Building capacity to help Africa trade better

The US-Africa Leaders Summit and the future of US-Africa trade and investment relations


The US-Africa Leaders Summit and the future of US-Africa trade and investment relations

The US-Africa Leaders Summit and the future of US-Africa trade and investment relations
Photo credit: Whitehouse.gov

On Monday 28 July 2014, tralac attended a roundtable discussion hosted by the University of Cape Town’s Graduate School of Business in partnership with the South African Institute of International Affairs. The roundtable brought together stakeholders from the public and private sectors to discuss the US-Africa Leaders Summit to be held in Washington D. C. from 4 to 6 August.

This inaugural Summit will be attended by 50 heads of state and government from across the African continent and is viewed as an important platform for strengthening economic ties between the United States (US) and Africa and for promoting progress towards inclusive and sustainable development in Africa. In particular, the Summit will focus on how to promote trade, accelerate employment growth and encourage investment on the African continent. It will also provide an opportunity for trade officials to discuss the future of the African Growth and Opportunity Act (AGOA) programme.

The roundtable focused largely on trade and investment relations between the US and Africa, and, in particular, on the future of the AGOA programme. AGOA is a unilateral and non-reciprocal trade programme established by the US in 2000 to support the economic development of countries in Africa through increased trade an investment and, among other things, to promote regional integration in Africa and alleviate poverty on the African continent. The programme, which provides duty and quota free access to the US market for over 6000 products from qualifying African countries, originally ran until 2008 but was extended by the US Government to 2015. Given this looming expiry date, there has been much recent discussion about the programme’s likely renewal and its effectiveness thus far.

At the roundtable, it was noted that African exports to the US, including exports of manufactured goods such as automobiles and textiles, have increased greatly since the initiation of AGOA, and the African continent as a whole runs a significant trade surplus with the US. According to data from the United States International Trade Commission (USITC), African exports under AGOA and the Generalized System of Preferences (GSP) increased from US$12.4 billion in 2000, to US$34 billion in 2013, with exports under AGOA and the GSP reaching a peak in 2008 of US$79.7 billion. Nevertheless, oil and gas still dominate African exports under AGOA.

It was also pointed out that although AGOA has helped promote African exports and has gone some way towards promoting regional integration on the continent by allowing African manufacturers that source their inputs from other AGOA-eligible countries to qualify for the programme, AGOA preferences have been relatively under-utilised by African countries. This, it was suggested, results from a number of factors, including numerous supply-side constraints on the ability of African countries to produce and trade goods, and a lack of awareness – especially among smaller African firms – of the opportunities available under AGOA, including the technical assistance offered under the programme.

On the issue of AGOA’s renewal, it was suggested that although there has been some talk of graduating certain wealthier African countries out of programme, and some pressure from agricultural lobby groups in the US to exclude South Africa from the programme due to the barriers South Africa employs to prevent imports of poultry, pork and beef products from the US, this is unlikely to happen due, among other things, to the strain this might put on US-South Africa relations and the damage it could do to attempts to foster regional value chains on the African continent.

While it would appear that AGOA is likely to be renewed without any particularly significant changes, it remains to be seen whether it will be renewed for as long as 15 years, as called for by South Africa and other African countries. Such a time horizon would undoubtedly enhance investor certainty with regard to AGOA benefits, and could be particularly beneficial in improving the utilisation of AGOA-benefits. The increased certainty that would come with a 15-year extension may also drive greater investment in Africa, and particularly in the manufacturing sectors of AGOA-beneficiaries. This in turn could be leveraged to facilitate skills upgrading, export diversification and, ultimately, the much-needed structural transformation of Africa’s economies.

For more on AGOA, see http://agoa.info/

For more on the US-Africa Leaders Summit, see http://www.whitehouse.gov/us-africa-leaders-summit


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