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Trading Up: Strengthening AGOA’s Development Potential

6/1/03
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The U.S. Africa Growth and Opportunity Act (AGOA) of 2000 uses the instrument of trade policy to fight global poverty by granting duty-free treatment to most imports from sub-Saharan Africa (SSA). Because the poor account for two-thirds of the population and over half of income in the region, U.S. imports from SSA are highly “poverty-intensive” compared, for example, with those from Latin America or East Asia. SSA is thus the region where free access to the U.S. market can make the most direct difference to the global poor.Is AGOA living up to its potential? Although the statistics can be deceptive, the answer is that AGOA is already doing a great deal, but more can be done. Goods enjoying duty- and quota-free benefits specific to AGOA account for only 43 percent of U.S. imports from countries designated as AGOA beneficiaries. However, another 29 percent enters duty-free under zero most-favored-nation rates applicable to all suppliers, and a further 3 percent enters free under the Generalized System of Preferences. Fully three-fourths of imports from AGOA beneficiaries thus enter duty-free.The full potential has not yet been met, however. In the important sector of apparel, only 38 percent of imports are duty-free, and the fraction is even lower for sugar, tobacco, iron, and steel—all traditionally protected sectors in the United States. Features of eligibility approval and time horizon also unduly limit investor certainty and thus AGOA’s impact on exports and job creation. Moreover, the entire dimension of incentives to direct investment is absent and could be added to achieve synergy with trade access incentives.This brief assesses the impact of AGOA to date and recommends measures to improve its development potential.