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Manchester Trade

Manchester_Free_Trade_HallManchester Trade has had two decades of successful business in Washington, DC, providing strategic trade and business advisory services to domestic and international clients in areas such as trade negotiations, export development, investment promotion, and legislative advocacy. Their Principals and Associates work closely with clients to advance domestic and global business and policy interests in the U.S. market and abroad. Stephen Lande is the President of Manchester trade and is a distinguished international trade expert in the United States. Mr. Lande has been involved in international trade since the 1960s He had a twelve year career with the Office of the United State Trade Representative as the Senior Trade negotiator and the first of a long-line of Assistant USTRs. Mr. Lande has negotiated many bilateral and multilateral trade agreements on behalf of the US Government in Asia, the Middle East and the Caribbean.

Welcome to the interview Mr. Lande. I would just like to start by asking you what AGOA is?

Lande2AGOA: African Global Opportunity Act. It is considered a flagship program of the U.S. in terms of our economic relations with Africa. It was developed, actually, by the Clinton Administration, in the last century! As an old program, an in one sense maybe not, it went into effect in the year 2001, it has received bipartisan support; meaning support from both Republicans and Democrats. It is mainly a Tariff Preference Program. Tariff preferences are generally available to developing countries. It is usually subject to conditions and limits. The U.S started a goal with the theory that we should designate every product for duty free. We didn’t quite make it. We missed a couple products, but particularly some agricultural products that we can discuss later.

I recently read a document stating that Manchester Trade has some recommendations to improve AGOA. What might those be?

Well, a lot depends on how you define AGOA: If you define it as a program that provides market access, obviously we have several recommendations but they are more limited. If you describe AGOA as being the US approach to Africa, then we can go beyond market access to include provisions which promote U.S investment, which supports regional infrastructure, which a real necessity in Africa as you know that now. (And) We support regional integration and relationships to developing pre-trade agreements common markets, giving Africa the required economic space to operate.

As far as improvements go to AGOA. Using the same standard I will explain a few. For the market access provisions we basically suggest three proposals. We suggest that AGOA be extended indefinitely. Meaning, the trade preferences be extended indefinitely for two reasons: number one, when the provisions are allowing Africa to use fabric or to incorporate fabric, produced in the Far East, which is only available- no other country can do that. A lot of people can import apparel to the U.S duty free, but they all have to use their own FRAVRIC. Very few can use the very competitive Far East Fabric. That was to expire, if I remember correctly, in October 2012. And it took us up until the last second to get it renewed. Well, by that time people cancelled their orders, they said “Wait a minute, I have a Christmas order coming in on December, I don’t know whether to pay Duty or not… How can I import those products?”. So you had what was called the ‘cliff’. What we argue is that we should make things permanent so that we don’t have the ‘cliff’.

Also, what happens when you negotiate a free trade agreement (negotiate reciprocity), you don’t increase duties, you keep your zero duties in place but you get paid for them. That’s what is called reciprocity; the other country reduces duty. So, at the end of the day you have a free trade agreement where there is no duties on either side. So that is why, by extending it duty free indefinitely, but also saying that we are going to give you a hiatus of ten years because of your development, because of the fact that in order to negotiate as a group, you have to be unified. That takes ten years to put (together) the reasonable economic communities. The African Union has a proposal for a continental free trade agreement. The Abuja treaty, which kind of regulates economic integration within Africa as an African common market, also to be completed at the end of the decade.

So what we basically say, is let us first extent the duty free treatment indefinitely. Let’s give Africa ten years so it can complete its own regional integration and then Africa should be strong enough as a group to negotiate with the U.S. Since duties don’t go up, the permanent duty free remains in place, the only difference is that Africa gradually gets to begins to provide the same rights to U.S duty free imports. 

Can we talk a little about the Trans-Atlantic South Partnership?

Well, that is one of our ideas, we appreciate the question. As you may know, the Obama administration has two major trade initiatives: One is called the Trans-Pacific Partnership, which is designed to bring, I believe 18 countries that boarder the Pacific, not necessarily right on the border because some of them are inland but we still use that language. And this specifically based countries either in Latin America; so we include countries ranging from Chile, Peru, on up to Mexico. Canada now has joined too. To countries in the Pacific area including going as far as inland as Malaysia. But these countries have got to a Free Trade agreement.

Similarly, we are negotiating an agreement with the Europeans, called by what you had said the Trans- Atlantic South Partnership, in short we call T-TIP. So, we have TPP negotiations and T-TIP negotiations. Well, I looked at the map the other day, I didn’t have anything better to do, and guess what I discovered? That the Atlantic is a big ocean, but to be honest, it’s only the North Atlantic that separates the U.S from Europe, and the South Atlantic separates the United States from Africa. So, we said, “Okay, I’m very happy so let’s call it what it was, I would call T-TIP, TN-TIP, but I don’t wanna go there because that name has already been given by people, so they can keep it… so, why don’t we then put together, well, Manchester Trade said, why not put together something we call the Trans-Atlantic South Partnership. Which, in fact, if you look at the growth rate of the country is probably more economic promise in the Trans-Atlantic South than there is in the Trans-Atlantic North, or the U.S/ Europe Free Trade Agreement. So we say, “what should we include in it? We are not ready yet for Reciprocal Duties, We are ready for making AGOA permanent, we are ready, certainly,  to work together with the country to eliminate barriers to U.S trade. ” So, there is a number of things we can do in the TASP which are similar to perhaps a little more development, perhaps moving into a few more areas than the T-TIP, but certainly not having yet the free trade component that we have, or the Custom Union support.

