During the United States - Africa Summit, hosted by President Barack Obama earlier this month, the renewal of the African Growth and Opportunity Act (AGOA) frequently came up in discussions. AGOA expires in September 2015.

Basically, AGOA gives selected sub-Saharan African countries duty-free and tariff-free status to export a wide range of goods to the US market.  

This preferential treatment has been around for almost a decade and half.  Results have been mixed. Some countries have reported substantial gains, while others do not have too much to show for it. 

The crux of the matter is what can you sell to a country that almost has everything? The siutation is made more complicated, because many African countries do not have the industrial and manufacturing base able to sustain the high volumes and guaranteed delivery requirements associated with doing business with Americans.

The very strict sanitary and phytosanitary measures demanded by the US government also make it difficult to export most of Africa’s agricultural produce. Yet this is where we have some comparative advantage.  And we cannot forget the very powerful American farm lobby that guards its turf with fearsome determination.

Generally, Americans remain big buyers of African natural resources like oil and gas which make up 80% of all traded goods. Exporters of garments or apparel are also notable beneficiaries of AGOA, but for  the most part, it has been thin pickings for 30-plus African countries.

The AGOA secretariat paints a different picture. US imports from eligible countries has reached nearly $27 billion compared to $8 billion in 2001. Non-oil AGOA trade has increased almost fourfold during the same period from $1.4 billion to almost $5 billion and 300,000 jobs created in Africa.

According to the United States Trade Representative Office, since AGOA was launched, Africa’s non-oil exports to the US have tripled. Note that this came fro a very low base since Africa’s leading trading partner has benn the European Union.

However, some analysts believe that AGOA has had “only limited impact on Least Developed Countries’ economic transformation, since key products such as dairy products, sugar, cocoa, peanut and cotton are excluded”. 

This limited product coverage of the AGOA scheme is also a source of concern, with exports from LDCs largely concentrated in the clothing sector. And this is not as simple as it seems. In order to export garments to the US, an AGOA-eligible country must have a textile visa in place to satisfy US authorities and prove compliance with AGOA rules of origin. Essentially to make sure that most inputs are not simply imported from East Asia.

However AGOA concessions have enabled African garment exporters to remain competitive in the US market. Key beneficiaries have been Kenya, Lesotho, Mauritius, Swaziland, Tanzania, Ethiopia, South Africa, Ghana, Botswana, Cameroon and Malawi

Obama has directed the US Congress to start working on the AGOA renewal process in line with the recommendations made by the Federal government and eligible member countries. Eligibility depends on certain benchmarks related to good governance.

Recently, Stephen Karingi, Director, Regional Integration and Trade Division Economic Commission for Africa (ECA), thighlighted the work of the  Africa Trade Policy Centre (ATPC. They have been providing support to eligible African member countries in their efforts to ensure that the trade arrangements play a role in Africa’s transformation and remain beneficial to the US as well.

AGOA incentives are most useful in lower quality products with less value addition. This discourages skills development and other forms of quality upgrading.