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AGOA

Which Benefits And Lessons For Africa, Cameroon?

Origins and purpose of AGOA For almost two straight decades spanning the pe- riod 1980-2000, most African countries experienced a serious economic crisis arising from a prolonged slump in wor- ld commodity prices, sluggish economic growth, erratic political and economic governance, deepening poverty rates and other regressive social indicators, especially in health and education. The international community, spearheaded by the World Bank and the International Monetary Fund, came to Africa’s rescue with a more or less standard package of pro-market economic reforms which prioritized privatization of much of the public and para-public economic sector and recommended export-based development strategies that appeared to have worked miracles elsewhere in driving economic growth and reducing endemic poverty. It is against this backdrop that the United States African Growth And Opportunity Act (AGOA) came into being following close to 10 years of efforts by pro-African activist who lobbied for enhanced U.S. engagement with and investments in Afri- ca. Thanks to their sustained advocacy, AGOA was adopted by the U.S. Congress in the year 2000 and signed into Law the same year by President Bill Clinton. It is a preferential trade agreement which unilaterally expands access to the U.S. market for some African goods, increase trade and investment between the U.S. and eligible African countries, reduce and eliminate tariffs for African exports of different products, and promote economic liberalization and human rights reforms in Africa. First set to expire in 2008, AGOA was later extended to 2015, and extended yet again in 2015 for another 10 years. Initially, 34 countries were included in the list of beneficiaries, a list which changes with each annual review by the U.S. Ad- ministration of which countries should be eligible. Country and product eligibility : The AGOA portal (www.AGOA.info) lists the conditions or criteria established (unilaterally) by the U.S. Administration for the countries and products covered by AGOA.. The criteria are heavy on political and economic governance values which the U.S. believes to be best attributes and practices for promoting democracy, human rights, rule of law, open-market economies, etc. Anyone familiar with the structural adjustment programmes (SAPs) of the 1980s will not fail to note some strong similarities between SAPs and the AGOA eligibility pact. These crite- ria, which are reviewed unilaterally each year by the U.S., have hardly changed since the inception of AGOA, which leaves the impression that African states have little or no leverage over the U.S. policy conduct of the programme. Indeed AGOA is somewhat unique in that it is a non-reci- procal, non-negotiated preferential trade arrangement, which may therefore qualify as a sort of humanitarian handout by the U.S. to Africa. As such the potential scope for negotiating an upgrade of AGOA to an even more effective trading scheme for boosting Africa’s economic growth might be lost under present arrangements. With respect to product eligibility, AGOA preferences currently apply to about 6,500 U.S. tariff lines, including some 5,000 lines currently covered by the U.S. Generalized System of Preferences (GSP), plus tariff lines added by the AGOA legislation. To summarise, four main sectors including oil and other energy-related products, textiles and apparel, transportation equipment, and minerals and metals, account for over 90 % of African exports to the U.S. under AGOA. As can be noted, African countries have fairly limited comparative advantage in those four sectors covered by AGOA benefits, with the possible exception of oil and other energy-related products. Africa’s major agricultural products and raw materials are not covered (as yet) by AGOA treatment and benefits. Indeed much of the tariff reduction under is for non-agricultural commodities while agri- cultural goods imported from the eligible countries account for less than 2% of total U.S. agricultural imports according to data sourced from the World Trade Organization and the U.S. Department of Agriculture. Yet, agriculture being Africa’s economic mainstay, any trade arrangement that sidesteps the agriculture sector, as cur- rently noted under AGOA, is bound to have little or no impact on promoting economic growth and industrialization, and reducing Africa’s poverty rates – which happen to be AGOA’s solemn goal. This issue should therefore qualify for consi- deration at annual AGOA Forums. Africa’s trade performance under AGOA: Since 2000 when AGOA was enacted, Afri- ca’s overall economic performance has been much better than in the previous two lost decades. But that uptick in economic estimates at 30% per annum; and China overtook the U.S. in 2008 as Africa’s premier trading partner. These and other factors have been the main forces underlying Africa’s improving economic prospects since AGOA’s inception. But the foregoing analysis in no way be- littles the significance of AGOA to African economies. Notwithstanding Africa’s sur- ging trade with China, the U.S. remains Africa’s major trading partner whose imports from Africa have consistently outstripped in value and volume its ex- ports to the continent since AGOA was enacted. U.S. imports from the region as a whole grew from less than USD 25 billion in 2000 to upwards of USD 80 billion in 2008 before declining annually to their 2000 level or so, partly due to the adverse effects of the global financial crisis, as depicted in figure 2 above on aggregate trade flows between Africa and the U.S. from 2000 to 2016. But the share of AGOA ingredient (AGOA-eligible imports) in those figures has varied widely from one country to another, from almost 100% for Chad (oil exports) in 2016 to 11% for Cameroon, less than 1% for Ivory coast and Senegal, 70% for Kenya, and 83% for Nigeria for example. The U.S.