TRALAC - Trade Law Centre

US-Africa trade a powerful engine for growth

Wednesday, 31 July 2013 Published: | US Department of State / Embassies

Source: US Department of State / Embassies

"Sub-Saharan Africa is a region of extraordinary opportunity for growth and economic development," President Obama said in November 2012, with the launch of a US initiative to encourage American businesses to increase trade in African nations.

The primary goal of the African Growth and Opportunity Act (AGOA) is to help expand the volume and diversity of US trade with sub-Saharan Africa.

“The economies of sub-Saharan Africa are among the world’s fastest-growing, and this economic expansion — partly a result of our long-standing investment in Africa — provides an opportunity to lift millions out of poverty and foster long-term stability,” the president said.

Echoing the president’s remarks, the newsmagazine The Economist says that six of the world’s top 10 fastest-growing economies between 2001 and 2010 were in Africa.

The International Monetary Fund says that between 2011 and 2015, African nations will account for seven of the top 10 fastest-growing economies.

To underscore Obama’s desire to bolster development in sub-Saharan Africa, the White House issued the first U.S. Strategy Toward Sub-Saharan Africa in June 2012The plan aims to spur economic growth, trade and investment and to promote opportunity and development across the region. It also emphasizes the importance of strong democratic institutions.

AGOA, created in 2000 by President Bill Clinton, is a significant factor in sub-Saharan Africa’s economic expansion.

According to Under Secretary of Commerce Francisco Sánchez, sub-Saharan Africa’s economic growth is expected to be more than 5.6 percent in 2013, and as much as 6.1 percent in 2014.

"AGOA also promotes economic cooperation and trade among the countries of sub-Saharan Africa by encouraging intraregional trade among AGOA beneficiary countries,” Assistant U.S. Trade Representative Florizelle Liser says.

Liser says that many more African nations are taking advantage of the liberal trade opportunities under AGOA, but some face significant challenges in their efforts to increase trade.

"We are continuing our efforts to increase the number of AGOA-eligible countries taking advantage of the program, and we are also trying to address the many supply-side constraints the Africans face and to help them increase the range and quality of products being traded and improve Africa’s overall competitiveness,” Liser said.

Ethiopia, in association with the United States, hosts the 2013 U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum, commonly known as the AGOA Forum, August 12–13 in Addis Ababa.

The theme of this year’s AGOA Forum is Sustainable Transformation through Trade and Technology. The event will include high-level talks on the future of U.S.-Africa trade and economic cooperation.

The forum will be preceded by private-sector and civil-society programs, as well as a program arranged by the Ethiopian African Women’s Entrepreneurship Program August 10–11. In addition, the Corporate Council on Africa, in collaboration with the Ethiopian Chambers of Commerce and Sectoral Associations, will organize a U.S.–Sub-Saharan Africa Trade Exhibition to run concurrently with the forum.

It is estimated that if sub-Saharan Africa were to increase its share of global trade by just 1 percentage point to 3 percent, it would generate additional export revenues of $70 billion annually. “This reflects the importance of trade as a critical platform for Africa’s economic growth, which is nearly three times the amount of current annual assistance to Africa from all donors” Liser has said.

Economists believe that striking a critical balance between trade volume and the diversity of exports is essential to long-term economic development and growth.

AGOA - which has been modified several times since its inception - was designed to extend preferential treatment to imports from eligible countries that are pursuing market reform measures, says Danielle Langton, an international trade and finance analyst with the U.S. Congressional Research Service, in a recent analysis of AGOA. “Data show that U.S. imports under AGOA are mostly energy products, but imports to date of other products have grown,” she said.

AGOA also directs the U.S. president to provide technical assistance and trade capacity support to AGOA countries, Langton said. Government agencies with roles in helping African nations include the U.S. Agency for International Development (USAID), the Office of the United States Trade Representative, the U.S. Overseas Private Investment Corporation, the U.S. Export-Import Bank, the U.S. and Foreign Commercial Service, and the U.S. Trade and Development Agency.

Exports from the continent are concentrated in primary commodities such as petroleum, minerals, cocoa and coffee. Liser says that “there is little of the manufacturing engine in sub-Saharan Africa that has fueled economic growth and reduced poverty in other regions of the world.”

“We believe that export diversification and further processing of agriculture products into higher-value exports could help improve food security in the region by addressing issues of availability and stability of food supply,” Liser said.

Obama has announced that he will work with the U.S. Congress to extend AGOA beyond the current 2015 expiration of the law.

US-Africa Trade Profile

Eligible African nations exported nearly $35 billion in products to the United States in 2012 under AGOA and its related Generalized System of Preferences provisions. Total exports under AGOA have risen more than 300 percent since the program’s start.

While petroleum products accounted for 84 percent of AGOA imports to the United States in 2012, the programs have helped promote other, value-added exports such as vehicles, apparel, footwear, processed agricultural products and manufactured goods, according to U.S. government statistics. Non-oil exports to the United States from sub-Saharan Africa totaled $4.7 billion in 2012, rising more than 250 percent since the law’s inception.

Exports have been driven by demand for machinery, vehicles and parts, wheat, noncrude oil, aircraft and electrical machinery, which included telecommunications equipment. After oil, U.S. imports of African products were led by passenger vehicles, the report said.

AGOA (currently) allows 39 eligible African countries to export most products duty-free to the United States. The 39 countries are Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Chad, Comoros, Côte d'Ivoire, Republic of Congo, Djibouti, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Kenya, Lesotho, Liberia, Malawi, Mauritania, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, São Tomé and Príncipe, Senegal, Seychelles, Sierra Leone, South Africa, South Sudan, Swaziland, Tanzania, Togo, Uganda and Zambia.