TRALAC - Trade Law Centre

Africa and US Must Build On AGOA Foundation

Tuesday, 01 November 2005

Source: United States Department of State

Even though the African Growth and Opportunity Act (AGOA) has been successful in stimulating trade between the United States and sub-Saharan Africa, much remains to be done on both continents to further enhance trade and economic development, says Stephen Hayes, president of the Corporate Council on Africa (CCA).

In an October 27 interview with the Washington File, Hayes said that "AGOA has been very important and a very positive factor in U.S.-Africa relations," but he cautioned that "a lot of [the 37 AGOA-eligible] countries have not been able to benefit from AGOA as much as they had hoped."

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, to alter or clarify certain provisions and to extend its expiration date.

Hayes decried AGOA's emphasis on textiles, an emphasis that he said has left some of the countries that initially had great starts in textiles "highly vulnerable" following the recent expiration of the Multi-Fiber Agreement of 1974.

For that reason, he said, "a lot more emphasis needs to be put on other sectors, especially agriculture. Every country in Africa can produce agriculture," he stressed, while counseling the United States to make some adjustments in its own agricultural trade policies.

Hayes also cautioned: "AGOA cannot work as effectively as we would like until there is greater infrastructure development and more supporting mechanisms that will permit Africans to produce world-class in-demand products.

"There needs to be greater investment, particularly by U.S. companies, in Africa and particularly at the manufacturing and production level - to go beyond primary production" to more value-added production that generates greater income.

"The real money to be made in a country is to have value-added trade, where raw commodities like coffee, tea or fruits are not just grown but processed and packaged in the country of origin so they can be sold at a higher value," he said.

AGOA, MILLENIUM CHALLENGE ACCOUNT EFFECTIVE PILLARS OF U.S. POLICY

Hayes said that there are at least two effective pillars of U.S. policy in Africa: AGOA and the Millennium Challenge Account (MCA). "I think now we need to just continue to build on the foundation [laid by AGOA], with some new initiatives that build upon those pillars," he said.

Both AGOA and MCA, he said, "got it right" in how to encourage change in Africa, but he warned, "More is needed." He called AGOA "a good platform" for an even better U.S.-Africa relationship.

To bring that into existence, he said, "we should stop tinkering with AGOA. It's been good. It's been great in some ways. We use it, but we have got to expand our involvement. From a political and economic point and not from a humanitarian point," he explained, "it is really in our most vital interest that Africa develop because â-oe it is an area that could have many great allies for the United States in the long term."

What must be looked for in the wake of the recent Group of Eight nations meeting in Gleneagles, Scotland, he said, is a way for those nations that made a commitment to Africa, along with the World Bank and the International Monetary Fund, to support greater infrastructure development on the continent as a whole. (See related article.)

Second, he cautioned, the private sector, particularly the U.S. private sector, is "not blameless." He said one of CCA's main jobs will be to send its staff members across the United States to convince U.S. companies that "Africa is a good investment."

MORE HELP NEEDED FOR SMALL BUSINESSES

Hayes said any enhancement of AGOA also must make it easier for small business to develop. "AGOA is great but not of use if they [small businesses] are not able to use it," he said. He praised the Bush administration for all it has done for Africa with regard to AGOA, but he said the reality of Africa is that "if we are going to make this work really as well as we would hope, we need to be doing a lot more."

Hayes said a further enhancement of trade between sub-Saharan Africa and the United States also is being impeded by a lack of financing. "Companies are not going to Africa because â-oe they do not have the financing they need," he warned.

"U.S. financial interests seldom fund U.S. companies for investments in Africa, and the banking system in Africa has traditionally never supported small business in the private sector and no micro-credit" to speak of, he said.

CCA, he said, has formed an agricultural task force bringing together key U.S. agricultural companies and a financing task force bringing together key financiers along with the U.S. Overseas Private Investment Corporation, the World Bank and the U.S. Export-Import Bank. Additionally, he said, CCA will continue to develop its energy task force and will announce the formation of a small business task force in the next few weeks, to link U.S. small business with African small business.

"I think unless Africa's small business sector is able to develop, then you are not going to develop a middle class in these countries and will still have a lot of instability. One of the keys to our own development here [in the United States] has been small business. Eighty-five percent of our work force is in small business. So how do you start to link some of those small businesses with African small business? That is what we are going to address."

Asked to assess the level of awareness of business opportunities in Africa by American business, Hayes said Africa is still "a tough sell."

Even though CCA's greatest area of growth has been small and medium-sized businesses, it is also the category with the highest turnover, he said. "They stay a year or two. They need contracts, but often lack the financing they need to develop business long-term. That must be corrected," he said.

The Corporate Council on Africa, established in 1993, works to strengthen and facilitate the commercial relationship between the United States and the African continent. CCA works closely with governments, multilateral groups and businesses to improve the African continent's trade and investment climate and to raise the profile of Africa in the U.S. business community.