Opinion
Enhanced AGOA will benefit both the U.S. and Africa’s economies
By Erastus Mwencha
A few days ago, in meetings with both members of the United States Congress and the Obama Administration, each of the officials reaffirmed their commitment not just to a timely renewal of the African Growth and Opportunities Act(AGOA); everyone was much keener on a more progressive partnership between the United States and the 54 states that make up the African Union (AU).
In these high level discussions, I conveyed the appreciation of the African Heads of State for the commitment to Africa as expressed by President Obama during the U.S. – Africa Summit of August 2014. Following this, in their Decision (AU/555/XXIV), the Assembly of African Heads of State called upon the US Congress to preserve AGOA as the cornerstone of Africa-US trade and investment partnership by ensuring the timely reauthorization of AGOA co-terminus with the Third Country Fabric Provision.
Essentially, AGOA can be even more effective as a developmental tool if the program is renewed within the first quarter of 2015. Short of this, textile executives will cancel their orders with African garment manufacturers – leading to huge losses that Lesotho, Mauritius and Kenya can barely afford. The adverse consequences of these losses are even worse for AGOA employees.
Like Congress and the Obama Administration, we as the African Union believe that enhanced trade and investment between the United States and Africa will improve not only Africa’s economy but also America’s economy, national security and standing in the world – charting the course to expand American exports and create good jobs for Africa and America.
Invariably, while AGOA has led to some economic development in Africa, the program has also fallen short of its original goal, with oil producing countries and textile/garment exporters garnering more from AGOA than most beneficiaries. This was what prompted the African Union’s AGOA 2.0. white paper. Written in line with Ambassador Michael Froman’s address to the 2013 AGOA Forum in Addis Ababa, we hoped that by now, with less than six months before AGOA expires, the United States Congress would have renewed AGOA and its third country fabric provision for a long enough period to encourage investment in Africa’s industry.
Additionally, on top of recommending that AGOA’s rules of origin be updated to help effectively insert Africa into global supply chains, we suggested that AGOA’s eligibility criteria and review processes be amended to provide opportunities for AU member states. This would enhance Africa’s continental integration and structural transformation agenda. Then, to ensure that more African countries could export their comparative advantage commodities, we urged that those tariff rate quota (TRQ) products currently excluded from AGOA be admissible into the United States under the program’s duty-free, quota-free provisions.
To the latter point, some AGOA beneficiaries have whispered to me that although they understand how including certain products in AGOA could either slow up the process of expedited renewal, or lead to more questions around the financing of Africa’s market access provisions, the reality is also that until countries like Ghana, Ivory Coast and Nigeria can add value to their cocoa product, they will not benefit as much as those who sell chocolate to the United States. If sugar and dairy tariff rate quotas are lifted so that African countries can add more than 10 percent sugar or milk to cocoa, diversification of exports can happen much faster in these and in more countries.
There’s also no doubt that those countries that have the capacity to export their groundnuts, cotton, leaf tobacco and sugar would relish the opportunity to do more business with the United States. Thus, in spite of what is currently happening in Congress, and in the American political system, Congress has this narrow chance within its power to provide AGOA beneficiaries with the additional economic stimulus via agriculture.
There are two compelling reasons for this request:
(i). Various studies by American and African think tanks find that American producers of what are considered politically sensitive agricultural commodities would neither be greatly impacted nor suffer job losses as a result of commodities such as cotton, peanuts, sugar, tobacco, et al receiving AGOA designation. In fact, TRQ experts – David Skully and Kimberly Elliot – have argued that admitting TRQ products into the U.S. under AGOA would lead to greater market access for Africa.
(ii). More importantly, with Africa producing about 2 percent of America’s overall global imports, there’s no doubt that any increase would not have as sizable an impact as many may fear. However, that tiny change in the United States will have a huge positive effect on Africa’s employment, investment and security.
My hope is that during this period of intense legislative activity, AGOA renewal and Africa’s proposals are taken into consideration and given priority. Ultimately, should the United States succeed in the timely renewal and improvement of AGOA, not only shall you have our gratitude; our rapidly expanding middle class will present America’s private sector with the opportunity to supply what will soon be an insatiable market.
Erastus Mwencha has over 30 years experience in Africa’s policy formulation and institutional transformation at national, regional and
continental levels. An ardent regional integration advocate, he actively contributes to Africa’s growth and prosperity by empowering others to
cultivate capacity to achieve economic, social and cultural development.
He was elected Deputy Chairperson of the African Union Commission in January 2008 by the Heads of State and Government of the African Union’s 54 Member States. In July 2012, he was re-elected to the same position with an overwhelming 98 percent vote count.
During his first tenure as AUC Deputy Chairperson, He placed particular emphasis on supporting continental development agenda and programs as well as strengthening internal institutional systems. For his second term, strategic focus has been placed on upgrading those internal mechanisms; allowing the organization to perform its role in Africa and around the world.
Prior to the African Union, Mwencha worked at Common Market for Eastern and Southern Africa (COMESA) for over 25 years and served as Secretary General for ten years. There, he contributed to the transformation of the regional body into a viable regional economic integration entity, with the largest free trade area (FTA) in Africa. He also developed the continental negotiating position for the Doha Round of negotiations of the World Trade Organization, Economic Partnership Agreements (EPAs), AGOA, and actively supported programs to integrate women in development.
He also held several senior roles within the Ministry of Industry in Kenya.