The African Growth and Opportunity Act

One of the most important tools in the fight against poverty is trade. Africa needs to increase its ability to export in order to be able to finance its own development. In addition to agricultural subsidies, access to developed country markets for African products continues to be limited. Quotas limit the quantity of products that may enter a certain market, while tariffs often make products too expensive to compete. Sometimes tariffs on processed goods are higher, making it more difficult for Africans to move into higher value manufacturing.  

The Africa Growth and Opportunity Act (AGOA) is one way in which the U.S. has worked to open its markets to African producers. AGOA was enacted in 2000 as the first piece of trade legislation focused on increasing and enhancing trade between the United States and countries in sub-Saharan Africa by permitting the duty-free export to the U.S. of over 6,000 products from AGOA-eligible countries. In order to qualify for AGOA, each country must be working to improve its rule of law, human rights, and respect for core labor standards. Currently, 40 of 48 sub-Saharan African countries qualify.

AGOA Successes

• Lesotho has become the leading sub-Saharan African exporter of apparel to the U.S. with AGOA exports in 2007 of more than $300 million, up from $129.6 million in 2001.
• Kenya is one of the top exporters of cut flowers under AGOA and is a significant contributor to a doubling of fresh flower exports to the U.S. from sub-Saharan Africa between 2001 and 2007. Overall, Kenya's 2007 AGOA exports were valued at $255 million and also included apparel, nuts, sporting equipment, plastic goods, and jewelry.
• Mauritius is a leader in the prepared seafood sector which has experienced significant growth in recent years, with AGOA exports growing from $754,000 in 2001 to $15.8 million in 2007. Mauritius' total AGOA exports in 2007 were valued at $120 million and included apparel, sugar, sunglasses, and jewelry.
• Non-oil AGOA exports of footwear, toys, sportswear, fruits, nuts, cut flowers, prepared seafood, and essential oils all increased during 2007.

The Impact of AGOA

Statistics indicate that imports from AGOA-eligible countries have increased each year since enactment of the law, most recently rising by 29.8 percent in 2008 over 2007. Total two-way trade between the U.S. and sub-Saharan Africa has more than tripled since 2001 as a result of AGOA. However, the majority of AGOA exports to the U.S. are oil and petroleum products.  The leading exporters under AGOA have been countries producing oil and engaged in other extractive industries. Four out of five leading exporters - Nigeria, Chad, Angola and Gabon-are oil-producers. Other sectors such as agriculture, textiles and apparel, and automobiles are benefiting from AGOA as well. AGOA exports to the U.S. reached $66.3 billion in 2008, more than six times the amount in 2001, and non-oil AGOA exports accounted $5.1 billion of the 2008 total, a 51.2 percent increase over 2007, and more than double their market-share in 2001. Apparel has been particularly successful, accounting for 40 percent of non-oil trade, due to a special provision of AGOA that allows 26 of the 40 AGOA countries to use inexpensive fabric from anywhere in the world to make clothing that can be exported to the U.S. duty-free.

Limitations of AGOA

Though efforts have been made to extend AGOA and make it easier for African countries to take advantage of the benefits, AGOA as a tool is limited in its ability to truly alter African trade with the U.S. AGOA could have a greater impact if the scope of products was expanded to cover all products from all African countries in order to create more export opportunities. For example full access to sensitive products such as sugar, beef, and footwear is not included under AGOA but could have great potential for African producers if it was added. Additionally, coordinating trade policies with other preference programs in donor countries would make it simpler for African countries to access developed-country markets.

Ultimately, trade policy must be well-integrated with development policy in order to fully utilize the power that trade has to unlock the economic potential in poor African countries. AGOA itself only addresses market access and thus its impact will be limited because it does not reflect a comprehensive approach to trade policy. Tariffs and subsidies hinder access to new markets, and poor countries need better infrastructure facilities, technology, and resources to meet the demands of the global market. AGOA does not and is not intended to address subsidies in any way; therefore the competitive advantage of subsidized U.S. goods continues to impact Africans' ability to compete in the agricultural sector. What AGOA even more vividly reveals is the need for greater trade capacity assistance and the need to address "supply side" issues in Africa. With increased trade capacity, once the barriers to trade are removed, Africa can better take advantage of access to the U.S. market in a variety of industries, and can meet U.S. demand. The lack of infrastructure (transportation, telecommunication, energy, and water), access to capital, and familiarity with the U.S. market all work against Africa. Addressing capacity/infrastructure gaps, encouraging diversification of exports, and transforming the international trade system to level the playing field will ensure that more trade benefits accrue to sub-Saharan Africa.