Export Digest: AGOA Forum 2012
29 August 2012
The Export Digest touches on export-related matters, including SATH export-related activities, export marketing, trade finance, export logistics, international trade law, export administration, export sales contracts and export success stories under the African Growth and Opportunity Act (AGOA). We answer readers' questions about practical export-related matters and highlight important trade-related developments such as new trade agreements or regulatory changes. International trade experts, exporters and importers feature as guest contributors to the column to share their experiences.
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The AGOA Forum 2012
AGOA remains a center-piece of the US-Africa commercial relationship. Since its inception, exports under AGOA have grown 500% from US$8.1 billion in 2001 to US$53.8bn in 2011 (US$48.8 billion energy/oil-related, US$5 billion as non-oil exports).
On an annual basis, the US and Sub-Saharan African (SSA) Governments, private sector and civil society converge to deliberate on trade matters. The annual AGOA Forum is a 'premier high-level, bilateral event' that brings together the US and sub-Saharan Africa. In 2011, the event was held in Lusaka, this year it was in the US (Washington DC and Cincinnati), in June, and it is expected to be held in Ethiopia in 2013.
EXPORT DIGEST requested Zenia A. Lewis, a Research Analyst with the Africa Growth Initiative at the Brookings Institution, to share a summarized version of what transpired at the 2012 AGOA Forum, held under the theme '"Enhancing Africa's Infrastructure for Trade." The perspective provides an independent view – separate from the private sector and government standpoints. Two months after the AGOA Forum, this article helps to keep the discussions fresh and alive.
Key Highlights:
The 2012 AGOA Forum was reflective of the discussion around AGOA, which moved beyond the legislation itself and its extension in a way that many past forums have not. Participants felt that this year marked a change in attitude, from one which saw AGOA as the entirety of the US-Africa relationship towards one which saw AGOA as the underlying foundation that could be built on – an important tool for facilitating trade, but not an end in itself.
This meant more discussions on how other tools for facilitating trade could be combined with AGOA. Infrastructure and its enhancement was a focus. One of the largest barriers for African countries is having consistent and reliable power supplies – an issue that the Millennium Challenge Corporation (MCC) addressed in its panel. The MCC helps to finance energy programs in Africa, and its important work in this area, along with additional efforts and ideas for addressing infrastructure, need to remain at the forefront of the trade policy discussion.
In addition to enhancing infrastructure, improving the business environment and pushing forward efforts towards increased regional integration were also discussed at the Forum. African countries have made both of these priority issues. Vast improvements in the business regulatory environment have been reported for the continent over the last year and the African Union made the theme for its 2012 summit 'Boosting Intra-African Trade' – a goal that pushes for enhanced regional integration.
Surrounding the official US-Sub-Saharan Africa Trade and Economic Cooperation Forum, there were many other events held to foster dialogue on US-Africa trade relations and the AGOA legislation. The AGOA Civil Society Organization hosted its 11th Annual Civil Society Form; the State Department held its annual African Women Entrepreneurs Program (AWEP) US-Africa Exchange in conjunction with the Forum; and the Brookings Institution also held a seminar featuring key US and African government officials and stakeholders. The Corporate Council on Africa (CCA) held an Infrastructure Conference.
In a Nutshell, has AGOA been a Success?
The last decade worth of data shows that AGOA has been a success for both Africa and the US. The legislation has played a key role in moving US engagement with Africa beyond development aid and has significantly strengthened the commercial relationship between the two regions. As mentioned, exports under AGOA have increased from US$8.1 billion in 2001 to US$53.8 billion in 2011. AGOA has directly created 300,000 jobs in Sub-Saharan Africa since its inception, and the African Coalition on Trade argues that it has indirectly created 1.3 million additional jobs that support up to 10 million people.
While there are obviously many successful aspects of AGOA, there are also areas for improvement. Many question the fact that oil accounts for such a large proportion of total exports under AGOA which weakens the argument for the legislation's success. However, this feature does show the growing strategic importance of Africa to the US, and has the potential to give countries in the region additional leverage at the negotiating table. Sub-Saharan Africa now rivals the countries of the Middle East as a leading source of energy imports to the US.
