GHANA: TRADE AND INVESTMENT FRAMEWORK AGREEMENT

UNCLAS SECTION 01 OF 04 ACCRA 001899

SIPDIS

SIPDIS

DEPARTMENT PLEASE PASS TO USTR FOR AGAMA
COMMERCE FOR VINEYARD
NSC FOR COURVILLE

E.O. 12958: N/A
TAGS: EAID EINV ETRD KMCA PGOV PREL GH
SUBJECT: GHANA: TRADE AND INVESTMENT FRAMEWORK AGREEMENT
COUNCIL MEETING

SUMMARY
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1. During a July 19-23 visit to Ghana, Assistant U.S. Trade
Representative Florie Liser, Commerce Deputy Assistant
Secretary for Market Access and Compliance Holly Vineyard and

SIPDIS
accompanying USG officials engaged with GOG officials and
members of Ghana's private sector to discuss strategies for
increasing bilateral trade and investment. Ghanaian private
sector exporters shared their concerns regarding poor
infrastructure, low financing, high shipping costs, and lack
of market research that prevent them from taking maximum
advantage of the African Growth and Opportunity Act (AGOA).
During the fourth council meeting of the U.S.-Ghana Trade and
Investment Framework Agreement (TIFA),discussions with GOG
officials focused on obstacles to maximizing exports under
AGOA, such as the need for energy sector reform. Both sides
agreed on the need to increase horticulture processing and to
find ways to develop vertically integrated textiles and
garment industries. They also agreed on the importance of
finding ways to better support small and medium enterprises.
GOG officials described their plans for using Millennium
Challenge Account money to support their national trade
strategy, and the two sides exchanged views on the current
impasse in the Doha Round of WTO negotiations. The GOG
proposed mid-July for the 2007 AGOA Forum and shared its
ideas about the event. End Summary.


2. Assistant U.S. Trade Representative Florie Liser and her
GOG counterpart, Minister of Trade, Industry, and Private
Sector and Presidential Special Initiatives Alan Kyerematen,
chaired the fourth council meeting of the U.S.-Ghana Trade
and Investment Framework Agreement (TIFA) July 20-21, 2006,
in Accra. Deputy Assistant Secretary of Commerce for Market
Access and Compliance Holly Vineyard, USTR Director of
African Affairs Laurie-Ann Agama, and Department of Energy
International Program Specialist Tom Sperl accompanied A/USTR
Liser.

EXPORTERS NEED INFRASTRUCTURE, FINANCING, RESEARCH
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3. In July 20 sessions with Ghanaian apparel and non-apparel
exporters, A/USTR Liser emphasized that Ghanaian exporters
must take advantage of the African Growth and Opportunity Act
(AGOA) to increase exports to the United States. Ghanaian
exporters generally lauded USAID's West Africa Trade Hub for
helping them connect with U.S. buyers through trade shows.
They expressed concerns, however, about infrastructure,
financing, shipping costs, and market research that prevent
them from taking full advantage of AGOA. In the apparel
session, exporters questioned how Ghana could achieve
vertically integrated textile and garment industries when
much of the fabric used in Ghanaian garment production is
currently sourced from outside the sub-region, and the AGOA
third country fabric provision is scheduled to expire in 2007.


4. In both sessions, exporters generally complained of
inadequate GOG efforts to improve infrastructure, including
roads, energy, and reliable cold storage. The banking sector
was criticized for offering only short-term, high interest
financing that fails to meet the needs of businesses
attempting to expand in order to produce the volumes required
by U.S. buyers. Companies seeking to maximize exports under
AGOA also face freight challenges. Surface shipping to the
United States is over four times the cost of that to Europe,
the journey often takes three weeks or more, and containers
in some cases face long delays at U.S. ports for quarantine
and security purposes, they said. Finally, exporters noted
that Ghana lacks institutional capacity to conduct market
research.

U.S.-GHANA TRADE AND INVESTMENT FRAMEWORK AGREEMENT
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5. Opening the fourth session of the U.S.-Ghana Trade and
Investment Framework Agreement (TIFA) council meeting on July
21, Kyerematen called attention to Ghana's constructive
engagement with the USG and with the U.S. private sector over
the years, which would culminate, he said, in the landmark
signing of Ghana's USD 547 million Millennium Challenge
Compact. The United States' role as a close friend and
strategic ally of Ghana, however, is not reflected in the
volume of bilateral trade, he said. Saying that these
numbers will not change unless Ghana takes full advantage of
AGOA, which lies at the heart of U.S.-Ghana trade relations,

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Kyerematen expressed his hope that the talks would include a
serious look at how the United States can help Ghana take
advantage of AGOA.


