Ending a tortuous, four-year journey through the US Congress, the Africa Growth and Opportunity Act finally was signed into law by President Bill Clinton on 18 May. Mr. Clinton hailed the free trade legislation as one that will expand "Africa's access to our markets and improve the ability of African nations to ease poverty, increase growth, and heal the problems of [its] people." But some analysts suggested that its practical impact may be much more modest.
There is plenty of room for expansion. Sub-Saharan Africa last year accounted
for barely 1 per cent of total US exports, imports, and foreign direct investment
(FDI). Total two-way trade amounted to less than $20 bn, of which South
Africa and petroleum exporters Nigeria, Angola and Gabon accounted for $15
bn. By itself, petroleum made up well over half of the $14 bn Africa exported
to the US in 1999 (see graph). It also accounted for about two-thirds of
the $9 bn of US investments in Africa the year before.
According to the bill's Congressional sponsors, the legislation is intended
not just to increase the volume of US-Africa trade, but also to open US
markets to a broader range of African exports - particularly in labour-intensive
manufactured products like clothing, where economists have long argued that
Africa enjoys a competitive advantage.
The legislation's key provisions include:
The complex textile provisions could provide the most significant short-term benefits to Africa, say trade experts. Last year, total African apparel exports to the US came to about $580 mn, just 0.8 per cent of total US apparel imports. Under the new legislation, African manufacturers could almost double their exports next year and send as much as $4.2 bn of duty-free apparel made from African or third-country fabric to the US by 2008.
In the face of fierce opposition from domestic apparel manufacturers and the US trade union movement, Congressional negotiators arrived at a last-minute compromise that allows duty-free and quota-free market access for all apparel made in Africa from US-origin yarn and fabric. Apparel made in Africa from regional fabric can be exported duty free up to a cap of 1.5 per cent of total US imports in 2001, rising to 3.5 per cent of total apparel imports by 2008. In addition, apparel made from third-country fabric by any African country with a per capita annual income of less than $1,500, subject to the same caps, will be allowed entry duty free until 2004. The bill imposes stiffer penalties against the trans-shipment of apparel through Africa by non-African producers to the US.
These provisions will mainly benefit those countries whose apparel exports to the US have risen sharply in recent years, including South Africa, Mauritius, Lesotho, Kenya, Swaziland, Madagascar and Zimbabwe, according to a 1997 study by the US International Trade Commission. The same study concluded that Botswana, Cameroon, Côte d'Ivoire, Ghana, Malawi, Mozambique, Nigeria and Tanzania could benefit. Of these, only South Africa, Mauritius and Botswana have per capita incomes greater than $1,500.
"We're very pleased with this," said Mr. Peter Nyikuli, Kenya's commercial attache in Washington. "We lost 11,000 jobs in Kenya due to US quotas, which acted as a disincentive for would-be manufacturers to place investments and for would-be buyers to source from Kenya." The legislation enjoyed the strong support of the African diplomatic corps in Washington, which lobbied hard to secure its passage.
Beyond the textile provisions, however, the impact of the legislation on the volume and content of US-Africa trade is likely to be limited. Although the legislation will raise the number of products eligible for duty-free access under the GSP from 4,000 to 5,800, the great majority of those items are either not currently produced in Africa or have only a limited potential US market.
Nor are all African countries eligible. A country may benefit only if the US president determines that it is committed to establishing a "market-based economy" that protects private and intellectual property rights, accords foreign investors the same treatment as its own nationals and eliminates corruption, bribery and barriers to US trade and investment, among other conditions. A country also may be deemed ineligible if it engages in gross human rights abuses or does not adequately protect core worker rights, including prohibitions on child labour.
The legislation leaves intact the full array of tariff and non-tariff barriers to imports deemed threatening to domestic suppliers. Although South Africa is one of 41 sub-Saharan countries that currently qualify for duty-free access to the US under the GSP, for example, certain of its steel products nevertheless have been kept out of the US market through "anti-dumping" measures, ostensibly designed to protect domestic goods from unfair external competition.
The more business-oriented eligibility requirements persuaded a number of African and US labour, church, environment and development groups that the bill was designed more to lock African economies into trade and market liberalization policies than to assist African development objectives. "In general terms, this bill favours US business and multinational corporate interests, rather than African grassroots communities," said Mr. Larry Goodwin, director of the Washington-based Africa Faith and Justice Network, one of a number of non-governmental organizations that opposed the bill.
Skeptics note that the bill fails to provide trade preferences for many African products, including agricultural and mining commodities, which have long been the region's dominant exports. The advantages obtained by eliminating quotas on textiles and apparel could prove fleeting, they argue, since all textile quotas are to be phased out worldwide in 2005 in favour of World Trade Organization rules. "This really is the basic flaw," wrote Mr. Tetteh Hormeku, a trade expert at the Ghana-based Africa Secretariat of the non-governmental Third World Network. The Africa trade bill "is not really about Africans but about American business and competition with Europe."
