TRALAC - Trade Law Centre

US seeks better access to Africa as part of AGOA review

Monday, 12 August 2013 Published: | Katrina Manson

Source: Financial Times

The US will launch a review of its 13-year-old preferential trade agreement with sub-Saharan Africa on Monday that will consider asking the region to offer better commercial access to American companies.

The African Growth and Opportunity Act (AGOA), originally crafted under President Bill Clinton in 2000 and renewed by George W Bush, has become a cornerstone of US-Africa economic relations worth $58bn for business on both sides of the Atlantic.

But it is due to expire in 2015, just as growth in Africa gains traction and global competition to attract trade and investment deals there intensifies.

President Barack Obama has committed to a “seamless” renewal of the AGOA agreement, which gives sub-Saharan countries duty-free access to the US for products from crude oil to seafood. But Mike Froman, US trade representative, said he plans to warn African countries on Monday at a closed-door trade meeting in Ethiopia’s capital that Washington also wants to see better access to Africa.

“As we think about renewing AGOA, we certainly do not want US firms to be put at a competitive disadvantage in the rapidly growing and dynamic African market,” Mr Froman will say in his speech.

Washington is mindful the EU’s trade talks with sub-Saharan Africa, which are expected to produce an agreement in 2014, may secure Europe better access to African markets than the US, unless AGOA is renegotiated.

“We have until September 2015 and we want to get started now with two years runway so we have the time to do a good proposal,” Mr Froman said in a phone interview before his trip to Addis Ababa, Ethiopia’s capital. He said the review should take several months and its conclusion will ultimately be down to Congress.

Last year, an extension over textile provisions, which are renewed separately, was held up in Congress until the eleventh hour because of political deadlock, provoking some buyers to cancel forward contracts with African producers owing to the uncertainty.

Mr Froman will stop short of making any prediction about the likely duration of any renewed pact, which has been extended three times to date. African representatives are arguing for a minimum 10-year extension of the deal to encourage long-term investments instead of piecemeal timeframes that make it difficult to plan.

Mr Froman will also ask whether some sectors or countries should gradually be eased out of AGOA as they become more competitive.

“AGOA was never intended to be a permanent preference programme, nor should it be,” Mr Froman will tell representatives at the opening session of a two-day ministerial forum, which he will co-host with Uganda’s trade minister, Amelia Kyambadde. “Duration will certainly be . . . part of this review,” he said.

Petroleum products make up 80 per cent of African goods exported under the pact but the value of non-oil exports such as textiles, which as a whole fall under AGOA, spare vehicle parts, coffee, precious metals, and fruits and nuts is also growing from a low base. The US is keen to support the expansion of value-added exports that process and package raw materials in the region.

In addition, the US wants to secure a growing market place for its own products among the subcontinent’s burgeoning middle class. Mr Obama repeatedly emphasised the benefits of trade with Africa to US jobs and the economy in his regional tour last month. US exports to sub-Saharan Africa rose to $23bn last year, from $7bn 11 years ago.

Tariff and quota-free access of some products that are produced on both sides of the Atlantic, such as peanuts and cotton, are sensitive, and may affect some reciprocal arrangements.

“We will be frank about our sensitivities, and I’ll expect the same candour from you,” the text of Mr Froman’s speech says. “We should drill down into the thousands of duty-free tariff lines under AGOA and ask if they are appropriate for eligible exporters.”

The US stipulates that eligible countries must meet minimum standards, such as upholding the rule of law, and this year admits 39 of the subcontinent’s 48 countries. Democratic Republic of Congo, Madagascar and Zimbabwe are among those excluded.

Mr Froman stresses that other forms of US assistance such as extending electricity to the continent, two-thirds of which goes without power, and helping to reduce intra-regional trade barriers, would all help put the subcontinent on a more even competitive footing in the longer term.

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