Bridges Weekly Trade News Digest • Volume 13 • Number 29 • 5th August 2009

Africa Pushes for Trade Reforms at AGOA Forum

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African leaders are urging reform of the African Growth and Opportunity Act (AGOA) - a trade agreement between 39 sub-Saharan African countries and the United States - at this week’s eighth annual AGOA forum. The meeting, which began on Tuesday and will conclude on Thursday, provides a regular opportunity for leaders from the member states to discuss strategies for improving inter-regional trade.

The bill, which was signed by then-US President Bill Clinton in 2000, gives sub-Saharan Africa trade preferences for over 6,400 products, granting African producers duty- and quota-free access to US markets. Its goal is to stimulate trade and investment between the regions and facilitate the expansion of Africa into the global economy.

AGOA expands on the Generalised System of Preferences, a set of formal exceptions from the WTO’s ‘Most Favoured Nation’ principle, which allows developed countries to offer developing countries lower tariff rates on specific goods. The agreement was originally supposed to expire in 2008 but was extended by former US President George W. Bush until 2015.

Africa Wants to Diversify Exports

African leaders argue the agreement should be restructured to promote diversity among African exports, given the region’s development challenges. “Sub-Saharan exports to the US continue to be largely dominated by energy-related products, and efforts to diversify the range of products are yet to be fully realised,” explained Uhuru Kenyatta, Kenya’s Deputy Prime Minister, in a speech on Monday.

“Exports from the region continue to face enormous challenges such as lack of competitiveness, supply capacity constraints, weak infrastructure base, low flow of private investments from the US, lack of access to finance, and low technical capacity, among other factors,” he added.

According to data from the US International Trade Commission, 90 percent of goods and services trade last year under AGOA went to four countries: Nigeria, Angola, South Africa and Gabon. Exports from three of those countries - all but South Africa - are dominated by energy-related products, namely oil and gas. African exports of natural resources, such crude oil, precious metals, and oil seeds, have grown under AGOA while exports of manufactured goods like motor vehicles, computer machinery, consumer electronics, and apparel have dropped.

African Union Deputy Chairperson Erastus Mwencha of Kenya called on Washington to help African countries diversify their exports, which would enable them to further penetrate the US market. He also said AGOA needed to be more investment friendly. “This element is lacking in the act and that is an area that we could try to reinforce in AGOA,” he said in a speech Tuesday. “Many investors will always be hesitant to embark on AGOA programs especially when they don’t know that they will be eligible.”

Mwencha suggested that the parties transform AGOA into a permanent trade agreement to further strengthen relations between the US and sub-Saharan Africa. African textile producers seconded the call. “We would like to see AGOA as a more permanent trade agreement, similar to the European Economic Partnership,” Jaswinder Bedi, chairman African Cotton and Textile Industries Federation, told Reuters. Bedi explained that potential investors are scarce because AGOA is set to expire in six years, leaving the textile industry’s future uncertain.

Washington Responds

The Obama administration has signaled strong support for African development, but Washington may not sign on to all of the suggestions made by its African partners. Anticipating some criticisms of AGOA ahead of the forum, US Trade Representative Ron Kirk indicated that “[t]he answer is not expanding the list of AGOA products,” but instead “increasing the utilisation of AGOA.”

“As President Obama said [during his recent trip to Ghana], what we are trying to achieve with our African partners is ‘more than growth numbers on a balance sheet’,” Kirk wrote in an op-ed that ran in several local Kenyan newspapers on Monday. ”We are working to create opportunities, new jobs, and brighter futures for Africans and Americans alike.”

Kirk is expected to tell African textile producers that the US can only cut cotton subsidies as part of a larger agreement that sees emerging economies like China and India agree to open their markets to more US cotton exports.

US Secretary of State Hilary Clinton also addressed the forum, stressing that good governance in Africa is critical for economic growth. “True economic progress in Africa will depend on responsible governments that reject corruption, enforce the rule of law, and deliver results for their people,” Clinton said on Tuesday. Clinton’s presence has been taken as a signal of the Obama administration’s commitment to the trade agreement, Kenya’s Daily Nation reports.

“Investors will not be attracted to states with failed or weak leadership, crime and civil unrest, or corruption that taints every transaction and decision,” she said.

But her message was not all doom and gloom. “You know that too often the story of Africa is told in stereotypes - about poverty, disease and conflict,” Clinton told delegates. “Such notions are not only stale and outdated, but are wrong. Africa is ripe with opportunities - some waiting to be seized together.”

AGOA is only available for countries that have established or are making progress toward developing certain policy objectives, including market-based economies, the rule of law, minimal trade barriers, intellectual property protection, anti-corruption policies, poverty alleviation, health care and education, and protection of human rights. Thirty-nine out of the 48 sub-Saharan African countries are now eligible for benefits under AGOA.

Despite the legislation, trade between the US and the AGOA countries remains limited. Goods from sub-Saharan African countries represented 3 percent of all US imports in 2008, and just over 1 percent of US exports were shipped to the region that year.

Additional information

For detailed information about AGOA and its impacts, visit http://www.agoa.info/.

ICTSD reporting; “Africa seeks amendments to AGOA deal,” XINHUA NEWS, 5 August 2009; “Great trade hopes for Kenya as Clinton due for talks,” DAILY NATION, 4 August 2009; “Africa textile makers want US trade deal extended,” REUTERS, 3 August 2009.