[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
INCREASING AMERICAN JOBS THROUGH GREATER EXPORTS TO AFRICA
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON AFRICA, GLOBAL HEALTH,
GLOBAL HUMAN RIGHTS, AND
INTERNATIONAL ORGANIZATIONS
OF THE
COMMITTEE ON FOREIGN AFFAIRS
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
MAY 7, 2013
__________
Serial No. 113-57
__________
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
80-799 WASHINGTON : 2013
-----------------------------------------------------------------------
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
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,
SCOTT PERRY, Pennsylvania Massachusetts
STEVE STOCKMAN, Texas AMI BERA, California
RON DeSANTIS, Florida ALAN S. LOWENTHAL, California
TREY RADEL, Florida GRACE MENG, New York
DOUG COLLINS, Georgia LOIS FRANKEL, Florida
MARK MEADOWS, North Carolina TULSI GABBARD, Hawaii
TED S. YOHO, Florida JOAQUIN CASTRO, Texas
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
C O N T E N T S
----------
Page
WITNESSES
Mr. Stephen Lande, president, Manchester Trade................... 7
Mr. Peter C. Hansen, principal counsel, Law Offices of Peter C.
Hansen, LLC.................................................... 18
Sharon T. Freeman, Ph.D., president and chief executive officer,
All American Small Business Exporters Association.............. 36
Ms. Barbara Keating, president and founder, Computer Frontiers... 45
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Mr. Stephen Lande: Prepared statement............................ 11
Mr. Peter C. Hansen: Prepared statement.......................... 20
Sharon T. Freeman, Ph.D.: Prepared statement..................... 39
Ms. Barbara Keating: Prepared statement.......................... 48
APPENDIX
Hearing notice................................................... 76
Hearing minutes.................................................. 77
INCREASING AMERICAN JOBS THROUGH GREATER EXPORTS TO AFRICA
----------
TUESDAY, MAY 7, 2013
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 o'clock
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
afternoon to everybody. Today's hearing is intended to examine
the issues surrounding U.S. exports to Africa, which are
supposed to, at least, balance African exports to the United
States. This will include existing obstacles to two-trade trade
with Africa.
The hearing will specifically examine the Increasing
American Jobs Through Greater Exports to Africa Act of 2013,
H.R. 1777. The bill was introduced, as we did previous years,
by myself, Ranking Member Karen Bass, and my friend and
colleague Bobby Rush, who is joining us on the panel, on April
26th and was introduced in the Senate on April 11th as S. 718.
The purpose of H.R. 1777 is to increase U.S. exports to
Africa by 200 percent over the next decade. This bill does not
replace AGOA. It complements it by providing for rebalancing
that makes it as beneficial to Americans as it is to Africans.
The bill intends to reach its ambitious but achievable goal by
taking several steps, including the creation of a comprehensive
U.S.-Africa trade strategy and a coordinator to ensure that all
U.S. agencies involved in trade work in concert with one
another.
The legislation also calls for not less than 25 percent of
available U.S. financing for trade deals to be devoted to
facilitating U.S.-Africa trade. Furthermore, it encourages the
descendants of Africa in this country, who largely operate
small- and medium-sized businesses to play a greater role in
trade with countries in Africa.
Various studies show that every additional $1 billion in
exports generates 6,000 to 7,000 new U.S. jobs. According to
current data from the United States International Trade
Administration, export-supported jobs linked to manufacturing
account for an estimated 3.3 percent of my home State of New
Jersey's total private sector employment. More than one-sixth
or 17.2 percent of all manufacturing workers in New Jersey
depend on exports for their jobs.
But U.S. exports have suffered during the global economic
downturn because traditional markets, such as in Europe, are
buying fewer U.S. products. According to the U.S. ITA, we are
the largest importer of African goods, receiving 20 percent of
the continent's total global exports. However, U.S. exports to
Africa fell sharply during the height of the global recession.
From 2008 to 2009, U.S. exports to Africa dropped 45 percent,
from $78.3 billion to $42.8 billion.
According to statistics released by the U.S. Census Bureau,
African exports to the U.S. since AGOA took effect in 2001
increased from $25.4 billion to $66.9 billion in 2012, an
increase, a huge increase of more than 163 percent. By far,
petroleum exports from Africa led the way, with more than $28
billion in 2012 alone.
Meanwhile, U.S. Census Bureau statistics showed that the
United States' exports to Africa increased from $12 billion to
$32 billion from 2001 to 2012, an increase of 166 percent.
Consequently, while U.S. exports to Africa showed a robust
increase, since the inception of AGOA, the U.S. trade deficit
with Africa increased from $13 billion in 2001 to $34 billion
last year.
The five most popular import sectors for African countries
are machinery and equipment; chemicals; petroleum products,
including lubricating oils, plastics, and synthetic fibers;
scientific instruments; and food products. That means that
small- and medium-sized companies across the United States have
commercial opportunities available in exporting goods and
services to African countries.
The African Development Bank estimates that one in three
Africans is considered to be in the middle class. That is
nearly 314 million Africans who have escaped poverty and now
buy consumer goods, including those from the U.S. In the
supermarkets and department stores that have sprung up across
Africa in recent years, there are some American products
already on the shelves, but there is space for more
contributions from U.S. producers. Companies, such as Procter &
Gamble, have long realized the potential of African markets.
Two years ago, Wal-Mart, the world's largest retail outlet,
purchased South Africa's Massmart and its 288 stores in 14
African countries.
The Economist magazine created a significant buzz within
the U.S.-Africa trade community 2 years ago when it announced
that 6 of the world's 10 fastest growing economies in the first
decade of this century were in Africa: Angola, Chad, Ethiopia,
Mozambique, Nigeria, and Rwanda. In the following 5 years, The
Economist projected that 7 of the 10 fastest growing economies
in the world would be in Africa: The Democratic Republic of the
Congo, Ethiopia, Ghana, Mozambique, Nigeria, Tanzania, and
Zambia.
Whether or not you agree with the popular slogan ``Africa
is rising,'' markets on the continent are attracting foreign
trade and investment in increasing amounts. It is not only
China that has had its sights set on African markets. Countries
as diverse as India, Japan, Brazil, and Turkey all see the
potential of selling their products in Africa.
The Anglo-Dutch consumer goods giant, Unilever, has long
considered Africa a lucrative environment for consumer sales,
earning a fifth of its profits in Africa until the 1970s, when
it turned its main commercial attention to Asia. Now Unilever
is back in Africa in force, selling $3.7 billion of everything
from soap to soup. Frank Braeken, head of Unilever's African
operation said African consumers are underserved and
overcharged. To meet the continent's need for personal care
products, Unilever developed its Motions range of products.
At our hearing on this legislation last spring, we heard
from Luster Products, which produces items that fit the
description of what Unilever is selling as well. There is
little reason why this company and other U.S. producers can't
follow suit and meet the needs Unilever says it is now meeting
as an unmet need.
We will hear today from four witnesses with expertise on
the opportunities and challenges faced by U.S. companies in
trade with countries in Africa. We expect to learn why the U.S.
exports to Africa have not kept pace with U.S. imports from
Africa and find out what Congress can do better to balance
U.S.-Africa trade.
I would like to now yield to Mr. Cicilline for any opening
comments he might make.
Mr. Cicilline. Thank you, Chairman Smith.
I also want to acknowledge and thank Ranking Member Bass
for holding today's hearing on this very important issue and
extend my gratitude to the witnesses for their testimony today
and for their important work on this very critical subject. As
has been noted in The Economist, between 2001 and 2010, 6 of
the world's 10 fastest growing economies were located in
Africa, and it is predicted that it will grow to 7 out of 10 by
2015.
In light of this growth, it is critical that the United
States remain a strong trading partner with nations on the
African continent in order to remain competitive in today's
global economy. We must cultivate new and existing trade
relations with emerging markets in the African continent,
particularly sub-Saharan Africa, to maintain and foster a
strong, mutually beneficial relationship to harness this
accelerated and exciting growth.
I look forward to hearing your thoughts and recommendations
on the United States-African trade relationships and the future
of this important partnership, and with the permission of the
chair, I would like to yield the balance of my time to the
distinguished gentleman from Illinois, Congressman Rush.
Mr. Rush. I want to thank my friend for yielding his time
to me.
And I want to join in the chorus of thanksgiving to the
chairman, Chairman Smith, to Ranking Member Bass, and to all
the members of the subcommittee for allowing me to participate
in this hearing, and I appreciate the opportunity to be with
you today to address this most important issue.
Africa as a continent and as nations as trading partners
offer U.S. businesses and government unprecedented and
significant economic opportunities. I am proud to work with my
colleagues in a bipartisan and bicameral effort to remedy a
problem that we see. As has been discussed many times, Africa
is indeed a continent on the rise, and the African sub-Saharan
area region is definitely one of the fastest rising parts of
the African Continent. As has been indicated, more than half of
the world's 10 fastest growing economies are located in sub-
Saharan Africa.
What is even more impressive about that fact is that these
economies are located where they are in a region that, as we
all know, is traditionally seen as underdeveloped. H.R. 1777 is
indeed an important step and not only is happening in cities'
vast markets but also an important step in helping correct the
trade imbalance that currently exists. In short, this is indeed
a win-win move for Africa and the U.S.
I am disheartened by the continuing projection of the image
and the consciousness of Africa as only being in need of aid
when I think that the most prevailing solution to the problem
of Africa, notwithstanding the aid, is also to increase the
level of trade. And during my tenure as a Member of this
Congress, I have had the opportunity to travel, as many of you
have, and when I am there, I am impressed but also disheartened
about the amount of global investment that is happening in
Africa, particularly Chinese investment. I am gladdened because
China and other nations are there, but I am saddened because
the U.S. is standing flat-footed as the other nations of the
world are standing, are moving fleet-footedly.
. One of the distinctive resources that the U.S. has and
places us at a trading advantage to other nations is our
Nation's vast diaspora. The ethnic and cultural linkages that
have been forged with Africa throughout our own history links
inextricably to this continent. Indeed, our economic prosperity
was founded, has depended upon, and has grown thanks to
Africa's vast resources and to Africa's people.
So, in this bill, we will be able to leverage trade
opportunities with Africa. It is an economic prescription that
will promote our economic aims and our objectives and give the
U.S. a leg up over our competitors.
Once again, Mr. Chairman, I want to thank you for holding
this hearing, and I want to thank you and the ranking member
for allowing me to participate, and I look forward to hearing
the testimony of these expert witnesses, and I will look
forward to also asking a few questions of my own.
Thank you, and I yield back the balance of my time.
Mr. Smith. Thank you very much, Mr. Rush, and you are
welcome anytime to join us. Thank you for being here and for
your leadership on the bill. It is deeply, deeply appreciated.
We do have, and I say this to our distinguished witnesses,
a vote, a few votes on the floor right now, so we will
temporarily take a recess and then come back. Again, I want to
apologize. We will lead off with Ms. Bass' opening statement,
and then go to our witnesses. Thank you for your patience.
[Recess.]
Mr. Smith. The subcommittee will resume its hearing, and
the chair recognizes Ms. Bass, the ranking member.
Ms. Bass. As always, I want to extend my appreciation to
Chairman Smith for his leadership in this, on this issue and
for calling this hearing and also to my colleague who has left
us, Mr. Rush. I want to compliment both of them for moving
swiftly to reintroduce H.R. 1777, Increasing American Jobs
Through Greater Exports to Africa Act, and holding a hearing on
a topic that is a key priority for me personally and for the
more than 1 billion people living and doing business on the
continent.
Let me also acknowledge Senator Durbin for leading the way
in the Senate regarding the bill's reintroduction and also the
bill's other cosponsors, Senators Coons and Landrieu and
Boozman.
It has been a pleasure to work with them. I think this bill
is an example of our bipartisan and bicameral commitment to the
continent, and I always tell everybody we only make the news
when we are fighting. When we are working on something together
that is going along smoothly, that, for whatever reason, is not
newsworthy.
I believe that if we focus on the task at hand,
strengthening economic opportunities for the U.S. and nations
of Africa, we will benefit from the continent on the rise. In
Washington, we often hear about Africa's rise and its
reemergence. Six of the world's fastest growing economies over
the last decade are located in Africa, and that number is
expected to increase to seven by 2015, yet this information
more often remains a well kept secret to U.S. businesses
looking for new profitable markets.
