Manchester Trade (Washington, DC)

11 December 2012

Africa: The Perfect Storm for an Enhanced Agoa

opinion

In September 2012, just as the 3rd Country Fabric was about to expire, a series of events conspired to create the perfect storm for an enhanced AGOA: The non controversial AGOA provision was, in a surprise turn of events, unanimously approved by the US Congress.

The bill had, due to partisan gridlock, languished for over a year, and in the process, both American and African businesses suffered loss from the uncertainty of renewal. But the manner in which 3rd Country eventually passed gave hope to the then despondent stakeholders that renewal of the AGOA program would be as seamless and also well before its July 2015 expiration date.

Besides, the 113th Congress, which commences January 2013, indicated that they'd address AGOA and the Generalized System of Preferences [GSP] - two programs that concurrently enable the duty free importation of certain products into the US from select developing countries. Should they do this, Congress will have, uncharacteristically, provided legislative solutions well in advance of their due dates.

That notwithstanding, a whole host of strategic stakeholders concur that while renewing AGOA is, undoubtedly, important to the US-Africa trade relationship, the program would be more beneficial to many more African and US based entrepreneurs if it were enhanced to include exports to Africa from the US and US investment in Africa - on top of its current preferential treatment for imports from Africa.

Enhancement must also include deepening trade preferences to include all agricultural products In addition to being expanded beyond trade preferences to not only include investment promotion but to add specific measures to insert Africa into global supply chains and distribution networks including strong support of the AU's continental FTA and customs union by the end of the decade. Thus, a new initiative from the Obama Administration, from Congress or stakeholders would ensure the true transformational nature of that the flagship US trade and investment program for Africa - beyond the 4 technical changes over the past 12 years of AGOA's existence.

But stakeholders may spur on the side of caution by opting for simple AGOA extension to either 2020 or 2025. The delay in passing the simple 3rd Country caused a number of US textile orders to be moved from Africa to Asia and there's grave concern amongst Southern Africa apparel manufacturers that an AGOA enhancement would be less favorable in replacing or limiting current benefits to resemble the reciprocal elements imposed by the European Union.

Trepidation aside, the benefits of an AGOA with real teeth would be well worth the effort. The US must strengthen its support for the private sector in both Africa and at home so that the world's largest economy can effectively compete against China and the European Union for a larger slice of the African trade pie.

As demonstrated by current trade flows; in the face of Chinese infrastructural investment in various parts of Africa and in Chinese control of natural resources and emigration, the US commercial position vis-à-vis third countries in Africa, has since 2009, precipitously shrunk. Additionally, there's overwhelming evidence that the European Union intends to overcome African opposition to Free Trade Agreements through the use of Economic Partnership Agreements that are tied to economic aid and market access to the region.

Basically, if African countries do not, individually or in small group, enter into these EPAs, aid will be reconsidered. Should the EPAs be signed before sub Saharan Africa has had a chance to establish a continental Free Trade Area and Customs Union, then the path to Africa's regional integration will be hampered with additional roadblocks!

There are countless synergies between the US and sub Saharan Africa. Not only does the continent's private sector stand to benefit from the hefty one trillion dollars worth of capital held by American multinational corporations: A progressive US | Africa trade and investment policy would allow African countries to bargain collectively and also introduce higher standards of living from high quality American goods plus the associated robust investment.

The foundation for a more expansive initiative has already been laid by the business oriented visits to the continent by Secretary of State, Hillary Clinton, acting Commerce Secretary Rebecca Blank, Presidential adviser, Michael Froman and other high profile Obama administration personnel. Secondly, although this was overshadowed by the General Election, the President issued a June 2012 directive laying out the basis for a more coordinated approach to US | Sub Saharan Africa relations.

This directive focuses as much on trade and investment as it does on human rights and democracy - a significant change from past practice. There are also a number of legislative bills geared towards better coordination between US trade and investment agencies, and the US Ex-Im Bank - the nation's Export Credit Agency - is adopting a more aggressive strategy to insure American businesses against loss, just as the Overseas Private Investment Corporation, OPIC, is proactively financing US private sector projects and enhancing support for regional integration. Additionally, as a way to recognize their significant investment on the continent, both Congress and the State Department are empowering the African Diaspora in various ways.

These are what make the 'perfect storm' for an initiative befitting of the times. The Africa Program at the Woodrow Wilson Center and Manchester Trade, a Washington DC based trade policy firm, are undertaking a program designed to develop consensus on what could be the most effective way to progress from AGOA. More than 30 recommendations are to be considered by stakeholders in this exercise This is an excellent place to start - with various African and American stakeholders working together to establish the basis of an overarching program.

Stephen Lande is currently President of Manchester Trade and former Lead Negotiator at the US Trade Representative's Office. He led US preferential programs dating from the 70's and 80's when he developed the US GSP and CBI programs. Dennis Matanda is an American Policy Analyst from Uganda who serves as Editor at The Habari Network and currently works in Global Banking and Corporate Communications in Manhattan.

The Woodrow Wilson Center | Manchester Trade collaboration can be found here.

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