MIAMI UNIVERSITY The Graduate School
Certificate for Approving the Dissertation
We hereby approve the Dissertation
of
Bede U. Eke
Candidate for the Degree:
Doctor of Philosophy
______Director (Dr. John M. Rothgeb, Jr.)
______Reader (Dr. Walter Arnold)
______Reader (Dr. Cyril Daddieh)
______Graduate School Representative (Dr. Robert Applebaum) ABSTRACT
PREFERENTIAL TRADE AGREEMENT AS PATH TO ECONOMIC DEVELOPMENT: THE CASE OF NIGERIA’S RESPONSE TO AFRICAN GROWTH AND OPPORTUNITY ACT (AGOA)
by Bede U. Eke
This dissertation examines the issue of preferential trade agreements (PTAs) as a vehicle for economic growth. It focuses on how Nigeria has implemented the United States’ African Growth and Opportunity Act (AGOA) which is a PTA aimed at offering eligible Sub-Saharan African countries duty-free access to U.S. markets of many of their textile and agro-based products. It is envisaged that the Act would help promote economic growth through trade expansion for the eligible countries. Since Nigeria is a major AGOA participant, and offers the largest market in Africa, examining AGOA implementation in Nigeria is pertinent in understanding the successes and challenges of the Act. The research made use of both secondary and primary data sources. The primary data included interviews with AGOA stakeholders in Nigeria who responded to questionnaires distributed to them either by mail or in-person. In all, the findings reveal among other things, that although its implementation has had some major challenges, AGOA is helping in trade expansion and economic growth in Nigeria through increase in export and implementation of its conditionalities, which have encouraged reforms and trade capacity building (TCB) initiatives. However, the targeted industry and sector (textile and agriculture respectively) are yet to witness significant export growth although they hold great potential for success. This does not suggest a failure of the Act but need to re-evaluate its objective vis-à-vis its achievement after six years of implementation. Although the findings in this research may not be generalized to other participating Sub- Saharan countries given that each country has fairly unique political and economic conditions that produce different implementation outcomes, there are reasons to believe that the Nigerian case offers a clue about the general issues AGOA is facing in the participating countries. The research offers recommendations in the light of the findings.
PREFERENTIAL TRADE AGREEMENT AS PATH TO ECONOMIC DEVELOPMENT: THE CASE OF NIGERIA’S RESPONSE TO AFRICAN GROWTH AND OPPORTUNITY ACT (AGOA)
A DISSERTATION
Submitted to the Faculty of
Miami University in partial
fulfillment of the requirements
for the degree of
Doctor of Philosophy
Department of Political Science
By
Bede U. Eke
Miami University
Oxford, Ohio, USA
2007
Dissertation Director: Dr. John M. Rothgeb, Jr.
©
Bede U. Eke
2007
TABLE OF CONTENTS
LIST OF TABLES------v
LIST OF FIGURES------vi
LIST OF TERMS------vii
DEDICATION------x
ACKNOWLEDGEMENTS------xi
CHAPTER ONE: Introduction------1 Statement of Purpose 1 Literature Review 2 Research Design 22 Research Approach 23 Data Collection 24 Chapter Previews 26 Chapter One References 28
CHAPTER TWO: Background of AGOA------33 The U.S. and FTAs/ PTAs Policies 33 The Objectives of U.S. Preferential Trade Policies 35 AGOA: Origin and Overview 36 Structure of AGOA 41 Summary of Performance 54 General Implementation Challenges 63 Chapter Two References 65
CHAPTER THREE: U.S. Trade Relation with Nigeria and the AGOA Implementation ------67 Nigeria Trade Activities & Policy in the 1990s 68 Sectoral Performance in the 1990s 71 Trade Relationship Before AGOA 73 The U.S.-Nigeria Relationship Since AGOA 79 AGOA Implementation Status in Nigeria 85 General Results so Far 91 Major Challenges of AGOA Implementation in Nigeria 92 Chapter Three References 95
CHAPTER FOUR: Interview Results on AGOA------97 Knowledge & Procedure Issues 101 Sovereignty/Ideological Issues 102 General Response and Implementation Issues 105 Industry Specific Cases 109
iii Textile Industry in Nigeria 109 The Cashew Industry in Nigeria 115 Chapter Four References 127
CHAPTER FIVE: Discussion of Findings, Recommendations & Conclusions ------129 Summary of Major Findings 129 Implications of Findings 131 Recommendations 139 Suggestions for Future Research 145 Chapter Five References 147
APPENDIX I: Questionnaire------149
APPENDIX 2: Nigeria in Brief------155
BIBLIOGRAPHY------157
iv LIST OF TABLES
Table 1: Table listing AGOA eligible countries, the effective date of their eligibility, and the effective date of their eligibility for AGOA apparel benefits if applicable 39-41
Table 2: U.S. Total Exports, Imports, and Trade Balance with AGOA Countries, year-to-date Data from 2002 to 31 January 2005 56-61
Table 3: U.S. Trade in Goods with Nigeria in the 1990s 74
Table 4: Nigeria Cereals Import from the U.S 75
Table 5: U.S. Commodity Import from Nigeria 76
Table 6: U.S. Commodity Export to Nigeria 1992-1999 77-78
Table 7: U.S. Trade with Nigeria Since 2000 80
Table 8: U.S. Commodity Export to Nigeria 2000-2006 81-82
Table 9: U.S. Commodity Import from Nigeria 2000-2006 82-84
Table 10: Exports of Cashew Nuts from Nigeria, 1990 – 2000 121
Table 11: Potential Income Generation and Job Creation from the Cashew Industry 123
Table 12: Bilateral Trade Profile between United States and Nigeria: Agricultural and Textile Sector 136
v LIST OF FIGURES
Figure 1: Employment statistics of the Nigerian Textile Industry (1996-2006) 110
Figure 2: Map of Nigeria showing cashew activities 117
vi LIST OF TERMS
ACP Africa, Caribbean, and Pacific Nations AIDS Acquired Immune Deficiency Syndrome APEC Asia-Pacific Economic Cooperation AU African Union AGOA African Growth & Opportunity Act APD AGOA Professional Development Program BISF Boston International Seafood Fair CBI Caribbean Basin Initiative CCA Corporate Council on Africa CEMA Customs and Excise Management Act CRIN Cocoa Research Institute of Nigeria CS Commercial Service CUSFTA Canada-U.S. Free Trade Agreement EC European Community ECOWAS Economic Community of West African States EEG Export Expansion Grant EFCC Economic and Financial Crimes Commission EFTA European Free Trade Association EU European Union FAO Food and Agricultural Organization FCT Federal Capital Territory FDI Foreign Direct Investment FGN Federal Government of Nigeria FTA Free Trade Area and/or Agreement FTAA Free Trade Agreement of the Americas GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GSP Generalized System of Preferences IFC International Finance Corporation IGO Intergovernmental Organization
vii IMF International Monetary Fund IPPC International Plant Protection Convention IPR Intellectual Property Rights IRB Institutional Review Board for the Use of Human Subjects in Research ITC International Trade Commission LDC Least Developed Country LDBC Lesser Developed Beneficiary Countries MAN Manufacturers Association of Nigeria MERCOSUR Mercado Común del Sur (Southern Common Market) MFN Most Favored Nation MNC Multinational Corporation NACCIMA Nigerian Association of Chambers of Commerce, Industry, Mines & Agriculture NAFTA North American Free Trade Agreement NAFP Nigeria Apparel and Footwear Project NAICPP National Accelerated Industrial Crops Production Program NEPC Nigeria Export Promotion Council NEPAD New Partnership for Africa’s Development NGO Non-Governmental Organization NTMA Nigerian Textile Manufacturing Association OECD Organization for Economic Co-Operation and Development OPIC Overseas Private Investment Corporation PTA Preferential Trade Agreement RTA Regional Trade Agreement RTAA Reciprocal Trade Agreements Act SAP Structural Adjustment Program SME Small and Medium-sized Enterprises SPS Sanitary and Phytosanitary Standards TCB Trade Capacity Building TCBP Trade Capacity Building Project TDA Trade Development Agency
viii UN United Nations UNCTAD United Nations Conference on Trade and Development UNIDO United Nations Industrial Development Organization USAID United States Agency for International Development USCBTPA United States-Caribbean Basin Trade Partnership Act USD United States Dollar USITC United States International Trade Commission USTDA United States Trade and Development Agency USTR United States Trade Representative VER Voluntary Export Restraints WATH West African Trade Hub WB World Bank WTO World Trade Organization
ix
DEDICATION
To my wife
Stephanie I. Eke
For the love and life we share together
x ACKNOWLEGDEMENTS
For the four years of my doctoral program, and in the process of writing this dissertation, I have received assistance and support from some individuals who deserve special acknowledgement here. Their invaluable contributions came in different ways, and are well-appreciated. First, my profound gratitude goes to Almighty God who has helped me from the inception of my academic program to its completion. My trust in Him made the great difference in times of overwhelming challenges. Second, I would like to thank the Director and Associate Director of Scripps Gerontology Center, Miami University, Dr. Suzanne Kunkel and Dr. Robert Applebaum respectively, for the support I received from the Center that made the initial funding of my doctoral program possible. My great appreciation goes to my dissertation director, Professor John M. Rothgeb, Jr. who, right from the beginning of the program, made himself available to me as a mentor and an advisor. He proved a great source of encouragement to me. Throughout the process of this dissertation, he was ever willing to assist me in whatever possible way to make the completion of this project a reality. The timely completion of this project is due largely to his persistent support and advice. He is a very wonderful professor to work with, and I feel a sense of privilege and honor to have worked with him. Worthy of special thanks are my dissertation committee members who took time to read through the manuscript and made necessary comments and corrections. Among them are Professors Walter Arnold, Cyril Daddieh, and Robert Applebaum. They are a great inspiration to me, and I cannot thank them enough. I owe much to Professor Ryan J. Barilleaux, the Chair of the Department of Political Science at Miami University, for his willingness to offer prompt help to both graduate and undergraduate students of the department. I benefited from his support and assistance, which helped in making my data collection trip a reality. He is a great “Gift” to the Miami University and the Department of Political Science.
xi My gratitude also goes to those who participated in the interviews I conducted for this research, and those who provided the logistics that made it possible. In this regard, Mr. Saturday Ubi and my brother, Gavas Eke, deserve commendation and appreciation. I also want to express my thanks to Rev. Dr. Mike Yeshua for his prayers and financial support during the period of the program. He has showed me great moral support in the process of my academic pursuit. He e-mailed and called me many times with great words of encouragement and prayers. My brother-in-law, Ken Nnamoko, and his wife, Charity, deserve a special thanks here as well for their continued support of my family during the program. They called from time to time to ask me how far the program had gone. They were always there for me and my family to offer needed assistance. Your support is greatly appreciated. Also to my friend, Nicolas Fondom who assisted in formatting the document, I say thank you! Last, but certainly not the least, my warmest thanks and appreciation go to my wife, Stephanie Eke, and our two daughters, Chinonso and Kelechi, for their show of understanding, love, support, encouragement and prayers. They allowed me times to be away to concentrate on the work without complaining. Indeed, without my wife’s wonderful support, this project would not have been realized. She shares greatly in the commitments that produced the joy of seeing this project completed. I also thank other members of my family: my mother, Juliana N. Eke, my parents-in-law, Mr. and Mrs. Sampson Nnamoko, and my siblings—Jacinta Ekeh, Godwin Eke, Catherine Amagbah, Gavas Eke, and Jude Eke for their prayers and support.
xii CHAPTER ONE
INTRODUCTION
Statement of Purpose
In their search for an effective path to economic development, developing countries have turned to preferential trade agreements (PTAs). However, PTAs have produced mixed results as a vehicle for achieving economic development. While some PTAs have recorded huge success for countries party to these agreements, others have not been as successful in bringing about the desired level of economic development. African Growth and Opportunity Act (AGOA) is one of the PTAs that essentially targets Africa with the aim of improving economic development. AGOA is a U.S. preferential trade Act enacted in 2000 by the Clinton administration, which intends to benefit eligible Sub- Saharan African countries and the U.S. in their trade relationship with one another (Sasore, 2003). It is envisaged that this Act would, among other things, help to accelerate economic development through trade expansion for the participating countries. The purpose of this dissertation is to examine how Nigeria, a major AGOA participating country, has responded to AGOA by identifying the progress made so far and the challenges that are being encountered, and the reasons for these challenges. Consequently, possible suggestions will be explored as a way forward. The U.S. trade relation with Nigeria has for a long time centered on energy but it is envisaged that, with the enactment of AGOA, there would be changes in this existing trade pattern. The changes are expected to occur with the introduction of duty-free export to the U.S. of various agricultural products originating from Nigeria and other participating countries of Africa. It is hoped that there would be new products Nigeria could export duty-free to the U.S. under this Act which were not covered earlier by the generalized system of preferences (GSP). How far AGOA has worked in Nigeria, the obstacles limiting its progress, and possible solutions are the concern of this dissertation. The result of this research is hoped to be beneficial to Nigeria and the U.S. in future trade relation policies and programs under or even beyond AGOA. The succeeding sections of this chapter will deal with the literature review, the research design, and an outline of the remaining chapters. The literature review will focus
1 on preferential trade and economic development. It will also show some aspects of the literature that perceive AGOA essentially as an instrument of domination and control by the United States. Because AGOA is premised on neoliberal principles that advocate the establishment of market-based economies, it will be essential to review literature that proposes this aspect of neoliberal ideology. Works that assess the impact of neoliberal policies on the domestic institutions and political practice of countries that adopt such policies will be examined here as well. Lastly, I will examine some works that have looked into the inability of countries to successfully adopt neoliberal policies. The effort in this regard is to establish a framework and ask some crucial questions about the presumption of AGOA as a policy for the benefit of African countries. The research design will discuss the reason for case selection, and how the data was collected. It will also state the basic variables and the questionnaire.
Literature Review Preferential trade agreements (PTAs)1 are considered in some cases as a powerful tool for resource transfer from the developed countries to the developing ones (McCulloch & Pinera, 1977). In this sense, trade expansion is viewed as aid to the developing countries since it encourages wealth transfer. The concern about how to tackle the growing trade imbalance and economic gap between the developed and developing nations crystallized into an international action-plan when a United Nations’ Conference on Trade and Development (UNCTAD) was convened in Geneva in 1964 to discuss problems of trade faced by less developed countries (LDCs). The Conference had as its main objective, the improvement of LCDs’ economic well-being through “trade” instead of “aid.” Consequently, a system of preferential tariff rates or generalized system of preferences (GSP) was developed in which the advanced countries would reduce or eliminate duties on imports from the LDCs while maintaining the most-favored-nation (MFN) principle on imports from other countries (Murray, 1973). Among the developed nations, the U.S. was late in developing modalities for the implementation of GSP. It was
1 PTAs are agreements among a group of nations which involves the preferential treatment of bilateral trade between any two parties to the agreement relative to their trade with the rest of the world. Preferential treatment may not extend to all trade between the two. In other words, the scope of trade covered is determined in the agreement establishing the PTA. PTAs may take the forms of custom’s union, regional trade agreement (RTA) and free trade areas (FTAs).
2 not until 1976 (12 years after UNCTAD Conference) that the U.S. implemented the GSP provision by permitting duty-free imports of various commodities from 137 developing countries (Graham, 1978). Since that time, PTAs have proliferated, with mixed feelings about their efficacy. For example, according to Panagariya (2000: 287), “The current wave of preferential trade agreements like the first wave in the 1950s and 1960s has given rise to a lively debate between the free trade economists who view the arrangement as harmful and others who see them as beneficial.” As a first step in this review, I will present a broad view of what the debate looks like and then narrow it down to what serves the interest here. The debate on PTAs is divided into three broad categories: (1) those who argue that PTAs negate the development of multilateral trade agreements and impede trade liberalization, (2) those who argue in favor of PTAs and maintain that PTAs increase the volume of trade and foster economic growth among members party to the agreements, and (3) those who are opposed to the idea of trade liberalization and see PTAs essentially as impacting adversely on the sovereignty of the state, sensitive economic sector, and on the environment.
