TRALAC - Trade Law Centre

Collier warns against expanding AGOA-like trade preferences

Monday, 03 May 2010

Source: Ghana Web

Eminent development economist Dr. Paul Collier, Director of the Center for the Study of African Economies at Oxford University, warned on Monday that expanding the trade preferences currently reserved for eligible African nations by the African Growth and Opportunity Act (AGOA) to all Least Developed Countries (LDCs) would be disastrous for African economic development.

Speaking at the Leaders Forum on the 10-Year Anniversary of AGOA in Washington , DC , Dr. Collier described how proposed legislation in the US Congress to extend duty-free and quota-free access to the US market to big apparel exporting LDCs like Bangladesh and Cambodia would destroy Africa ’s much smaller apparel manufacturing sector.

Trade preferences are the “pump priming mechanisms” for the creation of the manufacturing clusters of mutually-supporting industries necessary for building a labor-intensive and globally-competitive sector, he said, adding that apparel sectors in countries like Bangladesh, Cambodia and China were already benefiting

from such clustering and had achieved critical economies of scale, but that the African apparel sector had not yet reached that threshold.

“We know where trade preferences should go, and where they should be kept out because if we let in one huge manufacturer, it would cut out all the little manufacturers,” Dr. Collier said. “These large manufacturers must be kept out because they are not entrants into manufacturing. Bangladesh doesn’t need privileged

access. There are many ways to help Bangladesh because it is still poor, but trade preferences [to benefit its apparel sector] is not the way.” In 2008, the value of apparel exports to the US from all 48 sub-Saharan African

(SSA) countries combined was a little over $1 billion. Bangladesh alone sold $3.5 billion worth of apparel to the US, and Cambodia $2 billion. With the onset of the global economic downturn, African apparel exports to the US dropped by over 10 percent in 2008, while imports from Bangladesh grew more than 11 percent.

“One reason [trade preference reform] is on the political agenda is because there will be big money for companies importing from Bangladesh,” Dr. Collier said. US retailers stand to gain about a $1 billion in recovered duties if the US Congress enacts trade preference reform in its present form.

He added that rather than diluting AGOA, now was the time to scale it up. “There is a real opportunity for AGOA to go global. If we had a Super AGOA that included Europe and Japan, it would make life so much easier for Africa,” he said.

Dr. Collier also noted that climate change was already adversely affecting African agriculture and it was critical for Africa to break into light manufacturing where employment can be scaled up rapidly.

The Leaders Forum was co-hosted by the AGOA Action Committee and a coalition of organizations that support AGOA. It was organized by The Whitaker Group, a premier US-based consultancy that facilitates trade and investment in Africa.