…By Muyiwa Aderinto for TDPel Media.
Addressing Concerns: US Industrial Policy and Africa’s Economic Development
The passage discusses the Biden administration’s increased focus on protectionism and industrial policy, particularly in the context of rising economic tensions with China.
The legislation passed in 2022 aimed to promote domestic production of renewable energy, electric vehicles, and strategic industries while limiting China’s access to crucial technologies.
However, these protectionist measures have wider implications for global economic integration and pose potential challenges for African countries.
The author expresses concern that the world is entering a more dangerous period, with protectionist industrial policies gaining momentum.
The US-China trade war initiated under the Trump administration marked the beginning of Washington’s protectionist approach.
The current policies exacerbate economic fragmentation driven by geopolitical conflicts and sanctions.
As a result, global economic integration is being reversed, which had previously led to improved productivity, higher living standards, and reduced poverty.
The passage highlights that US allies, such as the EU, Japan, and Korea, are responding by adopting their own protectionist measures and aligning with the US to establish a global supply chain less dependent on China.
However, this shift could negatively impact African countries, especially those facing debt distress.
Scarce fiscal resources, increased inflation, disruptions in regional integration efforts, and limited access to investment could hinder their growth and green development plans.
The passage further outlines the US’s protectionist industrial policy, including the Chips and Science Act, the Inflation Reduction Act, and the infrastructure bill.
These measures have raised concerns among European and Asian policymakers, who see them as favoring American companies and deviating from free trade principles.
The fear of losing companies and investments to the US has led to substantial subsidy plans in the EU and increased investments in green technologies by companies like Volkswagen and Samsung.
The fragmentation of the global economy caused by the US-led subsidy push and export controls is redirecting supply chains away from China.
However, this is also alienating non-EU and Asian allies who cannot provide similar subsidies to support their companies.
African countries, lacking the financial resources for substantial subsidies, will face significant challenges.
The International Monetary Fund has warned that Africa stands to lose the most from this global economic fragmentation, potentially reducing GDP by up to 4% for the median African country.
To mitigate these challenges, the passage suggests that the US Strategy Towards Sub-Saharan Africa, announced by the Biden administration, should address concerns about the country’s protectionist industrial policy.
Overall, the passage highlights the potential negative consequences of protectionist industrial policies and advocates for measures to ensure African countries can navigate these challenges and benefit from opportunities in the energy transition and trade diversification.