Worst in Aid: The Grand Prize

Hillary Clinton recently declared: “We are working to elevate development and integrate it more closely with defense and diplomacy in the field…The three Ds must be mutually reinforcing.” Clinton says that the 3D approach will elevate development to the level of diplomacy and defense. Unfortunately, it could instead lower development further to an instrument employed to achieve military or political priorities. Clinton foresaw these objections: “There is a concern that integrating development means diluting it or politicizing it – giving up our long-term development goals to achieve short-term objectives.” She said reassuringly, “[t]hat is not what we mean, nor what we will do.”

But it’s too late. Sacrificing long term development aims for short term military and diplomatic objectives is what the US already does, and the 3Ds is making it worse. That’s why the Grand Prize for the Worst in Aid goes to…the 3D approach, nominated by an anonymous reader.

References to the "3D approach,"… have become so pervasive in foreign policy, development, and national security circles that they have taken on the status of self-evident, common wisdom. - J. Brian Atwood, former USAID administrator, February 2010

The frequent contradiction between defense and development is the most obvious instance of 3D dissonance. A coalition of eight NGOs in Afghanistan lamented that “[d]evelopment projects implemented with military money or through military-dominated structres aim to achieve fast results but are often poorly executed, inappropriate, and do not have sufficient community involvement to make them sustainable.” Nonetheless, increasing amounts of aid get channeled through the military, “while efforts to address the underlying causes of poverty and repair the destruction wrought by three decades of conflict and disorder are being sidelined.”

An Oxfam case study on programs to reform the security sector in “frontline” states like Iraq illustrated another way in which narrow military goals (to train and equip soldiers and police) are not entirely compatible with development goals. The report found that an increasing reliance on military contractors rather than civilians “has strongly reinforced the focus on operational capacity over accountability to civilian authority and respect for human rights.”

In the battle of the Ds, enervated development loses to pumped-up defense, and not just in Afghanistan and Iraq. The trend goes two ways: USAID is compelled to spend more and more of its budget on states that are strategically and militarily important (The 2011 foreign aid budget allocates 20 percent of State and USAID money for “securing frontline states.”) A development priority like India (with a huge chunk of the world’s poor) loses out. At the same time, a growing proportion of what the US calls Official Development Assistance flows through the Pentagon rather than USAID.

Frequent readers of the blog will already be familiar with our final example. On Christmas Eve in Madagascar, President Obama bowed to the exigencies of diplomacy when he punished the nondemocratic government of Madagascar by taking away trade access to U.S. markets. But this same action was disastrous for development.  Already, tens of thousands of jobs created textile exports to the United States under the African Growth and Opportunity Act (AGOA) have been lost. Factories are closing, increased competition among street workers is pushing down wages, and the effects are spilling over into neighboring countries that made inputs to Madagascar’s factories. Any claim that the Madagascar AGOA delisting was part of a high-return Diplomatic initiative to promote Democracy became a wee bit more tenuous when we saw Angola, Cameroon, and Ethiopia named on Christmas Eve as still eligible for AGOA.

[We could go on -- This week brought another collision of development and defense/diplomatic goals in Somalia.]

The lie that underlies the 3D framework is that development, diplomacy, and defense are complementary (or totally “mutually reinforcing”); that there are no difficult choices to be made. Alas, politicians are fond of denying the existence of tradeoffs (we are not trying to pick on Hillary in particular; many politicians are guilty of this).

The only 3D strategy that makes sense for development is one that acknowledges the frequent conflicts between these three very different goals as natural outcomes of their different agendas.  Then we can hold our politicians accountable when they sacrifice Development big-time to achieve small-time (or sometimes illusory) Diplomatic or Defense goals.

Chronicle of a death foretold

When the article Madagascar: Textile Industry Unravels came across our desks yesterday, we were saddened but not surprised. That’s because people on the ground have been predicting this outcome (and Aid Watch has been stubbornly blogging about it over and over). Multiple critics have protested ever since the US government, hoping to force President Andry Rajoelina’s questionable government to hold elections, first threatened to remove preferential trading rights for Madagascar. The Malagasy textile industry was a clear success story of the US African Growth and Opportunity Act (AGOA), which removed US quotas and duties from thousands of products from eligible African countries. Madagascar’s exports tripled in the first three years of the program, and the textile sector, which made up 60 percent of Malagasy exports, accounted directly for 50,000 jobs and indirectly at least 100,000 more.

