The United States Trade Representative’s office released two reports last week that highlight the importance of trade as a component of a holistic approach to development. ONE has long argued that creating an environment that allows opportunity for economic growth and prosperity to be shared by all is an essential component in the overall fight to end extreme poverty. We are encouraged by the work that USTR has been doing to increase the United States’ trade relationship with developing countries.
The first report, the “2016 Biennial Report on the Implementation of the African Growth and Opportunity Act” provides an update on the status of the United States trade relationship with sub-Saharan Africa. This important preference program provides duty-free, quota-free access to eligible countries and was extended thru 2025 last year; you can read more about it here.
ONE has long believed that AGOA is simply one of the first steps in what has the potential to be both a deep and wide trading relationship with sub-Saharan Africa. Therefore, we were pleased to see in this first biennial report after AGOA’s reauthorization that the United States government is not only committed to making AGOA as useful as it can be, but also expanding its trade relationship with Africa beyond AGOA.
In fact, USAID reported that under its Trade Africa initiative, in East Africa they have already met 3 of their 4 goals three years ahead of schedule:
- They have reduced transit time for shipping containers moving from the port of Mombasa (in Kenya) to the landlocked Kigali (in Rwanda) by a whopping 71% (their goal was to reduce transit times by 15%). It used to take a shipping container 21 days to make this 890-mile journey—now it takes a mere 6 days!
- In just one year, they reduced the time it takes to clear cargo at the port from 5.8 days to 3.7 days, a decrease of 36%; their goal was to decrease this time by 30%.
- The support provided through the East Africa Trade and trade Hub has resulted in an increase of 94% in intra-regional trade in the first 21 months of implementation.
- The outstanding goal is to increase East African Community (EAC) exports to the United States by 40%; to date, exports from the EAC to the United States have increased by 29%, more than halfway to the goal.
Perhaps the most heartening part of this report was the section on potential free trade agreements with sub-Saharan Africa. The Obama Administration is encouraging African countries to take a dual track approach in this next 10 years of AGOA. First, by developing AGOA utilization plans that help them take full advantage of the AGOA preference program; and second, by looking beyond AGAO to a more stable, permanent and mutually beneficial trade and investment relationship with the United States. We think this is a prudent approach, and are encouraged that two countries (Kenya and Mauritius) have already expressed interest in entering into free trade negotiations with the United States.
The second report looks more broadly at how U.S. trade preference programs are reducing poverty and hunger through economic growth. Three preference programs for developing countries; The Generalized System of Preferences (GSP), AGOA, and the Caribbean Basin Economic Recovery Act (CBERA) waive tariffs on thousands of goods sourced from developing countries that meet certain eligibility criteria. In 2015, these three programs provided duty-free treatment to about $27 billion of goods from 126 beneficiary countries and territories. This accounts for 13% of the $212 billion in all goods sourced from the beneficiary countries.
All three of these programs have helped reduce poverty in developing countries by increasing and diversifying trade, encouraging inclusive economic growth, and creating new employment opportunities. In many countries, these programs are creating growth in the textile and apparel sectors, which are more likely to benefit the poor.
The report warns that the impact of these programs could wane in the coming years, however, in light of an overall drop in tariff rates worldwide.
In today’s global economy, developing countries have more opportunities than ever before to create inclusive economic growth that helps reduce poverty. The United States’ preference programs have been successful in starting this work, but we hope that the United States will continue its moves towards a more reciprocal trade relationship that reduces poverty and provides inclusive economic growth for all.