TRALAC - Trade Law Centre

Mixed consensus emerges at AGOA Forum

Thursday, 03 September 2015

Source: Bridges Africa

The 14th African Growth and Opportunity Act (AGOA) Forum took place from 25-27 August in the Gabonese capital, Libreville.

Considered the central pillar of economic relations between the US and sub-Saharan Africa, AGOA provides duty-free quota-free access to the US market for over 6000 products.

Its renewal in June until 2025 had been enthusiastically welcomed by many.

The Forum was attended by over 1,000 delegates from 39 AGOA-eligible countries and the US with a view to discuss the opportunities offered by the scheme, to examine the new legislation renewing AGOA for the next 10 years, and to think about ways of increasing the benefits that Africa can draw from this partnership. The Forum also saw the development of a commercial mini-fair, during which many exhibitors presented their products in search of support for marketing in the US.  

A mixed picture

Following the event, the consensus drawn by many African actors seemed quite mixed. While it is true that the interest or even the necessity of such AGOA legislation seems generally accepted, there are many who point out that the preference regime has not fully achieved its intended objectives. Indeed, trade between Africa and the US remains very limited and highly concentrated in certain sectors .

At present, only 1 percent of US imports come from the 39 African countries benefiting from AGOA. According to data provided by the US Department of Commerce, exports from AGOA countries to the US have fallen from US$72.4 billion in 2011 to US$25.6 billion in 2014. Given that the hydrocarbon sector alone accounts for most of the African exports under AGOA, the sharp fall in US imports has led to a slump of total AGOA trade.

"All African countries have not benefited from AGOA," insisted Ngoulakia Barthelemy, President of the Scientific Committee of the Libreville Forum, during a press conference following the first closed-door meeting. Until now, only a few countries have managed to take advantage of the opportunities offered under AGOA. These include Nigeria, Angola, Chad, Congo-Brazzaville and Congo, and South Africa, which unsurprisingly are some of the largest oil producers in the region.

As an explanation for these lackluster performances, many people point to the failure of African infrastructure - physical and institutional - which, in their current state, do not allow countries to take full advantage of the opportunities offered by AGOA. Another readily advanced reason is the low levels of competitiveness and lack of human capital characterising many African countries. Capacity building, notably to allow market players to more easily comply with US and international standards is necessary. In this regard, several signals at the AGOA Libreville Forum suggest that the US is prepared to pursue this course, in particular to support non-oil sectors. Régis Immongault, Gabon's Minister of Economy, Investment Promotion, and Opportunity, said in a recent interview that the US could also do more in terms of market access.

"We cannot pretend to ignore the timidity with which the US opens their markets when it comes to other non-hydrocarbon sectors," he said.  

New unappreciated provisions

The Forum also enabled African officials to look into the new version of AGOA where it emerged that some of the new provisions are not favourable to all.

"Compared to the new law, there are fundamental non-trade related changes that have taken place concerning mainly human rights and child labor," said Bartholomew Ngoulakia following the first closed-door meeting.

"Today, the US president can decide to exclude a country because it has not met the commitments made in relation to AGOA," added Ngoulakia, noting that Africans do not really enjoy this prerogative. If a determination of exclusion is made, African representatives suggest that the period granted to the State in question be extended to several months instead of 60 days.

"60 days is really not sufficient to comply with any comments or injunctions," insisted Ngoulakia. Despite such resistance, it should be noted that the new version of AGOA is substantially similar to the previous one. (See Passerelles, May 19, 2015)  

Maximising the potential of AGOA

In his video message to the AGOA Forum, Barack Obama stressed the virtues of AGOA. "AGOA is creating economic opportunities for families across the continent and helping African companies to improve their competitiveness, while creating an environment conducive to the growth of private sector investment," he insisted.

According to the US, AGOA has helped to create approximately 300,000 direct jobs in eligible countries. Nevertheless, given the mixed performance of exports benefiting from AGOA, both Africans and Americans at the Forum called for further efforts to ensure that the opportunities offered by the preference scheme are more leveraged and beneficial to all eligible countries.

"The instrument of economic and trade cooperation made available by AGOA should encourage us to redouble our efforts in the utilisation of its implementation mechanisms, so that the greatest number of African countries can benefit, "said the Prime Minister of Gabon, Daniel Ona Ondo. The Gabonese Minister of Trade and Chairman of the AGOA Forum, Gabriel Tchango, has meanwhile called on African countries to develop strategies to this effect, while indicating that Gabon intends to seize the opportunity provided by AGOA "to fully harness the potential for economic diversification”.

 "We are in a process of reforming our economy and AGOA is a tool that has come just when African countries have embarked upon an era of reform. This is our time to capitalise on this opportunity,” he insisted. On the American side, a similar message could be heard. "We must ensure that the potential of AGOA is fully exploited and that its benefits are fully utilised. This will require work on both sides of the equation," affirmed Michael Froman, US Representative for Foreign Trade, at the opening ceremony of the AGOA Forum.

"Our African partners will devise strategies to take full advantage of tariff preferences under AGOA, and the US will have to ensure that they provide the capacity building and trade-related assistance that are needed to support these strategies," he added.  

Last lap for AGOA?

According to some, the 10-year AGOA extension approved in June could be the last of this preference scheme as we know it. Indeed, some evidence suggests that the US may seek to pass, in the relatively near future, a scheme based on greater reciprocity in their economic relations with sub-Saharan African countries. At a time when the European Union has already begun this turning point with the conclusion of the Economic Partnership Agreements, the US could potentially follow suit. In May, a bill entitled "Africa Free Trade Initiative Act" was introduced to the Senate by US Senators Chris Coons and Jim Inhofe. The latter was meant to confront the US president with a plan to negotiate and conclude free trade agreements with countries in sub-Saharan Africa.

Until now, however, it has not received the expected support. During the AGOA Forum, Michael Froman unreservedly welcomed the renewal of AGOA for a period of 10 years, but he also stressed that "we must also begin to think about our long-term trade and investment relationship."

In a blog post recently co-signed with Dana Hyde, CEO of the Millennium Challenge Corporation, Froman is even more explicit, making calls to "look beyond 2015, and imagine what a more mature economic partnership relationship would imply". When Peter Henry Barlerin, Director of Economic and Regional Affairs in the Africa Bureau of the US State Department, was recently questioned on the subject, he provided the following response: "This is precisely the theme of the forum held in Libreville.

AGOA dates back 15 years, we want to pave the way towards more sustainable partnerships between the US and Africa in the field of trade and investment. We have 10 years to move towards a more reciprocal relationship. This is good not only for the US but also for sub-Saharan Africa."

 

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