Noteworthy….

"The continent must not be like a beautiful fruit tree by the wayside. Every passer-by plucks a share and the fruit tree seems to forget that it could one day grow old.." Words of caution to Africans as both Russian and American leaders make trips to the continent

African leaders have denounced the ICC and refuse to extradite Sudan's president Omar al-Bashir, while others attempt to decipher what, exactly, this means

Niall Ferguson and James Fallows discuss the influence of China on the U.S. economy at the Aspen Ideas Festival

Win in China: a great documentary on the rise of entrepreneurship in China

Free trade as a tool for development

Via VoxEU Kimberly Elliott suggests the United States should lower tariffs on imports from small, poor economies:

... the Doha Round, under the best of circumstances, will take some time to conclude, and the US and other rich countries should move as quickly as possible to further open their markets to the world’s poorest countries. The eighth of the Millennium Development Goals adopted at a UN summit in 2000 calls on the rich countries to provide duty-free-quota-free market access for the least-developed countries (LDCs). This goal was reiterated at the WTO’s 2005 Hong Kong ministerial meeting, but US negotiators would only commit to provide access for 97% of products and only in conjunction with the conclusion of the Doha Round.

Importantly, the pledge to provide duty-free-quota-free access is not part of the round’s “single undertaking,” and the LDCs are not being asked to undertake liberalisation commitments. So President Obama would lose nothing and could gain a great deal of good will, as well as providing an economic boost to struggling developing countries, by asking Congress to act now and provide access on 100%of products, as the European Union already does, rather than just 97% as promised in Hong Kong. Three percent may not sound like much, but such liberalisation would unblock a number of items that that are of the most interest to poor countries.

Providing full market access will not reverse the decline in trade flows, but it would open opportunities for some of the poorest countries in the world. It would also address a fundamental unfairness created by the fact that US trade policy, like that of other rich countries, discriminates against poor countries and poor people. The highest US tariffs fall on agricultural products and labour-intensive light manufactures, where many developing countries have a comparative advantage.

I have generally found such an argument to be quite compelling, and tend to agree with Ms. Elliott's assessment of the matter.

Dear Africa, We would like to invest. Sincerely, the U.S.A. (P.S. Just fix some things, first...)

The U.S. Chamber of Commerce today launched the Africa Business Initiative (ABI) intended to help bridge the investment gap between the United States and Africa. Together with Baird's Communications Management Consultants, ABI today also released a report entitled The Conversation Behind the Boardroom: How Corporate America Really Views Africa. Driving the study is the ever-perplexing question of why Africa has not attracted more attention from the U.S. business community.

The answer, it seems, is that Africa is attracting the attention of U.S. businessmen - particularly in the technology sectors, and particularly now more than ever - but the costs of investment (political instability, a general lack of a business-conducive framework, and a poorly defined rule of law, among others) continue to outweigh the potential profits to be reaped.

What would it take for corporate America to fully take the African plunge? In short: a stable political environment; an educated (African) workforce; a fair business environment; and improved infrastructure. Goodness! If this is, indeed, the wish list then any such investment may be a lonnng way off! Given that the Chinese seem to have little trouble with the continent's current state of affairs, too, many African states now have little incentive to reform so as to accommodate U.S. desires. If nothing else, such U.S. demands may well result in more African leaders 'looking East,' much to the disadvantage of American corporations.

Regardless, the report itself is quite interesting and forms the first part of a two-party study. Part two, The Public Sector Conversation, will be conducted over the next several months and will focus on African government responses to the corporate American responses put forward in the currently available study. This may be quite telling, indeed!

Lula in Beijing to "defend a new economic order"

Brazilian President Luiz Inacio Lula da Silva arrived in Beijing today where it is expected that he and President Hu will strengthen bilateral relations between their two countries, promote oil contracts, strike deals on the sale of Embraer aircraft, and negotiate meat exports and biofuel for cars, among other top agenda items.

Already in March, China surpassed the U.S. as Brazil's biggest trade partner, and the trip seems to signal even further shifts in the global economic arena: namely, the U.S. out, China in. Or, perhaps more realistically - the U.S. down, but not (yet?) out; China up, and rising: 

"I think the trip that I am about to embark on... is one of the most important I am going on to defend a new economic order and a new commercial policy in the world," Lula told reporters before leaving Brazil.

Roberto Jaguaribe, a Brazilian foreign ministry official, said last week the trip represented a "reorganisation of the international scene" in which the top emerging economies were playing a bigger role in world affairs.

Among the more curious agenda items to be discussed between Lula and Hu is Lula's proposal that the countries conduct bilateral trade through each nation's currency, removing the U.S. dollar as an intermediary. Silva has been urging the end of the use of the American dollar in South American trade for some time now, suggesting such a move would reduce transaction costs for both exporters and importers, especially those operating on a smaller scale. Brazil and Argentina have agreed to trade with each other using their own currencies, and China and Argentina have likewise agreed to establish a 70 billion yuan ($10.24 billion) currency swap system that will enable trade between the two nations to be settled in Chinese currency. Might we be witnessing the gradual usurping of the U.S. dollar as the world's currency reserve by the Chinese yuan?

Such a reality may still be some way off, but the Chinese are slowly laying the ground for the yuan's ascendance, one bilateral negotiation at a time.

