Here’s your Daily Brief for August 6th:

There has been a lot of buzz surrounding AGOA for the last week or so, and I’ve included a few articles in my daily briefs the last couple of days. I figured today I would dedicate the entire DB to AGOA and flush out some of the concerns and issues on all sides.

First of all, I’m very disappointed in the US Media for completely ignoring this story all together. I was watching NBC Nightly News the other night and Brian Williams cut to a reporter traveling with Hillary Clinton, they were in Nairobi, and all they talked about was North Korea! A cursory Google News query for “AGOA” yields nominal US reports. But some wildly important issues are being raised!

So, I hereby take it upon myself to be your guide through AGOA 2009:

Brief Background on AGOA

The African Growth and Opportunity Act (AGOA) was initially passed by Congress and signed into law by President Clinton in May 2000. Four years later, President Bush signed the AGOA Acceleration Act of 2004. AGOA expands on the Generalized System of Preferences (GSP) and gives eligible African Countries trade preferences for quota and duty-free entry into the US on certain goods.

But what would US Trade Policy be without political stipulations? AGOA allows the President to determine a country’s annual eligibility (of course, this responsibility lies more in the hands of the USTR). To date, there are about 41 countries eligible for AGOA preferences.

While AGOA acknowledged the need for eased integration of African economies into the core global economy, it has had some significant shortcomings. It is these shortcomings that have dominated the discussion among scholars and the African media the last couple of weeks.

The theme of this year’s AGOA Forum was “Realizing the Full Potential of AGOA Through Expansion of Trade and Investment”. It’s interesting this comes a year after the original legislation was set to expire (the 2004 Acceleration Act extended it through 2015). But given this theme, it makes these shortcomings essential to address and discuss.

AGOA Shortcomings

The first of the major shortcomings is the political stipulations mentioned above, whereby the US reserves the right to pick and choose eligible recipients. Bill Easterly wrote a great post yesterday on this (linked below), so I’ll keep my remarks short here. Whenever politics and economics come together, the outcome is rarely/never good. And when we’re speaking about developing nations, sometimes the stick/carrot game really hurts us more politically. (This could lead into an entire discussion on the role of China in Africa!)

The second major shortcoming is the US’ still-burdensome import standards, regulations, and policies. From Kenyan exporters to the US that I’ve spoken with, this is a big non-tariff barrier in itself. If we want AGOA to succeed we need to work on assisting African exporters in meeting US-Import Standards.

A third shortcoming is that of little capacity building and technical assistance. While a provision for this was written into the original legislation, it remains a significant issue. This is discussed further below in the “African Countries Call on US Reform” section.

The final shortcoming, and probably most important, is the disproportionate consistency of US-Africa trade under AGOA. While last year’s trade numbers reached $67.5 billion, about a 30% increase year-on-year, 97.2% of that went to oil producers in only six countries. This means that all other countries only brought in $1.9 billion total. And that number is predominantly textile and apparel exports. (Download US-African Trade Profile 2009)

US Calls on African Reform

Aside from calls for political reform throughout Africa (notably in Madagascar, Liberia, and Kenya), the US Trade Representative to Kenya Ron Kirk offered his suggestions for economic reform in an Op/Ed piece for the Business Daily newspaper.

He called for a diversification of trade in order to generate and sustain economic growth. Furthermore, he suggested African Countries improve their local business environments and foster entrepreneurial initiative.

Secretary Hillary Clinton notably announced, “Today, Africa counts for two percent of global trade. If Sub-Saharan Africa were to increase that share by only one percent, it would generate additional export revenues each year greater than the total amount of annual assistance that African currently receives.” Hopefully this signals a shift is State Department / USAID thinking away from the traditional aid model and more toward a business/trade approach to Africa. (Her full remarks are embedded below)

African Countries Look Inwards

African ministers have acknowledged the role they play internally in making AGOA work. They have called on regional economic blocs like the EAC, SADC, ECOWAS to lead the way in increasing global competitiveness.

African Countries Call on US Reform

President Kibaki called on the US to assist in removing obstacles to trade such as those mentioned above. “The US should help Africa build trade capacity because some of the set quality standards demand that we import specialized equipment, materials and parts from the developed world,” he said.

Other African ministers called on the US to enhance the goals of AGOA through the transfer of skills and technology to improve the quality of exports.

One request include the establishment of a low-cost credit facility for start-up businesses in Africa willing to participate in AGOA, coupled with US-provided technical training and assistance.

African entrepreneurs have requested that product inspection be done in the country of origin, helping lower costs and other technical barriers to trade.

Concluding Remarks

Overall, the discussion is an important one. Integrating Africa into the global economic core is an essential task, but a task of which responsibility does not solely lie on the shoulders of the United States. There is a lot to be done in African Countries with respect to capacity building that does not require US assistance. Additionally, there needs to be a discussion among business leaders, both American and African, to lead toward greater cooperation and increased access to mutually beneficial opportunities.

Here’s Secretary Clinton’s Keynote Remarks at the AGOA Forum in Kenya:

And Here is a Joint Press Conference with Kenya’s Foreign Minister:

And As a Little Treat, Here’s a Sneak Peak Into The Night’s Activities @ Carnivore:

Note: It’s not like the nights at Carnivore I remember!

Here’s the Bill Easterly article I mentioned above:

Hilary offers trade opportunities to Africa – except when we don’t feel like it (via Bill Easterly) – Bill Easterly expresses concern in this blog post over the USTR’s ability to revoke AGOA status from any country for “political” reasons like poor governance. He points to Madagascar, an exemplar country for the success AGOA has had in promoting its textile industry; but political unease in the country has led to the USTR threatening to revoke AGOA eligibility (effectively destroying the local textile industry comprising 6.5-8% of GDP and 50,000 jobs).

Updated:

Here’s some good articles on AGOA:

The New Global Reality: Africans Lead the Way at the AGOA Forum

Will Global Recession Damage US-Africa Trade Ties? (via Paul Collier and Rosa Whitaker)