REPORT OF WORKING GROUP 4 (TRADE AND INVESTMENT) WHITE HOUSE TASK FORCE ON ENDING HUNGER IN AFRICA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP93T01142R000100150005-2
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 8
• Document Creation Date: December 27, 2016
• Document Release Date: November 28, 2011
• Sequence Number: 5
• Publication Date: October 16, 1986
• Content Type: MISC

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a .~
October 23, 1986
The enclosed Report of Working Group 4 (Trade and Investment)
is for your consideration before our meeting at 1:00 p.m.,
Friday, October 24, in Room 476 of the Old Executive Office
Building.
We will also be looking at the report by Working Group 6
(Budget) which was sent to you last week.
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REPORT OF WORKING GROUP 4 (TRADE AND INVESTMENT)
WHITE HOUSE TASK FORCE ON ENDING HUNGER IN AFRICA
SUMMARY:
The Working Group found that there are a number of
substantial and varied USG programs directed at trade and
investment in Sub-Saharan Africa(SSA). They involve policy
reform measures, investment financing and guarantees, and
training and technical assistance. There is insufficient
understanding of private sector U.S. assistance efforts, both
in SSA itself, and in the U.S. Themes which should be an
integral part of any commitment to end hunger in Africa through
broad based private sector activity must include: (1) deepening
that understanding through heightened public awareness and
participation; (2) providi-ng support and encouragement for
human resource development responsive to private sector needs;
(3) creating special and innovative financing schemes to
attract investors; (4) assuring that general and specific
policy reform efforts take into account basic private sector
needs; and (5) coordinating USG agency activities targeted to
the private sector.
Background
U.S. trade, investment, and private sector involvement
with Sub-Saharan Africa (SSA) is modest, at best. In 1985
total U.S. imports from the 50 SSA states and territories
amounted to 7.4 billion, of which petroleum and natural gas
constituted 5.7 billion. If five other product groups are
added (cocoa, coffee, bauxite, copper and cobalt), about 90% of
total imports are covered. Cobalt, coffee, and bauxite enter
the U.S. duty free, as do most cocoa products, and some
petroleum and natural gas products. (In 1985 the U.S imported
593 million in all other categories.)
With respect to U.S. market access: a) almost all SSA
states are eligible for GSP, which includes 3,000 TSUS items,
no LLDC has had to meet "competitive need" requirements, and
only one country -- Zambia -- has ever been determined
ineligible for GSP benefits (copper); b) in textiles, other
than Mauritius, no SSA country faces any textile quota -- their
export levels have never been sufficient to trigger textile
consultations; c) in agriculture, the U.S. tariffs are
generally low, averaging 3.1%. There are quotas imposed on
specific products when a U.S. price support program is
threatened such as for certain cotton and cotton products,
certain dairy products (cheese), peanuts and tobacco. There
are also quotas determined by international agreement (coffee),
and sugar is specially treated.
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U.S. investment levels are low, and tend to track the
more active trade sectors. (Computed book value of U.S.
investment in SSA, excluding South Africa, as of the end of
1985 was $2.3 billion.) For example, most of the U.S.
investment in Nigeria is in the petroleum and petroleum related
sector, with the second largest category of investment in flour
mills, reflecting past U.S. wheat export activity. Investment,
whether foreign or domestic, has not been growing in
Sub-Saharan Africa generally because the investment climate,
policies and dependability levels of many SSA countries have
not been competitive with other countries or regions. Most SSA
governments now claim to recognize the virtues of a stable,
supportive investment environment but their performance has
lagged or improvements only have been made recently.
Sub-Saharan Africa must compete with the "world" both for
U.S. consumer preference and U.S. capital available for foreign
investment. To compete successfully means a long term effort
on their part, requiring a complementary mix of public support,
policy improvements, streamlining of investment procedures, and
human resource development.
