U.S. – Africa trade: Africa to benefit more from AGOA with a developed manufacturing engine

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The primary goal of the African Growth and Opportunity Act (AGOA) — which was signed into law as part of the larger Trade and Development Act in 2000 — was to help increase both the volume and diversity of U.S. trade with sub-Saharan Africa.

“AGOA also promotes economic cooperation and trade among the countries of sub-Saharan Africa by encouraging intraregional trade among AGOA beneficiary countries,” Assistant U.S. Trade Representative Florizelle Liser testified at a recent congressional hearing. Two-way trade between the United States and sub-Saharan Africa was $104.6 billion in 2008. This was more than triple the amount in 2001, the first full year of AGOA implementation, she said.

Total U.S. trade with sub-Saharan Africa in 2002 under AGOA totaled $23.92 billion, and it has risen each year since then, according to U.S. government reports.

More countries

However, Liser said, the United States recognizes that trade with Africa has dropped as a result of the global economic crisis and declining oil and commodity prices. Many more African nations are taking advantage of the liberal trade opportunities under AGOA, she said, but some are facing significant challenges in their efforts to increase trade.

“We are continuing our efforts to increase the number of AGOA-eligible countries taking advantage of the program, and we are also trying to address the many supply-side constraints the Africans face, and to help them increase the range and quality of products being traded and improve Africa’s overall competitiveness,” Liser said.

The 8th AGOA Forum will be held August 4–6 in Nairobi, Kenya, at the Kenyatta International Conference Center. As part of the AGOA law, there is an annual meeting between the United States and African nations known as the AGOA Forum. The August forum is the eighth such event. Its theme focuses on encouraging private investment that will help expand trade and economic growth for the AGOA countries.

Critical balance

Liser said that if sub-Saharan Africa increases its share of global trade by just 1 percentage point to 3 percent, it would generate additional export revenues of $70 billion annually. “This reflects the importance of trade as a critical platform for Africa’s economic growth, which is nearly three times the amount of current annual assistance to Africa from all donors” she said.

Economists believe that striking a critical balance between trade volume and diversity of the exports is essential to long-term regional economic development and growth.

AGOA — which has been modified several times since its original enactment — was designed to extend preferential treatment to imports from eligible countries that are pursuing market reform measures, said Danielle Langton, an international trade and finance analyst with the U.S. Congressional Research Service, in a recent analysis of AGOA. “Data show that U.S. imports under AGOA are mostly energy products, but imports to date of other products have grown,” she said.

The AGOA law also directs the U.S. president to provide government technical assistance and trade-capacity support to AGOA countries, Langton said. Government agencies with roles in helping African nations include the U.S. Agency for International Development, the Office of the United States Trade Representative, the U.S. Overseas Private Investment Corporation, the U.S. Export-Import Bank, the U.S. and Foreign Commercial Service and the U.S. Trade and Development Agency.

Lack of manufacturing engine

Liser said that exports from the continent are concentrated in primary commodities such as petroleum, minerals, cocoa and coffee. She added that “there is little of the manufacturing engine in sub-Saharan Africa that has fueled economic growth and reduced poverty in other regions of the world.”

And Liser said that agriculture, which is regarded as Africa’s strong suit, has not been a positive contributor to export trade. In 2005, she said, the region switched from being a net exporter to a net importer of farm products.

“We believe that export diversification and further processing of agriculture products into higher-value exports could help improve food security in the region by addressing issues of availability and stability of food supply,” Liser said.

U.S. – Africa trade profile

U.S. total trade with sub-Saharan Africa, which includes both exports and imports, rose 28 percent in 2008 from the year before, as both exports and imports grew, according to a U.S.-Africa trade profile published by the U.S. Commerce Department’s International Trade Administration (ITA). In 2008, U.S. exports totaled $18.6 billion, compared with $14.4 billion in 2007, and imports in 2008 reached $86.1 billion, compared with $67.4 billion in 2007, the ITA report said.

Exports were driven by demand for machinery, vehicles and parts, wheat, noncrude oil, aircraft and electrical machinery, which included telecommunications equipment. U.S. imports of African products were led by crude oil and passenger vehicles, the report said.

Africa News Report  Africa News Report is a specialist information dossier dedicated to providing news information and analysis from a diplomatic and political perspective. Topics covered include some of the most pressing health, economic, political and social issues. Besides bringing its multi-facetted news, views and analysis to the fore, Africa News Report seeks to highlight the United States' policies and positions on diverse issues affecting the African continent.
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