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Africa's trading ambitions on the table

Published date:
Thursday, 16 January 2003

American delegates have been rattling off billion-dollar figures at the US-African trade conference.

The African Growth and Opportunities Act, or AGOA, was introduced just over two years ago to open up a tariff-free or duty-free arrangement between the US and initially 36 African countries.

That's now been expanded to 38, and most of them are represented in Mauritius to reflect on how much trade has been carried out, how much money has been made, how many jobs have been created, and where this is all going in the future.

The statistics are impressive, if a little misleading.

Big firms gain most

Of the billions of dollars involved, well over two thirds is accounted for through oil or minerals trade.

The idea of preferential deals was to help poorer countries to develop, not line the pockets of rich big businesses and corporations.

Wandering around the trade fair which accompanies the Private Sector Forum of the conference, it's difficult to find any small producers who will shout from the rooftops about how much AGOA has helped them.

They just say how much they are expecting it to help in the future.

Growing trade

One exception is the textile industry, and nowhere more so than in Lesotho where 11 new factories have opened and eight more have been expanded to take advantage of the trade advantages of AGOA.

The US government says it is now sub-Saharan Africa's largest single-country export market, and that 92% of US imports from AGOA countries enter duty-free.

In South Africa, the export of auto parts has increased 16 fold.

Across all the AGOA countries, America has seen imports of non-fuel products increase by 50%.

Confidence crisis

But there are criticisms - the incentives result in factories being relocated to poor countries such as Madagascar to take advantage of the cheap labour, and the type of industry involved can be quite fickle.

Ralph Lauren makes use of African workmanship

Of the 100,000 jobs recently created in Madagascar, almost all were wiped out in a matter of weeks when political crisis saw the textile industries running back to Mauritius with their tails between their legs.

The factories are drifting back to Madagascar, but confidence in the country has collapsed - the companies can pull out as quickly as they arrived.

Membership of AGOA depends on American-defined rules of good governance and democracy and where this falters, the country can lose all the trade benefits.

A question mark is currently hovering over Eritrea and Swaziland, the latter a big beneficiary of the relaxed trade regulations, and there is a serious threat it may be excluded from the deal if the political crisis is not quickly and "adequately" resolved.

No progress on agriculture

Agriculture is potentially Africa's biggest export, and although agricultural produce makes up hundreds of the products covered under the AGOA agreement, little trade has been achieved.

Labour is much cheaper in Africa

The main reasons are western subsidies, protecting their own producers, but also sanitary requirements.

Agriflora from Zambia has been trying for five years to export its flowers into the US market, but is still finding the way blocked by these regulations.

Another criticism levelled at AGOA here in Mauritius is its short time span - quotas will be scrapped in 2004 and the privileged trade position is due to expire in 2008.

Longer-term hopes

In a video address to the delegates, President Bush said he will try to extend the AGOA programme, and his trade representative Robert Zoellick said after the success of the latest adaptations to the law in AGOA II, he hopes to address an AGOA III in the future.

"America is committed to building on the great success of AGOA," said President Bush.

"One way we can do this is to give business the confidence to invest in Africa knowing the law's benefits will continue long into the future."

"I'm pleased to announce I will ask the United States Congress to extend AGOA beyond 2008," he said.

Home-grown plans

This is perhaps the biggest development to come out of this Forum - as well as strengthening ties and allowing businesses to mingle on the fringes of the event.

AGOA has got off to a slow start when you consider what it set out to achieve.

But the commitment to US-African trade appears to be strengthening and setting out a model for the way the New Partnership for Africa's Development might work in practice, in the future.

The difference, of course, is that Nepad is Africa's idea.

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