INTRODUCTION TO THE REPORT:
Working Group 4's assigned goal was to identify optimal
contributions for growth by the private sector. Consistent
with the guidance provided, we solicited suggestions from
representatives of interested agencies participating as
individuals. There was considerable interest in the subject
with some agencies engaging several representatives in the
effort. Several were particularly familiar with the problems
faced due to active participation over the past 2-3 years on
the Interagency Working Group on Private Sector Development in
Africa. The AID Africa Bureau was in the final stages of
drafting its comprehensive private sector policy and strategy
statement for Africa. As a result, we were provided with
numerous proposals, ranging from broad policy approaches to
micro-project design.
There was limited time to review existing agency
programs, to consider the ideas put forward in any detail, or
to seek consensus on highest priority options. Since the
public announcement of this exercise was delayed there was no
time to consult with the private sector or U.S. missions in
Africa. Should the Task Force process be continued these may
be appropriate "next steps". There was, however, general
agreement that a focused, sustained, and multifaceted campaign
to encourage private sector growth will be needed if we intend
to dramatically change the pace of U.S. trade and investment in
SSA.
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We have sought to synthesize the suggestions received,
capsulizing ideas. We have sought' to characterize Working
Group participant views on the various proposals, i.e. general
support(A), significant differences of views(B), and little or
no discussion(C). If the Task Force decides that any
particular proposal or concept warrants further details or
development, these can be provided upon request.
TRADE RELATED PROPOSALS
Congressional Action Items:
1 -As part of the development of U.S. positions for the new
GATT round, study with Congress U.S.legislative barriers to SSA
products to determine if there are ways to provide exemptions
for them or if there are means to provide more comprehensive
duty free entry for a defined category of countries which would
primarily benefit SSA. (B)
Policy Adjustment Items:
1 -Open SSA markets through privatization and deregulation. We
should more vigorously pursue efforts to introduce or expand
private sector competition in the export or import of
economically important-commodities and encourage the
privatization of trade parastatal monopolies and dismantling of
marketing boards.(A)
2 -Develop a regional program to focus on enhancing trade
administration/management, documentation, import operations,
techniques of customs valuation, export packaging, export
financing, transport arrangements, and legal aspects of foreign
trade.(B)
3 -Encourage the adoption of SSA preferential trade
arrangements to encourage specialization in production and to
facilitate trade among neighboring countries and/or regional
groupings as a means to improve production incentives and
facilitate trade in food commodities from surplus to deficit
areas.(A)
4 -Encourage SSA rationalization and liberalization of tariffs
and other trade inhibiting taxes, fees and non-tariff
measures.(A)
1 -Offer technical assistance to regional African trade
organizations on trade enhancement, on staff development and
management.(A)
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2 -Organize executive and specialist level trade missions to
Africa to conduct training seminars in selected fields such as
agribusiness, telecommunications, water resources and
transportation.(C)
3 -Provide increased technical assistance to SSA governments on
better utilization of GSP opportunities and other market access
advantages.(A)
4 -Develop means to elicit and optimally direct corporate'
donations of goods and services to SSA countries.(C)
5 -Study the use of USDA Market DeveloprUent Cooperators to
support expansion of trade, and production in Africa.(A)
6 -Create an SSA Major Projects interagency task force to
generate greater U.S. business interest in major infrastructure
development projects in Africa.(B)
INVESTMENT AND FINANCE RELATED PROPOSALS
Congressional Action Items:
1 -As lack of USG tax sparing is a particular obstacle in
negotiations with developing countries, study with Congress the
possibility of offering limited recognition in U.S. tax law of
new investment tax holidays in Least Developed or other
narrowly defined groups of countries.(B)
2 -Eliminate restrictions on USG support for private sector
activity in Africa when the resulting project would result in
products in competition with U.S. agriculture.(B)
3 -Expand existing and initiate new USG programs of private
sector pre-feasibility and feasibility study support in SSA for
trade and investment.(A)
4 -Support the development of new and innovative financial
mechanisms, such as an "Africa Growth Fund" to mobilize U.S.