Non-energy exports, however, spur the majority of job creation under the legislation. Thus to be successful in creating economic growth and improved livelihoods in the region, AGOA's gains in this sector are a necessity. The number of AGOA-eligible countries exporting non-energy products has doubled over the last ten years, but only a small portion of the eligible product lines are currently being exploited. Some of the limited utilization of AGOA stems from the arguably short time-horizon of the legislation, which has been extended once and is hoped to be extended again. For investors to seek out opportunities in new export sectors there needs to be sufficient time to finance and develop them. An AGOA that provides investor confidence in its time horizon will likely also be an AGOA that sees more diversification across sectors and additional exploitation of its potential benefits.
Major Recommendations:
The report last month from the Africa Growth Initiative at Brookings, 'The African Growth and Opportunity Act (AGOA): Looking Back, Looking Forward' reveals the successes and achievements of AGOA and expands on ways that the legislation can be improved. Recommendations – in addition to the obvious need for immediately extending the Third-Country Fabric provision – include extending AGOA itself for 10 years to 2025, scaling the US commercial presence on the continent, and harmonizing efforts of the different branches of US government that support AGOA. (Right now there are 10 different US government agencies involved in the US-Africa trade strategy – making the strategy complicated and its coordination, which lacks clear oversight, very difficult.) The report calls for support for and passage of the Increasing American Jobs through Greater Exports to Africa Act, and pushes for the suggested "whole of government" approach for the US export strategy to apply to AGOA as well, which would create a more comprehensive overall US-Africa commercial engagement strategy.
What do Americans Say About AGOA? Especially the Private Sector?
AGOA is one of the few items that generally recieves bipartisan support from the US Congress. In fact, looking at Africa-related policy more generally one finds that both sides of the aisle can boast strong legacies. The recent Increasing American Jobs through Greater Exports to Africa Act, which was introduced with bipartisan support, demonstrates this commitment and reflects Americans' view of the importance of Africa as a trading partner and region; the legislation specifically mentions the rapid growth and development taking place in Africa and its position as the "next frontier market." Supporting legislation on a particular issue, however, does not equate with passing legislation, so unfortunately movement on things like the Third Country Fabric provision, an AGOA extension, and the Increasing American Jobs through Greater Exports to Africa are not always quick to happen.
Looking beyond the hill, the private sector in America is very supportive of AGOA. The Corporate Council on Africa, which is an organization made up of nearly 200 US companies and representing about eighty-five percent of US private investment in Africa, states that it "considers AGOA to be the most important US-Africa trade legislation ever enacted." Their support for and commitment to AGOA, and that of the private sector generally, has been apparent, especially as the Third Country Fabric provision is nearing expiration and causing increasing anxiety for African countries and investors alike. The private sector is also of the persuasion that AGOA is not sufficient in and of itself to compose the entirety of the US' commercial strategy with Africa, and find the passage of the Increasing American Jobs through Greater Exports to Africa Act to be a key complement to the existing legislation.
Third Country Fabric Provision
The Third Country Fabric provision remained a key topic of discussion at the AGOA forum. Yet as its renewal is dependent upon action from Congress, much of the expressed US government support for its extension served as little more than high level advocacy. Secretary of State Hillary Clinton and US Trade Representative Ron Kirk testified to its importance during the course of the AGOA Forum. The US private sector, as aforementioned, has been especially aggressive in pushing for action. An open letter to Congress by the US Chamber of Commerce, the Corporate Council on Africa, among many others, expressed how imperative the extension is for the continent.
Since the AGOA Forum, the issue has remained at the forefront of the African trade conversation. Multiple news sources, including the Financial Times and the Wall Street Journal, have pointed to the urgency of the issue as well as the devastating effect on livelihoods and economic progress that would come about by letting the bill expire. The Senate Committee on Foreign Relations in the last week of July hosted a hearing on "Economic Statecraft" in Africa with testimonies that consistently reiterated the importance of the Third Country Fabric provision.
