from The African Economist..
July 13, 2013
Posted by Editor
Since 2000, the African Growth and Opportunity Act (AGOA) has been America’s main vehicle to enhance U.S.-African trade. If you look merely at the numbers, trade between the United States and the AGOA-eligible African countries has increased significantly. However, the gains from AGOA have yet to manifest for most Africans.
When AGOA was crafted, the textiles and apparel sector was predicted to be the key to sparking African industrialization as it had been previously for Great Britain and other currently industrialized countries including South East Asian economies currently in the process. Unfortunately, the process of vertical integration, synchronizing several stages of production from raw materials through the finished product, never widely took place in Africa. Cotton producers in countries like Benin and Mali looked to sell their product to America rather than other African countries, although the latter was an easier market to crack.
Under AGOA, African textile and apparel producers were originally intended to buy their raw materials from their neighbors or from the United States. Because this was either impractical or unworkable, a third-party fabric exemption was granted to allow the purchase of inputs from other sources. This has not helped African producers nor sped the development of vertical integration, which has been a source of frustration for American lawmakers who created and must maintain AGOA.
If you travel by road in Africa, at some point you will see old, abandoned factories left behind by the colonial powers. Breweries still operate, but many cereal production facilities and other manufacturing plants no longer operate. Whatever the reason, Africa lags behind the rest of the world in industrialization and remains dependent on the production of manufactured goods by other nations when it could be creating jobs and selling its own products to the rest of the world.
This is especially critical in the agriculture sector, which should be Africa’s most productive sector. During and just after the colonial period in Africa, many of its countries were not only self-sufficient in agricultural production, but also sold their products internationally. For reasons too many to mention in one article, many areas became non-productive. In Nigeria, the discovery of oil diminished interest in agricultural production. Without value-added agricultural production, nations in Africa are vulnerable to a volatile world market for primary products. The massive leasing of African land to foreigners is ostensibly meant to be mutually beneficial, but it does not involve African farmers and doesn’t increase the indigenous capacity to produce value-added agricultural products. Moreover, there doesn’t seem to be strategies to grow more valuable crops such as gum Arabic, even though desertification is increasing the land most useful for its production.
My one dissatisfaction with the AGOA plan is that it does not help Africa in the areas that Africa desperately needs help. So far, the AGOA plan has mostly benefited United States in that it has granted United States with access to resources in Africa. Yet Africans still face challenges selling their agricultural produce to the United States. Even worse, United States, as the European Union, have subsidies on most of the products produced by Africans. This is insane since most Africans get their living through Agriculture, not oil or gold or uranium.