TRALAC - Trade Law Centre

US-Africa trade in the spotlight at annual AGOA Forum

Wednesday, 04 August 2010

Source: ICTSD (Geneva)

Ministers and trade officials from the United States and 38 African nations met in Washington this week to discuss US-Africa trade relations ten years after the US enacted the African Growth and Opportunity Act.

The meeting, the ninth of its kind since the act became law in May 2000, represents “the highest-level dialogue between the United States and the countries of sub-Saharan Africa,” US Trade Representative Ron Kirk said in his opening remarks on Monday.

AGOA builds on Washington’s Generalized System of Preferences for developing countries, eliminating US import duties on nearly all products (more than 6,400 tariff lines) exported from the 38 sub-Saharan African countries that currently qualify for the special privileges.

In the decade since the act was signed, US non-oil imports from sub-Saharan African countries have more than doubled, hitting US$3.4 billion in 2009, according to a statement from the Office of the USTR. Apparel, footwear, fruits and nuts, prepared vegetables and cut flowers are among the sectors that have benefited from the agreement, the statement said.

US-Africa trade took a major hit in 2009 as a result of the global economic crisis. US imports from countries in sub-Saharan Africa fell by 45.5 percent last year, largely due to a 47.3 percent slide in imports of crude oil. The fuel accounts for more than 90 percent of all US imports from AGOA countries, according to the International Trade Administration, a branch of the US Department of Commerce.

The economic crisis aside, Kirk acknowledged in his opening remarks that the implementation of AGOA has not been flawless.

“Some AGOA countries are not exporting under AGOA at all, and in some key AGOA sectors - like textiles and apparel - tough global competition is having an impact,” he said. He also noted that governance problems in African countries can act as significant barriers to trade. He called on the continent’s leaders to stand firm against corruption, to respect contracts, and to take measures to cut red tape.

But he stressed that AGOA’s first ten years have largely been a success story.

“There are some who may look at our trade with sub-Saharan Africa and see only petroleum or extractive minerals,” Kirk said, acknowledging a common complaint among some members of civil society. “But AGOA has brought about a greater diversity of products being exported to the US market duty-free - including non-oil, manufactured and processed goods.”

Addressing the room of high-level trade officials, Washington’s top trade envoy added that the United States will continue to work to secure a new global trade deal in the WTO’s Doha Round of trade talks. A Doha agreement, he said, is “the best way to ensure that trade’s promise as an engine for economic growth can be fully realised by sub-Saharan African nations.”

For the first time, this year’s two-day ministerial gathering in Washington is being followed by a subsequent forum aimed specifically at business leaders. The latter - which is taking place during the second half of this week in the central US state of Missouri - is meant to facilitate new interactions between US firms, African businesses and African leaders. The business forum will focus on agriculture, which was the only sector that saw a growth in trade between the US and AGOA countries last year.

US-Africa farm trade could get big boost if the US government got rid of its tariff rate quotes on African farm exports like sugar, tobacco and peanuts, the US Civil Society Coalition for African Trade and Investment said in a communiqué released in conjunction with a two-day NGO forum held in Washington last week.

The group said that such restrictions “limit trade in products that hold immediate trade potential for a number of countries.”

The group noted that AGOA has enabled a substantial expansion of US trade with sub-Saharan African countries, but added that the economic challenges facing the struggling region remain enormous. Seventeen African nations celebrate 50 years of independence this year, the group noted in its communiqué. “At independence, Africa’s share of global trade was three percent; it is now about two percent,” they said.

Under AGOA, the US provides eligible countries with substantial amounts of assistance to help African exporters make the most of the trade benefits to which they are entitled under the act. Total aid for fiscal year 2009 amounted to US$ 733 million. Much of that aid was been funnelled through four “regional competitiveness hubs” that have been established across the continent, the Office of the USTR said in a statement. The hubs are managed by US Agency for International Development.

AGOA allows the US president to determine on an annual basis which countries in sub-Saharan Africa should be allowed to benefit from AGOA’s trade preferences. In a presidential proclamation issued in December last year, Obama added Mauritius to the list of eligible countries and removed Guinea, Madagascar and Niger, citing those countries’ failure to make “continual progress” toward meeting the conditions of eligibility.

Those conditions cover a range of areas, including the rule of law, intellectual property protections, corruption, labour laws, poverty reduction strategies and human rights. Each of the three countries that Obama removed from the list in December had undergone either a constitutional crisis or a military coup during the previous year.