Africa. It’s important, he said, that industry’s trying to brand themselves do so collectively and that governments support their efforts.

“Industry branding is something best left to the organizations and

government entities out there – no private company can afford to

support an entire industry,” he said. “Why government groups don’t do more to promote

cashews, shea or other crops that are grown everywhere is beyond me.”

Promoting free tradeBranding is a diverse

endeavor – almost anything can be

branded. Publicis Ghana reviewed the USAID Trade Hub’s work on transport and regional trade policy to develop Borderless (see p. 13)

to inspire governments, stakeholders and the general public to increase trade in the region.

From Senegal to Nigeria, Borderless

is West Africa without trade barriers, efficient and cost-effective.

Borderless was launched in March 2010 and the private-public partnership driving it has introduced it across the region to address the problem of checkpoints that delay and add expense to transport and increase trade by implementing uniform trade policies and streamlining procedures.

“The Borderless brand helps people understand the substance of the problem, and connect emotionally to our vision of a West Africa with efficient trade,” Amoo-Gottfried explained. “It attracts attention and then builds awareness through other materials, like the website.”

Ultimately, brands connect people to ideas or raise awareness. Whether for industry or for social issues, brands have significant impacts.

Global Shea organizes the most important annual shea event in the world.

Visit www.globalshea.com to nd out more about Global Shea 2010.

STAND H50

also at NYSCC Suppliers’ Day, May 11-12in-cosmetics

www.africa-now.orgBooth #2483

General giftDécor and accessories

with a story

(Bring this ad for a free gift!)

Consistent use of branding builds visibility, essential for business success.

The attractive AfricaNow! booth draws in trade show visitors.

Check us out on Facebook

7


EXPORTS

Janet Onyinah is a cleaning supervisor at the new apparel factory.

“I want to save some, and then use some for my children’s education,” Onyinah said. As a cleaning supervisor at the factory, Onyinah oversees two other people in maintaining a clean environment. It’s the first job she’s ever held, she said. Onyinah also hopes to use some of her earnings to start her own business.

“I will use some to sell other things too, in case I get enough money,” she said.

Training began in mid-May for workers at the facility, called Lucky1888Mills. By August, it will employ at least 200 workers, 90% of whom will be women.

Lucky1888Mills represents the fusion of two textile companies: Lucky Textiles, based in Pakistan, and 1888 Mills, based in the United States. The decision to locate its new factory in an African country reflects that Africa is a profitable place to do business. Equally important, it is in line with 1888’s brand purpose of “Weaving a Better World” as it aims to use its business to reduce

poverty.“People see Africa as a new option,”

said Miguel Chicas, the factory’s general manager. “There is Asia, there is Central America. Africa is the new, big opportunity for this kind of business.”

He said two main reasons led the companies to locate in Ghana.

“One of the most important things was AGOA, which allows duty-free imports into the United States” said Chicas. “Equally important is the political stability and the government’s commitment to job creation.”

Charity Akwetey was a rice seller before landing a job at the new factory.

Passed by the U.S. Congress in 2000, AGOA – the African Growth and Opportunity Act – eliminates import tariffs on thousands of products, giving African producers in eligible countries a competitive advantage in the U.S. market.

The company also took advantage of another set of investment incentives trade when it achieved Free Zone Status last November. Under the Ghana Free Zones Programme, the company receives such benefits as subsidies and a tax exemption on imported equipment and supplies.

Chicas said that technical assistance from the USAID Trade Hub enabled the company to understand the benefits of AGOA and obtain Free Zone status.

“The Trade Hub helped in a lot of things that matter,” he said.

The company plans to employ 1,500 employees within five years.

“We are at the tip of the iceberg,” he said. “If it goes well, we will be a big company here.”

Chicas said he was optimistic about Lucky1888Mills’ chances of performing well in Ghana in part because of the quality of the workforce.

“I’m seeing now in Ghana that there are good people here – many hard workers,” he said.

Human resources manager Dorilyn Agamah also praised the employees.

“They are dedicated, hardworking, committed to the job,” she said.

