TRALAC - Trade Law Centre

AGOA Forum 2007: Outcomes of the African Ministerial Consultative Group

Monday, 23 July 2007

Source: AGOA.info

A meeting of the African Ministerial Consultative Group on AGOA took place on the sidelines of the AGOA Forum in Accra, and was the second such meeting to be held. In attendance were 34 of a possible 38 AGOA beneficiary countries, as well as various regional institutions such as COMESA, SADC, SACU, ECOWAS, NEPAD and the Africa Development Bank.

The meeting was chaired by Hon. Alan Kyerematen, Ghana’s Minister of Trade and Industries. In his opening remarks, he emphasised the need for the Forum to focus on the practical implementation of AGOA-related activities. There was a need for policies and programmes that enhance the capacity of beneficiary countries to be able to supply the US market and compete more effectively.

The specific challenges faced by African countries are mostly of a technical and supply-side nature. Technical issues include the stringent non-tariff measures, including technical standards and SPS requirements, which need to be complied with for entry into the US market. This is of particular relevance for agricultural and agro-processed products, where African countries have a comparative advantage. Another issue that was raised was the difficulty associated with obtaining a business visa for the USA.

Supply-side challenges facing AGOA beneficiaries are manifold. The Consultative Group found that these include the inability of most African producers to meet large US orders, inadequate managerial know-how, high transportation costs (both in terms of logistics and cross-border issues), and the general state of infrastructure in many African countries. Improved infrastructure has been identified by many stakeholders as one of the key drivers of manufacturer competitiveness.

Other issues that were identified by participants include the stiff competition in the US market for Africa’s cotton exports brought about by US subsidies, which have the effect of lowering the price of cotton. Also, the issue of duty-free quota-free market access was raised, with the meeting finding that since this would also benefit countries outside of Africa (notably Cambodia and Bangladesh), the effect would be to reduce Africa’s margin of preference for US exports and thus will have negative consequences on AGOA beneficiaries. Presumably the greatest competition will be in the garment industry, which is a key sector with respect to manufactured exports to the US.

With respect to the garment industry, the group found that South Africa and Mauritius’ differentiated treatment under AGOA’s wearing apparel provisions, which prohibits the use of non-originating (third country) fabrics, should be amended and brought in line with the rules faced by LDCs. At present, South Africa and Mauritius are de facto subject to a triple stage transformation requirement: spinning of yarn, weaving of fabric and making up of the finished garment. This is an issue that has been controversial from the outset, even among the various stakeholders within South Africa.

The meeting concluded with a list of action items to be further investigated and / or undertaken by African governments and the United States.

Issues to be addressed by Africa:

Enhancing capacity building in meeting sector-specific standards

Attracting new FDI by promoting joint ventures and intra-regional trade

Development of trade policies with implementation programmes

Increase access to finance

Improvement in quality standards

Increase mobility and availability of skilled labour

Introduce trading houses to increase visibility of Africa’s exports in the US

Strengthen regional markets to increase regional competitiveness

Organise small rural enterprises into co-operatives that are able to cater for larger orders from the US

Support product diversification and beneficiation activities

Washington-based Ambassadors of African countries to take a lead role in preparing for AGOA Experts meetings

Issues to be addressed by the United States:

Aid for trade (A4T) should focus on financing infrastructure to help address supply side constraints

US to provide technical assistance to Africa eg. concerning fumigation

US called upon to facilitate establishment of petro-chemical industries in Africa for greater beneficiation there, with refineries in at least three African regions (South, East and West Africa)

Reduce red tape and streamline process involved in obtaining US business visas for the African private sector

Review AGOA rules of origin (ongoing)

US to focus on a more diverse investment portfolio outside the oil extraction industries

US to push for an extension of AGOA legislation

Joint priorities:

Strengthening of production and marketing caoacities including market research and private sector activities in collaboration with the USAID Trade Hubs

Improved technical and financial assistance mechanisms for the private sector stakeholders