The inability of the US Congress to fast-track the issue when hundreds of thousands of African jobs stand on the line has been disappointing.
Extension of the Third Country Fabric Provision was finally announced on August 2, 2012.
The Changing Face of US-Africa Commercial Engagement
The discussion in the US regarding trade with African countries is now considering a broader strategy beyond AGOA. The Increasing American Jobs through Greater Exports to Africa and the recent Senate Foreign Relations Committee hearing on this legislation show that there are at least desires for the US to pursue greater commercial engagement with the continent. The US seems especially interested as it finds China, India and other actors playing an increasingly important role in African economies. The US, belatedly, seems to be finally acting on its recognition that "emerging Africa" presents a dynamic investment environment and an opportunity to create jobs abroad and at home – in short, a mutually beneficial partnership. It will be interesting to see if the current momentum in the US continues and if legislators along with the private sector will be able to find the necessary consensus to expand the US-Africa relationship.
About the Author:
Zenia A. Lewis is Research Analyst with the Africa Growth Initiative at the Brookings Institution. The Brookings Institution is a non-profit public policy organization based in Washington, DC. The Africa Growth Initiative at Brookings works to amplify the voice of African researchers through its research and analysis, which focuses on attaining sustainable economic development and prosperity in Africa.
For more information about AGOA, please visit: www.agoa.gov; www.agoa.info; www.ustr.gov
Next Articles: Subsequent Export Digest articles will focus on more questions from the exporting community, the processes on the US side, as well as some success stories by exporters under AGOA.
Cos Mamhunze
Column Editor
Cos is an international trade specialist with more than 12 years' experience promoting international trade between Africa and the US and intra-regional trade within Southern Africa. His work has involved working with small and medium enterprises (SMEs) and large firms, women-owned enterprises, importers, exporters, trade support institutions as well as government departments. Cos holds a MBA and has studied International Trade Management.
Opinions expressed in this column are not necessarily those of USAID or SATH.
Write to This e-mail address is being protected from spambots. You need JavaScript enabled to view it with your suggestion, topic or question. Or start a conversation via our Facebook Page.
The AGOA Forum 2012
AGOA remains a center-piece of the US-Africa commercial relationship. Since its inception, exports under AGOA have grown 500% from US$8.1 billion in 2001 to US$53.8bn in 2011 (US$48.8 billion energy/oil-related, US$5 billion as non-oil exports).
On an annual basis, the US and Sub-Saharan African (SSA) Governments, private sector and civil society converge to deliberate on trade matters. The annual AGOA Forum is a 'premier high-level, bilateral event' that brings together the US and sub-Saharan Africa. In 2011, the event was held in Lusaka, this year it was in the US (Washington DC and Cincinnati), in June, and it is expected to be held in Ethiopia in 2013.
EXPORT DIGEST requested Zenia A. Lewis, a Research Analyst with the Africa Growth Initiative at the Brookings Institution, to share a summarized version of what transpired at the 2012 AGOA Forum, held under the theme '"Enhancing Africa's Infrastructure for Trade." The perspective provides an independent view – separate from the private sector and government standpoints. Two months after the AGOA Forum, this article helps to keep the discussions fresh and alive.
Key Highlights:
The 2012 AGOA Forum was reflective of the discussion around AGOA, which moved beyond the legislation itself and its extension in a way that many past forums have not. Participants felt that this year marked a change in attitude, from one which saw AGOA as the entirety of the US-Africa relationship towards one which saw AGOA as the underlying foundation that could be built on – an important tool for facilitating trade, but not an end in itself.
This meant more discussions on how other tools for facilitating trade could be combined with AGOA. Infrastructure and its enhancement was a focus. One of the largest barriers for African countries is having consistent and reliable power supplies – an issue that the Millennium Challenge Corporation (MCC) addressed in its panel. The MCC helps to finance energy programs in Africa, and its important work in this area, along with additional efforts and ideas for addressing infrastructure, need to remain at the forefront of the trade policy discussion.
