US Pulls in African Goods thru AGOA

African GDP has Doubled Since 2000

Ed Gresser, Global Works Foundation, Washington DC

African export growth to the U.S., 2000-2013

Malawi macadamia nuts: 1500%

South African cars: 900%

Energy: 100%*

All goods: 100%

Clothes: 28%**

*Energy trade accounts for most import growth- $15 billion of $20 billion – and is volatile, oscillating between $70 billion and $20 billion annually.

**Main sources of African clothes are Lesotho, Swaziland, and Kenya.

Malawi’s macadamia-nut industry – Macadamias have a modest but real tariff of 1.3 cents per kilo. (Cashews are duty-free, while the tax on imported walnuts is 7 cents a kilo). Malawi’s pre-AGOA macadamia sales averaged 140,000 kilos a year; since 2001, annual shipments have averaged 300,000 kilos, with a 628,000-kilo peak in 2010,000.

AGOA is a three-part program whose main features are (a) waivers of nearly all U.S. tariffs on African goods (the exceptions are canned fruit and quota-limited foods including sugar, chocolate, and dairy); (b) a dialogue series headlined by the annual AGOA Forum and also including outreach to African government, business, and farm groups; and (c) a set of conditions for participation covering human rights, democratization, labor policy, and economic reform. 38 of sub-Saharan Africa’s 49 countries now participate. Gresser’s observations on the record and thoughts on the next steps:

1. AGOA’s successes - real, but not the ones designers expected: Since the bill passed, Africa has had a remarkably good decade. In fact, all of Clinton’s hopes have been fulfilled: the global resource boom has helped double continental GDP, boost Africa’s exports from $95 billion to $430 billion, swell the continental middle class from 175 million to 300 million, and (by World Bank estimates) cut the deep-poverty rate from 59 percent to 42 percent. AGOA’s role in all this shouldn’t be exaggerated - trade is only one reason for Africa’s growth, and the U.S. remains a smaller export market for the continent than Europe or Asia - but it has made an important contribution.

AGOA’s successes, though, aren’t really the light-industry and clothing exports its designers expected in 1999 and 2000. America’s fastest-growing imports from Africa by dollar value have been in energy, driven by high global demand rather than tariff policies or economic reforms. By percentage growth, the most striking jumps include (a) non-traditional agricultural products such as Ethiopian birdseed, West African shea butter, and Malawi’s macadamia nuts, where tariffs were all low or zero before AGOA, and successes likely come from better information about the American market; and (b) South African autos, where waiver of a 2.5% tariff looks like AGOA’s most effective bit of new market access. By contrast, the duty-free clothing program often seen as AGOA’s heart has had only modest results. Though clothing is an important export for Lesotho and Swaziland and a growing business for Kenya, continental sales to the U.S. last year came to about $930 million, roughly equal to imports from Haiti or Nicaragua. And tariff waiver or not, Africa’s overall share of the American clothing market has actually dropped since 2000.

2. Next steps -trade facilitation and capacity-building: The clothing program’s difficulties highlights the fact that, as Ethiopian Ambassador Girmu pointed out at the ITC hearing, “Africa is the most expensive region with which to trade in the world.” The World Bank’s annual Trading Across Borders database has precise figures: its 2013 version finds an average cost of $1,010 for a single container to transit an African seaport, and a 26-day average transit time from factory to sea. By contrast, Southeast Asia is at $440 and 16 days, South Asia $690 and 20 days, and Latin America $780 and 17 days. For oil and high-value products like cars, this may not matter much; for clothes and other high-volume, time-sensitive products, the extra cost and time nullifies most of the advantages of AGOA’s tariff waivers.

Closing these gaps, Gresser argues, is especially important as - with Chinese growth fading a bit, the U.S. moving toward energy self-sufficiency, and the last decade’s resource boom likely over - the next decade’s economic landscape looks less friendly for Africa than the last. With this in mind, the challenge for the next version of AGOA is to help Africa build its capacity to export, with key issues including support as African governments implement new WTO rules for trade facilitation:

a. Publication of all import and export forms on the Internet, to help buyers and exporters navigate African seaports and air cargo systems more cheaply and easily.

b. Pre-arrival processing of manifests for air and sea cargoes to avoid long port holdups that make it difficult to include African factories in supply chains.

c. Developing risk assessment management in African seaports and airports to focus security and regulatory officers on the highest-priority cargoes.

d. Customs-agency collaboration at inland border points to ensure that cargoes from land-locked countries reach ports and exit transit countries more rapidly.