I also think that it is very positive that the legislation
calls for the appointment of a special White House coordinator
who would focus on an assertive whole of government approach
promoting U.S. private sector engagement with the continent.
As the U.S. economy strengthens, we need to seize the
moment and recognize that the expanding markets in Africa and
the growing middle class who increasingly attend universities
in the U.S. present opportunities for engagement by our
Government and by the U.S. private sector. These are
opportunities that our competitors in China, India, the EU, and
Brazil have been quick to exploit. These are opportunities that
can and will prove transformative for our economy and the
billion Africans eager to be full participants in a global
marketplace.
Africa is no longer interested in development aid alone.
Africa, with a U.S.-educated middle class, wants to do business
increasingly with the United States. We must recognize that
Africa itself is in transition and seeks partners that want to
provide opportunities for trade, economic growth, and
investment. It is time for our Government and the private
sector to see Africa through a new prism.
Mr. Chairman, nearly a year ago, President Obama released
the U.S. strategy toward sub-Saharan Africa. In this policy
directive there are four interlocking pillars: Strengthening
democratic institutions; spurring economic growth, trade and
investment; advancing peace and security; and promoting
opportunity and development. While this hearing may focus on
the second pillar of economic growth and trade, our success in
accessing African markets will rely on the strength of each of
these pillars and their ability to develop and sustain
environments that will support the type and quality of business
engagement that will attract and retain American businesses.
U.S. companies, such as General Electric, Microsoft, and
Firestone, as well as our witnesses today, understand the
importance of stability, good governance, and the institutions
that encourage and welcome businesses that create jobs and help
put an end to poverty of individuals and communities across the
continent.
A couple of weeks ago, in Los Angeles, where I represent, I
invited representatives from MCC, the Ex-Im, OPIC, and the
Department of Commerce to my district in Los Angeles to help
educate and raise awareness on how California-based businesses
can access U.S. Government resources intended to seek
opportunities throughout Africa and to do so safely and with
the sense of security that their investments will be
safeguarded.
And I am not the only one. I understand that Senator Coons
has held forums in his home State of Delaware on doing business
in Africa, and last year, Representative Ellison invited me to
his district, where we met with the Somalian diaspora, and
there are other members, like Chairman Royce, Rush, Isakson,
Rangel, and McDermott, all of whom care deeply about
strengthening our economic ties with the continent.
To this point, I commend the President for launching Doing
Business in Africa last year through the Department of Commerce
and holding the Doing Business in Africa Forum earlier this
year. This forum and the program aims to leverage the Federal
Government's trade promotion financing and strategic
communications capacities to help U.S. businesses identify and
seize opportunities in Africa.
Mr. Chairman, in closing, I want to acknowledge the
bipartisan and bicameral support for AGOA, our lead trade
agreement with Africa. The Foreign Affairs Committee has a long
history of supporting this legislation, including Chairman
Royce, who has been a staunch and ardent supporter,
Representatives Rangel, McDermott, and also the chairman have
been long champions. I look forward to working with you and our
fellow colleagues as we continue to elevate U.S.-Africa policy
as well as look for any and all opportunities to strengthen our
own economy while also benefiting African nations.
Thank you, and I look forward to your testimony.
Mr. Smith. Thank you very much, Ranking Member Bass.
Let me now introduce our distinguished panelists.
Beginning first, over his 50-year career at the State
Department--talk about a journeyman--the Office of the U.S.
Trade Representative, and in private sector work, Mr. Stephen
Lande has worked extensively to expand U.S. trade. He has
worked as a Foreign Service Officer, a senior trade negotiator,
and an assistant U.S. Trade Representative. He has negotiated
trade agreements with countries around the world, and he was
instrumental in the creation of the Generalized System of
Preferences, or GSP, 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 Mr. Peter Hansen, who is an attorney
with 15 years of legal experience and specializes in public
international law and African investment law. He has served
with the United Nations and World Bank and has taught,
lectured, and published on the United States and international
law topics. Mr. Hansen advises clients in African investment
and the development of commercial projects involving Africa. He
has taught, lectured, and published on international legal
subjects.
We will then hear from Dr. Sharon Freeman, who is the
president and CEO of the All American Small Business Exporters
Association. She is an entrepreneur and has undertaken major
development assignments in over 100 countries around the world.
Dr. Freeman has been appointed to numerous U.S. Government
boards, including those of the Department of Commerce, the Ex-
Im Bank, the U.S. Trade Representative's Office, the SBA, and
the Department of Energy. She has also won awards from leading
business institutions and government agencies in recognition of
her business and community leadership and business successes.
We will then hear from Ms. Barbara Keating, who is the
president and founder of Computer Frontiers, and has 25 years
of experience working in Africa bringing technology solutions
to the most remote parts of the continent. She has worked for
several companies and partnered with USAID in support of
various U.S. Government initiatives and has Peace Corps
experience as well. She works to provide effective
communication services in limited infrastructure environments
and adapting technology to improve performance for government
agencies, NGO programs, and private companies.
Mr. Lande, if you would begin.
STATEMENT OF MR. STEPHEN LANDE, PRESIDENT, MANCHESTER TRADE
Mr. Lande. Good afternoon. And thank you very much for the
opportunity to speak before you on a very current topic. When
you have been in trade policy and investment policy as long as
I do, I always begin by saying, This is not the History
Channel, but hopefully we are looking forward to other policies
that we may be able to discuss.
We have all read the tea leaves about Africa and can almost
smell the opportunities that will ooze from collaborating with
a continent of over 1 billion increasingly urbanized, more
dynamic, better educated, deeper democracy, upwardly mobile,
and mostly young. Unfortunately, our private sector has not
heard this message. As pointed out, some of the larger
companies are involved, and you mentioned the names earlier,
and we appreciate that.
We believe that it is a possibility for the U.S. Congress,
working together with the U.S. administration, to demonstrate
that there is full support for U.S. investment. We are not a
Communist society. We don't have state-operated, state-owned
enterprises; we don't tell people where to invest. But what we
can do as a group, we can work to make sure that there is a
level playing field that exists for U.S. investors, U.S.
exporters overseas.
To do this, Manchester Trade has come up with their own
idea, which we call a new Transatlantic South partnership. As
you know, the U.S. is focusing on a Trans-Pacific Partnership
involving 12 Asian and Latin American countries. We are working
on the Transatlantic Trade and Investment Partnership, the
TTIP, which focuses on 27 European countries. However, unlike
the other two, which focuses on trade agreements, our
suggestion for a Transatlantic South partnership goes well
beyond trade agreements and will encompass investment and
development goals. It will realize there is significant U.S.
national security consideration and will herald the whole of
government approach that was mentioned by Ranking Member Bass
just before in her comments and so on.
However, what we are talking about, an important component
is coordination in Congress, and that is the message that I
would like to spend a few minutes and focus on. Just for
example, we all know that Ways and Means Committee is going to
soon consider, hopefully renew and even more importantly
enhance the current African Growth and Opportunity Act. We all
know that H.R. 1777, which we are very pleased that Chairman
Smith has reintroduced and so on again this year and with
bipartisan support and so on, focuses on exports. We all know
that last year, Congressman Bobby Rush introduced H.R. 656, the
African Investment and Diaspora Act. Between them, they form a
perfect triangle for moving into Africa as a group. They must
proceed under congressional rules, under their own committees,
and so on. That is how it operates. But if there could be
coordination--and in this regard, we must recognize the efforts
of Ranking Member Bass--to bring together a group of
influential Members all with the commitment of Africa, this is
the kind of thing that must happen for us to be successful with
a coordinated approach.
I guarantee you the Chinese coordinate everything that they
do there and so on, and they have the advantage of being able
to tell their SOEs and their profits where to invest. We don't
have that, but we could certainly coordinate to assure a level
playing field.
Let me just use the few minutes that I have been given to
just touch a few measures which could help illustrate where
this kind of coordination could take place. I want to be clear,
there is a lot of ideas out there. The Corporate Council has
just come up with 44 suggestions in the trade investment area.
The Wilson Center has turned out a very good paper, which we
were very pleased to participate in, but so we are putting out
these ideas not as exclusive but as ideas for further work and
so on.
We have already mentioned the fact that the Ways and Means
Committee should focus on imports, and the act to double U.S.
exports from this committee can work together very nicely and
so on.
Export-Import Bank is the largest source of funding for
U.S. business overseas. The bank itself has been committed to
increase resources. In fact, under the leadership of Chairman
Hochberg and so on, Rick Angiuoni, who runs the African Bureau,
and so on, we have seen since the beginning of the Obama
administration an increase of Export-Import financing for
Africa from $400 million to $1.5 billion last year, almost a
four times increase, which is impressive.
Your bill--even better, your bill calls for 10 percent of
Export-Import Bank financing to go to Africa or else you should
report to Congress why not, which is a good way to push for
going there. That will result, if you assume that our financing
will be in the neighborhood of $40 billion next year, $4
billion, so that is another doubling. So we support that.
But we have to go a little deeper than that, and that is
where you have to work with the Financial Services Committee
because Export-Import Bank is very proud of the fact that
people pay back the money that it lends to them. And obviously,
we don't want to have some recent examples where people didn't
pay back money; we know what happens in that case.
But, on the other hand, if you are going to work in a
frontier economy, like an African economy, you have no choice
but to take greater risk. So I don't know how you are going to
work out the 2 percent; we shouldn't lose money, yet you have
to take greater risk. One idea we have, which involves some
work, is that maybe there could be more coordination with MCC,
with USAID, and maybe they could help service the debt, service
the loan, so if Export-Import Bank gives a loan and it is
entitled to a higher interest rate, maybe they can contribute
some money that they can use in order to do business. There are
many ideas.
Another idea we have been working on, a little bit separate
than this, but it makes sense, is given the need for fiscal
probity, Export-Import Bank, OPIC, TDA, all require all kinds
of paperwork, it has to be done. Well, a little guy can't do
it. An SME can't do it. A diaspora company can't do it. Maybe,
it could well be possible that MDBA, SBA can work together with
Export-Import Bank, with the other lending institutions, and
try to conglomerate investments and put them together and
provide the technical assistance. In other words, we must work
together.
Regional integration. There is nothing more important to
U.S. commercial and political interests than an integrated
Africa. We cannot live in the post-colonial era, where a
relatively small continent compared to others were sliced into
47, now 48, countries in sub-Saharan Africa. They must come
together, and this is in your bill, you promote it. But, again,
it has to be done with Ways and Means because it is a trade
issue, so they involve both together and so on.
But let me mention what I consider to be the biggest threat
we face. AGOA is a good program. It should be renewed. I don't
know how much time I have, but it still says 5, and I know you
are not supposed to go over 5, so I don't--I will just keep
talking.
Mr. Smith. If you could sum up, I didn't put it on there.
Mr. Lande. Let me make my three points and end, I didn't
want to cut myself off either, but I didn't want to go on. But
let me just make three very quick points and make them very
specific and so on. Regional integration, extremely important
for the U.S. It provides sufficient scope for U.S.
multinationals, large U.S. companies to reach the economies of
scale, working together with the U.N. in peacekeeping and so
on, regional community, peer group pressure is extremely
important and so on. U.S. provides AGOA, which basically says
nonreciprocal, when you are together as a group, let's
negotiate a group. The Europeans have come up with Economic
Partnership Agreement; horrible things, from a trade point of
view. If you don't sign, we cut off access. The U.S. free
access, the U.S. is right; Africa isn't ready to sign until
they are a group. What we are suggesting is that together with
the relevant committees, we send a signal to the Europeans,
excuse me, we are doing a Transatlantic Trade and Investment
Partnership with you, let's make sure that extends to Africa,
to our southern area, and so on.
The other quick recommendation there, of course, is that
you work with European Parliament. European Parliament was just
pressured into agreeing to this deadline. It would be good if
together with yourselves you could have a consultation, whether
a regular scheduled or special, to look at this issue and so
on.
President Obama, when he took office, was very specific. He
said we cannot do things alone. We have to work with other
countries. We have too many unilateral sanctions, conditions.
