TRALAC - Trade Law Centre

African countries seek AGOA extension, export diversification, more US investment in 2011 Forum

Thursday, 09 June 2011

Source: Xinhuanet (China)

The 2011 African Growth and Opportunity Act (AGOA) forum takes place on Thursday and Friday in Lusaka, Zambia under the theme "Enhanced Trade Through Increased Competitiveness, Value addition and Deeper regional Integration."

The 2011 forum also marks the 10th year that government officials, business leaders and civil society from African countries and the United States will convene to promote trade, business and investment opportunities that sustain economic development in Africa.

AGOA, the centerpiece of the U.S. government's trade policy with sub-Saharan Africa, was signed into law on May 18, 2000. It offers tangible incentives for African countries to continue their efforts to open their economies and build free market.

AGOA provides trade preferences to 37 sub-Saharan African countries that are making progress in economic and political reforms.

Initially, AGOA was set to expire in 2008. In 2004, the U.S. Congress passed the AGOA Acceleration Act of 2004, extending the legislation to 2015.

Every year an AGOA forum is held which brings together government officials, business leaders, and civil society from the African countries and the United States.

At the 2011 forum, the sub-Saharan African countries are expected to call for the extension of AGOA, export diversification to the U.S. market, increased U.S. investment in the infrastructure sector, among others.

The sub-Saharan African countries have been calling for the extension of AGOA beyond 2015, with Zambia, South Africa and Kenya as the strongest advocates.

Felix Mutati, the Zambian minister of commerce, trade and industry, told the local media recently that the U.S. government should consider extending AGOA beyond 2015.

"We appreciate the trade preferences extended to us by our trading partners such as the U.S. extending AGOA preferences to sub-Saharan Africa. However, we appeal for the extension," he said.

The Business Unity South Africa (BUSA) has also recently urged extension of AGOA beyond 2015, saying it would greatly benefit the South African economy and further enhance trade relations with the United States.

"It is therefore essential for government and business to work together to seek for a long-term extension of AGOA," BUSA said.

The AGOA initiative provides for duty free export of more than 6,000 products from 37 sub-Saharan African countries that are eligible. However, the African countries have not been able to take full advantage of the process.

While South Africa is identified as being a "diverse user" of the framework created through AGOA, other African countries have not had much success in diversifying their exports to the U.S. market, with some barely utilizing only 0.25 percent of the total product lines offered.

Trade data showed that some sub-Saharan African countries do actually export a great deal to the U.S. market within the framework of AGOA, but these countries are only those which have substantial petroleum and mineral deposits.

Angola's 99 percent of exports under AGOA have been energy- related. The same is true of Nigeria and other countries with rich oil and mineral deposits.

In fact, more than 80 percent of all exports from the sub- Saharan African countries fall under this sector.

Since agriculture is the pillar of their economies, the sub- Saharan African countries have been calling for diversified exports to the U.S. market to include others products including agriculture products.

Nigeria has continued to lose so much in terms of the huge revenue it should have earned from export of non-oil products. It ranks only high in the energy-related sector in terms of export to the U.S. market. The country has failed woefully in the textiles and apparel, agriculture products and mineral and metals sectors where it has potentials to excel.

The trade data has also shown that the agro-related exports from sub-Sahara African to the United States under AGOA arrangement only accounts for 1 percent which has discouraged a number of African small scale farmers in taking advantage of the AGOA initiative.

In spite of their efforts, the sub-Saharan African countries have continued to be plagued by the same old constraints in developing their economies, namely the poor infrastructure, extended customs clearance times, high transport and energy costs and limited regional integration.

The situation has gotten so bad that domestic manufacturers cannot even access their own markets because it has become too cost prohibitive to do so.

A communique of ministers of trade for AGOA-beneficiary countries on May 14, 2011 urged the United States to be engaged more in infrastructure development in Africa.

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