TRALAC - Trade Law Centre

Benefits of AGOA to Africa Debated in US Congress

Tuesday, 01 November 2005

Source: The East African (Nairobi)

Five years after its enactment by the United States Congress, the African Growth and Opportunity Act (Agoa) is being praised for creating thousands of jobs in Kenya and other countries but is also being faulted for falling short of key goals envisioned by its sponsors.

The preferential trade programme was described last week by US Congressman Chris Smith as perhaps the most significant American initiative ever undertaken in regard to Africa. Smith and other speakers at an October 20 Agoa review organised by a US congressional subcommittee pointed to the enormous growth in trade triggered by the programme. US imports from eligible African countries have increased by 50 per cent since 2000.

"Agoa has improved living standards for many Africans in a way that few other US efforts have," said Congressman Ed Royce. "You would have to hold Agoa to very unrealistic standards to suggest anything but success."

Addressing the panel of lawmakers, Assistant US Trade Representative Florizelle Liser cited several Agoa "success stories," including Kenya. The country's exports to the US under Agoa now include fresh cut roses, nuts and essential oils, and apparel, Liser noted.

Some of those who were most effusive in their praise for Agoa also acknowledged shortcomings in the programme.

Congressman Smith, for example, pointed out that 80 per cent of the trade conducted under Agoa's duty-free terms involves oil and gas, almost all of which is imported to the United States from three countries: Nigeria, Angola and Gabon. Smith further noted that the rights of African workers are not being safeguarded through Agoa to the extent that had been intended.

Sharp criticisms in this regard were expressed by Robert Baugh, director of the largest US federation of trade unions.

The eligibility conditions for African countries set forth in the trade law are heavily weighted in favour of investors, but provide "only minimal protections for workers' rights, exacerbating unequal bargaining power and speeding up the race to the bottom," Baugh declared.

He cited Uganda as one of the countries that has little respect for workers' rights. "Ugandan labour law fails to meet minimum standards on freedom of association and the right to organise and bargain collectively as defined by the International Labour Organisation," Baugh said.

The trade union leader went further than any other speaker at the review session in criticising Agoa's record.

While exports from Africa have grown sharply under Agoa, this increased trade has failed to translate into robust growth, decent jobs, and sustainable development for the region," Baugh said. "Meanwhile, widespread unemployment, high poverty rates, low wages, and violations of workers' rights continue to plague the region."

Other analysts echoed concerns Baugh also voiced in regard to the recent slump in Africa's apparel exports to the US, which had initially boomed as a result of Agoa's duty-free provisions.

A recent study by the International Labour Organisation found that US apparel imports from Agoa-eligible countries fell 25 per cent during the first three months of this year. That drop coincides with a 19 per cent increase in China's apparel exports to the United States during the same period.

The ILO warns that most of the apparel-related benefits of Agoa may be erased as a result of the elimination of almost all clothing quotas at the start of 2005. "Many Asian companies, which had invested in Africa in order to take advantage of Agoa, seem to be pulling out," the study says.

Kenya, where Agoa has created 30,000 apparel-making jobs, has seen its exports to the United States in this sector fall from nearly $70 million in the first quarter of 2004 to about $60 million in the same period this year. Six investors operating in Kenyan export-processing zones have pulled out of the country in the past year, resulting in the loss of 6,000 jobs, according to the ILO. Two of the companies moved to Uganda, one went to Tanzania, and the others relocated to South Africa, Sri Lanka and China.