By Emily Huie & Kedar Mankad, Policy Officers for Agriculture & Inclusive Growth, ONE
Washington is abuzz with conversations about the variety of trade bills currently under consideration by Congress. Trade negotiations are complicated. Sometimes it takes years to sort out the details, with rancorous debate from all sides of the negotiating table. Among these, ONE is focused on a non-controversial bill that has been in place for 15 years, The African Growth and Opportunity Act (AGOA).
We’ve already written about the benefits of AGOA and why we think trade is important to development; but trade has many components, and for Africa, agricultural trade is critical. Over 80% of Africa’s poor are employed in agriculture; 50% of the agricultural labor force is made up women; and agriculture contributes to about 30 percent of GDP. Currently, trading opportunities that would help bring more Africans out of poverty are underutilized. This reality also limits the impact of U.S. development programs like Feed the Future.
The U.S. needs a better agricultural trade policy with Africa. The Brookings Institution and Chicago Council on Global Affairs have both written extensively on this topic; tomorrow’s guest blog by Andrea Durkin, a respected voice in the field and author of the Chicago Council report will outline her views on agriculture and trade as well.
Here at ONE, our focus is to figure out what it will take to leverage this trade policy to end extreme poverty.
In 2013, AGOA exports to the United States from sub-Saharan Africa totaled $24.9 billion. Agriculture and food product exports were a mere $262 million of that total and constitute only 5% of all non-crude petroleum exports under AGOA. These agricultural exports are predominantly citrus fruits ($62 million), edible nuts ($58 million), wine ($52 million), and unmanufactured tobacco ($37 million).
The potential for growth in exports in the African agriculture sector is huge; in fact the World Bank estimates the sector as a whole could reach $1 trillion by 2030. But there are significant hurdles that African food producers face before being able to access the U.S. market, and many of the challenges are not unique to agriculture.
Non-tariff barriers to intra-African trade, particularly in the agricultural sector, are huge impediments to growth. Several key challenges facing food producers in particular are: limited access to markets outside of their local market, variability in quality of produce which impacts an ability to find buyers; and a lack of access to finance.
Another big problem African food producers face is inadequate infrastructure, which limits their ability to get goods to market. High transport costs drive up the price of goods, making it difficult to compete with more developed regions. The United States and other donors should increase financial assistance aimed at improving hard infrastructure as well as provide technical assistance to reduce costly delays in moving goods across borders and through ports.
Technical Assistance and Capacity building
Participating in the global trading system requires the ability to meet standards, regulations, testing and certification requirements. Many African countries, particularly the Least Developed Countries (LDCs), lack the capacity to do so, limiting their ability to export agricultural goods. The United States and other donors must work to provide the technical assistance and training needed to understand and meet these requirements.
For example, sanitary and phyto-sanitary standards (SPS) ensure that food is safe to import. Meeting the U.S. standards is a very high bar for resource-poor African food producers. The U.S. Department of Agriculture should provide technical assistance on how to navigate this complex process, and help build countries capacity to help farmers meet our standards.
Access to U.S. markets
The U.S. should eliminate all tariffs and quotas on agricultural exports from AGOA-eligible countries, especially from LDCs. Brookings estimates that eliminating tariffs alone would increase exports by over $105 million compared to what it would be otherwise in 2025, with only minor reductions in U.S. production.
As African food producers are able to export more products and earn greater profits, their local economies will improve. As their local economies grow, new opportunities for investment will open up for U.S. companies to enter into the African market. Thus, the benefits of increased trade run in both directions.
Today, the US House of Representatives passed legislation that will reauthorize AGOA for the next ten years. We hope that following AGOA’s reauthorization, officials at the U.S. Trade Representative and other federal agencies will focus on how to address barriers to trade in Africa, and we urge them to prioritize agriculture in all future trade negotiations with African countries.
ONE wants to see trade barriers carefully lifted in a way that benefits the very poorest in African communities. Agriculture, trade and development are intrinsically linked, and AGOA affords the United States an opportunity to set an approach to trade that has boosting agricultural activity for the poorest, and development objectives at its heart.