In 2000 when the Clinton Administration enacted the African Growth and Opportunities Act (AGOA) to enhance trade between Africa and the US, many thought it would end the economic and financial woes of sub-Saharan Africa.

However, that never happened; Africa is still in want. Africa, over the years, has had its growth and development dependent on other forces or nations, for which reason Africa went out for a tea party when the AGOA was enacted.

In fact, AGOA marked a fundamental shift in US policy towards Africa. For the first time, the US emphasised increased trade as a means of promoting economic development as much as the traditional forms of development assistance.

This year’s AGOA Forum is centred on the theme of realising the full potential of AGOA through expansion of trade and investment.

The Trade and Development Act of 2000, which created AGOA, mandated the annual Trade and Economic Co-operation Forum with eligible sub-Saharan nations to discuss expanding trade and investment relations between the US and sub-Saharan Africa.

The Act sought to increase trade by allowing qualifying sub-Saharan African (SSA) countries to export most products to the US duty-free. In order to qualify for AGOA benefits, countries must make progress towards improving the rule of law, human rights and respect for core labour standards, including addressing child labour issues.

Thirty-seven countries now qualify for AGOA benefits. And how has the score card looked like since the Act was passed nine years ago?

The eighth forum of AGOA, which took place in Nairobi, Kenya, last Tuesday, should provide the necessary answers to the performance of the act.

The forum, which is being attended by high profile officials, including the US Secretary of State, Hillary Clinton, is supposed to catapult trade in sub-Saharan Africa to the next level of enjoyment of preferential treatment of goods from the region to the US market.

In fact, AGOA called for the strengthening and expansion of the private sector in SSA, especially for women-owned businesses. But has that been the case? It also seeks to encourage increased trade and investment between the US and SSA.

The AGOA is aimed at reducing tariff and non-tariff barriers to exports to the US market while expanding US assistance to sub-Saharan Africa and also encourging regional integration efforts.

The Act, which aimed to boost trade with the world’s poorest continent, had not met its full potential. The nine-year-old law, due to expire in 2015, allows about 6,500 products from Africa to enter the US free of duties or quotas.

Performance

After nine years, AGOA’s results have fallen far below original expectations, especially in the textile industry where competition from non-African nations, after the lifting of a quota system, has stifled SSA countries’ ability to compete in the US market.

Oil shipments from six nations, Nigeria, Angola, the Republic of Congo, Equatorial Guinea, Chad and Gabon, account for 92 per cent of sales under the terms of AGOA. Trade between Africa and the outside world should not solely rely on oil exports.

The continent must be able to diversify its products and services. Textile imports to the US fell 10 per cent in 2008, while agricultural products declined 7.9 per cent. About three per cent of US merchandise imports come from SSA.

Strangely enough, African countries want to trade with the outside world, yet they find it very difficult to trade among themselves. The single biggest opportunity that African countries have right now is to open up trade with one another.

The market of the US is about 300 million people, while the African market is in the region of 700 million plus.

Last year, the 48 countries of SSA represented only 1.2 per cent of the $95 billion US apparel import market. Bangladesh alone captured 3.8 per cent, more than three times the trade of AGOA’s African beneficiary countries combined.

This tells you that Africa has not taken advantage of the AGOA to improve upon its textiles and garment industry.

Now, there is a serious campaign to extend AGOA to other least developed countries. If that goes through, Africa will be the loser, particularly for those countries that have used AGOA to grow their apparel and textile industries and created more than 300,000 jobs across the continent.

Extending AGOA benefits to other least developed countries like Bangladesh and Cambodia will almost certainly be the death knell for Africa’s very promising but still nascent apparel sector.

Last year, apparel exports from Africa to the US dropped by over 10 per cent, a decline which is over three times greater than the contraction in the overall US textile and apparel market.

When one considers countries such as Bangladesh, whose apparel and textile exports in 2008 grew by 11 per cent to about $3.5 billion, or Cambodia, which exported over $2 billion in apparel and textiles to the US, then it stands to reason that Africa is not a serious continent. The continent is more interested in food aid, grants and other handouts.

For how long can the continent depend on this?

Even trade among African countries is less than it is in any other region in the world. That makes it very difficult for Africa to compete effectively with the outside world.

Taking Ghana as an example, the country has not benefited much from the AGOA.

Bilateral trade between Ghana and the US was relatively well-balanced in recent years, although 2002 saw a sharp drop in exports to the US. Available records show that in 2002, exports from Ghana to the US amounted to $76 million, while imports were almost $200 million.

This resulted in the country recording a significant trade deficit with the US of $76 million.

Ghana's main export categories to the US consist of ‘forest products’, 'agricultural products', ‘energy-related products' and 'minerals and metals'.

Exports eligible under AGOA amounted to $34.8 million in 2002 ($43 million in 2001) and consisted mostly of 'energy-related' products.

In 2002, the country qualified for the 'Wearing Apparel' provisions. It is also classified as a 'Lesser Developed Country' in terms of AGOA, thus reaping the associated 'Rules of Origin' benefits which allow third-country textile inputs until September 30, 2004.

Although exports of 'textiles and garments' are insignificant vis-à-vis the country's other exports to the US, there are indications that AGOA eligibility will stimulate this sector in future.

What has happened to the President’s Special Initiative on garments and textiles? We made so much noise to such an extent that instead of developing the sector to generate employment, we rather supervised its demise.

At this time and age we are rather happy importing second-hand underwear and cloth and in another moment we turn round to complain of unemployment.

The eighth AGOA forum in Nairobi will come to naught if Africans themselves do not take control of their development agenda. As it has been echoed repeatedly, only Africans can unlock the potential of the continent.

Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Ghana'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)