US aims to boost trade with Africa to challenge China on key minerals
Bloomberg (Supply Lines Newsletter) | 19 August 2024
US aims to boost trade with Africa to challenge China on key minerals
By Prinesha Naidoo
It’s unclear whether Donald Trump or Kamala Harris will triumph in the Nov. 5 presidential election, but one thing’s for sure: America’s next leader must ensure it doesn’t lose out in the competition to secure supplies of key minerals needed to produce clean energy.
More than a fifth of the world’s reserves for minerals essential to the green-energy transition — including cobalt, copper, nickel and lithium — are in Africa, and China has more operational mines on the continent to tap them than the US does. That makes the world’s biggest economy vulnerable to supply disruptions and surges in the prices of inputs used in technologies such as lithium-ion batteries, fuel cells and wind energy.
“The next US administration will likely seek to challenge China’s dominance in Africa’s critical-mineral space,” said Yvonne Mhango, Bloomberg’s Africa Economist. (Read her full analysis on the Bloomberg Terminal.)
Cementing a new trade deal with the continent will go a long way toward laying the ground for Washington to mount such a challenge.
The African Growth and Opportunity Act, or AGOA, is a flagship US program that gives almost 40 sub-Saharan African nations duty-free access to the American market. It is set to expire next year and its beneficiaries are eagerly awaiting formal guidance on what will replace it.
In April, US senators introduced a bill to extend the trade preferences until 2041. The draft legislation also proposes modifying AGOA’s rules of origin to allow inputs from North African nations that are members of the African Continental Free Trade Area, which would be the world’s biggest free-trade zone by area when it becomes fully operational by 2030.
African Trade Ministers have called for the deal to be speedily renewed, and extended for at least 16 years with minimal changes so as to stabilize commerce, promote investment and preserve regional value chains.
With greenfield foreign-direct investment into Africa’s extractive industries in decline, the US has a golden opportunity to step in and close the gap with China. And African leaders should capitalize on the increased competition for critical minerals to bolster local industries and export earnings by shifting more toward value addition.