The US pulled the plug on AGOA at the end of December and import duties of up to 34 percent were reintroduced. Now we are starting to see the effects in the formal and informal economy:

• Factories closing and factory jobs lost: “As lead times [expire] on orders placed before the agreement [came to an end], factories are laying off workers and we are seeing an explosion in the numbers of unemployed,” said the director pf the Association of Free Trade Business in Antanarivo.
• Increased competition among street traders now that former factory workers are pushed out to sell goods in overly crowded street markets (and lower wages now for both): “‘I used to be able to earn 20,000 ariary ($9.30) a day,’ said Soloniaina Rasoarimanana, who has been selling clothes from a pavement stall for 10 years. ‘Now, with the political crisis and more competition, I earn around 5,000 ariary ($2.30) a day.’”
• Knock-on effects in neighboring countries (Mauritius, Swaziland, Lesotho, South Africa) which made inputs like zippers to Madagascar’s factories.

Among the effects we are NOT seeing: signs of increased interest in arriving at a power-sharing agreement or instating democratic governance on the part of Rajoelina’s government.

Ineffective sanctions, effective job destruction.  An unaccountable branch of the US government hurts poor people far away who have no voice in US politics. Deeply saddened…we don’t know what more to say.

Madagascar textile workers ask President Obama to keep their jobs for Christmas, but nobody is listening

Here's an excerpt from an ad that appeared in the print edition of Politico today, paid for by the owners of apparel factories in Madagascar and one of their American investor partners. We have blogged about this seemingly obscure issue already many more times than you, our patient readers, may have wanted, but we see this as one of those rare, clear opportunities for the US to do good by first doing no harm. And yet US leadership seems blithely set on a course of action that will punish vulnerable textile workers and their families without touching the fortunes of the political elite responsible for Madagascar's current predicament.

President Obama: Please don’t harm one half million of the poorest people in Africa.

Your advisors have recommended that you decertify Madagascar as a beneficiary country for benefits under the Africa Growth and Opportunity Act (AGOA). This action will revoke the duty free treatment for products such as trousers, t-shirts and sweaters produced in Madagascar next year—re-imposing steep US import taxes as high as 32% on a polyester t-shirt. This action will make garments produced in Madagascar uncompetitive with similar products made in China — which already produces 100 times more apparel for the US market compared to Madagascar.

We ask you to consider the human tragedy of an action that will wipe out 100,000 good jobs in the Madagascar apparel sector created under AGOA. Surely there is a way to send a strong message to feuding politicians in Madagascar — without punishing innocent workers and their families who have nothing to do with the disputed control of Government. Your advisors will tell you that they are doing this to help people in Africa.

We respectfully disagree.

While we hope that the continued destabilized situation in the Government of Madagascar is hopefully only temporary, we know that the exit that results from AGOA decertification from the country of our American retail customers will be permanent.

Over 28,000 of our employees signed a petition to President Obama asking him to save their jobs. A copy of that letter can be viewed at www.gefp.com.

USTR Replies to Our Campaign to Save Madagascar Jobs

After sending an email to Constance Hamilton, Deputy Assistant U.S. Trade Representative for Africa, we received the following email in response: Thank you, Mr. Easterly, for your email. We of course, want to have as many sub-Saharan African countries as possible be eligible for AGOA benefits. We are working with all the countries, including Madagascar -- to encourage their governments to abide by the AGOA eligibility criteria, particularly rule of law. There has been some recent progress amongst the Malagasy actors involved which gives us some hope. But at the end of the day, an unstable political environment, no regard for rule of law, etc. will undermine Madagascar's future, ongoing investment, and the lives of its people more than any one preference program or initiative. We hope that it is their understanding of that point that will keep them moving forward with restoring democracy and rule of law in Madagascar.

