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U.S. – Sub-Saharan Africa Trade: An Examination of AGOA

U.S. – Sub-Saharan Africa Trade: An Examination of AGOA. Vivian Agbegha School of Public Policy George Mason University 9/25/2008. Introduction. What is AGOA? African Growth and Opportunity Act Effective in 2000; Extended to 2015 Includes 40 out of 53 Sub-Saharan African (SSA) nations

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U.S. – Sub-Saharan Africa Trade: An Examination of AGOA

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  1. U.S. – Sub-Saharan Africa Trade: An Examination of AGOA Vivian Agbegha School of Public Policy George Mason University 9/25/2008

  2. Introduction • What is AGOA? • African Growth and Opportunity Act • Effective in 2000; Extended to 2015 • Includes 40 out of 53 Sub-Saharan African (SSA) nations • Liberalizes trade with SSA – quota- and duty-free access to certain products from SSA • Offers incentives for political and economic development

  3. Major issues • Market and Non-market Failures • Weak or non-existent infrastructure • Lack of financial and technical capacity • Corrupt or weak SSA governments • Petroleum • More than 90% of gains in trade under AGOA • Agriculture • Moderate growth in this sector • Textiles • Considerable growth, but mainly in South • Publicity • Very few outside of the Beltway know of AGOA

  4. Who’s Affected? • U.S. government • Security concerns • Economic development abroad • Helping U.S. business • U.S. business owners • Garment makers support this • Textile makers do not • African governments • Overcoming institutional and economic barriers to help their people • African business owners • Effectively taking advantage of AGOA

  5. U.S. Interests • U.S. national interests • Petroleum • Economic development in SSA/altruism • Stopping political instability/terrorism • A new untapped market with nearly 1 billion inhabitants • U.S. policies • There have been 3 amendments of AGOA concerning increasing investment and rules of origin • Technical assistance from USAID

  6. Textiles & Apparel • Apparel and textile exports have risen since 2000 • Why is there a problem? • Expiration of the Multi Fiber Agreement in 2005 • Textiles from Asia are much cheaper and are flooding markets. Difficult for African producers to compete • Not enough investment in Africa for many reasons including risk and lack of knowledge of AGOA • Rules of origin: yarn and fabric must be made in SSA or USA • SSA governments having difficulty meeting other requirements dealing with customs and visas

  7. Policy Proposal • Improving AGOA • An extension of third party input benefits for lesser developed nations • Changing the rules of origin terms – makes sense, but should be more gradual, since SSA does not have the capacity yet • A focus more on investment and publicity; there is more investment from Europe and Asia than from U.S. • More time for SSA nations to reduce barriers amongst themselves and to improve their policy systems

  8. Pros African nations have more time to reduce intra-regional barriers and improve governance Larger gains from trade with U.S., other SSA nations, and remainder of world Increases SSA employment and development opportunities Cheaper for U.S. garment buyers Cons Less of incentive to move quickly to promote change in SSA governments Possibly less earnings for U.S. textile producers Policy Proposal cont.

  9. Conclusion • AGOA is a step in the right direction • The criteria should be relaxed somewhat to include more SSA nations

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