Extending the African Growth and Opportunity Act, set to lapse on Sept. 30, 2015, will enable the U.S. to maintain a competitive edge against China in the rapidly expanding African market.
The passage of AGOA in 2000 marked a major innovation in U.S.-Africa relations — it was the first step in showing that Africa was not just an aid destination but a respected trading partner. The driving vision of the legislation was one of mutual prosperity. The strategic intent was to spur job creation and improve governance and to make Africa a more attractive market for U.S. businesses. Over the last fourteen years, AGOA has become the cornerstone of the U.S.-African commercial relationship.
In the competition for African opportunities, job creation is the U.S. strategic advantage. We are not going to finance infrastructure the same way that China does, we are not going to provide direct budget support to African governments like the Europeans do, but we can help African countries create broad based economic growth that benefits everyone. Fifty percent of Africans are under the age of 15, and 60 percent of youth are unemployed. Successful job creation will determine which countries remain stable, develop dynamic economies and grow a vibrant middle class that will purchase American products.
On Monday, the Administration officially called for the “seamless renewal” of AGOA at the annual AGOA Forum. Though an important step, this is the same promise that President Barack Obama and senior administration officials have been making for the past two years. With no legislation introduced, time running out on this Congress and very dim prospects for trade legislation passing in an election cycle, AGOA’s renewal seems more uncertain than seamless.
AGOA helps to create jobs. While not yet achieving its full potential, the legislation has led, directly and indirectly, to the creation of several million jobs on the continent. And its impact is about to get stronger. Changing realities in the global market are making AGOA more relevant than it ever was, especially when it comes to manufacturing clothing for the U.S. market. Chinese wages are rising, and in the last year there have been tragedies in Bangladeshi apparel factories and anti-Chinese riots in Vietnamese factories. By 2040, 1 in 4 global workers will be in Africa.
If AGOA is renewed in a timely manner and with a long time horizon, it will accelerate the transfer of manufacturing jobs from Asia to Africa. African countries want to claim a significant portion of the 80 million jobs that China is expected to outsource in the coming years as it shifts from lower end to higher value manufacturing.
Seven of the ten fastest growing economies in the world are in Africa. Some of these countries are on the verge of a manufacturing take-off. In Ethiopia, for example, manufacturing accounts for 12 percent of GDP and the sector grew by 18.5 percent last year. Many AGOA participating countries are home to a growing middle class, on par in size with China and India’s, in which consumer activity is more significant than the extractive industries in driving the region’s 5.5 percent economic growth rate.
While American companies are slowly waking up to commercial opportunities on the continent, companies from India, Brazil, Russia, Turkey and South Korea have established a presence across the region. The European Union is trying to secure an advantage for European companies by compelling African governments to sign agreements or lose favorable access to the EU. In short, the African market is in full play but it does not have to be a zero-sum game.
The African Leaders’ Summit this week is an important step in changing negative stereotypes about African countries and raising the profile of the region on the US policy agenda. We are enthused by the announcement of the White House’s Steering Group on Africa Trade and Investment Capacity Building and hope that it ensures meaningful follow up for today’s business leaders Summit.
AGOA is key to a deeper commercial relationship with Africa, and it enjoys widespread support across the continent. It also commands strong bipartisan support in Congress. AGOA was signed into law by President Clinton and extended three times by President Bush. It is now Obama’s turn to ensure that the progress made over the past 14 years is not lost.
This post was co-authored by Aubrey Hruby, a visiting fellow at the Africa Center at the Atlantic Council and a consultant helping companies do business across African markets.