First Category (Neo-Liberal Debate/Detractors) The first category is basically neo-liberal in orientation and inclination. Neoliberalism as an ideology, is the new version of the classical 18th century economic liberalism promoted by classical economists like Adam Smith, David Ricardo, and others who believe that the “magic” hands of the market force, not government control or trade barriers, should regulate the economy (Kotz, 2003; Vander & Prevost, 2002). This category of literature sees PTAs as detrimental to non-discriminatory global trade liberalization. Jacob Viner’s (1950) work that brought to the fore the concepts of “trade creating” and “trade diverting” pioneered this debate. Viner argues that PTA can result in either “trade creating” or “trade diverting” which, to the “outside world” (countries not members of the preferential trade group or customs union), is injurious in the short or long-run at least (Viner, 1950: 44-45). Trade creation results from elimination of trade barriers (especially tariffs) among the participating members of the customs union or the
3 preferential trade bloc. Trade diverting effect is produced when as a result of a country not belonging to the customs union, trade with that country is diverted in favor of a member country of the customs union or preferential trade arrangement. From Viner’s concept of trade creating and trade diverting, a great debate has proliferated. A well-known neo-liberal position on this issue is that of Bhagwati (1995). In his argument against the proliferation of PTAs, Bhagwati maintains that it is a dangerous tragedy that needs to be avoided. In addition to undermining multi-lateral trade liberalization, Bhagwati identifies some of the problems with preferential trading arrangements as: (1) rules of origin, which according to him, are inherently arbitrary and multiply indiscriminately under different preferential trade blocs; (2) Who’s Who in defining trade policy, which is an anomaly because it ties up trade policy in knots and absurdities, and facilitates protectionist capture; (3) trade diversion which results when non-members of a preferential trade agreement suffer as a result of selective antidumping actions and other measures aimed at reducing non-members’ supplies; (4) weaker partners (e.g. developing countries) suffer from harmful trade diversion from joining a preferential trade arrangement with a stronger partner (e.g. developed countries); and (5) PTAs do not actually “lock in the reforms” and do not give credibility to developing countries for economic reforms embarked upon by them due to their membership. He criticizes the U.S. and the E.U. for their indiscriminate support for and creation of different types of preferential trade arrangements. Consequently, Bhagwati concludes by asserting that: “If the architecture of the new world trading system is left entirely to the United States on its current course, and to the European Union, which too has proliferated all kinds of preferential arrangements with other countries not in the core of the Common Market, it is likely that the dilution of the multilateral trading regime by the spaghetti bowl of preferential trading arrangements will be our fate. That would be a tragedy” (p. 18). On the position of those who are opposed to free trade in general and prefer autarky because of their claim that free-trade engenders poverty for many, Bhagwati (2002: 89-90) asserts that “Contradicting the anti-free-trade rhetoric that flows ceaselessly from the street theater and even from certain international agencies, the facts
4 show that a shift out of autarky into closer integration into the world economy is producing better, not worse, results for poverty alleviation.” In two other publications by Bhagwati & Panagariya (1996a & 1996b) namely, “The Theory of Preferential Trade Agreements: Historical Evolution and Current Trends;” and “The economics of Preferential Trade Agreements,” they refuted some of the popular arguments made in support of PTAs. For example one of the arguments in support of PTAs is its trade creating outcome. This argument which has been advanced by analysts such as Paul Wonnacott and Mark Lutz (1989), Lawrence Summers (1991), and others maintains that if the countries forming a PTA are “natural trading partners,” 2 then the trade-creation effects will outweigh the trade-diversion effects, thus making the PTA beneficial to its members. But Bhagwati & Panagariya consider this view as untenable. According to them, it is easy to show that a higher initial volume of trade can be a significant loss to a member country because of the “tariff revenue redistribution” between member countries that it entails. One can also construct plausible models in which the trade diversion has no necessary relationship to the initial volume of trade. Finally, the initial high volume may itself be a result of preferences rather than “natural” affinity (1996a, p. 82). Another argument made in support of PTAs is that countries that share common borders are bound to benefit from preferential trade. To Bhagwati & Panagariya, this argument does not stand given that it is not in all conditions that increase in trade between or among countries with contiguous borders results just because of their contiguity. In other words, distance is not necessarily a factor that determines volume of trade between countries. A country’s best trading partner may be another country that is located very far away from it. For the third claim that since Article XXIV of GATT permits the formation of PTAs and provides that in doing so the average external tariff of the PTA should not rise in order to protect non-members against losses created by trade diversion, Bhagwati & Panagariya argue that the claim is problematic. According to them, this claim “simply does not come to grips with the fact that today’s trade barriers come more in the form of
2 The major criterion used in defining “natural partners” is a high initial volume of trade among them. For instance, if the two countries have been involved in high volume of trade transactions prior to entering into PTA, they can be considered natural partners (see Bhagwati & Paragariya, 1999, p.82).
5 administered protection: for example, as voluntary export restraints (VERs) and other export restraints imposed on the exporting countries and antidumping actions against their firms” (1996b, p. XVI). In their view, these protectionist instruments are both elastic and selective. Because of lack of discipline, member countries of a PTA can resort to their use to discriminate against non-members. They cite the example of what happened in Mexico during the peso crisis when the administration of Ernesto Zedillo raised several tariffs that had adverse effects mainly on non-members while sparing its NAFTA partners. In his “A Political-Economic Analysis of Free-Trade Agreements,” Levy (1997) shows that bilateral free-trade agreements can undermine political support for advancement of multilateral trade liberalization. He argues that if a bilateral trade agreement promises greater gains to key agents in a country than multilateral trade agreement, then their “reservation utility is raised above the multilateral free-trade level, and a multilateral agreement on free trade world be blocked” (p. 506). So, in his view, PTAs have the potential of weakening national support for multilateral trade regimes, and global trade liberalization. Levy’s view is also supported by Bagwell & Staiger’s (1998) finding “that preferential agreements pose a threat to the existing multilateral system” (p. 1181). Another work that bears support for neoliberal position is that of Krueger (1999). In her work, Krueger sees trade liberalization as a positive development, and opines that “trade liberalization on a multilateral basis is clearly one of the success stories of the postwar era” (p. 107). However, Krueger is concerned about the growing incidence of PTAs and RTAs (regional trade agreements). While acknowledging the fact that increase in trade may result from PTAs among members, as could be seen from the NAFTA, EU and MERCOSUR examples, she notes that for countries outside of these arrangements, there is the likelihood that they face barriers to trade due to these arrangements. In other words, PTAs ultimately lead to increased barriers to multilateral trade. In answer to the question of “whether the spread of preferential trading agreements should be viewed as building blocks or stumbling blocks to the course of free trade” (p. 109), she notes that given the existing knowledge, there is no conclusive presumption in either direction. However, she points out that “there are clearly grounds
6 for concern over the potential for PTAs to weaken the momentum toward multilateral trade liberalization” (p. 120). To her, a country’s commitment to PTA can diminish its interest in and commitment to multilateral trade liberalization. She cited the NAFTA formative years as an example in which the U.S. commitment to it weakened its support and enthusiasm for the multilateral trading system. The work of Cooper (2004) adds to the list of literature with neoliberal leaning in the argument on PTAs. Particularly, Cooper argues against the use of rules of origin in PTAs, which he considers essentially protectionist. In his view, the rules of origin clauses in PTAs are generally technical and their interpretation oftentimes is elusive to outsiders and negotiators who may lose interest in the bid to understand them. Because of the confusion that these rules of origin clauses engender, they qualify as protectionist instruments instead of instrument for trade liberalization. In summary, the neoliberal debate centers on the idea that instead of promoting global trade liberalization as some analysts have claimed, PTAs encourage protectionist practices that hide under different guises like rules of origin and other preferential treatments that discriminate against non-members.
Second Category (Regionalists & PTA Advocates) The second category of the PTA debate which is regionalist in theoretical orientation sees PTAs as an essential tool for increase in the volume of trade and for economic growth among members. In the view of scholars and analysts that belong to this orientation, formation of PTAs is necessary to encourage economic development among developing countries. It is a positive step towards enhancement of international trade and development. Consequently, this view encourages developing nations to enter into PTAs with advanced countries as a way to improve their economic growth and gradually get integrated into the larger global market. As argued by McCulloch & Pinera (1977), “Preferential trade generally makes additional resources available to developing countries” (p. 961). After analyzing the effects of trade preferences for developing countries, Pomfret (1986) remarks also that “once welfare distributional effects are included in models of trade preferences, the single strongest conclusion is that the preference recipients gain both vis-à-vis the pre-preference situation and vis-à-vis an
7 equal non-preferential tariff reduction” (p. 25). As argued by Lusztig (2004), trade liberalization in the PTA sense increases wealth, although it does not always distribute wealth equally; and it also creates more job opportunities. Seemingly responding to the view expressed by the neoliberal perspective, whose overarching goal is the maximization of global welfare achieved within a competitive international economy via multilateral trade, Lawrence (1999) argues that this view is “at best incomplete and at worst misleading” (p. 42). He sees the issues about the different trade arrangements (multilateral and regional) as ambiguous and more complicated than they seem. Consequently, he argues that the nature of policy changes under these arrangements suggests that the normal presumptions about trade creation and trade diversion may not hold. To this end, he points out that the welfare enhancing features of free trade areas (FTAs) or PTAs are likely to outweigh any trade diversion that results from tariffs elimination associated with such agreements. In response to the definition of PTA as “a process by which a hegemonic power seeks (and often manages) to satisfy its multiple trade-unrelated demands on other weaker trading nations more easily than through multilateralism” (Bhagwati, 1995: 13 & 14), Lawrence argues that although there is the likelihood for asymmetrical power relationship to exist in negotiations between countries of differing market sizes, this does not mean that poor, small countries will lose in these associations. He conclusively asserts that “Indeed the power asymmetries reflect the fact that the gains, particularly those from realizing scale economies, are likely to be relatively larger for the smaller countries. Similarly, economic integration generally leads to convergence, with poorer economies growing more rapidly than richer economies. Moreover, small countries join these agreements voluntarily” (p. 44). In a study that compares and contrasts Mexico’s experience under NAFTA with Jordan’s potential under the U.S.-Jordan Free Trade Agreement, Chomo (2002) asserts that contrary to the view that trade liberalization with industrialized countries slows economic development in less-developed countries, empirical evidence from this study shows expansion in foreign direct investment (FDI) and significant economic growth. She shows how the implementation of NAFTA helped Mexico in its economic recovery during and after the peso crisis of 1995. She maintains that “like Mexico, Jordan’s
8 improved access to the large U.S. market is expected to increase opportunities for Jordanian exports, attract foreign investment, and stimulate economic development with trade as the engine of growth” (p. 2). In whichever form (regional or international), she insists that trade liberalization between and among nations increases income. Chomo’s argument is that developing nations do not lose their industrial base by entering into PTAs with advanced countries. She elaborates her argument pointing out that most of the PTAs between advanced and developing countries permit non-reciprocal tariff reductions for developing countries party to the agreements. Also, these agreements allow extensive phase-in periods and several measures to ensure the protection of infant industries that may be adversely affected by preferential trade liberalization. Drawing from other works that complement her findings, she supports the idea that increase in exports is essential and decisive for economic development of developing countries. This can be achieved by developing countries having access to a larger international market through PTAs which promotes economy of scale among other things that are beneficial to developing countries. When comparing the gains of PTAs for developing countries vis-à-vis developed countries, Chomo concludes that “Developing countries have the potential for more efficiency and welfare gains from implementing free trade agreements than their industrialized partners due to the high level of trade interventions and resulting inefficiencies observed in developing countries. Gains from trade liberalization include improved efficiency in sectors previously protected by trade barriers and increased transparency for doing business” (pp. 5-6). She cites the example of the NAFTA dispute resolution mechanism which significantly improved access to legal services for Mexican producers and workers involved in trade disputes with other NAFTA members. So, PTAs can, through its conditionality, help in addressing internal issues like structural corruption that limit the ability of many developing nations to achieve rapid economic growth and transformation. Writing about the comparative utility of regional and multilateral trade agreements, Hudgins (1995) encourages countries in their effort at trade liberalization to adopt any available means including PTAs (bilateral or FTAs) even if such PTAs lead to
9 trade diversion. In his argument, PTAs such as FTAs can be more effective than multilateral trade arrangements like the World Trade Organization (WTO) in addressing difficult trade barriers where large membership poses a significant challenge in achieving consensus and compromise needed to address such barriers. Instead of being opposed to the idea of PTAs existing alongside multilateral trade regimes, Hudgins see PTAs as necessary to address issues which may be difficult to address under a larger and broader multilateral arrangements. In line with the views expressed by Hudgins, Bergsten (1997) sees FTAs as second to multilateral trade agreements. In his opinion, FTAs should be structured in a way to serve as a bridge or “building blocks” for the emerging global system of free trade. His introduction of the concept of “open regionalism” as the basis for future FTAs seeks to advocate that greater potentials exist for natural regional trade partnership for countries that belong to the same region. But such partnership should not exclude other nations outside of the natural region that are willing to join the agreement with its conditionality. On the concern about trade diversion which the neoliberal opponents of PTAs have expressed, Bergsten advocates the implementation of trade relations on the basis of either most favored nation (MFN) principle or conditional MFN that reduces the effects of “free rider.” According to him, this approach will minimize trade diversion. In addition, by adopting a regional trade agreement that is open to countries outside of the region, the tendency is that this will gradually lead to a situation in which almost all the members of WTO come to a point where the achievement of a global FTA becomes a reality. To this end, regional trade agreements are a necessary step toward achieving multilateral free trade agreements. The benefits of regional PTAs for developing nations make them an option worth exploiting. Schott (2004) identifies two major benefits among others of regional trading arrangements for developing countries. According to him, “first, they contribute to economic growth by spurring competition in domestic markets, dampening inflation, and promoting investment. Second, they provide an ‘insurance policy’ against new protectionism at home and abroad by substantially raising the cost of reversing the free trade reforms mandated by the regional pacts—and thus creating a more stable and
10 attractive environment for investment” (p. 10). In addition to these two major benefits, Schott mentions the following advantages of FTAs which advocates of PTAs have identified: 1. FTAs are trade creating and spur positive welfare gains for participating countries as well as, over time, for third countries by stimulating growth in the FTA region. 2. FTAs include rights and obligations regarding domestic regulatory practices and other “behind-the-border” measures that affect trade and investment flows. In this regard, FTAs set precedents and create a learning-by-doing effect through engagements in negotiations. 3. FTAs have an important lock-in effect on domestic reform: policy reversals become more costly because changes that violate the free trade obligations could trigger retaliation by trading partners. This advantage is contrary to the assertion by Bhagwati & Krueger that PTAs do not lock reforms in for participating countries. 4. FTAs strengthen trade relations among partner countries and make it easier to build alliances for WTO reforms in areas of common interest. Dismissing the fears from neoliberal perspective that the proliferation of PTAs is inimical to the welfare of global trading partnership, Schott sees the growing number of PTAs as beneficial to members as well as represents a positive step toward the enhancement of WTO reforms. In the same vein, Mansfield’s (1998) analysis of the reasons for the proliferation of PTAs comes to a conclusion that highlights the gains of PTAs. Essentially, PTAs help guarantee countries party to them access to key foreign markets should the international trading system fragment. He reasons that hegemonic decline and global recessions increase the risk of closure, and it is the PTA that can salvage a country in such situation. To him, these factors (which can rightly be considered as the gains of PTAs) have contributed to the proliferation of PTAs. In her “Different Paths to Free Trade: The Gains from Regionalism” Caroline Freund (2000) examines alternative liberalization strategies to determine how they influence trade flows and welfare. She compares free trade reached through expansion of preferential trade agreements with free trade reached via multilateral trade liberalization. Using what she calls a “three-country two-period model” with quantity competition and
11 sunk costs, she finds that a regional agreement in the first period, followed by free trade in the second period, leads to permanently greater trade among the member nations. According to her, the result obtained in this study shows that the equilibrium free trade outcome arising from a regional agreement followed by free trade may be different from the outcome attained through multilateral negotiations. This is because firms can effectively precommit to exports if there are large sunk costs involved in setting up a distribution network. “As a result, regionalism provides firms in the early entrant nations with first-mover advantages. This leads to higher welfare in the member nations than without the regional agreement. Welfare expands because of the effect of the regional agreement on competition” (pp. 1339-1340). This finding contradicts the neoliberal argument that PTAs undermine multilateral trade liberalization. It supports the view that regional trading arrangement is a positive step in the journey toward enhancement of multilateral trading system. In summary, the regionalist’s literature on PTAs supports the idea of PTAs as necessary building-block for the achievement of multilateral trade agreements. It sees PTAs as beneficial to developing countries that will be in a better position to access a larger market via such agreements. It encourages countries to be part of the PTAs and sees the proliferation as essential for economic growth and development.
Third Category (Anti-Free Trade Perspectives) The third category of literature on PTAs is essentially opposed to the idea of free trade and sees such move as undermining the sovereignty of the state, and having adverse impact on sensitive economic sector, labor, and the environment. Many of the analysts in this group are activists and members of special interest groups like NGOs. Their opposition to trade liberalization stems from their belief that trade liberalization has done more harm than good for majority of the population in the world especially the world’s poor and weak. Some of these voices of opposition will be presented in the succeeding discussions. Niyi Shomade is one of the voices of opposition against trade liberalization. Writing against U.S. trade policy on Africa under AGOA, and the G8 Countries’ trade initiative under NEPAD (New Partnerships for Africa’s Development), Shomade (2004)
12 criticizes such trade liberalization policies as essentially colonial in nature (having the intention to dominate and control partners), engenders deregulation, environmental degradation, and price volatilities. He argues against the AGOA conditions for eligibility, and maintains that such represents a lopsided policy of imperialism, and falls short of true partnership. In his words, “AGOA’s main purpose is to give U.S. corporations access to slave labor and tax-free energy-related imports to US markets. Africans are worse off and less revenue is generated from US imports. AGOA should be renamed the American Growth Opportunity Act” (p. 3). He argues also that multinational corporations hide under trade liberalization to commit environmental degradation. He cites the example of Shell and other oil companies in Nigeria that have done tremendous havoc to the environment through oil spillage and gas flaring without being held accountable by government regulations. He sees NEPAD as an economic “development” plan that opens African markets to the U.S. and to Africa’s former colonial masters in Europe. According to him, agreements with the major advanced countries of the world (the G8) and other regions such as NEPAD have “increased income inequality globally and within Africa to the highest levels in the world” (p. 4). It is also his conviction that “trade between the U.S. and Africa has always stood at direct contradiction with social services and human needs. From agriculture to industry, the impact of U.S. corporations has worsened since colonization, as trade agreements are signed by puppet leaders that are put in power to represent corporate interest” (p. 3). Because of the effects of trade liberalization—deregulation and privatization of public enterprises—government social welfare function has diminished, leaving many in worse economic conditions. Noble (2006) identifies Ralph Nader as a noted environmentalist, consumer rights activist and past U.S. presidential candidate who belongs to the anti-trade liberalization voices. The introductory chapter of Nader’s (1993) co-edited book, The Case Against Free Trade: GATT, NAFTA and Globalization of Corporate Power, opens with a warning: “Citizens beware.” This warning is against multinational corporations (MNCs) and their global free-trade activities. “Operating under the deceptive banner of ‘free’ trade,” says Nader, “multinational corporations are working hard to expand their control over the international economy and to undo vital health, safety, and environmental
13 protections won by citizen movements across the globe in recent decades” (p. 1). Nader is not happy with how multinational corporations circumvent the democratic process and achieve their autocratic far-reaching agenda through free trade agreements. Included in these agenda are the exploitation of developing countries’ generally low environmental, safety, and wage standards; the displacement of locally owned businesses and the exercise of control over their economies and resources. He feels that the use of secrecy and absence of accountability are the key components of global trade policy-making. He notes: “Every element of the negotiation, adoption, and implementation of the trade agreements is designed to foreclose citizen participation or even awareness” (p.3). Citing the GATT negotiating process to buttress his secrecy charge against trade agreements, Nader writes, “Small cliques of powerful nations regularly retreat to ‘green rooms’ to cut deals that will then be forced on a take it or tough luck basis on other GATT signatory countries as ‘consensus’ positions” (p.4). Because trade agreements are crafted to give MNCs leverage and greater incentives, most times this has led to lowered wages, lowered environmental standards, and lowered consumer safety standards by countries in order to accommodate the MNCs operating in these countries. In this situation, according to Nader, “workers, consumers, and communities in all countries lose; short-term profits soar and big business win” (p. 6). It is not only on the activities of the MNCs that the adverse effects of free-trade are being highlighted. There are concerns raised about the effect of free-trade on states’ sovereignty, people’s rights, and cultural identity and diversity. In this regard, Khor (1993) represents another voice in this group. He sees the likelihood of multilateral trade organization (MTO) leading to further economic dislocation and greater loss of sovereignty for the developing countries. This situation would happen when a member country’s government alters a wide range of laws and policies to conform to the agreements overseen by the MTO. The policies likely to be affected in this instance include those relating to external trade, domestic self-sufficiency, foreign investment, intellectual property, and technology. According to him, once the government of a country signs the MTO agreement, it would be very difficult for the government or its successors to amend or opt out of the deal.
