News / Africa

Study Weighs Benefits of US-Africa Trade Reforms

Some of the items from an AGOA exhibit (Photo credit:  US Dept of State)
Some of the items from an AGOA exhibit (Photo credit: US Dept of State)
William Eagle
Can the United States take a trade law that’s helping to increase African exports, and make it better?  That’s what African and American politicians, economists and policy makers are discussing as they consider the future of the African Growth and Opportunity Act, or AGOA. 
 
The legislation, which expires in two years, drops duties and tariffs on thousands of products from the continent. Supporters say it’s generated hundreds of billions of dollars in trade and investment opportunities.                                                                 
Most African development specialists and policy makers would like to see AGOA extended, at least for another ten years. Some would like to add other low income countries outside Africa or include a wider range of products. 
 
A new study by the Washington-based Brookings Institution looks at how changes to the law might affect US trade with Africa.
 
According to the report,  failing to extend AGOA would be among the worst options. 
 
Curtailing wealth creation  
 
The Brookings study says it would lead to a two percent drop in Africa exports to the United States, or about one billion dollars. 
 
African sectors affected by the end of AGOA -- and the return of tariffs -- would include meat and dairy, leather, textiles and manufactured goods.  Limited gains made in economic diversification would disappear in many AGOA-eligible countries, as would associated employment gains.  The act has been credited with creating over 300,000 jobs in Sub-Saharan Africa. Many of those would be put at risk. 
 
Wages for unskilled agriculture labor would be harmed particularly in South Africa and members of the Southern African Customs Union, Nigeria, and East Africa.   Pay for skilled laborers in the textile and apparel industry would drop in Mauritius and Malawi. 
 
The advantages of extension
 
On the other hand,  renewing AGOA would continue to improve African trade and revenues. Dropping all US quotas and duties on goods on AGOA-eligible countries would provide Africa with even greater gains.
 
Mwangi S. Kimenyi, a senior fellow and director of the Africa Growth Initiative at the Brookings Institution in Washington,DC.,  says Africa would benefit from increased trade with the US. 

"There’d be a big change in total value of trade between US and Africa….and because Africa is a small  global market player,  the cost to the US for allowing these  products to come into the US are extremely small,  with no major [effects] on the US economy…”
 
In fact, he says opening the US market to these sectors would cost the US less than $10 million dollars per year, but increase African exports by $72 million dollars.
 
In another proposed trade reform, some want to drop the 14 middle-income countries that are part of AGOA today.  The Brookings study shows that under this plan, several countries would see large drops in exports to the US. 
 
Nigeria would lose $500 million per year from mining and energy, agriculture and food.  Mauritius would lose about $95 million dollars, with a majority from textiles.  South Africa alone would lose nearly $260 million dollars in exports (including meat and milk products), while the rest of the Southern African Customs Union would lose about $110 million.
 
Out of Africa
 
US lawmakers are also considering an extension of AGOA-like preferences beyond Africa to other lesser developed regions of the world .
 
The report finds that doing so could harm African countries already enjoying AGOA-provided access to US markets. 

"What about if you give the same [duty and quota-free] preferences to low income developing countries …. like Bangladesh and Cambodia," he asks. "Particularly in the area of textiles..  we find that African economies would not be able to sell much to the US..In fact, there would be big losses to African countries."
 
Economic Partnership Agreements
 
The study also considers the effect of other trade pacts, including Economic Partnership Agreements, or EPA’s, between the European Union and the developing world. 
 
They would create a free trade area with reciprocal preferential trade agreements between the EU and countries that would belong to five EPA-created regions:  West Africa, Central Africa, East and Southern Africa, the Southern African Development Community and the East Africa Community.
 
Kimenyi says the report is not in favor of the agreements.

"Our model shows that….a lot of Africans would lose from EPA’s and if the US followed the same [idea], using EPA’s….it would be bad for Africa," he said..
 