Regards, Connie Hamilton

Hopeless cause of the week: save Madagascar!

Aid Watch has a stubborn attachment to excellent but possibly hopeless causes… Madagascar, a country we first blogged about in June and then again in August, may be down to its last few days as regards AGOA, the US preference program that underpins about 50 percent of the country's $500 million textile industry.  Because of the change of government that took place in Madagascar in March, the US has been steadily threatening to suspend its AGOA eligibility unless the country returns pronto to constitutional government.  A committee consisting of representatives from State, Commerce, Labor, Treasury, USAID, the NSC and the USTR has been deliberating for several days on whether Madagascar's transgressions merit suspension from AGOA.

With little likelihood that egregious democracy and human rights violators like Gabon and Angola will be suspended from AGOA, it's hard not to be cynical about why Madagascar has come under such scrutiny for a regime change in which a highly experienced kleptocrat was replaced by a less experienced one.  Or why, suddenly, there is such concern about a return to constitutional government when it's not at all clear that Madagascar's leaders over the last 40 years have ever placed the interests of their people above their own.  We can be fairly sure that if Madagascar were pumping oil instead of just looking for it the country's AGOA status would not even be under consideration. Still, we’re going to try not to be cynical.

We don’t know WHAT the AGOA eligibility committee on Madagascar is talking about. (The committee doesn't actually make the final decision on AGOA.  They make a recommendation to the president who typically announces who's in and who's out around Christmas time.)  But we imagine the discussion breaks down in two ways.  On one side, there are the idealists who believe that the AGOA goals of promoting democracy and good governance will never be achieved unless the US gets serious about sanctioning individuals who overthrow democratically elected governments.  After seeing Madagascar's political leaders backslide, prevaricate and just plain lie about their intentions in on-going negotiations brokered by the AU, SADC and the UN, the idealists are skeptical about whether these leaders - none of whom is a poster child for good governance - are serious about resolving their long standing differences.  The idealists are probably right.  These political adversaries, who have overthrown one another like kids playing leapfrog, despise each other.  We can expect that, AGOA or no AGOA, political friction, back-stabbing and jockeying for position will continue in Madagascar for years to come - just like in most countries.

On the other side of the committee table, there are the realists who recognize that cutting off AGOA is unlikely to have any effect on those behind the overthrow of the previous government but will vaporize millions upon millions of dollars of foreign investment in Madagascar, some of it by US companies, and dump tens of thousands of young female workers trying to feed their kids into the streets.

So what to do?  Cancel AGOA in support of a principle that will do nothing to advance good governance in Africa, or continue it and support workers and investors who had nothing to do with the whole business?  Forgive us for our presumption that this is a fairly obvious call.

This is an interesting test of whether independent observers who actually care about Madagascar have any effect on US government decisions in our democracy, or whether the departments concerned simply act with impunity to pursue their own interests and agendas. The rest is up to you, most esteemed AGOA committee. -- Update: Take action on this cause! Send an email to Florizelle Liser (Florie_Liser@ustr.eop.gov), Assistant U.S. Trade Representative for Africa, telling her not to cancel AGOA in Madagascar.

Hillary offers trade opportunities to Africa – unless we don’t feel like it

Secretary of State Hillary Clinton had good news for Africa in the Nairobi forum yesterday on the US African Growth and Opportunity Act (AGOA). AGOA offers breaks from quotas and duties on African exports to the US. First enacted under Bush, AGOA is at least a partial success story, with exemplars like textile exports in Lesotho and Madagascar. Secretary Clinton yesterday endorsed new efforts to “maximize the promise of AGOA.” She declared “we are committed to trade policies that support prosperity and stability.” Except when we aren’t. AGOA privileges can be revoked for political reasons, like if the President and the US Trade Representative (USTR) decide a country does not have sufficient “rule of law.”

Which is exactly what is threatened now with that success story of textiles in Madagascar. Ever since a political crisis and change in government in Madagascar last spring, the USTR has been threatening to revoke Malagasy eligibility for AGOA, which would effectively destroy the Malagasy textile industry (worth between 6.5 and 8 percent of GDP and accounting for 50,000 jobs).

