Download US-Africa AGOA Trade Program

NS4301
Summer 2015
Africa/US AGOA
Overview
• Oxford Analytica, “Africa/US: Trade Deal to Nudge
Development,” March 16, 2015
• Current version of the US African Growth and
Opportunity Act (AGOA) expires on September 30, 2015
• Legislation affords preferential (duty-free) and nonreciprocal access to U.S. markets to eligible SSA
countries
• Since its inception in 2000 AGOA has benefitted a few
SSA economies, but largely failed to reach its potential as
major driving force in continent’s development
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AGOA Eligibility I
• Eligibility for AGOA
• A country that has established, or is making continual
progress toward establishing:
• a market-based economy that protects private property rights,
incorporates an open rules-based trading system, and minimises
government interference in the economy
• the rule of law, political pluralism, and the right to due process, a
fair trial, and equal protection under the law;
• the elimination of barriers to United States trade and investment
• the provision of national treatment and measures to create an
environment conducive to domestic and foreign investment;
• the protection of intellectual property; and
• the resolution of bilateral trade and investment disputes;
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AGOA Eligibility II
• For eligibility, the country must also establish
• economic policies to reduce poverty, increase the availability of
healthcare and educational opportunities, expand physical
infrastructure, promote the development of private enterprise,
and encourage the formation of capital markets through microcredit or other programs;
• a system to combat corruption and bribery and
• protection of internationally recognized worker rights, including
the right of association, the right to organise and bargain
collectively, a prohibition on the use of any form of forced or
compulsory labour
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AGOA Eligibility III
• For eligibility the country also must not
• engage in activities that undermine United States national
security or foreign policy interests; and
• engage in gross violations of internationally recognised human
rights or provide support for acts of international terrorism and
cooperates in international efforts to eliminate human rights
violations and terrorist activities.
• If the President determines that an eligible Sub-Saharan
African country is not making continual progress in
meeting the requirements shall terminate the designation
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AGOA I
• AGOA ostensibly “developmental” because it grants trade
preferences to a wider range of products than already allowed
under the US generalized system of preferences (GSP) which
covers all developing countries.
• It aims to support export-led economic growth and structural
diversification along with deeper US/Africa trade and
investment links
• Products qualifying under AGOA cover 20,000 individual tariff
lines within the US Tariff Structure – almost 2,000 more than
under the GSP
• The expansion of duty-free access to cover certain apparel and
footware products has been particularly important
• AGOA also grants exemptions from a number of caps on GSP –
allowable duty free imports
• However it excludes duty free imports of agricultural products
subject to tariff-rate quotas
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AGOA II
Restrictive rules
• AGOA’s rules of origin are fairly restrictive
• Require direct importation of the product from the
beneficiary country to US with a minimum of 35% of its
appraised value originating either from within one or
more of beneficiary countries or US itself
• Difficult for many SSA exporters to prove given
underdeveloped labelling capabilities and often opaque
supply chains
• However these rules have been relaxed for certain textile
and apparel products.
• Previously deemed too “import sensitive” by the United
states this will apply to selected AGOA countries
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AGOA III
• The “third country fabric” provision is particularly
important
• Allows imports from certain AGOA countries to qualify
even if the component yarns and fabrics have emanated
from non-AGOA countries.
• Collectively, these preferences have enabled some AGOA
countries to compete with if not displace lower cost,
especially Asian producers in the US Market
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AGOA Trade Volumes I
Trade Volume
• US imports form AGOA countries were only $38.2 billion
in 2013 or less than 2% of total US merchandise imports
• Of these 70% were duty-free either under AGOA of GSP
• Energy related products (mostly crude oil) were dominant
– 82% in 2013 with Nigeria, Angola, Chad, Gabon and
Republic of Congo all AGOA-Eligible
• However they were sharply lower – by $30 billion or more
than 50% than in 2011 due to US switch to shale
• Given the 2014-15 drop in oil prices, imports likely to be
considerably lower
• Also nominal US tariffs on oil imports are very low (only 5
go 10 cents a barrel) – possible that AGOA’s benefits of
this trade very low
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AGOA Trade Volumes II
• Non-energy exports
• Totaled $4.9 billion in 2013, though small (and slightly
below 2011), three times that of AGOA’s first year of
operation, 2001
• Manufacturing
• Remains one of AGOA’s largest beneficiaries
• Exemption from otherwise high tariffs provides
significant benefits to
• Lesotho and Kenya and to a lesser extent
• Mauritius, Swaziland and Botswana
• However total value of AGOA-relevant apparel imports
barely $900 million dollars in 2013 compared with China’s
$30.3 billion and total apparel imports of $50 billion
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AGOA Benefits
Skewed benefits
• South Africa by far largest exporter under AGOA, earning
$3.7 billion – about eleven times more than second place
Kenya
• Also includes diverse range of manufactured goods
• More generally preferential imports to US amounted to
less than $1 million dollars in over half of 40 AGOAeligible SSA economies in 2013
• Despite this -- wide support in SSA and the US for view
that AGOA has delivered increased and more diversified
African exports
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AGOA Issues
Constraints
• Even with improved access and marketing support, many
SSA enterprises lack the competitiveness necessary to
exploit AGOA fully
• Usually due to domestic constraints to business
development caused by
• Skills and infrastructure deficits
• Administrative burdens and other disincentives to innovation –
expropriation risks
• SSA exporters often flounder in navigating US trade
bureaucracy
Future
• Up for renewal in September 2015
• If renewed and in absence of meaningful economic
diversification in SSA’s smaller economies, its benefits
will remain limited.
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