The report says EPA’s encourage commerce within designated regions,  but not between African countries belonging to different regional blocs.  For example, some countries bordering each other, like Mozambique and Malawi, would belong to different EPA groupings, and would each maintain high tariffs on each other.
 
Free trade areas
 
But the report does cite another tool for boosting African exports: free trade areas, or FTA’s.
 
For example, it found that an FTA between the US and EU would increase world trade by up to $124 billion dollars.  It says Africa could benefit from such a deal if it implements regional trade agreements, preferably a continent-wide free trade area, or CFTA. 
 
The report says $36 billion dollars per year in new trade would be created by dropping all quotas and tariffs between and among all countries on continent. 
 
The resulting increase in exports could work to help offset the large loss of revenues from dropping duties and tariffs.
 
The question now, say Africa watchers, is if there’s political will to enact the economic reforms. 

Listen to report on Brookings study on African-US trade
Listen to report on Brookings study on African-US tradei
|| 0:00:00
...    
🔇
X

You May Like

Video Miami Cubans Divided on New US Policy

While older, more conservative Cuban Americans have promoted anti-Castro political movement for years, younger generations say economically, it is time for change More

2014 Sees Dramatic Uptick in Boko Haram Abductions

Militants suspected in latest mass kidnapping of over 100 people in Gumsuri, Nigeria on Sunday More

Video Cuba Deal Is Major Victory for Pope

Role of Francis hailed throughout US, Latin America - though some Cuban-American Catholics have mixed feelings More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Sudan School Becomes Target of Aerial Attacksi
X
December 19, 2014 12:45 AM
The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school
Video

Video VOA Reporter Tours Devastated Peshawar School

Islamist militants wearing military uniforms and strapped with explosives attacked a military run school Tuesday in the northwestern Pakistani city of Peshawar. At least 141 people were killed in the horrific attack, most of them young students. VOA reporter Ayaz Gul visited the devastated school and attended the funeral of the principal who courageously tried to save her students from the deadly attack.
Video

Video Nigerians Fleeing Boko Haram Languish in Camp Near Capital

In its five-year effort to impose Islamic law in northeastern Nigeria, the Boko Haram extremist group has killed thousands of people and forced hundreds of thousands to flee. Some of those who ran for their lives now live in squalor on the edges of the capital, Abuja. Chris Stein reports for VOA.
Video

Video Putin Says Russian Economy Will Emerge Stronger

Russian President Vladimir Putin has said his country's sinking economy will not only recover but also become stronger, despite falling oil prices and Western sanctions over Ukraine. VOA's Daniel Schearf reports.
Video

Video Detained Turkish Journalists Follow Teachings of US-Based Preacher

The Turkish government’s jailing of critical journalists has sparked international condemnation and is being seen as an effort to undermine the followers of an ailing Turkish preacher based in the United States. VOA religion reporter Jerome Socolovsky has more.
Video

Video ‘Anti-Islamization’ Marches Increase Tensions In Germany

Anti-immigrant rallies in Germany have been building in recent weeks, peaking Monday night in the city of Dresden where tens of thousands of people turned out to demonstrate against what they call the ‘Islamization’ of the West. Germany has offered asylum to more Syrian refugees than any other country, and this appears to have set off the protests. Henry Ridgwell reports from London.
Video

Video Aceh Rebuilt Decade After Tsunami, But Scars Remain

On December 26, 2004 there was an earthquake in the Indian Ocean so powerful it caused the Earth’s axis to wobble a few centimeters. Onshore on the island of Sumatra, the resulting tsunami was devastating. A decade later, VOA Correspondent Steve Herman reports from Banda Aceh, Indonesia, where although there is little remaining evidence of the physical devastation, the psychological scars among survivors remain.
Video

Video Refugees Living in Kenya Long for Peace in the Home Countries

Kenya is host to numerous refugees seeking safe haven from conflict. Immigrants from Somalia face challenges in their new lives in Kenya. Ahead of International Migrants Day (December 18) Lenny Ruvaga has more for VOA News from the Kenyan capital.

All About America

AppleAndroid