equity capital (with USG support) to implement, expand,
rehabilitate or privatize productive enterprise. The funds
could be managed and invested by private U.S. banks whose
compensation would be tied to the performance of their
investments.(A)
5 -The concept of foreign investment in an agricultural
processing/marketing operation drawing from small-scale local
producers holds great promise. Develop effective means,
including any necessary enabling legislation to permit
non-equity USG participation in these private projects such:.as
credit to the investor, credit to participating farmers or
parallel extension or input projects.(A)
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6 -As credit financing is often available in Africa if equity
participation is sufficient, study means to permit USG
agencies to establish mechanisms to facilitate private equity
participation, including innovative new quasi-equity financial
instruments which might meet both the needs of U.S. policy and
SSA investment.(A)
Policy Adjustment Items:
1 -Expand efforts to induce policy reform and restructuring by
African governments to improve the climate for domestic and
foreign private investment.(A) _
2 -Enhance direct U.S. support for indigenous African
institutions designed to mobilize, domestic resources for
private enterprise credit or equity participation.(A)
3 -Study SSA government management of foreign exchange and
domestic credit systems to increase private sector access to
foreign exchange and credit and to insure that the private
sector is not disadvantaged relative to the public sector.(C)
4 -Encourage modernization of trade and business laws,
particularly in those countries in which business law
development has stagnated. This could include the offer of
technical assistance where appropriate from U.S. government and
private sources.(A)
5 -SSA governments should be encouraged to adopt policies that
promote US-SSA private sector joint ventures.(C)
6 -Support feasibility studies on privately operated free trade
zones as a means to quickly overcome inappropriate African laws
and practices; to demonstrate the value to private development;
and to stimulate supportive growth.(A)
7 -Promote Bilateral Investment Treaties with SSA countries.(A)
1 -Rich offshore fisheries provide a particularly attractive
opportunity in several SSA countries. A team from the U.S.
private fisheries industry with USG support should visit these
countries to determine how indigenous utilization of these
resources could be increased.(C)
2 -Investigate creating industry or problem specific U.S.
business missions to Africa which would provide recommendations
on policy issues and business practices.(A)
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3 -Enhance efforts to make the American private sector aware of
African opportunities and obstacles through more frequent and
better targeted African investment seminars, including
presentations at selected annual trade and professional
association shows and conventions.(A)
4 -Work with donors and host governments to establish effective
privately-operated one-stop investment centers in selected SSA
countries.(B)
PUBLIC AWARENESS AND OTHER PROPOSALS
Policy Adjustment Items:
1 -Substantially increase the U.S. country team's knowledge of
the SSA private sector and instruct them to find ways to
establish private enterprise advisory groups from indigenous
and expatriate businessmen and farmers.(A)
2 -Create a centrally-funded SSA visitors program to enhance
African leadership familiarity with private trade and
investment goals and opportunities.(A)
3 -Study the use in Africa of tax or other incentives to the
African private sector to support appropriate training,
including possible U.S. replacement of lost tax revenues from
local currency generations.(C)
4 -Establish a Private Enterprise Institute for SSA which would
involve indigenous and foreign private sectors, USG, African
and other donor governments to provide information on relevant
new private enterprise development techniques, training and
investment climates.(B)
1 -Establish African internship programs in American business
firms for short-term practical training with the USG and
receiving firms sharing costs.(A)
2 -Develop partnership programs to link U.S. and African firms
or business associations for training, technical assistance and
business development.(A)
3 -Establish ties with U.S. business schools to develop
appropriate training for the SSA private sector to include
efforts to induce U.S. corporate scholarships with USG payment
of travel and selection costs.(A)
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4 -To expand the impact, appropriateness and breadth of
technical training, investigate community supported short term
visitation in America through industry specific visits of
African technicians including factory or site sessions,
seminars and home hospitality. American communities or firms
might support local costs and planning with the USG covering
selection and travel.(C)l
5 -Substantially increase the emphasis on private sector trade
and investment speaking tours in SSA.(C)
6 -Institute a computer talent bank of Americans with African
experience for use by government and private sector.(C)
7 -To determine the cost a-nd extent of the major transportation
and ports obstacle to both trade and investment, offer a team
of American private sector, regional port/river authority
experts and others to study port and transportation problems on
a regional basis in Africa and to prepare pre-feasibility
regional planning studies. Multilateral and bilateral donor
support and participation would facilitate this project.(A)
AF/EPS:GPowers--10/16/-86
Tel. [phone] #2207H
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