AGOA, Exports and Development in SubSaharan Africa

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AGOA, Exports and Development in Sub-Saharan
Africa
Paul Brenton Trade Department, World Bank
June, 2006
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AGOA at 5 Key issues

• AGOA provides improved (preferential) access to
  the US market for African exporters
• AGOA preferences have had limited impact
  confined to a few countries and driven mainly by
  apparel
• A range of products are excluded including
  textiles and sensitive agricultural products
• Example, peanuts subject to a duty of 163.8
• Rules of origin are a key factor determining
  impact
• Non-restrictive rules for apparel must be made
  permanent
• For other products the 35 value-added
  requirement should be reduced.

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African exports to the US have increased, as have
exports to other regions
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AGOA has been important, but has not been the
main driver of African export growth
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For most countries the value of US trade
preferences is negligible

• For most African countries, agricultural products
  and minerals remain the key exports typically
  not subject to duties in US
• Preference erosion an issue for few

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Rules of origin are key in determining impact of
trade preferences

• ROO are an essential element of preferential
  trade agreements to ensure that only
  beneficiaries get better access (prevent trade
  deflection)
• But when ROO are used to achieve other objectives
  they limit the benefits to developing countries
• AGOA has provided for non-restrictive rules for
  apparel, with substantial impact on trade

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Less restrictive rules of origin have stimulated
trade
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Restrictive ROO limit the impact of trade
preferences

• Undermine competitiveness by constraining access
  to cheapest inputs
• limit ability to integrate into global production
  chains
• burden falls particularly heavily upon small and
  medium sized firms and upon firms in low income
  countries
• discriminate against small low income countries
  where the scope for local sourcing is more
  limited.
• Undermine ability to exploit advantage of low
  labour costs

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AGOA can be improved

• Include all products
• Change approach to rules of origin
• Make third country fabric provision permanent
• Exporters should be able to choose between
  satisfying either a 10 value-added requirement
  or a change of tariff heading (at 6 digit level
  of HS)
• Would support expansion of exports of labour
  intensive products
• Would facilitate inclusion of African producers
  in global production chains
• No need for complicated cumulation provisions

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AGOA, Trade Preferences and Development

• Effective trade preferences can provide a window
  of opportunity to export whilst key barriers to
  trade are addressed
• Dealing with the barriers must be the priority
• aid for trade can support domestic reforms that
  improve policy environments and help to address
  infrastructure gaps that limit the capacity to
  trade
• Reducing trade costs supports access to all
  markets and assists all sectors