14 Besides the erosion of state sovereignty, Khor notes, “the MTO would also erode the powers of civil society, including Parliaments, interest groups and local communities” (p. 101). In this regard, the influence of Parliaments will be undermined because it may be difficult for a country’s Parliament to enact laws that supersede the MTO agreement to which the country is a party. The concerns and complaints of interest groups may be ignored or may have no effect. Brown (1993) argues also that free trade is not actually free given its negative consequences on the workers and the environment. Using NAFTA as an example, Brown decries the impact of free trade agreement on American jobs. He says that “under the banner of free trade and corporate restructuring, American employers continue the hemorrhaging of the U.S. jobs to more ‘efficient’ foreign production sites” (p. 67). He frowns at the emphasis of industrial lobbyists who are NAFTA advocates for placing primary emphasis on lowering costs, and not on responsibly protecting people, the environment or community well-being. Khor is also of the view that MTO is capable of eroding cultural diversity and identity. Through its liberalization of trade and services, the developing countries would be pressurized to accept and receive the cultural and professional services of foreign companies and individuals. He argues that government would find it difficult to regulate or prevent such cultural and service imports. Consequently, “since the largest and most powerful cultural enterprises belong to the North, the already rapid spread of modern Western-originating culture will be accelerated even more. Cultural diversity would thus be rapidly eroded” (p. 104). This view is shared by Kennington (2006) who identifies the homogenization of cultures as one of the reasons why international trade is bad. Kennington observes that the “so-called free trade causes the extinction of minor languages and minority culture such as local customs for clothing, music and architecture” (p. 1). As the world moves toward cultural homogeneity the consequence will be a very boring world with less tourist excitement. He sees free trade as having adverse effect on the poor countries and asserts: “Free trade leads very rapidly to enslavement and humiliation. Thus poor countries are condemned to lose their freedom, wealth and honor through free trade” (p. 2).
15 The lack of sensitivity to cultural diversity in free trade theory and its narrow focus on efficiency and gain-maximization led Morris (1993: 139) to write that: “Rather than promoting and sustaining the social relationships that create a vibrant community, the free trade theology relies on a narrow definition of efficiency to guide our conduct.” He sees free-trade as more of a moral doctrine than an economic one. According to him, although free trade pretends to be value-free, it is fundamentally value-driven. Its assumption is that the highest good is to shop, and that mobility and change are synonymous with progress. He concludes with the remark credited to John Maynard Keynes, the famous English economist that “I sympathize with those who would maximize economic entanglement among nations. Ideas, knowledge, science, hospitality, travel—these are the things which should by their nature be international. But let goods be homespun whenever it is reasonably and conveniently possible and, above all, let finance be primarily national” (p. 156). This closing remark epitomizes the stand of the third category of literature on free trade. In summary, while the first category favors a multilateral approach to free trade and takes issues with the proliferation of PTAs, the second category of this literature sees PTAs as a crucial step toward the enhancement of multilateral trade liberalization and also a necessary policy for economic growth and development; and the third category views international trade as bad and counter productive because it leads to negative outcomes for the poor and the weak. Having seen the three different perspectives on PTAs, it is pertinent to note that these perspectives address issues of free trade from different standpoints. None of the categories of this body of literature is conclusive enough but there are facts in each of them that make sense depending on the nature of the question under consideration. What seems to be a logical summary that reflects a balance of these theoretical debates on free trade is provided in the words of Krugman (1987: 132): “free trade is not passé, but it is an idea that has irretrievably lost its innocence. Its status has shifted from optimum to reasonable rule of thumb. There is still a case for free trade as a good policy, and as a useful target in the practical world of politics, but it can never again be asserted as the policy that economic theory tells us is always right.” Consequently, the duty of scholars and analysts is not necessarily to take sides but to have this basic fact at the back of their
16 minds when studying issues that relate to free trade agreements. For example, the idea that PTAs are positive phenomena for developing countries may possess some utility but the experience of each country may be different. To understand what bears out in each case seems to be the appropriate approach. This is the goal in this research.
Literature on AGOA At this juncture it is pertinent to present the state of literature with regard to AGOA. Essentially, the AGOA literature is neoliberal in composition. Advocates of neoliberalism emphasize the promotion of free trade around the globe; they are against government intervention and protection on trade and investments (World Bank, 1981). This ideology became more popular in the 1970s and 1980s. It is this neoliberal ideology that promotes free trade and globalization. The components of neoliberalism which promote free trade and market economy are: (a) radical reduction in government size and spending by cutting back on government jobs and programs especially social programs, (b) fiscal and monetary reform like currency devaluation, (c) minimizing government regulation on economic matters (deregulation), (d) liberalizing commerce through gradual elimination of all tariff barriers and trade restrictions, (e) opening up national economy to foreign investment and allowing the free flow of capital (MNCs play a crucial role in this respect), (f) privatization of government-owned corporations, industries, agencies, and utilities, (g) eliminating government subsidies for essential consumer goods and services like bread, petroleum products, basic health care, and education (Dannis, 2003: 144; Kotz, 2003: 3; Chodkiewicz, 2003: 161). All these conditions of neoliberalism have been offered to most African and other developing countries as the panacea for their economic crisis. In the words of Kotz (2003: 3) “The rediscovered ‘free market economy’ is, we are told, the route to optimum efficiency, rapid economic growth and innovation and rising prosperity for all who are willing to work hard and take advantage of available opportunities.” In AGOA, these neoliberal conditions are the basis for cooperation. In the midst of a period in which most African countries saw themselves in severe economic predicament, the World Bank published a major report in 1981 on Africa. The report, which came to be known as Berg Report, is entitled Accelerated Development in
17 Sub-Saharan Africa. This report diagnosed the economic problems of Africa and proposed solutions. The major recommendations of this report were a series of market- oriented policies with macroeconomic stability at their core. The structural adjustment programs (SAPs) which were sold as panacea entailed a significant reduction in the role of the state in the economy and the reliance on market forces for the allocation of resources (World Bank, 1981). Influenced by the propositions of the World Bank, the Organization of African Unity (OAU) published in 1985 a proposal for economic recovery entitled “African Priority Program for Economic Recovery 1986-1990 (APPER).” This proposal embraced some of the ideas of the World Bank’s Berg Report by acknowledging that “internal factors” were particularly responsible for the economic crisis in Africa (OAU, 1985: 5). Although the proposal to some extent discussed exogenous factors, it was more inward looking. The reaction of the UN to this publication was positive (Owusu, 2003:1658). Consequently, through the United Nations Programme of Action for African Economic Recovery and Development 1986-1990 (UN-PAAERD), the UN adopted APPER and pledged international support for the initiative. It appealed to the developed countries to change their relationship with Africa by arguing that Africa was ready to remove protectionist policies (UN, 1986 cited in Owusu 2003: 1658). Despite UN endorsement of APPER, African leaders were not oblivious to the fact that SAPs were still a prerequisite for access to assistance from the international community. However, according to Owusu, “African leaders resigned themselves to SAPs, although the policies did not address the injustices in the global economy” (p. 1658). The neoliberal persuasion of World Bank during the 1970s and 1980s was not actually delivering its promise because World Bank programs in many countries left the masses in poverty after at least a decade of application (Owusu, 2003). When James Wolfensohn was appointed the World Bank’s president in June 1995, it was an opportunity for the Bank to reinvent itself. In his address to the Board of Governors of the Bank in 1998, he was frank to admit that the World Bank’s policies had contributed to the crisis, which has dashed the hopes of many and created “dark searing images of desperation, hopelessness and decline” (Wolfensohn, 1998: 3). He was critical of SAPs, arguing that “Development is not about adjustment…Development is about putting all
18 the component parts in place—together and in harmony” (Wolfensohn, 1998: 11). He charged the Bank to come up with a new development framework that would not focus exclusively on macroeconomic stability, but one that would address the social, political, environmental, and cultural aspects of society; and afterwards produce a more balanced development. Moreover, he suggested that there should be ethical considerations in the application of policies (Wolfensohn, 1998: 11, 12). The neoliberal theory that informs the practice of free trade and deregulation is inconclusive in its postulations with regard to developed and developing nations. According to Coburn (2003:129) “Activists from the developing world frequently complain that in practice liberalization is uneven, with developing nations forced to open their borders while developed nations retain protective barriers in precisely those areas where the developing world is competitive.” The United States is at the vanguard of championing neoliberalism. Its effort has been to sell the idea to other parts of the world for both trade advantage and ideological expansionism. As noted by Kotz (2003: 2): The United States has sought to redesign the institutions of the international capitalist economy to conform to neoliberal prescriptions, while also demanding neo-liberal restructuring within countries in Western and Eastern Europe, Asia, Africa, and Latin America. In many countries the elites have welcomed such changes. However, change has been slow in some countries due to popular support for social welfare programs and state regulations that are intended to provide some protection against the enormous inequalities and instabilities generated by a capitalist economy.
The impact of neoliberal policies on domestic institutions and politics assumes different dimensions. The neoliberal policy of structural adjustments is devastating to the poor. There have been cases of wage freezes and inflated prices that badly hurt the poorer classes notably the peasants, mostly women. Articulating these policies as they affect Latin America for example, Chodkiewicz (2003: 163) states: The cost to Latin American countries was a very bitter pill to swallow.
19 They had to accept structural adjustment policies (SAP) which required them to devalue further their money, cut government spending on education, health care and other social programs, privatize state enterprises, accept foreign investors, welcoming them with relaxed labor and environmental laws.
There have been publications on how neoliberal policies have eroded the sovereignty of the states through the control of capital flight and FDI by the multi- national corporations (see Friedman, 1999 as cited in Waltz, 1999: 694; Drumberg, 1998). Although neoliberalism, to a large extent, has improved some economic indicators of some countries like the GNP of Mexico, and the industrial growth in Australia (Hans, 2001), it is yet to impact more positively on most poor people around the world. The application of neoliberal policies in Mexico has sparked off some domestic opposition. It has been argued that neoliberal policy serves the interests of the elites much more than it does the majority of peasants. The gap between the rich and the poor has not been narrowed. Looking at how neoliberal policies have fared over time, the stories have been a curious mixture of success and failure with more stories of failure reported in many cases. The impact of neoliberal policies in many countries has been adverse. Even where there has been some success, it has not been sustained for a long time. For example, among the industrialized countries, the U.S. is seen as a success story. In the 1990s, the U.S. economy blossomed under free market policies. But surprisingly, after August 2000, the U.S. stock market had some problems, and the recession that followed in the spring of 2001 marred the dream of uninterrupted economic growth. As Kotz (2003) puts it, “Even the most benign forms of capitalism are unable to meet the needs of the majority, but the U.S. economic record in the 1990s shows that, far from being a superior mode of capitalist organization, the neo-liberal version, even at its ‘best,’ has failed to live up to the predictions of its promoters” (p. 5). Another often cited success story among the developing countries is Argentina. As the economy has collapsed, people have died in confrontation with authorities, and millions are losing jobs or facing reduced salaries and risk going hungry. The bail out
20 loan of $20 billion offered to Argentina by the IMF has not helped matters either (Baeza, 2000:1; Palast, 2002). Even Chile that was thought to be doing well in its application of neoliberal policies has not been as successful (Cypher, 2004). Some countries that are reluctant to adopt neoliberal principles are pressured in one way or the other by the more powerful countries such as the U.S. and Great Britain. The slogan is: “Conform or suffer” (Waltz, 1999: 694). These weak countries have some unique internal political configurations that do not easily succumb to neoliberalism. As a result, the adoption of neoliberal policies is not working for most countries (Kotz, 1998). Some African countries are caught up in this type of setting which makes it difficult for them to “benefit” from AGOA. This explains fundamentally why AGOA has been kicked off in some African countries while in others it is yet to be embraced. The particular model of government-society-economy relations on which AGOA is premised exclusively favors neoliberal, free market economies thereby making the policy a poor fit for some countries even though its portrayal is all-embracing. This is the aspect that the literature on this subject has not fully explored and which is part of this present work’s objective. Some publications have reported success and failure stories so far with the AGOA implementation (Tralac, 2003; Ajikande, 2003; U.S. Embassy, 2002; The Times of Zambia, 2005; Business News, 2004). These publications contain stories of how the eligible countries have fared after some years of AGOA enactment and subsequent implementation. The reports from these publications show different outcomes of the AGOA implementation in some of the participating countries. Some countries are seeing more significant impact of the scheme, while others are yet to do so. In summary, the literature that advocates neoliberal economic and political advancement has encountered some criticisms because its therapy has not been as efficacious as promised (Li, 2004). As Kotz puts it, “One hindrance to the U.S. ruling class agenda of creating a neoliberal world system has been the glaring absence of convincing evidence that neoliberal restructuring produces the benefits claimed by its promoters” (2003: 3). But some countries are buying into the policies or are pressured to adopt neoliberal policies because that is the only way they can “benefit” from the promoters of the idea. Is this the case under AGOA? It is pertinent to note that some of
21 these criticisms of neoliberalism are extreme and do not actually reflect what the policy seeks to achieve. This research will look into this neoliberal criticism to see if there is evidence to support it or disagree with it. Having seen the state of literature on PTAs in general and that of AGOA in particular, one major question stands out namely: to what extent is AGOA a vehicle for economic development on the one hand, or a tool for imperial domination on the other? This and other questions are to be explored in this research using Nigeria as a reference case.
Research Design It has been more than half a decade since the enactment of AGOA as a major trade initiative between the U.S. and Africa. Consequently, one would have expected a proliferation of literature given that the initiative represents a watershed in the hitherto comparatively low volume of trade between the U.S. and most Sub-Saharan African countries. Instead, the state of literature on AGOA can be described as scanty. This has created a gap in understanding the nature of AGOA and in making the right assessment about its impact. Having a research that focuses on addressing this obvious gap in literature becomes a desideratum. In an effort to present an assessment of AGOA’s performance, this dissertation research focuses on Nigeria’s experience. As a major AGOA participating country, Nigeria offers significant insights into the successes of and challenges facing AGOA. Nigeria is the largest country in Sub-Saharan Africa. With almost one-quarter of Sub- Saharan Africa’s population,3 Nigeria presents the largest market in the African continent. Given that petroleum products have represented more than 95% of Nigeria’s total exports to the U.S. under the generalized systems of preferences (GSP) prior to AGOA’s enactment, it will be pertinent to know what has changed in this pattern of trade relationship following AGOA. Nigeria is better positioned than other participating countries to benefit from AGOA. If it does not, then something is wrong with the policy.
3 The U.N. World Population Report (2005), according to BBC News, puts the population of Nigeria at 130.2 million. (See http://news.bbc.co.uk/1/hi/world/africa/country_profiles/1064557.stm).
22 To this end, Nigeria is a good illustrative case of what opportunities and challenges AGOA presents.
Research Approach The nature of this research is such that it identifies with elements of the case study approach. In a case study approach according to Johnson and Reynolds (2005: 84), “the researcher examines one or few cases of a phenomenon in considerable detail, typically using several data collection methods, such as personal interviews, document analysis, and observation.” This dissertation research utilizes secondary data that are supplemented by personal interviews. The combination of these methods of data gathering is necessary given that the issue under study requires different data sources for better understanding of the case. As a “distinctive form of empirical inquiry” (Yin, 1989: 21) and “an important design to use for the development and evaluation of public policies as well as for developing explanations for and testing theories of political phenomena” (Johnson and Reynolds, 2005: 84), case study approach fits into the present study. As one of the leading proponents of the case study method, Yin (1989) is quoted by Johnson and Reynolds (2005: 85) “as defining case study as an empirical inquiry that (1) investigates a contemporary phenomenon within its real-life context; when (2) the boundaries between phenomenon and context are not clearly evident; and in which (3) multiple sources of evidence are used.” According to Johnson and Reynolds (2005) “a case study may be used for exploratory, descriptive, or explanatory purposes” (p. 85). Exploratory case studies may be conducted when little is known about a political phenomenon. In the present study, little has been written about AGOA from the academic point of view. The literature on the subject is still scanty, and there is need for more insight from an independent researcher. There are some “why” and “how” questions about AGOA implementation in one of the major participating countries. As pointed out by Yin (1989) case studies are appropriate tools to answer the “how” and “why” questions of current political issues. In addressing the how and why questions, a case study fulfills its explanatory role.
23 Writing about the process of case studies approach, Johnson and Reynolds (2005: 85) assert: “The strongest case studies start out with clearly identified theories that expected to explain the events.” This study sets out by examining the theories of PTA. The aim of this approach is partly to see the extent to which the present case supports or disagrees with existing theoretical propositions in what Lijphart (1971: 692), describes as “theory-confirming” and “theory-infirming” role of case studies. According to Lijphart, if the case study is of the theory-confirming type, it strengthens the proposition in question, and if the case study is of the theory-infirming type, it “merely weakens the generalization marginally” (p.692). The ambition in this study is not to falsify a general proposition, or to make claim that the result from a single case, has clarified a controversial debate but it unarguably adds a voice to the debate. In addition to what has been said so far about case studies, generally, case study method offers two strengths that make it a good choice in social inquiry (Van Evera, 1997). First, case studies are used in testing predictions. Here, the prediction is that AGOA would increase trade opportunities and engender economic growth. Although the testing will not be done through statistical analysis, the qualitative data collected are able to indicate whether the prediction is correct or not. According to Van Evera, case studies specifically allow the test of predictions about policy actions. Second, according to Van Evera, inferring and testing explanations that define how the independent causes the dependent variable are often easier with case-study than large-n methods (p. 54). The objective in this study is not to make statistical inferences but the evidence from case studies can be used to support or question theoretical assertions such as the ones made in the literature review section of this chapter. Given these strengths of case study method, it will serve as a useful approach in this research.
