US-Africa Trade Up More Than 500% But Many African Countries Losing Out, Washington-based Expert Tells AfDB Staff

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Africa’s trade with the United States grew by more than 500 per cent between 2001 and 2011, but many African countries missed out on that five-fold growth, a leading Washington expert told African Development Bank (AfDB) staff recently.

Sherman E. Katz, a senior advisor at the Centre for the Study of Presidency and Congress in Washington DC, gave a talk entitled “US Trade Policy under the New Administration: What Does it Mean for Africa?” at a Bank Staff Seminar in Tunis, organized by the AfDB’s African Development Institute in collaboration with the Regional Integration (ONRI) and Human Resources (CHRM) Departments, on February 21, 2013.

The context of the seminar was the upcoming renewal of the African Growth Opportunity Act (AGOA), a measure designed to provide incentives for US-Africa trade and originally signed in May 2000.

Since the act came into operation in 2001, AGOA-related non-oil exports from Africa have grown five-fold to US $53.8 billion from US $8.1 billion over 10 years.

However, many African countries are not benefitting from the opportunities created by AGOA. Research shows that, despite AGOA, the US-Africa trade remains dominated by a small group of Sub-Saharan countries. All exports from sub-Saharan Africa to the US in 2011 totalled US $79 billion, of which almost 80 per cent came from just three countries – Nigeria (47 per cent), Angola (19 per cent) and South Africa (13 per cent).

US exports were similarly concentrated, with those same three countries receiving 68 per cent of the 2011 total of US $20.3 billion – South Africa (34 per cent), Nigeria (22 per cent) and Angola (12 per cent).

To improve the situation, Katz emphasized the need for African countries’ active involvement in making their requirements and trade positions known to Congress at this negotiation stage ahead of the 2015 renewal. His presentation suggested that African countries need to focus on meeting AGOA export requirements to increase their utilization of the AGOA quota.

He presented the evidence of his work on the growth achieved by Vietnam in the last decade on the back of a similar unilateral trade preference agreement with the US. Katz pointed to the coherency and structured approach of the Vietnamese in tailoring their trade offerings for the US market as well as how they met the preference and standard requirements in developing their products for the US market. Vietnam, he said, rigorously adhered to the requirements of the agreement and through collaboration with NGOs, offering training and making business process development capacity building efforts.

Katz pointed out the low involvement of African countries in contributing to the debate on AGOA renewal and making their preferences known to Congress.

Katz said that while many in Congress thought of Asia first in terms of economic potential, there was a train of thought that connected security concerns in Africa with the need for more economic growth.

For better AGOA utilization, Katz said Africa needed more skilled personnel, better infrastructure, capital, transparency, rule of law, and country-wide AGOA strategies, among other things.

He added that that the US wanted to consider Africa a “commercial destination,” not a “food security problem.”

For its part, the AfDB noted several key questions for US and African beneficiaries to address with respect to AGOA renewal. Researchers had identified certain weaknesses that needed to be dealt with, if a renewed AGOA was to mutually benefit both African countries and the US.

Chief among them were: poor utilization of preferences; the high level of concentration in AGOA exports, and a high concentration among a few groups of exporters; the issue of the de-listing and eligibility of countries such as Guinea, Madagascar, Niger and Zimbabwe; whether to seek a reciprocal trade agreement similar to Africa’s Economic Partnership Agreements with the European Union, and expanding the range of AGOA preferences.

All the participating AfDB departments agreed on the need to focus on skills and technology and infrastructure needs for non-oil exports, particularly in agri-business. They also noted the need for training in business processes and to explore ways to attract US investment and capital to Africa.

More than 40 AfDB staff from six departments attended the seminar.

The director of the African Development Institute, Prof. Victor Murinde, and the Chief Infrastructural Economist in ONRI, Shem Shimuyemba, chaired the seminar early in the day. ONRI’s Chief Trade and Regional Integration Officer, Christian Kingombe, chaired the caucus session in the afternoon.