Charity Akwetey, 25, and her sister were among the first batch of hires. Before she was hired at the factory, she was a rice seller. Now that she has gotten the job, she said, “I feel happy.”

“It can help me in many ways,” Akwetey said through a translator. “It can help me to achieve most of the plans I have concerning finances – if not all, maybe a majority of them.”

Her plans include taking evening classes to learn how to read and write, and moving into an apartment with her two children. Currently, Akwetey lives in a house with 36 people, including siblings, cousins, and other members of her extended family.

Akwetey’s sister, 30-year-old Linda Laryea, has never held a job before. Like her sister, Laryea hopes to use some of her earnings to move out of the family compound.

“I want to keep it in a bank,” she said. “I want to save money, acquire land, and build my own house.”

Laryea currently takes care of her mother and grandmother, and with her earnings, she will be able to give them money for food and clothing.

The work environment at the factory is a collaborative one, said Agamah.

“Everyone lives as a big family,” she said. “One man’s problem is another one’s problem. We all share ideas and try to develop each other in the best possible way.”

Though a sense of optimism abounds, Lucky1888Mills still has obstacles to overcome, such as ensuring that employees have access to transportation to and from work. The company is addressing that issue and working to establish an on-site canteen and a health clinic.

“We want to have very healthy people,” said Chicas. “We want to create a very good environment for the people, with a canteen and clinic. That is one of our challenges right now, to get these two things for the people.”

Chicas stressed the holistic nature of the goals Lucky1888Mills is trying to achieve. It can be summarized in its “Weaving a Better World” brand purpose, which measures its impact in terms of people, the planet, and prosperity.

A newly established apparel factory in Ghana’s industrial city of Tema will create hundreds of jobs thanks to an investment from American and Pakistani companies. The facility will mean people like Janet Onyinah, 45, have a chance for good jobs.

New Apparel Factory Changing Lives

8


EXPORTS

Last November, an international buyer was fretting over an

order of exquisitely carved masks from Mali. The masks were being held up in transit because her broker thought they fell under new more stringent rules on the import of products made of wood.

“Help!” she wrote to Trade Hub Wood Expert Gustav Adu in an email. “My broker tells me that masks and statues are included in the current Lacey Act requirements.”

The buyer was referring to the Lacey Act Amendment which governs the import of products in to the U.S. Passed by the U.S. Congress in 2008, the law now requires importers to show U.S. Customs that any product made of plant materials has not been made using threatened or endangered species or otherwise against the laws of the country of origin.

“Under the amendment, for the masks, the wood that is used must have been legally taken, according to the source country’s laws,” Adu explained recently (the buyer’s interpretation was correct and the masks were successfully imported). “In effect this means an importer has to complete a form attesting to the legal source of the material. But at that time, the buyer was correct – the product was not yet being covered under the law.”

The law’s impact is being felt as various products are phased in. At least once, enforcement of the new rules has been delayed based on comments from industry stakeholders. The delays notwithstanding, the new rules are significantly affecting businesses.

Protecting West Africa’s natural resources makes good business sense. Producers and exporters are working together to ensure compliance with new rules with help from the USAID Trade Hub.

Enforcement has included factory raids by U.S. agents when they believe companies are using endangered forest wood to make instruments.

Exporters in West Africa are feeling the law’s impact, too, said Osei Opoku-Ampomah, the president of the Ghana Handcrafts Exporters Association. Exporters source their products from artisans who are sometimes illiterate and cannot fill out papers to attest to the legal origin of the wood they use.

“The carver will go to the bush to fell the tree,” said Opoku-Ampomah. “You have to ask yourself is the information he provides precise. And some are also not so good at filling out complex documentation.”

The association is working with Ghana’s Forestry Commission to develop a system that will work for artisans, he said.

“I believe a lot of companies were not aware of the exact requirements,”

said Robert Ellis who manages Fritete / Treasures of Africa in Ghana. “I’m sure that once the processes are put in place, there shouldn’t be any difficulty fulfilling the requirements.”

The USAID Trade Hub has organized workshops to raise awareness of the new requirements and help producers and exporters develop compliance mechanisms. At the 2010 edition of the Salon International de l’Artisanat de Ouagadougou in Burkina Faso, hundreds of producers and exporters learned about the rules.

