U.S. Relations With the People's Republic of China (2007)

2007 Comprehensive Report on U.S. Trade and Investment Policy Toward Sub-Saharan Africa and Implementation of the African Growth and Opportunity Act

Prepared by the Office of the United States Trade Representative

May 2007

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IV. Economic and Trade Overview

A. Economic Growth

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Both the World Bank and IMF emphasize that the removal of textile and apparel quotas by WTO members at the beginning of 2005 continued to cause a decline in value of African exports of these products to the United States and European Union due to increased competition from China. The World Bank notes, however, that China also represents a growing source of demand for African exports and this demand has also helped to increase world commodity prices, further benefiting some African economies.

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B. Africa's Global Trade

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Shares of Africa's Import and Export Markets

Sub-Saharan Africa accounts for slightly more than one percent of U.S. merchandise exports, and slightly more than three percent of U.S. merchandise imports, of which about 80 percent are petroleum products. Similarly, sub-Saharan Africa accounts for a little more than one percent of both EU merchandise exports and imports. The United States is Africa's largest single-country market, purchasing 29.6 percent of the region's exports in 2005. China came in a distant second at 10.9 percent, and the United Kingdom was third at 7.1 percent. The EU purchased 34.4 percent of sub-Saharan Africa's exports, down from 36.2 percent in 2004.

• The U.S. market share in sub-Saharan Africa remained constant in 2005 at 5.9 percent, with $10.3 billion in exports to the region.

• In 2005, for the first time, China became the largest individual country exporter to sub-Saharan Africa with a market share of 7.7 percent and $13.4 billion in exports to the region. China's exports to the region grew by 35.2 percent from 2004. Increased shipments of electrical and other machinery, motorcycles, woven fabrics, iron and steel products, woven and knit apparel, and low-end footwear comprised the largest share of China's growth in shipments to sub-Saharan Africa.

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Sub-Saharan Africa's Principal Trading Partners
($ Billions and Market Share)

		2004		% Share		2005		% Share
Sub-Saharan Africa's Imports
China		9.9		6.9%		13.4		7.7%
Germany		10.7		7.4%		11.7		6.7%
France		9.8		6.8%		10.8		6.2%
United States		8.5		5.9%		10.3		5.9%
United Kingdom		7.4		5.1%		8.1		4.7%
Japan		5.7		4.0%		6.3		3.6%
Italy		4.0		2.8%		4.8		2.8%
Spain		2.0		1.4%		2.4		1.4%
Total EU		47.7		33.0%		54.3		31.3%
Sub-Saharan Africa's Exports
United States		37.8		27.1%		52.4		29.6%
China		14.5		10.4%		19.3		10.9%
United Kingdom		11.3		8.1%		12.6		7.1%
Japan		8.3		5.9%		9.4		5.3%
Spain		7.0		5.0%		9.1		5.2%
France		7.0		5.0%		8.6		4.8%
Germany		6.3		4.5%		7.1		4.0%
Italy		5.4		3.9%		6.3		3.6%
Total EU		50.6		36.2%		61.0		34.4%

Source: Derived from IMF Direction of Trade Statistics Yearbook, 2006

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D. Investment and Debt

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Investment

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The leading source of FDI into sub-Saharan Africa remained the United States, the United Kingdom, France, and Germany. The Asia region, particularly China, has increased FDI flows to sub-Saharan Africa in recent years. In 2003, China's investment position in sub-Saharan Africa rose to $588 million from $49.2 million in 1990. Chinese FDI, like that from other countries, is directed primarily into the minerals and mining sectors.

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The following are some examples of recent AGOA-related investments:

Lesotho - A new clothing factory opened in early April 2006, with financing of $6 million from Taiwanese investors. The factory is expecting to employ 3,000 workers in the manufacture of t-shirts and jeans for export to the U.S. market under AGOA.

Malawi - A group of investors from Malawi, Taiwan, and India are planning to build a textile factory, which is expected to begin production in 2009. The new plant will cost about $30 million and will have facilities for spinning, weaving, knitting, and dyeing.

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F. Regional Economic Integration

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SACU: In July 2006, SACU signed a Free Trade Agreement (FTA) with the European Free Trade Association which should enter into force in 2007. SACU is also reportedly engaged in discussions about a possible trilateral FTA with India and Mercosur, and has discussed a possible FTA with China. In June 2003, the United States began negotiations for an FTA with SACU, the first FTA initiative between the United States and countries in sub- Saharan Africa (see Chapter V for additional information on the U.S.-SACU FTA). Active U.S.-SACU FTA negotiations were suspended in April 2006, largely due to divergent views on the scope and level of ambition for the FTA. An FTA remains a longer-term objective for both the United States and SACU. In November 2006, the United States and SACU agreed to pursue a trade and investment cooperation agreement (TICA), that could help lead the United States and SACU to an FTA in the longer term.

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