Data Collection This research makes use of both primary and secondary sources of data collection. The primary data collection was conducted using a questionnaire. The secondary data comprised of published materials from library search, textbooks, journal and newspaper articles, government documents and reports, and internet resources.
24 A detailed step in the process of primary data collection is pertinent here. In this research interviews were conducted with officials from the major trade-related agencies in Nigeria that have something to do with AGOA and from some U.S. trade representatives in Nigeria. In addition to these officials, questionnaires were administered to the officials of the Textile and Cashew industries that are supposed to be on board with the AGOA policy. Specifically, for the interview in Nigeria, the officials from the following agencies and industries were contacted and interviewed: - The Ministry of Trade & Industry - Nigeria-American Chamber of Commerce - Nigeria Export Promotion Council (NEPC) - West African Trade Hub (WATH) - Office of the Special Adviser to the President on AGOA - The US Embassy in Nigeria - The Nigerian Textile Manufacturing Association (NTMA) - The Nigerian Cashew Industry
The interviewed subjects were adults between the ages of 21 and 65 and are citizens either of Nigeria or the U.S. All questionnaires were administered to respondents in their offices at Lagos, Abuja and Owerri, Nigeria. Where a face-to-face interview was not possible, a questionnaire was sent to the respondent by e-mail. Permission to conduct the interviews was obtained both from the supervising officials in each organization and from the selected respondents. The selection of subjects in this interview was based on their position in the organizations mentioned above. It was considered appropriate to target individuals who are knowledgeable about AGOA policy. Since the interviews involved individuals from both the public and private sectors—Nigerian and the U.S. government officials/workers, and the private sector stakeholders in Nigeria—there is no suspicion by the researcher that their opinions would be biased. There is little or no reason to suggest that a cashew producer or a textile manufacturer would say that AGOA is creating new impact on their industries while it is not or ice versa. Likewise, there is little or no reason to suspect that a ministry worker or a government official in Nigeria would say that a U.S.-initiated
25 program (AGOA) is contributing to increase in trade in Nigeria while it is not and vice versa. What would be the gain of such individuals in distorting information? But we cannot rule out entirely elements of biases as long as human subjects are concerned. This is an acknowledged limitation of social inquiry which is also the case in this study. The recruitment procedure involved first contacting the top supervising officials in each of the organizations to request opportunity to conduct interviews about Nigeria’s response to AGOA and the challenges. The initial contacts with these supervising officials were made by telephone calls or e-mails (depending on which one elicited the quicker response). During these initial contacts, the purpose of the interview was mentioned to the officials with a promise to e-mail them a more detailed description of the goal of the research and the purpose of the interviews. A follow-up e-mails regarding the promise were sent with a request for participation in an interview via completion of questionnaire and oral response to follow-up questions at a date and time convenient to the respondents. The questionnaire was organized under two broad categories: general questions and industry-specific questions. General questions covered aspects of knowledge and procedure issues, ideological issues, and Nigeria’s implementation issues. The industry- specific questions addressed issues pertaining to textile and cashew industries’ performance under AGOA. A detailed copy of the questionnaire is attached as Appendix I.
Chapter Previews Chapter two presents the background of AGOA by giving a historical trend of U.S. PTAs and the circumstances that led to AGOA’s enactment. It presents a descriptive overview of AGOA that addresses such questions as the objectives of AGOA, its longevity, its rules and eligibility criteria and the status of its implementation so far. Chapter three focuses on the Nigerian case study. It starts with a discussion of the existing pattern of trade relation between Nigeria and the U.S. prior to the enactment of AGOA. It also looks at the changing pattern in this relationship as a result of AGOA by discussing the implementation of the Act in Nigeria.
26 Chapter four discusses the implementation status of AGOA in Nigeria, and then presents the findings from the questionnaire responses on the general feelings of Nigerians about AGOA, and Nigeria industry-specific experiences with AGOA. This chapter will try to answer some of the questions raised in the literature about positive and negative effects of PTAs in the light of AGOA’s promises and conditionalities. Chapter five which is the final chapter discusses the possible conclusions drawn from the findings. It also highlights some of the implications of the findings to Nigeria, and the U.S. in their present and future trade relationship. It makes some policy recommendations based on the findings and their implications. The recommendation will also include a brief discussion of future research potentials.
27 Chapter One References
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30 No. 5. (December), pp. 959-967. Mishra, R. (1999). Globalization & the Welfare State. Chelterham UK & Northhampton MA. Edward Edgar. Morris, D. (1993). “Free Trade: The Great Destroyer,” In Ralph Nader et al (Eds), The Case Against Free Trade. California: Earth Island Press & North Atlantic Books. Murray, T. (1973). Preferential Tariffs for the LDCs. Southern Economic Journal, Vol. 40, No. 1. (July), pp. 35-46. Mushita, T.A. (2001). An African Response to AGOA. Southern African Economist, Vol. 14, No. 6, pp. 17-19. Nader, R. (1993). “Introduction: Free Trade and the Decline of Democracy” In Ralph Nader et al (Eds), The Case Against Free Trade. California: Earth Island Press & North Atlantic Books. Noble, K. E. (2006). “The Complete Guide to Understanding the U.S./Sub-Saharan Africa Trade Relationship: Analysis & Opinions on the Ghanaian Implementation of the African Growth & Opportunity Act (AGOA)—A Case Study.” Doctoral Dissertation, Submitted to the Faculty of Miami University, pp.5-22. Ohmar, K. (1990). The Borderhen World. New York: Collins. Organization of African Unity (1985). “African priority program for economic recovery 1986- 1990.” Addis Ababa: OAU. Owusu, F. (2003). “Pragmatism and the Gradual Shift from Dependency to Neoliberalism: The World Bank, African Leaders and Development Policy in Africa.” World Development Vol. 31, No. 10, pp. 1655-1672. Pomfret, R. (1986). The Effects of Trade Preferences for Developing Countries. Southern Economic Journal, Vo., 53, No. 1 (July), pp. 18-26. Sasore, G. M. (2005). “Trade Opportunities under AGOA.” A Paper Presented at the Conference on Agricultural and Food Situation and Trade Opportunities in Nigeria in Kano, Nigeria on the 26th-27th of May 2005. Schott, J.S. (2004) “Free Trade Agreements: Boon or Bane of the World Trading System? In Jeffrey S. Schott (ed.) Free Trade Agreements: US Strategies and Priorities. Washington, DC: Institute for International Economics.
31 Palast, G. (2002). Venezuela and Argentina: A Tale of Two Coups. New Internationalist Magazine, Sunday, July 7. Schutt, R. (2003). Investigating the Social World: The Process and Practice of Research, Fourth Edition. California: Fine Forge Press. Shomade, N. (2004). “A Bomb is a Bomb” Available online at www.africaspeaks.com/articles/2004/0211.html Stiglitz, J.E. (2002). Globalization & Its Discontents. New York: W.W. Norton. Summers, L. (1991) ‘Regionalism and the world trading system.’ Federal Reserve Bank of Kansas City, Policy Implications of Trade and Currency Zones. Thacker S. C (1999). “NAFTA Coalition & the political viability of Neoliberalism in Mexico.” Journal of Interamerican Studies & World Affairs, summer 1999. The Times of Zambia, (2005). “Zambia Loses Out on AGOA Benefits.” January 31 Publication. Available online at: http://allafrica.com/stories/200501311341.html Tralac, (2003). AGOA: Trade Response from African Countries. Available online at: http://www.tralac.org/scripts/content.php?id=1758 United Nations (1986). United Nations Programme for Action for African economic Recovery & Development (UN- PAAERD) 1986-1990. New York: United Nations. Vanden, H.E. & Prevost, G. (2002). Politics of Latin America: The Power Game. New York: Oxford University Press. Viner, J. (1950) The Customs Union Issue. New York: Carnegie Endowment for International Peace. Waltz, K.N. (1999). Globalization and Governance. PS: Political Science and Politics, 32 (4), 693-700. Wonnacott, Paul and Lutz, Mark. (1989) ‘Is there a case for free trade areas?’ in Jeffrey Schott (Ed.) Free Trade Areas and US. Trade Policy. Washington, D.C.: Institute For International Economics, pp. 59—84. World Bank (1981). Accelerated Development in Sub- Saharan Africa: An Agenda for Action. Washington, DC: The World Bank. Yin, R.K (1989). Case Study Research: Design and Methods, (Revised Edition). Beverly Hills, California: Sage Publications.
32 CHAPTER TWO
BACKGROUND OF AGOA
AGOA is first and foremost a U.S. trade policy initiative that fits within the broader context of the U.S. recent preference for regionalism and free trade agreements (FTAs). Within this context, it is pertinent to present a brief historical trend of the U.S. involvement in FTAs and PTAs, and to discuss some of the underlying motives behind this preference in trade policy as opposed to its earlier commitment to multilateral trade arrangements. As observed by Schott (2004), “over the past two decades, regionalism has changed dramatically—involving more countries (especially the United States), linking developed and developing countries in reciprocal trading arrangements, and spreading beyond local neighborhoods to connect trading partners across continents” (p. 5). As part of its move to strike a balance between multilateralism and PTAs, the U.S. added AGOA to the growing list of FTAs and PTAs it has negotiated since the early 1980s after the initial 1976 response to the GSP provisions. Admittedly, the U.S. has had a long history of bilateral and multilateral trade agreements but its shift from a more multilateral trade approach to regional free trade agreements and PTAs is a more recent development. The next section of this chapter presents a historical analysis of the U.S. involvement in different FTAs and PTAs within which we can locate the origin and development of AGOA.
The U.S. and FTAs/ PTAs Policies Prior to 1976, the U.S. attitude toward PTAs was rather lukewarm. Instead, it largely supported multilateral free trade arrangements. Its reluctance to accede to the GSP provisions which allow unilateral granting of lower trade barriers for developing countries was evident in that the U.S. was late in working out modalities for the implementation of GSP after other developed countries had done so for some years (Graham, 1978). However, the U.S. attitude changed after a GATT Ministerial meeting in 1982 at Geneva deadlocked. As a consequence of the lack of agreement at the 1982 GATT Ministerial meeting, the U.S. announced it “would, henceforth, seek a more open trading system with a ‘two-track’ approach” (Krueger, 1999: 108). The “two-track”
33 approach, according to Krueger, would enable the U.S. to seek further multilateral trading arrangements and also join “GATT-Plus” arrangements with like-minded countries that are willing to open their economies to an extent greater than that agreed to under GATT” (p. 108). Under this new approach, observes Casanova (2005), “the United States used threats of retaliation, usually in the form of restricting trade partners’ access to the vast U.S. market, in order to get the partner to open its markets to the U.S. exports or to cease other offensive commercial practices and policies” (p. 6). This kind of approach was evident in the U.S. trade policy with Japan. As Casanova puts it, “for several decades, especially in the 1970s and 1980s, the United States conducted its trade policy toward Japan ‘unilaterally’ to get Japan to amend domestic laws, regulations and practices that prevented U.S. exporters from securing what they considered to be a fair share of the Japanese market” (p. 6). From this “two-track” approach, the U.S. trade policy moved to what Casanova calls a “third track”—bilateral and regional negotiations to establish FTAs. The first U.S. measure toward PTA was the Caribbean Basin Initiative (CBI). Under this policy, the U.S. granted certain unilateral trade preferences to some Caribbean countries. Currently, 24 countries benefit from the CBI, and they include: Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, British Virgin Islands, Costa Rica, Dominica, Dominican Republic, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, Montserrat, Netherlands Antilles, Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad and Tobago. In 1985, the U.S. completed its free trade agreement (FTA) with Israel. In 1986 bilateral trade negotiations began between the U.S. and Canada which later (in 1989) led to the establishment of the Canada-U.S. Free Trade Agreement (CUSFTA). A few years later, Mexico indicated interest in joining the FTA, and thus began the genesis of the North American Free Trade Agreement (NAFTA), which was concluded in 1993 under the Clinton Administration. After NAFTA, the U.S. inclination to FTAs did not stop. Instead, as noted by Krueger (1999), “it soon began to seem that NAFTA was only a first push toward a rising wave of preferential trade agreements” (p. 108).
34 Earlier, President George H.W. Bush had proposed a free trade area of the Americas initiative. But in 1994, the Clinton Administration led a group of trade ministers from 33 other Western Hemispheric countries in agreeing to work toward establishing a Free Trade Area of the Americas (FTAA) by 2005. On June 6, 2000, President Clinton and King Abdullah of Jordan announced that the U.S. and Jordan would begin negotiations to establish an FTA. The agreement concluding these negotiations was signed on October 24, 2001. In a similar vein, the U.S. and Singapore announced on November 16, 2000 their intention to complete a PTA. By July 2003, the U.S.-Singapore Free Trade Implementation Act was passed (Nanto, 2005: 9, 10). On December 6, 2000 the governments of the U.S. and Chile started negotiations to establish an FTA as a potential addition to the NAFTA (Casanova, 2005). It was in this spirit of U.S. increasing quest for preferential trade arrangements that AGOA was enacted in May of 2000.
The Objectives of U.S. Preferential Trade Policies The U.S. foreign trade policy (whether multilateral, “two-track” or “third-track”) is guided by certain objectives that dictate what preferences to pursue and the adjustments that are necessary. Cooper (2005) articulates some of these objectives as follows: 1. To secure open markets for U.S. exports. 2. To protect domestic producers from foreign unfair trade practices and from rapid surges in fairly traded imports. 3. To control trade for foreign policy and national security reasons, and 4. To help foster global trade to promote world economic growth. In accordance with these objectives, the U.S. has entered into several multilateral and bilateral trade agreements with different countries and regions. It is in the interest of the U.S. economy to have open markets for exports. To this end, it is expedient for the government to pursue trade policy that supports more open international market for U.S. products. It is also the duty of the U.S. government to ensure that domestic producers are protected from the adverse effects of unfair trade practices. Given that trade is a vital instrument of nations’ security, sensitive traded items are subject to some regulations and
35 policies that ensure compliance with security measures by states. The U.S. trade policy is sensitive to issues of national security and can only support trade agreements that do not compromise national security. Lastly, it is a fundamental objective of the U.S. trade policy that global trade should help promote world economic growth. Promoting increase in global trade, to the U.S., would ultimately lead to increased economic growth and development around the world. Some of these objectives, especially numbers 1 and 4 above, have been presented and portrayed as informing the AGOA policy initiative. But some critics have seen the objectives of the AGOA initiative as largely less benign than what the two mentioned here indicate. The main issue here is that we have to view the U.S. trade policies within certain objectives in order for us to understand them. AGOA was adopted after careful consideration of the benefits of such policy to both the U.S. and participating countries of Sub-Saharan Africa. The U.S. had the objective to be a strong trade partner with African countries, and to ensure that its commitment in Africa leads to economic empowerment as opposed to giving out aids.
AGOA: Origin and Overview
AGOA is part of the U.S. Trade and Development Act of 2000. The Act was signed into law on May 18, 2000 by President Clinton. It authorizes a new U.S.-African trade relationship based on preferential trade. It promotes increase in trade and economic cooperation between the United States and countries of Sub-Saharan Africa that are eligible. The Act provides tangible incentives for African countries in their efforts to build free market economy, and political reforms. Under this Act, tariff and non-tariff barriers to trade are removed on many products that were not included in the Generalized System of Preferences (GSP)4 made possible by the General Agreement on Tariffs and Trade (GATT). In other words, AGOA expands the list of products which eligible Sub- Saharan African countries may export to the United States subject to zero import duty
4 GSP is a WTO provision that allows member countries to treat the imports of other members like they do to countries that enjoy Most Favored Nations (MFN) status with them. The GSP exempts members of WTO from the MFN for the purpose of lowering trade barriers for developing nations. Under GSP, many items from developing nations are covered for duty-free export to the advanced countries.
36 under the Generalized System of Preferences (GSP). While general GSP covers approximately 4,600 items, AGOA GSP applies to more than 6,400 items.5 Under the United States-Africa Partnership Act of 2003 (AGOA III), AGOA provisions were extended to September 30, 2015.6 Before the AGOA enactment, the U.S. government had sought ways to promote its political and economic presence in Africa. Hitherto, it seemed that the African market was being dominated by its former European colonial powers. “America would no longer concede the African market to its former colonial powers,” proclaimed former Secretary Ron Brown when he led the U.S. delegation to the 1995 Africa-African American summit in Dakar, Senegal (Noble, 2006: 30). AGOA was born after six years of effort to promote greater expansion of trade relationship between the U.S. and Sub-Saharan Africa. For instance, in December 1992, President George H.W. Bush initiated “Operation Restore Hope” aimed at paying more attention to the situation in Africa by providing more aid. But this policy did not go far in changing the pattern of relationship that had hitherto been characterized by U.S. sporadic assistance in the form of grant-in- aid. In 1994, the U.S. government felt the need to adopt a new approach to its relationship with Africa. As Noble puts it, “after almost a year of non-engagement, the administration in the fall of 1994 renewed its resolve to engage Sub-Saharan Africa when it ushered in the first ever White House Conference on Africa” (p. 31). According to him, the objective of the Conference was to formulate a comprehensive policy towards the region that was based on mutual interests. In his address at the Conference, President Clinton made clear his administration’s resolve to formulate policy that would aim at unleashing “the human potential of the people of the African continent in ways that will lead to a safer and more prosperous world. A better life for them and a better life for us.”7 Seemingly, this marked a shift in policy emphasis—from emphasis on aid to emphasis on empowerment that involves many countries of Africa as a region. According to Noble, “this represented a clear break from previous policies that tended to view
5 http://www.agoa.gov/agoa_legislation/agoa_legislation.html 6 “AGOA III: The United States-Africa Partnership Act of 2003” 7 The Clinton Administration Record in Sub-Saharan Africa, Available at http://usinfo.state.gov/regional/af/record.htm,7/11/2005.