Every committee has something else. Each of the objectives are
good, but if you are a U.S. businessman and you suddenly face a
condition on whether you use, you know, carbon emission, even
though Africa is unfortunately going to have to use fossil
fuels; if you have a condition that you can't use U.S.
agricultural--you can't promote U.S. agriculture, which
promotes things, that you make, have an AGOA benefit, but it
could be taken away if it turns out that the country is
undemocratic.
We are arguing very basically that there should be some
committee within the Congress which would review these
conditions and look at them two things: One are they effective
in the way they operate. The worst thing we have done is take
Madagascar off of AGOA because we didn't like a bunch of
colonel thugs for seizing power. Seven years later those thugs
are around and 200,000 Madagascan women who are trying to help
could have lost their job, so we want this reviewed.
A third quick focus is on agriculture, again beyond Feed
the Future. We would want to look at, one, let's give Africa a
chance to export the products it can export. It produces
tobacco. It produces sugar. It produces peanuts or ground nuts.
It sweetens cocoa. All that is not included because of domestic
interests, even though if you let Africa ship them, they would
have no effect on domestic industry. They would be able to
compete against Brazil and displace them if we could give some
attention to that.
So, in conclusion, what we are really arguing for is there
is a whole area which involves more than one committee that has
to be looked upon. The contribution of Congress can be to work
together. The time, the tea leaves are in place. For some
reason, Mr. Froman, the only NSC adviser who ever went to
Africa, but then he spent 2 weeks there--as I said, only went
there on an economic mission, and he spent 2 weeks there, going
to five, six countries and so on, is now the USTR, also
remaining as the Special Adviser to the President, if Congress
approves him and so on, et cetera. You have all these ideas
coming from the private sector. Every time you read something
it talks about Africa is on the way, every magazine article.
You cited The Economist, Forbes, all there. I really would hope
very much that this Congress could focus on a Transatlantic-
South partnership with Africa. Thank you so very much.
[The prepared statement of Mr. Lande follows:]
----------
Mr. Smith. Thank you so very much.
Mr. Hansen.
STATEMENT OF MR. PETER C. HANSEN, PRINCIPAL COUNSEL, LAW
OFFICES OF PETER C. HANSEN, LLC
Mr. Hansen. Thank you very much.
I have been told I am a firebrand, so I hope I don't
disappoint without alienating anyone.
I would just like to start by saying I think the bill is an
excellent step in the right direction. In my written testimony,
which is fairly extensive, I made some minor suggestions as to
wording to emphasize investment, and I would like to request at
this time that my written testimony be put in the record.
Mr. Smith. Without objection, your full statement will be
made a part of the record and that of all of our distinguished
witnesses.
Mr. Hansen. Thank you. I would like to start off with a few
relevant figures that could put matters into context.
Unfortunately, they are surprising, perhaps humorous, and all
the more horrifying for being so. First off, sub-Saharan
Africa's entire GDP of $869 billion is 79 percent of the U.S.
budget deficit in 2012. So it is less than our budget deficit.
In other words, close to 900 million people in the region of
sub-Saharan Africa, that is almost three times the U.S.
population, live on a little under 6 percent of our GDP. So
when we ask Africans to buy more U.S. products, it is like
asking Americans to buy more U.S. products after losing 98
percent of their income.
As for trade, U.S. apparel imports, about which there has
been a great deal of talk and legislation over the years,
apparel imports under AGOA now roughly equal Americans'
consumption of over-the-counter teeth whiteners, which is sad.
U.S. food imports from rural agricultural Africa, filled
with farmers, in 2011, were about half of what America spent on
Twinkies, and even less than what Americans spent on Halloween
costumes for their pets.
As for investment, which is critical, U.S. investment in
Africa, after decades of amassing assets there and operations
there, is a little bit more than what Americans waste on
gambling in a year and little more than twice what Americans
spend on Easter.
This is quite sad, which brings me to one of my two points,
which is that the U.S. is losing Africa because it will not
invest in Africa. It is a cold fact that U.S. investment must
precede U.S. exports, as my written testimony made clear with
examples of Taiwan and the People's Republic of China.
As things stand, the U.S. has almost no economic
relationship with sub-Saharan Africa beyond oil. If the U.S.
were to level sanctions against sub-Saharan Africa in every
non-oil sector, it could hardly be more effective than present
U.S. indifference. The U.S. wants to sell to Africa but has not
wanted to date to buy or to invest there. The U.S. Government
has done almost nothing to secure treaty protections for U.S.
investors in sub-Saharan Africa, and by that, I mean bilateral
investment treaties, or BITs, or double tax treaties, which are
known also as DTTs or DTAs. By contrast, the People's Republic
of China wants to sell, wants to buy, and wants to invest in
sub-Saharan Africa. This is why China is ascendant in Africa.
Finally, as the stats on the rise of China show, AGOA is an
economic irrelevance and a strategic distraction of disastrous
proportions. This is not to say, incidentally, that AGOA should
be set aside, but it is a major distraction. So this brings me
to my last point, which is that the U.S. must get serious about
investing in Africa if it wants to export to Africa and
influence Africa, indeed to retain any kind of strategic
position on the continent.
The U.S. has got to quit arguing about AGOA and see it as
but a small part of a far larger Africa strategy. The U.S. has
to treat African countries like other countries, especially as
we do the People's Republic of China. We have to accord African
countries what I would call ``most favored investment partner''
status or to adapt a more current trade law term to have
``normal investment relations,'' as with other countries.
African countries should not uniquely have to earn U.S.
economic partnership by jumping through hoops and meeting or
passing ever-moving goalposts.
The U.S. Government should seek to turn Africa and African
countries into economic partners. In earlier writings
referenced in my written testimony, I have called this the
Mature Market Model or M3. The U.S. has to quit worrying about
closed economic sectors, whether it is mining or hotels. The
U.S. has closed economic sectors as well. What the U.S.
Government has to do is engage with Africa and allow U.S.
investors to penetrate those markets and gradually crack open
those closed sectors by gaining trust on the continent.
The U.S. Government has got to conclude BITs and DTTs, that
is bilateral investment treaties and double tax treaties,
across the continent. Arab North Africa along the Mediterranean
rim has 60 percent coverage of both BITs and DTTs. Once you get
down to Black Africa, sub-Saharan Africa, BIT coverage drops to
a mere 11 percent and double tax treaty coverage to 2 percent.
In other words, one double tax treaty with South Africa. This
is ridiculous. We need to conclude those treaties forthwith.
Also, if a stunning gesture is looked for, a sensible
approach would be to have a multilateral, continent-wide,
multilateral investment treaty and multilateral double tax
treaty.
And very finally, U.S. aid should reform whole industries
and embrace private projects as well. This is in my writings
called the Aid and Investment Model, or AIM, approach rather
than ineffective, one-off, isolated and useless projects and
studies. Thank you.
[The prepared statement of Mr. Hansen follows:]
----------
Mr. Smith. Mr. Hansen, thank you very much for your
testimony. I think this is the first testimony I have seen
where there were 85 footnotes. So I do appreciate the
extensiveness of your research.
Dr. Freeman.
STATEMENT OF SHARON T. FREEMAN, PH.D., PRESIDENT AND CHIEF
EXECUTIVE OFFICER, ALL AMERICAN SMALL BUSINESS EXPORTERS
ASSOCIATION
Ms. Freeman. Thank you very much, Chairman Smith, ranking
member, and members of the subcommittee, thank you very much
for this opportunity to speak to you today in my capacity as
the president of the All American Small Business Exporters
Association about increasing American jobs through greater
exports to Africa. I have read extensively the bill, and I
applaud it, and I certainly support it.
First, I would like to briefly mention why it is important
to encourage exporting to Africa by SMEs, including the African
diaspora firms. The U.S. International Trade Commission's 2010
report, called ``Small and Medium Sized Enterprises'
Characteristics and Performance,'' confirmed that SMEs play a
larger role in the export economy than is often suggested by
traditional trade statistics. In fact, it is estimated that
SMEs support 4 million jobs through their exports.
While we know a lot about the role of SMEs in exporting, we
know less about the contribution and potential of a subset of
SMEs, which is minority and immigrant-owned firms, particularly
African immigrant-owned firms.
So here is what we know. We do know that according to the
2007 census minority-owned exporting firms were larger than
their non-exporting minority-owned counterparts. We also know
that minority-owned exporting firms average having about 21
employees while non-exporting minority owned firms have about
7. Their receipts, that is the exporting minority firms, are
greater per employee and significantly so than non-exporting
firms. We know further that minority business export activity
spans into at least 41 countries over six continents, and we
know that minority firms are prime for exporting due in large
part to their language capabilities, their cultural
compatibility, and business agility.
Now let's consider what we know about Africans in the U.S.
This is important. We know that they have home country
linkages. We also know that most of these immigrants are
located in high-density exporting areas, such as California,
New York, and so forth. We also know that the largest African
sending countries, such as Nigeria and Ethiopia among them, are
also among the countries to which we export in growing number.
Surely that is not a coincidence.
Given this, what we need to do and consider is what could
be done to consider encouraging firms with home country
linkages, in other words African-owned firms, to export more to
their home countries. So there are about six suggestions I have
in the time that I have been allotted. Otherwise, I would have
a lot more.
But the first thing we have to do, really, is understand
that it is necessary to compete with China, and in that
recognition, we have to know that it is not possible to have a
one-size-fits-all strategy in how we go about that competition.
We can say for certain that China does not pursue a one-size-
fits-all strategy. They have a very tailored commercial
strategy for each and every country which they negotiate
directly with the Presidents of those countries, and I must say
the total number of African Presidents that has ever been in
America at one time is six; whereas certainly the head of China
has all of the African countries visit them at one time. So the
reality is, is China is a competitor, no matter where we are
trying to export in Africa, and so we have to have a China
strategy.
Now, I note that your bill mentions the Trade Promotion
Coordinating Committee a number of times. I know it very well,
and I have known it for many, many years. I have read all of
the national export strategies. I have worked closely with this
coordinating body, but here is the thing I want to say about
the coordination. It is not just a matter of coordinating the
unified budgets of the 19 or 20 Federal Government agencies. We
have to be more strategic about what we are actually
coordinating, and what I want to say in particular to draw your
attention to is one example of the failure of strategic
coordination is, for instance, the fact that the U.S. Agency
for International Development has come up with new rules
wherein they say for all the countries in which they are
operating, that now we can, U.S. companies working there can
procure all of the goods from those local countries, no matter
where those goods come from. So if you look on the shelves of
Malawi, you name a country, where do those goods come from?
They don't come from--they are not made in Malawi. So we have
now just eliminated just huge, billions of dollars worth of
export opportunities for our small firms. That is not proper
coordination.
On the one hand we have the national export initiatives and
on the other we are removing the export opportunities for our
firms.
Another issue that I want to mention is export processing
zones. A long time ago, USAID used to actually help fund those.
I work on them, so I know this is a total fact. They haven't
done this for years. But I tell you who is doing it now. That
is China. Big time. Because they know that their firms need a
foothold in that country. And so when it becomes difficult for
Chinese firms to work in African firms, they create a zone that
makes it easier. When they have power, when they have, you
know, exemption from laws and regulations, they can do their
business, and they are doing that business not just to export
from the zone into a foreign territory, the foreign territory
becomes the domestic territory. That means they are exporting
into Africa from that zone. That is a very important concept.
And we need to get with that concept.
So what I am saying is for all of the things that USAID is
doing, one of the things they need to be doing is having
another look at this, and I tell you who is looking at this
finally again is the World Bank and the IFC. For many years,
they considered this an economic distortion, but what they have
come to realize is that it is an economic and competitive
reality, and now they are sponsoring it, too.
I am going to say three other things really quickly. One is
mentor protege programs, and this is to help small firms
actually link with larger firms to take advantage of some of
the procurements that are involved in the Millennium Challenge
Corporation and other of the TPCC institutions, so that this
gives, helps the protege firms to develop the capacity to
export more, and of course, we do know that if you sell
anything right here in Washington, DC, to the World Bank or any
of the international organizations, that is an export because
they are a foreign entity. So we have a U.S., you know,
executive office in the World Bank. Here is an idea. Why don't
we get a list of, you know, those procurements and see how many
U.S. companies are involved, and then why don't we give
incentives to some of those companies that got some of those
procurements to join together with smaller firms? I think that
is very important.
