US-Africa Trade Updates: Outcomes of African Trade Ministers’ visit to Washington
by Zenia Lewis
Last month, from January 19 to 23, the African Union mission, in collaboration with the African Ambassador Group of Washington, DC and the African Development Bank with the support of the Africa Trade Fund project on boosting US-Africa trade, hosted a high-level delegation of African Ministers of Trade focused on promoting the expeditious renewal of the African Growth and Opportunity Act (AGOA) – a key component within the architecture of US-Africa trade.
The delegation was led by S’khulumi Ntsoaole, Minister of Trade and Industry, Cooperatives and Marketing in Lesotho, who was accompanied by Gabriel Tchango, Minister of Trade, Small and Medium Size Enterprises, Handicrafts and the Development of Services in Gabon, and Etienne Ghislain Sinatambou, Minister of Foreign Affairs, Regional Integration and International Trade in Mauritius.
The visit offered the delegation a unique opportunity to hold important consultations with representatives of the US Government,[i] including the National Security Council at the White House, the State Department, the Office of the US Trade Representative, key members of both houses of Congress[ii], and other critical US stakeholders, including the private sector, civil society, and think tanks, on the importance of AGOA’s timely reauthorization for the US-Africa strategic partnership. The consultations also highlighted the implications of that partnership for the shared interests of economic opportunity and the stability and prosperity of Africa.
The series of meetings made it possible for the Ministers to underscore particularly the urgent need for an expeditious reauthorization of AGOA as a critical avenue for boosting US-Africa trade, at the latest during the first quarter of 2015 before the eligible countries face huge economic and social challenges. The Ministerial delegation also called upon the US Congress and US Administration to not attach the potential AGOA bill to other trade policy bills (e.g. the Trade Promotion Authority), apart from the Generalized System of Preferences, which is related to AGOA, but to have it stand alone so as to separate AGOA from any lengthy negotiations or controversial pieces of proposed legislation that could harm or delay its chance of being reauthorized in a timely fashion.
If AGOA’s reauthorization is delayed beyond March 2015, as the Ministers stressed, there would be negative and harmful repercussions on employment, the business climate, and regional integration efforts, accompanied by the potential for engendering risks of insecurity and instability, which would erode the achievements made since the enactment of AGOA.
Outcomes and key takeaways from the delegation’s visit
The visit was successful in establishing a better understanding of the importance of the AGOA and its expeditious renewal, and the importance of trade and investment occurring on a predictable and certain basis.
The representatives of the US Administration at the US Trade Representative (USTR), National Security Council (NSC) and State Department all reiterated President Obama’s strong commitment to a long extension of AGOA and the readiness of his Administration to do everything it can to ensure that AGOA reauthorization happens quickly. AGOA enjoys a great deal of bipartisan and bicameral support, and US Government officials from the Administration and Congress indicated that the key question was not whether AGOA would be renewed, but when, how, and what legislative vehicle should be used.
The Administration and some Members of Congress also attached great importance to the enhancement of AGOA, to increasing and expanding its utilization, and to increasing its role in fostering deeper regional integration. Currently, most countries that are AGOA-eligible export using the preferences available under AGOA. However, while almost 900 different types of products were exported,[iii] this is still less than the 6,400 product-lines available, and one-third of these product-lines saw exports below $20,000. These numbers seem to indicate that, while countries are better utilizing the benefits available and new export product sectors are developing, there are still barriers to fully utilizing and scaling product exports. As stated by the UN Economic Commission for Africa (ECA),[iv] these flows still do not reflect the economic relationship that should exist between the world’s largest economy, and the world’s fastest-growing region. Supply-side challenges and problems complying with US market requirements still remain. The uncertainty and fixed duration of AGOA preferences also results in diminishing incentives for American firms to trade with and invest in Africa.
Making US-Africa trade more effective and addressing supply-side weaknesses requires a comprehensive focus on incorporating trade capacity and trade facilitation provisions into AGOA and individual country trade development strategies. There are some resources currently provided to AGOA-eligible countries to address these constraints, like the USAID Trade Hubs that work to enhance AGOA utilization and assist with sector export strategies, but more than this is needed. The delegation highlighted the efforts that are currently being made by individual countries to increase their utilization of AGOA’s benefits. Many countries have already created and others are currently developing or updating their national AGOA export strategies. During the course of this year the African Development Bank under the Africa Trade Fund (AfTRA) hopes to support the development of two national AGOA Strategies for Côte d'Ivoire and Malawi to enhance utilization of US trade preferences. Producers are also increasing their collaboration with the USAID trade hubs. For example, the West Africa Trade Hub is targeting support towards value chains for cereals, cashew, shea, apparel and mango. There is, however, always scope to scale up support.
