Africa-US

THE AFRICAN GROWTH AND OPPORTUNITY ACT: US POLICY ONLY BENEFITS THE CONTINENT’S TOP EXPORTERS

The US policy of reduced trade tariffs for African countries has mainly benefitted the top 5% of African exporters while the vast majority of exporters benefit only marginally or not at all. That is the central finding of research by Edgar Cooke, which goes against the widely held view that the policy has been a huge benefit to the whole of Africa.

The study, presented at the Royal Economic Society’s 2013 annual conference, looks at the export performance of countries that receive lower tariffs as part of the African Growth and Opportunity Act (AGOA). It compares these countries with other developing countries that face similar economic and political circumstances but without a reduction in tariffs. The study finds that:

  • The top five countries – Angola, Republic of Congo, Nigeria, Chad and South Africa – had on average five to six times higher exports than comparable countries.
  • Nigeria was the highest exporter in 2011 and exported seven and eight times more than Honduras and the Dominican Republic exported to the US respectively.
  • Angola, the second highest exporter in 2011, managed three times more exports than Honduras and the Dominican Republic.
  • Honduras and the Dominican Republic, countries with a free trade agreement with the US, were the highest exporters from the Caribbean region. This shows that the top African countries have what it takes to compete with other countries that have been provided free market access to the US.

But the author stresses one crucial advantage that countries like Nigeria and Angola have: reserves of crude oil, which dominate their exports. The same cannot be said of the countries at the bottom of the export ladder: Guinea Bissau, Gambia, Mauritania, Cape Verde and Niger exported less than the lowest exporters from the Caribbean. In particular, Cote d’Ivoire, Democratic Republic of Congo, Djibouti, Guinea Bissau, Madagascar, Mauritania and Sierra Leone did not take advantage of the AGOA programme in 2011.

The study also finds that the gain by the top 5% of exporters has not in any way affected their export performance in the EU market. Again, South Africa, Nigeria and Angola are the highest exporters to the EU. They exported more to the EU than their nearest competitors from the Caribbean, in this case Costa Rica.

The author concludes:

‘A one-size-fits-all policy cannot achieve the needed growth in exports for countries that have a lower export capacity. Contrary to previous opinion about apparel and textiles, the research shows the Caribbean countries have been more competitive in this area.

‘It is time for both African countries and the US to decide additional products of common interest that can be included in the programme to provide further benefits to the remaining countries.’

More…

The African Growth and Opportunity Act (AGOA) of the US is a programme offering reduced trade tariffs to African countries. The purpose of the Act is to grant market access to African countries. It has been touted for its positive impact on the export fortunes of African countries. The author of this research contradicts the current view that the policy has largely benefited the majority of African countries.

Comparing the performance of the AGOA countries with other developing countries that have similar socio-economic and political circumstances shows that the impact of AGOA has been most successful for the top 5% of AGOA exporters. The remaining countries show at most marginal gains and in some case no gains at all from the implementation of the programme.

The top five countries (Angola, Republic of Congo, Nigeria, Chad and South Africa) had on average five to six times higher exports than comparable countries. Nigeria, for example, was the highest exporter in 2011 and exported seven and eight times more than Honduras and the Dominican Republic exported to the US respectively. Angola, the second highest exporter in 2011, managed three times more exports than Honduras and the Dominican Republic.

Honduras and the Dominican Republic, which have a free trade agreement with the US, were the highest exporters from the Caribbean region. This shows that the top AGOA countries have what it takes to compete with other countries that have been provided market access programmes to the US. But one crucial advantage that AGOA countries like Nigeria and Angola have is their reserves of crude oil, which dominate their exports.

The same cannot be said of the countries at the bottom of the export ladder: Guinea Bissau, Gambia, Mauritania, Cape Verde and Niger exported less than the lowest exporters from the Caribbean Basin. In particular, Cote d’Ivoire, Congo DR, Djibouti, Guinea Bissau, Madagascar, Mauritania and Sierra Leone did not take advantage of the AGOA programme in 2011.

Notably, the gain by the top 5% of exporters has not in any way affected their export performance to the European Union (EU). Again, South Africa, Nigeria and Angola are the highest exporters to the EU. They exported more to the EU than their nearest competitors from the Caribbean Basin, in this case Costa Rica.

The research has important implications for the way we measure and try to quantify the gains of trade policy programmes provided by advanced countries. Essentially, the varied impact of the policy indicates that a ‘one-size-fits-all’ policy cannot achieve the needed growth in exports for countries that have a lower export capacity.

Contrary to previous opinion about apparel and textiles, the research shows that the Caribbean Basin countries have been more competitive in this area. It is time for both African countries and the US to decide additional products of common interest that can be included in the programme to provide further benefits to the remaining countries.

ENDS


Contact:

RES media consultant Romesh Vaitilingam:
+44 (0) 7768 661095
romesh@vaitilingam.com
@econromesh

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