The US-China Trade war is underway in Africa:- Is Washington planning to catch up?

US-China has been in the midst of trade war for a long time from now. There has been a battle for political & economic influences between the US & China. This battle is being played out across Africa & this presence of China in Africa is troubling policymakers in Washington. Africa has become the fastest urbanizing region on the planet & China has placed itself at the infrastructural vanguard of the new frontier. As of 2017, Africa boasted seven of the 20 fastest growing economies in the world. This data is according to the IMF (International Monetary Fund).

Chinese firms have been most active in building ports, roads & railways that will improve relations in trade between African nations. This intention has most recently exemplified across the continent by way of the landmark African Continental Free Trade Agreement (AFCFTA). The AFCTFA recently launched its operational phase & it eventually intends to bring together all 55 African Union member states into the world’s largest free trade area spanning 1.2 Bn people.

US- Africa trade has dipped in recent years, while China is now Africa’s biggest trading partner. Between the years 2002 to 2008, moments before the signing of African growth & opportunity act (AGOA). This provides tariff-free access to 6500 products for qualifying sub-Saharan countries. The trade between the US & Africa grew to $100 Bn. The combined value of African trade with the US in 2017 was just $39 Bn, which makes it the third-largest trading partner behind China & the EU. This data was compiled as per the US agency USAID.

The value of the China-Africa trade in 2017 was $148 Bn was down from a high of $215 Bn in 2014. As per the statistics from the General Administration of Customs of China, in the first half of 2019, China’s total import & export volume with Africa was $101.86 Bn, up by 2.9 % Year-on-Year. As per reports, currently, the total value of Chinese investments & construction in Africa is closing on $2 Trillion since 2005.

China has recently launched a $1 Bn Belt & road infrastructure fund for Africa & in the last year, it delivered a whopping $60 billion African aid package, which will further consolidate its robust economic influence.

Nagy, the US assistant secretary of state for African Affairs recently stated that “when investors have knocked on the door & the African had opened it, the only person standing there was the Chinese”.

With the exception of China, sub-Saharan Africa only significantly increased its trade with new or resurgent foreign partners, which include, Russia, Thailand, Turkey & Indonesia. The US International Development Finance Corporation, with its equity authority & higher investment cap, which would help to catalyze the US private sector with initiatives such as Prosper Africa which promised to modernize & co-ordinate the US resources. But the US needs to convince US companies which remain skeptical & uninformed about investing in the region.

The US & Chinese firms as of now are active in different sectors & they represent different models for economic development. But the key reason for the fall in the US-Africa trade is a shift in American energy demand. In 2008, the US imported $99.5 Bn of oil & gas from the continent which fell to just $17.6 Bn as of 2018.

In terms of US exports to Africa, the key challenge remains the relatively high cost of US export products such as cars, machinery & airplanes, versus China’s production of goods for a comparatively diverse range of income levels. There is also a risk that Chinese financing & projects will prevent other foreign firms from competing on subsequent commercial opportunities, essentially imposing a straitjacket on African governments to deal only with Chinese entities.

Also, China has been accused of saddling developing countries with substantial volumes of hidden debt through its Belt & Road initiative which a colossal infrastructure project is seeking to build rail, road, sea & other routes across China, Central Asia, Africa & Europe. China’s opaqueness in issuing loans means debt burdens for recipient countries which could be misinterpreted, causing potential problems to the global economy.

But Sino-African relations come into conflict with the interests of the US which itself is concerned about diversifying the sources of its oil imports.

Africa is slowly & steadily turning into China’s China. Same is the case with Pakistan with its CPEC investments and with Sri Lanka, under the OBOR (One Belt One Road Initiative) they have taken control of the Hambantota which is a strategic point for its trade & military might in the Indian Ocean Region.

China is making its way into Africa in disguise of its trade & industries to make use of rich natural resources to meet its end. This is seriously a threat as it trying to control the world by trade & investment and eventually could attack the sovereignty of the very country they trade with.

This was exactly how colonialism happened at the start of the 19th century by Europe against less powerful countries. The course of action seems to be the same and could by far lead to colonialism 2.0.

So, it’s clearly seen that US & US industries must buckle up & start their investments ASAP into the continent of Africa. They have to start by instilling confidence over these African republics by providing them a bigger picture and facilities which will seem more effective & believable. China is obviously a threat to the world in a sense because they are building a military faster than anybody & frankly using US Money.

The world’s two largest economies are locked in a trade war since Donald Trump in March last year imposed tariff hikes of up to 25% on USD 250 Bn of Chinese goods. In response, China which is the world’s second-largest economy after the US imposed tit-for-tat tariffs on USD 110 Bn of American Goods.

Hence we can clearly see that the US has not done much to thwart the Chinese competition in Africa. So to ensure that the US remains a dominant force of power economically, it should start investing right earnest and if not done so, it could clearly jeopardize US position in this fuelling trade war against China.

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Story Conceived & written by

Sumit Peer, Founder Insourcing Multiplier


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