Awareness campaigns, I think it is important for the U.S.
Trade Representative's Office and some of the other TPCC
offices to specifically figure out where are these African
diaspora firms located, because we know that essentially from
the Migration Policy Institute's data hub, you can find it in 5
minutes by zip code, and then let's reach out to them because
we can see a pattern of a relationship between increasing
exports to their countries where they are located. So when you
see more Ethiopians in Prince George's County, you see more
exports from Prince George's County to Ethiopia. So let's match
up and connect these dots.
Finally, in regard to export financing, what I like about
your bill in particular is that there is a recognition that you
need administrative funds to do the outreach. It is not just
program funds. So I do note that and support that, and I
support the comments of my colleagues, and I thank you for the
honor of being here today.
[The prepared statement of Ms. Freeman follows:]
----------
Mr. Smith. Dr. Freeman, thank you as well for your
testimony, and your very specific recommendations based on
extraordinary experience. Thank you.
Ms. Keating.
STATEMENT OF MS. BARBARA KEATING, PRESIDENT AND FOUNDER,
COMPUTER FRONTIERS
Ms. Keating. Chairman Smith and members of the
subcommittee, and especially to you, Congresswoman Bass, and
your staff, your very active role in bringing new voices like
mine to you to hear about the issues.
My name is Barbara Keating. I am the president and CEO of
Computer Frontiers. We are a small, woman-owned business. I
have been in business since 1996. I started it in a spare
bedroom in Germantown, Maryland, and since that time, we have
been focused on Africa. We work in 34 African countries. We are
incorporated in nine countries, and we currently have four
fully staffed offices on the African continent as well as my
office in Frederick, Maryland.
I am speaking to you today as a representative of small
business who has worked to establish business throughout Africa
and the continuing and growing challenges that are arising for
companies like mine.
There are two major points that I want to bring to your
attention in regards to increasing U.S. exports to Africa, and
those are to support that, one, small- and medium-sized
businesses is the right place for you to focus your support and
two, now is the time to act.
Why focus on small- and medium-sized business? One reason
is that there are 54 African countries and the majority of
these countries have relatively small individual markets,
making these markets less attractive to larger U.S.
corporations. However, for small- and medium-sized businesses,
African markets are the right size, leading to cooperative
partnerships and long-term relationships for continuing growth
between U.S. and African businesses.
My oldest company is located in Uganda. It is 13 years old.
Initially with a partner, we grew the company together from 5
to 35 core highly qualified technical staff and hundreds of
consultants and trainees throughout the last decade. In Uganda,
as well as in Togo, my companies with my partners grew and
expanded in both staff and revenue. From these bases, we then
expanded our reach into other surrounding African country
markets, incorporating in five other countries and hiring staff
and providing services without having full-fledged offices
there. The bottom line is that 90 percent of my professional
staff based here in the United States are reliant on our work
in Africa.
And yet we are a small company. The challenges are many for
small U.S. companies not only to enter and succeed in Africa,
but then, once established, to move from the startup phase to
the scale is further challenged by the lack of coordinated U.S.
Government focus on Africa as well as from U.S. policies
seemingly almost unwittingly bent on crushing small business. I
will discuss each of these in turn.
First, one could find that the U.S. Government is providing
many resources, including financing, for U.S. small business to
increase their exports to Africa. However, where to go and what
is really available is a hit-or-miss affair, based on the
knowledge of the staff in the government agencies you meet, and
this amorphous resource pool does not in reality seem to be
more than a few more inches deep. And in my experience over the
last decade, the bureaucratic hoops that must be passed through
to even determine if your business qualifies for a program or
financing are almost in themselves too unlikely to succeed, too
time consuming, and we in our own analyses have deemed them
unrealistic to even raise the effort to apply.
Other than minimal bank lines of credit based on
receivables, we have had no loans or financing. It is almost
impossible to grow, and we continue to cycle at the same level
of activity.
What would help is a more coordinated focus on Africa to
include a strategic trade policy and a one-stop shop for small
business to more quickly determine if there are any supported
options for our programs.
Second, in the same vein of challenges, is access to
Africa. One of the main plusses to being a U.S. State
Department, USAID, or other U.S. Government agency contractor
in Africa is that contract vehicle for small businesses like
ours gives us a reason to be in that market. Currently, as Ms.
Freeman also testified, the USAID Forward Implementation and
Procurement Reform process is requiring more local contracting
and loosening the hold on the ``buy America'' act. While one
might think that that would be an excellent move for small
business like mine, who has established a local presence for
more than a decade in Africa, the rule has language--I hope
which is unintended--which rules out companies like mine. The
new rule requires that to be considered a local company, it
must be owned at 51 percent levels by the local nationals from
that country, eliminating U.S.-majority-owned company, like
mine, which have long vested in these markets. To my mind, the
reason for a U.S. person or entity to maintain 51 percent
controlling interest is to ensure that we comply with the U.S.
and local laws. And it appears, in my humble opinion, to be an
advantage for the U.S. Government. However, this is not what is
being implemented.
Further, as part of the USAID Forward procurement reform,
large contracts, which large USAID government contractors will
pursue in Africa for USAID, will be required to include 30
percent of the contract value to go to African local companies.
Previously, these subcontracts may have gone to small U.S.
companies like mine. However, it is now unlikely that U.S.
small businesses will be considered to partner and provide
services for these large contracts as we don't meet the checked
box requirements for being a local company. In summary, USAID
Forward takes away both the logical vehicle for U.S. small
business that has now used this to access and grow in African
markets and further takes away our competitiveness in U.S.
contract marketplace itself.
Now is the time to act. Over the last 10 years, I have been
part of the discussion in Washington with relevant department
heads, Congressional Members on the Chinese entry into African
markets and have posited the notion that U.S. companies have no
support from the U.S. Government in Africa, while we are
exposed in direct competition with Chinese businesses having
full power and financing of the Chinese Government behind them.
A common response has been that it is just sour grapes the U.S.
private sector is experiencing from the new private sector in
the African markets. However, today, we can clearly see how
China's Government's efforts over the last decade have
positioned its companies to be the largest African investors by
far.
We should not dwell only on the Chinese investments or
their good sense in pursuing the African market, as other
countries are also providing significant support to their
companies to aggressively expand into Africa. I have, myself,
seen it from Europe, India, Turkey, the Gulf States, Brazil,
Malaysia, Israel, and South Africa. It is resulting in the
reality that the U.S. investment share is shrinking, simply
because others are doing more.
As is stated in the U.S. Corporate Council on Africa in
their policy recommendations to the Obama administration this
year and where I have been a board member and a member there
over the last 10 years, some European companies are pursuing
commercial advantage through economic partnership agreements
and reviving traditional relationships. Some countries are
offering concessional financing in addition to innovative
combinations of government assistance and private sector
contracting that the U.S. Government has been increasingly
unable to match. The move to create a BRICS infrastructure bank
is an indicator of how emerging powers are shifting focus
toward Africa. If the U.S. does not work to reverse this trend,
long-term opportunities for U.S. business will be greatly
limited. A substantial additional commitment of human,
financial, and policy resources is needed to support our
national interests in Africa. At a bare minimum, the United
States should be matching the support provided by other
governments to their private sector. Thank you for your
attention to this.
[The prepared statement of Ms. Keating follows:]
----------
Mr. Smith. Thank you very much for your testimony and for
being here to share your insights and wisdom.
Just a few opening questions, and I will yield to my
distinguished colleagues. And again, your full statements
really are helpful to this subcommittee because you have taken
the time to give us a very broad look. Obviously, time didn't
permit each of you to say everything in your paper. But I can
assure you, I read it. I know members of the subcommittee will
do likewise. So thank you so much for that.
Let me just ask Dr. Freeman, you mentioned that all firms
entering the African market now have to compete with China. I
am wondering if--there are a number of issues and all of you
might want to speak to this. But I have been baffled. I have
been here for 33 years. We know that much of the content of
what we deal with in terms of our policy--first, it was the
Soviets and the proxies there between ourselves and the USSR,
but now it has been the focus on PEPFAR, malaria, TB, the wars
in Sudan, obviously the problems in the D.R. Congo. We have
been crisis managers, if you will--how well or poorly is up to
the judgment of history. But there has been a genuine
compassion and concern on both sides of the aisle through
various presidencies to try to help out and to be a real force
for good.
But I wonder sometimes if the branding of Africa in the
mind's eye of the Americans becomes one of crisis after crisis
after crisis, inhibiting and chilling investment.
And Mr. Hansen, you talked about the need for investment.
So I am wondering how we change that perception. It would seem
to me that in an exporting strategy, which is why we are doing
this bill and why we are trying to promote it and get it
passed, will finally say it is in America's interest and the
most robust the give and take between the African countries and
the U.S. is, the better the rising tide will lift all those
boats. But this idea of the branding--I have been to Africa
many times. It is a wonderful place to visit. Even when we go
to difficult places, they are usually like difficult places
here or any other country in the world. There is also a number
of oases everywhere you go where people are living their lives,
their children are growing and opportunities, if they could get
more, would mean that they have a greater quality of life.
So I am wondering if you could speak to the branding issue.
Why hasn't, Mr. Hansen, the investment actually occurred? Is it
because of that? Is it not easy to get financing on the stock
market or ETFs not sufficiently including African businesses?
If you could start off with that, I would appreciate it.
Mr. Hansen. Thank you very much, Chairman Smith.
It is a complex question. I think, as to the branding
issue, I have written that if Asia gets CNBC, Africa is
relegated to the late night murder segments of the local news,
I am afraid. I think journalists love to go out there with
their flak jackets and go in for Pulitzers, and they don't want
to report on Ghana's explosive growth. They don't want to
report on the quiet places of Africa, the vast, vast tracts of
Africa that are quiet and ready to prosper. They want Somalia,
and they don't even talk--when they talk about Mogadishu, it is
Black Hawk Down-type stuff. It is not that the Turks are coming
in and investing at a tremendous clip.
So I think what Africa simply needs is normality from the
U.S. perspective. I think the U.S. needs to treat Africa as it
would treat Asia, as it would treat Mexico, as it would treat
Latin America. It should no longer be a plaything of the United
States, and particularly of the United States Government and
the United States aid industry. It simply needs to have
protections put in for business and a tone, however the U.S.
Government wants to promote that, that would be great, but a
tone that it is simply open for business and ready to work. I
think that is everything.
And I believe Ms. Freeman has some other insights.
Ms. Freeman. Well, actually, my comment will go beyond the
branding and to the issue of strategy. You know, a long time
ago, we used to put out in hard copy a very big book called the
U.S. Industrial Outlook, and it used to analyze very, very
clearly what America's standing was in respect to a whole host
of products and industry. We used to have 17 major sectors of
our economy, and we have actually trade committees still in
each of these 17 areas. So the issue is, how do we actually
understand ourselves and our economic growth and the basis for
it industrially?
China understands it very well. So when they look at the
pharmaceutical industry or the automotive industry, they look
at that from every strategic point of view--supply, demand,
inputs, outputs, whatever it is. And then they say, okay, where
can we get that from? Where does Africa play into this?
So, yes, we have commercial strategies and policies. But
are they strategic enough? Are we understanding where we are
going economically to understand therefore the role that the
assets that Africa has can play into that? And that is very
much on a product and industry sector basis. We no longer
produce these industrial outlooks.
And I would say that we have more information right now
that is available to us through the Internet, but we have less
knowledge, less knowledge and less understanding. If you ask us
where are we going in any sector--computers, pharmaceuticals,
you name it--where is there a unified approach and
understanding of how we grow? What are the inputs for that?
So let's take it outside the framework of how we feel about
Africa. China is not worried about how they feel about Africa.
They are talking about, you know, what can we get? When we look
at our Prius cars, where does the input for those batteries
come from? It comes from the Congo, okay? The Chinese don't
have any feelings about the Congo. They are saying, let me get
that titanium or whatever you make those batteries out of. So
we need to go back to that U.S. industrial outlook approach and
understand now where we are going industrially or even in the
service industries and see what plays into that. Thank you.
