African export performance under AGOA: a country analysis of Lesotho
This trade brief looks at the export performance of Lesotho’s trade with the United States of America (US) and more specifically it concentrates on the preferential trade accorded to Lesotho by the US. The country had a Gross Domestic Product (GDP) (Purchasing Power Parity) (PPP) of $5.282 billion and a real growth rate of 2.2% in 2014 and it relies on South Africa for much of its economic activity. For example, Lesotho imports 90% of its consumption goods from South Africa, including most agricultural inputs. Remittances from South Africa are a major income source for households from family members working in South Africa, in mines, on farms and as domestic workers.
The economy continues to face numerous challenges. These include ‘a lower degree of diversification, low domestic savings leading to over-dependence on foreign capital inflows, high unemployment, widening inequality and poverty, as well as spatial exclusion. Added to this is the burden of HIV/AIDS, particularly on the young generation. Together with high inequality (Gini Index of 0.52) these have implications on social spending to protect the vulnerable population’. Despite political challenges, the economy has remained resilient and is expected to grow by an average rate of 4.9% in 2015 and 2016.
The rest of the paper briefly addresses the African Growth Opportunity Act (AGOA) and developments after the extension of the AGOA. Eligibility criteria are also briefly discussed to provide a background on AGOA. Following this we look at the trade profile of AGOA eligible countries focusing on their exports to the US (with or without preferences). We then narrow the focus on Lesotho’s trade with the US, also focusing on imports by the US from Lesotho (Lesotho’s exports). Here the analysis splits the trade under different regimes to ascertain whether the bulk of trade is benefiting from AGOA or not. We also look at the main competitors for goods exported by Lesotho to the US under two regimes, AGOA (without the Generalised System of Preferences – GSP) and under the GSP (extended programme). This is then followed by a conclusion.
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