37 Africa only on a country by country, crisis by crisis, and conflict by conflict basis” (p. 31). On the strength of this new approach, a new and more comprehensive trade policy for Africa became imperative. Consequently, the Congressional process began in 1997 with House Representatives Jim McDermott (a Democrat, serving the 7th Congressional District of Washington State) and Philip M. Crane (a Republican, serving the 8th Congressional District of the State of Illinois), sponsoring the early version of AGOA8. After an arduous legislative debate in Congress, AGOA was passed and in May of 2000 signed into law by President Clinton. AGOA has been described as “the cornerstone of the (U.S.) Administration’s trade and investment policy toward Sub-Saharan Africa, aimed at promoting free markets, expanding U.S.-African trade and investment, stimulating economic growth, and facilitating Sub-Saharan Africa’s integration into the global economy.”9
Participating Sub-Saharan African Countries At the inception of the Act in 2000, 34 Sub-Saharan African countries were declared eligible by President Clinton. Since then, the number has fluctuated as the U.S. President adds and removes from the list annually in accordance with eligibility criteria review.10 Following this annual AGOA-eligibility review, on January 1, 2006, a new AGOA-beneficiary country – Burundi – was added to the list of AGOA-eligible countries, and another country – Mauritania – was removed from the list. As of April 2006, 25 countries are eligible to receive AGOA apparel benefits. Fourteen of these countries also qualify for AGOA’s provisions for handloomed and handmade articles (known as Category 9).11
8 Markup of House of Representatives 1432—African Growth and Opportunity Act, One Hundred Fifth Congress, First Session, May 22, 1997, p.1. 9 The 2006 Comprehensive Report on U.S. Trade and Investment Policy toward Sub-Saharan Africa and Implementation of AGOA (The Sixth of the Eight Annual Reports, May 2006). 10 Swaziland and Cote d’Ivoire were designated eligible in 2001 and 2002 respectively. On January 1, 2003 The Gambia and the Democratic Republic of Congo, were added as eligible. In 2004, Angola was also added to the list of AGOA eligible countries. But in the same year 2004, Central African Republic and Eritrea were removed from the eligibility list. Burkina Faso was added to the eligibility list on December 10, 2004. On January of 2005, Cote d’Ivoire was removed from the list of eligible countries. The reason for withdrawal of eligibility is tied to lack of progress toward neo-liberal reforms and other political problems that make environment for investment unfriendly. The number of eligible countries now stands at 37. 11 The 37 current AGOA beneficiary countries are Angola; Benin; Botswana; Burkina Faso; Burundi, Cameroon; Cape Verde; Chad; Republic of Congo; Democratic Republic of Congo; Djibouti; Ethiopia;
38 The Table 1 below shows the 37 countries and when they were declared eligible.
Table 1 Table listing AGOA eligible countries, the effective date of their eligibility, and the effective date of their eligibility for AGOA apparel benefits if applicable.
DATE DECLARED SPECIAL DATE DECLARED COUNTRY ELIGIBLE FOR RULE FOR AGOA ELIGIBLE APPAREL APPAREL** PROVISION**
(Republic of) Angola December 30, 2003
(Republic of) Benin October 2, 2000 January 28, 2004 Yes
(Republic of) Botswana October 2, 2000 August 27, 2001 Yes
Burkina Faso December 10, 2004 August 4, 2006 Yes
(Republic of) Burundi January 1, 2006
(Republic of) Cameroon October 2, 2000 March 1, 2002 Yes
(Republic of) Cape October 2, 2000 August 28, 2002 Yes Verde
(Republic of) Chad October 2, 2000 April 26, 2006 Yes
(Republic of) Congo October 2, 2000
(Democratic Republic December 31, 2002 of) Congo *
Gabon; The Gambia; Ghana; Guinea; Guinea-Bissau; Kenya; Lesotho; Madagascar; Malawi; Mali; Mauritius; Mozambique; Namibia; Niger; Nigeria; Rwanda; Sao Tome and Principe; Senegal; Seychelles; Sierra Leone; South Africa; Swaziland; Tanzania; Uganda; and Zambia. On January 1, 2006, Burundi was added to the list of eligible countries, and Mauritania was removed from the list. The 25 countries eligible to receive AGOA apparel benefits are Benin; Botswana; Cameroon; Cape Verde; Chad; Ethiopia; Ghana; Kenya; Lesotho; Madagascar; Malawi; Mali; Mauritius; Mozambique; Namibia; Niger; Nigeria; Rwanda; Senegal; Sierra Leone; South Africa; Swaziland; Tanzania; Uganda; and Zambia. The fourteen countries that qualify for AGOA’s provision for handloomed and handmade articles are: Kenya, Lesotho, Botswana, Malawi, Swaziland, Namibia, Zambia, Ghana, Mozambique, Tanzania, Senegal, Ethiopia, Nigeria, and Sierra Leone.
39 (Republic of) Djibouti October 2, 2000
Ethiopia October 2, 2000 August 2, 2001 Yes
Gabonese (Republic) October 2, 2000 No
The Gambia December 31, 2002
(Republic of) Ghana October 2, 2000 March 20, 2002 Yes
(Republic of) Guinea October 2, 2000
(Republic of) Guinea- October 2, 2000 Bissau
(Republic of) Kenya October 2, 2000 January 18, 2001 Yes
(Kingdom of) Lesotho October 2, 2000 April 23, 2001 Yes
(Republic of) October 2, 2000 March 6, 2001 Yes Madagascar
(Republic of) Malawi October 2, 2000 August 15, 2001 Yes
(Republic of) Mali October 2, 2000 December 11, 2003 Yes
(Republicof) Mauritius October 2, 2000 January 18, 2001 Yes
(Republic of) October 2, 2000 February 8, 2002 Yes Mozambique
December 3, (Republic of) Namibia October 2, 2000 Yes 2001
December 17, (Republic of) Niger October 2, 2000 Yes 2003
(Federal republic of) October 2, 2000 July 14, 2004 Yes Nigeria
(Republic of) Rwanda October 2, 2000 March 4, 2003 Yes
(Democratic Republic of) Sao Tome and October 2, 2000 Principe
40 (Republic of) Senegal October 2, 2000 April 23, 2002 Yes
(Republic of) Seychelles October 2, 2000 No
(Republic of) Sierra October 23, 2002 April 5, 2004 Yes Leone
(Republic of) South October 2, 2000 March 7, 2001 No Africa
(Kingdom of) Swaziland October 2, 2000 July 26, 2001 Yes
(United Republic of) October 2, 2000 February 4, 2002 Yes Tanzania
(Republic of) Uganda October 2, 2000 October 23, 2001 Yes
December 17, (Republic of) Zambia October 2, 2000 Yes 2001
Source: http://www.agoa.gov/eligibility/country_eligibility.html *AGOA trade preferences granted on October 31, 2003. ** Note, the addition of date declared eligible for apparel provision and the column for special rule for apparel underscores the emphasis of AGOA on textile. AGOA is heavily oriented toward textiles although it also embraces agro-based and other products.
AGOA, like any other trade act has rules, guidelines, implementation strategies and assessment of performance. In the succeeding sections, I will present the structure, implementation, performance and some criticisms of AGOA. The aim here is to provide the reader with a basic general understanding of the Act.
Structure of AGOA
As a trade Act, AGOA has different rules and regulations. There are criteria for countries eligibility and visa conditions for product eligibility. AGOA has been updated from its earlier version in 2000 thus, there is what has come to be known as AGOA I, AGOA II, and AGOA III.
AGOA I
41 AGOA I is the original Act as enacted in 2000. Since then, there have been two different amendments that are represented as AGOA II and AGOA III. Under AGOA I, the Act provides: (1) the basic findings on which the U.S. Congress considered the Act as a worthwhile initiative, (2) the policy issues, (3) the eligibility requirement, (4) the implementation measures, (5) the reporting measures, (6) apparel provisions, and (7) trade and economic forum.
1. Basic Findings: As contained in the U.S. Trade and Development Act of 2000,12 the following are the motivational findings on which AGOA was initiated: (i) it is in the mutual interest of the United States and the countries of Sub-Saharan Africa to promote stable and sustainable economic growth and development in Sub-Saharan Africa; (ii) the 48 countries of Sub-Saharan Africa form a region richly endowed with both natural and human resources; (iii) Sub-Saharan Africa represents a region of enormous economic potential and of enduring political significance to the United States; (iv) the region has experienced the strengthening of democracy as countries in Sub- Saharan Africa have taken steps to encourage broader participation in the political process; (v) certain countries in Sub-Saharan Africa have increased their economic growth rates, taken significant steps towards liberalizing their economies, and made progress toward regional economic integration that can have positive benefits for the region; (vi) despite those gains, the per capita income in Sub-Saharan Africa averages approximately $500 annually; (vii) trade and investment, as the American experience has shown, can represent powerful tools both for economic development and for encouraging broader participation in a political process in which political freedom can flourish; (viii) increased trade and investment flows have the greatest impact in an economic environment in which trading partners eliminate barriers to trade and capital flows and
12 The Act is a product of the One Hundred Sixth Congress of the United States of America at the Second Session which was held on the 24th of January 2000. The document is available online at http://www.agoa.gov/agoa_legislation/agoatext.pdf
42 encourage the development of a vibrant private sector that offers individual African citizens the freedom to expand their economic opportunities and provide for their families; (ix) offering the countries of Sub-Saharan Africa enhanced trade preferences will encourage both higher levels of trade and direct investment in support of the positive economic and political developments under way throughout the region; and (x) encouraging the reciprocal reduction of trade and investment barriers in Africa will enhance the benefits of trade and investment for the region as well as enhance commercial and political ties between the United States and Sub-Saharan Africa. 2. Policy Issues: As a matter of policy concerning new trade relationship with Sub- Saharan Africa, the U.S. Congress supports: (i) encouraging increased trade and investment between the United States and Sub- Saharan Africa; (ii) reducing tariff and nontariff barriers and other obstacles to Sub-Saharan African and United States trade; (iii) expanding United States assistance to Sub-Saharan Africa’s regional integration efforts; (iv) negotiating reciprocal and mutually beneficial trade agreements, including the possibility of establishing free trade areas that serve the interests of both the United States and the countries of Sub-Saharan Africa; (v) focusing on countries committed to the rule of law, economic reform, and the eradication of poverty; (vi) strengthening and expanding the private sector in Sub-Saharan Africa, especially enterprises owned by women and small businesses; (vii) facilitating the development of civil societies and political freedom in Sub-Saharan Africa; (viii) establishing a United States-Sub-Saharan Africa Trade and Economic Cooperation Forum; and
43 (ix) the accession of the countries in Sub-Saharan Africa to the Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.13 3. Eligibility Requirement: The President of the U.S. is authorized to designate a Sub- Saharan African country as eligible under the condition that the country has established, or is making continual progress toward establishing: (i) a market-based economy that protects private property rights, incorporates an open rules-based trading system, and minimizes government interference in the economy through measures such as price controls, subsidies, and government ownership of economic assets; (ii) the rule of law, political pluralism, and the right to due process, a fair trial, and equal protection under the law; (iii) the elimination of barriers to United States trade and investment by providing national treatment and measures that create an environment conducive to domestic and foreign investment; protecting intellectual property, and resolving bilateral trade and investment disputes; (iv) economic policies to reduce poverty, increase the availability of health care and educational opportunities, expand physical infrastructure, promote the development of private enterprise, and encourage the formation of capital markets through micro-credit or other programs; (v) a system to combat corruption and bribery, such as signing and implementing the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions; and (vi) protection of internationally recognized worker rights, including the right of association, the right to organize and bargain collectively, a prohibition on the use of any form of forced or compulsory labor, a minimum age for the employment of children, and acceptable conditions of work with respect to minimum wages, hours of work, and occupational safety and health. In addition to these conditions, the president of the U.S. has to ensure that the eligible country:
13 Ibid.
44 (a) does not engage in activities that undermine United States national security or foreign policy interests; and (b) does not engage in gross violations of internationally recognized human rights or provide support for acts of international terrorism and cooperates in international efforts to eliminate human rights violations and terrorist activities.14 Continuing compliance with these conditions is required for continuing eligibility. In this regard, the President of the U.S. has the right to terminate a country’s eligibility if there is lack of progress in meeting the requirements (Edomaruse, 2005). 4. Implementation Measures An AGOA Implementation Subcommittee of the Trade Policy Staff Committee (TPSC) was established to implement AGOA. Among the most important implementation issues are the following: • Determination of country eligibility; • Determination of the products eligible for zero tariff under expansion of the Generalized System of Preferences (GSP); • Determinations of compliance with the conditions for apparel benefits; • Establishment of the U.S.-Sub-Saharan Africa Trade and Economic Forum; and • Provisions for technical assistance to help countries qualify for benefits.
5. Reporting Requirement. It is required that the President shall submit to the Congress, no later than 1 year after the date of the enactment of this Act, and annually thereafter through 2008, a comprehensive report on the trade and investment policy of the United States for Sub- Saharan Africa, and on the implementation of this title and the amendments made by this title. 6. Apparel Provisions The Act provides for duty-free and quota-free access to the U.S. market without limits for apparel made in eligible Sub-Saharan African countries from U.S. fabric, yarn, and thread. It also provides for substantial growth of duty-free and quota-free apparel imports made from fabric produced in beneficiary countries in Sub-Saharan Africa.
14 Ibid.
45 Under AGOA I, apparel imports made with regional (African) fabric and yarn are subject to a cap of 1.5% of overall U.S. apparel imports, growing to 3.5% of overall imports over an 8 year period. AGOA II doubles the applicable percentages of the cap. Under a Special Rule for Lesser Developed Beneficiary Countries, those with a per capita GNP under $1,500 in 1998 will enjoy duty-free access for apparel made from fabric originating anywhere in the world until September 30, 2004. Apparel imported under the Special Rule is counted against the cap. 33 countries have been designated as eligible for the Special Rule, once they have met the additional requirements for the AGOA apparel provisions. AGOA II grants Lesser Developed Beneficiary Country status to Botswana and Namibia, qualifying both countries for the Special Rule. An amendment to the AGOA Acceleration Act of 2004 grants lesser-developed beneficiary country status to Mauritius, also qualifying the country for the Special Rule. The amendment limits Mauritius to a cap of 5% of the Special Rule cap, about 27 million square meter equivalents (SMEs). The cap is measured in square meter equivalents (SMEs), and has no dollar equivalent. However, the first year cap which was in effect October 1, 2000 - September 30, 2001 allowed AGOA eligible countries to ship nearly twice the volume of apparel to the United States which they shipped in 1999. Preferential treatment for apparel took effect on October 1, 2000, but beneficiary countries must first establish effective visa systems to prevent illegal transshipment and use of counterfeit documentation, and that they have instituted required enforcement and verification procedures. Specific requirements of the visa systems and verification procedures were promulgated for African governments via U.S. embassies on September 21, 2000. The Secretary of Commerce is directed to monitor apparel imports on a monthly basis to guard against surges. If increased imports are causing or threatening serious damage to the U.S. apparel industry, the President is to suspend duty-free treatment for the article(s) in question. The U.S. Government is now reviewing applications for approval of the required visa and enforcement mechanisms from AGOA eligible countries.
46 7. Trade and Economic Forum:
The Act directs the President to organize a U.S.-Sub-Saharan Africa Trade and Economic Forum, to be hosted by the Secretaries of State, Commerce, Treasury, and the U.S. Trade Representative. The Forum is to serve as the vehicle for regular dialogue between the United States and African countries on issues of economics, trade, and investment. The Act also calls for annual reports to Congress through 2008 on U.S. trade and investment policy in Africa and implementation of the Act.
AGOA II
Under AGOA II, modifications on the original Act were made to adjust to new conditions. By modifying certain provisions of the AGOA, the Trade Act of 2002 (signed by President Bush on August 6, 2002) substantially expands preferential access for imports from beneficiary Sub-Saharan African countries. These modifications – also known as "AGOA II" - became effective as soon as they were signed into law.15 AGOA II clarifies and narrowly expands the trade opportunities for Sub-Saharan African countries under AGOA I and encourages more investment in the region. It provides additional Congressional guidance to the Administration on how to administer the textile provisions of the bill. Based on the revisions requested by many countries of Sub-Saharan Africa, AGOA II, among other provisions, clarifies certain preferential treatments for the apparel articles, and allows Namibia and Botswana to benefit as lesser developed Sub-Saharan African countries. In other words, AGOA II was aimed at improving the operation of AGOA I by enhancing Sub-Saharan African countries’ utilization of the program.
AGOA III
AGOA Acceleration Act of 2004 (AGOA III, signed by President Bush on July 12, 2004) extends preferential access for imports from beneficiary Sub-Saharan African countries until September 30, 2015 by modifying certain provisions as contained in
15 “AGOA II” Provisions of the Trade Act of 2002. Available online at http://www.agoa.gov/agoa_legislation/agoa_legislation2.html
47 AGOA II. It extends third country fabric provision for three years, from September 2004 until September 2007; and provides additional Congressional guidance to the Administration on how to administer the textile provisions of the bill. These modifications often collectively referred to as "AGOA III" became effective on July 13, 2004.16
AGOA Acceleration Act of 2004 (AGOA III) Summary:17
• Extends the overall program from 2008 until 2015. • Extends third country fabric provision for three years, from September 2004 until September 2007, including a phase down in year three. The cap would remain at the full current level available in years one and two. In the third year, the cap would be phased down by 50 percent. • Includes a statement of Congressional policy that textile and apparel provisions under the program should be interpreted in a broad and trade-expanding manner to maximize opportunities for imports from Africa, accompanied by minor technical corrections to reverse restrictive interpretations by Customs officials. These minor technical corrections include a modification to the rule of origin to allow articles assembled either in the United States or Sub-Saharan Africa to qualify for AGOA treatment (hybrid).18 • Expands current eligibility to allow non-AGOA produced collars, cuffs, drawstrings, padding/shoulder pads, waistbands, belts attached to garments, straps with elastic, and elbow patches for all import categories to be eligible. Also included is the continued use of fabric from AGOA countries that also become free trade partners with the United States.
16 “AGOA Acceleration Act of 2004” is the product of the One Hundred Eight Congress of the United States of America at the Second Session, Held on the 21st of January 2004. 17 The summary of AGOA III provisions is available online at http://www.agoa.gov/agoa_legislation/agoa_legislation3.html 18 The idea here is that some of the eligible countries may not have the textile materials they need to produce clothing to ship to the U.S. So, under this provision such countries are allowed to source for these materials from either the U.S. or another eligible Sub-Saharan African country. It reduces the complexity and the difficulty that eligible countries face when they cannot assemble all the needed materials internally. It is considered a ‘hybrid’ because the final product is made up of materials from more than one source.
