K i n g f o r

African Independent - - COMMENT - WIL­LIAM GUMEDE

AS THE Africa Growth and Op­por­tu­nity Act (Agoa), a US law passed in 2000 to help African coun­tries ex­port some prod­ucts quotafree and duty-free to the US, ben­e­fited African coun­tries or has it ben­e­fited mostly US ex­porters and com­pa­nies from emerg­ing mar­kets, who use the Act to send their prod­ucts to the US through Africa?

In June, Pres­i­dent Barack Obama re­newed Agoa for an­other 10 years. It was due to ex­pire in Septem­ber. Pres­i­dent Bill Clin­ton steered the orig­i­nal 2000 Agoa bill, which gave trade pref­er­ences to more than 6 400 African prod­ucts.

The June re­newal of Agoa was ac­com­pa­nied by an­other bill, which ex­tended pro­tec­tion from for­eign trade to US work­ers.

Pres­i­dent-elect Don­ald Trump has vowed to adopt an “Amer­ica first” trade pol­icy and to rene­go­ti­ate all for­eign trade deals. This means Agoa, which in­cludes 39 African coun­tries in trade with the US, might also be re­viewed.

A re­search pa­per pub­lished by the Cen­tre for the Study of African Economies at Ox­ford Univer­sity said Chi­nese tex­tile com­pa­nies, for ex­am­ple, set up in Africa and sent their prod­ucts to the US. Un­der the guise that the prod­ucts were made in Africa, they got free ac­cess to US mar­kets. Africans had lit­tle in­put in the as­sem­bly of such Chi­nese prod­ucts, nei­ther was much val­ueadded to African economies.

This prac­tice is called tran­ship­ment. Agoa of­fi­cially pro­hibits it and any non-African com­pany found to have done so by US au­thor­i­ties is banned from ex­port­ing their prod­ucts to the US un­der the Agoa frame­work for five years. Agoa’s rules say African ex­porters must source cer­tain in­puts for their prod­ucts either lo­cally or from the US.

How­ever, Agoa is very le­nient about rules of ori­gin – how much value an African coun­try should get from a prod­uct ex­ported to the US.

The World Bank and the

HIn­ter­na­tional Mone­tary Fund have crit­i­cised Agoa for ex­clud­ing key African prod­ucts and pro­vid­ing sub­si­dies to US com­pa­nies deemed un­der threat from African com­pe­ti­tion.

The US sub­sidises its agri­cul­ture sec­tor, for ex­am­ple cot­ton, which many African coun­tries ex­port. For­mer US Trade Rep­re­sen­ta­tive Ron Kirk said the US could only cut some agri­cul­tural sub­si­dies, such as cot­ton, as part of larger agree­ments, which would have large de­vel­op­ing coun­try economies, such as Brazil, China and In­dia, also agree to open their mar­kets to the same prod­ucts.

A core re­quire­ment for Africa, if the con­ti­nent wants to achieve bet­ter, more eq­ui­table, growth is for coun­tries to add value to raw ma­te­ri­als and di­ver­sify into man­u­fac­tur­ing and ser­vices.

Agoa is only avail­able to African coun­tries which have adopted, or are mak­ing progress do­ing so, poli­cies ap­proved by the US. They must have es­tab­lished mar­ket­based economies, re­duce trade bar­ri­ers for US com­pa­nies and pro­tect US in­tel­lec­tual prop­erty.

Since the end of colo­nial­ism and the Cold War, Africa has been pre­vented from do­ing this by in­dus­trial na­tions, which have erected high trade bar­ri­ers to man­u­fac­tured prod­ucts trans­formed from raw ma­te­ri­als – those where value has been added. Raw ma­te­ri­als from Africa do not have the same high tar­iff bar­ri­ers.

African economies have lost wealth, jobs and eco­nomic growth be­cause coun­tries con­tinue to

ex­port raw ma­te­ri­als to both in­dus­trial and de­vel­op­ing coun­tries, while these coun­tries ex­port man­u­fac­tured and ben­e­fi­ci­ated prod­ucts to Africa.

The lat­ter cre­ate jobs and are more val­ued, yet are of­ten made from cheap African raw ma­te­ri­als, ex­ported back to Africa as a more ex­pen­sive fin­ished prod­uct. Some emerg­ing pow­ers – China and Brazil – are even trans­plant­ing their man­u­fac­tured goods from their home base to Africa.

The suc­cess of any trade deal be­tween Africa and in­dus­trial or emerg­ing mar­kets, there­fore, is based on whether Africans can de­velop value-added man­u­fac­tur­ing to be ex­ported.

Most African coun­tries ex­port raw ma­te­ri­als, such as oil, met­als and agri­cul­tural prod­ucts. Agoa has since its in­cep­tion con­trib­uted to a 78 per­cent in­crease in over­all trade be­tween Africa and the US. How­ever, the devil is in the de­tail of the trade. US im­ports from Agoa ben­e­fi­cia­ries rep­re­sent only 1 per­cent of to­tal US im­ports.

En­ergy ac­counts for 88 per­cent of ex­ports from Africa to the US through Agoa, with oil ac­count­ing for 68 per­cent in 2014. How­ever, oil im­ports from Africa to the US have ac­tu­ally de­clined over­all by 80 per­cent since 2011.

Ex­ports to the US of nat­u­ral re­sources, such as crude oil, pre­cious met­als and oil seeds have grown un­der Agoa, while man­u­fac­tured prod­ucts, such as cloth­ing, con­sumer elec­tron­ics and ve­hi­cles, have de­clined.

The African coun­tries that have oil and gas dom­i­nate ex­ports un­der Agoa. US In­ter­na­tional Trade Com­mis­sion fig­ures showed al­most 90 per­cent of prod­ucts traded un­der Agoa went to four coun­tries: South Africa, Nige­ria, An­gola and Gabon.

African agri­cul­tural prod­ucts might not face high tar­iff bar­ri­ers un­der Agoa but they face com­plex health and safety rules in the US, which ef­fec­tively trans­lates into high tar­iff bar­ri­ers.

If one ex­cludes South African ex­ports, the sec­ond largest im­ports from Africa to the US un­der Agoa are tex­tiles and cloth­ing. How­ever, a re­cent study by the US Congress Re­search Ser­vice showed African coun­tries which ex­port them have not been able to move from lowskill pro­duc­tion to higher-skilled man­u­fac­tured prod­ucts.

Kenya’s Pres­i­dent Uhuru Keny­atta said African ef­forts to di­ver­sify their ex­ports to the US away from en­ergy have not been “fully re­alised”. They faced “enor­mous chal­lenges, such as lack of com­pet­i­tive­ness, sup­ply ca­pac­ity con­straints, weak in­fra­struc­ture, low flow of pri­vate in­vest­ments from the US, lack of ac­cess to fi­nance and low tech­ni­cal ca­pac­ity”.

The US un­der the Obama ad­min­is­tra­tion has op­posed African coun­tries’ calls to have more prod­ucts se­cur­ing ac­cess to US mar­kets un­der Agoa, ar­gu­ing they should bet­ter use the cur­rent pro­vi­sions.

African coun­tries need to di­ver­sify the prod­ucts they pro­duce. They need to add value to their oil, metal and agri­cul­tural prod­ucts. But they must also di­ver­sify their trade with other de­vel­op­ing and in­dus­trial coun­tries. African coun­tries must trade more with each other.

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