Perhaps of interest to some.

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Date: Wed, 8 Jan 2003 16:10:34 -0800
From: International Bicycle Fund <[log in to unmask]>
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To: WASAN <[log in to unmask]>
Subject: [WASAN] AGOA FORUM 03-FINAL.doc

AGOA has been a contentious issue within WASAN. To get Bread for the
World's take on the facts please read the following report:

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AGOA 2003 and African Agriculture




"In an era of global trade and global terror, the futures of the
developed world and the developing world are closely linked.  We benefit
from each other's success.  We're not immune from each other's
troubles." -- President George W. Bush at the US--Sub-Saharan Africa
Trade and Economic Cooperation Forum, October 29, 2001.




I.                   Introduction




The Africa Growth and Opportunity Act (AGOA), included in the Trade and
Development Act of 2000, was passed by the United States Congress and
signed into law by President Bill Clinton in May 2000.  The primary
objective of AGOA, which is authorized until 2008, is to encourage
increased trade and investment between the United States and sub-Saharan
Africa (SSA), through the reduction of tariff and non-tariff barriers to
trade, expansion of U.S. assistance for regional integration,
negotiation of mutually beneficial and reciprocal trade agreements,
promotion of private sector engagement, and democratization. AGOA
directs the President of the United States to convene an annual meeting
between the U.S. government and representatives of eligible African
countries (the US--Sub-Saharan Africa Trade and Economic Cooperation
Forum), and to prepare an annual report to Congress on U.S. trade and
investment policies with SSA.  Presently, 38 of the 48 sub-Saharan
African countries are AGOA-eligible based on specific criteria, which
include continued progress toward establishing a market-based economy,
rule of law, and economic policies to reduce poverty.



Supporters of AGOA argue that it creates a policy environment for the
U.S. to engage Africa in trade relations similar to those extended to
other regions, thus aiding fledgling African economies to develop.
Opponents of the legislation say AGOA is fundamentally flawed because it
is based on questionable "trickle-down" economic theory and lacks an
institutionalized role for civil society. Some opponents still argue
that AGOA imposes stringent eligibility requirements in spite of the
fact that nearly 80 percent sub-Saharan African counties have already
been granted AGOA eligibility status.





II.                AGOA's Impact

The U.S. Administration's 2002 report on AGOA states that the
legislation has helped transform the economic landscape of SSA by
stimulating new trade opportunities for African and American businesses,
and by creating new jobs and investments worth hundreds of millions of
dollars. It reports that U.S. imports from SSA increased by more than 50
percent from 1999 to 2001. The U.S imported $7.6 billion of duty-free
goods under AGOA in 2001, which accounted for over a third of the total
imports ($21.3 billion) from SSA.

Crude oil dominated the imports, totaling 64 percent of the total value
of imports, followed by platinum group metals (7%), apparel (4.5%) and
diamonds (2.5%). Four countries - Nigeria, South Africa, Angola and
Gabon - accounted for the bulk (84%) of the U.S. imports from SSA.
Meanwhile, U.S. exports to SSA rose by 17.4 percent from the previous
year, from $5.9 billion to nearly $7 billion. However, SSA accounts for
less than 1 percent of overall U.S. exports and less than 2 percent of
U.S. imports.

Although data on the impact of AGOA is sparse, the U.S. Trade
Representative (USTR) reports that many new jobs have resulted. A 2002
report by a Pretoria-based research group said that AGOA had a direct
impact on 19,395 jobs and indirect impact on another 43,000 jobs in
South Africa. Similar trends on new jobs and benefits have been observed
in East and West Africa.



While the general business climate has improved since the passage of
AGOA, the steady growth in the petroleum and mining sectors probably
would have occurred due to other market factors.  Also, growth in these
sectors produces relatively low direct benefits to Africa's poor.
Currently, one third of Africa's population is undernourished and nearly
half live on less than $1 a day. Most of the poor live in rural areas
and depend largely on agriculture, which accounts for 35% of sub-Saharan
Africa's gross domestic product, 40% of its exports, and 70% of its
employment. Expanding AGOA's application to African agriculture would
have a significant impact on reducing hunger and poverty, and therefore
on improving the overall condition of sub-Saharan Africa. The
International Food Policy Research Institute estimated that a 1%
increase in agricultural productivity would raise the income of six
million African people above $1 per day. A $1 increase in agricultural
production generates about $2.32 in economic growth. Thus, expanding
market access and lowering trade barriers for African agricultural
products through AGOA will have the greatest impact, not only for the
poorest people in SSA but also on national economies.