Africa, the U.S., China and the economic crisis

Stephen Ellis writing in African Arguments:

The Chinese government clearly thinks long-term and is highly pragmatic. It does not entirely trust world markets. Therefore, even if China goes slow on the implementation of the mining and infrastructure agreements to which it is already committed, we can expect to see China continue to take the necessary steps to maintain its rights to resume these projects at some future date, when conditions are more conducive. The important thing for China is to maintain a firm hold on African commodities until the day when the mines start working and the trucks start rolling again.

A key question for the Obama administration in this context will be what strategy it adopts towards Africa’s oil. Thinkers within the US Department of Defense in particular see access to oil from the Gulf of Guinea—broadly defined as the swathe from Mauritania to Angola—as a major strategic concern for the US. The neo-conservatives who wielded such influence under President Bush believed that this was best done by the projection of military power. In short, they believed that the US should plan to deploy its armed forces in such a way that it could secure Africa’s oil for the next generation, putting it into not merely a commercial competition with China, but a militarized one. This was some of the thinking behind the creation of an autonomous Africa Command, Africom. China, however, has shown no enthusiasm for supporting its commercial aspirations in Africa with military power. On the contrary, in recent years it has shown every sign of playing a greater role in some of the complex multilateral arrangements by which Africa is bound into global systems of governance. For the first time, China has committed troops to United Nations missions in Africa, for example.

How will the games of great powers affect Africa itself? There is no foreseeable future for industrialization in Africa. Some African countries were earning serious money in recent years, before the collapse of commodity prices, but there was little sign of any of them using it in the service of a serious development strategy while conditions were propitious. Now, that option has gone. In principle, a shortage of foreign exchange plus high food prices could spark a revival of African agriculture, but there is no serious evidence of that happening as yet, despite encouraging signs here and there. What we are likely to witness is a situation that is in some ways rather reminiscent of the period immediately before the colonization of Africa, during the third quarter of the nineteenth century, with few centres of power in Africa being able to guarantee the rule of law in the Western manner, and external interests investigating local permutations with a view to identifying viable local collaborators. 

He said, She said.

Tim Geithner, Obama's pick for U.S. Treasury secretary yesterday accused China of "manipulating" its currency, and promised "aggressive" action to pressure the Chinese to amend their ways. Not surprisingly, China fired back today claiming such statements will only pave the way to US protectionism and chastised Geithner for his immaturity. 

An overall promising start to U.S.-China relations under the Obama administration, I think.

The pitfalls of a bonus culture

Paul Collier has an interesting comment piece in today's Guardian. In it, he argues that the culture of  high-powered incentives that led to the U.S. financial crisis is likewise behind Africa's governance crisis:

The financial crisis in the developed world and the long, slow crisis of African governance have one feature in common: what economists coyly term "high-powered incentives". The financial crisis was the consequence of management decisions in the financial sector. For decades people in these pos-itions had behaved prudently, which is why their businesses built up good reputations. Why was the behaviour of the present vintage so different? The answer is the introduction of high-powered incentives - or, more intelligibly expressed, obscenely large payments tied to some specified performance. The theory is that such incentives overcome problems of managerial shirking and niceties such as putting the workforce's interests before those of shareholders.

This simple theory provided the intellectual veneer for grotesque greed: high-powered incentives are, in reality, very damaging. And I have watched them wreak havoc in the apparently very different context of African politics. The bonuses Africa's leaders pay themselves are sizable even by the breathtaking standards of the developed world; like financial managers, the politicians have a massive incentive to achieve the performance benchmark. In the financial sector the benchmark has been quarterly measured profits; in Africa it has been winning an election.

How much is $700 billion?

Duncan Green puts the American bailout in international perspective: 

To put the proposed Wall Street bailout into perspective. $700bn:

• Would clear the accumulated debt of the 49 poorest countries in the world ($375bn) twice over
• Is almost 5 times the annual amount of extra aid needed to achieve all the Millennium Development Goals on poverty, health, education etc ($150bn a year)
• Is about 7 years of current global aid levels ($104bn in 2007)
• Is enough to eradicate all world poverty for over two years (UNDP  calculates it would take $300bn to get the entire world population over the $1 a day poverty line).

On the other hand it's

only a quarter of the cost of the Iraq war ($3 trillion on Joseph Stiglitz' calculation )

a half of annual global military spending ($1339 bn)

Those at the World Bank's AfricaCan blog are also speculating on the impact of the crisis on Africa. To this I would add that the current crisis has put China in a rather advantageous position vis-a-vis its African 'friends' - at least for now.

Asia rides high as US economy struggles?

Gideon Rachman has a column in yesterday's FT in which he suggests that the recent US economic troubles may signal a shift in global political power, though perhaps not as quickly as one may think. Citing Pan Wei, director of the Center for Chinese and Global Affairs at Beijing University, Rachman captures the Chinese sentiment:

"My belief is that in 20 years we will look the Americans straight in the eye – as equals. But maybe it will come sooner than that. Their system is in chaos and they need our money to rescue them."

Yet according to Rachman there are three key reasons why this reality may not be so quick to materialize:

1. Even if the American market is no longer the be-all-and-end-all for China and India, it is still extremely important.
2. The Chinese economic engine has already been sputtering, for other reasons. In Beijing and Shanghai, the price of smart apartments has been falling sharply, and the Shanghai stock exchange is down 60% over the past year.
3. The fact that American consumption is falling for the first time in eighteen years inevitably means that China will grow more slowly in the coming year

And, with today's drop in Asian stocks, the global shift surmised by Pan Wei seems less likely.