The delegation confirmed as well their interest in seeing enhancements made to AGOA – as has been indicated previously in reports identifying the recommendations made by the AU and the African Ambassador Group. These reports, along with recommendation reports from other institutions like ECA and Brookings, were released nearly two years ago. Despite the availability of these recommendations, it is still not clear from discussions with policy-makers that draft legislation exists. Many believe that it is now too late for negotiations and dialogue on enhancements to take place if renewal is to be achieved in time, and want to focus instead simply on reauthorization. Thus, while enhancements are important, the biggest concern for AGOA-eligible countries now is over Congress’ ability to draft and pass an AGOA bill in the next month before more negative repercussions are experienced by eligible countries.
Looking Ahead: The Consequences of Delayed Renewal
While, the delegation achieved its objective of highlighting the importance of having Congress present and pass a bill reauthorizing AGOA before March, it is clear that a great deal of work remains to be done to ensure that the renewal is achieved before major trade, job and economic losses occur in AGOA-eligible countries.
AGOA has achieved great economic growth over the life of the legislation. Exports of non-energy related products increased over three-fold since the legislation’s benefits began in 2001. AGOA has also achieved a lot in the area of employment. Many countries have created tens of thousands of jobs in sectors that developed and flourished under AGOA – the textile and apparel sector being one of the largest documented job-creating industries, which is estimated to have directly generated over 300,000 jobs.
The severity of the repercussions of AGOA’s delayed renewal for the textile and apparel sector are particularly important to consider. For instance, in 2012 when the renewal of the TCF provision was delayed until the 11th hour (only weeks before its expiration), the apparel imports from Africa that it promoted were down 12% in the months leading up to its expiration, and African apparel producers had to lay off tens of thousands of employees.
Right now, 1 in 45 people in the entire working and non-working age population of Lesotho are employed in a job that exports directly under AGOA (with the majority of jobs in the apparel sector)[v] If the legislation is not renewed quickly, over 40,000 people in Lesotho alone could lose their jobs, resulting in economic instability for the country.
Ultimately, it is critical for AGOA-eligible countries to maintain robust advocacy towards different economic stakeholders to ensure that Congress acts quickly within the next two months to address the concerns of African countries waiting on AGOA’s renewal.
The African Ministerial delegation and the AU wish to see AGOA expeditiously renewed for at least 15 years. This would allow a reliable time horizon for new sectors to develop, increased investment to continue into these sectors and the broader region, and for African countries to enhance their regional value chains and integration to achieve anticipated high growth levels. There is no desire for AGOA to be continued indefinitely, but instead for a period that would allow the continent to fully realize its economic potential. In 15 years, it is expected that many AGOA-eligible countries would be, at a minimum, lower-middle income and at this point the region would be in an excellent place to negotiate mutually beneficial trade agreements with the US that are fitting to its post-AGOA economic level.
The African Union mission, the African Ambassador Group and the African Development Bank will continue to work closely with key members of the private sector and civil society and policy-makers to advocate for and highlight the importance of AGOA’s renewal in the first quarter of 2015. Continued efforts will be made to draw attention to the very real consequences of AGOA’s delayed renewal. Parallel to this, the AU, with support from partners like the AfDB, will continue to support countries to promote the effective utilization of US trade preferences and investment between the US and Africa.
Zenia A. Lewis is a US-Africa Trade and Investment Specialist working with the AfDB in Washington, DC. She has worked extensively on African trade and economic development issues with the AfDB, the Brookings Institution and within the private sector.
[i] Meetings from the US Administration included: Ambassador Michael Froman, USTR and his staff; Ambassador Linda Thomas-Greenfield, State Department and her staff; and Grant Harris, Special Assistant to the President and Senior Director for African Affairs and his staff.
[ii] Meetings with the U.S. Congress included: Representative Karen Bass (D-CA); Senator Christopher Coons (D-DE); Senator Jeff Flake (R-AZ); Senator Tim Scott (R-SC); Representative Paul Ryan (R-WI); Representative Sander Levin (D-MI); Representative Pat Tiberi (R-OH); Representative Charlie Rangel (D-NY); Representative Todd Young (R-IN); Ed Royce (R-CA); Representative G.K. Butterfield (D-NC); Representative Yvette D. Clarke (D-NY); Representative Sheila Jackson Lee (D-TX); Representative Emanuel Cleaver, II (D-MO); Representative Gwen Moore (D-WI), Representative Robin Kelly (D-IL); Representative Gregory W. Meeks (D-NY); and Representative Stacey Plaskett (VI); and the staff of Senator Johnny Isakson (R-GA); and Everett Eissenstat, Chief International Trade Counsel, US Senate Committee on Finance.
[iii] At the 8-digit category level of the Harmonized Tariff Schedule (HTS).
[iv] UNECA. 2014. How ‘AGOA 2.0.’ Could Be Different. Outlining Africa’s Position on the AGOA Review process - A White Paper. Available online at www.uneca.org/publications/how-agoa-20-could-be-different
[v] Based on recent population and employment statistics provided by the Government of Lesotho, with employment creation data under AGOA sourced from the Lesotho National Development Corporation.