Trade trends under the African Growth and Opportunity Act (Agoa) have turned negative even as Kenya prepares to host a forum in August on the status of the US programme that permits duty-free imports of most African goods.

The combination of the global recession, shifts in international trade patterns, and a set of issues unique to Africa is responsible for a sharp downturn in sales under Agoa, American officials told the US Congress last week.

The gains made in the eight years since Agoa’s inception have begun to be eroded, resulting in the loss of jobs in Kenya.

And on their part, the other East African countries have never enjoyed any substantial Agoa-related benefits, casting doubt on officials’ claims concerning the programme’s enormous potential.

It is not clear whether the Agoa Forum in Nairobi will focus on past achievements while continuing to engage in upbeat rhetoric or meaningfully address the problems plaguing Agoa.

The programme was conceived during the Clinton years as a way to facilitate Africa’s economic development, in large measure by promoting the growth of textile and clothing production.

Agoa’s architects believed that duty-free and quota-free access to the vast US market could enable Africa’s textile sector to power the take-off of manufacturing generally, as had occurred in many Asian countries decades earlier.

With the remnants of a textile industry still in place, Kenya was initially able to take advantage of the opportunity offered by Agoa.

Kenya’s clothing exports to the United States were valued at $30 million in 2000 – the year prior to Agoa’s launch. By 2005, sales had soared to $258 million.

But the upward trajectory has since been halted.

Kenya’s apparel exports to the US totalled $246 million in 2007 and $245 million last year.

Head of the Kenya Apparel Manufacturers and Exporters Association, Jaswinder Bedi, has warned that many of the 32,000 jobs attributable to Agoa are being lost.

The outlook for the current year is not promising.

Top US trade official for Africa Florizelle Liser, told Congress that sales of Agoa-covered products other than oil fell 22 per cent during the first three months of 2009.

“We do not know if this trend will continue, but we suspect the decline would have been worse without Agoa trade preferences,” Ms Liser said at a hearing held by a committee of the US House of Representatives.

Declining textile sales by Africa to the United States mainly reflect the elimination early in 2005 of a World Trade Organisation system of quotas that limited clothing exports to the US by giant producing countries such as China and India.

Inefficiencies in the textile production sector of Kenya and other African countries has caused them to lose US market share to the Asian dynamos.

Agoa’s advocates are worried about efforts to extend the programme’s textile trade preferences to some of China’s and India’s poorer neighbours.

Agoa remains essentially an oil-sales programme.

US imports of petroleum products from Africa totaled $66 billion last year, which accounted for 92 per cent of all Agoa-related trade.

Four African nations – oil-producers Nigeria, Angola and Republic of Congo, along with South Africa — reaped 84 per cent of Agoa’s trade benefits in 2008.

Due to African companies’ apparent inability to compete effectively with Asia’s clothing exporters, Agoa boosters in the United States have been pointing to agriculture as a potential source of increasing exports to the US market. But actual performance has been disappointing.

Tanzania’s total Agoa-covered sales to the US market have declined in recent years – from a modest $3.7 million in 2006 to just $2 million last year. Uganda has followed the same downward path, with its Agoa exports dropping from $2.5 million in 2006 to $1 million in 2008.

Total US imports from both Tanzania and Uganda have increased during the same period, however – from $35 million to $54 million in the case of Tanzania and from $22 million to $53 million for Uganda.

“Recent trendlines have not been positive,” Ms Liser observed last week. “Africa’s current share of agriculture in its total exports is about 9 per cent, down from more than 16 per cent in 1980. Of Africa’s top ten agriculture exports in 2006, only one was a semi-processed product while the rest were primary commodities.”

Tanzania and Uganda could possibly generate significant farm-based exports to the United States. There is little sign of that happening, however.

Tanzania’s total Agoa-covered sales to the US market have declined in recent years – from a modest $3.7 million in 2006 to just $2 million last year.

Uganda has followed the same downward path, with its Agoa exports dropping from $2.5 million in 2006 to $1 million in 2008.

Total US imports from both Tanzania and Uganda have increased during the same period, however – from $35 million to $54 million in the case of Tanzania and from $22 million to $53 million for Uganda.

Political and economic impediments that African countries have failed to remove account to a great extent for the continent’s marginalised status in the global trading system, according to a recent report based on confidential interviews with 30 executives of US-based multinational corporations.

Entitled “Inside the Boardroom: How Corporate America Really Views Africa,” the assessment by the US Chamber of Commerce’s Africa Business Initiative cites three main obstacles to American investment in Africa.

Sub-Saharan nations are generally seen as representing “a difficult business case,” the survey found.

Risk is regarded as too high and potential returns too modest to warrant significant allocation of capital to Africa.

Second, corruption is viewed as widespread in Africa, with many countries lacking the political will to combat it.

The third impediment involves a perception by many US corporations that they will not be placed at a competitive disadvantage by foregoing investment in African countries.

Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Kenya's bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.

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