Though it will take some effort and cooperation between the public and private sectors, Ellis sounded a note of optimism.

“Once we develop new processes, it shouldn’t be too much of a problem,” he said. “That’s what we are all hoping.”

towoodon

new rulesIndustry Responding

9


AGOA

Tradewinds: It’s been 10 years since AGOA came into effect. What’s your overall assessment of its impact? In concrete terms, what best demonstrates its success?

Rosa Whitaker: I think it’s been a phenomenal success. Has it been a panacea for everything in Africa? No, it wasn’t designed to do that. But if you look at the return on the investment, it’s been amazing. It costs the American taxpayer very little – about $2 million a year. In under a decade, exports from AGOA-eligible countries grew over 300% from $21.5 billion in 2000 to $86.1 billion in 2008, though exports fell to $46.9 billion in 2009 because of the drop in oil exports during the recession AGOA has created well over 300,000 jobs in Africa, particularly in sectors like apparel that benefit women. Some people would say that that’s primarily oil but there’s no trade initiative that can change the paradigm that oil is the major export from Africa in 10 years. Non-oil exports since 2007 have increased to $28 billion.

AGOA

TW: You were an architect of AGOA. What’s the story of AGOA, how does it fit in with U.S. policy toward Africa?

Rosa Whitaker: AGOA represents the first ever trade law toward Africa. It expanded our policy from just aid – and aid is important, there’s a role for aid. AGOA made U.S. policy for Africa more comprehensive to include aid, diplo-macy and trade. Throughout history the trade component was missing. It’s made U.S. policy for Africa more robust and effective. We had an assistant U.S. Trade Representative for every region of the world except Africa. There was no trade policy toward Africa. AGOA created an Assistant U.S. Trade Representative for Africa, and it was my honor to serve as the first. And AGOA’s birth was at the same time as the WTO birth. That’s when people started asking, “Where will Africa be? How will we ensure that Africa moves toward the mainstream of the world economy?”

TW: The numbers are impressive. What

Ten years ago the United States launched the African Growth and Opportunity Act. One of its chief architects, Rosa Whitaker, CEO of the Whitaker Group, also served as the first U.S. Trade Representative for Africa after the U.S. Congress enacted AGOA. As the law passes its first decade, Tradewinds asked Whitaker for her thoughts on how it had affected trade between the U.S. and AGOA-eligible African countries.

are some concrete examples of AGOA’s impact?

Rosa Whitaker: The success stories are pretty phenomenal. AGOA helped develop an automobile industry in South Africa. In 2000, that industry was exporting about $148 million; it has increased to $1.9 billion in 2008. Car parts exported to the U.S. had an 18-25% tariff. When those tariffs came off for Africa, the assembly part of that manufacturing process moved to South Africa. There are plenty of other examples. Lesotho was exporting $139 million in apparel in 2000; now it’s over $340 million: a 143% increase. Kenya’s cut flower industry expanded from $34 million in 2001 and to exports over $240 million now. Swaziland was exporting $85,000 in jams and jellies in 2000; today it’s $1.6 million. For a small country like Swaziland, that’s important. Then you have Tanzanian coffee and other products. I could go on and on.

TW: And the real impact is bigger,

right?Rosa Whitaker: Certainly. These are

not just numbers – these are families, farmers, a woman sending her children to school. AGOA has not solved the pov-erty problem. It has provided us with a model that works. It only stands to reason that if you have something that works, you should build on it. AGOA has demonstrated that trade and enterprise solutions are among the best vehicles for economic development and poverty alleviation.

TW: Where are the problems for

AGOA? And what needs to be done to address them?

Rosa Whitaker: AGOA must be expanded to allow the duty- and quota-free import of all products, including agricultural products like sugar and a full range of processed cocoa products, in addition to products like ethanol that have been added to the U.S. Harmonized Tariff Schedule since AGOA was enacted.

While AGOA has expanded African exports to the U.S., it has failed to deliver the anticipated investment

is a Success’

‘Phenomenal

Rosa Whitaker was the first U.S. Assistant Trade Representative for Africa.

