Washington: Ten years ago, the US unveiled a programme which boldly proclaimed it would help end Africa’s isolation from world trade. The African Growth and Opportunity Act (Agoa) has extended duty-free access to the US market to about 40 countries, including in the highly contentious area of garments and textiles. It has not quite worked out that way. This past week, Agoa’s 10th anniversary was marked by discussion forums in Washington and Kansas. US officials were frank about its failures. Hillary Clinton, secretary of state, told delegates: 'We all know, despite the best of intentions, Agoa has achieved only modest results and has not lived up to the highest hopes of a decade ago. Petroleum products still account for the vast majority of exports to the United States and we have not seen the diversification or growth of exports that Agoa was supposed to spur.'
Making clothing is often the first step on the road to prosperity for developing countries. But while African textile and garment exports to the US under Agoa rose by 52 per cent by 2009, according to a report by the US government accountability office, they were still barely more than 1 per cent of total US imports. An initial burst of exports was not sustained, and was concentrated in a small number of countries including the middle-income nations.
Part of the reason is the breadth and depth of the agreement, shaped by political pressures in Washington. Economists say even a more generous programme would have struggled to overcome the real constraints to African exports, which are more to do with infrastructure and other supply-side problems on the east side of the Atlantic than trade barriers on the west.
In the case of Agoa, the US Congressional Black Caucus pressed hard to focus the scheme on the continent. But the US clothing and textile industry lobbied to circumscribe the garment provisions to shield itself from competition.
The 'rules of origin' - which determine how many inputs from other countries African nations can use to make exports to the US - are generous compared with other trade preference schemes, such as those for the European Union. But US clothing manufacturers insisted on more stringent rules for garments. The rules require special congressional renewal in 2012, three years earlier than the rest of the programme. Such political uncertainty restricts investment in garment production in Africa.
More generally, development experts say the scheme also shows the limits of what can be done with trade policy. Todd Moss, a fellow at the Center for Global Development in Washington, says: 'Market access to the US was originally seen as the big problem. But what became clear was that lack of infrastructure at the African end was far more important.'
In many African countries production costs are raised by expensive and intermittent power supply, weak transport infrastructure and corruption. African garment manufacturers struggle to compete against powerhouses such as China.
Ron Kirk, US trade representative, says: 'We have textiles that flood in to the US from all our preference programmes. I don’t know if the answer to Africa’s long-term growth is yet more textiles.'
* Copyright The Financial Times Limited 2010.
