Manchester Trade Ltd. Inc.

International Business Advisors

1710 Rhode Island Avenue NW, Suite 300
Washington D.C. 20036
Stephen Lande, President Tel: 202-331-9464
Anthony Carroll, Vice President Fax: 202-785-0376
David Lewis, Vice President Cell: 202-415-1243
Ambassador Michael Skol, Senior Associate E-mail: stepland@aol.com
November 14, 2009

PAEGO PROPOSAL
(Partnership for African Economic Growth and Opportunity)

The consensus is remarkably clear – as expressed by US and Sub Saharan African (SSA) leaders at the
recent African Growth and Opportunity Act (AGOA) Forum and the Corporate Council on Africa (CCA)
Business Summit—their Partnership has accomplished much but more needs to be done to promote this
growing relationship and improve African competitiveness. The Obama Administration should consider
implementing a broad-based economic growth initiative, focused on trade, regional integration and
development to complement current efforts on climate and food security.

Manchester Trade has developed a proposal to address these joint US-SSA concerns and to address the
critical need for an initiative to promote a deepened US-SSA partnership to the benefit of both. This
proposal is called the Partnership for African Economic Growth and Opportunity (PAEGO). It
recommends:

1. The focus of both US and African efforts in trade and development must be on regional integration
including the elimination of continental, bilateral and international barriers which inhibit these
formations (such as found in the World Trade Organization (WTO) and European Union (EU)
negotiations) and the development of world class regional infrastructure; and
2. Both the US and Africa have important steps to take, unilaterally, in order to improve
competitiveness to effect a true transformational change in Africa’s international competitive
position. The United States must focus on improving AGOA and capacity building programs, support
economic integration including transportation corridors and promotion of investment; African
countries must intensify their efforts to improve governance, attract investment and otherwise
open their markets to the United States.

An additional challenge is the lagging US commercial and investment position in the region. The United
States is behind China in infrastructure and will soon trail in total bilateral trade flows. EU Economic
Partnership Agreements (EPAs) threaten the very viability of the US flagship program in the region–
AGOA and the competitive position of US exporters as well as the viability of SSA efforts to integrate.
Indian trade negotiators exert more influence than the US in the formation of SSA’s WTO’s positions.
The deterioration is neither in the US interest, nor for that matter, in the interest of the SSA region.

PAEGO involves a concerted effort by the United States and the SSA region to deepen economic links
between them and solidify the emerging Partnership. It involves cooperative efforts in AGOA
implementation, in Geneva, in third country capitals, within the Regional Economic Communities (RECs),
in investment promotion and in development programs.

12/9/2009 3:01 PM
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The proposal for this reinvigorated Partnership has five basic components:

1. Enhancement of AGOA benefits and increased coordination in its implementation to allow

greater use of its benefits;
2. Initiation of a concerted US-SSA position to make sure that the WTO, EPAs and other bilateral
negotiations instead of inhibiting, actually promote regional integration;
3. Adding balance to the relationship by addressing US, as well as SSA, concerns by upgrading the
role of Trade and Investment Framework Agreements (TIFAs);
4. Implementation of more effective tools to promote private sector investment, and
5. Deepening and expanding current US Agency for International Development (USAID) programs
to strengthen African regional integration institutions; and

Description of Components

1. Enhancement of AGOA Benefits and Increased Coordination with SSA in its Implementation
The PAEGO proposal includes provisions to improve the functioning of US preferences towards the
region – many of which were suggested at the just concluded AGOA Forum and CCA Business
Summits. The most important provisions are to add a trade capacity building component to US
preference policy which it currently lacks. The trade provisions of AGOA would be more effective if
there were more assurances that its benefits: do away with tariff reduction quotas (TRQs) on less
sensitive agricultural products, would not be modified or terminated, had a more regional focus and
were expanded. In the interim, while PAEGO is being considered, some of the provisions could be
considered in the review of preference programs being carried out in the Senate Finance and House
Ways and Means Committees.