We had a previous blog post on this, which had a dramatically nonexistent effect on USTR actions.

Of course, the USTR implementing AGOA has good intentions – to promote good governance. There are two problems with this: (1) we don’t have a clue how to do this in Madagascar, and (2) why try to do it by punishing private individuals instead of the government?

On (1), Malagasy politics are not really that hard to understand, as long as you have a Ph.D. in Malagasy history, political science, sociology, economics, and familiarity with the byzantine maneuvers of the FOUR way-far-from-perfect quarreling rivals for power. All the US government asks in exchange for continuing AGOA is that these four guys who hate each other come to an instantaneous consensus on early, free, and fair elections. USTR officials confirmed to us on background yesterday that these efforts continue.

It’s not totally clear why USTR is being so insistent, when “rule of law” is so vague as to allow the eligibility of DRC, Guinea, and Guinea Bissau (as we ineffectively pointed out last time). (This arbitrariness is what justifies the snarky title of this post.)

On (2), all I have to say to elaborate on “why punish private individuals”, is – why punish private individuals?

Time is running out for Madagascar, as incentives to invest and produce for advance US orders are disappearing further the longer the USTR dithers. Political risk comes not from the Malagasy or other African governments, but from the US government’s failure to follow any consistent rule of law on how to apply the AGOA rule of law provision. This arbitrariness weakens the AGOA incentives for ALL African countries.

Please USTR, try to make Secretary of State Clinton’s promising words come true, don’t throw away one of our all-too-scarce development policy successes.

Here’s a US development program working – stop it immediately!

“[O]pen trade and international investment are the surest and fastest ways for Africa to make progress,” President Bush said when he signed an extension to the African Growth and Opportunities Act (AGOA) in 2004. Originally signed into law in 2000, AGOA removes US quotas and duties for thousands of products coming from some 40 sub-Saharan African countries.

AGOA has led to an overall increase of 8% in non-oil exports to the US, according to recent research. And Madagascar has been one of the program’s clearest success stories. The island nation’s exports tripled in the first three years of the program, led by strong growth in the apparel and textile sector. This sector remains vibrant in spite of the huge encroachments by China on African textile competitiveness since 2005, as well as the more recent shrinkage in global demand: textiles still account for 60% of Madagascar’s total exports, and 100,000 people are employed in the formal sector alone.

So why is the US now threatening to revoke AGOA in Madagascar?

The US government is using AGOA as a political lever to force President Andry Rajoelina’s questionable government to hold elections within the year. The textile exporters association says that the loss of AGOA would lead to downsizing and possibly even the collapse of the entire industry. Tens of thousands of jobs, and tens of millions of dollars of investment stand to be lost.

A letter that Aid Watch obtained addressed to the association of Malagasy textile exporters from the US trade rep warns ominously: “The recent events in Madagascar will be taken into consideration as the U.S. Government begins its review of Madagascar’s eligibility for AGOA in the coming months. As you know, respect for the rule of law is a condition of eligibility outlined in the AGOA legislation.”

The reasoning seems to be that political instability and violations of democratic procedures hurt the Malagasy people, so the natural US government response is to—hurt them more by taking away their jobs?

But a look at the AGOA eligibility requirements shows there is some room for interpretation. There must be, if non-shining examples of democracy like the DRC, Guinea, and Guinea Bissau get to stay on the list while Madagascar is kicked off. It turns out that the AGOA FAQ page contains a disclaimer: “Progress in each area is not a requirement for AGOA eligibility” [emphasis added].

So the USTR is not required to take Madagascar off the AGOA list, and it should not. Attorney and global regulations enforcement expert Jason Poblete said via email that “a country-wide sanctions regime is not likely warranted” and recommended a more targeted approach, such as adding the coup leaders to the list of "specially designated nationals" restricted from doing business with the US.

Another time for invoking Amanda’s Love Actually test— better for the USTR to do nothing, stay home, and watch a movie.