U.S.-Africa Trade Mostly Benefits Oil, Textiles

By Ramy Srour Reprint | | Print |

WASHINGTON, Oct 1 2013 (IPS) - With a key U.S.-Africa trade agreement up for renewal in 2015, advocates on all sides of the issue say current policies are rife with shortcomings that leave many African businesses out in the cold. Since its enactment in 2000, the African Growth and Opportunity Act (AGOA) has sought to create trade opportunities for small- and medium-sized African businesses by helping them export their products to the U.S. market.

Textiles are one of the key sectors to benefit from the African Growth and Opportunity Act (AGOA). Credit: Kristin Palitza/IPS

But policymakers and activists alike are currently increasing focus on AGOA’s failures at empowering Africa’s poorer communities, and whether the act can be tweaked by 2015.

“AGOA has been successful, but only within its limited parametres,” Kimberly Elliott, a senior fellow and expert on trade policy and globalisation at the Centre for Global Development (CGD), a think tank here, told IPS. “The bill has been relatively effective in removing U.S. barriers to African trade, but it hasn’t addressed the fundamental competitiveness issue in Africa.”

And while U.S. exports to Africa tripled over the last decade, “only as little as 1.3 million jobs have been created on the African continent since the enactment of AGOA,” Ambassador Michael Froman, the U.S. trade representative, recently warned.

According to the U.S. Department of State, “African exports under AGOA have more than quadrupled since the programme’s inception. In 2012, AGOA-eligible countries exported nearly 35 billion dollars in products to the United States duty free under AGOA.”

One of the obstacles to a truly successful outcome for AGOA has been its focus on only some sectors of the economy – including oil exports – to the detriment of those sectors with a more immediate impact on poorer segments of society. That includes the agricultural sector, the single most important for African communities.

“Outside of clothing and other few sectors, U.S. tariffs were already quite low prior to AGOA,” Elliott says. “The greater challenge is to get those key commodities such as sugar and cocoa products to access the U.S. market.”

So far, agricultural products have been excluded from the AGOA framework because of U.S. domestic regulations. This seems to be the biggest bump on AGOA’s road to decreasing poverty in Africa.

“There aren’t that many sectors benefiting from AGOA, apart from textiles,” Zenia Lewis, an analyst on economic development in Africa at the Brookings Institution, a Washington think tank, told IPS. “And unfortunately, the sector that has reaped most of the benefits has been the oil industry.”

According to recent estimates, oil exports cover nearly 90 percent of goods leaving African shores. At the same time, AGOA has managed to open the U.S. market to the growing African textile industry. Many are today touting as a key AGOA success story the recent boom in Kenyan textile exports to the United States, to companies such as Victoria’s Secret and Macy’s.

According to the most recent estimates, Kenya was the United States’ 103^rd-largest supplier in 2011, with a total of 382 million dollars’ worth of imported goods, a nearly 23 percent percent increase from 2010. “So far,” CGD’s Elliott says, “this has been AGOA’s best result when it comes to the poorer segments of African producers.”

Sheri Berenbach, president of the U.S. African Development Foundation (USADF), a federal agency, told IPS, “It is important to recognise that one of the most important constituencies of AGOA are the small local and marginalised communities. USADF has been very supportive of AGOA and trade, because a quarter of the producers that we support are small local groups that are now deeply involved with exports to the United States.”

USADF offers development grants to small African businesses seeking to access the U.S. market. Berenbach says such opportunities can have a direct impact on poverty. “Most of the work in Africa is about dealing with the weakest part of the African economy, the impoverished communities,” she says.

As the bill is set to expire, a broad cross-section of interests are looking to 2015 and providing recommendations on how to improve AGOA. They suggest that the bill’s ineffectiveness to date may not be entirely a result of hidden trade barriers.

“AGOA can’t reach those many African communities that aren’t involved in the production process, simply because of domestic restrictions and a lack of adequate infrastructure,” Mwangi S. Kimenyi, the director of the Africa Growth Initiative at the Brookings Institution here, told IPS.