Africa: Building on AGOA for African Agricultural Trade Expansion

29 August 2006

Washington, DC — On the final day of the annual forum on the Africa Growth and Opportunity Act (Agoa) last month, the United States and Rwanda signed a bilateral agreement aimed at increasing trade flow between the two countries.

The Office of the United States Trade Representative (USTR) valued Rwanda's exports to the United States at $6.3 million in 2005, up by 17 percent from 2004.

By many projections, Agoa has been a positive outcome for participating countries like Rwanda, but there are still many implementation issues that impede its effectiveness and benefits.

For one, Agoa hasn't really given market access for products "that Africans have the comparative advantage at producing, like sugar, peanuts and vegetables," says Frances Smith of the Competitive Enterprise Institute. Under Agoa, there are 6,500 products listed as eligible for export, but most countries can only export one or two commodities, which, for Rwanda, is coffee. And often processed goods aren't admitted duty-free.

Rwanda, like many other African countries, wants expanded trade with the United States. In fact, many Agoa participating countries are eager to export more of their agricultural products, which is one reason for Rwanda's recent bilateral agreement with the U.S. But the ability of African countries to produce crops for export varies from country to country, along with stiff non-tariff terms or standards of production.

For Africans, the questions are: how to build enough trade capacity and simultaneously surmount production obstacles to energize the agricultural sector with a focus on transforming lives.

"More than 80 percent of African people are engaged in farming or related activities for their livelihood," says Daniel Karanja, a senior research fellow at the Partnership to Cut Hunger and Poverty in Africa, a Washington-based policy and advocacy group.  According to Karanja, Agoa's focus early on was on the market for cotton, textiles and apparel, and many countries worked hard to be eligible.

However, the agricultural sector is where Africans have much more to offer. "African farmers have proven that they can be competitive given the knowledge and appropriate tools they need to do their work well," he said.

For Africans, the difficulties of international trade regarding agricultural commodities can seem insurmountable. Beyond the market access, "you've got to have something to sell and be able to get your stuff to the market," Karanja said. "Many countries have weak infrastructure. Some of the landlocked countries have to pay heavily to get their products to ports." Direct flights are often lacking. And there is limited technical capacity, along with incoherent trade policies, he said.

Agoa wasn't designed to address these conditions. "But if any real change is going to happen, then Agoa is now expected to help address these issues," said Oxfam America President Raymond C. Offenheiser. "Since more than three-quarters of the population of sub-Saharan Africa depends directly on agriculture for their livelihoods, efforts to promote sustainable agriculture must be at the heart of any trade legislation with Africa," he said.

"If trade is going to be a useful tool for enabling African development in the context of Agoa," Karanja said, Africa's agricultural sector must be infused with resources for capacity building and better infrastructure. Food crop production remains the focus of most African farmers, but as countries struggle to build their agricultural business, it is relevant that they have the institutional infrastructure available to support it. "The U.S. must work with Africans to overcome these development challenges," Karanja said.

Agoa-eligible countries have to identify their advantages in growing crops and manufacturing. "They need to look at diversifying very closely, perhaps growing certain fruits and vegetables for niche markets. Financing is a big issue in many participating countries, and the time limitation within Agoa is a drawback," Smith said. "An investor is going to be looking at a lot longer-term, given the time it takes to build and get things going."

New development initiatives to strengthen Agoa will have costs and benefits attached. Encouraging African agricultural sector productivity is highly desirable. But it would involve increased financial assistance that isn't in the Agoa legislation as presently constituted. Activists hope to change that in 2007 when two key elements of the Agoa legislation are expected to be renewed. The renewal legislation broadens the definition of the textile and apparel products that are eligible to receive duty-free treatment. Extension is sought for the third-country provision that allows African textile exports to use a percentage of fabric from a third region.

The legislation would expand Agoa by providing duty-free market access to the U.S. for agricultural products, such as dairy, beef, and sugar, away from petroleum products. Activists said lifting trade protections for U.S. farmers and encouraging trade with Africa would make a small dent in the U.S. market, but have a big impact on African economies.

Fred Oladeinde of the Foundation for Democracy in Africa said the efforts for reform must be multifaceted, with a significant focus on making changes in the continent. He wants "emphasis placed on partnership." Oladeinde said Africans can compete if there's truly fair trade, "but there's a lot of work to be done before we can get there."  He urges African governments to double their efforts and address the systemic problems of poor infrastructure.

Karanja agrees that reform should happen on all sides. He advocates for reforms of trade regulations both internationally and in African countries. It would also help if countries work in concert and coordinate policies.

If the world invested in agriculture and helped Africans participate in international trade, "we're bound to see the result in people's lives much faster," he said.

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