In addition to enhancing infrastructure, improving the business environment and pushing forward efforts towards increased regional integration were also discussed at the Forum. African countries have made both of these priority issues. Vast improvements in the business regulatory environment have been reported for the continent over the last year and the African Union made the theme for its 2012 summit 'Boosting Intra-African Trade' – a goal that pushes for enhanced regional integration.
Surrounding the official US-Sub-Saharan Africa Trade and Economic Cooperation Forum, there were many other events held to foster dialogue on US-Africa trade relations and the AGOA legislation. The AGOA Civil Society Organization hosted its 11th Annual Civil Society Form; the State Department held its annual African Women Entrepreneurs Program (AWEP) US-Africa Exchange in conjunction with the Forum; and the Brookings Institution also held a seminar featuring key US and African government officials and stakeholders. The Corporate Council on Africa (CCA) held an Infrastructure Conference.
In a Nutshell, has AGOA been a Success?
The last decade worth of data shows that AGOA has been a success for both Africa and the US. The legislation has played a key role in moving US engagement with Africa beyond development aid and has significantly strengthened the commercial relationship between the two regions. As mentioned, exports under AGOA have increased from US$8.1 billion in 2001 to US$53.8 billion in 2011. AGOA has directly created 300,000 jobs in Sub-Saharan Africa since its inception, and the African Coalition on Trade argues that it has indirectly created 1.3 million additional jobs that support up to 10 million people.
While there are obviously many successful aspects of AGOA, there are also areas for improvement. Many question the fact that oil accounts for such a large proportion of total exports under AGOA which weakens the argument for the legislation's success. However, this feature does show the growing strategic importance of Africa to the US, and has the potential to give countries in the region additional leverage at the negotiating table. Sub-Saharan Africa now rivals the countries of the Middle East as a leading source of energy imports to the US.Non-energy exports, however, spur the majority of job creation under the legislation. Thus to be successful in creating economic growth and improved livelihoods in the region, AGOA's gains in this sector are a necessity. The number of AGOA-eligible countries exporting non-energy products has doubled over the last ten years, but only a small portion of the eligible product lines are currently being exploited. Some of the limited utilization of AGOA stems from the arguably short time-horizon of the legislation, which has been extended once and is hoped to be extended again. For investors to seek out opportunities in new export sectors there needs to be sufficient time to finance and develop them. An AGOA that provides investor confidence in its time horizon will likely also be an AGOA that sees more diversification across sectors and additional exploitation of its potential benefits.
Major Recommendations:
The report last month from the Africa Growth Initiative at Brookings, 'The African Growth and Opportunity Act (AGOA): Looking Back, Looking Forward' reveals the successes and achievements of AGOA and expands on ways that the legislation can be improved. Recommendations – in addition to the obvious need for immediately extending the Third-Country Fabric provision – include extending AGOA itself for 10 years to 2025, scaling the US commercial presence on the continent, and harmonizing efforts of the different branches of US government that support AGOA. (Right now there are 10 different US government agencies involved in the US-Africa trade strategy – making the strategy complicated and its coordination, which lacks clear oversight, very difficult.) The report calls for support for and passage of the Increasing American Jobs through Greater Exports to Africa Act, and pushes for the suggested "whole of government" approach for the US export strategy to apply to AGOA as well, which would create a more comprehensive overall US-Africa commercial engagement strategy.
What do Americans Say About AGOA? Especially the Private Sector?
AGOA is one of the few items that generally recieves bipartisan support from the US Congress. In fact, looking at Africa-related policy more generally one finds that both sides of the aisle can boast strong legacies. The recent Increasing American Jobs through Greater Exports to Africa Act, which was introduced with bipartisan support, demonstrates this commitment and reflects Americans' view of the importance of Africa as a trading partner and region; the legislation specifically mentions the rapid growth and development taking place in Africa and its position as the "next frontier market." Supporting legislation on a particular issue, however, does not equate with passing legislation, so unfortunately movement on things like the Third Country Fabric provision, an AGOA extension, and the Increasing American Jobs through Greater Exports to Africa are not always quick to happen.
