TRALAC - Trade Law Centre

AGOA a Success in 2004 - U.S.

Monday, 04 July 2005

Source: The Monitor (Kampala)

The African Growth and Opportunity Act (Agoa) was a "measurable success" in 2004, an annual report prepared by the United States government has said.

The report titled: 2005 Comprehensive Report on US Trade and Investment Policy Toward Sub-Saharan Africa and Implementation of AGOA (Note: this report can be downloaded from AGOA.info's archives here), indicates that AGOA exports to US were about $26.6 billion, an increase of 88 percent in 2003.

Agoa exports from Uganda worth $2.6 million (Shs4.8 billion) in the first half of 2004 greatly exceeded the country's total Agoa sales to the US for all of 2003.

Overall, the country's 2004 exports under Agoa and its GSP provisions were valued at $5.1 million, representing 20 percent of total Ugandan exports to the US.

At least 37 African countries, including Uganda are eligible for the programme launched in 2001.

Agoa was intended to spur development in African countries by integrating their economies more fully into the global economy especially the US market.

Its object was to make Sub Saharan African countries more attractive and more cost effective sources for purchasing raw materials and finished products.

According to the report, the US remains Africa's largest single country market, purchasing 24.3 percent of the region's exports in 2003.

Followed by textile and apparel, petroleum products continued to dominate Agoa exports to the US with an 87 percent share. Other products were worth $3.5 billion, growing by about 22 percent in 2003.

Agoa textile and apparel exports increased by 35 percent to $1.6 billion and Agoa minerals and metals imports increased 76 percent to $728.1 million.

Although Uganda qualified for the 'Wearing Apparel' provisions on October 23, 2001, by year-end 2002 it had not yet exported any goods under this rule. Total Agoa-eligible exports were still insignificant as of full year 2002 trade data.

Uganda is classified as a 'Lesser Developed Country', providing it with a limited opportunity of utilising non-qualifying third country textile inputs in the manufacture of Agoa-eligible apparel exports, which has now been extended until September 30, 2007.

The Bugolobi-based textile firm, Apparel Tri-Star has been Uganda's main flag bearer in the Agoa market. It is sourcing its raw materials and fabric from Sri Lanka because of concerns about the quality of local cotton materials for use in apparel production.

Apart from apparel, Uganda has also reaped some earnings from processed Agoa-inspired coffee exports.

Under Agoa, Star Coffee Ltd is processing coffee before exporting it to the US -the first time the country has ever added value to its coffee exports. Consequently, total Agoa exports rose to $1.5 million in 2003, up from a mere $32,000 in 2002.

Agoa provides countries, such as Uganda with duty-free and quota free access to hundreds of exports products into the US market.

"As a country, we are pushing for better policy framework to enable us maximise benefits accruing from Agoa," Mr Onegi Obel, the Presidential Advisor on Agoa, told Daily Monitor recently.

In a June 10 message on Voice of America to the African people, US President George Bush, said there was a growing consensus in both Africa and the US that open trade and international investment are the surest and fastest ways for Africa to progress.

"Our goal is improve the lives of the African people, and our partnership is yielding results. The economies of many African nations are growing," Bush said.

Additionally, Bush said Agoa nations are strengthening the rule of law, lowering trade barriers, combating corruption, protecting workers, and eliminating child labor.

According to the report, Uganda's economic growth has slowed in recent years. It said Uganda is at a crossroads and needs to launch a second wave of reforms to sustain high economic growth and poverty reduction.

Compared to other Agoa countries, Uganda's benefits from Agoa are still a far cry. South Africa, Kenya and Lesotho have made three figure earnings from their Agoa exports.

South Africa, Africa's largest and most diversified economy, earned a mind boggling $1.7 billion from Agoa in 2003, an increase of 25 percent in 2002.

Lesotho's 2004 exports under Agoa and its GSP provisions were valued at nearly $448 million, up from $ 373 in 2003.

Kenya's 2004 exports under Agoa and its GSP provisions - mostly apparel, but also including cut flowers, nuts and light manufactures - were valued at $287 million, up from $184 million in 2003.

Comparatively, Uganda's 2004 exports under Agoa and its GSP provisions were valued at a meager $5.1 million. Tri-Star Apparels employs less than 2,000 people, while Nyanza Textiles and Lira Spinning Mill are yet to start production.

To realize more benefits of Agoa, the report recommends that eligible sub-Saharan African countries would need to diversify their exports, develop intra-regional trade linkages to attain economies of scale, and enhance external competitiveness.