- Africa trade pattern since the onset of AGOA and the overall weak performance of the region in utilizing the opportunities offered by AGOA would seem to suggest some serious growth appears to have been due less to AGOA’s trade and development impact than to other factors at play within Africa itself but also at global level. Firstly, the virtual collapse of communism in 1990 as a dominant ideological force led to the convergence of economic development theories around the supremacy of capitalism and « the magic of the marketplace », to quote former U.S. President Reagan. So African countries as a whole had little choice but to embrace pro-market reforms partly encouraged by international debt-relief programmes. Secondly, Africa appeared to have been rewarded by the relative decline in the 1990s of violent conflicts on the continent, making the region increasingly attractive for foreign direct investment flows, notably in the petroleum exporting countries. Thirdly, the growing economic clout of some emerging economies, China more particularly with its vast appetite for Africa’s commodities, whipped up world commodity prices on a sustained basis, thus contributing significantly to boost the economic growth trajectory of Africa’s mostly commodity-dependent economies. Indeed, China’s ever increasing engagement with Africa since 2000 has been such that the volume of its trade with Africa has been growing by some structural weaknesses in African econo- mies, particularly their limited industrial organization, infrastructure challenges, and unfriendly business environments, including corruption. These factors tend to inhibit their capacities to derive optimal benefits not only from AGOA but also from the global trading system more generally, including Africa-EU Economic Partnership Agreements (EPAs). AGOA is fundamentally an OPPORTU- NITY to be seized by eligible African countries to boost quota-free and duty- free exports to the U.S. But that cannot happen without an industrial strategy to tap available opportunities and remove supply-side bottlenecks. Currently mostly the oil-exporting countries such as Nigeria, Chad or Angola seem to be reaping the most AGOA benefits because, as already noted, the AGOA-eligible product range is heavily skewed towards energy-related commodities. But other non-oil-exporting countries such as South Africa, Kenya or Mauritius have equally benefited hugely from AGOA thanks to their articulated national AGOA strategies and policies. For example, according to a 2014 publi- cation by the Kenyan Ministry of Trade entitled « Kenya National AGOA Strategy » AGOA has played a critical role in spur- ring Kenya’s exports to the US. « This has been most dramatic in the case of the textiles and apparel sector, which grew at 44% a year in the few years af- ter AGOA’s passage. In effect, AGOA has created an apparel industry in Kenya on a scale that the country would unlikely have achieved without preferential access to the US market ». Overall, the volume of AGOA exports has increased 500 percent, from $8.15 billion in 2001 to $53.8 billion in 2011, and non-energy AGOA exports have increased 275 percent, from $1.2 billion to $4.5 billion. Notwithstanding its low utilization so far by many eligible countries such as Cameroon, AGOA is credited to have acted as a catalyst for increased trade with the US in the key sectors already mentioned, as borne out by the trade figures posted on AGOA.ifo portal. The U.S. foreign direct investment in Africa would also appear to have increased by threefold under AGOA. And by the esti- mates of the African Coalition on Trade, AGOA-related investment has resulted in the creation of some 300,000 jobs in Africa and almost 120,000 jobs in the United States. In the apparel sector alone, AGOA is estimated to have created as much as 350,000 jobs in Africa since 2001 and some 100,000 jobs in the US economy, according to the African De- velopment Bank. Cameroon AGOA performance : Cameroon’s exports to the U.S. under AGOA have not been spectacular. Since 2000 it has maintained a near-constant dismal trade performance with the U.S., not unlike many other AGOA-eligible African countries. For example, Cameroon’s exports declined from USD 23 million in 2014 to USD 17 million in 2016. The AGOA-ingredient of those exports also declined somewhat from 12.3% in 2014 to 11.0% in 2016. In a bid to boost the country’s export performance under AGOA, and in anticipation of the 2015 AGOA Forum that was to be hosted by Cameroon, the Prime Minister set up in 2012 an Inter-Ministerial AGOA committee (as per Decree No. 2012/0159/PM of 30 January 2012), which subsequently iden- tified, with the technical assistance of a Consultant and the AGOA Resource Unit of the Cameroon Chamber of Commerce and Industry (CCIMA), three industry sectors to be supported by government. These sectors included (a) the food industry; (b) textiles and apparel; and (c) handicrafts and related items. Additionally, 26 local enterprises were selected on the basis of their existing and potential export capacities. The national AGOA Committee, whose technical secretariat is lodged in the PM’s office, was to provide full and systematic support to the selected enterprises so as to enable them to showcase Cameroon’s performance under AGOA and so lead the way for other local enterprises wishing to export to the U.S. To date, however, nothing has happened and the question is whether the PM’s national AGOA Com- mittee has been administered to death. Also, the AGOA Ministerial Forum that was to be hosted in 2015 by Cameroon was finally hosted instead by Gabon. In conclusion, Cameroon’s private sector is still waiting on government to demons- trate its gravity of purpose by reviving the work of the AGOA Committee and coming up with a national AGOA strategy similar to strategies adopted by other countries with AGOA success stories, such as Kenya.

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