Specific proposals include:

-- Support for a meaningful “Aid for Trade” package in Geneva which would increase the capacity
of the SSA region on the regional and national levels to increase exports under AGOA and other
countries’ preference programs;
-- Allowance for the designation of regional economic communities as AGOA beneficiaries in
addition to individual country designations;
-- Taking into account the results of African Union(AU)/New Partnership for African Development
(NEPAD) peer reviews in US country eligibility reviews for AGOA preferences and other
programs especially in consideration of economic criteria;
-- Providing decision makers more flexibility by allowing targeted punitive measures, sometime
outside of trade instead of preference-removal in cases of non-conformity with AGOA criteria;
-- Alleviation of the burden of non-tariff measures (NTMs) and the few remaining tariff obstacles
which constrain the ability to import under AGOA, including the removal of tariff rate quotas
(TRQs) on AGOA agricultural exports and setting up a system for expeditiously satisfying sanitary
and phyto-sanitary (SPS) measures and standards regulations;
-- Making AGOA provisions permanent including the third-country garment origin rules and
authorizing a review of origin rules to maximum consistency among all LDC preference schemes;
-- Working with beneficiary countries on providing periodic reviews and benchmarks against which
to measure accomplishments; and
-- Treat South Africa as other beneficiaries. (South Africa is excluded from third-country fabrics.)

RECs should assist their members to mainstream trade in their development plans and coordinate
programs with member states to remove obstacles and other impediments to AGOA exports.
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2. US-SSA Concerted Position in Trade Negotiations

As part of the deepened US-Africa relationship, PAEGO advocates that the two sides partner in
efforts at global and bilateral trade negotiations. The major focus of these efforts will be to assure
that multilateral and bilateral agreements do not continue to apply different trade regimes to least
developed countries (LDCs) and non-LDCs members of the same Regional Economic Communities
(RECs). The different trade regimes deprive the 13 of the 48 SSA economies, who are not
considered least developed countries, of preferential treatment. This not only reduces market
access for these 13 economies but also discourages co-production within the entire REC. More
important, the different regimes create serious impediments to the formation of common external
tariffs within and between RECs, a requirement for realizing the African goal of more comprehensive
RECS eventually merging into an African Economic Community (AEC) covering all of SSA countries.
As the RECs strive to create common trade policies, it is disruptive to the system for third countries
to apply different trade regimes to the same REC.

SSA members, particularly non-LDC SSA countries should work with the US to have the same trade
regime apply to all SSA countries in the WTO. This is already done for non-trade purposes by the
World Bank, the G-7 (now the G-20) and some donor countries; applying this distinction to trade has
been more detrimental than beneficial.

The specific proposal has two elements:

-- Preference-giving countries would be able to provide LDC preferences to all SSA countries
through extending the AGOA waiver to all donor country special preference schemes;
-- SSA countries would have a period of up to ten years to make requisite market access
commitments. They should then be in a position to negotiate on an African Economic
Community (AEC) or on an amalgamated REC basis; thus, these bindings would not discourage
integration. The binding would apply to all members—both LDCs and non-LDCs.

The need to agree on a common tariff schedule to promote regional integration requires an
agreement on bound duties to be submitted by RECs to the WTO within a reasonable period of time.
The time frame must reflect the region’s ability to sufficiently integrate to allow submission of a
tariff schedule to the WTO. The wording of a possible WTO proposal is attached.

