The African Opportunities Growth and Opportunities Act (AGOA), which came into being in May 2000, is the defining pillar of US/African trade relations. President Clinton originally created the law for an 8 year period, which was extended by a further 7 years under President George W. Bush. Due to expire in 2015, AGOA has the specific goals of enhancing US export market access for qualifying Sub-Saharan African countries, using preferential trade access to the US market as a catalyst for economic growth in the Sub-Saharan region.
Since the inception of AGOA, trade between the US and Sub-Saharan Africa has more than doubled and non-oil exports to the US have tripled. It is estimated that AGOA has generated about 350,000 direct and 1 million indirect jobs in Sub-Saharan Africa. The oil and gas sector still dominates AGOA exports to the US (90-93%), and there is much more that could be done, but the textile and apparel sector is a great example of how this policy has had a positive effect on employment and sector development – the relaxing of rules of origin in this sector by allowing the use of fabric of any origin increased exports of apparel by about 300% for the top seven beneficiaries of AGOA’s special regime, and broadened the range of apparel exported by those countries.
While a lot has changed in Africa over the last 13 years, with 6 of the world’s top 10 fastest growing economies now on that continent, there is still a long way to go. The emphasis now, however, has moved from aid to trade, and from assistance to investment, with policies like AGOA helping to set the agenda for this changing attitude by helping to create an enabling environment for private sector led growth and foreign direct investment.
Trade and investment were at the centre of Obama’s recent visit to Africa, and his newly appointed US Trade Representative, Michael Froman, this week re-echoed the president’s call for a “seamless renewal” of AGOA in an interview at the Brookings Institute. He agreed that it is essential that AGOA is renewed before the official deadline in order to give investors confidence in their continued preferential access to the US market.
A working group of African Ambassadors this week published their recommendations for AGOA, ahead of next week’s AGOA Summit in Addis Ababa, where the future terms of the agreement will be discussed. They have argued that the sustained economic growth that has been facilitated by AGOA over the last decade will only be maintained if the US agrees to extend the agreement for at least a further 15 years (a time period sufficiently long to inspire investor confidence and allow the benefits of the agreement to take root and grow.)
As AGOA nears the time for renewal, Obama has also launched Power Africa and Trade Africa – initiatives that will only boost the work of AGOA and continue to increase the ability of African nations to trade their way out of poverty. Angelle B. Kwemo of the Washington-based Astrategik Group quite righty points out that no economy, even with trillions of dollars of traditional foreign assistance, can grow without ensuring a consistent and sustainable supply of affordable and reliable electricity. The $7bn dollars promised under Power Africa will go some way to filling Africa’s infrastructural gap that continues to hinder investment and growth.
Trade Africa aims to double intra-regional trade in the EAC, increase EAC exports to the US by 40%, reduce by 15% the average time needed to import or export a container from the ports of Mombasa or Dar es Salaam to land-locked Burundi and Rwanda, and decrease by 30% the average time a truck takes to transit selected borders. This policy complements AGOA by encouraging value chains and a progression from local to regional markets before reaching out to international players. This kind of work will hopefully receive a major boost if a deal on trade facilitation is reached at the WTO Ministerial in December.
Although there is a further 2 years before AGOA officially expires, a renewal before that time would prove America’s commitment to this combined trade and development policy, give confidence to investors and send a strong message to other developed countries about the US’ faith in African economies. Renewing AGOA reaffirms America’s belief in the benefits of policies that create the enabling environment necessary to produce sustainable poverty reduction and economic growth.
Although there is another 2 years to go before AGOA officially expires, a renewal before that time would prove America’s commitment to this combined trade and development policy, give confidence to investors and send a strong message to other developed countries about the US’ faith in African economies. Renewing AGOA reaffirms America’s belief in the benefits of policies that create the enabling environment necessary to produce sustainable poverty reduction and economic growth.