“Open trade and international investment are the surest and fastest ways for Africa to make progress,” President Bush said when he signed an extension to the African Growth and Opportunities Act (AGOA) in 2004. Originally signed into law in 2000, AGOA removes US quotas and duties for thousands of products coming from some 40 sub-Saharan African countries.

AGOA has led to an overall increase of 8% in non-oil exports to the US, according to recent research. And Madagascar has been one of the program’s clearest success stories. The island nation’s exports tripled in the first three years of the program, led by strong growth in the apparel and textile sector. This sector remains vibrant in spite of the huge encroachments by China on African textile competitiveness since 2005, as well as the more recent shrinkage in global demand: textiles still account for 60% of Madagascar’s total exports, and 100,000 people are employed in the formal sector alone.

So why is the US now threatening to revoke AGOA in Madagascar?

The US government is using AGOA as a political lever to force President Andry Rajoelina’s questionable government to hold elections within the year. The textile exporters association says that the loss of AGOA would lead to downsizing and possibly even the collapse of the entire industry. Tens of thousands of jobs, and tens of millions of dollars of investment stand to be lost.

A letter that Aid Watch obtained addressed to the association of Malagasy textile exporters from the US trade rep warns ominously: “The recent events in Madagascar will be taken into consideration as the U.S. Government begins its review of Madagascar’s eligibility for AGOA in the coming months. As you know, respect for the rule of law is a condition of eligibility outlined in the AGOA legislation.”

The reasoning seems to be that political instability and violations of democratic procedures hurt the Malagasy people, so the natural US government response is to—hurt them more by taking away their jobs?

But a look at the AGOA eligibility requirements shows there is some room for interpretation. There must be, if non-shining examples of democracy like the DRC, Guinea, and Guinea Bissau get to stay on the list while Madagascar is kicked off. It turns out that the AGOA FAQ page contains a disclaimer: “Progress in each area is not a requirement for AGOA eligibility” [emphasis added].

So the USTR is not required to take Madagascar off the AGOA list, and it should not. Attorney and global regulations enforcement expert Jason Poblete said via email that “a country-wide sanctions regime is not likely warranted” and recommended a more targeted approach, such as adding the coup leaders to the list of "specially designated nationals" restricted from doing business with the US.

By William Easterly and Laura Freschi

Sourced from RGE.

Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Madagascar's bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.

Other regularly updated trade statistics on AGOA.info include: (click each link to view)