Wednesday, 5 August 2009

AGOA: trade breaks or heartbreaks?

The Los Angeles Times carries an excellent story ("Struggling to make it in Kenya", by Edmund Sanders) on the efforts and aspirations of Kenya's government to make Kenya an attractive and viable destination for the "Made in Kenya" outsourced manufacture of leading brands and the subsequent events -- some encouraging, others disheartening.

The trigger for all of this was the US's Africa Growth and Opportunity Act (AGOA), which was signed into force by President Clinton nearly 10 years ago. Well-known brands currently manufactured in Kenya include Dockers, Gloria Vanderbilt and Izod, made principally for the US market -- but for many AGOA, and the trade agreement with the US that supported it, hasn't been as successful as was hoped. Economic conditions have depressed the US market but, even if they hadn't, AGOA's provision have been severely under-utilised. Of somet 6,400 products and goods that qualify for duty-free export to the US under the AGOA programme, Kenya is shipping only 20, including apparel, flowers and coffee.

Beneficiaries of AGOA, for whom US duties are waived, are 39 qualifying sub-Saharan African countries. This waiver lets them to sell African goods to US customers for between 15-30% less than rival exporters. The idea was that AGOA would help free-market African economies diversify their manufacturing bases and create jobs. In reality, its critics claim, it has mainly subsidized the export of oil to the US by waiving duties for firms in a small number of petroleum-producing nations which hardly needed increased incentives.

AGOA's trade breaks are set to expire in 2015.

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