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You are here: Home/News/Article/Trade talk: Debunking myths about AGOA

Trade talk: Debunking myths about AGOA

Published date:
Saturday, 05 September 2009

In the aftermath of the annual AGOA Forum held last month in Nairobi, there has been a chorus of pessimists placing AGOA in the Hall of Shame of failed policy initiatives. They could not be more wrong.

In fact, AGOA is among the most successful US policies towards Africa—especially in terms of a return-on-investment ratio. According to the OECD, over the past 50 years the US has spent well over $325 billion dollars in foreign aid to Africa – yet Africa remains the only region of the world getting poorer. The returns on investments from US aid have been dismal.

AGOA represents a modest investment costing US taxpayers a mere $18 million dollars per year—with a price tag of less than $300 million for the life of the program, which expires in 2016. The return on the AGOA investment has been astounding—more than 300,000 jobs created in Africa and more than $360 billion dollars in African exports to the US in 9 years. Behind these exports are African farmers, families and opportunities.

The naysayers are quick to point out that over 90% of AGOA's exports is oil. Of course oil is among America's largest imports from any oil-exporting region of the world, and AGOA was never intended to replace oil with tee shirts and cut flowers. This is a completely unrealistic litmus test for AGOA's success. Do those complaining about AGOA's oil exports really believe that there is a way for manufactured products from the world's poorest region to replace oil in less than a decade?

We should not apologize that AGOA is helping to address America's energy security needs by lessening our dependence on oil from the Middle East. However, as a development policy tool for Africa, AGOA is also working – non-oil exports have increased by 340% percent and, before last years' global economic crash, non-oil AGOA imports grew by an impressive 51% from 2007 to $5.1 billion in 2008.

How many other development initiatives have produced a return of over $5 billion with an investment of $18 million? AGOA is working for Africa and America. On the African side, perhaps AGOA should be viewed as a $5 billion dollar initiative based on its non-oil returns rather than a $66 billion dollar initiative based largely on oil. Five billion dollars annually and hundreds of thousands of new jobs are not insignificant for Africa.

While there are certainly countries that have not yet been able to benefit significantly from AGOA, others have seen transformative gains. Lesotho, in pre-AGOA days, had no manufacturing sector to speak of, now it has become the leading sub-Saharan African exporter of apparel to the US. Kenya has become one of the top exporters of cut flowers to the US. Mauritius is a leader in the prepared seafood sector and also exports apparel, sunglasses and jewelry to the US. South Africa, which exports 3-series BMW and C-class Mercedes Benz cars to the US under AGOA, is now the seventh largest manufacturer of cars bound for the US, ahead of such well-known car-exporting countries as Sweden, Italy and France.

This is more than encouraging especially when you consider that AGOA has been in effect for only nine years. It took South Korea two decades to become an "Asian tiger" and China began its upward trajectory more than 25 years ago. Many African nations are now working hard to put into place the same building blocks that lie at the foundation of South Korea's success: improving energy and infrastructure to support labor-intensive manufacturing sectors, investing in tertiary and skills education and reforming the business environment.

AGOA is a tool that has more than adequately demonstrated its potential to support transformative change on the continent. It is critical, however, that we not only give it time to realize its full potential, but that we continually work to make it bigger, better and smarter.

Rosa Whitaker is President and CEO of The Whitaker Group. She was a hands-on architect of the African Growth and Opportunity Act and the first ever Assistant US Trade Representative for Africa.

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