If the US Congress withdrew Agoa privileges, it would be deleterious to fragile economies, which are found in Africa. But more challenging is if the US Congress emulates the European Union Economic Partnership Agreement trade discussions with Agoa-eligible countries.
The 2014 US-Africa leaders’ summit is to the African leaders, a new lease of life in trade and investment.
The momentum at the summit shows that there is every indication the US Congress will approve the Agoa 2.0.
At the the 2013 Agoa forum in Addis Ababa, among the participants was Michael Froman, who expressed a desire to launch a comprehensive review of the Agoa trade preference programme.
The forum called for the seamless re-authorisation of Agoa by October 2014 for at least 15 years to ensure that trade with the US took place on a more predictable, in more reliable and on more legally secure basis that would inspire investors confidence.
Ethiopian Prime Minister Hailemariam Desalegn requested African Union Commission and the United Nations Economic Commission for AfricaUC and UNECA team to put a review on Agoa, outlining Africa’s position.
Taking Africa to the next level in trade and investment will need strong cooperation and proper strategies from the African leaders, more so an ‘authority on trade and investment’ equivalent to USTR.
This is because Africa is a conglomeration of fragmented nations and having one common goal is usually the biggest challenge. Also, Africa is the world’s most expensive region with which to do business.
Part of the proper strategies will be to put the agenda of mainstreaming trade policies in their respective countries, eventually making Africa an equal partner with the US, that is, having a possibility of free trade agreement.
The African leadership needs to focus on the supply side constraints such as capacity constraints, infrastructure challenges, institutional inefficiency, economic setbacks, marketing and merchandising inexperience, political risk and problem related to US market requirements.
The exponential growth of Agoa, which was signed into law in May 2000, provides for duty – free and largely quote-free access to the US market for products originating from Agoa eligible countries.
In 2008, before the financial meltdown trade had reached $100 billion, the aggregate exports from Agoa eligible countries stood at $ 81.9 Billion.
African exports have grown over 500 per cent over the decade increasing from $8.15 billion in 2001 to $53.8 billion in 2011. More than 1,835 products are on the list for trade between US and Africa.
The absurdity of this pattern of trade is that extractive industries (crude petroleum, oil and gas) remained the dominant African exports to the US under Agoa.
More shocking is that Nigeria, South Africa and Angola accounted for 80 per cent of the total exports to the US.
The question is: Is Agoa remedial to African trade? But the catch-22 situation would be if the US Congress withdrew Agoa privileges, it would be deleterious to fragile economies, which are found in Africa. But more challenging is if the US Congress emulates the European Union Economic Partnership Agreement trade discussions with Agoa-eligible countries.
In 2000–2009, Agoa exports of textiles and apparel from sub-Saharan African increased by 23 per cent from $748 million to $922 million. But most of the investments in Africa’s textile and apparel industries mainly came from Asian countries.
Why are American firms not increasing investments in Africa? Should Africa require an extension of Agoa, where only a few countries are benefitting?
The African Union Commission white paper proposes a number of strategies: Increase of product coverage to 100 per cent duty-free, quota-free access that would stimulate Africa’s exports to the US; make third country fabric provision an integral part of the revised Agoa; revise rules of origin to more simpler and flexible ones; unilateral withdrawal of country eligibility; graduation provision should be done away with; promoting US investment in Africa by providing targeted tax incentives; streamline US a to African countries; lay foundations for US–African trade agreement and maintaining momentum on Agoa forum.
Will the US Congress allow Agoa eligible countries to enter into global supply chains and distribution network via allowing them 100 per cent duty free quota free (DFQF) access to the US?
The white paper suggests comprehensive and enviable solutions but it will be interesting to follow how the US Congress and Senate will respond to Africa seeking re-authorisation of Agoa by October.
Eugene Jernigan