Extending the US AGOA waiver to all donor countries would alleviate the problems caused to
regional integration from non-designation of non LDCs in the SSA region. The current Chinese- and
Indian-proposed LDC preference systems could include all SSA countries, not just LDC SSA countries.
The EU would have no excuse for insisting on maintaining or entering into new Economic
Partnership Agreements as a condition for maintaining preferential entry into their markets for SSA
countries. Without the compulsion for non-LDC members to enter into these agreements or else
lose preferential access, these countries would be free to join, not to join or leave EPAs without the
threat of losing preferential access to the EU market. In addition to considering the implications on
regional SSA integration, countries could consider objectively whether these agreements require
premature market opening; whether their preferential requirements create or divert more trade,
and whether they establish impediments to additional negotiations with third countries—the
responses to these and similar questions would be determinative of whether countries joined EPAs
– not the fear of losing market access and disrupting RECs.
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Such a proposal should be well received in the WTO – especially with the support of the US and the
African bloc. First, this compromise would deprive the EU of leverage to exact preferences in the
SSA markets—preferences which discriminate against all third-country exports. Second, the United
States and SSA countries, as the only superpower and as the most numerous members of the WTO,
respectively, should have sufficient influence for this proposal to be accepted. Finally, modifying
this provision should not establish a serious precedent since the SSA region is already recognized as
a special area; this provision was one of the least known and abstract WTO provisions until recently,
and designating almost all SSA countries would have no adverse impact on third countries.

There are other opportunities for greater cooperation in trade negotiations between the SSA region
and the United States. In addition to the common commitment by both side to a balanced and
ambitious outcome of the WTO, there are opportunities for developing a partnership through trade-
offs. SSA countries favor an expansive aid for trade package with real export capacity potential and
are concerned that granting AGOA type apparel to competitive Far East LDCs, particularly
Bangladesh, would undermine the small foothold that six SSA countries have in the US market.
Their major product demand is for the US to introduce on an accelerated basis greater than formula
reductions of its cotton subsidy program. The United States would like SSA support in opening the
market of advanced developing countries. Although it would be unrealistic to expect SSA countries
to completely abandon their long-time alliance with other developing countries, such alliances do
allow exceptions for self-interest. Cooperation with the US in opening advanced LDC markets to
African trade would be a key example of such an exception. Such cooperation could be more
effective if applied quietly behind the scene—an approach which would be more consistent with
past SSA relations with advanced developing countries as opposed to publicly agreeing with the US.
Such cooperation would be a natural reaction to US willingness to support African aspirations even if
it led to conflict with an important US trade ally—the European Union.

3. More balance in US and SSA relations

U.S. and African countries have made direct requests of each other in order to deepen trade
relations and enhance investment. At the AGOA Forum both sides requested greater attention to
be paid to removing obstacles in each others’ markets. Ambassador Kirk cited the need for more
balance in bilateral relations by SSA countries addressing impediments to US exports and
maintaining a level playing field. He claimed that without such efforts, it would be difficult to
maintain support for the favorable trade treatment extended to the region.

SSA countries reiterated a number of concerns about US policies. In agricultural, they mentioned US
agricultural subsidy programs which made it difficult for African producers to compete in third
countries, regionally and even in their own markets. Cotton was mentioned the most. They pointed
out specifically that AGOA would be more effective if it addressed the major constraints to African
exports—the absence of trade capacity including 21st century infrastructure networks. AGOA should
do more to build production capacity, and reduce infrastructure costs. To facilitate agricultural
exports, they recommended that more attention be paid to overcoming SPS barriers and that tariff
rate quotas (TRQs) be removed on agricultural exports. They requested that AGOA and its
provisions be made permanent or if not possible, more secure.

The US has Trade and Investment Framework Agreements (TIFAs) with seven SSA countries and
three RECs. They meet at the senior officials’ level “to consult on “trade and investment” related
issues. Their major weaknesses are the fact that their meetings do not benefit from wide public
exposure, exclusivity to government actors and lack of funding for broader engagement.

