TRALAC - Trade Law Centre

Kenya: Let Locals Reap AGOA Gains

Monday, 12 April 2004

Source: New Democrats Online

With strong leadership from Rep. Charles Rangel (D-NY), Sen. Richard Lugar (R-IN) and President Bill Clinton, Congress took a big step toward unlocking Africa's economic potential four years ago, with the enactment of the African Growth and Opportunity Act (AGOA). At the time, Congressman Rangel predicted that it would "represent substantial trade benefits for Africa ... investment in Africa, less poverty, higher disposable incomes, and the ability to become a full partner in the global economy." By 2004, AGOA had fulfilled much of its hopes. But one of its key features is set to expire on September 30 and Congress needs to act soon to renew it.

Even at a time when there is widespread worry about a deteriorating U.S. position in the global market-place, there is widespread agreement that expanded trade and investment with Africa is strongly in our national interest, and crucial to prospects for political and economic freedom on that continent. AGOA has helped Africa's manufactured exports nearly double since 1999, and promoted about $20 million in agricultural trade expansion as well. While relatively industrialized South Africa and its neighbors were able to use AGOA benefits very quickly, success stories are now emerging in smaller and lower-income states like Uganda, Ghana, and Mozambique.

The Progressive Policy Institute recently published a small table illustrating the startling changes AGOA has brought so far.

This means thousands of skilled South African workers gained a chance to successfully compete against factories in Sweden and Korea. It means rural Kenyans found higher-paying jobs, and young Ghanaian women won a chance to support themselves. It is good news and a bipartisan success, at a time when America has all too little good news and next to no bipartisan spirit.

But the work is not done. And AGOA supporters are up against an urgent deadline if it is to keep going.

Most of AGOA's success so far is in clothing. This is a low-tech, labor-intensive industry where tariff preferences can bring fast results. But most of those results come from the fact that AGOA lets very low-income African countries obtain duty-free treatment for clothes made from 'third-country' fabrics bought around the world. Such countries do not yet have the infrastructure to support fabric production, which is a capital- and technology-intensive industry. The "third-country" provision of AGOA has made it possible for West African states like Ghana and Senegal, and low-income land-locked countries like Uganda and Malawi, to turn trade preferences into investments and jobs.

But the third-country fabric provision is due to expire in September. If that happens, Africans will have to use locally produced fabric or import it from across the Atlantic. This may work in relatively industrialized South Africa and among its immediate neighbors, which can take advantage of local fabric production. But it won't work in small, land-locked states like Uganda or Rwanda. Unless the provision is renewed soon, 20 or 30 countries could find the program's benefits vanish just as they begin to appear.

But there is another key lesson of AGOA that should be addressed at the same time: the need for action to expand Africa's ability to export agricultural products. Africa is the world's most rural continent, with 450 million of its 700 million people living on farms. Yet the continent has barely begun to achieve its potential as a major global producer of food. African sales of fresh fruit and vegetables to the United States, for example, totaled $7 million last winter -- a tiny fraction of the $120 million earned by Chile alone. The problem here is not really U.S. tariffs so much as the basic difficulty African farmers have in getting produce to ports and meeting strict health standards. Technical assistance to help African countries overcome these gaps in agricultural infrastructure could have an even greater impact than trade preferences.

Six months ago, an "AGOA III" coalition led by Congressman Rangel, joined by House Africa Subcommittee Chairman Rep. Ed Royce (R-CA) and Rep. Jim McDermott (D-WA), introduced an AGOA renewal proposal that would address both extension of the third-party fabric provision and the need for agricultural technical assistance. The administration and House Republican leaders initially reacted without much enthusiasm, but last week they seem to have gotten on board, with Ways and Means Committee Chairman Rep. Bill Thomas (R-CA) joining the group to introduce a somewhat less ambitious, but nonetheless very timely bill.

If passed, AGOA III will meet the clothing deadline by providing three more years of third-country fabric benefits, extend the broader tariff preferences for 10 years, and upgrade agricultural technical support programs for African farmers. It is the right thing to do and Congress should waste no time passing it. Providing Africa with growth and opportunity is one of the world's great economic, political, and human rights challenges. And here, as in so many areas, there is no substitute for U.S. leadership.