Follow us on twitter @watradehub

10


AGOA

response. AGOA should include tax incentives for U.S. companies investing in labor-intensive development sectors to be able to repatriate profits to the U.S. tax-free. Lack of U.S. investment incentives is a key reason why China and other nations are outpacing U.S. investments and engagement in Africa. We don’t recommend that the U.S. subsidize its companies like China, but America must open its tax code to promote development in Africa and expand opportunities for U.S. busi-ness in the region.

To protect against foreign workers being brought in to work in African factories, AGOA should encourage local laws requiring that African factories pro-ducing AGOA-eligible products employ a certain percentage of African citizens.

TW: Some have proposed extending AGOA benefits to all lesser-developed countries. What do you think of that idea?

Rosa Whitaker: Cambodia and Bangladesh export more than $6 mil-lion – they are growing by leaps and bounds. They don’t need trade incen-tives. If you give them the same deal, no one will source from Africa. Giving these countries AGOA benefits would devastate Africa. AGOA has been like a priming pump mechanism to build possibilities. Bangladesh and Cambodia have already achieved those steps. Trade preferences should be a way to help the weak reach a threshold. Trade preferences are not about countries, they are about sectors. To give them preferences where they are already strong at the expense of poorer people is just unfair.

TW: As a new decade starts, how

would you like to see AGOA modified?

Rosa Whitaker: We have not gotten the investment response that we had hoped to get. We have seen the exports expand but we have not seen a lot of American investors go into Africa to invest. That’s why in our new proposal we have recommended that American companies seeking to invest in Africa be awarded tax incentives. Companies go all over the world looking for tax incentives. If we really want to see the investment response, we know that tax incentives would be a strong catalyst to get a response. And AGOA has to be

permanent. If I’m an investor, I’m not going to invest into something that I’m not sure it’s going to be around in five years.

People need to remember, too, that market access is not enough. It’s one part of the puzzle. Critics look at AGOA as a policy instrument to take care of everything. But market access does not

take care of everything. You still need to build the productive capacity. The Trade Hubs have done great work, for exam-ple. They aren’t funded well enough to do what they need to do. If I say a country like Liberia can export like they can – 98%, 100% can come in duty free. But Liberia does not yet have the capac-ity to produce the things the American consumer wants to buy.

TW: AGOA alone does not drive eco-

nomic development, it’s part of a bigger picture. Can you paint it for us?

Rosa Whitaker: AGOA needs to be complemented with strong capacity build-ing. Initiatives are needed on the ground to develop the capacity of the private sector to produce products.

No country in the world has developed without incentivizing, empowering the indigenous private sector. That’s the issue. Strong trade capacity building would do that. You’ll never find a coun-try that has grown without it.

Ougadougou

Bamako

Monrovia

Freetown

Bissau

Banjul

Dakar

LagosCotonou

Douala

Sao TomeLibreville

N'Djamena

SENEGAL

NIGER

BURKINA FASO

BENIN

NIGERIA

CHAD

CAMEROON

GABONSAO TOME & PRINCIPE

LIBERIA

SIERRA LEONE

THE GAMBIA

GUINEA-BISSAU

Extending the Reach of AGOA

MAURITANIA

MALI

EQUATORIAL GUINEA

GHANA

CÔTE D’IVOIRE

TOGO

GUINEA

AGOA Elligible Countries

Non-Elligible Countries

AGOA Resource Centers

Nouakchott

Praia

CAPE VERDE

The Trade Hub has helped to create 15 AGOA resource centers throughout West Africa which offer assistance to exporters on competing in the American market.

HOW AGOA HAS HELPED AFRICA

Increased Exports

Bill

ions

$

0

10

20

30

40

50

60

70

80

01 02 03 04 05 09080706

Exports Dropped Due to Financial Crisis

Follow us on twitter @watradehub

“AGOA must be expanded to allow the duty- and quota-free import of all products...”