An enhanced TIFA Framework could be the instrument to effectively address market access
concerns of the two sides, as a way to meet Ambassador Kirk’s need for more balance.
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Below are some suggestions:
-- Establish TIFA mechanisms with each of the RECs, not now covered, as well as with the AU body;
-- Regularize the schedule of TIFA meetings with focused areas of discussion on key issues of
interests (such as developing trade regime reviews, removing barriers to US exports and to SSA
exports) and incorporating model agendas in order to develop best practices frameworks;
-- Find ways of greater public visibility for the meetings, opportunities for citizen/private sector
input and review of and annual reports of on the results of TIFA consultations, and
-- Increase the effectiveness of TIFAs by providing USAID funding for them.

4. Enhance US Development and Financing Agency Mandates

More Effective Tools to Promote US investment and Otherwise Support the Private Sector. The
major USG tool to encourage private sector investment and Private-Public Partnerships are the
development and financing agencies: Export Import Bank (ExIm), Millennium Challenge Corporation
(MCC), Overseas Private Investment Corporation (OPIC), US Trade and Development Agency (TDA)
working with USAID, the United States Departments of Agriculture (USDA) and of Commerce (DOC).
These agencies and their services have the potential to be the most effective instruments for
promotion of regional investment – a key goal of this initiative.

The PAEGO initiative advocates for more streamlined measures to ease and incentivize investment
into Africa – such as those implemented with great success by competing partners across the globe.
(Chinese ExIm outgoes last year was 25 times greater than that of its US counterpart). New and/or
improved mechanisms should be considered by the US. Some areas of consideration may be:

-- Review charters and where necessary include a specific chapter devoted to the needs of SSA countries;
-- Allow project support and financing on regional levels;
-- Increase funding, liberalize lending requirements and reduce interest rates to US businesses
interested in SSA countries to ensure that their assistance is both affordable and accessible (a
telling fact mentioned at the CCA Business Summit was that ExIm Bank in the US provided $400
million financing to US businesses compared to $10 billion from China ExIm Bank to Chinese
SOEs and private businesses); and
-- Create a “One-Stop Shop” where US investors can seek assistance for investments in SSA and be
provided guidance on which agencies they should pursue for specific support to their projects –
in essence, a place where each major financing and development-support agency can be
represented and provide support and guidance to potential SSA investors. Once agencies are
made aware of the needs of any US investor, they would decide jointly on the appropriate
response particularly highlighting which of them could provide the most effective support. The
goal here is to utilize USG resources to support investment in the region and introduce investors
to the support US agencies are prepared to provide them in SSA.

Additional measures can include:

-- Design broad tax incentives and bilateral investment and tax treaties to encourage investment
(Witney Schneidmen, former Deputy Assistant Secretary of State for Africa has been in the lead
with a number of proposals for tax incentives);
-- Promote coordination of international donor efforts in developing regional infrastructure with a
focus on transportation corridors;
-- Reframe the selling of Africa in the US to the American public and business circuit through a
marketing scheme that posits Africa, as much of the world now recognizes, as the next site of
emerging markets with exceptional opportunities for commerce and business development; and
-- Engage in a concerted follow up to CCA Summit linkages between private sector business
organizations in Africa and in the United States and the Chamber’s recent report on the
negative US perception of US business on investment in Africa.
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5. Enhanced USAID programming for Regional Economic Communities

USAID programs should be deepened and expanded to promote regional integration. USAID
should scale up assistance to the African Union and Regional Economic Communities (RECs) to
improve their capacity for regional integration. Support for trade and economic development falls
under the Economic Growth Unit of the African Bureau of USAID, where now the only program
responding to regional integration needs is the African Growth and Competitiveness Initiative
Regional Trade Hubs. The hubs need to be scaled up and their mandates broadened in order to
bring greater assistance, critically needed.

