10-year extension but new Bill unlikely to make Agoa successful

Zanaa, which makes leather products, at a Comesa SME exhibition in Kampala in 2012. The regional competitions authority will offer SMEs a level playing field. PHOTO | FILE 

By KEVIN J KELLEY, TEA Special Correspondent

In Summary

• Even in the case of Kenya — which ranks as Africa’s largest exporter of Agoa-covered textiles and apparel —the trade programme has fallen short of its architects’ hopes.
• Agoa’s advocates in the US have argued for years that the programme has substantial but largely untapped potential to boost agricultural production in Africa.

The US Senate recently approved a 10-year extension of the African Growth and Opportunity Act (Agoa), a preferential trade programme that has significantly benefited only Kenya among East African countries.

The legislation passed the Senate on a 97-1 vote, but the House of Representatives may not take the necessary action to finalise the proposal prior to President Barack Obama’s scheduled visit to Kenya in July.

READ: US Congress to decide on next phase of Agoa

Launched in 2000, Agoa is set to expire in September.

The 10-year renewal also applies to Agoa’s “third-country fabric” provision, which is of great importance to Kenya and other African textile exporters.

It allows products made from yarn produced in countries outside Africa to qualify for duty-free treatment. Most Kenya-made apparel contains fabric manufactured in Asia.

Agoa has given a big boost to Kenya’s textile sector, but has had little impact on Tanzania, Rwanda and Uganda, as well as on most African countries that do not export energy products. And the version of the Bill backed by the Senate appears unlikely to make Agoa more broadly successful.

Even in the case of Kenya — which ranks as Africa’s largest exporter of Agoa-covered textiles and apparel —the trade programme has fallen short of its architects’ hopes.

But Kenya has seen significant gains in employment as a direct result of the $423 million’s worth of products, mostly textiles, that it sold on US markets last year.

The rise and fall of Agoa trade involving Tanzania, Rwanda and Uganda matters little because its volume is comparatively tiny. Tanzania exported $18.3 million in goods to the US through Agoa in 2014, while the totals for Uganda and Rwanda were $1.5 million and $630,000, respectively.

Agoa’s advocates in the US have argued for years that the programme has substantial but largely untapped potential to boost agricultural production in Africa. Limited efforts have been made to enhance the sale of food products to the US, but barriers remain formidable, and the Senate’s Agoa renewal legislation does little to lower them.

READ: Obama admin looks to reshape, renew Agoa

The Bill would instead require African countries to develop and publish “utilisation strategies” that designate sectors in which Agoa could bring economic gains.

Several members of Congress view Agoa as unnecessarily one-sided. They say that Africa’s economic growth in recent years should be accompanied by greater reciprocity in trade benefits.

Proponents of this approach also point out that African countries have negotiated agreements with the European Union that establish preferential treatment for EU member-states’ exports.

The Senate’s Agoa-renewal Bill takes no specific action in this regard. It only requires US trade officials to report to Congress on plans for negotiating free trade agreements with African nations.

In any event, US exports to many sub-Saharan states are already booming. Even as Agoa sales declined sharply in most countries other than Kenya, sales of US goods and services to Africa rose six per cent last year. Exports to Kenya soared by 152 per cent, reaching $1.6 billion, mainly as a result of aircraft sales.

US exports to other East African countries were generally as anaemic as were Agoa imports.

Tanzania bought $304 million worth of products from the US last year — 26 per cent less than in 2013. Sales to Uganda totalled $78 million, a 36 per cent drop from the amount for 2013.