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WILL THERE BE AN AFRICAN ECONOMIC COMMUNITY? HEARING BEFORETHE SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH, GLOBAL HUMAN RIGHTS, AND INTERNATIONAL ORGANIZATIONS OFTHE COMMITTEE ON FOREIGN AFFAIRS HOUSE OF REPRESENTATIVES ONE HUNDRED THIRTEENTH CONGRESS SECOND SESSION JANUARY 9, 2014 Serial No. 113–157 Printed for the use of the Committee on Foreign Affairs ( Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or http://www.gpo.gov/fdsys/ U.S. GOVERNMENT PRINTING OFFICE 86–221PDF WASHINGTON : 2014 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate 0ct 09 2002 10:31 Jul 14, 2014 Jkt 000000 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 F:\WORK\_AGH\010914\86221 SHIRL COMMITTEE ON FOREIGN AFFAIRS EDWARD R. ROYCE, California, Chairman CHRISTOPHER H. SMITH, New Jersey ELIOT L. ENGEL, New York ILEANA ROS-LEHTINEN, Florida ENI F.H. FALEOMAVAEGA, American DANA ROHRABACHER, California Samoa STEVE CHABOT, Ohio BRAD SHERMAN, California JOE WILSON, South Carolina GREGORY W. MEEKS, New York MICHAEL T. MCCAUL, Texas ALBIO SIRES, New Jersey TED POE, Texas GERALD E. CONNOLLY, Virginia MATT SALMON, Arizona THEODORE E. DEUTCH, Florida TOM MARINO, Pennsylvania BRIAN HIGGINS, New York JEFF DUNCAN, South Carolina KAREN BASS, California ADAM KINZINGER, Illinois WILLIAM KEATING, Massachusetts MO BROOKS, Alabama DAVID CICILLINE, Rhode Island TOM COTTON, Arkansas ALAN GRAYSON, Florida PAUL COOK, California JUAN VARGAS, California GEORGE HOLDING, North Carolina BRADLEY S. SCHNEIDER, Illinois RANDY K. WEBER SR., Texas JOSEPH P. KENNEDY III, Massachusetts SCOTT PERRY, Pennsylvania AMI BERA, California STEVE STOCKMAN, Texas ALAN S. LOWENTHAL, California RON DESANTIS, Florida GRACE MENG, New York TREY RADEL, Florida LOIS FRANKEL, Florida DOUG COLLINS, Georgia TULSI GABBARD, Hawaii MARK MEADOWS, North Carolina JOAQUIN CASTRO, Texas TED S. YOHO, Florida LUKE MESSER, Indiana AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director JASON STEINBAUM, Democratic Staff Director SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH, GLOBAL HUMAN RIGHTS, AND INTERNATIONAL ORGANIZATIONS CHRISTOPHER H. SMITH, New Jersey, Chairman TOM MARINO, Pennsylvania KAREN BASS, California RANDY K. WEBER SR., Texas DAVID CICILLINE, Rhode Island STEVE STOCKMAN, Texas AMI BERA, California MARK MEADOWS, North Carolina (II) VerDate 0ct 09 2002 10:31 Jul 14, 2014 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 F:\WORK\_AGH\010914\86221 SHIRL C O N T E N T S Page WITNESSES Amadou Sy, Ph.D., senior fellow, Africa Growth Initiative, The Brookings Institution ............................................................................................................. 6 Mr. Stephen Lande, president, Manchester Trade ............................................... 22 Peter Quartey, Ph.D., senior research fellow, Institute of Statistical, Social and Economic Research, University of Ghana................................................... 30 Witney Schneidman, Ph.D., nonresident fellow, Africa Growth Initiative, The Brookings Institution ........................................................................................... 37 LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING Amadou Sy, Ph.D.: Prepared statement ................................................................ 8 Mr. Stephen Lande: Prepared statement .............................................................. 26 Peter Quartey, Ph.D.: Prepared statement ........................................................... 32 Witney Schneidman, Ph.D.: Prepared statement.................................................. 40 APPENDIX Hearing notice .......................................................................................................... 60 Hearing minutes ...................................................................................................... 61 (III) VerDate 0ct 09 2002 10:31 Jul 14, 2014 Jkt 000000 PO 00000 Frm 00003 Fmt 5904 Sfmt 5904 F:\WORK\_AGH\010914\86221 SHIRL VerDate 0ct 09 2002 10:31 Jul 14, 2014 Jkt 000000 PO 00000 Frm 00004 Fmt 5904 Sfmt 5904 F:\WORK\_AGH\010914\86221 SHIRL WILL THERE BE AN AFRICAN ECONOMIC COMMUNITY? THURSDAY, JANUARY 9, 2014 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH, GLOBAL HUMAN RIGHTS, AND INTERNATIONAL ORGANIZATIONS, COMMITTEE ON FOREIGN AFFAIRS, Washington, DC. The subcommittee met, pursuant to notice, at 2:13 p.m., in room 2172, Rayburn House Office Building, Hon. Christopher H. Smith (chairman of the subcommittee) presiding. Mr. SMITH. The subcommittee will come to order, and good after- noon. The African Union, or AU, is in the midst of a long program to create an African economic community through the eventual merg- ing of existing regional economic communities. U.S. policy is to support regional integration in Africa as is enhancing the success of U.S.-Africa trade by reducing trade barriers and creating larger markets. This hearing will examine the AU effort and its potential benefits for Africa as well as the United States. A focal point in U.S.