Part 2 – Effectively Improving AGOA

It is much too easy to find fault in how sub Saharan Africa has managed its relationship with the United States. There’s no doubt that the dynamic between the world’s largest economy and the world’s fastest growing region leaves much to be desired. That Africa is distracted by other things – development issues galore – is unchallenged. But then, what could we say about the United States, since we are discussing partnerships here?

In the first place, nothing defines America quite like its dissonance. On the surface, things are going great. Unlike Europe, China, Japan, Brazil and Russia, The New York Times reports that America’s economic output grew at an even faster rate during July, August and September 2014 than the government initially estimated, giving the economy its strongest six-month performance in more than a decade. But in the government, things could not be in a worse place: Both the Senate and House of Representatives will soon be managed by a Republican majority not keen to do brisk business with a Democrat President Obama who’s just as overt in his disdain. One of the Supreme Court justices just underwent heart surgery, and if she was to leave her position, those in the know KNOW for a fact that replacing her will be a bloody affair. Then there’s the state of affairs in Ferguson, Missouri. Sigh.

Fear not, some people suggest: Both Obama and Congress will work to not only renew the African Growth and Opportunity Act (AGOA) before it expires in September 2015. AGOA will be enhanced to resolve many of the problems that currently ail the 14-year old program. Oooh … You can almost hear experts groan. Passing legislation through Congress is, traditionally hard. Trying to change AGOA could mean the kind of problems the Generalized System of Preferences (GSP) suffered last year. While Sen. Coburn of Oklahoma is out of the way, not only is his replacement more of a flame thrower – Obama has already thrown flame and fuel into an already poisoned well.

We premise all this to make a point: Within what seems like a dark abyss is the fact that just like the Trans-Pacific Partnership (TPP) and a pending Transatlantic Trade and Investment Partnership (TTIP) will benefit the United States, an enhanced AGOA could be the reason the United States becomes Africa’s largest trading partner once again. And like compromise must be made in TPP and TTIP, the United States must make adjustments to its current tariff rate quota (TRQ) system.

In line with what the Brookings Institution, the African Union and the United Nations Economic Commission for Africa (UNECA) suggest that if the U.S. allowed African countries to export, under AGOA, currently excluded products like sugar, cotton, peanuts and leaf tobacco, exports would grow by over 100 million dollars. This is easier said than done. While many forget that sugar, cotton, peanuts and leaf tobacco are not just commodities but major African cash crops from time immemorial, adding them to AGOA must circumnavigate America’s TRQs, which are, at their root, simple tools designed to protect the American producer by ensuring that trade patterns are not distorted. In fact, like most OECD member countries, the U.S. protects some of its agricultural sub-sectors by putting 46 TRQs on 7 groups of agricultural commodities like sugar, cotton and leaf tobacco.

While some say that widespread concern over TRQs is overrated since they do not limit imports, there’s also agreement that TRQs do not, necessarily, encourage freer trade. Some argue that liberalizing TRQs can increase market access – enhancing programs like AGOA by reducing trade bias. In June 2000, the U.S. recommended TRQ reform under the premise that WTO members could reduce trade distortions by providing non-discriminatory market access opportunities. A compelling and widely respected study shows that the programs TRQs were initially designed to protect have been changed or even ceased to exist. For instance, allocated to a whole host of countries between 1975 and 1981, the raw cane sugar TRQ has, since 2002, not been fulfilled by Gabon, Haiti, St. Kitts and Nevis, Madagascar, and Trinidad and Tobago. On top of these countries not exporting sugar, the TRQ mechanism is further diluted by the free trade agreements the U.S. negotiates with various countries. TPP and TTIP will further undermine these very programs. While progress is being made at the World Trade Organization in terms of redistributing quotas from countries that do not fulfill theirs to those who can, Africa continues to stay on the sidelines under AGOA.

Perhaps, because special safeguard tariffs are waived for most FTA partners, and over-quota tariffs are granted a margin of preference, the most effective way to enhance AGOA could be to reform TRQs by providing duty-free, quota-free (DFQF) market access to all African agricultural products like is currently offered to Africa by the European Union under its ‘Everything but Arms’ program. David Skully argues that because AGOA was meant to expand the number of beneficiary countries that use AGOA benefits, there’s a direct link between diversifying AGOA exports away from primary commodities such as oil and strengthening the link between poverty reduction and trade in Africa. TRQs make that connection by providing improved market access in the U.S. for Africa’s cash crops currently controlled and curtailed by TRQs. This should make crystal clear sense to just about anyone.

Sadly, there’s a chance that even if AGOA is enhanced, we must deal with the fact that people still do not understand the program; they do not know what it can do for them – they even think that AGOA is a grant with money. Maybe, if we went on a campaign to change these aspects, AGOA beneficiaries would not have to leave too much power in the hands of the U.S. Congress.