By David Levin
Do not repeal AGOA
Dear President Trump,
I realize it has been quite a while since we last spoke but I really need to talk to you about something important. You are obviously kind of busy with the new job and the move down to DC, so let me just get right to it.
Please do not repeal the African Grown and Opportunity Act (AGOA) and go lights out on Africa. The continent simply cannot handle any more economic damage.
I know that AGOA falls into that big fat “trade” basket that has been on the top of your agenda since taking office last week. Suffice it to say, you were certainly pretty clear about your feelings on that during the campaign. You have already pulled the plug on the Trans-Pacific Partnership (TPP) on just your 5th day in office. And you are pounding Mexico every day like a candy-filled piñata at a 10 year old’s birthday party.
You are clearly not wasting any time getting started, are you? Now I’m hearing that you may want to revoke other trade agreements as well – including AGOA – largely because, like TPP, it is another multilateral deal that you believe is lopsided and bad for America.
Listen, for the record, I understand your thinking on trade. I get it. I have been angry too at how things have gone over the past decade here. I definitely wasn’t a fan of how President Obama engaged with the rest of the world. Actually, much of the rest of world wasn’t either.
And yes, I agree with you that it is “America First“.
That was a really good campaign slogan you came up with. Short, snappy, 5 syllables. It worked. You won. Obviously, protecting a country’s sovereign interests should always be its’ first priority. But if you check your thesaurus, I don’t think you will find the words isolationism and protectionism listed as synonyms for sovereignty.
The real irony here is that for all the manufacturing jobs you are looking to create here with your new trade policies, there are also millions of other jobs that rely on the relationships we have with our global partners that will be hurt – or worse yet – lost altogether. And, as much as I hate to say it, many of those assembly-line jobs that you want to bring back that were once done by low-skilled workers in the rust belt are now being done by robots and technology. So, many of these jobs simply no longer exist. And I think it is safe to say that robotics is a major manufacturing trend that will continue pretty much forever. So, while you may be gaining some jobs by bringing manufacturing back from Mexico and China, you will ultimately be killing others.
Look, you should probably think all this through a little further. I am starting to hear that some of our allies are getting a little edgy because you have basically just announced that the United States is voluntarily giving up its front row seat at the theater in favor of one in the last row of the balcony. What you have to understand is that to lose the U.S., as an export and business partner would result in some level of economic calamity for most countries that do business with us. And in this case, outside of our enemies, that is virtually everyone else on the planet – including much of Africa.
Globalization is not going to vanish
I know that that you want to protect us and do what is right for the country. Believe me, I am all for it. But globalization is not just going to vanish irrespective of the nationalistic winds sweeping across the U.S., and Europe.
There is no doubt that people are angry as hell everywhere you look. Just reading through Twitter and Facebook every day is enough to make some folks run right to their therapist for an emergency session. But you should not expect that other countries are just going to roll over and agree to everything you demand just because we are the U.S.
Those days are over. Already, since you ripped-up TPP, Canada is talking about doing more business with Japan and China. That conclusion took Justin Trudeau about 3 days to reach. There are obviously other big suitors out there with strong economies that will seize the opportunity to replace us in the driver’s seat in a heartbeat.
And besides China and Japan, you have India, Saudi Arabia and your good friend, Vladimir Putin, among others who are chomping at the bit to throw money and influence at everyone the U.S. decides to orphan.
So do not isolate us, Donald. As China’s President Xi Jinping said at Davos last week, “pursuing protectionism is like locking oneself in a dark room.”
Our country has to do business with the rest of the world. We cannot just lower the shades and hang the “closed” sign on the front door. We are all too inter-connected now and pulling the plug on trade will have severe repercussions many of which even the best and brightest of us cannot foresee because what you are doing has never been done before – not like this anyway. So, I don’t know what your advisors are telling you but you might want to Google the phrase “ripple effect” and see what it says.
So with this in mind, please consider AGOA. It has been the centerpiece of U.S. policy in Africa since President Clinton signed it into law in 2000. You know that already. Or maybe you don’t. And what you have heard is correct – it is not perfect. But you cannot simply walk away from a continent with 1.1 billion people that is expected to grow to 2.0 billion people or more by 2050. Quite frankly, as a businessman, you should be salivating at this and trying to figure out a way to unseat China at Africa’s dinner table.
You have been fixated on Beijing since before taking office. Think about it – how great would it be to go after China by dramatically growing the U.S.’s presence in Africa? Increasing investment and trade? It would be the ultimate kick to Chinas groin, wouldn’t it? Be the New York dealmaker we all know you are and show us “The Art of The Deal” as your book it so aptly titled.
I agree with the folks that say that AGOA has not lived up to its promise. Some of the big oil producing countries like Nigeria and Angola have derived the most benefit from it even though there have been well documented abuses with respect to corruption and exploitation. It is definitely a big problem throughout much of Africa. And some of the smaller countries like Malawi have barely even registered on the AGOA meter as their private sectors are so underdeveloped that they have little to export outside of a few crops. Yet, at the same time, there have also been many success stories in sectors like textiles, agriculture and auto manufacturing that demonstrate AGOA’s promise and what it was originally meant to achieve.
But keep this in mind – these large oil producing countries would take a huge hit if you move to dismantle the pact because a large percentage of their current and future export revenue would be wiped out. With oil prices already weak and production down, this would compound the impact of AGOA’s demise dramatically. Remember, most African economies these days have little to no room for error. So, the effect of AGOA being rescinded would ripple violently across the continent. And if Africa’s already hobbled economic leaders like Nigeria decline even further, the whole continent would ultimately be affected as many of the smaller countries, already on tentative economic footing, would be dragged down with them. This would be devastating.
AGOA benefits both Africa and the United States
So, Donald, do not kill it. Fix it. Renegotiate the parts of it that do not work just as you will probably end up doing with NAFTA and even TPP. Make it better. Put new checks and balances into the system to stem the corruption. Calculate the structure differently. Impose tougher punitive measures or even more stringent disqualification guidelines for those countries who violate the pact’s tenants. And at the same time, maybe look to build in new incentives so that some of the non-oil producing countries can finally benefit from AGOA the way it was originally envisioned.
Remember, AGOA benefits both Africa and the United States. It opens up the world’s largest market to many African countries while allowing for the duty-free flow of culturally diverse, quality products to American business and the American consumer. I think AGOA can be both America First – and – Africa First as well. What could be better? Everyone wins.
So, Donald, help Africa help itself – and remember that Africa’s gain is not necessarily Americas loss. It can be America’s gain too. Keep AGOA. It matters.
Oh, and by the way, congratulations on the election.
David S. Levin is the Managing Partner of Nexus Capital Markets, LLC.