AGOA has laid a strong foundation for dialogue and partnership between
U.S. and African governments and businesses.  It fosters an environment
that is stimulating new development and investments in SSA. The annual
US--Sub-Saharan Africa Trade and Economic Cooperation Forum, along with
the parallel events sponsored by business and civil society groups, are
facilitating contacts and strengthening relationships. There is also an
increased understanding within Africa of the complexities, challenges
and opportunities of economic and political reform, which will enable
African business to be more competitive in the global economy. Yet all
of these accomplishments remain only the first steps toward what many
hope will be a much fuller and more mutually beneficial trade and
investment engagement between Africa and the United States.






III.             Views and Concerns




The contentious debate that accompanied the enactment of AGOA (mainly in
the U.S.) continues today. Various internal barriers prevent about 10
countries from satisfying AGOA's eligibility requirements, therefore
making them unable to benefit from it. The technical capacity of African
public and private institutions and individuals to successfully navigate
within the structural relationships created by AGOA, and to extract
gains from them, varies considerably. Former Assistant USTR Rosa
Whitaker recently asserted that after two short years, "African
governments are clamoring for more trade and investment, not less." As
we begin 2003, AGOA is part of the U.S. trade policy landscape, yet
remains a hot-button issue for some advocacy organizations in the U.S.,
who say that it does not truly provide a broad range of opportunities
for African businesses to trade and grow.



AGOA's impact in the apparel manufacturing sector has been impeded by a
provision in the law requiring African manufacturers to obtain fabric
from other African countries or American manufacturers. There is an
exemption to this law that allows Least Developed Countries to purchase
fabric from the world market.  South Africa and Mauritius, which produce
fabric and are not eligible for this exemption, are arguably
economically benefiting from the status quo.  However, AGOA-eligible
countries in Africa that are classified as least developed are pushing
for an extension of the exemption-set to expire in September 2004-that
allows them to source fabric from any supplier worldwide.



The World Bank estimates that the removal of this one provision would
magnify AGOA's impact on African apparel exports five-fold. To make
matters worse, export quotas maintained on Asian and South American
countries under the Multi-Fibre Agreement are soon to be eliminated,
exposing Africa to stiff competition from more efficient producers in
those regions.



Many foreign investors are reluctant to make major long-term investments
in African countries precisely because AGOA is not a free trade
agreement. Advocates for the reform of AGOA assert that it should not be
just a unilateral U.S. action expanding market access, but an effective
catalyst for training, financing, and mobilizing Africa's resources for
community-based economic development. The U.S. has announced its intent
to begin negotiating its first free trade agreement with an African
entity, the five-member Southern African Customs Union (S.A.C.U.)



Yet, some opponents of AGOA argue that it offers Africa inherently
unequal trading relationships with the U.S., and that it parallels the
World Trade Organization's efforts to secure unlimited access in
developing countries for lucrative banking and insurance interests in
exchange for limited market access. They assert that AGOA provides
multinational corporations with unhindered access to African markets,
whereas fledgling African companies are not well equipped to take
advantage of new opportunities offered by AGOA.  Finally, critics of
AGOA reform proposals assert that without the parallel removal of
domestic U.S. agriculture subsidies and other trade distorting
practices, AGOA will never be able to unleash the economic potential of
the African agriculture sector.




