Renew the African Growth and Opportunity Act

Udunopa B. Abalu
April 11, 2015

The U.S. Congress should revise and renew the African Growth and Opportunity Act (AGOA) before it expires on Sept. 30. AGOA has been encouraging export-led growth and improving economic development in sub-Saharan Africa since 2000. Now is the time to extend preferential market access to sub-Saharan Africa’s agricultural products—the backbone of the region.

aginvest

Although AGOA has had its successes, certainly more can be done. Many observers argue that AGOA has extensively expanded preferential access for diversified African exports to the United States. But AGOA exports—mostly concentrated in energy products—represent less than a 2 percent share of overall U.S. imports. AGOA can be enhanced if Congress allows provisions for African agricultural imports. Such imports should include cocoa (from countries like Côte d’Ivoire and Cameroon), tea and coffee (Ethiopia, Kenya and Uganda), cotton (Burkina Faso, Mali and Benin), rice (South Africa), palm nuts/oil (Cameroon and Nigeria), horticultural products (such as cut flowers from Ethiopia and Kenya), fish and fishery products (Ghana and Nigeria) and a wide spread of approved fresh and processed fruits and vegetables from various sub-Saharan countries. We can no longer ignore the potentials of these rising global economic giants.

This policy would help all sub-Saharan African countries and not just those that are energy exporters. It would lead to greater export diversification, and greater U.S.-Africa trading volume and commercial ties. It would bring more economic growth and political stability to the sub-Saharan African region, and more opportunities for U.S. exporters and consumers. A revised AGOA would ensure that the United States is both a partner and beneficiary of Africa’s dynamic economic future.

Too many “diversified” exports from Africa to the United States are energy-related products, which are from too few African countries. Total U.S. trade with sub-Saharan African countries decreased by 27 percent in the first quarter of 2014 compared to the same period in 2013—mainly because of falling oil prices and falling U.S. imports (mostly oil from Nigeria and Angola). On the other hand, U.S. imports (mostly cocoa) from Côte d’Ivoire increased by 54 percent. Moreover, U.S. imports of cashew nuts for consumption increased by 35 percent from Benin and 13.2 percent Burkina Faso from 2013 to 2014. Extending preferential access to agricultural products would not only increase export diversification but also encourage more African countries to maximize their ability to benefit under AGOA. Allowing agricultural provisions would allow AGOA to reach its highest potential.

Agriculture is Africa’s largest economic sector, representing 15 percent of the continent’s total GDP. While faced with competing agricultural exports from Asia and South America, AGOA states have comparative advantages in lower labor costs. As agricultural trade increases in Africa, so will jobs and income levels. AGOA states would also be less likely to engage in political conflict as agricultural trade increases.

Increased economic growth in AGOA states would benefit U.S. companies seeking to expand their businesses abroad. U.S. consumers would also benefit from having more access to low-priced agricultural imports. Even though U.S. agricultural producers might receive lower profit margins due to lowered prices from the increased competition, they would still enjoy domestic farm subsidy protection.

Still, some may argue that this policy will never be realized because of the politics surrounding U.S. farm subsidies. Moreover, for Congress to act on a significant piece of trade legislation during its fall session would be quite challenging, to say the least. According to an article by Witney Schneidman at the Brookings Institution, it took Congress more than a year to extend AGOA’s third-country fabric provision in 2012—a provision that had already been extended twice. Even as the provision was eventually extended, it was extended at the 11th hour, which then led to cancelled contracts and the loss of jobs in AGOA countries. Yes, expanding preferential market access to Africa’s agricultural imports will be difficult and time consuming, but it is possible and can be done with due diligence.

Key supporting actors from U.S. companies and trade associations can help garner further support from Congress. Devin Nunes (R-CA), Chairman of the House Ways and Means Trade Subcommittee, said in July 2014, before announcing the July 2014 Subcommittee hearing on AGOA, that “AGOA is an important development tool that has been proven to promote economic growth and jobs both in developing countries in Africa and the United States. … We are studying potential changes to the program to improve its effectiveness and utilization. We are also exploring how Africa can reduce barriers and become more attractive for trade and investment within Africa, as well as globally, such as through full implementation of the WTO Trade Facilitation Agreement.” Lobbying efforts would need to focus on those agricultural products that would not negatively impact competing U.S. domestic production. A special quota system should be implemented to allow market access for a set number of agricultural imports from AGOA states.

Leaving out agriculture from AGOA would be equivalent to leaving out sub-Saharan Africa from growing global trade trends. But market access alone is not enough. The United States should also engage African economic and trade associations, such as the Economic Commission for West African States (ECOWAS) and the Southern African Development Community (SADC), by organizing annual agricultural trade conferences for AGOA states, focusing on issues like trade facilitation, dealing with supply-side constraints, climate-change impacts on agriculture and food supply, strategic infrastructure investments, enhancing market competitiveness, and promoting awareness to African agricultural producers about AGOA. These conferences could cost approximately $300,000 at least, but can be funded through corporate sponsorship or the Foreign Agricultural Services budget.

Extending preferential market access to agricultural products is Africa’s crucial path to economic growth—and for the United States, a ripe fruit of abundant opportunities.

Udunopa B. Abalu is a graduate student and research assistant at the Elliott School of International Affairs at the George Washington University. She studies international trade and investment policy and is expected to earn her master’s next month. Her personal studies and research focus on African trade and economic development issues. She has in-country experience in Nigeria, Ghana and Ethiopia.

Sourced here http://www.worldpress.org/Africa/4047.cfm

Tags: , , , , , , , , ,

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: