The African Growth and Opportunity Act Continues to Grow Trade

Francisco A. Laguna & Wojciech Kornacki

In 2000, the United States opened its domestic markets to sub-Saharan African nations. At that point, no one expected that within 14 years, Africa would be exporting over $400 billion in goods and services to the United States. Currently, with the increased competition from the European Union and China, the US and its African partners are developing new trade and training opportunities that could benefit your business.

Background

Africa

Africa

 In 2000, the United States decided to expand, simplify and diversify its trade relations with sub-Saharan African countries. In part, this was in response to the trade agreements the EU signed with 79 countries in Africa, the Caribbean and Pacific during the same period. Through the African Growth and Opportunity Act, the United States unilaterally opened its domestic markets to the African countries in the sub-Sahara so long as the African countries reformed their economies and made them more transparent, among other requirements.

The benefit for US companies was that this created many new opportunities to provide credit and technical expertise to various sector in Africa. It also allowed many American companies to benefit from new business-to-business opportunities with the African businesses.

In the last 14 years, the economies of many sub-Saharan African countries have significantly improved and stabilized. Many experts agree that overall the African Growth and Opportunity Act had many positive effects within the region. World Bank reports that over the same time period, it has significantly increased its lending to the sub-Saharan region. From about 2000 to 2010, sub-Saharan nations have qualified for over $1 billion in credit and lending.

How to Use This Opportunity

The first step is to identify which sub-Saharan countries directly benefit from having unrestricted access to the U.S. domestic markets. Currently, the U.S. Department of Commerce International Trade Administration lists 34 countries. This list changes from time to time. For example, recently Mali and Madagascar were placed back on the list, and Swaziland will be removed in 2015. In 2013, the United States removed Mali from the list because of lack of progress in reforms, which was related to the military junta taking over the country in 2012.

One of the largest beneficiaries of the US open markets for sub-Saharan African counties has been South Africa.  The United States has become its largest market for manufactured cars.  This picture shows the largest stock exchange in Africa – located in Johannesburg.  Photo Credit: Andres de Wet via Wikimedia Commons

One of the largest beneficiaries of the US open markets for sub-Saharan African counties has been South Africa. The United States has become its largest market for manufactured cars. This picture shows the largest stock exchange in Africa – located in Johannesburg.
Photo Credit: Andres de Wet via Wikimedia Commons

Currently, Nigeria, Angola, Congo and Cote d’Ivoire are some of the African leading exporters to the United States, which directly benefits their economies, boosts domestic employment and stabilizes their political systems.

The next step is to match a particular industry to the country. According to the Congressional Research Service, as of 2014, the biggest import from the sub-Saharan African countries to the United States is oil and natural resources. The Office of the United States Trade Representative reports that Nigeria exported $11.7 billion worth of oil to the United States in 2013 alone. However, there are many other industries as well.

The leading non-oil exports include transportation equipment, primary metal manufacturing, and chemicals, among others. The US Department of Commerce International Trade Administration reports that other industries which directly benefit from the open access to the U.S. market include fabrics, textiles, handmade and folklore articles and ethnic printed fabrics. Specific rules apply for each country depending on its GDP per person and level of development.

One of the overall greatest beneficiaries of the US open markets is South Africa. Its exports to the United States have skyrocketed by 83% from 2003 and 2012. South Africa exports to the United States platinum, diamonds, vehicles, iron, steel and other materials. Thanks to the US open markets policy, the United States became the largest export destination for the South African vehicle manufacturing sector.

Another industry that has directly benefitted from the U.S. open markets is the apparel industry. The African apparel industry has a competitive advantage over non-African apparel industries because it enjoys direct access to the US domestic markets, which means no tariffs and limited other restrictions. The Congressional Research Service points out that most of the companies that have taken an advantage of the business opportunities in the African apparel industries are located Lesotho, Kenya and Mauritius.

2014 US – Africa Leaders Summit

2014 US – Africa Leaders Summit

The final step is creating business opportunities and engaging African businesses. The United States and many African countries hold annual forums to develop key business partnerships. According to the Unites States Department of State, the last one was held in Adis Ababa, Ethiopia. However, there are also many other intermediate networking opportunities as well. TransLegal was fortunate enough to participate in various meetings of the recent Africa Summit in Washington, DC, and we have recently concluded projects for US business exploring export markets in Ghana, Kenya and Nigeria.

African Women Entrepreneurs

The opening of the US markets to African businessmen and businesswomen had a particularly positive impact for businesswomen. The US Government and the US private sector have instituted a wide array of programs and training opportunities for African businesswomen. 

Future Opportunities 

The United States is expected to announce approximately $1 billion in business deals and plans to expand food production and power generation in Africa outside of the normal annual exports. In addition, the United States and its African partners plan on meeting to develop new ways for the African countries and the United States to benefit from the US open markets. USAID and the World Bank are expected to make major contributions as well.

If you are looking to learn on how your business may benefit from some of the opportunities listed above contact TransLegal.

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