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AfDB To Help African Countries Exploit US AGOA

by Lorys Charalambous, Tax-News.com, Cyprus

23 May 2013


The African Development Bank (AfDB) has announced plans to help diversify African exports to the United States through the better utilization of African Growth and Opportunity Act (AGOA) preferences by its beneficiary countries.

The AGOA has been described as the cornerstone of America's trade and investment policy with sub-Saharan Africa. At the center of the AGOA are substantial trade preferences that, along with those under the US Generalized System of Preferences (GSP) tariff treatment, allow almost all goods produced in the AGOA-eligible countries to enter the US market duty free. The AGOA GSP provisions are in effect until September 30, 2015.

The AGOA's performance and effectiveness are also said to be closely tied to its third country-fabric (TCF) provision, which has also been extended to September 2015. Under the TCF provision, lesser-developed beneficiary countries enjoy an additional preference in the form of duty-free/quota-free access for apparel made from fabric originating anywhere in the world.

"The AfDB has launched a series of bilateral discussions on ways to boost US-Africa trade and investment, especially under AGOA," said Moono Mupotola, its Manager for Regional Integration and Trade. "AGOA, together with trade and investment framework agreements (TIFAs), are considered critical tools of US-Africa trade relations."

As a result, the AfDB has identified several areas of possible support to be discussed with US government agencies and African countries at the AGOA XII Forum that will be held in Addis Ababa later this year. Some of the identified areas include support and capacity building for export and investment promotion agencies in Africa, while the AfDB is also considering increasing its support for the development of agricultural and non-agricultural value chains in Africa.

Since its inception in 2000, the AGOA has acted as a catalyst to US trade with Sub-Saharan Africa (SSA), particularly in the oil, footwear, vehicles and parts, clothing and textiles sectors. In the apparel sector alone, the AGOA is estimated to have created as many as 350,000 jobs in SSA since 2001 and some 100,000 jobs in the US economy.

US-African trade grew by more than 500 percent between 2001 and 2011, with exports from Sub-Saharan Africa to the US reaching USD79bn. In 2012, petroleum products accounted for the largest portion of AGOA imports into the US, explaining why Nigeria, Angola, Chad and Gabon are four of the five largest AGOA beneficiaries.

However, while AGOA non-oil trade with the US remains small, non-oil exports totaled USD4.8bn in 2012, more than triple the amount in 2001, and South Africa (the AGOA’s largest non-oil beneficiary) is among a number of AGOA beneficiary countries exporting a range of non-oil products.

It has been confirmed by Florizelle Liser, Assistant US Trade Representative for Africa, that the US has already made serious efforts to deepen its economic engagement with Africa through a range of tools including AGOA, TIFAs, bilateral investment treaties and a new initiative with the East African Community that will negotiate a regional investment treaty and trade-enhancing agreements (such as trade facilitation).

However, it was pointed out that the continued low utilization of AGOA preferences by African beneficiary countries is in stark contrast to the aggressive export strategies that other developing countries like Bangladesh, Cambodia and Vietnam have adopted to access the US market.

"Overall, the Bank would want to support SSA countries to more than double and further diversify their non-oil AGOA exports over the next decade – with a special emphasis on enhancing SSA value chains and value addition," said Calvin Manduna, AfDB's Principal Trade Expert.

In addition, it has been disclosed that AGOA beneficiary countries have intensified their efforts to secure the renewal of AGOA beyond September 2015, following the former US Secretary of State Hillary Clinton's confirmation in August last year that the US is also committed to its extension.

TAGS: Chad | South Africa | africa | tax | Niger | Nigeria | tariffs | trade treaty | Angola | agreements | Gabon | United States | import duty | trade | Africa

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