Mr. Lande. Very short.
One of the challenges you face as a committee is that you
look at Africa. You have a budget for USAID to go up there. But
there is a big difference between the humanitarian needs of
Africa, which will be serious, the problems in Mali, which are
serious, and economic growth, which is as much in the U.S.
commercial interest as they are.
So my only suggestion--which Manchester Trade has made a
few times now--is to differentiate. Just say, economic growth,
this is our interest. Let's see how much money we can put into
it. Let's see how we can work with it, and we will get that
back. The good things we do continue doing. And no one said,
you shouldn't do it. PEPFAR, a great success. I mean, God. But
having said that, I think it is this differentiation.
One of the points, for example, we always have, as
mentioned, that brings us closer to your committee. MCC. MCC
has an emphasis on poverty. We understand that. But also, MCC
is the only institution in the United States today that focuses
on infrastructure. And infrastructure is one of the three
requirements for regional integration. One is doing away with
trade barriers. Two is infrastructure. And three is making the
political decisions that you have to make to move in that
direction. Why doesn't the MCC, as long as they have got money,
20 percent, reasonable infrastructure could be one of their
requirements working with, of course, the compact countries?
So all I am saying is that part of it might be able to be
done by differentiating the economic growth stuff with the
other stuff because America has to do the other stuff because,
as Sharon says, China will not do it. Thank you.
Ms. Keating. I have just a really specific and small
recommendation, which is, I have worked on some of the CODELs
into Africa, and so what you see and what the pictures that
come back are of the game parks, of the little village. I want
to see the buildings. I want to see those kinds of things, that
from your visits and showing that, it can go a long way.
Mr. Smith. I do have other questions. But I will yield to
my colleagues out of deference to them. And maybe if there is
time, I will go back to those questions.
Ms. Bass.
Ms. Bass. Thank you, Mr. Chairman.
I actually had a couple questions for each of you.
Mr. Lande, you mentioned in your series of recommendations
that--this is what Congress should do--a committee that would
review the conditions and sanctions. And I wanted to know if
you could expand on that a little bit. What is your vision of
that? How do you see that happening within the Congress?
Mr. Lande. Let me begin by amplifying the comment that
Sharon Freeman made. Again, it is the History Channel. But if
you remember when Ross Perot was running for President, he made
a big deal about our support of export processing zones in
Central America. And one of the results of that was that USAID
had a prohibition against aiding export processing zones.
Export processing zones in Africa create jobs for the U.S. They
enable Africa to participate in supply chains and displace
China. China participates in the supply chain and tries to grab
the production. It is trying to grab the intellectual property
rights and so on. I don't want to say the obvious.
All I am just saying is that it is this need of some
committee as part of this Transatlantic South initiative or
maybe a group of committees--I can't tell you how to organize
Congress itself. But just say, wait a minute, we are not the
only power in the world. It is a multipolar world. We have a
lot of conflicting interests. Some people worry about
commercial. When the people come who are concerned about
conflict diamonds--it is a horrible situation going on in the
Congo. No one is going to sit and defend--you were just there,
Ms. Bass. But to say that this is how you correct it, by
ensuring that no one in the Congo can work in mining, that the
average American company says, I don't want to be bothered with
all this mishegas concerning about investing with conflict
diamonds. I have to have tests. They have to make sure that
they don't come from this--I will just go to Australia. I don't
have that problem.
So what I would picture very much would be these two
requirements. One, is there a more effective way to do it? And
two, is there some way we can reduce the collateral damage on
innocent parties, of which innocent parties can be Africans who
want to work in the area or could well be American investors
who are trying to do a good job? So that is what I would
picture. I can't tell you how to organize it congressionally.
But the kind of work that you do talking to other Members is a
good way to get there. Thank you.
Ms. Bass. Thank you.
And Dr. Freeman, Mr. Lande was mentioning export processing
zones. Was that the same thing that you were talking about?
Ms. Freeman. Yes.
Ms. Bass. And you mentioned that used to be a part of
USAID. I was wondering if you could tell me when and why it
changed.
Ms. Freeman. It changed because the textile forces of the
U.S. thought that a lot of U.S. companies would go to,
particularly at that time, the Caribbean countries and
manufacture there and the U.S. would lose jobs. So it was first
supported by USAID in the early 1980s as a way to promote
economic development of those countries. But then the textiles
unions fought against it. So it was a prohibition against USAID
funding any more of those zones. And then, as I said,
subsequently, it was determined by the World Bank that the
promotion of these kinds of regimes was a macroeconomic
distortion, and they had reversed their position on that as
well. So, in fact, this----
Ms. Bass. That was their position; it is not their position
now?
Ms. Freeman. It is not their position anymore, no. IFC has
funded new positions to be in charge of overseeing these
various projects that they are now funding. So whether it is an
economic distortion or not, the reality of the world that has
presented itself before these institutions is that you really
need this. And so when you look at the diaspora, one of the
problems of taking advantage of the home country linkages is
when some of, you know, the diaspora go back home, they are
faced with a lot of difficulties of the lack of electricity,
the extensive costs of using the cell phone and so forth. So
when they are able to operate in a zone that has the necessary
provisions and also protections, let's face it, then they can
actually do business. And that business then does involve
importing goods into that export zone and then exporting into
the country from the zone. So I am a huge supporter of it. I
have actually been engaged to design these around the world. I
have studied at least 110 of them and have done papers on this.
And I tell you, it has changed the economic position of many
countries in the world.
Ms. Bass. Okay, thank you. We would like to follow up with
you and get some of those specific examples.
Ms. Freeman. Thank you.
Ms. Bass. Mr. Hansen, I appreciated your examples that you
gave in the beginning. I haven't had a chance to read your
written testimony. I am not sure if you put those examples in
there. But if you didn't, I would certainly like to have them.
I wanted you to expound on part of it though because you
painted an overall picture of our investment being minuscule.
And so I wanted to ask you what you thought the level of
investment should be.
And then you also talked about embracing the idea of whole
industries of private projects. And I wanted to know if you
could give an example on that.
On the issue of branding, I do think that part of the
problem is the education that we need to do with our own
country. I mean, when people hear about a problem in Mali, they
say, well, then I can't go on a trip to South Africa. If there
are riots in Greece, we would never think of not going to Paris
because there was a riot in Greece. So I think part of it is
education that we are all responsible for. But if you could
expound on that, I would appreciate it.
Mr. Hansen. Thank you very much, Ms. Bass. In my written
testimony, I gave a figure. I thought that if we invested in
sub-Saharan Africa at the rate we do Taiwan in terms of GDP
alone, sub-Saharan Africa should have $2.4 billion more right
now.
Ms. Bass. Was that $10.4 billion or $2.4 billion?
Mr. Hansen. If U.S. investment were distributed equally on
the basis of GDP, sub-Saharan Africa would have $2.4 billion
more today, and it would be shifted away from mining, where it
is heavily placed, and put into Taiwanese-style
industrialization. The point being, to give the sub-Saharan
Africans income with which to buy, not only their own products
but U.S. exports. We can't expect them to buy if we don't give
them jobs to earn money with. And I also wrote that if we
invested in sub-Saharan Africa the way we do in Taiwan in terms
of population, Africa would have $761.4 billion more in U.S.
investment. And frankly, that is not an unrealistic amount of
money for what could be done over there. And the idea being to
grow Africa's internal markets, not just their export markets
to the U.S., but to grow a vast African internal market, which
would increase consumer demand for U.S. goods. I have found
that if Africans imported U.S. goods--just the goods--at the
same rate that Taiwan does, they would import $988 billion
worth of goods annually, which is a lot of goods. And I believe
your other question was on the Aid and Investment Model which I
had put forward.
In a writing for the Compendium of the Working Group on
U.S. Investment in Africa, I put in an example which is
referenced in the written testimony. It has to do with the
Kenyan meat industry. There have been successive USAID studies
of the Kenyan meat industry. And one in the 1970s gave an
apparently huge amount of recommendations. And then recently
USAID paid for another study, which found a meat deficiency in
Kenya. And its recommendation--paid for by U.S. taxpayers--was
fat cows, low prices, and cleanliness, which I guess was news
to everybody everywhere. So I use that as an example for the
AIM model, which is what would happen is, USAID would focus on
bringing U.S. investment to bear on African industries in order
to reform them, expand them, and make them competitive. For
example, in the Kenyan meat industry case, instead of sending
out a team to make a study, you would have U.S. planners work
with the Kenyans to identify various theaters--abattoirs,
feedlots, transport, cold chain, you name it. And then each
theater would have a public sector anchor. You want to build a
cold chain warehouse, okay, fine. That is the anchor. But
whatever the bidding companies wish to do--if they want to add
vegetable warehouses as an extra, great. That is great. So what
you are doing is you are seeding that theater with a public
sector project but allowing U.S. investors to go in and build
related projects, partly under U.S. Government cover, which
would allow then a more gestalt approach and would allow the
industry to function and would bring U.S. investment in.
Ms. Bass. Thank you.
And then, finally, Ms. Keating, I wanted to know if you
would tell us a little bit more about your business. And then
you talked about coordination and how it would be helpful to
you and you also talked about the hoops that you have to jump
through. You talked about it in general terms, and I was
wondering if you could describe specifically your story. And
also if there is any relationship between your company and EX-
IM, or is EX-IM a model that is much too big for it?
Ms. Keating. Computer Frontiers, what we initially started,
we were a government contractor, and we helped to set up the
Internet in 21 countries. And from that process, we were able
to be in all those countries. And so that is where I am saying
that the link between working for the U.S. Government and also
seeing what is available and making those relationships with
ministers to, you know, end users is kind of under the cover of
being there and having some protection by the U.S. Government,
in essence. What I would say is that what I did was not
necessarily encouraged by USAID for most companies. What
happens is that if you are an aid contractor, they really don't
want you entering the market because of historical trends,
which were that if you are there, you know we don't want to be
seen as going into the market to take the market over. I think
those things have been overridden, and we have to change our
programming and how we are looking at the private sector in
these countries.
So I did have some very good managers basically at USAID at
that point. They knew what I was doing. They knew I was
establishing these businesses. And they allowed me in essence
to do it, and that has turned into a 17-year business and being
very productive and doing real development which is providing
real jobs.
So that leads to the other point of it is, is that they
can't buy our goods unless they are making money. So they have
to be selling it to somebody. So let's create those trade
relations with us. And that really in essence was the basis of
my company. So after those 10 years in creating that platform
of both the regulatory environment for telecoms as well as the
Internet infrastructure, we have built our companies on top of
it. I have people who do Internet programming. We do mobile
money applications. We are on the cutting edge of those kinds
of things in Africa. And I hate to tell you this, but Africa is
advanced in terms of mobile money and financial systems in that
regard. So that is where we operate.
We are basically bringing our intellectual property into
the mix, and we do need more protections for intellectual
property. There are other things that we want to do that we
cannot because we are afraid, basically, in all honesty that
our intellectual property will go missing or become very
available and not due to our work.
The other thing you were mentioning was the hoops that we
have had to go through. So I have been at this now for 17
years. In the initial years in talking to EX-IM, physical
exports. Obviously, I am not exporting physical things. It
makes it very difficult for them. The initial period when we
were trying to do deals, the deal sizes were $10 million. So
there was just no way that that would be a deal size that we
could do at that point. Now those things have started to
change. I am hearing that there are different amounts. But
still, the reality and the reality reflecting of other small
businesses of my size that try to really make inroads into
these groups, it is difficult. And also understanding what they
need in order for you to make the applications for their
assistance. I do think things are changing now, but it is just
not very apparent.
When I am talking about one-stop shop, the other issue is
there are two many trade related agencies, it is just so hard
to know where to go. And as a small business you have very
limited funds to do those pursuits. So you might make one
attempt a year. You pick a certain agency. You try to pursue
and see where that goes. You gain the knowledge from that. But
usually, it has not translated into any real money or pieces
out of that. So what would be helpful would be to have that
coordinated somehow so that we can just determine immediately,
well, this is not a place where we can get assistance, or it
is, and then we will put the money toward doing that. But those
are the things that you run into as a small business.
