Zimbabwe’s USA – China trade riddle

10 Aug, 2014 - 06:08 0 Views
Zimbabwe’s USA – China trade riddle The Super Power countries - China AND USA

The Sunday Mail

Shipments to US fall US$12,2m

Exports to China rise to US$672m

President of the USA, Barack Obama

President of the USA, Barack Obama

AS the gladiator fight for both economic and political supremacy between the United States of America (USA), currently the world’s largest economy, and China, which recently became the world’s second-biggest economy, assume a new dimension with Washington openly courting African leaders last week, debate continues about where relatively smaller economies like Zimbabwe will fit into the puzzle.

Last week, the USA convened a three-day US-Africa Leaders Summit with leaders from about 50 African countries, the largest such gathering with African leaders to be organised by the North American country.

Zimbabwe together with Sudan and Eritrea were left out.

Since the turn of the millennium, when Zimbabwe actively began the process of redistributing the land from the white minority to the majority blacks who had been disposed after 1896, relations between Harare, on the one hand, and Brussels and Washington, on the other hand, have been frosty.

But relations with China, especially after 2009, have been rising phenomenally with scope that they could be expanded further.

Recent trade statistics have been particularly telling.

Zimbabwe imported goods worth US$21,1 million from the USA in the January to May period and exported US$12,2 million worth of goods, yielding a trade deficit of US$8,9 million, according to the United States Census Bureau.

However, trade with Beijing has been markedly better.

President of CHINA, XI Jinping

The Chinese Embassy in Zimbabwe said last week the country managed to ship goods valued at US$672 million to China in the first months of the year compared to imports of US$118 million in the same period.

A positive trade balance with China of US$554 million was therefore recorded in the period.

This trend is not surprising, as Zimbabwe consciously pursued interests in the East when it was shut out of the West.

But though the relations with Brussels seem to be on the mend, with the European Union parliament expected to scrap sanctions imposed on Zimbabwe by the end of the year, the standoff with the US still exists.

The Zimbabwe Democracy and Economic Recovery Act (Zidera), which was signed into law by former United States President George W Bush on December 21 2001, and is meant to discourage America firms, including multilateral financiers linked to the US from giving financial assistance to Zimbabwe, still remains in force.

In addition, Zimbabwe is also excluded from the African Growth and Opportunities Act (AGOA) adopted by the Bill Clinton administration in 2000, which provides duty-and quota-free access for a wide range of products from African countries that meet US political and economic requirements.

So, there hasn’t been any preferential access of Zimbabwe into the US$1,2 trillion American market.

Unsurprisingly, the trade between the two countries has been on the decline.

While in 2000 Zimbabwe exported US$112 million goods to the US and imported US$52,3 million worth of commodities, last year the country managed to ship goods valued at US$13 million.

Pie Chart: Distribution of Chinese Investment in AFRICA

Pie Chart: Distribution of Chinese Investment in AFRICA

With unclear signals coming from Washington, especially at a time when the country has earnestly sought to renew relations with its traditional economic partners, it now remains unclear of how engagements between the two countries in both the medium and long-term will pan out.

Some analysts believe that Zimbabwe, which is currently trying to set the economy on a sustainable economic growth path and is facing serious headwinds, needs all the friends it can get.

Foreign Direct Investment (FDI) inflows into the country have remained flat in the past four years at US$410 million.

There were expectations that the election of America’s first black president in the form of Barack Obama, who assumed office on January 20 2009, will help smoothen up the relationship between the United States and Africa, Zimbabwe included.

But will Zimbabwe really miss out on the new commitments of US$33 billion that were mainly announced by the US last week?

The new commitments were mainly from private-sector companies such as Coca Cola and General Electric.

This does not exactly match the philosophy that is being pushed by the Government.

American companies are mainly searching for a market, while Zimbabwe, including some African countries, have of late emphasised on investment that likely leads to technological transfer and infrastructural development.

Washington’s policy doesn’t subscribe to this method and this explains why America’s trade with the whole of Africa is about the same as with Brazil.

Much tellingly, two of the US’s three largest trade partners in Africa are Angola and Nigeria, which, coincidentally, are some of Africa’s biggest oil producers.

In the current circumstances it might be difficult to see the US catching up on trade between Africa and China.

Much of the exports to the United States from Zimbabwe have mainly been raw materials.

For example, the bulk of the goods that were exported in 2013 were iron and steel (US$4 million), tobacco (US$2 million), coffee (US$2 million) and raw hides and skins (US$1 million).

But Zimbabwe in the same period imported machinery (US$13 million), pharmaceutical products (US$12 million), vehicles (US$6 million), optic and medical Instruments (US$4 million), and electrical machinery (US$3 million).

As emphasis is put on value addition and beneficiation, including the new push towards resource nationalism, it might be difficult to see the country’s developmental aspirations dovetailing with those of the United States, which principally is seeking raw materials.

Nii Akuetteh, a DC-based democracy activist who taught for several years at Georgetown University, said in a opinion piece published by Al Jazeera last week that Africa’s international relations remain driven by this dominant fact: Even after five centuries of plunder, the continent remains a treasure trove of natural resources that foreigners covet – very badly.

Africa is today the fastest growing among the continents.

This growth has been fuelled mostly by China’s gargantuan appetite.

It is not a secret that much of the growth is Africa is inextricably linked to China phenomenal growth.

However, while Beijing uses the carrot, Brussels and Washington uses the stick.

China’s investment policy, which is driven by the four principles – equality and mutual benefit, stress on practical results, diversification in form and economic development – sits well with African tastes.

The relationship has often been cemented by the “frequent flyer” form of relationship, where high-level reciprocal visits are often encouraged have also help to draw Africa close to China.

Recently, the Minister of Finance Mr Patrick Chinamasa was on a working visit to the Asian country.

However, there remains optimism that Zimbabwe will in the medium and long-term benefit from China, which, through FOCAC (Forum on China-Africa Cooperation), has been extending huge financial support to African countries.

FOCAC was established in 2000 and to date it has convened five ministerial conferences.

But Zimbabwe doesn’t figure within China’s top ten investment recipients.

So there is potential for more local investments.

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