East Africa Community, U.S. Close New Trade Agreement

By Godfrey Kimunya Posted 23 July 2008 @ 07:53 am EET     Print     Reprint     E-Mail     Comments

Nairobi (IBTimes.com) - The United States and the East African Community signed a trade agreement last week that could eventually lead to greater access to the two sides' respective markets.

The new Trade Investment and Framework Agreement represents "a major step toward deepening the US-EAC relationship," said Susan Schwab, the Bush administration's top trade official.


Under the terms of the accord, high-level talks will regularly be held on a full range of trade and investment topics, including the Africa Growth and Opportunity Act (Agoa), the World Trade Organisation's Doha round of negotiations and capacity-building assistance.

The signings by Ms Schwab and by EAC Director-General for Customs and Trade Peter Kiguta took place in Washington on the final day of an annual forum focused on Agoa. The deal came in advance of a key Doha-round meeting in Geneva where the US hopes to receive African countries' support on contentious subsidy and tariff issues.

Agreements of the type reached by the US and EAC build "momentum for liberalisation that in some cases can lead to a Free Trade Agreement," the State Department says in a Web posting providing background on framework deals that the United States has concluded with several developing countries.

The US signed a Trade Investment and Framework Agreement with the Common Market for Eastern and Southern Africa in 2001, leading to five meetings between American and Comesa officials.

Bilateral trade between the United States and the East African bloc was valued at about $1.2 billion last year. US imports from EAC members under Agoa's duty-free terms amounted to $265 million in 2007, with Kenya accounting for about 90 per cent of that sum.

Trade ministers had gathered in Washington on July 15 for an annual forum on Agoa.

Exports to the US from Agoa-eligible countries have been growing at a brisk pace, totalling more than $50 billion in 2007. Exports under Agoa not related to oil increased seven per cent last year, with Tanzania enjoying an encouraging jump in sales to the US - from $3.7 million in 2006 to $4.5 million last year.

Ms Schwab said Agoa has "reinforced African economic reform efforts" through provisions that make Agoa eligibility conditional on countries making progress toward open markets.

Agoa is also credited with having contributed to political reforms. African countries cannot participate in the preferential trade programme unless they are judged by the United States to be making gains in respecting human rights and observing the rule of law.

A total of 40 African nations are currently deemed eligible for Agoa's guarantee of duty-free access to the US market for hundreds of products. Policy analysts say that the US-Africa dialogue promoted by Agoa should be counted as a major benefit.

But Agoa is not producing the degree of growth that its architects had hoped to achieve in one key African export sector: textiles and apparel.

The lifting of international quotas on sales to the US fabric market has slowed exports from Africa as powerhouse Asian textile and apparel producers have increased their already sizable US market share.

Since the expiration of the quota system at the start of 2005, for instance, Kenya's clothing exports to the US have stagnated after experiencing a growth surge starting in 2001.

It is not clear what can be done to reverse this negative trend. The US Congress acted in 2006 to extend until 2012 the "third-country" provision under which Agoa-eligible countries are able to use Asian-made fabrics in the apparel they sell to American buyers. All of Kenya's clothing exports to the US involve third-country fabrics.

Agoa remains largely a duty-free oil export programme benefitting a handful of African countries. Petroleum products accounted for 93 per cent of all Agoa goods imported by the US last year. Nigeria, Angola, South Africa, and Republic of Congo accounted for 85.2 per cent of US purchases under Agoa in 2007.

Some non-oil exporting African countries have barely benefitted from Agoa. Among them is Uganda, with exports to the US last year valued at only $1.7 million, compared to $2.5 million in 2006. Uganda's Agoa exports included apparel, tungsten concentrates, cut flowers, wooden ornaments, and jewelry.

Kenya's purchases from the US in 2007 rose by 11 per cent, making it one of the top-five African destinations for American goods and services.