AGOA Forum 2015 to be held in Gabon soon

African Growth and Opportunity (AGOA) Forum 2015 to be held in Gabon to discuss trade and economic issues also countries are expected to meet specific eligibility requirements to qualify for AGOA. AGOA is a non-reciprocal and unilateral preference programme that provides duty-free access into the United States for qualifying exports from eligible African countries. In addition to the tariff preference.

The programme is similar to the Generalised System of Preference (GSP), a US trade preference programme that applies to over 120 developing countries, including sub-Saharan countries. AGOA, however, builds on the GSP by providing preferential access to the US market for more products, such as apparel, and sets out additional eligibility criteria. The GSP represents a set of formal exceptions from the WTO’s Most Favoured Nation (MFN) principle which allows developed countries to offer developing countries preferential treatment on specific goods.

AGOA’s authorization which expires on September 30, 2015, hence most African governments and some US Congress members, including trade associations, particularly the US Chamber of Commerce, have highlighted the success of the programme and want an expedited re-authorisation of the programme. The debate is whether AGOA in its current form is achieving the initial goals of the programme, which is effectively improving the economic circumstances in Africa. Others also discussed how to improve the value of non-oil exports into the US under the programme, as currently about 70 per cent of exports to the US under the programme are made up of petroleum products.

The AGOA Extension and Enhancement Act of 2015 has already been approved by the Senate, awaiting approval by the House of Representatives and the US President. AGOA and GSP, when renewed, would help develop key industries and foster improvements in governance and policy regarding labour and human rights.

The initial draft released on April 16, appears to settle on a 10-year re-authorisation. It also includes a 10-year extension of the third-country fabric provision, which is essential to nurture the development of the textile and apparel industry on the continent.

Another critical part of the draft extension act is the promotion of greater regional integration by expanding the rule of origin to allow AGOA countries flexibility to combine inputs to meet the rule of origin for AGOA eligible products.

There is also emphasis on policy implementations promoting the adoption and implementation of WTO Agreements, with particular attention on the recently adopted WTO Multilateral Trade Facilitation Agreement, which can reduce red tape at the borders, increase trade in services and resolve critical agricultural policy issues. This will be executed through a Technical Assistance and Capacity Building Programme to be carried out by different US agencies.

Key provisions of the legislation also include efforts to address “unfair” practices by the European Union (EU) that condition African countries access to the European market on signing unbalanced trade agreements. However, some experts believe this is to assist the US catch up with the EU on trading with the continent.

The draft gives the US President the authority to include cotton products on the list of AGOA preference items available to least developed countries. There are proposals in the draft outlining a path for deepening and expanding trade and investment between the US and Africa beyond 2025 when the currently contemplated extension is expected to expire. It requires the US Administration to develop a long-term strategy for negotiating trade agreements with individual sub-Saharan African countries or regional blocs.

Their focus should be on expanding the non-oil exports to the US markets. They need to narrow in on a few products which they can effectively and efficiently produce for export under this programme. As an example, a handful of AGOA countries, particularly Kenya, Lesotho and Mauritius provide the bulk of apparel exports under the programme. In 2014, Kenya exported $423 million worth of apparel to the US under AGOA, Lesotho, $289 million; Mauritius $227 million and Swaziland $77 million. Ghana may wish to examine why these countries have been so successful in utilising the preference programme.

Apparel production, unlike textile production, typically requires low-skilled labour and minimal capital expenditures, allowing the producing countries to become globally competitive. The average tariff on apparel in the US is 11.4 per cent as compared to an average of 3.5 per cent for all products. This restriction on US imports of apparel makes the AGOA preferential treatment for this product line advantageous, making the AGOA countries competitive with low cost producers in Asia.

In the agricultural sector, they can focus on selected products that are in demand in the US. For example, there has been an upsurge in the demand for tilapia and red sweet potatoes in the US. There is also an increase in the demand for ‘niche’ products such as plantain, cassava, plantain chips and coconut water. We need to identify a few of such products and focus on optimising these value chains and providing incentives to encourage production for export.

Out of over 300 products identified for export by the Ghana Export Promotion Council, a comprehensive focus on the handicrafts, baskets and bags will also be useful in taking advantage of the programme.

Ghana can take advantage of AGOA by focusing on a few carefully selected products and rapidly building our capability to effectively produce, process and export such products. Ghana can also take advantage of the capability development programmes that will be promoted by the various US agencies. We at the American Chamber of Commerce, Ghana, will be available to assist with such efforts as we continue at all times to promote Ghana as a favourite destination for US investment.

The American Chamber of Commerce, Ghana is the representative arm of US businesses and subsidiaries in the country, including Ghanaian businesses with US ties.