US-Africa trade lagging despite free access

AGOA has not led to the trade diversification hoped for, a US trade representative told a forum in Ivory Coast this week.

08 August 2019 | Economics

I do not think that AGOA has been the game-changer for many countries on the continent that we hoped it would be. - Constance Hamilton, Assistant US trade representative for Africa

Trade between the United States and Sub-Saharan Africa is in the doldrums despite a 2000 US law designed to boost access the American market, a conference in Ivory Coast has been told.

The African Growth and Opportunity Act, which in 2015 was extended to 2025, provides tariff-free access on 6 500 products to 39 countries, ranging from oil and agricultural goods to textiles, farm and handicrafts.

The latest data supplied by the Namibia Statistics Agency (NSA) shows Namibia exported N$670 million worth of goods to the US in the first quarter of 2019, up 135% from the same three months in 2018.

This made the US Namibia’s tenth biggest export market in the first quarter. By comparison, exports to China – Namibia’s biggest market in the quarter under review – exceeded N$5.4 billion.

Namibia imported N$450 million worth of goods from the US in the first quarter, a drop of 31% compared to the same quarter last year.

AGOA

US-Africa trade quadrupled in value from 2002 to 2008, a year when it reached US$100 billion, but fell back in 2017 to just US$39 billion, according to figures compiled by the US agency USAID.

The surplus is widely in Africa's favour, but most exports to the US are in oil or petroleum-based products, not the industrialised goods that provide a value-added boost to local economies.

"I do not think that AGOA has been the game-changer for many countries on the continent that we hoped it would be," Constance Hamilton, assistant US trade representative for Africa, told the 18th AGOA Forum, ending in the Ivory Coast's economic capital Abidjan on Tuesday.

"AGOA has not led to the trade diversification for which we originally hoped," she said in remarks on Monday.

"Petroleum products continued to account for the largest portion of AGOA imports, with a 67% share," Hamilton said.

"And the volume of AGOA trade remains modest. In the AGOA clothing sector, for example, we get about US$1 billion per year from Africa," he said, adding that this amounted to just one percent of all US clothing imports.

The United States is Africa's third biggest trade partner after the European Union and China. But Africa attracts only about one percent of all US foreign investment.

Deputy US trade representative Curtis Mahoney said Washington had drawn up a "variety of new initiatives" to "lay the groundwork for an even closer trade and investment partnership".

AfCFTA

"We will combine the promise of the AfCFTA with these new US initiatives and help maximise the potential of US-Africa trade," he said.

The AfCFTA - the African Continental Free Trade Area - is a scheme for demolishing trade barriers among the 55-member African Union.

The long-negotiated agreement was ceremonially launched at a summit in July, but will need a year to become operational, the AU says.

According to the conclusions of a pre-forum meeting of ministers ahead of the Abidjan conference, only 18 out of 39 countries have set down a national strategy for exploiting the benefits of the AGOA.

Many African companies either do not know of the advantages that are on offer, or they do not know how to use them, the ministers found.

Prosper Africa

In July, US ambassador to Namibia, Lisa Johnson, introduced the local media to Prosper Africa, the US government’s initiative to sustainably increase two-way trade and investment between the superpower and Africa.

Johnson said Prosper Africa will help advance Americans and Africa prosperity and security, supporting jobs and demonstrating superior value of transparent markets and private enterprises for driving growth.

“With six of the ten fastest growing economies in the world and over one billion consumers, Africa is poised to play a pivotal role in the global economy. Meanwhile, producers in Africa see a US consumer market of more than 300 million people that already has purchasing power of US$300 trillion; the largest in the world,” she said. - Own report and Nampa/Reuters

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