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AGOA to be Expanded?

Published date:
Friday, 21 October 2005

While the African Growth and Opportunity Act (AGOA) has been successful in spurring economic growth in sub-Saharan Africa by expanding exports to the U.S. market -- much remains to be done to broaden the historic legislation, especially in the area of small businesses, lawmakers say.

Republican Congressman Chris Smith, the chairman of the House International Relations Subcommittee on Africa, Global Human Rights and International Operations and Donald Payne, the subcommittee's ranking Democrat each made that point -- along with Republican Congressman Ed Royce, the subcommittee's vice-chairman -- at an October 20 hearing assessing the effectiveness of the AGOA legislation.

"Since being signed into law in May 2000," Smith told the subcommittee "the African Growth and Opportunity Act, or AGOA, has increased U.S.-Africa trade to more than $35 billion last year and created excitement on both sides of the Atlantic Ocean among businesspeople seeking to increase their income through trade."

Smith praised AGOA as perhaps the most significant United States initiative on Africa in history, but he lamented that about 80 percent of trade under AGOA remains in extractive industries, such as oil, and does not involve small and medium-sized businesspeople to the extent originally intended by AGOA's authors.

"Despite the signing by President Bush of the AGOA Acceleration Act last year [July 2004] and the spending of $181 million in 2004 on trade capacity building programs," he warned, "small and medium-sized businesses in Africa and America have not been able to take advantage of AGOA's benefits as hoped.

"Even after much discussion of this issue, there remain too many African and American businesspeople unable to successfully build the business ties necessary for U.S.-Africa trade to be more broadly meaningful for African economies," he said.

For that reason, he added, only a relatively small number of the nearly 6,500 duty-free items under AGOA are being traded by African and American small and medium-sized businesses, including hundreds of agricultural products that African farmers could be selling to the United States duty-free.

Smith acknowledged "AGOA has definitely produced some positive results due to the diligent support of the Administration and many members of Congress. Nevertheless," he said, "many of the goals they set have not been met, and after five years, it is time to make some course corrections so that AGOA fully lives up to its promise."

Congressman Payne, the subcommittee's ranking Democrat, said AGOA "must be expanded to maximize economic activities among a variety of sectors and to ensure a real and measurable impact on the economy and well-being of sub-Saharan Africa."

Quoting figures from the U.S. Commerce Department, Payne said trade between the United States and sub-Saharan Africa is "highly concentrated" with a small number of African countries accounting for an overwhelming share of both imports and exports.

For that reason, he said, "We need to broaden" the group of countries that benefit from AGOA. "Nigeria, South Africa, Angola and Gabon together claim 81.4 percent of U.S. imports from Africa in 2004," mostly in the energy sector, he added.

"We have heard from various African leaders and they are ready for a new and more inclusive AGOA," he declared.

Payne called on everyone to look for ways for AGOA to "deepen its coverage" of Africa's agricultural sector, which is where about 80 percent of all sub-Saharan Africans earn their livelihoods. "Increasing investment and incentives to African agriculture through AGOA would be the surest way of fighting poverty and hunger, especially among the poorest and neediest people on the continent," he said.

Payne cited farm subsidies paid by developed nations as the biggest obstacle to Africa's enhanced agricultural trade. "The U.S., EU and Japan combined spends more than $360 billion a year on subsidies to farmers or about one billion dollars a day" he said, and for that reason, "We must end these farm subsidies."

Subcommittee Vice Chairman Royce, a co-author of AGOA, called the act "a proven success" and "one of the most successful Africa policy initiatives ever."

Since AGOA's inception five years ago, Royce said he has witnessed a host of African business successes firsthand on his many visits to the continent.

"Over the years, I have visited manufacturing sites where AGOA is working, and seen job creation first-hand. And, as anyone who knows Africa is aware; one formal sector job often supports an extended family. Formal sector jobs also support many informal sector jobs. In sum, AGOA has benefited millions of Africans. Without it, there would be far fewer jobs in several very poor African countries, period. They would be in China and elsewhere, especially the apparel jobs," Royce said.

By promoting economic and political reform -- reforms that are happening in several African countries -- he said AGOA also aids U.S. businesses.

U.S. exports to sub-Saharan Africa increased 25 percent from 2003 to 2004, and include agricultural goods, machinery, and transportation equipment. "More trade means higher economic growth for Africa, which leads to better infrastructure, and health and education services," he added.

Additionally, he said, "AGOA has given many Africans a psychological boost. It has shown that Africa, traditionally only a raw materials exporter, can play in the highly competitive global apparel industry, and in some light manufacturing sectors. This is no small feat given intense global competition, especially from China."

Royce said that AGOA has spurred the U.S.-Africa trade agenda, leading to a new trade dialogue, including annual forums, with a goal to better integrate Africa into the world economy.

"Encouraged by AGOA, many African countries are now active players in global trade negotiations. Some have not appreciated Africa's new assertiveness, as our cotton subsidies have been rightly challenged. Many of us believe that Africa's empowerment on trade has been a very positive development, largely spurred by AGOA," he said.

Looking to the future, Royce said, "Of course, AGOA can be strengthened."

AGOA, enacted May 18, 2000, as Title I of The Trade and Development Act of 2000, offers tangible incentives for African countries to continue their efforts to open their economies and build free markets. The original act has been amended twice.

Regularly updated trade statistics on include (Click to follow the links):

  • All Countries’ AGOA and GSP Trade Overview

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.

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