Africa: Continent wants U.S. to review Agoa pact

August 7th, 2009

 

Nairobi (Kenya) - Africa will be pushing for a comprehensive revision of key provisions of US legislation to remove hidden barriers to trade, delegates to the Africa Growth and Opportunity Act conference said. Trade experts said the law, popularly known as Agoa, is fraught with stringent conditions that continue to prevent producers in Africa's agro-based economies from accessing the world's largest market nine years since it was enacted.

Erastus Mwencha, the African Union deputy chairman, said stringent quality and lengthy certification processes had prevented many African producers from exporting to the United States under what has been described as the most lucrative trade preference legislation ever passed by the American Congress.

"We intend to use this forum to press for improvement in quality certification processes, especially in sanitary and phytosanitary (SPS) assessment," said Mr Mwencha.

US International Trade Commission (USITC) data indicates that trade between Africa and the world's largest economy is still dominated by export of natural resources. That reality has left four oil-producing countries with more than 90 per cent of the $56 billion that Africa earned from the sale of goods and services to the US under the Agoa pact last year. The USITC data shows that Africa's export of crude oil, precious metals, medicinal chemicals, oil seeds, steel grew steadily under Agoa while exports of motor vehicles and parts, computer peripherals, consumer electronics, lumber and apparel dropped.

On Tuesday, participants at the Nairobi conference called for modification of the Act to promote trade in value added products from Africa.

Kenya, which has more than six thousand product lines to sell to the US under Agoa, has mainly exported textile and apparel, a crowed segment with more than 27 players from Africa alone. East Africa's biggest economy also has a comparative advantage in fresh produce that has made the leading exporter to Europe but traders said slow process of clearing agricultural products destined for the US has discouraged them from pursuing the market. Kenya holds the right to export pastries, mango juice, avocado, fish, crafts, animal and leather products under the quota-free and duty free instrument but textiles still account for 96 per cent of the country's exports to the US.

Trade officials said the push for sale of value added products to America is a long term one citing difficulties in passing the necessary legislation.

"Most US companies in the business of value addition control budgets that are more than half the average GDP of an African state. Their level of lobbying is such that even congressmen who side with Africa in the push for trade in value added products risk losing their seats," said Mr Joseph Kosure, the EPZ Authority's acting CEO who once worked as the Kenya's trade representative to the US.

Ms Phyllis Jones, the president and CEO of Elan International and a former US Assistant trade representative told journalists at a video conference last week that America would not lower its vetting processes in favour of Africa because of strong pressure from consumers.

Concern has been growing over the decline in the value of Kenya's Agoa exports in past five years and the country's inability to open new lines of trade with America. The value of Kenya's exports to the US has decline from $277 million in 2004, $270 million in 2005, $262 in 2006, $ 249 million in 2007 and $246 last year.

"Most of buyers are unwilling to set up the necessary infrastructure in Africa referring to Agoa as a temporary legislation that cannot support long term plans," said Jaswinder Bedi, the chairman of African Cotton and Textile industries. "We'll be pushing for a permanent framework of engagement," he said.

Mr Bedi said that Kenyan producers had significantly reduced factory costs and are also working with the government to cut labour and energy costs, there was need to attract long term infrastructure that can reduce time and cost at which products get to the market

Exporters have also blamed slow clearance of goods by custom officials and the long route that merchandise spend in the high seas to reach America as factors that have impeded growth of Agoa exports.

But America insists that poor governance and a breakdown in the rule of law continues to undermine trade relations between the US and Africa.

US ambassador to Kenya Micheal Ranneberger told delegates to the Agoa forum that Africa must appreciate the intricate link between economic development and strong democratic institutions. He said the US foreign policy is to assist 'responsible individuals and responsible institutions'. That policy has seen countries such as Kenya that suffered post election violence and borders chaotic Somali classified as risky for trade with US.

African delegates however pointed to the positive rating that oil producing countries have continued to enjoying despite persistent political and economic turmoil. Critics point to Nigeria, the continent's leading oil producer and has retained its position as a leading exporter to the US under Agoa despite its ranking below Kenya in the World Bank's index of competiveness.

Kenya's Prime Minister Raila Odinga accused the Americans of shifting goals for African governments and urged Africans to reject the wave of protectionism that is spreading across the globe in the wake of an economic recession.

"America doesn't have to lecture us on good governance because just the other day, during cold war they embraced dictator who pledged support to their campaign against communism," he told delegates.

 

source.businessdaily.ke