TRALAC - Trade Law Centre

AGOA Forum 2006: Stakeholders Seek Ways To Broaden AGOA Opportunities

Monday, 12 June 2006

Source: Allafrica.com

When the African Growth and Opportunity Act (AGOA) was enacted in 2001, the legislation "changed U.S. political discourse with African countries from begging bowl to business partner," David Beckman, president of Bread for the World, told a gathering of non-governmental organizations convened to examine Agoa's impact on economic growth and poverty reduction on the African continent.

Over the past five years, the law has reduced trade barriers and stimulated job creation and opportunities for private enterprises in those African countries that qualified to participate. But changes are needed "because the U.S. market is only interested in energy-related commodities from African countries," said Beckman, whose nationwide Christian organization focuses on fighting hunger around the world.

Last week's two-day Civil Society Forum was part of a series of annual meetings here headlined by an official gathering at the State Department of ministers from the 37 Agoa-eligible African nations. The schedule included a day-long conference for private sector representatives and an investment round-table that brought together the presidents of the World Bank and African Development Bank and representatives of leading private equity firms investing in Africa.

"As a result of Agoa, the United States and Africa are prospering together," Secretary of State Condoleezza Rice said in her opening address to the ministerial forum. "The United States remains Africa's great partner in trade and in assistance. While oil remains a source of our expanding trade relationship, last year we also saw impressive growth in sectors like agriculture and machinery and electronics," she said.

To expand the relationship further, Rice said new actions must be taken by the United States and by Africa. She cited the African Global Competitiveness Initiative, a $200 million program launched by President Bush in 2005 to assist African companies, along with what she called the president's "bold commitments last September to eliminate all U.S. barriers that prohibit the free flow of goods and services as long as other nations do the same." African governments need to reduce red tape, open their borders to trade with neighbors and "continue diversifying their economies," Rice said.

During the sessions at the various meetings, participants differed widely in their assessments of what Agoa has accomplished and what needs to be done to increase economic and social development through trade. There is agreement that countries have benefited from duty-free access to the American market for many of their goods and commodities, particularly textiles and apparels. But increasingly, African stakeholders want market access to be coupled with specific modifications to make the opportunities more meaningful. And many are seeking to add agricultural products to the list of some 6,400 goods that can be exported to the United States on a duty-free basis.

"The Agoa we need would also provide commodity producers with skills-building and technical assistance," said Kwame Amoako Tuffuor, a Ghanaian delegate at the Civil Society meeting held on the campus of the George Washington University. Africans also want micro-financing assistance for small and medium enterprises to expand production and enhance our product quality "so that the goods we supply can meet global market standards and be competitive, he said. Without these two key supporting factors "Agoa's promise to help Africans eradicate poverty cannot be fulfilled," said Paul Mugambwa, a Ugandan delegate.

At the Private Sector Forum, much of the discussion focused on creating "an enabling environment" that would make Africa more attractive for investment. U.S. investors aren't flocking to Africa, even though the continent presents a number of attractive opportunities with high-return potential, several participants noted. One explanation offered is that investors seem to be overwhelmed by the complexities of the social, political and cultural terrain of African countries, many of which also have poor infrastructure.

African governments could help by lowering regulatory barriers to investment and facilitating cultural education for interested American businesses, several speakers said. Africa could strengthen its bargaining position by adopting a unified position on trade issues, according to Paul Ryberg, president of the Africa Coalition for Trade. "We need one voice, one vision to present to Congress," he said.

He also believes American businesses would be more apt to invest in Africa countries if the perception were removed that "Africa is one big bundle of risk." One way to address misperceptions, Ryberg said, is for African political leaders to reach out to American businesses to emphasize how vital Africa is to the U.S. economy. African leaders should take time to create more awareness by meeting with American business leaders, keeping in mind "that some of these companies have assets greater than some countries," Ryberg said.

At a ministerial luncheon organized by the Corporate Council for Africa, whose members include both large and small businesses with African interests, U.S. Assistant Secretary of Commerce for Africa, Holly Vineyard pinpointed several obstacles that discourage a higher level of interest from American firms. One problem area is poor infrastructure, she said. "The U.S. is a time-sensitive market and African producers need to further develop their capacity to serve the U.S. market." Another area of concern is intellectual property. Piracy also damages African businesses, she said.

One way to improve Agoa, several African business leaders said, would be by providing more information to investors on investment opportunities and more resources for managing risk.

Two important elements of Agoa will expire in 2007 - the Third Country Fabric provision for textiles and apparels, and the Rules of Origin of the components of finished products brought into U.S. markets. Most African countries are not yet able to sew sufficient quantities of cloth for the apparel they can produce, and the Third Party Fabric provision in the legislation allows them to export duty-free to the United States clothing made in Agoa-eligible African countries using cloth sourced from outside the continent. Over 85 percent of apparel exported to the United States from Agoa countries in 2005 was made with material from Asia. (For the latest apparel trade statistics available on AGOA.info, please follow this link

"Textiles are the most important export under Agoa for non-oil producing countries in Africa," Kenya's Trade and Industry Minister Mukhisa Kituyi told Nation correspondent Kevin J. Kelley. "It's the cornerstone of Agoa for us." Unless the Third Party Fabric provision is extended, Agoa "will be virtually dead," the minister is quoted as saying.

SenatorsAgoa supporters hope to generate public and Congressional support both to extend expiring provisions and to add elements that would strengthen the legislation, as was done in 2004. Civil society groups want trade preferences extended to the agricultural sector. They also advocate the provision of skill training and technical assistance to increase Agoa's positive impact, and they see support for micro-financing assistance as a critical element for boosting small and medium enterprises that help farmers' cooperatives bring their products to the market.

Petroleum and minerals account for over 80 percent of United States imports from Africa, coming primarily from oil-producing Angola, Gabon and Nigeria and mineral giant South Africa. The rest comes from the other 33 nations that have been certified for eligibility under the terms of the law. "Even if all the 48 Africans countries qualify for Agoa, without the needed technical assistance, only the oil producers will still benefit," said Vore Gana Seck, one of the civil society delegates from Senegal.

We must keep in mind that there's a development aspect to this process and "everybody has a role to play in order to advance Agoa," says Fred Oladeinde of the Foundation for Democracy in Africa, a member of the Civil Society Coalition. To improve Africa's development and enhance African competitiveness in the global economy, he said, African NGOs must double their efforts and work with both the private sector and their governments.