The document states that the EU is part of a problem to this reform. Could you tell us a little bit about that?

You did read the document, I’d like to point that out, that you asked all the right questions. So, this is the challenge, and it’s a hard challenge. The problem with trade policy and the reason it puts everyone to sleep, the concepts are not very hard- it’s not nuclear science, it’s just that you have to go through all these long tedious stories to explain what happened so you can get to where we are today. Many years ago, two things occurred: number one, the Europeans, back in the 1970’s, they decided that they were going to come up with an agreement with their former colonies, which took place at the Lome Convention, where they were going to get back reciprocity. They were going to give them duty free treatment. And the U.S said “no, no, no, no that’s not how we picture it, these preferences should be given unilaterally, you’re not supposed to get a special position, or a special foothold in your market so that it gives you an advantage over everybody else, and so on.” So, we had a big fight with the Europeans, and we won. What we agreed was that one would have a system they called the Generalized System Preferences (GSP) where you would include all preferences, all products to the extent necessary, all developing countries that meet your criteria and you would not ask for Reciprocity. There would be non-Reciprocity.

This system worked well until the beginning of the century. Because, in the meantime, the Central Americans were very upset, because the Europeans had a number of “Regional Agreements” and the agreement with the African-Caribbean Pacific states were not subject to GSP. The old GATT (General Agreement on Tariffs and Trade) was really a general agreement to talk and talk because there was no way to enforce a decision. If you found someone that was violating it then, big deal. I remember, when they formed the WTO after 1994; according to those dispute agreements, even if the people disagreed with you, but if you lost a case you were out or you would have to change your trade law or be subject retaliation. So, the Europeans kept losing the trade laws because ACP is not a generalized system it was only available to former African colonies and specific colonies of Pacific Africa and the Caribbean. The U.S wanted to do something for Africa so we got a WTOA, but the Europeans didn’t want that so the Europeans told the ACP countries that they either had to sign a Reciprocal agreement (not outlawed by the WTO), or they would lose preferences. Based on that history the Europeans were able to sign with the Caribbean countries possible because there were no Least Developed Countries (LDC) in the Caribbean, except for Haiti that had its own special interests, but they couldn’t sign with Africa!

Africa has two types of countries; they have those which do rely on the special preferences of loamy????, but there is another group of countries and I probably should have been done with that in my introduction, which are called Least Developed Countries, counties with a General Per capita income of less than 1400 bucks, they had to have a certain low on the human value poll and so on. There is a way to measure it. You had to provide duty free treatment for all LDC’s countries. So, you end up with this problem, on one hand you have some African countries that are going to lose market access but are not least developed. The Europeans end up saying “if you do not sign, they put a date on it- 1st October 2014- , if you do not accept agreements with us by that date you’re going to lose preferences.” So, we feel “wait a minute, that’s crazy. Since you are a common market and you hope to be a single market, you are moving in the right direction, you are partial already; why are you telling Africa it has to sign an agreement ahead of time?” We are saying to the Europeans; “forget it, you wait- give Africa ten years to form their Customs Union or their Free Trade agreement and then then they can negotiate with you as a group.” The Europeans are saying, no, we have to finish by this given date. We asked for a WTO weaver, we got it, they never asked for a WTO weaver.

Part of the tactical approaches that you’re looking at to further the Trans-Atlantic South Partnership is reconstructing the market access provisions, promotion of U.S investment in Africa and Regional integration. Can you tell us a little bit more about those approaches?

One idea I would like to put on the table is that we should renew AGOA; renew the preferences permanently but indicate that after a ten year period, if they are to continue, there has to be some kind of Reciprocity when you negotiate with Africa as a whole. I said when we began, that some things you can say are AGOA measures and some things you could say are beyond AGOA. I always like to say you need a coordinator, I don’t care if it’s with AGOA or not, that’s just wording. [They have various committees]. I don’t care if we have separate legislation or not, you may need it, it’s the requirement of the system, every committee has legislation, every committee has its jurisdiction. But what I do care (about) is that you coordinate this on the top. Maybe by the speaker himself, maybe by ranking leader of the majority, I don’t know. Maybe you do it with the Committees themselves, with the Chairman and the Ranking Member, the ranking member means the person from the other party that has the leadership role. Republicans control the House so every single chairman is Republican, and the Ranking Member would someone the Democrats have chosen to kind of be the alter-ego, so that’s what I mean by Ranking Members. So, again, what we have basically argued is even though there are different pieces of legislation they should be coordinated; either by the Committee Chairmen as a group or by the Speaker of the House, open issue and so on.

