TRALAC - Trade Law Centre

AGOA III looks set for Passage this Year

Thursday, 29 January 2004

Source: Finance24.co.za

South Africa is still one of America's largest African trading partners, even as trade between the US and Africa fell during 2002, a US report showed.

The decline in trade between the US and Africa has been ascribed to a decline in US exports of transportation goods and a decrease in energy exports from Africa.

But trade is likely to pick up in coming years because of a deal between Washington and several African nations and a new US energy policy, said the study from the US International Trade Commission (ITC).

In 2002, US-sub-Saharan merchandise trade totalled US$24.1bn, down from $27.8bn in 2001. In the same year, US exports to the area declined by 12.7%, to $5.9bn, and US imports fell 13.5% to $18.2bn, says ITC.

The commission released its fourth annual report on Tuesday, calling it a tool that President George W. Bush could use to develop a comprehensive trade and development policy for the countries of the region.

The ITC said the controversial African Growth and Opportunity Act (Agoa) could help reverse the decline in US-Africa trade soon. But activists who follow US-Africa relations say the study actually proves Agoa is not living up to its billing.

Congress passed Agoa in 2000 after several years of debate. It eliminates US import barriers on virtually all of sub-Saharan Africa's main exports to the US, particularly textiles and clothing.

In the first 11 months of 2001, US imports of Agoa-covered products, excluding oil and other mineral fuels, rose 96% to $1.2bn, leading US officials to boast that the plan had worked to boost trade.

The largest share of US imports under Agoa came from Africa's main energy exporter, Nigeria (60.2%), followed by South Africa (14.9%) and Gabon (12.7%).

According to the report, "as government officials, companies and international firms become more familiar with the advantages of Agoa, sub-Saharan Africa continues to attract investment driven by access to Agoa benefits."

But that growth is uneven, it adds. The textile and apparel sector has received significant investment, but other sectors, such as South Africa's automobile sector and information technology in Uganda, are only beginning to benefit from Agoa-related investment.

The report forecasts increased foreign investment to the region even as portfolio flows to the region fell from $1bn in 2001 to $700m in 2002.

As in prior years, South Africa accounted for virtually all foreign investment to the area in 2002.

US net direct investment to Africa totalled $861m in 2002, representing less than 1% of the country's direct investment abroad.

US critics note Washington's focus on trade with Africa has served to obscure the decline in US foreign aid spending in the continent.

They say duty-free access under Agoa has done nothing to boost sales of African farm produce, while African farmers are still struggling against import quotas and low world prices, thanks to heavy subsidies that Washington and European governments pay to their farmers.

Critics say the latest ITC report only confirms that trend.

According to the report, 2002's drop in US exports to sub-Saharan Africa was primarily caused by cuts in exports of transportation equipment to South Africa and Kenya; the decline in US imports from the area resulted largely from a fall in imports of energy-related products, including a 17.9% decrease from Nigeria.

The decline in energy products comes as Washington is trying to diversify its energy sources, which includes replacing Middle East oil with African exports. - Sapa-IPS