TRALAC - Trade Law Centre

US Act on Africa a window of opportunity

Wednesday, 06 November 2002

Source: Business Day

THE US's African Growth and Opportunity Act (AGOA) is a blessing in disguise if SA companies take it seriously before the full liberalisation of trade kicks in from 2005 as stipulated by the World Trade Organisation (WTO).

The first meeting on Agoa held jointly by some African and US representatives last week reflected on how Agoa was working after one year of its enactment, but had little to do with the bigger picture.

While the WTO is forging ahead with its commitments to liberalise sectors such as textile and clothing by 2005, Agoa is only expected to run for the next eight years. The US's good intentions for Africa by providing trade benefits through Agoa will effectively be whittled down tremendously after 2005.

The Uruguay Round's agreement on textile and clothing, for example, requires that this sector be fully integrated into the WTO rules by endDecember 2004.

But Agoa cannot be dismissed. Jack Kipling, chairman of SA's clothing industry export council, says: "Agoa provides a five-year window of opportunity for SA manufacturers and industry sectors to establish themselves as zones of excellence....

"In the not too distant future, to be globally competitive, countries, and more specifically industry sectors within a country, will have to be globally recognised as zones of excellence for the production of specific products based purely on sustainable natural competitive advantage or not survive at all."

All industries worldwide, not only the clothing industry, will be subject to the removal of trade barriers and reduced tariff protection a move levelling the playing fields globally.

Despite this, opponents of Agoa say the WTO's intentions of global trade liberalisation creates a helpless situation for Agoa which attempts to give advantage to African countries in industries that have no sustainable advantage over other key developing countries, such as India and China.

Others are worried that, like the bad experience African countries have had with the Generalised System of Preference (GSP), Agoa's realistic benefits are questionable. The fact is that GSP has not filtered through African economies in any meaningful way, and has not led to any structural changes in economies which are still based largely on primary economic activities, with little or no beneficiation and industry development.

It is also arguable that preferences into the US market have not been granted in isolation of greater liberalisation of key international markets. The US and the European Union are steadily moving ahead with bilateral and multilateral trade talks with countries globally. Taking into consideration lowering of tariffs under the WTO schedule, many of the provisions will be eroded over time anyway.

The preferences for Agoa and other bilateral or multilateral trade accords thus assume a "use it or lose it" nature, almost by default; this should spur those seeking advantage from the provisions to act swiftly.

Agoa could be perceived as simply imposing restrictions on African nations in terms of domestic policies and providing short-term and dubious benefits. However, African countries could also see Agoa as an opportunity for them to expand exports in a variety of fields from apparel to agroprocessing and beneficiated metals.

SA, in concert with other key manufacturing countries in Africa such as Nigeria and Zimbabwe, when granted benefits, has a key role in this process, both in terms of exploiting opportunities correctly and through this redefining the continent's image in the minds of US consumers.

The opportunities are there now is the time to use them fully.