Saturday, November 21, 2009

Making AGOA Work Better

When I attended the August 2009 AGOA Forum in Nairobi, Kenya, I heard complaints from African participants that the African Growth and Opportunity Act was not as effective as it could be because its term needed to be extended, and its coverage of products needed to be expanded. U.S. government officials responded that AGOA had already been expanded to 2015 and that relatively few of the more than 6,400 tariff lines were being used currently by Africans. This disparity is the result of a disconnect on the how and why of AGOA that must be corrected.

African producers aren’t taking full advantage of AGOA, but we have made it unnecessarily difficult to do so. The U.S. government has extended AGOA, but what officials see as a long extension is too short for business people asked to make longer-term investments. African governments have been too slow to make the necessary adjustments to enable their producers to better compete on the world market, including trade preference compliance issues and internal trade process issues.

If AGOA is to work as effectively as we had hoped, I recommend the following steps be taken:

o AGOA is based on the Generalized System of Preferences, which also is subject to periodic renewal. The U.S. government should make AGOA and GSP permanent subject to review to remove the reluctance to source products in Africa. All of our reasonable requirements can be maintained to determine which countries should continue to benefit from AGOA even as the overall program continues.

o The U.S. government should support infrastructure programs to lower costs for African producers to reach U.S. markets. For example, the German Marshall Fund and the Hewlett Foundation are working on a Development Corridors program to stimulate the expansion of existing and creation of new transportation structures to allow African products, especially those produced by smallholder farmers, to be brought to market.

o The U.S. government should target capacity building on U.S. trade rules and processes to the African private sector, African government officials and African civil society together. Governments must understand how to make the playing field level, while the private sectors understands the rules under which they must operate and civil society plays watchdog on the whole process.

o The U.S. government should eliminate existing product exclusions under AGOA, which are primarily in agricultural products. This would have negligible impact on American agricultural competitiveness, but would be of great benefit to African agricultural producers, who comprise such a high percentage of African productive capacity.

o Using its taxation authority, the U.S. government should create tax incentives to stimulate economic development by encouraging American investment in non-extractive, labor-intensive sectors such as the agriculture and hospitality industries in Africa, as well as encouraging shipping companies to provide adequate transportation options to African exporters.

o In order to assist in the African process of regionalization, U.S. government aid programs should take into account the regional impact of single-country grants and create regional grants to help Regional Economic Communities better facilitate the creation of regional markets that are more attractive destinations for U.S. investment and product sourcing and more efficient exporters of African products. Manchester Trade, a trade facilitation firm, has a Partnership for African Economic Growth and Opportunity proposal for facilitating African regional and international trade that should be examined for its U.S. policy implications.

Government, the private sector and civil society have worked together thus far to make AGOA work as well as it has. If we continue to work together, we can remove the obstacles that prevent it from working as well as we want.

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