As I said, you could say that there are many pieces that
are available to us, but in reality, there are not. So that is
part of it. I think I covered it for the most part.
Mr. Smith. Mr. Marino.
Mr. Marino. Thank you, Chairman.
Good afternoon. And thank you for being here. Dr. Freeman
and the rest of you, it is an honor for me to be having this
discussion with you.
I want to ask the ladies--my father always told me to refer
to a female as a lady. That is the quintessential compliment.
So, ladies, can you explain to me, how are women's rights and
child labor considered in expanding U.S. trade with Africa?
Ms. Freeman. I will take a stab at that first. A lot of the
ways in which U.S. companies enter Africa is through--we have
talked about the trade promotion coordinating committee in
these 20 Federal Government agencies. You add those together
with the international organizations, including the United
Nations, the World Bank, and others, and actually there are
provisions that you have to agree to about anti-trafficking,
anti-sexual harassment. You actually cannot engage in
procurements with these entities without agreeing to those
conditions.
So I would say they are very clearly set forth. In fact, in
contract terms, they are called standard provisions, and they
are flowed down even to subs that you might work with. So I
think there is a clearer foundation for the protection of those
rights. When you work with any of these organizations, and very
few--my colleague here may be an exception from this. Very few
firms go alone into Africa. They are usually under the umbrella
of some funding organization, in which case they are signing up
for all of these provisions. And of course, firms have their
own set of ethics and standards and their own policies and
procedures. And from a human relations point of view, if you
look at the manuals of--I am sure even my colleague's company
and many other private firms, these provisions of our Title IX
follow us overseas. We cannot be exempted from it because we
are working overseas. So you will see this in our own
individual handbooks as well.
Mr. Marino. Are we adequately monitoring this?
Ms. Freeman. Well, I can say with regard to certain
provisions like--let's take anti-trafficking in persons as an
example. There is a new Presidential directive for which the
regulations are actually going to come out very soon--or if
they are not out already--and it will be very seriously
monitored beyond simply a firm declaring that they are
following these precepts. They basically have to proactively
have, number one, training programs and, number two, if they
have any partners or subs involved in their work, they actually
have to investigate, proactively investigate, what they are
doing to comply with these provisions. So I think the bar has
been raised to a higher level to require this kind of
investigation.
Mr. Marino. Thank you.
Ms. Keating, what role do women play in Africa in the
international business sector? African women?
Ms. Keating. I want to first add a little bit to what she
was saying.
Mr. Marino. Go ahead, please.
Ms. Keating. Which is our greatest export is ourselves. And
our greatest export is how we do business in the United States
and carrying that with us. And that is why my comments earlier
on USAID not wanting 51 percent majority U.S. companies, but
that brings with it our requirements to adhere to all these
types of rules. If you don't have that, you are basically
subcontracting to people that you have no control as the U.S.
So, in terms of protection of women's rights and child
labor and those kinds of things, those come with us. And that
is what I would say is that the biggest thing that we really
need to do is to be incorporating in these countries, not
seeing it as just places where we are outsourcing necessarily.
So that is in so much the difference that I would like to draw.
Mr. Marino. Are African women playing a vital role?
Ms. Keating. African women play a very vital role in
business in Africa. And again, in some ways, the reason for
doing business with women in Africa is that they are more
inclined to do the development that you want to get done, which
is where women are educated and are part of business and
earning their own income, it goes back into the family and to
the advancement of their own children. And that in itself
becomes a development process instead of trying to develop
externally into all these different kinds of projects. Those
are the kinds of things, and empowering them in that way is a
very important force.
Ms. Freeman. Could I just add one point to that?
Mr. Marino. Yes.
Ms. Freeman. I was commissioned by the African Development
Bank to do a study of the role of women entrepreneurs in
Africa. And this was as a foundational work for them to create
an actual lending window at the ADB for women in particular. So
we studied the most successful women to understand how were
they able to be successful and, conversely, what were the
barriers to women entrepreneurs in Africa. And that book was
published for the African Development Bank, and we will send
you a copy.
Mr. Hansen. Thank you, Mr. Marino.
I just want to make a quick comment here. This kind of goes
to the branding question Ms. Bass had as well, which is that
concern about African women is very well merited. And gender
inequities there are quite extreme sometimes, and inclusion is
a necessity. Also, child labor is a horror, and it should be
suppressed.
But what the concern, though, is, is that we see these
issues, which are at this point just issues, not actual
problems. But we see it as an issue of whether we should engage
with Africa: Shouldn't they clean their act up, and then we
engage? But what happens is, for example, in Bangladesh
recently, in Dhaka, a factory collapses, and they pulled 700
bodies out of the wreckage, mostly women. Now, no one says we
should never have gone to Bangladesh in the first place, we
never should have made shirts there. We don't think we should
pull out of Bangladesh. We don't even really call for a
commission on Bangladesh. But if it were Africa, if that
happened in Lagos, it would be all over the news. We should
never have been there. It is immoral. We are exploiting these
people, et cetera, because we see Africans as playthings
ultimately, and as unable to take care of themselves. But the
Bangladeshis, they can make shirts, and they are tough, and
they are part of the game.
We need to see Africans as everybody else in the world, and
we need to engage. It doesn't mean you accept collapsing
factories. It doesn't mean you accept child labor. But it means
you engage. You put them down there. And when you find a child
working there, you say, get them out of there and get them into
school. But you have a factory there where someone else can
take that kid's job and do it properly.
Mr. Marino. Thank you. I yield back.
Mr. Smith. Mr. Stockman.
Mr. Stockman. Yes, thank you.
I would like to preface to my questions with a statement.
First of all, I have been to DRC. I have been to numerous
countries--Chad and South Sudan and all over the area.
And I think, Mr. Hansen, for me, I would appreciate it if
when you say ``investments,'' I think we need to, in your
numbers, delineate between private and government so that we
know. Because I think when you talk investments, you are
talking both, right? Correct? You are talking both government
and private?
Mr. Hansen. Thank you, Mr. Stockman. The investment numbers
that I have come from USTR and CRS, which are presumably
private investments. In another piece I have done, which is
referenced here in the Compendium, I added all of the aid on
top which would be, if you calculate generously, about $30
billion on top of it, essentially nonproductive----
Mr. Stockman. I think some of the statistics show that the
West has given about $1 trillion in aid. But this is one of the
things that I think is a challenge; because we are trying to
bring medicines into--in particular into DRC, the Republic of
Congo has changed their airport. But when I was going to DRC,
the challenge for an individual that is not a government high-
ranking official is the bribes and the hassle you have to go
through. And we were there as humanitarians trying to help. We
were basically assaulted in terms of shakedowns.
I think it is not so much a racist thing as it is as much
of a hassle factor. Americans will go to McDonald's--they are
not going to sit down for a four-course meal. Americans avoid
hassle. I was even asked for money from a general there as I
was leaving.
And I think that is part of the problem. It is not that we
don't care. It is that we try to avoid those situations.
Also you keep saying--both Dr. Freeman and Mr. Hansen, you
talk about being like China. But I know close up and personally
that the Chinese do not have the Foreign Corrupt Practices Act.
And I don't think you would suggest that we emulate their
manner of giving contracts through bribes and things like that.
I mean would you suggest that?
Mr. Hansen. Thank you, Mr. Stockman. I would absolutely
not--absolutely not ask to have the FCPA repealed. I think it
is a net asset by far for U.S. investors because if you say, I
don't want to pay a bribe, you are arguing over the price. If
you say I am not going to U.S. Federal prison over this, that
is a pretty clear no. So that is good.
I differ with certain of my colleagues in the
anticorruption field though in calling for a de minimis
exception because at this point, if you go to Kampala and do a
trade show and you show these officials, well, we would like to
open a series of clinics here and, by the way, have some beer
and here are some gifts for your kids, you are a Federal
criminal, because there is no dollar threshold on the FCPA.
But if a U.S. Congressman--no offense--but if a U.S.
Congressman showed up with staff, you could probably hand them
a large campaign check and that is fine.
Mr. Stockman. But we can't accept anything over $25.
Mr. Hansen. I may be wrong on this. But one could have
someone mail it to a PAC or what have you. We are more
sophisticated than this.
Mr. Stockman. No, we can't take foreign money either.
Mr. Hansen. No, no. Not foreign money. No. The U.S.
investor. I am talking about the U.S. investor could do this,
yes. So the point is, is that a de minimis exception should be
put in there.
As for the larger question of corruption, I think it is
actually rather overblown in Africa. It does happen very much.
One thing, it is actually a function of our lack of investment
there because what people often fail to realize is that Africa,
coming from a very agricultural background, is basically, you
have two choices if you want real money, a middle class
lifestyle. Well, cassava farming is not going to do it, so you
have to join the only real industry, which is government. And
if you succeed in rising in that industry, your real income
oftentimes, unfortunately, comes from getting it from the
capital flows that come in. Humanitarian aid is a capital flow.
People wonder why Africans will get mosquito nets and then go
sell them. It is because that is the only capital coming in.
They are a capital deprived environment. It is like an anoxic
environment. They do not have financial oxygen.
What we need to do is--we should not worry about them
cleaning up their act and the public sector becoming like
Switzerland before we go in. What we need to do is get the
legal protections. We have the savvy investors by the thousands
who could go in there, make their way in and provide
alternatives for the Africans to make money.
Mr. Stockman. I think you are missing my point. My point
is, I know firsthand--because I was there--the Chinese operate
in a very different manner than we do. And it does constitute
oftentimes--let's be up front--large sums of money. I was
there. So I am suggesting to you that it would be helpful if we
could somehow address that issue, too, because we are playing
on an uneven playing field.
Go ahead.
Mr. Lande. I think your question is really the nub of this
conversation, and it is right on the mark. I don't know the
answer. The reason I say this is as follows: The Foreign
Corrupt Practice Act, they had a meeting--oh, God, it was just
the other day. And Symbion Power, GE were there. And they both
were saying, thank God we have this act. We are able to tell
people, ``No, we will go to jail''; people don't even ask us
for bribes anymore.
The negative side. People don't come to the Hill and give
you the negative side because it sounds like you like
corruption. Negative side: More people come into my office and
say, you know, I was trying to do some business in Africa and I
had this deal, and I went to this U.S. corporate executive. I
said, Let's do it together. They said, oh, but FCPA. I said,
What do you mean? Well, you have to understand. It is
administered by the Justice Department. Justice is pretty
straightforward. They want to find something and so on. They
don't look at necessarily what is going on. They say that if
there is corruption, well, I am a CEO. And some local guy does
something and so on and it falls under the act, I am
responsible. I have to exercise due diligence. Well, due
diligence for a small company may not be possible. You would
have to get a whole legal group in there to prove--the CEO
hasn't touched any of this money. He is not even part of it. He
doesn't know what is going on. You have that.
The British have now decided that you want to cover
everything that happens, even what you call the doing business
bribes, you know, just to get something out of customs quickly.
Maybe your point but on a much lower level and so on. If you
are guilty of being involved with that, the British say, you
can't list on our stock market, which also means you can't list
on the U.S. stock market. So what we are recommending in
Manchester Trade--not that you get rid of FCPA because
obviously it does something. But that we sit and we see, how is
it administered? Can it be administered in ways as more people
are scared to go into Africa, people who really want to do the
honest thing and want to work on it and so on.
I grew up in the Rockaway, which has recently been in the
news for the hurricane. But when I grew up, my neighbor was
Carmine DeSapio. You may remember him. He was the last Tammany
Hall boss. We got rid of Tammany Hall. It doesn't exist
anymore. We didn't do it because the British came and told us
to get rid of it. We did it because we reached that level of
economic development where it didn't make sense. We got rid of
the corruption in the--I am looking at Congressman Smith--with
the longshoremen. Remember, that was a horrible thing in the
ports.
So I think what Peter and I are trying to say is, yes,
there are problems. We need some rules. But we also have to
accept the fact that you make progress through economic growth.
