GENEVA — African trade ministers and experts in global commerce said renewal by the U.S. of the African Growth and Opportunity Act last month will help boost trade and investment, including in textiles and apparel, for many developing countries on the continent.
“It will help in the industrialization of Africa,” said Amina Mohamed, Kenya’s minister of foreign affairs and international trade.
AGOA’s extension will enhance “stability and predictability” and boost investor interest in Kenya and other sub-Saharan African countries, she said in an interview on the sidelines of a three-day conference here that ended Thursday on Aid for Trade hosted by the World Trade Organization.
Mohamed said investors had been in a wait-and-see mode, and noted after passage of AGOA was secured in Washington that there has been a surge in investor interest.
The Kenyan official said a new export processing zone is being developed in the port city of Mombasa, the busiest container terminal in east Africa.
In 2014, under AGOA duty-free treatment for certain apparel products, Kenya exported $379 million worth of apparel to the U.S., while Lesotho exported $279 million and Mauritius $223 million, according to U.S. data compiled by a Congressional Research Service study.
Aziz Mahamat Saleh, Chad’s minister of economy, trade and development, said the extension of AGOA opens new opportunities for the cotton-producing nation to attract foreign investors to develop value-added textile and apparel products in the country for the U.S. market.
Arancha Gonzalez, executive director of the International Trade Center, said, “AGOA means good news for African countries wishing to export to the U.S. in that it offers them market access with more predictable terms, but it’s only 50 percent of the answer. It’s also fair to say we need the other 50 percent, which is making sure countries have the capacity to export goods and services to the U.S. So it’s important to build the capacity part of the poorest African countries to make sure it translates a great opportunity into reality.”
Bernard Hoekman, professor of global economics at the European University Institute in San Domenico di Fiesole, Italy, told WWD the renewal of AGOA “is a really important development for African countries because one of the problems for preferential schemes is, as they run out, people don’t really know where they are.”
“So, getting rid of that uncertainty is important for African exporters,” Hoekman said, “The buyers will actually know that they can rely on the suppliers to deliver and know what the terms of the deal will be.”
Taffere Tesfachew, director for Africa at the United Nations Conference on Trade and Development, said the extension “on the whole is positive for Africa and it’s going to impact trade.”
He also said it will spur investments from China and other Asian countries.
Tesfachew said Ethiopia, which last year attracted $1.8 billion in new foreign direct investments in textiles and apparel, expects exports to increase 80 percent over the next five years.
He also noted that AGOA rules of origin are “more relaxed” than those proposed by European Union economic partnership agreements. But getting AGOA duty-free goods to the U.S. market poses a big challenge, experts noted.
“In the African region as a whole countries are lagging, especially in logistics performance, and that’s where I would focus…on trade facilitation, but broadly defined to include logistics and transport services, customs clearance,” Hoekman said. “What would make a big difference in reducing trade costs is to actually focus on this trade facilitation agenda.”
Steve Felder, managing director for East Africa for Maersk Line, said the biggest challenge in the region is the imbalance between imports and exports in container traffic volume. For every three to four containers imported full, only about one is exported full, and that poses a supply challenge, he said.