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AGOA dilemmas: Is it too narrow, or is Africa not exporting?
2005-12-14 08:00:02
By Nimi Mweta
Administration officials in the United States are at varying tones when it comes to assessing the impact and prospects of the United States Africa Growth and Opportunity Act (AGOA).
The facility has had an impact in terms of propelling the development of export oriented industries in the continent, but two dangers hover on it, first it may not last too long (in the wake of freeing the trade in textiles).
Secondly it is a special dispensation and thus by terms of US free trade rules can’t be a durable facility in like manner as traditional EU-ACP ties, for instance.
Yet this is precisely the sort of longing that is noticed in Africa’s wish, for if there is one thing Africa can’t think about without losing its head in a spate of dizziness, it is competition.
Africa wishes to have a specific role in world economy which is neatly cut out for it for instance it used to be the case that Tanzania Mainland (or Tanganyika) used to lead the world in sisal, and Zanzibar in cloves, while Kenya would be a leader in tea and Uganda in coffee.
Malawi and Zimbabwe were tobacco leaders and Mozambique, definitely cashew nuts, and Nigeria palm oil (before oil itself, etc).
This neat division of labour was crushed by introducing most of those crops in the Far East, which then flooded the world with surplus produce, and Africa is still reeling backwards from these blows.
But then it is a rule of dependency that developing countries cannot complain about the market (as this would mean criticizing each other, or accepting the nature of things) but focus on what is being done by the rich.
Thus Africa has spent years in diplomacy at the WTO to seek the repulsing of subsidies for farmers in the West, keenly hoping that in this manner prices are going to rise, whereas the logic is elsewhere.
Were it that farmers in the West find it unprofitable to farm, any excess needs can be sourced from the Far East at current prices, or hover near these same prices.
Any rise in prices presumes that there is scope for more produce, and efficient farm systems will bring out this additional crop, which means that prices would always tend to be driven to the bottom.
As AGOA is a marginally protected market access initiative, prices that are found or may look to be available at the moment might not be the lowest the market can afford, but this is a temporal situation.
Yet even within this situation, noticeable problem still face many African countries in seeking to use the facility, on account of inefficient systems in these countries, as most farming is peasant, etc.
Thus the manufacturing sector push expected to enable Africa to obtain via AGOA isn’t forthcoming, and 80 per cent of trade under AGOA is tied to extractive industries.
It is also clear to administration officials that small and medium sized firms that AGOA authors targeted are marginal to this trade, at the moment.
US administration officials explain this situation, as in the World Bank and the IMF for that matter, to ’lack of the necessary business ties.’
Even then, in July 2004 President Bush signed the AGOA Acceleration Act where about $181million was to be spent in trade capacity building programs, but again SMEs in Africa and the Americas (ACP zone) have largely failed to take advantage of its benefits.
There are hundreds of agricultural products that African farmers could be selling to the US duty free but aren’t doing that. Many of the goals for which AGOA was set up haven’t been met, so what corrections are needed so that it lives up to its promise? Is the problem in the Act or it lies within Africa itself?
Questions as to how this can be expanded are being responded to in different ways, but apparently the ’review the Act’ view has greater say, as in any case the question is how the US adapts to African realities, and still be able to realize a number of set goals.
One official says it has to be expanded’to maximize economic activities among a variety of sectors and to ensure a real and measurable impact on the economy and well being of Sub-Saharan Africa.’ But if 80 percent of trade is still in extractive industries, and hundreds of agricultural products that Africa could produce for the US markets aren’t coming, how is this resolved?
That is where a sort of psychological gap opens up, where the ’half full’ view sees AGOA as basically right, and pushes for greater use of the capacity building programs for awakening Africa to these possibilities.
The other side, the ’half empty’ school sees a glaring weakness in how all this is going on, with about 81.4 per cent of imports of the US from Africa (in value terms) sourced from oil producers Nigeria, Gabon and Angola, as well as industrial giant South Africa which has a major capacity for oil storage, nuclear fuels (this is part of AGOA?) etc.
Is the Act generally fine, but Africa isn’t in a position for widespread activity?
When one also thinks of capacity building under present circumstances, of ’empowering’ this or that group, either the mass of rural peasants or select groups of farmers for instance in horticulture, problems will come up in future.
First there would be onerous requirements to ’enable’ them to produce, which may not be envisaged in trade capacity programs. It is unclear if price structures are of ’AGOA character’ or reflect broader tendencies at a diminution of prices for all sorts of goods.
Were it that the latter is the case, it would partially explain inability of investors to move into the hundreds of products the AGOA planners thought, and instead stick to a few higher profit margin activities like fillets or flowers.
If one attempts a rapid scan at the sort of ’trade capacity’ issues, and how these relate to prices, a possible link might be the predominantly middleman character of production processes.
Only some extractive areas where a minimum of scale is possible is it likely that producers can operate with a profit margin linked with international markets, while in the others it is the middle man who sets the course.
The latter scarcely affects producers’ choices at the bottom, nor would he be in a position to introduce varieties of products in view of US markets tied to AGOA.
Given that the AGOA arrangement is temporary, and its being extended to 2009 or 2013 will be more or less final, chances that Africa changes its structures soon enough to take off through AGOA are limited, but it may still turn out to be practical, as a goal.
Since the European Union is revisiting its arrangements with Africa, Caribbean and Pacific states on trade in agriculture, the combined push may help reorient a few basic features on thinking about agriculture or exports in the continent.
But if no change in how land is acquired or used for such activities happens, chances of peasants being brought into AGOA-related efficiency are nil.
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