This article first appeared in my weekly column with the Business Daily on June 14, 2015
The African Growth and Opportunity Act (Agoa) is set to expire this September. Agoa provides about 6,500 African products with a preferential quota and duty-free access to the United States market. Over the past 13 years, Agoa has been important to Kenya and Africa because unlike economic partnership agreements, the Act is non-reciprocal and unilateral – preferences apply only to African imports entering the US and not US exports into African countries.Basically, African products are allowed to enter the US with limited tariffs which makes them more marketable.
Kenya has already benefited from Agoa through textiles, spices, coffee, tea, fruits and nuts exports. The textile and apparel industry has reaped significant benefits through Agoa and contributes 85 per cent of the jobs created in the export processing zones (EPZ).
Over the Agoa period, the Institute of Economic Affairs says, the value of our exports to the US increased from $109 million (Sh10.5 billion) to $433 million (Sh42 billion) per annum. Part of that can be attributed to Agoa.Luckily for Kenya, the Obama administration seems keen on renewal. However, it is clear that the partnership will be reviewed. Already there are signals from Washington that the US is getting anxious about its economic position globally. It is in the process of negotiating the Trans-Atlantic Trade and Investment Partnership (TTIP) with the EU which will give EU products top preferential access to US markets.
The US has good reason to grant such access to the EU because the pact will be reciprocal. The negotiation of such a partnership gives clear signals that the US is looking out for itself and Kenya should watch out. Secondly, as Kenya becomes a stronger economy, the baby-sitting treatment Africa has traditionally received aimed at rectifying trade imbalances will happen less. Over the past few years Kenya and Africa have been saying, “Stop giving us aid, we’ve grown up; we’re ready for investment, trade and being treated as equals.” Kenya ought to realise that the US is listening and this new ethos of equal partnership, not preferential access, may inform Agoa’s renewal. Already, there are plans to amend Agoa to put pressure on South Africa to open its market to American poultry producers and Kenya can expect similar changes.
So what should Kenya aim for in the renewal of Agoa? The first is to push for the maintenance of preferential access with limited or no expectation of reciprocity. This case will be harder to make now than it was 13 years ago, but the government ought to make the case that Kenya should continue qualifying for unreciprocated access.
Secondly, we should push for value addition. In the case of textiles and apparel, for example, Kenya should make the case for adding value to the skins and hides before export. This will add value to textile exports, deliver greater financial returns and support economic growth more strongly.
Thirdly, expand Kenya’s export profile. The Brookings Institute suggests that we should set up a task force to identify products for which the country has a comparative advantage in producing, and then export these through Agoa. South Africa has diversified its exports to include agricultural products, chemicals, minerals, machineries and energy-related products. Kenya can learn from its experience.
Finally, high transport costs to the US are a non-tariff barrier translating into weak price competitiveness of our products. We need to negotiate a bilateral agreement for air freight transportation via direct flights into the US.
Were is a development economist. Twitter: @anzetse, email: firstname.lastname@example.org
This article first appeared in my column with the Business Daily, on May 31, 2015
The European Union and the United States are negotiating the Trans-Atlantic Trade and Investment Partnership (TTIP) which should create the largest free trade zone in the world, accounting for a third of global commerce.
Of course the question is how will this affect Africa and how can we benefit? Well, as it is currently structured, the rules of origin section of the TTIP will heighten the barriers faced by African countries exporting processed goods to the zone because at least 50 per cent of the value addition in a product must be produced in a TTIP state to benefit from tariff reductions. Such clauses discourage Africa from industrialising yet industrialisation is considered one of the most viable means of pulling millions of Africans out of poverty. Basically it’s the same old bias.
The TTIP also aims to harmonise product standards to a very high level. This is a mixed bag for Kenya which has significant horticultural exports into the TTIP zone. High standards may be a barrier at first as it will be more difficult for poor countries such as Kenya to comply with them; this may lock out African exporters. But eventually it will be of benefit for Africa to produce internationally competitive goods. Why should Africa be allowed to lag behind in the pursuit of excellence?
There are already calls for third party countries, particularly developing economies and Africa, to contribute to the TTIP and make recommendations that ensure they benefit.
But even such a position fails to realise a basic truth: the TTIP is not about creating an equitable and fair world, it’s about strengthening the Euro-American power. So while the specifics of the agreement matter, what the TTIP is truly saying is that the US and the EU are finally admitting and recognising the erosion of their control and influence over the global economic, political and social landscape. The TTIP is an attempt to rebalance the scales and make Euro-America economically all-powerful again.
The TTIP is an indirect admission by both parties that their influence and clout has been receding in what has increasingly become a multipolar world with the emergence of competition from China, Brazil, India and even Russia in economic and political spheres. It will be interesting to see how China responds to this mega regional trade agreement and whether it leads to consent or contest of the new norms and rules. Africa should keep an eye on this.
So, how will the TTIP affect the continent? Well, we can only really begin to answer that question once we analyse the specifics but there is already one message Africa should get loud and clear: integrate economically.
The TTIP provides yet another compelling reason for the economic integration of the continent. But, as the outgoing president of the Africa Development Bank states, there are far too many regional and sub-regional funding initiatives that they can never gain critical mass and foster continental economic integration. The TTIP should provide an even deeper impetus for Kenya to push for intra-regional integration where the EAC integrates with Comesa and SADC and Ecowas. Integration should become an even stronger mission for Africa. Only then perhaps can Africa begin the process of agglomerating economic and socio-political clout in a New World order.
Ms Were is a development economist; email: email@example.com; twitter: @anzetse