Guest post by Anna Diofasi, Humanitas Global
The extension of the African Growth and Opportunity Act (AGOA) and new conditions of reciprocity has been be on top of the agenda at the 12th AGOA meeting in Addis Ababa, as US Government officials and representatives from over 39 African countries come together to discuss economic and trade relations between the US and Sub-Saharan Africa from August 9-13. The theme of this year's AGOA Forum is "Sustainable Transformation through Trade and Technology".
The African Growth and Opportunity Act was enacted in May 2000 to improve market access to the US for qualifying Sub-Saharan African (SSA) states by offering duty-free treatment to African exports. The Act, following a seven-year extension in 2008, is now set to expire in 2015. In order to qualify and remain eligible for AGOA, each country must work to improve its rule of law, eliminate barriers to US trade and investment, and protect worker’s rights. Depending on their perceived compliance with these criteria, countries may be added to or suspended from the list of eligible nations at the discretion of the US President.
Both the United States and eligible African states agree that an extension of AGOA is desirable, though the exact timeframe and conditions of the extension remain to be negotiated. An additional 15 to 20 years would be a realistic expectation according to US officials, but there are no plans to make the Act a permanent feature of US-Africa trade relations.
AGOA does not currently contain any provisions for reciprocal treatment of US goods being exported to Africa, which is likely to be a key point for discussion during the Forum. Given the European Union’s ongoing free-trade negotiations with several African nations, the US is likely to demand similar preferential treatment for its own exports to Sub-Saharan Africa. This would fundamentally alter the terms of trade with many eligible nations and may have an adverse impact on some African businesses and manufacturers.
Amidst discussions on extension and re-negotiation, it is worth asking what AGOA has done for African growth and development so far. Total exports under AGOA have risen more than 300 % since the start of the program. Petroleum products continue to dominate the trade, making up 86% of all AGOA exports in 2012. Given the African petroleum industry’s dubious track record, however, it is hard to determine how much ordinary Africans have benefitted from the program.
AGOA has boosted the African textile industry, creating jobs and government revenue in several African nations such as Lesotho, where apparel exports to the US sextupled during the past two decades. Nevertheless, textiles and other non-oil products remain only a fraction of AGOA exports. Critics also point out that the US has failed to revoke the eligibility of many oil-exporting countries with egregious human rights violations like Angola, rendering the rule of law and rights provisions of the Act meaningless.
In order to ensure that AGOA benefits more African nations, there needs to be more emphasis on capacity building for exporters and linking African producers to retailers in the United States. Many manufacturers fail to take advantage of the Act due to lack of knowledge and support from trade ministries. In Ethiopia, producers complained of difficulties in building relationships with buyers and the high costs of promoting their goods abroad. Remarkably, only 10 of the 39 eligible countries earned more than $100 million through their participation in AGOA in 2012.
At this year’s Forum, the African Development Bank hopes to work together with US agencies to reduce the number of missed opportunities across the continent. An extension of AGOA could be a catalyst for exceptional economic growth, but only if coupled with the right policies and support for its implementation
