TRALAC - Trade Law Centre

AGOA Enhancing Africa's Economy But More Can Be Done

The historic African Growth and Opportunity Act (AGOA) is helping to stimulate economic growth and investment in sub-Saharan Africa, but it is "not succeeding enough," said Florizelle Liser, assistant U.S. trade representative for Africa.

AGOA is a U.S. law that provides duty-free access to wide range of some 6,400 products - including textiles - into the U.S. market for African nations willing to reform their economies along free-market lines. The landmark trade legislation - the first of its kind with Africa - was passed by Congress in 2000 and since has been amended and renewed. (See African Growth and Opportunity Act.)

Addressing the Leon H. Sullivan VII Summit in Abuja July 17, Liser said it is important to build on the law's success by looking at the "supply-side constraints" that can be found on the Africa side of the equation. "They are the things that governments are doing or not doing that do not encourage trade," she said.

"Africa, as a continent, trades the least among itself of all the continents," she said. "If Africans are not exporting their products to each other, the chances are that those products that could be more competitive are not rising to the top and preparing for the global competition" that awaits Africa in the international marketplace.

"Before an African country can get good at exporting prawns to Europe and to Asia, it needs to be exporting those prawns to its neighbors in Africa. That is where your barriers to each other's trade are important," she said.

Important to build trade capacity, transport infrastructure

Liser said there are "a number of areas that need to be looked at" with regard to supply-side constraints, like the high cost of energy and inefficient transportation due to poor roads, rail, ports and aviation. For that reason, she called trade-capacity building or aid for trade "really, really critical."

"The question of what is holding Africa back - Is it government policies outside of Africa that are barriers to their exports ... or is it something that is happening domestically within Africa that has to do with policies that are in place that impede business and trade in one way or another? -- we can look at it as a little bit of both."

Thanks to AGOA, she said, Africans now have access to the U.S. market. "Something like 98 percent of the products that Africa sends to the United States comes in duty-free, zero duty, no tariffs," she said.

Despite such penetration in the United States, she said, market access is still very important for African products going to the fastest-growing economies in the world: India, China and Brazil.

"You have duty-free access to the U.S. market, a $12 trillion market. But we still need to work on getting you duty-free access to all the other markets, including those in Asia, Latin America - and this is where the Doha round of trade negations comes in," she said, referring to the World Trade Organization talks aimed at creating market access and reform in agriculture and expanding opportunities for manufactured goods and services. (See USA and the WTO.)

"But even with considerable market access to the U.S.," Liser added, "we are not seeing enough African products coming in."

Africa's share of world trade currently stands at about 1.5 percent of all world trade, the assistant trade representative said. "That is all that Africa has," and that percentage includes oil, she added.

"If Africa could increase its share of world trade by 1 more percent, this would generate about $70 billion of new revenue for Africa and that ... is about three times all of the aid that Africa gets," she told the delegates. Such a change, she said, could have a huge impact on Africa's economic growth and development.

Liser said it is important for nongovernmental organizations (NGOs), governments and business people to think of ways to increase Africa's share of trade, whether its exports go to the United States or other nations.

Liser appeared on a panel that also included G.M. Sasore, from the Nigerian Production Export Council, and Nazir Karamagi, minister of trade from Tanzania. Both praised AGOA for helping to establish a closer U.S.-Africa trade and economic partnership.

The Leon H. Sullivan VII Summit runs July 17-20 and has as its theme "Africa: A Continent of Opportunities - Building Partnerships for Success."