The U.S doesn’t have much money, but we do have off budget funds which we call Export/Import Bank. OPIC- Overseas Private Investment Corporation, we have these funds and the U.S Trade Development Agency. OPIC is the most exposed to Africa. What we are basically saying is what can we do in our program to increase the amount of money that can be loaned and the effectiveness of that money. So that is one important ingredient. Another agreement I mentioned is that we don’t want the Europeans to keep pushing their Free Trade agreement because they will get a Free Trade agreement other countries will be piling on. I mean, you’ll never have to have an independent African trade agreement anymore. So part of our proposal is that you work within the T-TIP framework and you try to develop agreements like I said earlier.

We have a big emphasis on working with equity funds, because we think that that is where the investment is coming in from for Africa. That is what now collects money from small to medium sized investors, so we have that possibility as well. We have been arguing very specifically for agriculture. There are three products that Africa produces in great number which are currently subject to Tariff Rate Quotas. Which means that if your traditional supplier, within the traditional amounts, you can chip inside the Tariff Rate Quota. However, with your new supplier you have to chip outside the Tariff Rate Quota. The problem is, and I will use tobacco as an example, that in tobacco if you are an AGOA beneficiary you ship for nothing under the Tariff Rate Quota. If you have to pay a duty it is about 6%, meaning for people that don’t have AGOA benefits but they get it. But if you’re an importer, like an African importer that doesn’t have a tradition of being in the market, they don’t a market share of the Tariff Rate Quota, they have to pay a duty of 350%. So, that is a very specific example, the same is true for sugar, the same is true for ground nuts or peanuts. What we would like to see happen, is that we would like these products of interest to Africa to be granted duty free treatment just as if they were an LDC. 

Would you like to make any comments about Regional integration?

We touched a little bit on it earlier because we did mention the need for the Europeans to give up on reciprocity, to try to push the Europeans, and to try to energize the Africans to finish these agreements. One thing people have to realize is that there are two things involved when it comes to Regional integration, one is easier than the other: The first thing is the absence of obstructions –you can’t have tariffs every ten minutes along the way- you can’t have arbitrary import charges you’re not expecting to be levied on you. So we have been pushing for negotiations that eliminate the tariff barriers between countries and addresses the non-tariff measures. We include this as an AGOA approach. The challenge is the EU is asking for Reciprocity. We have argued, and we are suggesting, is that the way you solve the problem is like I said that under my task you negotiate under the context of the T-TIP a common approach to Reciprocity in Africa with the Europeans.  And that is how you begin to solve the problems; that is what we are recommending.

We have spoken a little bit about the shortcomings of AGOA and the tactical approaches that Manchester Trade plans to implement; I was wondering if you could comment about any foreseeable challenges?

Well, we have got a lot of challenges: number one is the Congressional agenda which is always full, so it is very hard to include these ideas. Number two is the fact that some people who have current benefits are nervous they are going to lose them even though there are only four or five countries who export apparel under AGOA. South Africa is the only country that is in many different product groups which is representative of its development level. On the whole, countries are not benefiting from AGOA. It’s not bad, it delivers a message to the importance of the private sector, it delivers messages for good governance (you have to have them in order to be eligible), but it’s not generally as effective as Chinese program. So we are trying to convince people that they should push it.

I don’t know how the AU is going to come out, but I think what is very important is that President Obama, on two occasions, while he was in Africa, talked about the need to improve AGOA. So, that is already on the agenda. The question is what ideas do you need to improve it, and I think that is what will be researched and available well before. When President Obama was speaking to the Africa press or the African young businessmen, he looked at Froman, his USTR (United States Trade Representative), and said “Mike over there is going to begin this process of the AGOA forum.” The AGOA forum begins in August 2013 in Addis, and that is why it is so important that the Africans get together a position and they propose it in that particular meeting.

In your opinion, do you see a bright future for the African Union playing a positive role in this?

Yeah, because the movement, the evolution is from small to larger groups, that is what we saw happen in Europe. A lot of resistance was in the beginning when they had six members. Now, it has 28 members and growing and certainly with power. There are always all kinds of fringe issues but there is no question that the AU will increasingly become more enhanced.

You mentioned that you are particularly interested in agriculture; why that sector more than any other?

Well, I have two answers for you: first, even though by 2023 the actual population in the rural areas will is going to be less than the population in urban areas, there is this movement going on and it does call for increased productivity in the agricultural section because we have less people working there and yet there will be more demand. That is why I think we need to keep on focusing on agriculture. Two, you have these three strange items which because of the Trans operation of the TRQ system Africans are denied benefits. That does not make sense. Obviously AGOA is designed to modify, during a period when something happened domestically, but there is no right to just say I can permanently give it to you. So that is what are arguing for. The U.S hasn’t said “no, they won’t do it.” We are just arguing and we will see what happens.