-Africa trade policy is the encouragement of integrated markets in Africa. It makes trade with Africa more effi- cient and beneficial for African businesspeople as well as governments. It is also more attractive for foreign investors. The AU, a regional grouping of all countries except Morocco, was established in 2002 as the successor of the now-defunct Organiza- tion of African Unity, or the OAU. Its formation was largely moti- vated by OAU members’ desire to more quickly achieve the goals of the 1991 African Economic Community Treaty, which was signed by some 51 heads of state. The treaty is intended to promote Afri- can regional economic integration and socioeconomic development through the planned creation of a common African market and shared political and economic institutions. Make no mistake about it, this is a challenging goal. The exam- ple of the European Community demonstrates the difficulty even when involving developing nations. The current African nations were not created to collaborate with one another. Varying languages, conflicting legal and commercial systems, and often incom- patible transportation infrastructures make this worthy goal a major challenge, and there are other obstacles that make this effort even more daunting. Nevertheless, the eight recognized regional economic communities have a timetable to which they are generally adhering to (1) VerDate 0ct 09 2002 10:31 Jul 14, 2014 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 F:\WORK\_AGH\010914\86221 SHIRL 2 with few exceptions. The Arab Maghreb Union, a trade agreement comprising Algeria, Libya, Mauritania, Morocco, and Tunisia, is in- active and frozen due to deep political and economic disagreements between Morocco and Algeria regarding, among other issues, the matter of Western Saharan independence. The Community of Sahel-Saharan States, comprising 28 countries across Africa’s Sahel region, is finding regional integration difficult because of its members being part of other trade blocs that are more advanced in their integration. Meanwhile, the Common Market for Eastern and Southern Afri- ca, a free-trade area with 19 member states stretching from Libya to Swaziland, has agreed to an expanded free-trade zone and is also considering a common visa scheme to boost tourism. The East African Community, an intergovernment organization comprising some five East African countries—Burundi, Kenya, Rwanda, Tanzania, and Uganda—signed a protocol just last year outlining their plans for launching a monetary union within 10 years. The Economic Community of Central African States, which in- cludes 10 countries across the middle of the continent, formed a customs union with a free-trade area between members and a common external tariff for imports from other countries as long ago as 1966. The Economic Community of West African States, a regional group of 15 West African countries, is creating a single large trading bloc to an economic and trading union and serves as a peacekeeping force in the region, all despite operating officially with three coequal languages: French, English, and Portuguese. The Intergovernmental Authority on Development is an eight- country trading bloc based in East Africa and has transformed from an executive group with a focus on development and environ- mental control to a larger structure as a regional economic community. The Southern African Development Community began as an anti-apartheid coalition fighting for majority rule in South Africa in the 1970s, but since majority rule came to South Africa in 1994, it has become a traditional regional economic community and, like its West African counterpart, sometimes engages in peacekeeping operations. By 2017, a free-trade union and customs union is supposed to be established in each regional economic community. The process is still stalled in North Africa and the Sahel, although there is progress elsewhere. This phase is now fully enforced in East Africa as well as West and Central Africa. In today’s hearing, we are looking for recommendations on what the regional economic communities and their member countries must do to fulfill the AU’s ambitious agenda. We also want to examine what the U.S. Government, other donor governments, and international financial institutions can do to enhance their efforts in this regard. Ostensibly, this assistance has been ongoing for some time now. We want to find out more about these efforts and why they have not moved further ahead. We have with us an extraordinary panel of experts who have ob- served regional integration in Africa and, in some cases, have VerDate 0ct 09 2002 10:31 Jul 14, 2014 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 F:\WORK\_AGH\010914\86221 SHIRL 3 worked to promote it, for more than a decade. We know what governments have said about the benefits of regional integration, and we have heard from the private sector about their preference for integrated markets. Today we want to hear from some who can provide and have provided the technical assistance necessary to make these goals a reality. We in Congress are currently working on legislation to extend the Africa Growth and Opportunity Act, and integrated regional markets will only enhance the success of this trade process moving forward. We hope today’s contributions will better inform us on how we can be more effectively engaged in regional integration and the expansion of African markets. I now yield to my friend and colleague, Ms. Bass, the ranking member. Ms. BASS. Well, thank you very much, Mr. Chair. And Happy New Year. And I want to thank you, as always, for your leadership in holding today’s hearing, which is raising the question: Will be there an African economic community? This is a very important question as it relates to Africa’s economic development, and it is critical that we familiarize ourselves with the strategic roles played by the African Union, its Commis- sion, member states, and individual regional economic communities regarding regional economic integration. As early as 1991, the African Union addressed this issue by iden- tifying regional economic integration as crucial to Africa’s