6. Ghana is a special country with huge potential, A/USTR
Liser said. Agreeing that current trade relations do not
accurately reflect Ghana's important bilateral relations with
the United States, Liser noted that if Ghana and other
African countries were to capture only one percent more of
global trade, it would generate billions more each year in
revenue and create thousands of jobs.


7. In her opening remarks, the Ambassador stressed that Ghana
was the first West African country to obtain certification
for AGOA eligibility and that the United States is the fifth
largest investor in Ghana. The country must do more,
however, if it is to reach its goal of Middle Income status
by 2015, she said. In particular, Ghana must address
widespread corruption, a slow court system and high rates of
fraud, all of which dissuade tourists and investors from
spending their money in Ghana, she stated.

TRADE CAPACITY BUILDING: GHANA'S ENERGY PROBLEMS
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8. The lack of an adequate or stable energy supply, coupled
with high energy costs, makes Ghanaian producers less
competitive, A/USTR Liser said. Though tackling the entire
problem would likely cost billions of dollars, targeting the
energy needs of specific export-oriented factories could have
a dramatic impact. Conducting a survey of top exporters'
energy needs, in addition to improving donor coordination
with the World Bank and others, could help the GOG obtain
appropriate support. The GOG must also address Ghana's
energy regulatory regime, Department of Energy International
Program Specialist Tom Sperl added. With the opening in 2007
of the West Africa Gas Pipeline, running from the Niger Delta
to Togo, Benin and Ghana, the market for gas services in
Ghana will be extremely lucrative, Sperl continued. However,
to cash in on this opportunity Ghana must create
state-of-the-art legal and financial regulatory regimes and
minimize barriers to entry for service providers.
USAID/Ghana Advisor on Economic Growth Trade and Investment
Ron Stryker noted that some progress is already being made in
this area, with USAID supporting GOG efforts to develop a
regulatory framework for a secondary market for gas coming
from the pipeline.


9. Minister Kyerematen agreed that Ghana must target the
energy needs of export-oriented industries. The GOG is also
attempting to address the problem of regulatory transparency
in the energy sector, he said, exploring whether Ghana has
any specific policy barriers or is doing enough to provide
incentives to independent power producers.

FROM AGRICULTURE TO AGRO-PROCESSING
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10. USAID/Ghana Advisor on Economic Growth Trade and
Investment Ron Stryker explained that USAID's Trade and
Investment Program for a Competitive Export Economy (TIPCEE)
is focused on helping Ghana's horticulture sector to become
self-sustaining, though the program also works with various
ministries to improve Ghana's investment climate. Making the
point that Ghana must strive to export agricultural products
not only to Europe, but also to the United States, A/USTR
Liser noted that while raw agricultural products can enter
Europe duty free, processed foods face tariff escalation.
AGOA, however, does the opposite, allowing processed foods
from Africa to enter the United States duty free. Third
countries that invested in agricultural processing in Ghana
could save an average of 20 percent in tariffs by exporting
to the United States under AGOA, Liser said.


11. Minister Kyerematen responded that high trans-Atlantic
freight costs prevent Ghana from competing with Latin
American countries on raw agricultural exports to the United
States. He said the focus for both TIPCEE and the Millennium
Challenge Compact must be to put a heavier emphasis on
processing. To address the high cost of trans-Atlantic sea
freight and the dearth of air cargo options from Ghana to the
United States, A/USTR Liser suggested that Kyerematen and
other ministers organize a meeting with shipping companies
and air carriers to seek ways to improve transport options
for Ghana and other West African nations.


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SMALL AND MEDIUM ENTERPRISES NEED HELP, TOO
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12. Minister Kyerematen told A/USTR Liser that Ghana also
needs help in developing its small and medium enterprises
(SMEs) and would benefit from the assistance of the U.S.
Small Business Administration (SBA) in this respect, as well
as in re-engineering Ghana's own SBA-type institution.
Noting that his Ministry has already established a framework
for cooperation with SBA, Kyerematen lamented that SBA does
not appear to have funding for conducting work outside the
United States. USAID support for SBA assistance is
preferable, he added, because while other donors like the
World Bank do provide support to the SME sector, it is not in
the form of direct subsidy payments. A/USTR Liser suggested
that relevant USG agencies work to improve coordination on
assistance to Ghana and see if existing funds could be
leveraged for providing help on SMEs. Some work is already
happening in this area, Liser said, noting that the Trade
Development Agency (TDA) has provided grants to Ghana to
train SMEs to become localized electricity distribution
companies.

