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This week, Kebour Ghenna, Executive Director of the Pan African Chamber of Commerce and Industry (PACCI) took time to answer five questions CAPITAL put to him on the effectiveness of the African Growth and Opportunity Act (AGOA).
The PACCI, which was founded in 2009 by thirty five national chambers of commerce and business associations of Africa, is a non-profit making organization with the objective of representing the interests of Africa’s businesses and providing Africa a stronger voice in continental and global economic matters. The PACCI works to strengthen commercial ties among African nations and the world for the promotion and advancement of economic vitality and the quality of life of its citizens.
1. What is the impact of AGOA on exports from Sub-Saharan Africa LDC?
Since the enactment of AGOA in 2000 exports from sub-Saharan Africa to the US have increased substantially. However, it’s not clear, perhaps even questionable to assign all the credit to AGOA for this export growth. Studies show that only a small share of these increased exports can be directly credited to AGOA. Also most of the benefits were in one particular sector, namely clothing, and so the benefits went mainly to a small number of countries like Lesotho, Madagascar and Malawi, who mainly export textiles and apparels.
2. No increase outside apparels and textiles?
No! As far as I know there is no evidence of any other significant AGOA exports from LDCs outside of apparels and textiles. And when one looks closely at the textiles and apparels sector, linkages with the local economy are almost nil; plus very little transfer of capital or skills. I will also add that most of the benefit from apparel preferences goes to Asian investors and importers in the US.
3. Why this limited success?
To start with the product coverage under AGOA has been limited, particularly in the case of LDCs. As a matter of fact AGOA offered very limited additional coverage over and above what these countries already enjoyed under the Generalised System of Preference (GSP). When compared to tariffs on products excluded from AGOA, the preference margins under AGOA were minimal, except for apparel products on which average preference margins are high. One more thing: AGOA’s liberal rules of origin have also been instrumental in driving apparel exports from Africa’s LDC.
4. What will be the Impact on African exporters of full Duty Free Quota Free access to US market for all LDCs?
The extension of full Duty Free Quota Free access to the US market to all LDCs will erode Africa’s position further, but as I said this will be limited to a small number of countries, exporting textiles and clothing. The positive side for Africa of the DFQF is that it will open the US market to African agricultural exports that are not covered by AGOA preferences.
5. Any message to those AGOA enthusiasts gathering in Addis?
I will only raise three points. First, the fact that AGOA’s broader economic impact has been very much modest should be acknowledged to start looking for effective or alternative solutions.
Second, why can’t we have AGOA extend its preferences to all products with a fixed longer period of time, also why not include products which are currently subject to tariff rate quotas? I believe the US government should really do better in committing itself to the development of the continent.
Third, we need to do more up to date research and analysis to figure out what’s going on with AGOA, and how it affects exports from Africa to the US. This has been a field that has been literally ignored by academics and professionals.