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The AGOA Problem: Africa's Hidden Secret

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For the last seven years in my travels across the African continent, I try to pay attention and listen to what things are troubling some African businesses and traders in retail and exports. AGOA is the one word that keeps coming up with excessive groans. In English and French, small African traders are complaining about it.

Created by the Clinton Administration, "the African Growth and Opportunity Act (AGOA) was signed into law on May 18, 2000 as Title 1 of The Trade and Development Act of 2000. The Act offers tangible incentives for African countries to continue their efforts to open their economies and build free markets." The U.S. Government intended that the largest possible number of Sub-Saharan African countries would get trade benefits of AGOA. The proclamation was the result of a public comment period and extensive interagency deliberations of each country's performance against the eligibility criteria established in the Act.

My African exporter friends in West Africa usually give me an earful about AGOA -- one called it an unpleasant experience and even came up with an expression Americans Getting Over on Africans, again. When I first heard about AGOA, I was attending a conference run by the Corporate Council of Africa in Washington D.C. At that event, I met Nigeria's Minister of Agriculture who wondered why I was interested in crafts and not oil, as he put it, after all, I was from an oil state in Nigeria. I went to that conference to learn about the craft sector and because a design colleague of mine was speaking.

AGOA should spell opportunity for Africans, but go into Ghana today and you will have a lot of Ghanaians in an uproar about it. Why? Well, the story goes like this. AGOA is meant to help Africans who are ready to export goods into the U.S. but it is creating more opportunities for American companies (profit and not-for-profit) who are more ready to export. The average African exporter is an individual and not a company. He or she is a basic trader, one who flies into the U.S. and sells their goods on the streets or to stores. So, AGOA is not something they would even know about. And when they do find out about it, they usually go to their respective government official -- who gives them the run-around. I know this because I decided to test this out by going to talk with the Nigerian Embassy here in New York and the Nigerian Export Promotion Organization in Lagos.

At the Corporate Council on Africa, I met Leslie Mittelberg who runs Swahili Imports and we talk often enough, so I decided to ask her about AGOA. When I asked her: How well as AGOA worked for African companies, African governments or U.S. companies? Who is taking more advantage of it? And how would you rate it? Leslie was frank: "I give it a zero rating = failure. The process is too complicated for the population we work with. We are yet to have a successful entry." Leslie works with artisan groups who could qualify to be part of AGOA process of selection.

The major problems of AGOA for African companies and countries seems to be "unclear guidelines between U.S. customs and the country of origin. Artisans are unable to do the documentation or understand what goods are eligible and what are not" says Mittelberg. My experience talking with traders is that the paperwork is a nightmare on both sides -- U.S. and their country. And this makes it harder to compete. So, most traders go ahead and pay the duties rather than do the paperwork. Simply, Africans are not prepared at all. And in their own countries, there is little on the ground support for them.

The U.S. government knowing this created Trade Hubs across Africa -- four regional trade hubs in sub-Saharan Africa. The one I am familiar with is the West African Trade Hub. I reached out to hear from them. According to USAID West Africa Trade Hub AGOA Services Manager Abou Fall, "AGOA has resulted in increased trade worldwide and the numbers do not capture that. AGOA has led to a leveraging of resources, it has facilitated dialogue, it has fostered the creation and growth of industry alliances, it has built capacity for doing business -- and all that entails -- on both sides of the Atlantic. AGOA is telling a different story in Africa -- it does not look like the conventional story of increased trade."

In some ways, the hub is right. Trade has increased in Africa, "AGOA not only eliminated the tariffs on 6,400 products -- it also put in place annual forums between U.S. and African governments and initiated the Trade Hubs." That is good news, but the reality on the ground is the average trader, artisan groups and small companies are not experiencing the increase. Quite the opposite. Just take a look at the decrease in the number of traders across New York or the lack of African goods in stores across the countries. Even more so, the number of exporters at trade shows for crafts and gifts have decreased.

In other areas of trade, AGOA is working well. It is building traction and using collaboration and partnerships together. "One of the best examples of the Trade Hub's impact in West Africa is our work in building industry alliances. These are good for the public and private sectors. When we co-founded the African Cashew Alliance in 2006 many people were skeptical of what it could or would do" says Abou Fall.

As much as the USAID West Africa Trade Hub has trained hundreds of exporting companies, customs officials and other stakeholders on AGOA. It admits to some key issues. "Building cooperation and collaboration within an industry is a huge challenge no matter where you undertake it -- when you do that in a region where the regional connections are tenuous, with language and cultural gaps, it's a challenge arguably on another level. Awareness of AGOA -- in the U.S. and in Africa -- is a constraint. And awareness of Africa as a good place to do business is an issue, too, that limits the impact of AGOA."

And more importantly, the issues are enormous for AGOA to work. The trade hub admits that "in order to fully take advantage of AGOA, African countries must resolve issues that hamper their competitiveness such as infrastructure, cost of production, and some "soft" infrastructural issues such as setting up the adequate procedural systems to facilitate exports, and implementing specific sector strategies to boost exports." Are African countries listening to this?

AGOA is up for renewal soon, or more precisely an extension -- the third-country fabric exemption. Fall says, "this exemption means if you are producing apparel using fabric you bought in, say, China, you still benefit from the AGOA preferences. So, the source of the fabric is not disqualifying. In Africa, this exemption is very important because of the lack of capacity to produce fabric. Apparel manufacturers count on AGOA particularly because margins are so thin but potential volumes so high. A further extension of AGOA will also give a signal to investors who have more time to plan out their investment decisions and expand their fledgling operations."

I ask, how beneficial is this third country extension if the raw material is not from Africa? Who benefits? Both -- one African country and the third country -- which might not be African? Trade Negotiations are a tangled web. AGOA is good for Africa, but it needs to be user-friendly for the average African. It needs to be simplified.