48 • Increases the De Minimis Rule from its current level of seven percent to 10 percent. This rule states that apparel products assembled in Sub-Saharan Africa which would otherwise be considered eligible for AGOA benefits but for the presence of some fibers or yarns not wholly formed in the United States or the beneficiary Sub-Saharan African country will still be eligible for benefits as long as the total weight of all such fibers and yarns is not more than a certain percent (currently seven percent) of the total weight of the article. • Includes findings and statements of policy about the benefits of AGOA to Africa and supporting various Sub-Saharan Africans efforts such as reducing poverty, promoting peace, attracting investment and trade, and fighting HIV-AIDS. • Expands the current "folklore" AGOA coverage to include certain machine-made ethnic printed fabric made in Sub-Saharan Africa or the United States. • Encourages bilateral investment agreements. • Directs the Administration to implement an interagency trade advisory committee. • Encourages the development of infrastructure projects that increase trade capacity through the ecotourism industry. • Directs the President to assign personnel for the purpose of providing agricultural technical assistance to select AGOA countries and advising them on improvements in their sanitary and phytosanitary standards to help them meet U.S. requirements. • Promotes investment in infrastructure projects that support the development of land transport, roads, railways, ports, the expansion of modern information and communication technologies, and agriculture. • Facilitates increased coordination between customs services at ports and airports in the United States and Sub-Saharan countries to reduce time in transit and increase efficiency and safety procedures. Amendment to AGOA Acceleration Act of 2004 Summary: The "Miscellaneous Trade and Technical Corrections Act of 2004" signed into law on December 3, 2004 includes an amendment to the "AGOA Acceleration Act of 2004." The amendment grants lesser-developed beneficiary country status to Mauritius. This status qualifies the country for the Special Rule for Apparel, allowing Mauritius to use non-U.S.
49 fabric and yarn in apparel wholly assembled in Mauritius and still qualify for duty- and quota-free treatment. The amendment limits Mauritius to a cap of 5% of the Special Rule cap, about 27 million square meter equivalents (SMEs).
AGOA Annual Forums Since 2001 (one year after AGOA kicked-off) there have been five AGOA Forums in accordance with the provision of the Act. The forum is a gathering of all the stakeholders of AGOA—the U.S. government, the governments of the participating African countries, NGOs, private entrepreneurs and other concerned members of the public from the U.S. and Sub-Saharan Africa. It is in the forum that assessment is made of the progress so far and the challenges ahead. It is a time of putting heads together by the stakeholders, and sharing ideas and visions of how AGOA can expand and produce the intended result. The first forum was held in Washington, DC in October 2001. During the Forum, U.S. officials emphasized the United States’ strong commitment to Africa and noted the initial success of AGOA. U.S. and African speakers underscored the necessity of good governance, rule of law, and political freedom to attract investment and achieve growth. The use of African co-chairs and active question and answer sessions allowed African officials the opportunity to speak openly about the benefits and challenges of AGOA. The second U.S.-Sub-Saharan African Trade and Economic Cooperation Forum (also known as 2nd AGOA Forum) was held in Mauritius in January 2003. The forum was used to reflect on what has been achieved since the first forum. The participants at the Forum used the opportunity to express some of the successes, concerns and suggestions for future progress of AGOA. In his address read at the forum, the U.S. President re- iterated his administration’s commitment to the success of AGOA. In his closing remarks, the United States Trade Representative Robert Zoellick commended the efforts of all the stakeholders, and emphasized the need to work together to enhance the achievement of more gains. In his words, “It’s clear that together, and I emphasize together, we have made tremendous progress on AGOA implementation. But it is also
50 clear that we have a lot more work ahead of us. Together, we can achieve our vision of a stronger trade and investment relationship -- with AGOA leading the way.”19 The Third Annual United States-Sub-Saharan African Trade and Economic Cooperation Forum (Third AGOA Forum) was held in Washington, DC and hosted by the State Department. In his opening remarks at the forum, the then Secretary of State, Collin Powell, announced the extension of AGOA to 2008 which is contained in the AGOA III Legislation. He used the forum to highlight some of the successes under AGOA, and the commitment of the U.S. government to African development efforts. He noted: “Indeed, in the three short years since AGOA went into effect, we estimate that AGOA-related trade and investment has created over 190,000 jobs and over $340 million in new investment. Behind these overall numbers lie hundreds of individual success stories.”20 He cited examples of success stories from some AGOA countries. In Ghana, for example, two American companies have invested in plants to export socks to the United States. These first-time investors in Africa are employing 400 Ghanaians. In Tanzania, business for a small handicraft company has boomed as a result of AGOA. Before AGOA, the company employed 25 people and exported $20,000 a year in arts and crafts to the United States. Since AGOA, the company has hired 100 new employees, mostly women, and its exports to the United States have increased ten-fold.”21 He charged the stakeholders to remain resolved in their commitment to ensure the overall success of the trade act. Other speakers at the forum re-iterated their commitment and resolve to achieve economic development through trade and investment under AGOA. The Fourth AGOA Forum was held in Dakar Senegal in July 2005. As usual, the Forum brought together the governments of the U.S. and the 37 AGOA-eligible countries as well as the representatives of the civil societies, and private individuals from the business community. At the Forum, participants discussed how AGOA could continue to
19 United States Trade Representative Robert Zoellick, AGOA Forum Closing Remarks January 17, 2003, available online at: http://www.gov.mu/portal/sites/ncb/agoa/index.htm 20 Secretary Colin L. Powell’s Remarks at The United States Sub-Saharan Africa Trade and Economic Cooperation Forum, Washington, DC, December 9, 2003; Available online at: http://www.state.gov/secretary/former/powell/remarks/2003/26990.htm 21 Ibid.
51 be a springboard for increased trade and investment between the U.S. and Sub-Saharan Africa. On July 19, 2005 (the second day of the Forum), the U.S. released a “Fact Sheet on African Global Competitiveness Initiative” which aims at achieving great expansion of the trade capacity building efforts among AGOA-participating countries. In this initiative, President Bush announced a 5-year funding target of $200 million of additional resources to expand trade capacity building in AGOA-eligible countries through the U.S. Agency for International Development's (USAID) Regional Trade Hubs located in Accra, Ghana; Gaborone, Botswana; and Nairobi, Kenya. According to him, “the Initiative will further the work of the Trade Hubs in enabling African economies to become better integrated into regional and global markets and to take advantage of trade opportunities afforded by the African Growth and Opportunity Act (AGOA).”22 In accordance with the theme of the Forum— “Expanding and Diversifying Trade to Promote Growth and Competitiveness,”—the new Secretary of State Condoleezza Rice in her own address at the Forum on July 20 announced the AGOA Diversification Fund. According to her, this fund will provide resources through several U.S. Government agencies to help African countries diversify their economies and thus take advantage of a wider range of opportunities under AGOA. Among the projects to be funded are a feasibility study for West African regional rail integration and technical assistance for the development of a new West African aviation safety and security agency.23 Secretary Rice also noted some of the progress made under AGOA in 2004. According to her, AGOA imports to the United States totaled $26.6 billion, up 88% over 2003.24 The Fifth AGOA Forum was held in Washington, DC on June 6-7, 2006. The Forum was divided into three separate groups meeting concurrently—the private sector, the civil society, and Ministerial. The Private Sector Forum was hosted by Corporate
22 Fact Sheet on African Global Competitiveness Initiative, available online at: http://www.state.gov/p/af/rls/fs/49817.htm 23 Secretary of State Rice Announces New AGOA Fund to Promote African Economic Growth. Bureau of Public Affairs, Washington, DC., July 20, 2005. Available Online at: http://www.state.gov/r/pa/scp/2005/49821.htm 24 Ibid.
52 Council on Africa (CCA), the Civil Society Forum was hosted by Bread for the World, and the Ministerial Forum was hosted by the U.S. Department of State. For the first time in the history of AGOA Forum, the private sector was given a unique recognition as a very significant stakeholder in the AGOA enterprise. The attendance at the CCA AGOA Private Forum was remarkable. Two hundred and seventy-five U.S. and African public and private sector participants attended the Private Sector Forum.25 Speaking at the Forum, the CCA President, Stephen Hayes, said, “our future success will be based on our ability to keep the communication channels between the public and private sectors open so that we can jointly address challenges, create and stimulate new U.S. investment in Africa, and significantly increase export development in all AGOA-eligible African countries.”26 The Civil Society Coalition Forum was comprised of U.S. secular and faith-based non-governmental organizations. Most coalition members operate programs in Africa. The activities of a few are focused on research, education and policy advocacy. The work of several organizations in the coalition is rooted in African-American advocacy for Africa. Most of the coalition's partner organizations have grassroots members across America. Delegates from U.S. advocacy and development organizations, civic leaders and owners of small businesses from all over Africa attended the forum. The major theme was "The AGOA We Have" versus "The AGOA We Need."27 Participants used the forum to examine the impact of AGOA's first five years on economic growth and poverty reduction. They agreed that several countries have benefited from duty-free access to the U.S. market, particularly in textiles and apparel, but pointed out that AGOA's opportunities could be made more meaningful if the countries diversify their products. The Ministerial Forum featured deliberations on the implementation of AGOA at the governmental and inter-governmental levels. The forum which was attended by Trade Ministers of AGOA-eligible countries and their U.S. counterpart looked at individual government involvement and contributions in creating the needed environment for
25 The African Journal: AGOA Special Edition. “CCA Hosts Major Forum on the Private Sector and AGOA,” Available online at: http://www.africacncl.org/(q0rpgezoixleie45rwpelkec)/Events/AGOA_2006.asp 26 Ibid. 27 “2006 AGOA Civil Society Forum.” Available at: http://www.bread.org/learn/global-hunger- issues/agoa-forum-2006/
53 AGOA’s success. The different groups deliberated and brainstormed on how they can contribute toward creating the needed incentives for AGOA gains to be made. What each group would bring into the success of AGOA depends on its trade capacity-building powers. The great highlight at the Forum was the signing ceremony that involved the U.S. Trade and Development Agency (USTDA) awards of over $2.7 million in grants to promote economic growth in Africa. The grants were specifically aimed at supporting the growth of key economic sectors in strengthening the U.S.-Sub-Saharan African trade relationship, and facilitating the growth of open competitive markets.28 In summary, the AGOA Forum has become a very important structure in the implementation and assessment of AGOA after each year of performance. It has made the Act something much more than trade and business; it has become a forum for mutual interaction, building of relationships, sharing of values and vision, achieving mutual understanding and cooperation, and weakening barriers created by suspicion and distrust. It has become a vehicle for identification of problems and articulation of innovative solutions for the benefit of Africa and the U.S.
Summary of AGOA Performance
Some publications have reported success and failure stories so far with the AGOA implementation (Tralac, 2003; Ajikande, 2003; The Times of Zambia, 2005; Business News, 2004). These publications contain stories of how the countries have fared after fours years of AGOA enactment and subsequent implementation. Great success has been reported in non-oil producing countries like South Africa, Ghana, Lesotho and few others. However, majority of the countries in Sub-Saharan Africa have reported moderate performance or less.29 In general, according to the U.S. Office of Trade Representative,
28 USTDA Awards over $2.7 million in Grants to Promote Economic Growth in Africa: Grants Awarded During the Signing Ceremony at the Fifth AGOA Forum. Available online at: http://www.agoa.gov/agoa_forum/USTDA%20AGOA%20Forum%20Press%20Release%2006-07-06.pdf 29 Congressional Hearing before the Committee on Foreign Relations of the U.S., June 25, 2003.
54 there are indications of success in the two-way trade between the U.S. and Sub-Saharan Africa. The following represent the summary of the performance as at the end of 2004:30 - AGOA has been a success, increasing the trade between Africa and the U.S. and diversifying the range of products being traded. - In 2004, AGOA imports (including GSP) increased up to 88% and valued at $26.6 billion. - Take oil away from AGOA, and you find that non-oil AGOA imports increased up to 22% at a totaled value of $3.6 billion. - Apparel and agricultural products accounted for more than half of non-AGOA imports. - AGOA apparel products totaled $1.6 billion, up 35%; and agricultural products were $265.1 million, up 10%. - Two-way total trade (exports plus imports) between the U.S. and Sub-Saharan Africa increased 37% to just over $44 billion in 2004. - Particularly impressive is the growth in AGOA imports of footwear, up 223% since 2000; toys and sport wears, up 79%; fruits and nuts, up 68%; and cut flowers, up 58%. - U.S. total exports to Africa rose 25% to $8.6 billion and U.S. total imports (AGOA and non-AGOA) from Africa increased by 40% to $35.9 billion. The above performance summary, however, does not capture variations across countries. While some countries have fared better, others are yet to register the benefits offered by AGOA. The table below (Table 2) indicates the level of success among the eligible countries of Africa vis-à-vis the U.S. as at 2004/2005:
30 U.S. Trade Relations Report available online at http://www.ustr.gov/assets/Document_Library/Fact_Sheets/2005/asset_upload_file792_7354.pdf
55 Table 2 U.S. Total Exports, Imports, and Trade Balance with AGOA Countries, year-to- date Data from 2002 to 31 January 2005 Unit: '000 U.S. dollars (Source: U.S. International Trade Commission USITC, based on U.S. Dept. Commerce) (updated March 2005)
Country 2002 2003 2004 2004ytd 2005ytd
Angola: Exports (i.e. US 370,826 482,612 588,584 94,579 48,853 exports to Angola) Imports (i.e. US 3,231,266 4,176,429 4,475,677 339,042 469,749 imports from Angola) Trade Balance -2,860,440 -3,693,818 -3,887,093 -244,463 -420,895 Benin: Exports 34,619 29,386 43,760 2,052 3,952 Imports 680 602 1,525 109 50 Trade Balance 33,939 28,783 42,235 1,943 3,902 Botswana: Exports 31,501 24,682 51,632 8,023 6,221 Imports 29,732 13,642 72,986 3,227 8,731 Trade Balance 1,769 11,040 -21,354 4,795 -2,510 Burkina Faso: Exports 18,742 10,612 21,747 1,270 3,158 Imports 2,914 893 583 19 12 Trade Balance 15,828 9,719 21,164 1,251 3,146 Cameroon: Exports 155,270 89,342 98,676 4,028 11,564 Imports 172,057 193,319 328,337 42,669 35,578 Trade Balance -16,787 -103,978 -229,661 -38,642 -24,014 Cape Verde:
56 Exports 8,926 7,872 50,466 50 861 Imports 1,811 5,640 3,686 204 300 Trade Balance 7,115 2,233 46,780 -155 561 Chad: Exports 126,971 63,523 40,306 2,641 6,019 Imports 5,700 22,434 698,405 28,397 81,913 Trade Balance 121,271 41,088 -658,099 -25,755 -75,895 Congo (DROC): Exports 26,612 30,384 60,186 4,899 4,930 Imports 189,692 173,867 112,266 11,872 5,576 Trade Balance -163,079 -143,484 -52,080 -6,973 -646 Congo (ROC): Exports 51,793 78,601 64,512 4,739 15,628 Imports 223,824 407,186 849,730 18,897 99,077 Trade Balance -172,031 -328,585 -785,218 -14,158 -83,448 Djibouti: Exports 55,945 34,287 43,109 12,393 1,933 Imports 1,915 615 964 168 66 Trade Balance 54,030 33,672 42,144 12,225 1,867 Ethiopia: Exports 60,123 407,354 458,179 8,717 9,929 Imports 25,659 30,496 41,167 1,497 2,089 Trade Balance 34,464 376,858 417,012 7,220 7,840 Gabon: Exports 65,176 61,856 92,181 21,988 3,690 Imports 1,622,021 1,927,715 2,423,504 185,626 241,595 Trade Balance -1,556,845 -1,865,859 -2,331,323 -163,637 -237,905 Gambia: Exports 9,103 10,588 22,181 554 1,604 Imports 563 134 361 81 3 Trade Balance 8,540 10,454 21,820 473 1,601
57 Ghana: Exports 186,601 204,426 300,341 16,137 16,316 Imports 115,641 83,603 140,474 4,797 9,066 Trade Balance 70,960 120,823 159,868 11,339 7,249 Guinea: Exports 62,489 35,280 57,528 3,880 6,971 Imports 71,600 69,226 64,225 4,605 5,526 Trade Balance -9,110 -33,946 -6,697 -725 1,446 Guinea-Bissau: Exports 2,559 1,203 1,227 74 48 Imports 35 1,912 26,611 48 0 Trade Balance 2,523 -710 -25,384 26 48 Kenya: Exports 267,972 193,009 386,938 8,417 11,047 Imports 189,156 249,137 352,165 24,748 38,085 Trade Balance 78,815 -56,129 34,773 -16,332 -27,038 Lesotho: Exports 1,818 5,098 5,481 1,321 170 Imports 321,475 393,056 467,047 31,831 43,139 Trade Balance -319,658 -387,958 -461,566 -30,509 -42,968 Madagascar: Exports 15,217 45,488 33,041 1,451 1,411 Imports 215,923 383,329 469,404 37,049 31,240 Trade Balance -200,706 -337,841 -436,362 -35,598 -29,829 Malawi: Exports 28,626 16,507 21,514 699 2,755 Imports 68,109 80,076 79,356 7,625 4,683 Trade Balance -39,483 -63,569 -57,841 -6,926 -1,928 Mali: Exports 11,031 29,916 42,033 1,380 3,704 Imports 2,583 2,394 3,702 116 146