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TRANSPORT

Reducing West Africa’s transport costs – among the highest in the world – could significantly

expand trade and lift millions of people out of poverty. Fueled by new research – and a list of recommendations from the USAID West Africa Trade Hub – public and private sector transport stakeholders are taking important steps toward tackling the problem.

Workshops in Burkina Faso and Ghana in September 2010 included public and private sector stakeholders - including representatives of trucking companies and major shippers, like Bolloré Afrique and Maersk, managers of firms that assure the movement of goods, like Cotecna, and officials from the customs services in both countries - met to discuss how to implement recommendations from a compre-hensive study of costs on the Tema-Ouagadougou corridor published by

Public and private sector stakeholders can make West Africa’s transport industry more competitive. A comprehensive review showed more than 20 ways to cut costs by as much as half. Now stakeholders are working together to take the ideas off of the pages and put them into action.

A r m e d w i t hRECOMMENDATIONS, StakeholdersTACKLE HIGH

TRANSPORT COSTS

12


TRANSPORT

ing to the nationality of the company and another that directs cargo to trucks based on a first-come, first-served basis – deter competition in the industry.

Such regulations fuel the existence of cartels and drive transport costs up. A new study by the USAID Trade Hub confirms the problem, which was first pointed out by researchers at the World Bank.

“Deregulating the trucking market would undoubtedly drive transport costs down,” said Niels Rasmussen, director of transport at the USAID Trade Hub. “But we understand that there will be winners and losers and is therefore not a simple thing to do.

“Policymakers need to examine it closely and devise ways to mitigate the impacts on those transport compa-nies that are not prepared for an open market.”

The recent workshops are critical, stakeholders agreed.

“We are on the right path now,” said Yedan of the Burkina Shippers Council. “We didn’t want this study to sleep in a drawer somewhere. It was critical to ask people, ‘OK, what are we going to do with this?’”

Already, working groups formed at

the recent workshops have committed to making changes. Hamoui wrote an article promoting pro-active work on axle-load restrictions due to be uni-formly implemented across the region on Jan. 1, 2011. Cotecna, where inspec-tion times were identified as an issue in the costs study, was committed to the effort, Ouedraogo said.

“Cotecna will put in place the recom-mendations in the study,” he wrote in an email. “We’re very optimistic. We’ve made enormous improvements in our operations in Burkina – for example, the interconnection of customs and Cotecna. This demonstrates the capac-ity of stakeholders to take into consid-eration the recommendations that have been made.”

A large shea exporter in Ghana was equally optimistic. He said transport costs were his biggest obstacle.

“The problems can be fixed,” he said. “Ghana’s port is not the worst in the world – but it could be much, much better. Concerted effort will produce results.”

the USAID Trade Hub in April 2010.“The Trade Hub’s work in this area

is very encouraging,” said Ousseni Ouedraogo of Cotecna in Burkina Faso, one of the world’s leading trade inspec-tion, security and certification com-panies. “The data and analysis in the study constitute a major step forward to reducing the costs on the corridor.”

“This is a positive step forward,” said Ziad Hamoui of Tarzan Enterprise, a transport company that has operated for more than 50 years in Ghana.

If implemented, the recommenda-tions could reduce trucking costs by as much as half. Such a reduction could lead to a huge expansion in business activity – creating jobs and increasing incomes for millions of people in both countries.

“The reduced transport costs study looked at all of the costs traders incur when they move goods on the Tema-Ouagadougou corridor,” explained Christel Annequin, who led the study at the USAID Trade Hub. “Implementing the study’s recommendations could lead to significant cost reductions.”

The study is available at www.watra-dehub.com.

Stakeholders are sure of one thing: It won’t be easy.

“There’s lots we could do to improve the situation but there’s generally a lack of will to do anything about it,” said a worker at the container terminal in Tema who asked to remain anonymous because he is not authorized to speak for his company. “It has to do with the environment within which we work, that kind of third world environment. People are not too sure that the gains they’ll make by making improvements will be worth the trouble.”

The inefficiencies in the system rep-resent business opportunities for many who therefore naturally resist change, a transport expert added, asking to remain anonymous due to the sensitiv-ity of the issues.