socioeconomic development, self-sufficiency, and financial prowess. The AU Commission’s prioritization of this issue and the commitment of AU member states and the RECs to support this effort was un- derscored at the 50th summit of the AU last May, which I had the honor of attending. Last September, in a keynote address at the Congressional Black Caucus’ braintrust here in Washington, DC, AU chairperson Dr. Zuma emphasized the importance of regional economic integration and stressed that achieving this goal would be socioeconomically transformative for Africa. As a strong supporter of increased trade and investment between Africa and the U.S., a component of which is the reauthorization and strengthening of AGOA, I applaud the AU’s objective of regional economic integration. I believe the growth in business and investment between the U.S. and African private sectors is a win-win scenario which can ultimately expand the growing service sector and contribute to capacity-building on the continent. It can also develop an increasing customer base for U.S. business comprised of a growing African middle class, trends which develop and secure jobs in Africa and the U.S. The U.S. Government initiatives, such as Power Africa, Trade Af- rica, AGOA, and Doing Business in Africa, help to build trade and investment partnerships between the U.S. and Africa by focusing increasingly on partnerships with the private sector, the involve- ment of civil society in Africa, as well as the diaspora community. Feed the Future contributes to developing Africa’s agricultural sector and promoting food security. The success of the latter is particularly noteworthy this year, as the AU has identified 2014 as the year of agriculture and food security. VerDate 0ct 09 2002 10:31 Jul 14, 2014 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 F:\WORK\_AGH\010914\86221 SHIRL 4 These government initiatives increasingly work on a whole-of- government basis and contribute to growth in key sectors of individual African countries and regions. Over the past few years, we have witnessed increased AU member states’ commitment to the greater goal of intra-African trade, promoted by the realization that old barriers to trade must be eradicated in favor of less complicated commerce-enhancing alter- natives. We have also seen several African countries identified by the international financial institutions as having the fastest-growing economies worldwide. Especially given the reversal of the brain drain, record levels of remittances from hardworking and successful diaspora communities, and the expansion of middle-class con- sumerism, Africa is viewed as a good investment by several of our economic competitors. While this progress is commendable, African and American economists and observers stress that much more needs to be done to address ongoing infrastructural and capacity-building challenges faced by many African countries, particularly those dependent on the agricultural sector. Uneven income distribution, price subsidies, poor transportation networks and infrastructure, rampant unem- ployment and underemployment of young people, poor access to electrical power, and, frankly, a greater need for good governance has resulted in a pattern of uneven economic development across individual countries and regions. Against this backdrop, I welcome our witnesses here today. I am very interested in hearing from them about how the AU, the RECs, and individual countries plan to address these challenges. Sec- ondly, as the U.S. seeks to strengthen trade and investment rela- tions with Africa, what role should U.S. Embassies play in the process? And while AGOA has been very successful in increasing U.S.-Af- rica trade in oil and textile industries, which has limited job creation, frankly, there has been little success in exporting other AGOA-eligible products to the U.S. that could be produced by small to medium-size companies. Are AGOA-eligible countries developing strategies to increase exports of goods produced by SMEs? And, finally, in view of current situation in South Sudan, how does the EAC address Juba’s application for EAC membership? As I have said in previous hearings, we learn as much from our success as we do from our failures. As we hear from today’s witnesses, our focus should not only cover the broad diversity of success and the many challenges but the activities that worked well in addition to those that fail to accomplish their objectives. Thank you. I yield back. Mr. SMITH. Thank you, Ms. Bass. Mr. Marino? Mr. MARINO. I have no questions. Mr. SMITH. Mr. Cicilline? Mr. CICILLINE. Thank you, Mr. Chairman and Ranking Member Bass, for holding today’s hearing on this very important issue. I would like to offer my gratitude to the witnesses for their testimony and, more importantly, for the important work that they are doing. VerDate 0ct 09 2002 10:31 Jul 14, 2014 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 F:\WORK\_AGH\010914\86221 SHIRL 5 As one of the most resource-rich regions on the planet, Africa has always possessed tremendous economic potential. And while the eight regional economic communities in Africa develop closer ties and foster greater cooperation, the world will be watching atten- tively. It is imperative that the United States remain a strong trading partner with nations on the African continent throughout this process and, as Congresswoman Bass said, learn both from the suc- cesses as well as the failures. As regional integration improves, the African trading position and economy in general will improve, and I hope that we will see a correlating reduction in