TRALAC - Trade Law Centre

AGOA Forum 2015 to assess gains, losses of pact

Saturday, 22 August 2015 Published: | Kevin J Kelley

Source: The East African

An Africa-US forum in Gabon this week will celebrate the recent extension of the preferential trade programme -- the Africa Growth and Opportunity Act -- and initiate what an Obama administration official describes as "a strategic conversation" about US-Africa trade relations.

President Barack Obama last month signed into law a 10-year extension of Agoa. A long-term renewal had been the top Agoa priority of African countries that have benefited from the 15-year-old programme. It allows almost all products from eligible sub-Saharan nations to enter the US duty-free.

However, independent Africa trade experts in Washington said that few improvements were made to Agoa in the extension legislation approved by the US Congress.

Stephen Lande, president of a US consulting firm specialising in Africa trade issues, points to the 97-1 US Senate vote in favour of the Agoa legislation as an indication that it contains little that is innovative or controversial.

It thus appears unlikely that East African nations, apart from apparel-exporting Kenya, will see increased benefits through Agoa in the coming years.

Kenya sold $423 million worth of products, mostly clothing, in US markets last year. Tanzania exported $18.3 million in goods to the US through Agoa in 2014, while Uganda and Rwanda have barely made any use of the trade programme.

But the 10-year extension is itself a major achievement, Florizelle Liser, the top US trade official for Africa, said in a press briefing last week.

The assurance that Agoa will remain in place until at least 2025 creates "a stable environment that encourages increased investment in sub-Saharan Africa," said Ms Liser, adding, "And now that we are no longer worrying about Agoa expiring in the near term, the Agoa Forum will provide an opportunity for us to begin a more strategic conversation about the future of our trade and investment relationship with Africa."

The forum in Gabon is expected to include discussions on whether Agoa's non-African fabric allowance acts as a disincentive to development of fabric-making factories in countries such as Kenya.

A study by the non-governmental Peterson Institution for International Economics said the "third-country fabric provision" discourages skills development as well as manufacturing investments in Agoa-exporting countries.

More broadly, the Peterson Institute study's authors said, "beneficiary countries still do not have viable internationally competitive industries that could survive without the preferences, nor have they diversified into new products and markets or added greater domestic value.

"The experience of Agoa demonstrates," they added, "that policies designed to promote more trade do not automatically lead to more economic development."

Ms Liser countered that assessment. Investment in fabric production is in fact starting to be made in Kenya and Ethiopia, she said.

And the 10-year Agoa extension will further spur such investments because US apparel buyers now have a reliable cost-savings incentive to establish fabric production facilities in African clothing-exporting countries.

US officials point to a threefold increase in Africa's non-oil exports to the United States since the enactment of Agoa in 2000.

While oil remains by far the dominant component of Agoa-covered trade, the preferential programme has encouraged a sharp rise in African agricultural exports to the US as well as sales of apparel, Obama administration officials point out.

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