58 Trade Balance 8,449 27,521 38,330 1,264 3,558 Mauritania: Exports 22,652 34,191 76,835 2,375 5,407 Imports 929 929 7,347 2,760 133 Trade Balance 21,723 33,262 69,488 -385 5,274 Mauritius: Exports 19,398 23,689 18,319 1,175 1,129 Imports 280,433 298,096 270,397 22,264 22,424 Trade Balance -261,035 -274,407 -252,078 -21,089 -21,295 Mozambique: Exports 97,869 62,340 75,869 9,829 3,981 Imports 8,160 8,711 9,933 258 467 Trade Balance 89,708 53,629 65,937 9,571 3,514 Namibia: Exports 53,688 26,668 66,047 4,272 8,319 Imports 57,353 123,249 238,219 4,847 13,845 Trade Balance -3,665 -96,581 -172,171 -575 -5,526 Niger: Exports 39,320 32,365 30,771 1,451 4,791 Imports 897 4,034 26,855 37 980 Trade Balance 38,423 28,331 3,916 1,414 3,811 Nigeria: Exports 1,046,908 996,453 1,510,369 115,002 91,361 Imports 5,819,603 10,113,618 16,295,101 939,277 1,648,571 Trade Balance -4,772,695 -9,117,165 -14,784,733 -824,274 -1,557,210 Rwanda: Exports 10,162 7,914 11,107 992 363 Imports 3,086 2,623 5,411 474 485 Trade Balance 7,076 5,291 5,697 518 -122 Sao Tome & Prin: Exports 1,921 1,243 2,793 28 5,072
59 Imports 391 91 86 0 0 Trade Balance 1,530 1,152 2,707 28 5,072 Senegal: Exports 71,962 98,888 73,204 3,682 5,467 Imports 3,799 4,326 3,000 146 270 Trade Balance 68,163 94,562 70,204 3,535 5,197 Seychelles: Exports 8,204 6,947 10,247 508 507 Imports 26,291 15,324 6,010 70 208 Trade Balance -18,087 -8,377 4,237 438 298 Sierra Leone: Exports 25,006 27,466 39,952 3,195 3,093 Imports 3,833 6,478 10,842 431 379 Trade Balance 21,173 20,988 29,110 2,764 2,713 South Africa: Exports 2,446,169 2,698,201 2,977,484 188,074 364,305 Imports 4,235,974 4,887,962 5,926,332 413,061 447,405 Trade Balance -1,789,805 -2,189,762 -2,948,848 -224,988 -83,100 Swaziland: Exports 11,040 8,075 11,708 508 1,026 Imports 114,464 162,033 198,769 16,303 26,329 Trade Balance -103,424 -153,958 -187,060 -15,795 -25,303 Tanzania: Exports 61,800 63,639 124,697 4,809 3,342 Imports 25,343 24,234 23,818 2,224 2,463 Trade Balance 36,456 39,405 100,879 2,585 878 Uganda: Exports 22,635 42,240 62,660 2,830 2,766 Imports 15,197 34,883 25,810 2,289 1,522 Trade Balance 7,438 7,356 36,850 541 1,244 Zambia:
60 Exports 35,491 19,002 26,102 1,600 1,885 Imports 7,790 12,469 32,467 2,303 5,519 Trade Balance 27,701 6,533 -6,365 -703 -3,634 Total: (All 37 AGOA countries) Imports by 37 AGOA 5,566,145 6,011,347 7,601,786 539,622 663,578 Countries from US Exports from 37 AGOA 17,095,899 23,914,765 33,692,572 2,149,371 3,247,624 Countries to US Balance of Trade (pos. = in -11,529,756 -17,903,427 -26,090,782 -1,609,752 -2,584,047 favor of US)
The above table shows that the U.S. enjoys favorable balance of trade with 22 out of 37 AGOA eligible countries. A sectoral review/analysis of benefits under AGOA shows that some countries are doing better than others. In the energy sector, which consists of about 75% of AGOA export, Nigeria and Gabon enjoy the benefits. Since AGOA essentially targets non- energy export trade, more improvement is required for many countries. According to Tralac publication online, Overall, a picture emerges of substantial market access opportunities for African countries, but a trade and investment response that is still fairly polarized. Apart from energy and clothing sector exports, South Africa has managed to take the lion’s share of exports under AGOA. The country accounts for all AGOA exports in the transportation sector, and dominant shares of agricultural as well as mineral and metal exports. In fact, 51% of non-GSP (i.e. AGOA) and non-energy exports under the program originate in SA, a figure that rises to 62% when including goods that now qualify under AGOA but were previously eligible for preferential market access only under the GSP. In addition, SA enjoys a substantial trade surplus with the US.31
31 http://www.tralac.org/scripts/content.php?id=1758
61
Before AGOA’s enactment, the U.S. level of trade and investment in Sub-Saharan Africa was very low, especially in sectors such as agriculture, textile and manufacturing. After AGOA, this situation has witnessed some changes in some cases, while in others, it seems little or nothing has changed. For instance, in South Africa, the value of agricultural-related export to the U.S. increased steadily from $103,332 million in 2003 to $109,477 million in 2004, and to $131,521 million in 2005 as a result of AGOA; the story is different for a country like Nigeria where the value of agricultural-related export to the U.S. under AGOA was zero in 2003 and zero in 2004, and then increased to $138,000 in 200532. The fact is that AGOA has produced change but this change varies in depth and impact from one participating country to another. The April, 2006 Office of the United States Trade Representative “Trade Fact Report” summarized the U.S.-Africa trade relation since the inception of AGOA in the following bullet point expressions: • Since its inception in 2000, AGOA has helped increase our two-way trade with Africa and diversify the range of products being traded. • Two-way total trade (exports plus imports) between the United States and Sub- Saharan Africa increased 37 percent to just over $60.6 billion in 2005. • U.S. total exports to Africa rose 22 percent to $10.3 billion, with notable gains in agricultural goods, machinery, and transportation equipment. U.S. total imports (AGOA and non-AGOA) from Africa increased by 40 percent to $50.3 billion, largely due to an increase in oil imports. • U.S. imports from Sub-Saharan African countries under AGOA (including its GSP provisions) totaled $38.1 billion in 2005, up 44 percent over 2004, primarily due to an increase in oil imports. • Non-oil AGOA trade declined by 16 percent, to $2.9 billion in 2005, mainly due to declines in AGOA apparel imports ($1.4 billion, down 12 percent), minerals and metals ($493.9 million, down 32 percent), and transportation equipment ($273.6 million, down 49 percent).
32 AGOA country-by-country trade profile, available online at http://www.agoa.info/index.php?view=.&story=news&subtext=719
62 • These declines were due in part to increased global competition in the apparel sector, resulting in part from the end of global apparel quotas and the anticipated end of AGOA third country fabric provisions; an appreciation of key currencies such as the South African rand; decreased demand for key minerals and metals such as manganese; and production shifts in the South African automotive sector. • There were also some gains in AGOA trade in 2005. Thirty-three countries exported products to the United States under AGOA in 2005. Several countries expanded their AGOA exports including Malawi, Botswana, Mozambique, Tanzania, Mali, Niger, Guinea, and Rwanda. • Several non-oil sectors experienced increases, including footwear, toys, sportswear, fruits, nuts and cut flowers. And despite the overall decline in apparel exports, some countries (including Botswana, Uganda, Ethiopia, Tanzania and Mozambique) experienced increases in their apparel exports to the United States. • In 2005, AGOA imports of chemical products totaled $329.3 million, up 48 percent; agricultural products were $272.1 million, up 3 percent; miscellaneous manufactures totaled $72 million, up 15 percent; machinery products totaled $19.3 million, up 12 percent; and electronic products were $19.2 million, up 22 percent.
General Implementation Challenges Although AGOA has presented many opportunities, there have been notable challenges in its implementation. The challenges exist in the form of criticisms from some quarters that AGOA represents another tool of domination by the U.S., the task of realizing and maximizing tangible benefits from AGOA across all the countries in the region, promoting small business, trade financing and access to credit, and quota elimination among others.33 First, AGOA has been criticized by some for its premise on neo-liberal conditions which they perceive as a way of extending U.S. imperialism in Africa (Shomade, 2004). They contend that the several conditionalities for AGOA eligibility are insensitive to the internal political and economic realities of some of the
33 Congressional Hearing before the Committee on Foreign Relations of the U.S., June 25, 2003, pp. 9 &10.
63 countries of Sub-Saharan Africa. These conditionalities limit access to AGOA benefits for these countries (Mushita, 2001). Second, creating a competitive and investor-friendly commercial environment remains a challenge to some of the AGOA countries. In some of these countries, there is lack of basic infrastructure—good road, railroad, electricity, and telecommunication. Third, how to promote small business is also a major challenge because of the daunting odds small businesses face in the midst of very large and well-established ones. Obtaining credit facility is another challenge most AGOA country businessmen are facing. Banks are not very willing to give credit financing to some of the businesses approved under AGOA. The fact that there is still quota for U.S. textile market limits the volume of trade in textile where most of the eligible countries are making substantial investment.34 Given these challenges, the U.S. government has adopted a strategy known as trade capacity building (TCB) to help AGOA countries surmount some of these challenges. Under this strategy, the U.S. government appropriates some funds to assist some businesses in the AGOA eligible countries to grow in capacity that helps them become more competitive. In addition to appropriation of funds, the U.S. provides technical support and organizes annual AGOA forum to enhance efficiency in different sectors and evaluate performance of the Act.
Summary Conclusions From the overview of AGOA, we have seen what the history, structure, implementation, and the status after six years look like. This affords us a good point of departure in looking in-depth at how far a major AGOA-eligible country like Nigeria has fared since the enactment of the Act. Therefore, in chapter three the focus will be on Nigeria as a case study. The chapter will explore the state of the Nigeria-U.S. trade relations prior to and since the enactment of AGOA. It will also discuss the implementation of AGOA in Nigeria.
34 Ibid.
64 Chapter Two References AGOA, country-by-country trade profile, available online at http://www.agoa.info/index.php?view=.&story=news&subtext=719. AGOA II” Provisions of the Trade Act of 2002. Available online at: http://www.agoa.gov/agoa_legislation/agoa_legislation2.html. AGOA III: The United States-Africa Partnership Act of 2003. Available online at: http://www.agoa.gov/agoa_legislation/agoa_legislation3.html. Ajikande, N.K. (2003). “Nigeria is Now Reaping the Benefits of AGOA—Sasore.” Daily Trust, Friday, August 8. Business News (2004). “Nigeria Makes AGOA Gains.” Available online at: http://www.nigeriafirst.org/article_2662.shtml Casanova, M.F. (2005). The U.S.-Singapore Free Trade Agreement. New York: Novinka Books. Cooper, W. H. (2005). “Free Trade Agreements: Impact on U.S. Trade and Implications for U.S. Trade Policy,” In M.F. Casanoova (Ed.), The U.S.-Singapore Free Trade Agreement. New York: Novinka Books. Edomaruse, C. (2005). “Bush Okays Nigeria, 36 Others for AGOA.” This Day, Available Online at http://www.thisdayonline.com/nview.php?id=36795 Graham, T. R. (1978). The U.S. Generalized System of Preferences for Developing Countries: International Innovation and the Art of the Possible. The American Journal of International Law, Vol. 72, No. 3. (July), pp. 513-541. Krueger A.0. (1999). “Are Preferential Trading Arrangements Trade-Liberalizing or Protectionist?” Journal of Economic Perspectives—Volume 13, Number 4, Pages 105—124. Markup of House of Representatives 1432—African Growth and Opportunity Act, One Hundred Fifth Congress, First Session, May 22, 1997, p.1. Mushita, T.A. (2001). “An African Response to AGOA.” Southern African Economist, Vol. 14, No. 6, pp. 17-19. Nanto. D.K. (2005). “The U.S.-Singapore Free Trade Agreement,” In M.F. Casanoova (Ed.), The U.S.-Singapore Free Trade Agreement. New York: Novinka Books. Noble, K. E. (2006). “The Complete Guide to Understanding the U.S./Sub-Saharan
65 Africa Trade Relationship: Analysis & Opinions on the Ghanaian Implementation of the African Growth & Opportunity Act (AGOA)—A Case Study.” Doctoral Dissertation, Submitted to the Faculty of Miami University. Schott, J.J. (2004). Free Trade Agreements: U.S. Strategies and Priorities. Washington, DC: Institute for International Economics. Shomade, N. (2004). “A Bomb is a Bomb” Available online at www.africaspeaks.com/articles/2004/0211.html The Times of Zambia, (2005). “Zambia Loses Out on AGOA Benefits,” January 31 Publication. Available online at: http://allafrica.com/stories/200501311341.html The Clinton Administration Record in Sub-Saharan Africa, Available at http://usinfo.state.gov/regional/af/record.htm,7/11/2005. Tralac, (2003). AGOA: Trade Response from African Countries. Available online at: http://www.tralac.org/scripts/content.php?id=1758.
66 CHAPTER THREE U.S. TRADE RELATION WITH NIGERIA AND THE AGOA IMPLEMENTATION
Nigeria is the most populous country in Africa, located in Western part of the continent (See Appendix 2 for Nigeria in brief). Nigeria is a major trading partner of the U.S. in Africa. Globally, the U.S. is Nigeria’s largest trading partner after the United Kingdom. However, the U.S. trade relationship with Nigeria is largely focused on energy-related products—oil and natural gas. The U.S. is Nigeria’s largest customer for crude oil, which accounts for 40% of Nigeria’s total oil export. Nigeria provides about 11% of all U.S. oil imports and ranks as the fifth largest source of U.S. imported oil.35 This does not, however, mean that the two countries do not engage in trade outside of energy products. Nigeria buys agricultural products like wheat, and other finished goods from the United States. The United States also imports few agricultural and other products outside of oil and natural gas from Nigeria. To understand the pattern of this relationship in the light of AGOA, it is pertinent to examine the nature of trade between the two countries prior to and under AGOA. This chapter examines in brief the nature of the U.S.-Nigeria trade relationship before the enactment of AGOA, and then focuses in more details on the nature of the relationship under AGOA. This is against the backdrop of the expectation that AGOA would change the existing trade pattern by its provision of duty-free export of many agricultural and allied products to the U.S. from participating African countries like Nigeria. Also it is hoped that the incentives AGOA offers to participating countries in the form of technical assistance (TA) and trade capacity building (TCB) would facilitate increase in the volume of trade and competitiveness of the traded goods for these countries. The extent of this envisaged change is particularly of interest in this chapter. This chapter takes a closer look at the extent to which these expectations have become a reality under AGOA. To describe the nature of this relationship, I will utilize trade data from the 1990s especially from 1995 to 2000 (the year AGOA was enacted). Before highlighting the
35 This information is contained in the CIA’s country factbook publication on Nigeria. Available online at http://www.cia.gov/cia/publications/factbook/geos/ni.html
67 nature of the U.S.-Nigeria trade relationship prior to AGOA, it is pertinent to present a background of the nature of Nigeria’s trade activities and economic policy in the 1990s.
Nigeria’s Trade Activities & Policy in the 1990s Nigeria’s export trade activities in the 1990s were dominated by crude oil and refined oil products which constituted about 95% of export. However, Nigeria had other export products such as cocoa beans, rubber, cotton, groundnut, palm oil, etc. The proceeds from most of these products were relatively small. Among these products, only cotton, cocoa beans, and rubber had proceeds that exceeded US$10 million as at 1996 (WTO, 1998). During the period between 1990 and 1996, the structure of import in Nigeria changed a great deal. There was great increase in the quantities of food and petroleum products imported into the country. Ironically, while petroleum products constituted a major import during this period, import in machinery, transport equipment, and clothing decreased significantly. During this period, the most important trade partners for Nigeria were still the United States, the United Kingdom and Germany. As indicated in the 1996 trade data, Nigeria was the 34th largest exporter and 43rd largest importer worldwide, and it is also the third largest trading country in Africa (WTO, 1998). The 1990s witnessed a commitment to structural reforms which slowed down and weakened economic growth to an average of 2.5% a year between 1991 and 1994. This was a huge decrease from 5.3% recorded during 1986-1990. However, there was increase in economic growth after 1994 due largely to better macro-economic policy stance of the government, and an increase in the price of oil in the world market. This growth lasted until 1997 but could not be sustained in 1998 because there was still an over-reliance on oil revenue, which decreased as a result of oil price fluctuation in the international market. The reform of economic policy was a major focus of Nigerian governments in the 1990s. To this end, some committees were established to help formulate economic policy. One such committee is the Vision 2010 Committee, which was constituted in November 1996. The Committee was tasked with identifying and analyzing the reasons for Nigeria’s poor economic performance below potential level. Another term of
68 reference for the Committee was to develop a blueprint to realize such potential by 2010. Consequently, the Committee came up with some findings and concluded that the dominant role of the public sector should be reduced in order to improve the economic situation of the country. In this regard, the private sector of the economy needed a boost to make it more viable, dynamic and attractive to foreign investors. As a result of the Vision 2010 Committee findings, the Federal Government of Nigeria in 1998 announced a “Guided Privatization and Commercialization Policy” aimed at reducing government overarching involvement in the ownership and management of public enterprises. In the new arrangement, government’s equity in the privatized enterprises should not exceed 40%. The first phase of this privatization arrangement would focus on reducing government monopolies in electricity, telecommunication, petroleum refining, coal and bitumen mining, chemicals, and tourism development. The government argued that if properly implemented, this first phase of the privatization process would bring foreign investment, and enhance the efficiency level in these establishments. As privatization of government owned enterprises was gaining momentum, government also undertook import liberalization that involved significant tariff reduction. According to a 1998 WTO Trade Policy Review for Nigeria, import liberalization undertaken in 1995 significantly reduced tariff rates and reliance on quantitative restrictions. Only ad valorem tariffs are used. Import duties consist of a basic rate of customs duty modified by an annually set rebate, plus a 7% surcharge. Applied duties average 23.5% on an unweighted basis in 1998, with some exceeding 100%. The highest levels of duty are levied on consumer goods, with lower rates on intermediate and capital goods.” In January 1998 the government abolished excise duties levied on domestically produced goods.