Bread for the World's Recommendations




Bread for the World is a U.S. Christian citizens' movement against
hunger. Its nationwide grassroots membership of concerned individuals
and churches mobilize a quarter of a million letters to the U.S.
Congress each year on issues that are important to hungry people. Bread
for the World has made a long-term commitment to work for reducing
hunger in Africa. Bread for the World believes that trade has the
potential to help to lift African people out of the cycle of hunger and
poverty; however that potential can only be realized with the
establishment of institutions and policies that raise economic
productivity and achieve equitable distribution of benefits. We urge the
U.S. government to adopt a comprehensive Africa policy, including a
strengthened AGOA, increased development assistance (including the
promised Millennium Challenge Account), increased emphasis on
agriculture and rural development, and a vigorous response to famine and
civil conflicts. U.S. policy, including AGOA, should be responsive to
the New Partnership for African Development (NePAD), which is Africa's
own comprehensive development policy. The highest priority for U.S. and
African development policy should be to reduce hunger and poverty.



To strengthen AGOA's impact on hunger and poverty, Bread for the World
recommends that AGOA be revised in these ways:



1. In order to encourage the production, processing, and transporting of
more exports, and better quality exports, the U.S. should support AGOA
eligible countries in the areas itemized below. Many economic
development goals can be achieved within the existing framework of AGOA
by increasing appropriations targeted to strengthen the capacity
building provisions of the Act:



a.       Technical training and capacity building in agricultural
production, trade, processing, research, and markets especially for
institutions serving smallholder farmers, small-scale rural businesses,
co-operatives, marketing and transport organizations;



b.   Specialized technical training to increase African capacity to
negotiate in the WTO.



c.       Infrastructure development, including the creation of modern
packaging plants, increased investment in storage plants, regional bulk
commodity management facilities, and value-added processing, as well as
the enhancement of export product quality and phyto-sanitary standards;



d.      Improvement of transport and communication networks to reduce
transaction and marketing costs related to agricultural trade, including
support for efficient ocean freight and air freight systems, direct
port-to-port linkages, and incentives to reduce handling charges for
AGOA commodities;



e.       Market product and price information gathering, delivery and
access to farmers, traders, processors, and policy makers;



f.        Creating a comprehensive information database on U.S. and
African agribusinesses to serve as a clearinghouse for specific
inquiries regarding international trade, laws, contacts, etc.



2. Obtaining necessary capital is a major constraint on development.
The U.S. government should press the Overseas Private Investment
Corporation (OPIC) and the Export-Import Bank to respond to the AGOA
policy dialogue and bring significant new resources to help African
countries attract more investment capital. In addition, the U.S.
government should reduce the risks for commercial bank lending to
agribusiness, provide training in market and loan facilities, establish
loan guarantee funds, defray supervisory costs, and promote an increase
in the number of U.S. financial firms doing business in Africa.



3.  AGOA should encourage and support African countries in the
establishment and enforcement of effective laws, rules and regulations
governing international trade and marketing.



4. The U.S. government should establish an AGOA agricultural trade
advisory team to facilitate communication between African and American
stakeholders. The advisory team would include designees of U.S. and
African governments, educational institutions, the private sector,
including smallholder producer organizations, and NGO representatives.



5. Consumer preferences in the U.S. have increased demand for
high-quality niche products and value-added products, such as year-round
fresh fruits and vegetables, higher value horticulture and floriculture
products, organic tea, raw cotton, cotton seed, spices, nuts, processed
seafood and folk craft items. The U.S. should provide technical
assistance for eligible countries to identify and access these niche
agricultural markets, especially for products from smallholder farmers.



6. The U.S. government should provide tax incentives for U.S. companies
to make trade, agriculture, and infrastructure investments in Africa.





Most of these changes will take additional financial resources. This
underscores why increases in development assistance (including the
promised MCA) are necessary to the strengthening of mutually beneficial
trade that will help reduce hunger and poverty in Sub-Saharan Africa.



(January 2003)



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Next WASAN meeting is Wednesday, January 22, 2003. Location: Safeco Jackson Street Center, 23rd Ave and E Main St, 2nd Floor.
7:00 pm Business meeting (none in Jan, next on February - watch this space for details.)
7:30 pm Program:
Everyone is welcome).

We usually meet the fourth Wednesday of the month. For a calendar of local Africa events see http://www.ibike.org/africamatters/calendar.htm .  To post a message: [log in to unmask]  To subscribe send a message to [log in to unmask]  To unsubscribe send a message to [log in to unmask] . All past postings are archived at http://groups.yahoo.com/group/wa-afr-network

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