And if what we do is because we are so concerned about the
current situation, we prevent U.S. investment, two things
happen: One, we don't have economic growth. And who comes and
builds this stuff? The Chinese. And they are going to do it
worse than we are going to do, and you are going to have the
factories falling down in Bangladesh. You are going to have the
roads not working right and so on. So all we are trying to
say--at least Manchester Trade is trying to say is, I would
like to go through all our conditions. Have somebody take a
step back and say, there is nothing wrong with the conditions.
They are highly moral. In a multipolar world, where you have to
work with the Chinese, where we have to work with other
countries and so on, how do we establish something that is
effective, but we don't shoot ourselves in the foot, how we
don't shoot those Africans who we don't want to work with in
the feet and that is kind of the balancing we are trying to put
on the table.
Mr. Stockman. I have to agree with you. I think there needs
to be a little bit of leeway. Our Government, I know from our
standpoint, anything we do--when Chris and I go out or
whatever, we are so paranoid to act. I know for a fact that in
Africa, people are paranoid to act, because it is safer to do
nothing than to do something. And if we could modify that law
to where we are not so paranoid to act.
If you understand, I am very sympathetic to what you guys
are doing, but I also know on the ground what is really
happening. And I think that the act and the way it is
implemented is hindering Americans from saying, ``Why take a
chance?'' I can make a buck here the United States. Why go over
there and risk a buck over there, because I could go to jail?
Mr. Lande. Let me give one last quick example because this
has been mentioned at other congressional hearings and it is
correct. Normally when a person wants to do business, he
invites a foreign person to come over to the country and look
at the factory and how it operates. Normally, when that
happens, you say, okay, bring your family with you. If you are
going to come, let's spend the day in Disney World. It is only
about 20 minutes away from where we are located.
Under the Department of Justice interpretation is, that
could be a bribe. It could just be an incidental normal bit of
entertainment. So I think we are in absolute agreement that I
just want somebody or some group who cares about Africa, cares
about our values, to look at these things and say, are we doing
it the best way possible? We cannot have eight different
committees deciding how we are going to operate in Africa, all
setting up norms, because there is one investor, and when he
looks at what the eight different committees have done, he is
discouraged. And I would say I agree 100 percent with your
point as to--that we have to figure out a way to do it that
makes sense.
Mr. Stockman. Dr. Freeman, I know you wanted to say
something. I apologize.
Ms. Freeman. Yes. I am just going to say quickly, you asked
what example should we take from China? Certainly, being
corrupt is not one of them.
But here is what I do want to say that is very important
and is an example we should take from them. When they want to
learn how to do something, okay, because they have gone from
like zero to 110 percent in 20 years, okay, how did they do
that? Well, they learn. They seriously look at every example
that is the penultimate example of the thing that they are
looking at. So if we are good in financing, they will call
over--they will find out. They have teams of researchers who
know exactly who is the best finance person in America. And
they bring over that person, and they understand. They have
whole committees of people who will sit that person down, and
they say, what can we learn from you? They are a learning
institution.
And so in support of the points my colleagues are making,
we also need to learn better how to implement and modify, as
appropriate, whatever we want to achieve from this act. So that
is what I was saying earlier, too, about being strategic and
looking at our industries. We have to take this example from
them and say, how do we do everything smarter?
So one little small example on corruption, for instance,
let's say this price of water is $1. What they have is a
structure in tenths. They say, do you want quality one of the
water? Because that is 10 cents. If you want quality two of the
water, it is 20 cents. So is it corrupt when they say that the
water is $1, they negotiate downward with everybody
individually on what it is that you can agree on from a supply
and a demand point of view.
That is an interesting example. So we need to learn what we
can learn that is good from them, just like they learn from us
what is good in us. But we are not the only examples of
ourselves. We can learn from Saudi Arabia. We can learn from
Turkey. We have to be a learning institution.
Mr. Hansen. Excuse me, Mr. Stockman. I know you want to
move on, but I just would like to point out, I think apart from
a de minimis threshold on the FCPA, where like buying a cup of
coffee is not a big deal, I would recommend that the FCPA not
be loosened, not be watered down, because it would declare open
season on U.S. investors, because they would say: Oh, now the
FCPA doesn't apply, so now you have got to pay me some money.
So we have the solution in place. I think removing it would be
more harm than the disease.
Also, I just want to point out that U.S. investors are
extremely law abiding, on the whole. I mean, there are corrupt
people. But most want to play by the rules. So if we just
provided them legal protections, that would be something
because what we have done now--we are in a situation where,
let's say we send someone to Nigeria or Kenya, we don't provide
a bilateral investment treaty, so they are at the mercy of the
local government. We don't provide them a double tax treaty, so
they are at the mercy of the local tax authority. We send them
out there with no hope of escape. It is basically a Black Hawk
Down situation for investors out there. You can maybe ask the
U.S. Embassy to help you if they care.
But if you are out there and you get caught and some
official says, okay, now you have to pay me something, and you
are unprotected, exposed and isolated and you make a payment,
you are a federal criminal. And they will put you in jail.
So we are telling U.S. investors, go over if you want but
don't put a foot wrong. We are not going to help you. But if
you put a foot wrong, you are going to prison. Who wants to
invest in that kind of environment?
Mr. Stockman. I couldn't leave the country, though, until I
paid passport fees that were repeated throughout the chain. I
am just telling you on a firsthand basis, too. As you know,
there is a mountain of copper out there. And what the Chinese
have done, they didn't even hire the indigenous folks. They
moved the Chinese folks from China to that area. It doesn't
benefit the local government or the local people to do that.
I, for one, would like to see more American participation.
But on the other hand, I think we need to understand the
investors and the people that go over there, they have got
challenges, too. They want to help out, but they can't always
do that. I yield back what time I don't have back to the
chairman.
Mr. Smith. Thank you very much.
Mr. Rush.
Mr. Rush. I want to thank you, Mr. Chairman.
I have been quite interested. This is my first opportunity,
I believe, to--not be in a hearing of the Foreign Affairs in
this subcommittee--but it is my first opportunity to be in a
hearing on this particular type nature.
And I would preface my remarks by saying that the biggest
obstacle that I see to a robust U.S.-African trade policy is
the question of the meeting of the minds. America, U.S.
investors and indeed this Congress have really not made up its
mind about what it wants to do or needs to do in Africa, I
think. And once we make up our mind, then it is in our national
interest to be vigorously engaged and helping to develop the
economy of Africa. And I think that we will be better off, and
we will see more results, more positive results.
I don't see Africa as a continent any more corrupt than I
see China and I am--I have been made aware of some of that
corruption among government officials in China. And I know that
the citizenry of different nations in Africa, some of those
citizens are very, very upset with the corrupt officials and
the corrupt government there. And I feel as though one of the
things that we are lacking in this conversation and most
conversations that I am involved in is that we don't hear from
the Africans. And one of the things that I have noted being
reinforced around the issue of immigration is that the African
immigrants are the most educated immigrant group of all of the
immigrant groups in this Nation. And so the diaspora, as far as
I am concerned, represents an enormous reservoir of
intellectual capital and brain power that could be harnessed in
a serious way in some discussions about how do we move our
Nation and the nations of Africa together in some kind of
harmonious way that would be beneficial to both.
Mr. Hansen, I was very interested in some of the things
that you said. And in your testimony, your written testimony,
you say, Africa is poorer because the U.S. gives it no way to
earn serious money in the way the U.S. did for Taiwan. You are
using the Taiwanese model. Could you be more explicit in terms
of the industrialization of Taiwan? And it might not be fair to
look at this entire sub-Saharan region, but maybe you could
take one nation and compare it.
Mr. Hansen. Thank you very much, Mr. Rush.
Well, perhaps looking at the Taiwanese example, Taiwan is
very much like Japan, South Korea, and the People's Republic of
China in that they became, they are known as the Asian tigers
because they became export-driven economies, and we imported a
great deal from them to spur their development.
Now, one way where I see a difference between sub-Saharan
Africa and the Asian model is that the U.S. does not care
really about rights or what have you in these Asian markets and
just sent over much of our industrial base to Japan, to Korea,
and more recently to Shanghai, Guangzhou. We did not ask
whether they respect women or children or care about human
rights or abortion or corruption. We didn't ask any of that. We
just sent it over. And with results that in my written
testimony show, especially for what is now a rather fearsome
regional and now increasingly global rival, the People's
Republic of China, they now have almost twice our U.S.
investment that we have across the whole of sub-Saharan Africa.
They are importing a hundred, I believe $104 billion in U.S.
products, which is--in fact, all U.S.-Africa trade now is one-
third of our trade deficit with the People's Republic of China.
The reason the PRC can do that and the reason Taiwan can do
it is that we industrialized them, which allowed them to rise
up the economic chain and to earn real money. It is like asking
like a CEO of a Fortune 500 company now to buy stuff; whereas
with Africa it is like treating the 18-year-old intern and
asking them to buy stuff. It is not the same scale.
Where we went wrong and where AGOA is a misdirection--I
mean, it should be continued, but it is a misdirection
strategically--is that we applied the Asian model to sub-
Saharan Africa without an Asian-style export economy. We said,
okay, export stuff. But who was there to export? There was no
export industry waiting to happen. AGOA, as I point out in my
written testimony, it is very unclear whether there is an
intention to help U.S. investors go over to start AGOA
businesses, and in fact anecdotal evidence around town here,
when you talk to people, they sometimes say, oh, U.S.
businesses can't benefit from AGOA. So it is very unclear even
what our purpose is with that.
We basically said, okay, be South Korea. Oh, you are not
South Korea? Oh, well. I mean, we did not take any step to turn
them into South Korea. We just said be South Korea, and that
was foolish.
Mr. Rush. Are there any legislative remedies that you
suggest in order to correct the non-industrialization policy
that relates to Africa? Is there some specific, and how do you
see an industrialization policy that emanates from the U.S. to
Africa, how do you see that in terms of the forms, shapes, and
mechanisms?
Mr. Hansen. Thank you, Mr. Rush.
I know Mr. Lande wants to make a point on this, so I will
be brief. In my written testimony, I suggest various wording
changes to the bill to emphasize investment, which is actually
to make it fully comport with the existing section 4 of the
bill calling for investment, and in fact naming investment
first.
As for legislative means, what has to be done is pressure,
great pressure has to be put on the U.S. executive branch to
conclude bilateral investment treaties and double tax treaties
across the continent. Preferably they would be in a simplified
form or in one multilateral form for all of Africa. That would
be a way to do it. What absolutely has to happen is whatever
gets U.S. private capital to Africa and in the hands of private
people, not through a Byzantine aid industry, which basically
ends up enriching folks in Arlington, Virginia. I am talking
about getting money into the hands, into the pockets of every
day Africans who are able to do their own business and make
their own way and create their own economies and their own
markets. That whatever gets that U.S. capital there to create
businesses must be done. That will have the effect of creating
not only profitable U.S. businesses that are involved in Africa
but also markets for U.S. exports. You can't sell to a market
that doesn't exist. We have to build that market. So I would
like to--oh, I am sorry.
Mr. Rush. If I might, just before Mr. Lande steps in here,
I have one final question for you. I am intrigued by the,
again, by the diaspora. Those who are Africans who are here,
who are quite capable, who started small businesses, those who
have been trained in the best Western colleges and
universities, those who have a keen mind and keen abilities and
character, that really, you know, want to see, be successful,
not only here in America but also want to be successful in
Africa, would love to be successful in Africa, how do you see
engaging those individuals, that asset? And do you--how
powerful an asset is it in your opinion?
Anybody, Dr. Freeman, Mr. Lande, Ms. Keating, anybody
should respond to this.
Mr. Hansen. Well, Mr. Rush, I would just very quickly say
that the diaspora is an amazing asset and absolutely has to be
used, but Dr. Freeman is a much better authority to speak on
that.
Ms. Freeman. Actually, one thing I do want to say about the
example of Taiwan's growth, not just our role in it, but also
China and its growth is that policies and even institutions did
not cause that growth. You know what caused that growth? Money.
And where did that money come from? Their diaspora. The Chinese
has the biggest diaspora in the entire universe, and they
poured in more money--we talked about export processing zones,
for instance. Well, they put in more money in Tianjin in one
export processing zone in 1 year than all of the investment in
Asia combined in that year. That means in one little zip code,
okay?
