The Office of the U.S. Trade Representative and the State Department are reviewing Madagascar’s eligibility as an African Growth and Opportunity Act (AGOA) beneficiary country after its army forced President Marc Ravalomanana out of office and installed his political rival in office last March.

USTR and State will likely require Madagascar to hold democratic elections this year in order to remain on the list of AGOA beneficiary countries. If those elections do not take place, Madagascar’s AGOA benefits will be suspended for at least one year starting on Jan. 1, sources this week said.

These sources pointed out that AGOA countries that experience an undemocratic change of government typically have their AGOA benefits suspended the following year. AGOA has rule of law requirements with which African countries must comply in order to benefit from unilateral trade preferences. Included in those requirements are regular democratic elections, sources said.

U.S. Trade Representative Ron Kirk, however, was more cautious on the topic of suspending preferences for Madagascar in a July 31 press conference. “You know, the political instability there and the coup has put us in a very challenged situation, and we are going to review that carefully,” he said. “No decision has been made at this point.”

Ravalomanana and Andry Rajoelina, the transitional head of state of Madagascar who dissolved the country’s parliament after the military-backed coup in March, were expected to meet in Mozambique this week to discuss the possibility of holding an election before the end of the year, sources said.

However, the impact of the potential suspension of AGOA benefits is already impacting businesses on the Indian Ocean island country, sources said.

Typically, orders for apparel exports are placed four to six months in advance, and with Madagascar’s AGOA preferences in question, many of those orders have already slowed down, one source said.

“Pretty soon the orders that are already in the pipeline will be done and they’ll have to start closing factories and laying off workers,” this source said.

Madagascar exported roughly $280 million in textiles and apparel last year, nearly all of which qualified for duty-free entry under AGOA. Of that, the country exported duty-free to the U.S. about $123 million in cotton trousers and about $58 million in knit shirts. If Madagascar loses it AGOA beneficiary status it will have to pay a 16 percent duty on cotton trousers and a 20 percent duty on knit shirts, according to a private sector source.

Officials within the transitional government have said they were willing to hold elections before the end of 2010 if those elections could be organized by a neutral government.

“The transitional authority is afraid that if they organize the elections, that [Ravalomanana’s] party will claim it’s an unfair election and they’ll still be in this boat,” one source said. “But, if they can get somebody neutral to come in and organize the elections, then it will not be as disputable.”

The source said that Ravalomanana wants to be reinstated as president and may not agree to holding the elections if he believes he will not win.

Several African countries have had their AGOA benefits suspended over the past decade due to political instability caused by coups.

On Jan. 1, 2009 President Bush suspended AGOA benefits for Mauritania in response to a military coup in August 2008. In 2004, Bush suspended AGOA benefits for the Central African Republic and Eritrea for coups. In 2005, Bush suspended AGOA benefits for Cote d’Ivoire following years of political unrest.

Sources said that Kenya, the host country of this week’s AGOA Forum (see related story), nearly had its AGOA benefits suspended this year, following a disputed election in December 2007 that was followed by months of political unrest and violence.

Kenya remained a beneficiary, however, after political leaders formed a unity government to run the country.

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)