ENHANCING GHANA'S PARTICIPATION UNDER AGOA
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13. AGOA is at the heart of the U.S.-Ghana trade
relationship, Kyerematen said. Ghana is developing a country
strategy for taking advantage of AGOA, as called for by the
African Ministerial Consultative Group, that consists of a
national trade policy as well as direct support interventions
to the private sector. Ghana's national trade policy, being
developed with input from the private sector, includes the
areas of trade facilitation, production capacity, trade
support services, domestic trade, competition policy, an IPR
regime, standards, and consumer protection. The
sector-specific, enterprise-level interventions would take
place in select areas: garments and textiles, wood
processing, agro-processing, and fish products and processing.


14. Describing Ghana's sector-specific strategy for textiles,
Kyerematen said the plan has three components. First, Ghana
will set up a "garment village" in the free trade zone to
provide infrastructure and support for entrepreneurs.
Second, the GOG will train young workers to develop a talent
pool from which investors can easily draw. Third, the GOG
will support market development to attract foreign investors
by addressing problems with infrastructure and the regulatory
environment. Ghana must support its own entrepreneurs,
Kyerematen said, as foreign garment manufacturers still have
little interest in exporting to the U.S. market from
Africa--despite AGOA--due to the phase-out of the Multi-Fibre
Agreement (MFA) and the fact that setting up a textile mill
in Ghana would require a USD 100 million or more investment.


15. Echoing points she made the previous day, A/USTR Liser
stressed the difference between the garment and textile
industries and noted that roughly 94 percent of the apparel
entering the United States under AGOA makes use of
third-country fabric. Ghana, therefore, must invest in
fabric production and develop vertically integrated textile
and garment industries if it is to compete effectively.
Addressing Kyerematen's concerns about the cost of developing
the textile industry in Ghana, Liser argued that simply
extending the allowance on third-country fabric will not in
itself lead to vertical integration, but rather that any
further extension must be structured to include incentives
for AGOA-eligible exporters to use more African-made fabrics.
Congress already extended third-country fabric in 2004,
Liser continued, and would certainly need to know why a
further extension is needed and how it could be structured to
meet immediate and longer-term goals for Africa's apparel
industry.

2007 AGOA FORUM PLANNING
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16. Turning to plans for Ghana's hosting of the 2007 AGOA
Forum, Kyerematen suggested that either June or July would be
the most suitable timeframe in order to avoid Ghana's 50th
anniversary celebrations in March, while also taking
advantage of Ghana's most pleasant season. Kyerematen
proposed that in the months leading up to the Forum,
sub-regional consultative groups such as ECOWAS and SADC
could meet twice to chart their progress toward developing an
AGOA strategic framework. Just prior to the actual Forum

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there would be a technical experts meeting. The day before
the Forum there would be a Ministerial, and finally the AGOA
Forum itself. Kyerematen proposed that civil society and
private sector participants be integrated into the main Forum
event.


17. Thanking Ghana for offering to host the 2007 AGOA Forum,
Liser said a USG planning team would need to visit Ghana to
meet with the host point of contact at least twice prior to
the event. Liser suggested that planners on both sides try
to find opportunities to meet that piggyback on other
scheduled events, such as an ECOWAS meeting, to bring
together AGOA members from a number of countries.

MILLENNIUM CHALLENGE ACCOUNT, DOHA ROUND
--------------


18. The GOG side offered a detailed presentation to A/USTR
Liser on how Ghana intends to use its USD 547 million
Millennium Challenge Compact, particularly how the MCC will
support Ghana's overall trade strategy. Examples include
helping with farmers' transition from subsistence farming to
cash crops, improving infrastructure such as feeder roads to
facilitate bringing goods to market, creating an unbroken
cooling chain to allow Ghanaian producers to move into higher
value fruits and vegetables, and targeting education and
financial reforms to assist producers. Liser commended Ghana
for its compact, saying that the country has truly put the
concept of "aid for trade" into practice.


19. A/USTR Liser and Kyerematen discussed the future of the
Doha Round of WTO talks at some length, particularly the
issue of U.S. and EU disagreements over the depth of
necessary tariff cuts. Both sides agreed that the EU must
show more flexibility if any progress is to be made.


20. A/USTR Liser cleared this cable.

BRIDGEWATER