So we were talking about learning, okay? The Indians and
the Chinese have learned how to harness very strategically the
remittances and the intellectual capital of their diaspora. So
what we can do to help the African diaspora here is to learn
from these examples, support these examples, and help to
transport these examples and transplant them, both here among
our diaspora and among the leadership there.
Mr. Lande. Let me go back to your first question, which was
right on the mark, Taiwan, and why did it succeed in Africa.
Two reasons. One, it is something called the East African--the
East Asian growth model where, and again, I don't want to go
debating free trade and liberal trade, but the Japanese first,
followed by the Koreans and the Taiwanese built up very
protective barriers, was able to first produce for the domestic
market, at the same time produce for export but keep U.S.
products out. And we saw the loss of the U.S. television
industry. We saw the loss of the U.S. footwear industry while
these countries operate. Good or bad, I don't think now we can
use an East African--East Asian development model for Africa.
Having said that, it is interesting to me--and there is no
debate; that is what annoys me a little bit. The Africans have
something they call localization, where they say we want to
give some preferences for our own people to give them a chance
to participate in the economy, and so on. So maybe we will have
some local requirements. Well, as a free trader, teach at Johns
Hopkins, that is bad, oh, no, no, you have to have the free
market determine it. I would rather have a discussion, because
everybody has protectionism. We had protectionism in the years
1900-1912, the McKinley and so on kind of tariff bills. So all
I am saying is that there are models that Africa can follow.
Now, what can we do to help Africa, because, again, your
question focuses exactly correctly. What can we do to get the
establishment of supply chains that operate in Africa that is
in our interest because that is the modern form of where you
get your manufacturing. You become part of a manufacturing
process. And that is where there is a whole group of ideas. The
export processing zone was one that we mentioned. Let's get rid
of U.S. aid limitations, that they can't help develop them
along the way and so on.
Let us begin to, I don't know how to put it, I will be very
blunt. Bangladesh has always been a problem in terms of exports
to the U.S. of textiles. They have no respect for labor rights
at all. That is why in these export processing zones that they
have, unions aren't allowed to operate, and that is why there
is all these complaints that show up about Bangladesh, the fire
safety discussions we are having now.
Africa basically comes out of an English tradition, at
least a lot of the exporters are English, where they have a lot
of respect for labor rights. In fact, sometimes people say they
don't want to go to Africa because labor is too strong. Others
will say it is more productive that way.
But, again, if we would begin to play to Africa's
strengths, and I don't care if Bangladesh doesn't have a
preference; they are running around town saying Africa has a
preference, we want to have a preference. Not my interest and
so on. So I would say let's figure out what Africa's strengths
are. Maybe they can't be as protectionist as East Africa, but
at least accept this idea.
Let me just make one last quick point, and again to go back
to the really good question that Ranking Member Bass asked and
so on, and that is, the way that you should apply sanctions is
the way that we have applied them in the Middle East and in
North Africa during the recent problem. They should be
targeted. You decide who are the bad guys and let's do it. If
somebody grabs power, Assad, let's just punish his family; they
can't travel, or we will bring different cases against them.
And then let's try to take them collectively. It shouldn't be
the U.S. alone anymore. It should be a whole group of people
doing it along. And then the collateral damage should be let's
agree that we are going to do nothing or at least do a study on
the impact that is going to minimize Africa's possibility for
industrialization. So if this is going to have an effect on
industrialization, let's come up with a different tool. The
idea of taking away from a country because a dictator is a
horrible guy but of punishing people by taking away MCC
programs, by taking away USAID economic development programs,
by taking away AGOA preferences, taking away trade preferences,
which is the only way available for them to develop, with all
due respect, coming from New York, it is cockeyed, it just
doesn't make sense, and that is what we do sometimes.
Mr. Smith. Thank you, Mr. Rush.
Let me just ask one final question, and perhaps Ms. Bass
might want to say something as well.
Mr. Hansen, you earlier mentioned in passing at least that
when it came to China and human rights and trade and the like
that, and you are right, there was a lack of concern about
workers' rights, whether it be the Clinton administration, the
Bush administration or the Obama administration, there are no
linkages to Most Favored Nation status or now PNTR with China.
There should have been, and unfortunately, that was squandered
on May 26, 1994, when Bill Clinton shredded his own Executive
order that had laid out very fine, and I think very important,
benchmarks on the achievement of human rights. ``Significant
progress'' was the language he used in his Executive order, and
then he just tore it all up, which said to the Chinese
Government all these clowns think about is profits. And I love
profits, but profits, human rights, trade, and the non-
exploitation of workers ought to go hand in hand.
So I would raise a question because, again, Dr. Freeman,
you said all firms entering the African market now have to
compete with China. Had we stuck to our guns about reforming
China, the good model that they might be projecting to the
world would have at least been more favorable toward human
rights and intellectual property rights and the like.
Thank you for your very specific recommendation of how we
can improve the bill. I think, you know, as we go to markup,
that will be extraordinarily helpful. But how do we deal with
the exploitation of Chinese workers? I filed with the AFL-CIO
some years back, and it still went nowhere, an unfair trading
practice complaint because of the exploitation of their
workforce, 10 to 50 cents per hour in China. I mean, no OSHA
regulations, an increasing problem with arrearages, with not
even paying their workers. There is just one problem
compounding after another, which makes it hard for the U.S.
manufacturers, small, medium, or large, to compete with that
kind of cost. The cost of the product is reduced substantially.
As I think you kind of referenced, or at least hinted at, Ms.
Keating, the intellectual property issue is very real, and we
had a hearing in this committee, and I chaired it, on that
problem in China, once a company markets its product and starts
to get a foothold in a market, in comes the Chinese Government,
and its friends in business, and they produce that same
product. They rip off the intellectual property rights, and we
had Luster Products here. They talked about this in Nigeria.
They held up their product and they held up the Chinese fake,
and they said, you tell the difference because they have been
ripped off, and I am wondering how we protect against that. You
know, so if you could speak to those issues, if you would like,
I would appreciate it.
I do have some other questions, but because it is late, I
won't get to those, but please.
Ms. Keating. In terms of the intellectual property rights,
the biggest issue that we have is just that, and it is even
more difficult, not even a physical product, in software and
things that we are developing. So if we develop a mobile money
application, it is very quick and very easy for them to
duplicate it very easily.
How do we defend against that? Really that is the biggest
issue that we have, which is that there are no relations
between the U.S. Government and the African governments in any
kind of trade practices that would allow them to enforce it or
allow the U.S. Government to assist them in enforcing those
things because there is nothing to enforce. So we are just in
the open. We are--and that is the problem with bringing any
intellectual property from the United States into Africa almost
everywhere outside of South Africa.
And that is a huge issue that unless you have these things,
you have the trade agreements that are going between the
different countries or Africa as a whole that they sign on to,
and in that signing, they agree to protect our intellectual
property, we are not going to get there, and so that is just a
major hindrance. And so we need those kinds of things in order
to even go forward, and that is what America has to sell in
many ways and what our advantage is. So I will leave it at
that.
Ms. Freeman. I will just say quickly when I was a little
girl hiding under the chairs when we used to have those drills
when we were afraid of the Russians, well, if we remember what
we were afraid of, that the Soviet Union might take charge, and
they would what? Well, what in fact has happened is, it wasn't
the Soviet Union; it was China. And we weren't paying
attention. We were hiding under the desk, you know, worrying
about that eventuality, and so now we have arrived at this
point in history and in this situation where, quite frankly, in
my view, what you have asked, it is actually not solvable at
this time, period.
Mr. Lande. Very short and to the point. One, Africa is
making progress on intellectual property rights. The Nigerians
have one of the top intellectual property rights offices, and
they have come to the States and they have visited with us. The
Ghanaians have done a lot. There is a lot of work going on in
Africa over the particular issues. It was our company that
brought that famous textile example of the printed fabric,
which you couldn't--they even copied the name of the company
that did that and so on, et cetera. But it was an issue, you
know, which is a Chinese issue. It was their product that was
coming in, and so on. We could have done more.
But Africa, one, is aware of this and they are making
steps. But what makes it very hard is the fact that the U.S.
goes equally against all intellectual property rights
violations. And that brings us up to some really tough issues
where the populous are there. Textbooks, I am not in favor of
anybody copying a textbook, but let me be very careful. If I
have a choice between going after somebody maybe stealing my
software and putting it in the government and somebody putting
out a textbook that is spreading the word I want them to
spread, I am not sure.
The most sensitive of all issues is pharmaceuticals, New
Jersey a tough issue. But how the hell do you deal with that
issue? The U.S. pharmaceutical companies correctly say, I put
in millions of dollars, I developed these things, and then they
rip them off in Africa, cheap medicine. And the next thing I
know, this cheap medicine is now coming in to my developed
country markets. The Africans say, ``Excuse me, guys, we need
this stuff. We can't afford it.''
So, again, I would always come back to the same thing. The
general rule doesn't apply. Yes, we should help the Africans
develop better IPR standards and so on. The U.S., we should use
a little intelligence and maybe not go after every single
intellectual property right because somebody is yelling, but
focus on those which are important to us but also on those
which are ``deleterious to the Africans.'' That would be my
only little additional comment.
Mr. Hansen. Thank you, Mr. Smith, for the question.
A bit of historical perspective is in order just simply to
say that after the Revolution, the U.S. was decried by Great
Britain for being a thief of intellectual property and having
protected markets, and we seem to have done okay as a result.
Another thing, I think a certain humility has to be applied
in the face of historical trends. Yes, there are horrendous
abuses of labor in China, but what will ultimately correct that
is not U.S. legislation or U.S. investment trends or whatever,
except, you know, on the margins. What really is going to do it
is the fact that China is developing. And now on the coast of
China, wages are going through the roof, and their workers are
going to become scarcer, more demanding, and have better
rights. So, in a way, history unfortunately will--well, it will
correct itself--but unfortunately, there is only so much that
can be done.
I think that in terms of Africa, we should not be--we
should not let concern for these inevitable tragedies prevent
us from engaging with Africa because that is the greater
tragedy. If we don't do anything with Africa, they will have no
economy, and they will be poor and dying in huts with malaria
in the countryside. If we industrialize, if we invest, yes,
there will be factory collapses; yes, there will be corruption;
yes, there will be all that, but it will develop. And it will
progress to a higher stage inevitably if we keep going.
I would just simply point out, Upton Sinclair, you know, he
wrote ``The Jungle'' about Chicago. Chicago was awful. I mean,
there were like carcasses of pigs in the river and everything.
It was a nightmare, but now look at Chicago today; it is a
glory, because if you keep it going, eventually things will
develop. That is the way it is. We need to engage and we need
to develop with Africa, together with Africa. Thank you.
Ms. Keating. I just want to add one point. One of the
mitigating factors that we have is because we are in Africa, we
are producing the software in Africa. Some of it is U.S.; some
of it is African. Because we have African people also producing
that, there is--the theft of it goes into, I hate to say it,
the local networks, which is they aren't going to allow that to
happen, they start to talk to their own people about this joint
product that we have created. So, again, it goes back to that
joint activity with Africa, and that is the only way we can
mitigate at this point, and so that works for us.
And then what we would really appreciate is those trade
agreements because what happens for us is if they want to try
to bring stuff into the U.S. market, which they all do, they
won't be able to if they are stealing intellectual property.
But anyway, that is just a mitigating factor.
Mr. Smith. Thank you.
Ms. Bass.
Ms. Bass. Well, I just want to also thank you. This was a
great panel. I thought it was very helpful, all of your input
in the discussion today, and I would just like to ask if--today
we were talking about this specific piece of legislation. But
you all know that AGOA is on the table as well, and perhaps you
could give us in writing your recommendations, how this
discussion today might be applicable to the discussion that we
are having on AGOA would be very helpful. Thank you very much.
Mr. Smith. Thank you.
Thank you very much for your testimony and insights,
wisdom, and very, very fine recommendations. It has been a
great panel. We deeply appreciate it, and again, I am sorry for
the votes that pushed this back about 45 minutes. The hearing
is adjourned.
[Whereupon, at 5:03 p.m., the subcommittee was adjourned.]
A P P E N D I X
----------
Material Submitted for the Hearing RecordNotice deg.
\\ts\