Looking beyond the hill, the private sector in America is very supportive of AGOA. The Corporate Council on Africa, which is an organization made up of nearly 200 US companies and representing about eighty-five percent of US private investment in Africa, states that it "considers AGOA to be the most important US-Africa trade legislation ever enacted." Their support for and commitment to AGOA, and that of the private sector generally, has been apparent, especially as the Third Country Fabric provision is nearing expiration and causing increasing anxiety for African countries and investors alike. The private sector is also of the persuasion that AGOA is not sufficient in and of itself to compose the entirety of the US' commercial strategy with Africa, and find the passage of the Increasing American Jobs through Greater Exports to Africa Act to be a key complement to the existing legislation.
Third Country Fabric Provision
The Third Country Fabric provision remained a key topic of discussion at the AGOA forum. Yet as its renewal is dependent upon action from Congress, much of the expressed US government support for its extension served as little more than high level advocacy. Secretary of State Hillary Clinton and US Trade Representative Ron Kirk testified to its importance during the course of the AGOA Forum. The US private sector, as aforementioned, has been especially aggressive in pushing for action. An open letter to Congress by the US Chamber of Commerce, the Corporate Council on Africa, among many others, expressed how imperative the extension is for the continent.
Since the AGOA Forum, the issue has remained at the forefront of the African trade conversation. Multiple news sources, including the Financial Times and the Wall Street Journal, have pointed to the urgency of the issue as well as the devastating effect on livelihoods and economic progress that would come about by letting the bill expire. The Senate Committee on Foreign Relations in the last week of July hosted a hearing on "Economic Statecraft" in Africa with testimonies that consistently reiterated the importance of the Third Country Fabric provision.
The inability of the US Congress to fast-track the issue when hundreds of thousands of African jobs stand on the line has been disappointing.
Extension of the Third Country Fabric Provision was finally announced on August 2, 2012.
The Changing Face of US-Africa Commercial Engagement
The discussion in the US regarding trade with African countries is now considering a broader strategy beyond AGOA. The Increasing American Jobs through Greater Exports to Africa and the recent Senate Foreign Relations Committee hearing on this legislation show that there are at least desires for the US to pursue greater commercial engagement with the continent. The US seems especially interested as it finds China, India and other actors playing an increasingly important role in African economies. The US, belatedly, seems to be finally acting on its recognition that "emerging Africa" presents a dynamic investment environment and an opportunity to create jobs abroad and at home – in short, a mutually beneficial partnership. It will be interesting to see if the current momentum in the US continues and if legislators along with the private sector will be able to find the necessary consensus to expand the US-Africa relationship.
About the Author:
Zenia A. Lewis is Research Analyst with the Africa Growth Initiative at the Brookings Institution. The Brookings Institution is a non-profit public policy organization based in Washington, DC. The Africa Growth Initiative at Brookings works to amplify the voice of African researchers through its research and analysis, which focuses on attaining sustainable economic development and prosperity in Africa.
For more information about AGOA, please visit: www.agoa.gov; www.agoa.info; www.ustr.gov
Next Articles: Subsequent Export Digest articles will focus on more questions from the exporting community, the processes on the US side, as well as some success stories by exporters under AGOA.
Cos Mamhunze
Column Editor
Cos is an international trade specialist with more than 12 years' experience promoting international trade between Africa and the US and intra-regional trade within Southern Africa. His work has involved working with small and medium enterprises (SMEs) and large firms, women-owned enterprises, importers, exporters, trade support institutions as well as government departments. Cos holds a MBA and has studied International Trade Management.
Opinions expressed in this column are not necessarily those of USAID or SATH.
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