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

Ukraine Purges Interior Ministry Leadership With Pro-Russian Ties

Interior Minister Avakov says 91 people 'in positions of leadership' have been fired, including 8 generals found to have links to past pro-Moscow governments More

US Airlines Point to Additional Problems of any Ebola Travel Ban

Airline officials note that even under travel ban, they may not be able to determine where passenger set out from, as there are no direct flights from Liberia, Guinea or Sierra Leone More

Nigerian President to Seek Another Term

Goodluck Jonathan has faced intense criticism for failing to stop Boko Haram militants 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.
Talks to Resume on Winter Gas for Ukrainei
X
Al Pessin
October 25, 2014 4:21 PM
Ukrainian and Russian officials will meet again next week in an effort to settle their dispute over natural gas supplies that threatens to leave Ukraine short of heating fuel for the coming winter. VOA’s Al Pessin reports from London the dispute is complex, and has both economic and geopolitical dimensions.
Video

Video Talks to Resume on Winter Gas for Ukraine

Ukrainian and Russian officials will meet again next week in an effort to settle their dispute over natural gas supplies that threatens to leave Ukraine short of heating fuel for the coming winter. VOA’s Al Pessin reports from London the dispute is complex, and has both economic and geopolitical dimensions.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.

All About America

AppleAndroid