‘US-African trade lagging despite free market access’

Trade between the US and sub-Saharan Africa is in the doldrums despite a 2000 US law designed to boost access to the US market, a conference on the African Growth and Opportunity Act (AGOA) has shown.

AGOA, which in 2015 was extended to 2025, provides tariff-free access on 6,500 products to 39 countries, ranging from oil and agricultural goods to textiles, farm and handicrafts.Trade quadrupled in value from 2002 to 2008, a year when it reached $100bn, but fell back in 2017 to $39bn, according to figures compiled by the US Agency for International Development (USAID).

The surplus is widely in Africa’s favour, but most exports to the US are in oil or petroleum-based products, not the industrialised goods that provide a value-added boost to local economies.With six years to the expiration of the extended African Growth and Opportunity Act (AGOA), the United States has expressed concerns about the performance of the scheme, stating that petroleum products continued to account for the largest portion of AGOA imports, with a 67% share.

Indeed, the Assistant U.S. Trade Representative for Africa, Constance Hamilton stated that AGOA has not led to the trade diversification for which the US originally hoped.

On Nigeria’s performance under the scheme, Hamilton said: “I think that Nigeria has not taken advantage of AGOA because they send us mainly oil, so in a certain extent, they actually are taking advantage of it—probably more than some of the other countries—but it is petroleum. And oil doesn’t really create the kind of jobs or other benefits from trade that I think that countries are looking for.

“I really think that the question for the Nigerian government is how do we take better advantage of the opportunities that AGOA presents? I mean, we have opened the door; we’ve got the trade hubs there to provide assistance to individual entrepreneurs, but it’s up to the government to create the conditions and to provide its businesspeople with what they need to access this market.

“So I think that Nigeria, and I think the new government is talking about trying to expand and go beyond just petroleum production and get into other things, but that really is a question for what Nigeria wants to see happen. You’re part of ECOWAS. ECOWAS is always talking about the liberalization of trade barriers, removing those barriers to trade and investment.

“I think that the fact that Nigeria has now joined the conversation with the Continental Free-Trade Area Agreement; it will also be submitting its commitments on liberalization, those are opportunities to open up the Nigerian market in many, many ways, not just for the United States and other partners outside of Africa, but also within the region”.

In the AGOA clothing sector, for example, the US stated that it gets about $1 billion per year from Africa, representing roughly 1% of the United States’ $95 billion imports in global clothing imports.”I do not think that Agoa has been the game-changer for many countries on the continent that we hoped it would be,” Constance Hamilton, assistant US trade representative for Africa, told the 18th Agoa Forum, ending in the Ivory Coast’s economic capital Abidjan on Tuesday.

“Agoa has not led to the trade diversification for which we originally hoped,” she said recently.”Petroleum products continued to account for the largest portion of Agoa imports, with a 67% share,” Hamilton said. “And the volume of Agoa trade remains modest. In the Agoa clothing sector, for example, we get about $1bn per year from Africa,” he said. This amounted to only 1% of all US clothing imports.

The US is Africa’s third-biggest trade partner after the EU and China. But Africa attracts only about 1% of all US foreign investment.
Deputy US trade representative Curtis Mahoney said Washington had drawn up a variety of new initiatives to “lay the groundwork for an even closer trade and investment partnership”.

“We will combine the promise of the AfCFTA [African Continental Free Trade Area] with these new US initiatives and help maximise the potential of US-Africa trade,” he said.

The AfCFTA is a scheme for demolishing trade barriers among the 55-member African Union (AU).The long-negotiated agreement was ceremonially launched at a summit in July but will need a year to become operational, the AU says.

According to the conclusions of a meeting of ministers ahead of the Abidjan conference, only 18 out of 39 countries have set down a national strategy for exploiting the benefits of Agoa. Many African companies either do not know of the advantages that are on offer, or they do not know how to use them, the ministers found.