Is AGOA Worth Africa’s While?

Twelve years after the introduction of the African Growth and Opportunity Act (AGOA) by the United States Government, the African Union (AU) has called for an extension of the programme beyond its 2015 expiry date.

Making the call at the opening of the ministerial meeting of the 2013 US-sub Saharan Africa Trade and Economic Cooperation Forum (otherwise known as The AGOA Forum) in Addis Ababa, last week, the AU Chairperson and Ethiopian Prime Minister, Haile Mariam Desalegn, was said to have suggested an extension of the programme for another 15 to 20 years even as he regretted the continent’s inability to exploit the full potentials of the Act in spite of significant improvements in trade relations with the Americans, so far.

According to Desalegn, African countries have been inhibited by the many difficulties they encounter in accessing the US market. He also said that exports under AGOA had been restricted to a few products which often raised doubts over the Americans’ sincerity of purpose.

The African leader, however, expressed the hope that there are potentials for improvement in the coming years.

AGOA came into existence as part of the US Trade and Development Act of 2000 signed by former President Bill Clinton on May 18

th of that year. His successor, former President George W. Bush, later amended it on August 6, 2002 to expand the list of items that could be imported duty and quota-free into the US market from eligible sub Saharan African countries.

Going by available records, AGOA exists to facilitate trade between the US and participating African countries in a manner that is designed to bring about reduction in poverty and an increase in economic progress while creating stronger markets in these African nations.

It is also aimed at creating job opportunities and lead to a reformation of these African economies through the creation of new incentives for good governance, sustained business enterprises and investments.

Over 40 sub Saharan African countries are currently doing business with the Americans under the terms of AGOA. Foremost among these are Nigeria, Angola, South Africa, Gabon and Chad. Other leading participants include Ghana, DR Congo, Mauritius, Cameroon, Kenya and Ethiopia.

Products that are eligible for export by participating African nations include oil and gas, mineral fuels, precious stones and metals, textile and apparels, shoes, handbags and other leather items, tropical fruits, among several others.

On their side, the Americans engaged mainly in the export items classed under machinery and parts, transportation equipment, cereals, aircraft and parts, and electrical machinery.

The report also showed that exports between sub Saharan African countries and the US rose from $8.15 billion in 2001 to $53.8 billion in 2011 with about 90 per cent coming from oil products.

But more up-to-date statistics provided in a speech at the AGOA Forum by the US Trade Representative, Mr. Michael Froman, reveals that there has been a decline in the shipments of oil, mineral fuels, precious stones and metals resulting in a 33 per cent shortfall to $49.7 billion. And of this amount, reports say that only $34.9 billion was traded under AGOA terms.

In terms of job creation, the AU account claims that between 2001 and 2011, trade under AGOA generated about 350,000 direct jobs and one million indirect engagements in Africa, especially in the textile and apparel sector.

Froman readily agreed with this claim: “Behind the billions of dollars in exports generated by AGOA are hundreds of thousands of jobs that have helped African men and especially women to support their families in ways that once seemed impossible.”

But like Desalegn, US President Barack Obama does not believe that AGOA is as yet an economic uhuru tale. In fact, he thinks that the Act has not gone far enough in helping African exporters become more competitive.

Obama’s views were made known during his recent tour of three African nations. A Bloomberg report had quoted the American leader as saying that the US wants to help African countries ease trade and investment barriers by further simplifying Customs procedures and improving the flow of goods across borders, among other measures.

Indeed, much as Froman and the AU can continue to attest to the number of jobs already created by AGOA, there are critics who argue that these jobs earn paltry incomes, hardly enough to support the usually large African household. Some have even claimed that much of the growth recorded so far has been in the oil sector which is known to create few jobs, with most of them going to skill expatriates.

Again, AGOA is an American creation and, like almost all other Western initiatives before it, the idea is intended to fully exploit Africa’s human and natural resource endowments while creating marginal, if any, benefits for the latter. Only little else can account for the wide price disparity between products emanating from the US and those shipped from Africa.

Desalegn’s complaint that AGOA has created very limited space for African products in the US market runs counter to America’s claim that over 6,400 items had been listed to enjoy zero import duty and quota-free entry under the Generalised System of Preferences (GSP) in the American Trade Act.

In truth, the fault may not rest entirely on Washington, DC. This is because most of the AGOA products originating from sub-Saharan Africa already have supply-side quota restrictions placed on them as part of some price-control measures by the international commodity unions to which their producers are known signatories.

For example, as a member of the Organisation of Petroleum Exporting Countries (OPEC) with a maximum daily production quota of 2.4 million barrels of crude oil, Nigeria can hardly be expected to export more than this daily production limit even in the event of an enduring energy crisis in the US, and with AGOA blowing at full throttle.

Africans may never get to realise full benefits from AGOA due to the frequent political, social and economic disruptions caused by coups, wars and youth restiveness in parts of the continent.

The Congos have remained perennially turbulent since after gaining political Independence in the 1960s. The diamond regions of Liberia and Sierra Leone still bear fresh scars of the recent fratricidal wars fought to establish control over the precious stone. Neighbouring Cote d’Ivoire, Senegal and Mali are still struggling to survive the peace after their recent respective political skirmishes.

In Nigeria, such disturbances had resulted from the militant activities of some agitated Niger Delta youth. But now, it has to be admitted that the al Qaeda-backed Boko Haram sect is indeed causing so much concern in the land, especially in the North.

Related to this are the activities of con men which seem to undermine AGOA’s aim of attracting to the continent, American firms that may be eager to help build stronger commercial partnerships with African entrepreneurs. The sordid experiences of some of these potential foreign investors in the hands of Internet fraudsters, impostors at high places, kidnappers and outright armed robbers are better left to the imagination.

Even so, with China offering what seems like a more robust business landscape to many sub-Saharan African countries, AGOA surely needs to do more in order to sustain whatever interests it may have roused in these countries, so far. This scenario is also not assisted by reports that the European Union (EU) is already negotiating to give preferential market access, known as Economic Partnership Agreements (EPA) to countries across the continent before October 2014.