Trade Agreements between Africa and Developed Countries

By March 5, 2022 Uncategorized No Comments

It is promising that African countries are already developing strategies on how to leverage the agreement and developing clear action plans to exploit national, regional and global markets in the context of the AfCFTA. The AfCFTA can play a pioneering role in Africa`s economic diversification and inclusion. This is not an opportunity to be missed, and 2019 will be a crucial year. Since its passage in 2000, the African Growth and Opportunity Act (AGOA) has been at the heart of U.S. economic policy and trade engagement with Africa. AGOA provides eligible sub-Saharan African countries with duty-free access to the U.S. market for more than 1,800 products, in addition to the more than 5,000 products that have duty-free access under the Generalized System of Preferences program. Economic progress is the result of many factors, and it is difficult to attribute progress to a political decision. Nevertheless, Mexico`s approach to trade agreements appears to have contributed significantly to the country`s economic development. Mexico`s total trade with the United States and Canada increased from about $94 billion in 1993 to about $647.7 billion in 2019.23 when it renegotiated NAFTA with the United States and Canada (creating the agreement known as T-MEC in Mexico and USMCA in the United States).

In recent decades, the world has rewarded Mexico with investment: foreign direct investment has grown from about $14 billion in 1999 to about $608 billion in 2020, more than half of which came from the United States and Canada.24 Africa and Europe have a long history of trade that began before Europe`s economic integration. The EU is often one of Africa`s largest trading partners: in 2019, the EU accounted for 31% of African imports and 29% of exports. African countries mainly export primary goods to the EU (66% of the value of total exports in 2019) and import mainly industrial goods (70% of the value of total imports in 2019). In March 2018, three separate agreements were signed at the 10th Extraordinary Meeting of the African Union on the AfCFTA: the African Continental Free Trade Agreement, the Kigali Declaration; and the Protocol on the Free Movement of Persons. The Protocol on the Free Movement of Persons aims to create a visa-free zone in the AfCFTA countries and to support the creation of the African Union passport. [27] At the Kigali Summit on March 21, 2018, 44 countries signed the AfCFTA, 47 the Kigali Declaration and 30 the Protocol on the Free Movement of Persons. Although it was a success, there were two notable resistances: Nigeria and South Africa, Africa`s two largest economies. [28] [29] [30] Although AGOA enjoys bipartisan support in the United States, efforts to establish more reciprocal trade agreements with African countries have gained momentum in recent years.

In 2015, the Obama administration took the position that after AGOA`s scheduled expiration in 2025, the United States should move away from unilateral preferences and seek reciprocal agreements with African countries.20 This was partly due to fears that emerging mutual trade agreements between Africa and other partners, such as the EU and China, would disadvantage U.S. companies in the region. Other factors that have played a role have been the proliferation of non-tariff barriers such as location requirements in several African countries, improved economic conditions in Africa, and decisions by other developed economies such as Canada and the EU to reduce their unilateral preferential tariff programs. In light of these trends, Congress ordered in agoa legislation that the U.S. Trade Representative develop plans to negotiate reciprocal free trade agreements with African countries. Paul Brenton is a Senior Economist in the Trade and Regional Integration Unit (ETIRI) of the World Bank. It focuses on analytical and operational work on trade and regional integration. The AfCFTA integrates and builds on WTO agreements and disciplines, which is important because 11 members of the African Union are not yet members of the WTO. In recent months, the United States has begun negotiations on a bilateral free trade agreement with Kenya. These negotiations are consistent with the current government`s vision of trade reciprocity and not unilateral trade preference programs. While these negotiations may result in the first bilateral trade agreement between the United States and a sub-Saharan African country, the transition from regional preferential trade agreements to bilateral free trade agreements could hurt the growth of small countries that may not be of sufficient economic interest to the United States.

Bilateral agreements could also undermine efforts to create a regional economic bloc through the African Continental Free Trade Area (AfCFTA). With its African Growth and Opportunity Act (AGOA) of 2015, the United States took a step toward a more meaningful agenda with Africa. While it is still a unilateral preferential program, AGOA offers a specific benefits program that allows the 49 countries in sub-Saharan Africa to export goods to the United States. Goods covered by AGOA can be imported duty-free into the United States until the end of 2025. In 2020, 38 African countries exported goods eligible for this treatment. However, if the AfCFTA is to harness its potential to diversify and transform African economies in an inclusive manner, African countries need to develop effective export policies and strategies and identify new opportunities for diversification, industrialization and value chain development. While the AfCFTA can address many important barriers to trade on the demand side, particularly those related to market size, supply-side constraints also need to be addressed. The advantage of preferential trade agreements is that they can lead to lasting structural changes. After 18 years of using AGOA, a computable analysis of the overall balance conducted by the World Bank in 2018 showed that terminating AGOA by 2020 would result in a 1% loss of revenue and a 16% drop in textiles and clothing. But the simulations also showed that trade facilitation measures that reduce average trading costs by 2% per year would eliminate the negative effects on revenues resulting from the elimination of AGOA. .