TRALAC - Trade Law Centre

Africa: Trade talk - 'Not on my watch'

Friday, 12 June 2009

Source: The Whitaker Group

As the Obama Administration develops its Africa and trade policies, it is critical that it resists pressure from some development advocates and members of Congress to support legislation that extends the duty-free access to the US market enjoyed by African nations under the African Growth and Opportunity Act (AGOA) to all Least Developed Countries (LDCs).

While the sentiment is commendable, the result of such a broad-brush trade policy would be disastrous for Africa, particularly those countries that have used AGOA to grow their apparel and textile industries and, in so doing, created more than 300,000 jobs across the continent.

Last year, the 48 countries of sub-Saharan Africa represented only 1.2% of the $95 billion US apparel import market. Bangladesh alone captured 3.8% – more than triple the trade of AGOA's African beneficiary countries combined - and Cambodia accounted for 2.5% of the US apparel market, exporting over twice as much as African exports.

Yes, Bangladesh and Cambodia both suffer the scourge of poverty, but the difference is one of economic trajectory and divergence. Africa continues to be the only region of the world getting poorer and not converging with developed economies. Africa has the dubious distinction of being the only region of the world getting poorer. AGOA offers hope and has demonstrated progress in reversing these trends. Apparel has been the entry point into manufacturing for all countries including the US and China. To cut Africa off as it is entering this labor-intensive sector is homicidal for the region.

Extending AGOA benefits to other LDCs, like Bangladesh and Cambodia, would almost certainly be the death knell for Africa's very promising, but still nascent, apparel sector. Already, the continent's clothing exporters, faced with the global recession as well as super-competitive, low wage producers in Asia, are under severe stress.

Last year, apparel exports from Africa to the US dropped by over 10%, a decline over three times greater than the contraction in the overall US textile and apparel market. When you consider countries like Bangladesh, whose apparel and textile exports in 2008 grew by 11% to about $3.5 billion; or Cambodia, which exported over $2 billion in apparel and textiles to the US; it is easy to understand the necessity of maintaining AGOA's special benefits for African countries.

As Paul Collier points out in his "Bottom Billion" book, Bangladesh and Cambodia have created hypercompetitive garment industries and trade preferences are clearly not needed for the "hypercompetitive" but for the most vulnerable and fragile. If one believes trade policies should have a developmental impact, as I do, then trade preferences have to be targeted.

When Asia broke into these markets it did not have to compete with established low-cost producers, because it was the first on the block," Collier writes. "For [Africa] to break into these markets they need temporary protection from Asia."

With a new Administration and a new Congress in Washington, it is a good time to open up the discussion of how the US can develop a trade policy that serves our both economic and development objectives. It is critical that we don't succumb to superficial, feel-good policies that could have devastating consequences for the very people we mean to help.

AGOA was enacted by President Bill Clinton and enhanced three times under President Bush with consistently strong bi-partisan support. This key pillar of US policy towards Africa—which was endorsed by all 48 sub-Saharan African countries and the Africa Union must not be diluted or destroyed under the Administration of America's first African-American President.

I have always believed in and worked for more certainty and clarity in our trade preferences programs. Certainly there is room for improvement in our trade relationship with all LDCs, but as Washington's retail interests try to dilute AGOA's apparel benefits under the banner of lifting all of the world's poor to prosperity – and in the process sacrificing 300,000 African workers and their families – I hope that President Obama will simply reply: "Not on my watch."