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

Tired of Waiting, South Africans Demand Change ‘Now’

With chronic poverty and lack of basic services largely fueling recent xenophobic attacks, many in Rainbow Nation say it’s time for government to act More

Challenges Ahead for China's Development Plans in Pakistan

Planned $46 billion in energy and infrastructure investments in Pakistan are aimed at transforming the country into a regional hub for trade and investment More

Audio 'Forbidden City' Revisits Little Known Era of Asian-American Entertainment

Little-known chapter of entertainment history captured in 80s documentary is revisited in new digitally remastered format and book 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.
Study: Insecticide Damaging Wild Bee Populationsi
X
April 24, 2015 10:13 PM
A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.
Video

Video Study: Insecticide Damaging Wild Bee Populations

A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.
Video

Video Data Servers Could Heat Private Homes

As every computer owner knows, when their machines run a complex program they get pretty hot. In fact, cooling the processors can be expensive, especially when you're dealing with huge banks of computer servers. But what if that energy could heat private homes? VOA’s George Putic reports that a Dutch energy firm aims to do just that.
Video

Video Cinema That Crosses Borders Showcased at Tribeca Film Festival

Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.
Video

Video UN Confronts Threat of Young Radicals

The radicalization and recruitment of young people into Islamist extremist groups has become a growing challenge for governments worldwide. On Thursday, the U.N. Security Council heard from experts on the issue, which has become a potent threat to international peace and security. VOA’s Margaret Besheer reports.
Video

Video Growing Numbers of Turks Discover Armenian Ancestry

In a climate of improved tolerance, growing numbers of people in Turkey are discovering their grandmothers were Armenian. Hundreds of thousands of Armenians escaped the mass deportations and slaughter of the early 1900's by forced conversion to Islam. Or, Armenian children were taken in by Turkish families and assimilated. Now their stories are increasingly being heard. Dorian Jones reports from Istanbul that the revelations are viewed as an important step.
Video

Video Migrants Trek Through Western Balkans to Reach EU

Migrants from Africa and other places are finding different routes into the European Union in search of a better life. The Associated Press followed one clandestine group to document their trek through the western Balkans to Hungary. Zlatica Hoke reports that the migrants started using that route about four years ago. Since then, it has become the second-most popular path into Western Europe, after the option of sailing from North Africa to Italy.
Video

Video TIME Magazine Honors Activists, Pioneers Seen as Influential

TIME Magazine has released its list of celebrities, leaders and activists, whom it deems the world’s “most influential” in 2015. VOA's Ramon Taylor reports from New York.
Video

Video US Businesses See Cuba as New Frontier

The Obama administration's opening toward Cuba is giving U.S. companies hope they'll be able to do business in Cuba despite the continuation of the U.S. economic embargo against the communist nation. Some American companies have been able to export some products to Cuba, but the recent lifting of Cuba's terrorism designation could relax other restrictions. As VOA's Daniela Schrier reports, corporate heavy hitters are lining up to head across the Florida Straits - though experts urge caution.
Video

Video Kenya Launches Police Recruitment Drive After Terror Attacks

Kenya launched a major police recruitment drive this week as part of a large-scale effort to boost security following a recent spate of terror attacks. VOA’s Gabe Joselow reports that allegations of corruption in the process are raising old concerns about the integrity of Kenya’s security forces.
Video

Video Japan, China in Race for Asia High-Speed Rail Projects

A lucrative competition is underway in Asia for billions of dollars in high-speed rail projects. Cambodia, India, Indonesia, Malaysia Thailand and Vietnam are among the countries planning to move onto the fast track. They are negotiating with Japan and the upstart Chinese who are locked in a duel to revolutionize transportation across Asia. VOA Correspondent Steve Herman in Bangkok has details.
Video

Video Scientists: Mosquitoes Attracted By Our Genes

Some people always seem to get bitten by mosquitoes more than others. Now, scientists have proved that is really the case - and they say it’s all because of genes. It’s hoped the research might lead to new preventative treatments for diseases like malaria, as Henry Ridgwell reports from London.
Video

Video Bible Museum Coming to Washington DC

Washington is the center of American political power and also home to some of the nation’s most visited museums. A new one that will showcase the Bible has skeptics questioning the motives of its conservative Christian funders. VOA religion correspondent Jerome Socolovsky reports.
Video

Video Armenia and Politics of Word 'Genocide'

A century ago this April, hundreds of thousands of Armenians of the Turkish Ottoman empire were deported and massacred, and their culture erased from their traditional lands. While broadly accepted by the U.N. and at least 20 countries as “genocide”, the United States and Turkey have resisted using that word to describe the atrocities that stretched from 1915 to 1923. But Armenians have never forgotten.
Video

Video Afghan First Lady Pledges No Roll Back on Women's Rights

Afghan First Lady Rula Ghani, named one of Time's 100 Most Influential, says women should take part in talks with Taliban. VOA's Rokhsar Azamee has more from Kabul.
Video

Video New Brain Mapping Techniques Could Ease Chronic Pain

From Boulder, Colorado, Shelley Schlender reports that new methods for mapping pain in the brain are providing validation for chronic pain and might someday guide better treatment.

VOA Blogs