A delegation of African trade ministers have descended on Washington, D.C., this week to lobby for a swift renewal of the African Growth and Opportunity Act, a 15-year-old set of trade incentives up for reauthorization this year.
The delegation of ministers and other advocates of AGOA — which has directly and indirectly created almost 1.5 million jobs and generated more than $26 billion in duty-free exports to the U.S., according to the Office of the U.S. Trade Representative — fear Congress won’t get around to renewing AGOA until close to the deadline in September.
In a communique issued ahead of a civil society forum hosted by the African Union on Tuesday, the AU emphasized that thousands of jobs — most of them held by women — could be lost if Congress waits until the third quarter to renew AGOA. If legislators drag their feet, the interruption in trade could impede progress, and negatively affect aid donors’ trade efforts in the region.
“AGOA is very important to MCC not only because two-thirds of our portfolio is invested in the continent of Africa,” said Kyeh Kim, principal deputy vice president in the department of compact operations at the Millennium Challenge Corp., “but also because so much of our work overlaps with the AGOA eligible countries.”
The last-minute reauthorization of AGOA in the third quarter, Kim added, would deprive businesses of that predictable investment climate.
MCC’s mandate of reducing poverty through economic growth was implemented four years after AGOA was signed by former President Bill Clinton in 2000. AGOA, Kim explained, has been a key part of improving the trade climate in Africa since MCC’s inception, and will be no less crucial as MCC explores a more regional and subregional, in addition to its country-based approach.
“We’re looking toward AGOA reauthorization to improve our ability to expand markets across borders,” Kim added, “and move toward improving trade between countries, [as well as trade] to and from the U.S.”
AGOA and the big picture
MCC’s shift toward considering regional compacts would benefit from a unified approach, namely from Congress; AGOA presents that opportunity, MCC told Devex.
“One of the possible vehicles for us to make regional investments more feasible could be in AGOA,” said James Mazzarella, managing director of congressional affairs at MCC.
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“We’re asking, how do we work within our existing model to make regional investments more effective and efficient?” Mazzarella added, “Because a lot of trade capacity is helping countries trade among themselves.”
A reauthorization could be a platform, not only for coordination of U.S. goals in Africa but for changing the conversation about how the United States engages with the continent.
On the other hand, critics of AGOA point out that trade incentives have failed to benefit as many African countries as hoped. The program has also come under fire for dropping and adding AGOA-eligible countries on a yearly basis, creating a somewhat risky climate for potential investors.
“What could work better is a complaint-based assessment, like something similar to what the World Bank does, where issues are investigated year-round by a board,” suggested Stephen Land, representative from the AGOA Coalition Partners, during a civil society forum at the African Union.
“It’s not comforting to investors to know that the U.S. could decide to halt trade incentives for a whole year when the situation could improve over weeks or months,” Zenia Lewis, U.S.-Africa trade and investment specialist at the African Union, told Devex.
But the greatest barrier in taking full advantage of AGOA isn’t eligibility, according to officials. It’s a lack of trade infrastructure in AGOA-eligible countries.
Kenyan Ambassador Robinson Njeru Githae told Devex that many countries lack the ability to meet U.S. demand because of poor transportation or manufacturing infrastructure. While conditions are improving, there are many places where “the potential for trade is there, but not the roads or the facilities.”
That’s where cooperation between AGOA and U.S. donors becomes critical. Officials from MCC and USAID told Devex that they count trade infrastructure and capacity building among their highest priorities in the region, for which AGOA serves as a foundation.
“Many donors — and MCC in particular — work on infrastructure and trade capacity,” said Mazzarella. “Good trade incentives require good infrastructure and capacity, but you can’t take advantage of infrastructure without those incentives, so it’s a ‘chicken and the egg’ situation.”
Mazzarella added that AGOA “must be there as a fundamental underpinning” for MCC’s trade capacity projects in Africa to achieve maximum effect.
Building on and around AGOA
Anthony Chan, the U.S. Agency for International Development’s acting deputy assistant administrator for the Africa bureau, told Devex he anticipates more work by USAID to help countries create export strategies, which will in turn allow countries better use of AGOA benefits.
“We’ve been involved in trade capacity building for a long time that has had [mutually] complementary benefits with AGOA,” Chan told Devex. “We’ve seen the benefits of trade hubs throughout [the continent], but what will get additional emphasis is export strategies,” which, Chan said, will likely receive more support from USAID.
In Kenya and Tanzania, governments formulated “AGOA export strategies,” and saw significantly greater exports than neighboring countries, like Uganda, which did not craft a strategy.
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