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African Trade Officials Work To Realize AGOA's Export Potential


Last week the fifth annual AGOA Forum brought high-ranking US officials together with trade experts and businessmen from 37 African countries. The meeting was formally called the “US-Sub-Saharan Africa Trade and Economic Co-operation Forum.” One of its goals was to assess the effectiveness of AGOA, the African Growth and Opportunity Act. The US Congress passed it six years ago, with the aim of promoting African development with increased trade and duty-free access to the US market.

The ministers applauded the expansion of trade created by AGOA, but they say more can be done to take full advantage of the law.

Most would say that AGOA has been a success. In the last year alone, US officials say the act has helped increase US-Africa trade by 37 percent, to 60 billion US dollars. It allows for 6,400 items to enter the US market duty-free. Among them are wicker products from Madagascar, fruits and nuts from Malawi, textiles from southern Africa, footwear from Mauritius, and an ingredient in insecticide pyrethrum, from Rwanda.

But there are problems – among them, the need for capacity building, better access to American markets, and improvement of African infrastructure.

Three African officials and businessmen recently expressed their concerns on the VOA talk show Straight Talk Africa, with Shaka Ssali.

Among them was Paul Mugambwa. He's the chairman of the Uganda Coffee Development Authority and the managing director of Victoria Company Limited – an exporter of specialty coffees around the world.

He recounted some of the remaining problems in the effort to increase exports to the United States. One of them is the need to add value to products shipped to the US by exporting finished products rather than raw materials:

"Selling our coffee in green form is a major problem. What we are thinking of doing in Uganda is adding value to our coffee [before we export] it here, because then you’d be exporting more value using the same amount of money per ton…. Once coffee is delivered [to the US] and roasted, you lose 25 percent of the value of the coffee (from weight loss, etc). "

Mugambwa offered an example of the amount of value lost to the Ugandans. He says, “At the [local] level, the farmer on the slopes of Mt. Elgon [for examples] gets not more than $1 per kilo. But at the export level this changes to…$2.00 per kilo; from [there] to the roaster level…[the value] increases to $14.00…and at the retail end…[for example] at Starbucks [the American retail coffee chain] …I found a kilo not costing less than $20.00 !”

He says some of that increase could be kept in Africa if Uganda learned to process and package the coffee bean in-country. He says other ways to increase revenues from trade are to encourage farmers to participate in joint ventures with foreign companies, and to encourage coffee farmers to form cooperatives that will help them share new technologies.

Some African trade officials say another factor preventing the export of Africa’s food crops – such as Ugandan pineapples and bananas - is the amount of time it takes for US authorities to certify the produce to be free of pests or disease.

Erastus Mwencha is the secretary general of the Common Market for Eastern and Southern Africa (COMESA).

He says it can take up to six years to gain the approval of office of the US Animal and Plant Health Inspection Service. He says during the AGOA meeting in Washington in early June, he and other African ministers expressed their concerns to US government officials.

"We had breakfast with the US Secretary of Agriculture. And we were happy to hear him announce – due to the concerns of African ministers – that the US will now try to reduce the bureaucracy of certifying those products....We’ve been putting pressure to have some African products come to the US market. He announced after five years, we have two products from Zambia – baby corn and baby carrots - that are coming into the U.S. "

Mwencha also says in an effort to reduce transaction costs and improve competitiveness, African countries with ports and advanced transportation systems should help expedite the exports of landlocked countries. As for increasing overall trade, he says governments should encourage their own investors to take advantage of tax holidays and other tax incentives, rather than allow them to go to foreign investors.

One of the most successful exporters to the United States is Botswana.

Its minister of trade and industry, Daniel Moroka, says other African countries should adopt the measures taken by his government – including the adoption of free market incentives, such as liberalized currency controls, lowered tax rates and laws introduced to encourage investment.

Moroka says exports to the United States grew from 20 million dollars worth of goods in 2004 to more than 50 million dollars in 2005. Even more is expected this year.

He credits AGOA for helping create 10 thousand jobs in Botswana’s textile and apparel manufacturing sector in recent years. But Moroka says there is one problem:

"The difficulty for us is that the raw materials for manufacturing – like cotton [for] yarn and fabrics - is quite low. That is why we are asking for the relaxation in [AGOA’s requirements regarding the] rules of origin [of a product] so we can have access to third country fabrics (as in Asia). I think the challenge is to make sure we actually produce yarn and fabrics in Africa so we can source this much closer. This will help us vertically integrate our operations in Africa and even create more jobs than were destroyed by the structural adjustment programs of the 1980s."

Moroka says a key provision of AGOA allowing African countries to ship clothing made with fabric and yarn from third countries expires in 2007. He’s asking the US Congress to allow African countries to renew that provision, or risk losing their competitive edge to China, India and other textile manufacturers. The African officials say that – despite a few remaining impediments to liberalized trade – they agree with Secretary of State Condoleezza Rice. She told the AGOA forum that the act remains the best framework for continuing to engage in dialogue, identify challenges and work together.