Business Hilights

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Trump China

Trumpnomics begins today, plans to wrestle Africa from China by all means

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As the United States of America’s 45th President, Billionaire Donald Trump enters the oval mansion Government House in Washington DC today; issues of revamping America’s economy using Africa as target market and battle ground are clearly upbeat in his mind.

Beyond rhetoric, analysts say China has more grounds in Africa of today more than any other world power including Trump’s US.

Credence to this was seen weeks earlier when his transition committee circulated a list of questions on Africa to the State Department and Pentagon. Leading the queries are two issues about the United States and China and their relative presence on African continent especially on “How does U.S. business compete with other nations in Africa? Are we losing out to the Chinese?”

Peter Navarro, who will lead Trump’s National Trade Council, provided his own answers in his book “Death by China.”

He said, “[China’s] million-man army is moving relentlessly across Africa … locking down strategic natural resources, locking up emerging markets, and locking out the United States.” Navarro says this is part of China’s strategy to boost its factories back home and undermine the U.S. manufacturing base.

Over the past 15 years, China’s investments in Africa have increased rapidly and China has become Africa’s largest trading partner. There are continuing misperceptions about China-Africa economic relations, and little empirical evidence on the policy tools that underpin China’s economic diplomacy in Africa and how they affect the conduct of Chinese companies.

China and several sub-Saharan African states have signed bilateral investment treaties. This report explores the content of the treaties, and whether they achieve their stated goal of promoting foreign investment as part of South-South foreign cooperation. It draws on a literature review, a legal analysis of the treaties and interviews with Chinese stakeholders. The findings provide a cautionary tale about whether the treaties fulfill their objective, as well as pointers for follow-on research and for policy and practice in China and Africa.

China’s engagement in Africa does affect the United States, and the reality is more pronounced. According to Navarro, “Our research at the China-Africa Research Initiative rigorously investigates Chinese trade, investments and loans to African countries and offers insights into how China’s interests across Africa will actually affect the incoming Trump administration”.

From all indications, the fact remains that since US out of commission or omission allowed China to become ‘World Factory,’ Chinese exports started to dwarf U.S. exports to Africa.

Business Hilights gathered that Trump proposes imposing a 45 percent tariff on Chinese imports to the United States to protect U.S. manufacturers and harm Chinese ones. But the United States is not China’s only export destination.

Statistics show that between 2004 and 2009, China-Africa trade grew at an annual rate of over 40 percent. In 2009, China surpassed the United States as Africa’s top trade partner.

Navarro further observed in his book that 2009, Chinese exports to Africa have grown steadily, reaching about $103 billion in 2015. In contrast, U.S. exports to Africa the same year amounted to only $27 billion.

Today, Chinese exports to Africa are mostly manufactured products: machinery, electronics, automobiles and textiles. These are absorbed by the continent’s rapidly growing middle class, which has a strong demand for consumer goods. Although definitions differ, the World Bank estimates the middle class makes up 34 percent of Africa’s population, and its consumer spending is expected to reach $2.2 trillion by 2030.

US-China analysts agree that for now, Chinese goods will continue to flow into expanding markets in Africa. This will offset, even if slightly, Trump’s intention to block the global movement of Chinese products through a trade war.

To tame Chinese manufacturing prowess, it would be recalled that on the campaign trail, Trump pledged to bring Chinese manufacturing jobs back to American soil. But with wages rising in China, Chinese industries are upgrading: Knowledge-intensive services and information technology are replacing labor-intensive manufacturing firms. Jobs that once migrated from the United States to China are now off shoring to Africa.

With low-end manufacturing on the way out, what was “Made in China” is now “Made in Africa.”

The Huajian Group, one of the largest shoe manufacturers in China, employing 25,000 workers, opened a factory in Ethiopia in 2012; the company will invest $2 billion over five years to build a “shoe city” in Addis Ababa. Supply chains now span the United States, China and Africa: Huajian produces for U.S. brands such as Tommy Hilfiger, Guess and, ironically, Ivanka Trump’s eponymous shoe line.

Findings in related companies across Africa reveals Chinese managers increasingly implement technical skills-training programs for their African workers. African workers frequently make up over 80 percent of the factory workforce. Some receive further training in China. This investment in local workers indicates a serious commitment to the longevity of Chinese manufacturing operations in Africa.

Deciphering between ‘China model’ vs. ‘U.S. model’, analysts say Africans rank China second as “a development model” after the United States.

Out gone US President, Mr. Obama and Hillary Clinton have suggested that the United States, unlike China, will “stand up for democracy and universal human rights” rather than simply “extract minerals” in Africa. Washington has viewed its own model in Africa as promoting good governance and environmental responsibility.

However, under trump, there are indications that that could change under Trump.

Considering his background in business and industry, observers argue that his support for undemocratic regimes threatens human rights around the world. Trump claimed global warming was created by the Chinese to disadvantage U.S. manufacturing, and several of his Cabinet nominees deny climate change and hold special interests in the oil-and-gas industry. In departing from the “U.S. model,” Trump may come to embody the characteristics that Obama and Clinton attributed to the “China model.”

But this isn’t new. China has previously called out the United States for being hypocritical on human rights issues. And research reveals Chinese firms aren’t any more environmentally destructive in Africa than Western ones. Perhaps Trump will reveal that the United States and China are more similar than different in Africa, after all; the dichotomy between the two “models” may dissolve.

Indications are clear that as Trump steps up breakage of U.S. policy set by his predecessors, the effects will reverberate in Africa. When he breached protocol by taking a call from Taiwan’s president and openly questioning the One-China policy, Beijing responded by calling the policy “nonnegotiable.”

In fact, Beijing takes the One-China policy seriously, everywhere: statistics from Navarro’s book show that three African countries that recognize Taiwan — Burkina Faso, Sao Tome and Principe, and Swaziland — don’t receive any Chinese loans. This may even be the reason why Nigeria recently attempted to cut ties with Taiwan, a development tactically denied by the federal government. It was not clear if the move by the Nigerian government was to clear way for the planned new loan request from China after the first effort failed last year.

Each time Trump acts to change the status quo on U.S.-China relations, African countries are watching what it means for themselves.

As Trump takes over White House today, there not be much delays in his speed in rolling out international trade policies in other right-size China as soon as possible in African affairs.

Trump’s “America First” outlook largely promotes protectionist, isolationist policies. But matters are more complex in a globalized world. Driven by internal economic upheaval, China has its own agenda for engaging with the rest of the world on trade, manufacturing and other economic affairs, and its relationship with the developing world will only continue to grow. To understand the future effect of Beijing’s policies on the U.S. economy and its workers, Trump would be wise to look at China’s role in Africa.

His looks at the scenario may not just be mere observation, but to see how he can wrestle Afriac from the grip of Chinese surreptitious loan deals, resource for infrastructure agreements and dumping policy matters.


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