The Economic Partnership Agreement between Europe and Africa, expected to be signed before October, will shake up the international market. Under the agreement, African member states will benefit from exporting more products — duty and quota free — into Europe. In a reciprocal arrangement, Africa will be required to open up its markets to Europe.
As the agreement will provide African and European traders lucrative benefits, the prospect offers competition to the U.S., which has an existing and flourishing trade deal with Africa through the Africa Growth and Opportunity Act, due to expire in 2015.
AGOA was signed into law on May 18, 2000 and offers tangible incentives for African countries to access U.S. markets and remain globally competitive.
The Economic Partnership Agreement will not impact AGOA, according to David Renz, counselor for economic affairs with the U.S. Embassy in Nairobi. Renz spoke to AFK Insider in an interview at the embassy.
“While EPA will not jeopardize AGOA, all we can say is that competition is good and so we ask them to bring it on,” he said.
The U.S. and other world trading blocs are attracted by Africa’s growing middle class and youthful population.
As a means to that end, a U.S.-Africa heads of state summit has been scheduled for 2014. Ahead of the summit, the U.S. government will host the 2013 U.S.–Sub-Saharan Africa Trade and Economic Cooperation Forum, known as the AGOA Forum, Aug. 12-13 in Addis Ababa.
“It is still unclear when AGOA will be extended but we believe it could happen as early as 2014 so that no damage is done to economies in Africa that depend on U.S. markets,” said Florizelle Liser, assistant U.S. trade representative for Africa in the office of the U.S. Trade Representative.
Liser spoke during a media briefing via video-link at the U.S. Embassy in Nairobi.
The AGOA forum theme is “Sustainable Transformation through Trade and Technology.” It will focus on the future of U.S.-Africa trade and economic cooperation.
During the AGOA forum in Ethiopia, the Doing Business in Africa campaign will address opportunities in Africa and how to provide finance and support to U.S. businesses in Africa.
AGOA allows traders in Africa duty-free access to the U.S. market leading to expansion in trade and investment.
The list of goods eligible for access to the U.S. market from Africa under AGOA has 6,400-plus items.
“The most popular products entering the U.S. market include canned fruits and juices, leather, apparel and textiles, Liser said.
Exports of apparel from Africa into U.S. increased in value from $359 million in 2001 to $850 million in 2012. Export of fruits and nuts grew in the same period from $29.1 million to $212 million.
“While China has been the largest producer of footwear in the world, labor costs in this sector are on the rise, forcing most Chinese companies to abandon the business. This creates room for Africa to export footwear to the U.S.,” Liser said.
The value of footwear exports to the U.S. from Africa increased from $242,000 in 2001 to $ 7.4 million in 2012.
In Malawi, AGOA led to foreign direct investment in two garment factories by European and Taiwanese companies, creating at least 4,350 jobs, according to data from the U.N. Center for Trade and Development.
In Mauritius, FDI worth $78 million took place. Prospects of Asian and European companies building cotton-yarn spinning mills are strong. A leading Senegalese apparel and textiles company planned to partner with a U.S. textile manufacturer and a Malaysian firm to export to the U.S. with a potential creation of 1,000 jobs.
In Tanzania, a textile mill expanded in partnership with a U.S. company, creating 1,000 jobs.
In Cape Verde, a U.S. company bought a fish-processing company and two new Portuguese investments in the garment industry were announced.
Volume of exports from the U.S. to Africa increased from $ 6.1 billion in 2001 to $ 22.6 billion in 2012, according to the the office of the U.S. trade representative for Africa.
The U.S. Congress does an annual review of AGOA based on how African countries open their markets, resolve commercial disputes, protect children against being used as laborers as well as deal with corruption and human rights issues.
“We remove from the list of eligibility all those countries that do not meet the criteria set out by Congress,” Liser said.
African countries are being encouraged to expand, form regional markets and take advantage of economies of scale.
“Regional economic blocs in Africa should be encouraged to enable countries take advantage of the global economy,” Liser said.
U.S. companies looking to do business in Africa may find new opportunities in privatizations of African state-owned enterprises or in partnership with African companies in infrastructural development projects.