Agoa’s 10th anniversary

Ambassador Ron Kirk spoke at the opening ceremony of the Ninth U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum last week, better known as “the AGOA Forum.” In attendance werecabinet ministers and senior officials from the 38 sub-Saharan African countries that benefit from the African Growth and Opportunity (AGOA) trade preference program, as well as representatives of African regional economic communities, the American and African private sector, and civil society.

During his remarks, Ambassador Kirk observed that AGOA has helped support African economic development by opening the U.S. market to a greater diversity of African products, including value-added and processed goods.“President Obama and this Administration are committed to a partnership with Africa that is commensurate with Africa’s vital and growing role in the global community, and that reflects past, present, and future ties between African nations and the United States,” said Ambassador Kirk. “The progress and potential of African economies are reflected in reduced inflation, lowered trade barriers, growing intra-African trade, rising foreign capital flows into Africa, and the creation of substantial new business opportunities.”

Enacted into law in 2000, AGOA is the U.S. government’s trade preference program for Africa.

Ambassador Kirk said trade between the United States and Africa has more than doubled during the first decade of AGOA.

“I think AGOA has been a success by any measure. Two-way trade between the U.S. and Africa usually ranges between $64 and $70 billion a year. Exports from Africa to the United States have, in some cases, quadrupled, and our U.S. exports to Africa have doubled,” Kirk said.

While AGOA over the last 10 years has led to increased trade between Africa and the United States, it has yet to achieve its full potential.

US officials have been frank in some of the shortcomings of AGOA.

US officials were frank about its failures. Hillary Clinton, secretary of state, told delegates: “We all know, despite the best of intentions, Agoa has achieved only modest results and has not lived up to the highest hopes of a decade ago . . . Petroleum products still account for the vast majority of exports to the United States and we have not seen the diversification or growth of exports that Agoa was supposed to spur.

Making clothing is often the first step on the road to prosperity for developing countries. But while African textile and garment exports to the US under Agoa rose by 52 per cent by 2009, according to a report by the US government accountability office, they were still barely more than 1 per cent of total US imports. An initial burst of exports was not sustained, and was concentrated in a small number of countries including the middle-income nations. Part of the reason is the breadth and depth of the agreement, shaped by political pressures in Washington. Economists say even a more generous programme would have struggled to overcome the real constraints to African exports, which are more to do with infrastructure and other supply-side problems on the east side of the Atlantic than trade barriers on the west. In the case of Agoa, the US Congressional Black Caucus pressed hard to focus the scheme on the continent. But the US clothing and textile industry lobbied to circumscribe the garment provisions to shield itself from competition.

The “rules of origin” – which determine how many inputs from other countries African nations can use to make exports to the US – are generous compared with other trade preference schemes, such as those for the European Union. But US clothing manufacturers insisted on more stringent rules for garments. The rules require special congressional renewal in 2012, three years earlier than the rest of the programme. Such political uncertainty restricts investment in garment production in Africa.

More generally, development experts say the scheme also shows the limits of what can be done with trade policy. Todd Moss, a fellow at the Center for Global Development in Washington, says: “Market access to the US was originally seen as the big problem. But what became clear was that lack of infrastructure at the African end was far more important.”

In many African countries production costs are raised by expensive and intermittent power supply, weak transport infrastructure and corruption. African garment manufacturers struggle to compete against powerhouses such as China.

Ron Kirk, US trade representative, says: “We have textiles that flood in to the US from all our preference programmes. I don’t know if the answer to Africa’s long-term growth is yet more textiles.”

Secretary of State Clinton was in attendance also. She delivered some remarks.

Secretary Clinton said, “I must say that my trip across Africa last summer offered me an opportunity to meet with leaders and citizens from all walks of life. And for me, that visit was a really important turning point, because coming as it did on the heels of President Obama’s very important speech in Ghana, it was a reaffirmation of this Administration’s commitment to appreciate Africa even more fully in its promise and its potential for the future.”

She continued, “Under President Obama’s leadership, the United States is taking a new approach in Africa rooted in partnership, not patronage. That means we are looking for sustainable strategies that help nations build capacity and take responsibility, that give people the tools they need to help themselves and their communities, that empower problem-solvers at the local and regional levels, be they entrepreneurs, NGOs, or governments themselves. We are also working to integrate our trade and development strategies with greater emphasis on bottom-up, locally driven solutions, fostering regional markets within Africa, boosting trade and aid effectiveness, and working with partner governments to promote structural reforms and gradual market liberalization.”

Secretary Clinton also spoke to the challenges confronting Africa. The Secretary said, “AGOA was founded on the premise that export-driven growth would provide Africa with sustainable economic development and wider prosperity. Today, we still believe in the value of exports, but we better understand that the development of domestic and regional markets is a necessary prerequisite to taking full advantage of global opportunities. Many of Africa’s major challenges — from inadequate infrastructure to political instability to corruption — also present opportunities for market-based solutions, creative partnerships, and responsible government action.”

In closing, Secretary Clinton said, “Everyone understands that opportunity and responsibility go hand-in-hand. That tomorrow’s future depends upon today’s choices. The United States can and will be a partner. We’re here for the good times and the bad. We want to work toward the day when every child born in Africa has the opportunity to live up to his or her God-given potential. That is our goal and that is our pledge.”

Her full remarks can be seen here.

Although Agoa hasn’t lived up to its full potential, none the less it still has been good for Africa.

Agoa has helped to encourage the diversification of Africa’s trade with the United States. What has happened under AGOA is we have a number of stories in terms of the increase in non-oil trade. That has doubled in the 10 years of AGOA. And, in the meantime, U.S. exports to Africa have also grown.

It  has created more than 300,000 jobs in Africa and also brings in about $300 billion in export earnings and nearly $30 billion in non-oil exports to Africa at a minimal cost to United State (US) taxpayers.

This will only go up, increase trade and economic opportunity for both the US and African nations, especially with the renewed interest and understanding of the Obama administration, which has doubling US exports as one President’s main goals.

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