“There are some institutions impli-cated that do not want to change,” said Yaya Yedan of the Burkina Shippers’ Council. “But this is the right approach. This is the best way to bring about the changes necessary.”

The study’s primary recommenda-tion – to deregulate the trucking indus-try in West Africa – is probably the most difficult to achieve. Regulations – like a rule that allots cargo to trucks accord-

What if truck carrying rice from a port in Ghana could arrive in Burkina Faso in 3 days instead of 9?

What if people crossing from Togo into Benin could do so in 10 minutes instead of one hour?

What if an exporter could pay a trucking company just to cover the costs of labor and fuel to send a load of shea nuts to port – without adding US$250 to pay bribes at checkpoints along the way?

Borderless is the ECOWAS vision for competitive trade in West Africa – of removing barriers to trade. Streamlining procedures, attacking corruption and facilitating the movement of people and goods will lower costs.

Public and private sector stakeholders, civil society, and people across the region are coming together to increase trade and realize the ECOWAS vision.

www.borderlesswa.com

13


INFORMATIONTECHNOLOGY

West Africa is poised for an exponential increase in internet connectivity – which

could revolutionize exporters’ access to markets, increase their productivity and lower their costs. With public and private sector partners, the USAID West Africa Trade Hub is helping companies capitalize on the opportunity.

“Wholesale prices of internet connectivity have dropped by 50% because of new submarine cables that have come online,” said Estelle Akofio-Sowah, director of Google Ghana. “These reductions will reach consumers soon and the impact will be tremendous.”

Akofio-Sowah was speaking at a regional conference on ICT organized by the USAID Trade Hub with support from Google, MTN, MyConfigsys, BusyInternet and CompuGhana. The event brought more than 50 exporting companies from across the region to Ghana, connecting them to service providers and experts.

It was the culmination of the roll-out of eBizBox II, a package of hardware, software and connectivity solutions tailor-made for exporting companies that was developed by the USAID Trade

IC T Is InCreas Ing sales & lower Ing CosTs

Hub.Dr. Sam Somuah, former director

general of Ghana’s National Information Technology Agency (NITA), echoed her views in a keynote address.

Improved connectivity will bring internet access to millions of people, he said.

Ghana is investing $30 million to bring WiMax wireless access to Accra and all regional capitals in 2011, and building a data center to host websites in the country – companies generally host their websites overseas, not only increasing costs but driving up traffic on the international internet connection.

After about an hour-long training, exporting companies had designed

web sites.Government services

will become much more accessible thanks to the increased bandwidth now available, he added, and companies will be able to make use of online applications and services that require faster, more reliable connections.

“The opportunities that ICT create for companies

to reduce costs and improve marketing are significant,” said Ben Coleman, the ICT Advisor at the USAID Trade Hub. “We used the conference to help companies realize, in a very practical sense, the

From web sites that connect companies to billions of people instantaneously to productivity software that lowers costs, ICT is helping exporters compete successfully.

opportunities.”Edtex Limited, a textile and home

décor company in Ghana, increased its efficiency dramatically after a workshop introducing new accounting

productivity software, said the company’s managing director, Edwina Assan.

At Solution Oasis, a company that produces shea butter beauty

products,Francesca Opoku said she had overcome the idea that putting up a website was simply too hard.

“That was the biggest obstacle – thinking that it couldn’t be done,” she said after a September workshop on websites implemented by Google and the USAID Trade Hub. Her new site won accolades from her classmates in the workshop.

“Around the world, ICT has revolutionized business,” Coleman said. “With better connectivity, proper hardware and software and good training, West African exporters can increase their competitiveness and enjoy similar gains.”

For Exporting Companies

14


ECONOMICIMPACT

Increased exports from West Africa promise immediate income increases and more jobs for poor households in the region. Enduring benefits of increased trade will reach West African

producers, exporters, importers, trucking firms, bankers, and others engaged in supporting the regional economy. The exact nature of those benefits will vary, but they will

go to sectors of the West African economy that participate in—and successfully compete in—the global economy.

In October, Prof. Bromley presented his findings at a public lecture in Accra.