terrorism and political unrest in the region. I again thank the witnesses for their testimony, and I look forward to hearing the testimony. And I yield back. Mr. SMITH. Thank you very much. Mr. Weber? Mr. WEBER. I am good. Mr. SMITH. And Dr. Bera? I would like to now welcome our distinguished witnesses to the witness table, beginning, first of all, with Dr. Amadou Sy, who is a senior fellow at the Brookings Institution’s Africa Growth Initia- tive and currently serves as a member of the editorial board of the Global Credit Review. He focuses on banking, capital markets, and macroeconomics in Africa and emerging markets. Dr. Sy was pre- viously deputy division chief of the Financial Service Division of the International Monetary Fund’s Monetary and Capital Markets Development. And Dr. Sy has also held a variety of positions at the IMF for the last 15 years, covering more than 20 countries and all the financial crises since 1998. He also worked on a project to set up a trust fund for capacity-building in Africa. We then will hear from Mr. Stephen Lande. Over his 50-year ca- reer at the State Department, the Office of the U.S. Trade Rep- resentative, and in private sector, Mr. Lande has worked extensively to expand U.S. trade. He has worked as a Foreign Service Officer, senior trade negotiator, and an Assistant U.S. Trade Rep- resentative. He has negotiated trade agreements with countries around the world, and he was instrumental in the creation of the Generalized System of Preferences, the Caribbean Basin Initiative, and NAFTA. Mr. Lande continues to work with African governments and teaches international trade at Johns Hopkins’ School of Advanced International Studies. We will then hear from Dr. Peter Quartey, who is an associate professor in development economics at the University of Ghana. He was formerly the deputy director of the Center for Migration Stud- ies at the University of Ghana. He is also currently the board chairman of the University of Ghana’s Cooperative Credit Union. He has published extensively, and his research interests are private-sector development, including small and medium enterprises, development finance migration and remittances, and poverty anal- yses. He consults for the World Bank, the Organization for Eco- nomic Cooperation and Development, the Overseas Development Institute, and many others. VerDate 0ct 09 2002 10:31 Jul 14, 2014 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 F:\WORK\_AGH\010914\86221 SHIRL 6 Finally, we will hear from Dr. Witney Schneidman of Covington & Burling and the Brookings Institution. He is a senior international advisor for Africa at Covington & Burling. Dr. Schneidman, a nonlawyer, has a deep understanding of many of the major African countries as well as uniquely valuable insights into the recurrent challenges and opportunities across the continent. He provides strategic advice on the varied political, economic, social, and regulatory issues that are critical to companies’ success in Africa. Dr. Schneidman’s work focuses on U.S.-Africa re- lations, trade and investment in sub-Saharan Africa, and issues re- lated to economic growth and regional integration on the continent. So, Doctor, thank you, as well. We will begin with you, Dr. Sy. STATEMENT OF AMADOU SY, PH.D., SENIOR FELLOW, AFRICA GROWTH INITIATIVE, THE BROOKINGS INSTITUTION Mr. SY. Chairman Smith, Ranking Member Bass, and members of the subcommittee, thank you for convening this important hearing to discuss Africa’s progress toward establishing an economic community. I appreciate the invitation to share my views on behalf of the Af- rica Growth Initiative at the Brookings Institution. The following views are my own and do not necessarily represent those of the Brookings Institution. Mr. Chairman, hoping for their countries to benefit from integration, 51 African leaders signed the Abuja Treaty in 1991 and established a roadmap toward an African economic community to be completed by 2028. Mr. Chairman, 23 years later, regional integration is happening across Africa, but progress is happening at different speeds. The eight building blocks of the treaty, the regional economic communities, have different levels of advancement across the com- ponents of regional integration, such as freedom of movement for capital and goods, labor mobility, and unification of currencies. Simply put, four RECs are measurably progressing at regional integration and four are falling behind. As of 2013, the East African Community appears to have made the most progress overall toward the stages of the Abuja Treaty. Even within regional groupings, the progress of individual countries toward achieving convergence target is uneven. The diversity of countries within the same regional bloc is at times very pro- nounced. For instance, the Central African Republic is the only non-oil-exporting country in the Economic Community of Central States. In South Sudan, a member of the Intergovernmental Au- thority on Development, IGAD, the humanitarian, political, and economic situation is deteriorating very rapidly. There is also significant overlap of membership between RECs. This is a problem because countries belonging to more than one regional bloc can find it difficult to prioritize their policies. Mr. Chairman, African governments will need to address a num- ber of challenges to accelerate integration. They will need to main- tain regional peace and security, strengthen common institutions, and streamline regional integration policies. VerDate 0ct 09 2002 10:31 Jul 14, 2014 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 F:\WORK\_AGH\010914\86221 SHIRL