Africa growth opportunity vs America’s trade policy with Africa

Africans love President Barack Obama, for the same reasons as the rest of the world. They also love him for ancestral reasons. Yet, it is common to hear it said on the continent, that Presidents George W. Bush and Bill Clinton did more for Africa than Obama, the first sitting United States (U.S) president to address the African Union (AU).

Clinton’s African Growth and Opportunity Act (AGOA), and Bush’s President’s Emergency Plan for AIDS Relief (PEPFAR), are proofs of the duo’s strategic policies for Africa. In fairness to Obama, he maintained both policies. But even his admirers would admit that foreign policy was his Achilles heel.

U.S and European relationships with Africa are usually between a donor and a recipient. This relationship has not always been beneficial to either party. And it is why critics often say, what Africa needs is trade and investments and not aid, relief materials or grants. That may be true, but it belittles the tremendous impact programmes like PEPFAR have had in the lives of Africans.

Most will argue though, that it is criticisms such as the one cited above, that made AGOA possible, because it is the first U.S trade policy towards Africa.

Nonreciprocal Trade Policy

AGOA was signed into law on 18th May, 2000 by President Bill Clinton. Rosa Whitaker, who served both Clinton and Bush’s administrations as the first ever Assistant U.S. Trade Representative (USTR) for Africa, is considered the architect of AGOA. However, there was an ‘AGOA Coalition’ of U.S representatives which developed the concept in 1995.

The Act is nonreciprocal; its objectives are to improve economic relations between the U.S and Sub-Saharan Africa (SSA) and to help the economies of eligible SSA countries grow by giving them preferential duty-free access to the U.S market. It is like a General System of Preferences (GSP) by the U.S, different from the ‘‘more general rules of’’ World Trade Organisation (WTO), or from European Union’s (EU) Economic Partnerships Agreement (EPAs) with Africa, which has some reciprocal tariff benefits.

AGOA has been renewed twice, in 2008 and 2015, with the most recent renewal extending it to 2025.

There are 49 countries in Sub-Saharan Africa, 39 of them are currently eligible for AGOA. Some of the ineligible countries are namely, Zimbabwe, Congo DRC, Gambia, and Sudan.

How Beneficial is AGOA?

In 2010 after a decade of operation, there were questions regarding the significance of AGOA’s achievements. In response to those who call it a ‘‘disappointment’’, Rosa Whitaker is reported to have said:

‘‘I, for one, am not disappointed in the progress made under AGOA over the past 10 years. Exports from AGOA-eligible countries grew over 300% from $21.5 billion in 2000 to $86.1 billion in 2008. Of that, $28 billion was in non-oil exports – automobiles from South Africa, apparel from Lesotho, cut flowers from Kenya, jams and jellies from Swaziland. None of these counted for much in 2000, but now, thanks to AGOA, they and a host of other nascent industries are beginning to make a significant contribution to Africa’s prosperity’’.

Jobs in Lesotho Apparel Sector

In a 2016 interview, Joshua Setipa, Lesotho’s Minister of Trade and Industry, said, ‘‘Four years after AGOA came into effect our exports have grown considerably, by volume and by value. We currently have around 44,000 people in the apparel sector in Lesotho. And out of that 44,000, 32,000 are directly related to AGOA exports’’.

Also, the policy has attracted investments from U.S companies. Automobile firm, Johnson Controls, invested in Lesotho, to help it diversify its exports to include upholstery for vehicles.

Diversified South Africa Exports

South Africa has had the most diversified exports to the U.S., under AGOA. Some of these exports are vehicles, oranges, wine, citrus and macadamia nuts. In 2014 alone, South Africa exported agricultural products worth $176 million.

Potential in Kenya Apparel Sector

A 2015 Mckinsey report said Kenya has the potential to export garments worth $3 billion by 2025. The forecast is based on the number of European companies sourcing garments from Eastern African countries, and on the renewal of AGOA.

Dwindling Nigeria and Angola Energy Exports

From 2013, U.S oil imports from SSA decreased considerably. Nigeria and Angola which led the region in oil exports to the U.S were the most affected. Yet, petroleum products still account for largest portion of AGOA exports.

Opportunity No Utility

In theory, granting duty-free access to the U.S. consumer market, which is worth trillions in dollars, is a great opportunity for SSA. However, because of the lack of infrastructure, technology, technical skill, and a conducive environment for domestic investment, the very issues for which AGOA was enacted and was designed to solve, most SSA countries have been unable to take advantage of the Act.

Trade Deals or Merely Aid 2.0

Many SSA countries that have benefited from trade deals like AGOA and EU’s EPAs have done so through single primary commodity exports. SSA countries benefit from these deals by supplying raw materials, and most times, because proceeds are not ploughed back into the economy, these countries find it difficult to diversify their AGOA exports.

The AGOA trade act has been described as ‘One Way’, a U.S initiative without inputs from Africa. The trade partner, who designed the Act (or deal), like the Igbo proverb says, holds the yam and the knife. A trade deal can only be fair if it is entered into by equals, or if the weaker party has leverage. This isn’t the case with AGOA, as South Africa realised, when it was threatened with suspension, after concern about an outbreak of avian flu in the U.S, forced it to place restrictions on American poultry.

Like Dr. Nkosazana Dlamini-Zuma, the former AU chair said, ‘‘Africa’s only protection in these treacherous global waters is to honour the decision to commence its own Continental Free Trade Area in 2017’’.