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You are here: Home/News/Article/The African Growth and Opportunity Act: growth without opportunity?

The African Growth and Opportunity Act: growth without opportunity?

The African Growth and Opportunity Act: growth without opportunity?
Published date:
Thursday, 10 July 2014
Sabina Dewan / Greg Randolph

When President Obama spoke to African leaders gathered in Ethiopia last year, he painted a new vision for U.S. engagement in Africa. "Now we have an opportunity to unleash the next era of African growth together. As we work to renew AGOA in 2015 and continue integrating Africa into the global economy, we also want to make sure that the benefits of Africa's growth reach all parts of the society."

The African Growth and Opportunity Act, or AGOA -- the U.S. trade preference program granting special duty-free access for 38 African nations -- has helped fuel high levels of growth on the continent. But this economic growth has not translated into broad-based economic opportunity for a majority of African people. As the administration seeks renewal for AGOA in 2015, the trade accord must be updated to ensure that growth is creating high-quality employment.

Since its inception in 2000, U.S. imports under AGOA have increased by over 300 percent -- from $7.6 billion in 2001 to $24.8 billion in 2013 -- and even reached a pre-recession peak of nearly $60 billion in 2008. Ten of the 20 fastest growing economies in the world are AGOA nations.

But economic growth does not always translate into good jobs and shared prosperity. Nowhere is this more apparent than in sub-Saharan Africa.

Nigeria -- the top exporter under AGOA -- grew at the breakneck pace of 8.3 percent per annum from 2000-2013, benefiting from expanded oil exports. Meanwhile, both general unemployment and youth unemployment remained high at 7.6 percent and nearly 14 percent respectively. And these figures don't reflect the many people in low-paying and low-productivity jobs.

In Angola -- the second biggest exporter under AGOA -- 85 percent of GDP comes from oil production and related industries, fueling a growth rate above 8 percent. Meanwhile, 67 percent of Angolans live on less than $2 a day, a figure that has remained virtually unchanged since AGOA benefits were extended there in 2003.

The trend here is clear: trade in sectors like oil, which are capital-intensive rather than job-creating, do much to benefit Gross Domestic Product (GDP) and little to create shared prosperity. Consider, then, that crude petroleum comprised almost 90 percent of the value of all AGOA exports from 2001-2013. The question of what expanded trade under AGOA is actually offering everyday Africans looms large.

And yet, when the United States International Trade Commission -- the federal agency responsible for guiding U.S. trade policy -- released an almost 400-page report in April assessing the impact of AGOA, it neglected to touch this question.

The first step to ensuring that the benefits of AGOA reach more African people is greater transparency and honesty about what AGOA has achieved and what it hasn't. Given the evidence to the contrary, it is deceitful to use GDP as a proxy for broad-based economic opportunity in sub-Saharan Africa.

Second, the United States can step up efforts to provide technical assistance to African institutions that reinvest the profits from expanded trade in social goods such as education, health care and infrastructure.

Finally, those negotiating the renewal of AGOA must use the agreement as a vehicle for promoting growth in labor-intensive, high-productivity export industries that can create just jobs for African people -- jobs with appropriate remuneration, rights at work, and economic mobility.

Promoting just jobs and economic mobility in Africa helps President Obama fulfill the promise he made last year. It also creates new opportunities for investment and new markets for American products and services in a region of almost a billion people.

As they consider the terms of AGOA's renewal, American and African leaders have the opportunity to accomplish two goals. First, they can build the kind of thriving middle class in Africa that has driven prosperity in other emerging economies around the world. And second, they can diversify and improve trade and investment prospects between the United States and African countries. High-quality job creation is the key to both.


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