Without an extension of the current African Growth and Opportunity Act (AGOA) preferences beyond 2015, there will be a decline in African exports, economic diversification and employment for many AGOA-eligible countries, according to a new study announced Wednesday by the UN Economic Commission for Africa (ECA).
In order to inform the design of the post-2015 relationship between Africa and the US, the Commission has, in collaboration with the African Growth Initiative (AGI) at Brookings Institution, published ‘The African Growth and Opportunity Act: An Empirical analysis of the Possibilities Post-2015’.
The report is an empirically-based analysis of how changes to the legislation could affect trade patterns as well as how changes in the global trading environment could affect U.S.-Africa trade volumes and African economies more broadly.
The publication sheds light on the trade and income implications of not extending AGOA beyond 2015; expanded product eligibility for AGOA; revisions to the currently eligible countries; a restructuring of AGOA to resemble the economic partnership agreements (EPAs) of the European Union; and the effects that a possible EU-U.S. free trade agreement (FTA) could have on AGOA or an EPA-like situation.
In addition, the publication draws an additional scenario examining how a continental free trade area (CFTA) would play into such an integrated trade environment.
The findings point to a strong case for continuing or expanding the current AGOA preferences beyond 2015.
For the AGOA, 30 September 2015 will bring to an end the defining characteristics of the trade and commercial relationship between the US and Africa.
Amid the discussions by African and US policymakers on the post-2015 commercial relationship between the US and African countries (excluding North Africa), hard empirical evidence has been the missing ingredient in the ongoing, legislation oriented debates.
Further, the results show in a projected scenario that a return to the US Generalised System of Preferences (GSP) would mean that the extra 1,800 product lines, for which AGOA provides preferential access, would no longer be duty-free.
The GSP would be the only preferential scheme offered by the US to Africa, which is also granted to 127 other developing countries in the world.
According to the ECA, the results show the importance of regional integration and allowing African exporters to remain competitive, making efforts toward offsetting the potential tariff revenue losses that could be experienced with EPAs (or similar agreements), or external FTAs that would compete with African exports.
Increased trade assistance and investment will likely be necessary for countries to ensure sufficient progress in this area.
The AGOA was signed into law in 2000, marking the beginning of a new trade-focused relationship between the US and Africa.
It provides trade preferences for the continent that, combined with the US Generalised System of Preferences, allow for duty-free export access to the US market for up to 6,400 product lines coming from 39 countries in Africa.