Recommendations here include:

-- USAID and its SSA counterparts should take steps to strengthen the capacity of the AU and the
RECs to deal with the new challenges from amalgamation and deepening of the RECs. USAID
could assist RECs by identifying future needs, determining where there are or will be deficiencies
in staffing and resources and then agreeing on a program to redress them;
-- Strengthen the economic components of US missions to the AU and to RECs;
-- Increase funding and otherwise enhance the African Global Competitiveness Initiative (AGCI)
including specific funding to support TIFAs;
-- Inclusion of provisions for enhanced capacity-building assistance targeted to AGOA exports;
-- A review of current USAID programs and US financing agencies’ mandates to find ways to
increase resources towards increased export-capacity in SSA countries;
-- Provide resources to continue the improvement of the quality of NEPAD peer reviews;
-- Increase funding or otherwise enhance the Trade Hubs; and
-- Require plans of bilateral missions which can impact regional integration efforts to be reviewed
by AGCI and the trade hubs to assure consistency with regional integration plans.

Conclusions

PAEGO is about deepening and realizing the potential of a US-Africa Partnership. In order to reach that
mark, however, key steps yet need to be taken – most notably, in how the US and Africa are working
together to promote common goals. These include trade policy revisions as well as incentive schemes
buttressed by a focused development agency policy of capacity-building and regionalized approaches.

In the WTO, PAEGO recommends that the US and SSA delegations work together for recognition of the
region as a special development zone, allow the RECs to participate in WTO work, eliminate the arbitrary
distinction between LDC and non-LDCs, provide preferences to all SSA countries as allowed under the
AGOA waiver and postpone less than full reciprocity from SSA countries for a period no longer than ten
years at which times concessions would be provided by both non-LDC and LDC members of the RECs.

Acceptance of such a proposal would eliminate problems with selectivity in SSA designation under the
EU EPA’s and the soon to be implemented Chinese and Indian preference systems. For EPAs, SSA
countries would be free to remain in the Interim EPAS or even enter into comprehensive agreements.
On the other hand, the SSA countries could replace EPAs with non-trade diverting, non discriminatory
and more flexible MFN multilateral commitments. This would be because non-LDC SSA countries would
no longer be subject to the pressure of losing duty-free access to the EU market if they decided to
withdraw from them. Even if SSA countries did decide to join or remain in RECs, this would certainly
level the playing field and reduce the EU ability to force agreements on these countries.
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US-specific trade programs would seek to enhance preferential benefits available under AGOA. In
coordination with other US programs, they would be part of a transformational approach as opposed to
being programs with significant but still only anecdotal successes. They would work to strengthen TIFA
structures with a focus on market opening measures to be taken by both sides and regularizing the
structure to allow all TIFAs to benefit from best practices in any one TIFA.

In development, the major suggestions are for US and African governments to: one, agree on
augmenting resources towards and more effective support of regional integration; two, establishing a
stronger role for development agencies in financing US private sector, in general, and regional
integration projects, specifically; three, enhancing USAID support of regional integration through
technical- and capacity-building assistance as they meet new challenges associated with amalgamation
of individual RECs into larger units and the assumption of new responsibilities as integration deepens
into new areas; four, developing investment tax incentive programs and investment and tax treaties
which reflect the unique needs of the region; and five, building on the recently completed CCA Business
Summit and Chamber of Commerce studies to enhance the role of the private sector and to promote
coordination with their counterparts in the SSA region as well as a rebranding of Africa as overflowing
with investment promise.

To fully secure US efforts at Regional Integration, PAEGO suggests the Secretary of State work with her
counterparts to strengthen international support for regional integration particularly regional
infrastructure as well as a parallel effort to that suggested by the United States to develop a coordinated
approach towards investment tax credits and investment and tax treaties tailored to African needs.

Regional integration is a critical step to achieve economic growth by overcoming challenges from many
countries being too small to compete independently in the global marketplace. While lip-service is
being played to the notion on both sides, serious, coordinated programs in areas of trade, investment
and development have yet to emerge. PAEGO respectfully addresses the need for this coordination with
concrete recommendations for moving forward swiftly and effectively. The opportunity sits before the
United States to cement the US-African partnership, bring benefit to both and growth to SSA economies.