TRALAC - Trade Law Centre

AGOA success hinges on its permanency

Sunday, 09 August 2009

Source: The East African

The African Growth and Opportunity Act should be amended to make it a permanent trade programme if it is to achieve its purpose of strengthening trade between sub-Saharan Africa and the United States.

This is one in a raft of recommendations that traders attending the 8th Agoa Forum in Nairobi sent to the US.

The suggestion was backed by the African Union Deputy Chairperson, Erastus Mwencha.

Mr Mwencha, who is also a former secretary-general of Comesa, said the Act should be investment-friendly and predictable to encourage investors to take advantage of the opportunities it presents.

“This element is lacking; that is an area that we sould try to reinforce in Agoa,” Mr Mwencha said.

“Many investors will always be hesitant to participate in the Agoa programmes when they don’t know for how long they will be eligible.”

This, he added, was particularly true in situations where there is a breakdown in dialogue between the US and a member state, where the business community tends to bear the brunt of the standoff.

The pact, which is part of the US legislation and is meant to liberalise market access to the country, initially covered the eight-year period from October 2000 to September 2008.

Amendments signed into law by former president George W. Bush in July 2004 however extended it to 2015.

“The US government can also include in the legislation some investment provisions that encourage US investors to look at Africa,” Mr Mwencha added, pointing out this would help dispel the image of Africa as a politically unstable, poor, conflict-wracked and disease-stricken continent.

At the official opening of the 8th Agoa Forum, proposals were also fronted for the linking of Agoa to other global trade initiatives such as the World Trade Organisation and the G20 and G8 forums, which would go a long way to integrate Africa into the global economy.

Mr Mwencha also urged the United States to assist Africa to diversify its export products, which would, in turn, enable the continent to further penetrate the American market.

Efforts to diversify and add value to eligible African countries’ products have borne fruit, with the 2008 figures showing US imports under Agoa standing at $66.3 billion, approximately 30 per cent higher than in 2007.

The primary goal of Agoa — which was signed into law as part of the larger Trade and Development Act in 2000 — was to help increase both the volume and diversity of US trade with sub-Saharan Africa.

“Agoa also promotes economic co-operation and trade among the countries of sub-Saharan Africa by encouraging intra-regional trade among beneficiary countries,” Assistant US Trade Representative Florizelle Liser said.

Total US trade with sub-Saharan Africa in 2002 under Agoa totalled $23.9 billion and has risen each year since, according to US government reports.

However, trade with Africa dropped this year as a result of the global economic crisis and declining oil and commodity prices.

Many African nations are facing significant challenges in their efforts to increase trade.

Supply-side constraints, too, have affected the range and quality of products being traded, affecting Africa’s overall competitiveness.

Economists believe that striking a critical balance between trade volumes and diversity of exports is essential to long-term regional economic development and growth.

Exports from the continent are concentrated in primary commodities such as petroleum, minerals, cocoa and coffee.

There is little of the manufacturing engine in sub-Saharan Africa that has fuelled economic growth and reduced poverty in other regions of the world.

Agriculture, which is regarded as Africa’s strong suit, has not been a positive contributor to its export trade.

In 2005, the region switched from being a net exporter to a net importer of farm products.

Trade analysts believe that export diversification and further processing of agriculture products into higher-value exports could help improve food security in the region by addressing issues of availability and stability of food supply.

Total US trade with sub-Saharan Africa, which includes both exports and imports, rose 28 per cent in 2008 from the year before as both exports and imports grew, according to a US-Africa trade profile published by the US Commerce Department’s International Trade Administration (ITA).

In 2008, US exports totalled $18.6 billion, compared with $14.4 billion in 2007, and imports in 2008 reached $86.1 billion, compared with $67.4 billion in 2007, the ITA report said.