The Perfect Storm for an Enhanced AGOA

By Stephen Lande and Dennis Matanda

In September 2012, just as the 3rd Country Fabric was about to expire, the non controversial AGOA provision was, in a surprise turn of events, unanimously approved by the US Congress. The bill had, due to partisan gridlock, languished for over a year, and in the process, both American and African businesses suffered loss from the uncertainty of renewal. But the manner in which 3rd Country eventually passed gave hope to the then despondent that renewal of the AGOA program would be seamless and also well before its July 2015 expiration date. Also, the 113th Congress, which commences January 2013, has already indicated that they intend to address AGOA in the same time frame as the Generalized System of Preferences [GSP] program which enables US companies to import certain products from selected developing companies free of duty. Thus, uncharacteristically, Congress could renew AGOA within this session or even by end of this year!

However, while renewing AGOA is important, if the program were significantly enhanced to address imports from Africa to the US, exports to Africa from the US and especially US investment in Africa, this might even be more beneficial to even more stakeholders. A new initiative from the Obama Administration, from Congress or stakeholders would ensure that the flagship US trade and investment program for Africa lives up to the original expectations of being truly transformational and not just a cosmetic extension or renewal like has happened on four occasions in the past 12 years of AGOA's existence.

But stakeholders may opt for cosmetic changes to AGOA. The delay in passing the simple 3rd Country caused a number of US textile orders to be moved from Africa to Asia – affecting sub Saharan Africa companies and their employees. There's actually concern amongst Southern Africa apparel manufacturers that any revision of the program could result in a less user friendly AGOA; one that replaces or limits their current benefits for more advanced ones such as reciprocal elements like those imposed by the European Union.

Nonetheless, while this trepidation is understandable, the benefits of an aggressive option would be well worth the effort. There is a general understanding that the US must strengthen its support of the private sector in both Africa and in the US so that the world's largest economy can better compete against China and the European Union, which competitors are benefiting from more generous programs from their respective governments. In the face of Chinese competition, the US commercial position in Africa is rapidly shrinking as demonstrated by trade flows, infrastructural development, the control of natural resources and Chinese emigration to the region. Additionally, there's overwhelming evidence that the European Union intends to overcome African opposition to Free Trade Agreements FTAs through the use of Economic Partnership Agreements. EPAs would be tied to European aid levels and market access to the region – and would be reduced if African countries, specifically non-LDCs, do not enter into such agreements. Should the EPAs be signed before sub Saharan Africa has had a chance to establish a continental Free Trade Area and Customs Union, then the path to Africa's regional integration will be filled with roadblocks!

Sub Saharan Africa stands to benefit much more from a progressive US | Africa trade and investment policy. Not only would a novel initiative differ from the Chinese and EU approach in Africa; it would focus on unleashing the US and African private sectors while foregoing reciprocal agreements with individual countries until such a time that Africa is able to have a collective bargaining advantage.

The foundation for a more expansive initiative has already been laid by business oriented visits to the continent by Secretary Clinton and other high profile Obama administration personnel. Secondly, although this was overshadowed by the General Election, the President issued a June 2012 directive laying out the basis for a more coordinated approach to US | Sub Saharan Africa relations. This directive focuses on trade and investment as much as it does on democracy and human rights. Also, a number of bills geared towards better coordination, American investment and exports were introduced in both the House and Congress. Additionally, the US Ex-Im Bank – the nation's Export Credit Agency is adopting a more aggressive strategy to insure American businesses against loss just as the Overseas Private Investment Corporation, OPIC, is proactively financing US private sector projects and enhancing support for regional integration. And as a way to recognize their significant investment on the continent, both the House and the State Department are empowering the African Diaspora in various ways.

These are what make the 'perfect storm' for an initiative befitting of the times. The Africa Program at the Woodrow Wilson Center and Manchester Trade, a Washington DC based trade policy firm, are undertaking a program designed to develop consensus on what could be the most effective way to progress from AGOA. This is an excellent place to start - with various African and American stakeholders working together to establish the basis of an overarching program.

Stephen Lande is currently President of Manchester Trade and is a former Lead Negotiator at the US Trade Representative's Office.

Dennis Matanda is an American Policy Analyst from Uganda who serves as Editor at The Habari Network  and currently works in Global Banking and Corporate Communications in Manhattan.

The Woodrow Wilson Center|Manchester Trade collaboration can be found here