The reality of exporting and importing is that the West African economy must achieve a level of economic coherence that will allow importers and exporters to compete in world trade. Economic coherence is the idea that a well-functioning economy is rather like a fine-tuned machine. All the parts must work together. When market signals—prices—no longer transmit proper information to producers, then the economy does not cohere.

Markets must work well enough to be reliable signaling devices to indicate ideal enterprise choice, and ideal use of productive inputs. For example, if the price of millet goes up, while the price of cotton goes down, farmers will abandon cotton in favor of millet. If the price of fertilizer drops then farmers will use more of it. If the price should rise again, farmers will use less fertilizer and yields will suffer.

What are the qualities of economic coherence? First, West African firms—basket makers, wood craftsmen, and agricultural producers—must be capable of producing the quality of goods expected by global consumers.

This means that product design and quality standards for handcrafts must be at or above world standards, and agricultural products must meet quality and safety standards of regulators in Europe and North America.

Second, economic activities in the region must be carried on with a degree of efficiency that will allow West African exporters to compete on price as well as on quality. This means that the organization of production inside of the firm must be brought into close harmony with what is found in the rest of the world. For many enterprises in West Africa, production practices will need to be re-engineered to bring equipment and labor activities up to international standards.

Third, West African producers must gain access to credit on competitive terms. They are now stifled by some of the highest rates of interest in the world. It is not uncommon for interest rates to approach 36%APR—far above what would be justified on inflation-adjusted terms. Perhaps of equal concern, there is a sense that many lenders will not bother to meet with potential borrowers. If true, this means that credit is being rationed.

Selling more baskets creates jobs and lifts incomes in rural areas.

Finally, transportation costs must be competitive. Currently, transportation costs in West Africa are approximately double those found in Western Europe. When the costs and delays of the transport sector are added in, it is virtually impossible for West African products to compete in world markets. Studies conducted by the USAID West Africa Trade Hub show that trucks carrying imports face generally higher levels of bribes and delays than those carrying exports – and even those carrying goods produced in West Africa face this harassment. This means that products from Benin, Côte d’Ivoire, Ghana, and Togo carry a severe cost burden which dampens demand in

countries such as Burkina Faso, Mali, and Niger.

Each of these problems causes a general lack of economic coherence in the region. When credit markets do not offer necessary financial instruments to the basket weavers of Bolgatanga then production is choked off. When wood carvers and furniture makers of the Ashanti region are denied access to affordable credit then necessary supplies are restricted, inventories must be minimized, innovation is stifled, and new products are impossible to create. When cashew and shea producers cannot obtain loans to invest in tree planting and improvement—and to reduce post-harvest losses—the sectors fall into financial despair, and incomes fall.

When road transport, already twice as expensive as that in Western Europe, entails an additional burden of corruption¬, the economy lacks coherence. Corruption chokes off commerce and makes it much more difficult to engage world markets in competition with countries whose economies do not suffer from incoherence. Indeed that is one of the advantages of international trade -- engaging and confronting the global economy.

When production practices inside of farms and firms become more efficient, when credit markets begin to work better, and when the transport system begins to work at a level of cost-effectiveness that approximates that found in Western Europe, we can say that the economies of West Africa are beginning to show evidence of coherence.

Engaging the global market offers a wonderful opportunity for citizens and politicians in West Africa to learn from that experience and to act on what they learn, enhancing economic coherence. If nothing is learned from a greater engagement with the global market then temporary gains in household incomes and employment in the region will ultimately dissipate under the dead weight of current economic incoherence. This would be a tragedy.

Dr. Daniel Bromley of the University of Wisconsin-Madison in the U.S. led researchers at the University of Ghana and U.S. Peace Corps Volunteers in the multiplier effect study (see p. 4). Here’s what the study means for West Africa and its competitiveness in the global economy.

Exports,jobs & incomes

Dr. Dan Bromley

15

Cashew

Apparel

Shea

Fish & Seafood

Home Décor

Specialty Foods

Business Environment

Transport

ICT

Access to Finance

AGOA

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WATH Tradewinds - Winter 2011

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Transcript of WATH Tradewinds - Winter 2011