Consequently, it was argued that the removal of excise duties without corresponding adjustment to the tariffs on import products that are competing with domestically produced ones is another way of promoting protectionism. Most domestically produced
69 goods and services and imported ones attracted a 5% value-added tax (VAT), which provided government with up to 6% revenue in 1998. Imports constitute about two-thirds of VAT revenue (WTO, 1998). Import ban was another area of concern and challenge for Nigeria. It had stood as an obstacle to the free flow of goods and services to Nigeria (USTR, 2006). Calls for the federal government to do something about this problem increased in the 1990s and is still ongoing. Since the early 1980s, Nigeria has practiced import prohibition on a number of goods with the reason that it wanted to achieve better balance-of-payments as contained in Article XVIII:B of GATT. Goods affected by this import prohibition included maize, vegetable oils, wheat flour, sorghum, millet, gypsum, kaolin, barites, bentonites, mosquito repellant coils, and plastics. But in 1996 the Committee on Balance-of- Payments Restrictions for WTO considered such import bans as not justifiable under GATT’s 1994 balance-of-payment rules. Following this development, Nigeria’s reaction then was a proposal to eliminate all import bans by 1997. From this initial reaction, Nigeria later in February 1998 shifted to another proposal for a five-year phase-out program for such import restrictions. But this shift in position was considered by members of WTO as inconsistent with WTO rules. However, in March of 1998, Nigeria informed WTO Committee on Safeguards that the import prohibitions on products such as wheat flour, sorghum, millet, gypsum and kaolin were in place for safeguard reasons, but promised to remove them as soon as possible. Since then, Nigeria has not fully eliminated import restrictions especially its ban on some products. In addition to this setback, importation into Nigeria was also faced with arduous bureaucratic process and duplication of clearing agencies, which needed serious government attention. To ease the cumbersome process of import documentations, and multiplicity of agencies involved in the clearing of imported goods, which have proved daunting for importers, the government recognized the importance of some changes in this area. Before this new initiative of finding a solution to port congestion, it was common to see several agencies operating at the Nigerian ports and collecting different levies, some of which were illegal. As noted by the WTO Report, “Several agencies operating at the ports also appear to impede trade flows: the authorities estimate that illegal discharging levies increase the cost of imports by up to 45%.” As a result of this, according to the
70 WTO Report, “large volumes of trade are being diverted to neighboring ports and a significant share of Nigeria’s regional trade takes place on an informal basis.”36 This situation compelled the government to initiate reforms within the customs unit and general port clearance. The reforms include measures to computerize customs procedures by introducing Automatic System for Customs Data Entry. These reforms were aimed at making clearance of goods easier and facilitating the decongestion of the ports. Another area that attracted government’s attention in its effort to create a better business environment in the country is the intellectual property rights. The issues of greater concern here are the patent and trade mark rights. To address the concerns expressed about the enforcement of intellectual property rights, the government reviewed and amended the Counterfeit and Fake Drugs Act of 1990 and created a Federal Task Force on Counterfeit and Fake Drugs. In addition, government introduced more stringent registration measures and licensing requirements in order to combat the importation of fake, expired and dangerous drugs, food, beverages, tobacco, and chemicals. Most of these measures taken by the government have been described as a step in the right direction although there are still many areas that need reforms.
Sectoral Performance in the 1990s The various sectors of the Nigerian economy performed differently in the 1990s. The energy sub-sector witnessed significant and dynamic export growth. Due to the continued increase in the prices of crude oil and natural gas, the energy sub-sector received greater attention by the government. However, this sub-sector also had some policy issues that were not very favorable to foreign investors, and some that created internal crisis especially in the product availability and distribution. For instance, policies such as import licensing, exclusive import rights, administered pricing, and restrictions on foreign commercial presence limited foreign investments. Also the producer and consumer subsidies provided by government policy affected the prices of petroleum products within the country. Pump prices of gas and other petroleum products were relatively cheaper in Nigeria compared with other countries due to the government
36 WTO Trade Policy Review: First Press Release, Secretariat and Government Summaries, Nigeria: June 1998. Available online at http://www.wto.org/english/tratop_e/tpr_e/tp75_e.htm
71 subsidies on petroleum products. Consequently, any attempt by the government to remove such subsidies, and thus raise the pump prices of petroleum products were met with some resistance from organized labor. Although the Military Governments increased prices from time to time, they did so with great caution. The agricultural sector still accounts for over 41% of GDP and two-thirds of employment.37 According to World Bank estimates, agricultural GDP increased at an annual rate of 2.9% in 1990-98. 38 However, the sector had suffered from protracted neglect, and sometimes receives very little government attention. Thus, agricultural production and export decreased in a significant way in the 1990s. For instance, two and half decades ago, Nigeria was producing over 300,000 tons of cocoa per annum, but this has currently declined to about 180,000 tons. In a similar vein, Nigeria’s poultry production, which used to be the biggest in Africa with about 40 million birds per annum, has declined to about 18 million.39 Groundnut (peanut) and palm oil production has witnessed the same decrease. In addition to these problems, there were bans on importation and exportation of some agricultural products, which also affected the level of international trade flow between Nigeria and its trading partners. As noted by WTO Report, “a variety of agricultural exports, of which Nigeria could become a significant exporter have been or remain prohibited to encourage local processing or satisfy domestic demand. The lifting of the export ban on cassava tuber and products in 1996 was followed by a substantial increase in production, suggesting that the other prohibitions could be advantageously eliminated.”40 Import restrictions limit the availability of many agricultural and food processing equipments. Fishery in Nigeria is not well-developed and properly managed, thus limiting revenues that can be accrued from that. So, the adverse effects of these prohibitions are both internal and external. In other words, Nigerian government would sustain these prohibitions at its own disadvantage. The manufacturing sector witnessed some improvement following trade liberalization. For instance, the food, beverages and textile industries have made some
37 CIA’s factbook publication on Nigeria, 2006. Available online at http://www.cia.gov/cia/publications/factbook/geos/ni.html 38 “Opportunities in Nigeria's Agriculture Sector” 5reported in Nigeria Business Information, Reviewed 31st Oct. 2005. Available online at: http://www.nigeriabusinessinfo.com/agric.htm 39 Ibid. 40 WTO Trade Policy Review: First Press Release, Secretariat and Government Summaries, Nigeria: June 1998. Available online at http://www.wto.org/english/tratop_e/tpr_e/tp75_e.htm
72 progress. But other capital-intensive industries such as the aluminum and steel did not do well due to “construction delays, budget overruns, low capacity utilization, high costs, lack of working capital and, in many cases, plant closures.”41 The role of physical infrastructure in the growth of the Nigerian economy has been weakened as a result of poor maintenance and lack of initiative to build new ones. For example, basic infrastructure like road network, telecommunication, electricity, and railroad suffered severe neglect in the 1990s. It is recently under the Obasanjo administration that new measures are being taken to improve these basic infrastructures. I will discuss some of these reforms in the later part of this chapter. In the service sector like banking, there has been very significant reform. The banking industry in Nigeria has emerged from inefficiency and near bankruptcy to a very dependable, stable, viable and efficient institution. The bank consolidation policy of the Central Bank has created more formidable banks than ever before that can compete internationally (Adeleye, 2007). In fact, Nigeria has taken several steps toward integration with the world economy but there still are a lot that need to be done. In other words, the Nigerian business environment is improving.
Trade Relationship Before AGOA The U.S. relationship with Nigeria in the 1990s, especially during the military regime of General Sanni Abacha (1993-1998), was generally strained. This was due to the military government’s dictatorial stance on human rights and equal opportunity, which tended to alienate Nigeria from most of the developed world. This strained political relationship also affected adversely the economic or trade relationship of both countries. Although Nigeria was shipping crude oil to the U.S. during this period, bilateral trade and services flow suffered some setbacks. Export and import of agricultural and allied products between the two countries also suffered during this period. Following the death of Abacha in June 1998 and his replacement by General Abdulsalami Abubakar, a new phase of improved bilateral relations was opened. A more cordial relationship between the two countries was restored after a democratic transition under the leadership of Olusegun Obasanjo in 1999.
41 Ibid.
73 A closer look at the trade relationship between the U.S. and Nigeria in the 1990s when judged by the value of trade during the period reveals some levels of oscillation. Both import and export values increased and decreased in a less consistent way. Some years had fairly consistent trade figures while others saw un-even trade distribution. For instance, the value of U.S. export to Nigeria in 1992 was approximately $1 billion but this decreased to $894.7 million (approximately 20%) in 1993. It went down again in 1994 and 1995 to $509 million and $602.7 million (50% and 40%) respectively. The value then jumped to an average of about $800 million from 1996 to 1998 and decreased again to $627.8 million in 1999.42 Import value also oscillated but showed a modest increase and decrease for the period between 1990 and 1999. This is shown in Table 3 below.
Table 3 U.S. Trade in Goods with Nigeria in the 1990s Figures in Millions of U.S. Dollars YEAR EXPORT TO IMPORT FROM BALANCE OF NIGERIA NIGERIA TRADE 1999 627.9 4,385.1 -3,757.2 1998 816.7 4,194.0 -3,377.3 1997 813.0 6,349.4 -5,536.4 1996 818.4 5,978.3 -5,159.9 1995 602.9 4,930.5 -4,327.6 1994 509.0 4,429.9 -3,920.9 1993 894.7 5,301.4 -4,406.7 1992 1,001.1 5,102.4 -4,101.3 1991 831.4 5,168.0 -4,336.6
1990 553.2 5,982.1 -5,428.9 SOURCE: Compiled from U.S. Census Bureau, Foreign Trade Division, Data Dissemination Branch, Washington, D.C. 20233. Available online at: http://www.census.gov/foreign-trade/balance/c7530.html
42 The figures are extracted from the U.S. Bureau of Census’ import and export merchandise trade statistics. See http://205.207.175.84/vistausatrade/VitsaView/displayview.aspx
74 Looking at the commodity import and export for the 1990s, one observes that mineral fuel and oil constitute the bulk of U.S. import from Nigeria, and machinery and industrial equipments constitute the bulk of U.S. export to Nigeria. Agricultural products like cocoa, rubber, cereals, cotton, raw hides and skins, vegetable oil among others constitute agricultural import and export trade for both countries. Cereals are the major agricultural products that Nigeria imports from the U.S. while cocoa, rubber, raw hides and skins are the major agricultural products the U.S. imports from Nigeria. Among cereals, wheat constitutes the largest U.S. agricultural commodity export to Nigeria. Nigeria is the fifth largest purchaser of U.S. wheat (Table 4 shows this in more detail). Tables 5 and 6 show the different commodities and their values which the U.S. imported from and exported to Nigeria from 1992 to1999.
Table 4 Nigeria Cereals Import from the U.S. Figure in USD.
1992 1993 1994 1995 1996 1997 1998 1999 Year
Commodity
Wheat And 31,988,394 117,681,060 50,756,649 96,368,932 156,974,772 103,206,148 137,165,728 149,417,556 Meslin
Corn (maize) 879,991 622,000 5,800 614,016 10,000
Rye In The
Grain
Barley
Oats 22,219
Rice 261,636 31,103 178,716 295,958 351,523
Grain 114,576 2,281,193 Sorghum
Buckwheat, Millet & 39,628 9,977 Canary Seed; Cereals Nesoi
75 SOURCE: U.S. Import and Export Merchandise trade statistics. Compiled by US Bureau of the Census: Foreign Trade Division
Table 5 U.S. Commodity Import from Nigeria Figures in USD.
Year 1992 1993 1994 1995 1996 1997 1998 1999
Commodity
All Commodities 5,102,501,855 5,301,428,198 4,429,921,038 4,930,438,081 5,978,270,839 6,349,425,982 4,193,978,000 4,385,127,121
Mineral Fuel, Oil Etc.; Bitumin Subst; Mineral 5,057,499,916 5,222,498,971 4,364,438,792 4,865,097,692 5,927,551,948 6,313,996,730 4,165,566,383 4,360,693,595 Wax
Rubber And Articles 15,745,045 18,162,773 17,812,150 24,947,622 24,358,990 12,129,960 3,872,434 721,327 Thereof
Cocoa And Cocoa 13,365,179 24,991,159 20,971,835 10,461,945 5,054,550 6,037,863 4,384,653 3,385,620 Preparations
Fish, Crustaceans & 5,567,245 5,307,530 3,317,456 3,129,915 1,042,118 826,550 518,986 240,836 Aquatic Invertebrates
Special Classification 2,484,192 11,293,458 4,179,909 2,505,860 2,868,307 1,608,263 2,435,531 3,776,212 Provisions, Nesoi
Vehicles, Except Railway 1,402,635 56,000 Or Tramway, And Parts Etc
Cotton, Including Yarn 976,433 34,566 473,961 1,688,578 1,253,447 1,834,349 3,237,653 659,024 And Woven Fabric Thereof
Wood And Articles Of 855,939 1,959,375 325,682 417,494 589,409 647,439 1,052,086 1,088,961 Wood; Wood Charcoal
Lac; Gums, Resins & Other 654,878 74,214 1,088,210 1,032,442 1,035,817 654,625 496,124 936,522 Vegetable Sap & Extract
Ores, Slag And Ash 639,623 317,134 142,117 2,251,062 1,211,846 1,427,680 714,793 549,310
Apparel Articles And Accessories, Knit Or 501,114 8,537 139,948 8,660 6,165 952 42,322 8,534 Crochet
Coffee, Tea, Mate & Spices 494,341 283,781 215,397 162,729 280,632 750,427 942,855 390,438
Plastics And Articles 334,570 834,042 30,188 26,592 3,549 123,465 92,275 1,009 Thereof
76 Year 1992 1993 1994 1995 1996 1997 1998 1999
Commodity
Works Of Art, Collectors' 292,191 529,316 1,223,747 547,355 1,254,946 2,606,840 3,758,549 4,591,807 Pieces And Antiques
SOURCE: U.S. Import and Export Merchandise trade statistics. Compiled by US Bureau of the Census: Foreign Trade Division
From Table 6, one can observe that the value of the U.S. import of some agricultural products like cocoa, which is a major cash crop in Nigeria, decreased from $13.3 million in 1992 to $3.3 million in 1999. Import of apparel articles and accessories which was valued at $0.5 million in 1992 decreased to $0.008 million. In Table 6 below, one can as well see that the value of U.S. export to Nigeria was dropping from $1.1 billion it was in 1992 to $6.8 million in 1999. The reverse is what one would have expected given that there was inflation; and given that in 1999 good economic relationship trade was being restored following the inauguration of a civilian government in May of that year.
Table 6: U.S. Commodity Export to Nigeria 1992-1999 Figures in USD
1992 1993 1994 1995 1996 1997 1998 1999 Year
Commodity
All Commodities 1,001,147,739 894,736,462 509,060,933 602,780,117 818,358,702 813,073,122 816,827,753 627,822,713
Nuclear Reactors, Boilers, 436,625,198 311,511,564 245,208,102 168,131,514 357,358,976 327,528,811 331,024,540 177,215,649 Machinery Etc.; Parts
Electric Machinery Etc; 89,340,234 77,643,277 29,532,456 36,918,076 26,512,176 34,727,212 42,474,706 37,413,680 Sound Equip; Tv Equip; Pts
Ships, Boats And 69,448,526 61,526,309 7,312,116 40,113,401 15,011,976 102,220,436 42,747,418 65,085,458 Floating
77
1992 1993 1994 1995 1996 1997 1998 1999 Year
Commodity
Structures
Vehicles, Except Railway Or 67,690,842 52,808,153 39,443,504 23,225,689 24,059,637 22,151,113 22,991,316 31,456,094 Tramway, And Parts Etc
Plastics And 46,266,025 27,326,869 12,293,476 42,168,941 24,240,777 42,378,800 33,637,941 13,585,342 Articles Thereof
Cereals 32,868,385 118,479,483 50,756,649 96,630,568 157,011,675 103,998,880 137,461,686 152,070,249
Articles Of Iron 32,297,631 26,288,472 13,636,999 28,076,812 47,862,635 26,548,388 40,734,842 12,266,558 Or Steel
Optic, Photo Etc, Medic Or 26,863,788 17,476,301 10,648,812 13,915,970 13,346,032 12,622,059 22,263,461 8,693,844 Surgical Instruments Etc
Essential Oils Etc; Perfumery, 21,079,723 17,292,692 8,797,411 12,073,953 6,916,970 5,392,728 5,107,872 6,892,343 Cosmetic Etc Preps
Mineral Fuel, Oil Etc.; Bitumin 14,800,718 38,284,541 1,034,568 15,727,289 17,288,881 40,777,805 28,911,811 24,786,501 Subst; Mineral Wax
Miscellaneous Chemical 14,569,048 18,357,618 4,902,892 10,201,610 9,969,203 18,029,668 15,508,227 8,785,113 Products
Special Classification 13,410,864 14,284,534 8,465,788 7,454,136 8,866,874 8,042,099 10,645,385 10,319,485 Provisions, Nesoi
Animal Or Vegetable Fats, 11,780,251 8,353,358 8,295,203 11,499,917 14,130,535 2,041,700 3,739,837 9,391,254 Oils Etc. & Waxes
Tobacco And Manufactured 10,995,230 7,658,491 6,973,792 7,338,452 3,613,801 6,272,642 7,043,961 6,439,734 Tobacco Substitutes
78 SOURCE: U.S. Import and Export Merchandise trade statistics. Compiled by US Bureau of the Census: Foreign Trade Division
Different factors contributed to the rise and fall in the volume and value of traded goods between the U.S. and Nigeria in the 1990s. One major factor was the political instability of the 1990s especially the instability created by the annulment of June 12, 1993 Presidential Election by the military government of General Ibrahim Babangida. With the coming into power of General Sani Abacha the political atmosphere in Nigeria became unfriendly to the international community, which also affected economic relationship with other countries (Lewis, 1999). In addition, the Abacha Government maintained import prohibitions on certain agricultural and non-agricultural products. Most of these import prohibitions affected the U.S. import from and export to Nigeria and vice versa. Thus, trade with the U.S. as with other countries stagnated, and investment in trade and services slowed down. So, the trade relationship between the U.S. and Nigeria in the 1990s was characterized by uncertainty and disincentives for increase in trade flow between the two countries. This pattern of trade relationship did not change until the civilian government came into power in May of 1999. As would be expected, since the transition to democracy in 1999, Nigeria and the U.S. have continued on the path to sustainable political and economic partnership. This has enhanced the volume and value of trade between the two countries. Coincidentally, AGOA was introduced in 2000 barely one year after the inauguration of a democratic government in Nigeria. As will be seen in subsequent sections of this chapter, the trade between the two countries has witnessed slight growth in areas other than the obvious trade in oil. So, the discussion in this section will focus on the nature of the U.S.-Nigeria trade relations since 2000 when AGOA scheme was introduced.
The U.S.-Nigeria Trade Relationship Since AGOA According to a document from the Office of the United States Trade Representatives on the U.S.- Nigeria trade relationship under AGOA, Nigeria is the U.S. largest trading partner under AGOA preference program.43 Overall trade between Nigeria
43 “Notes on Nigeria and AGOA” made available to me by the Office of U.S. Trade Representatives, Washington, D.C.
79 and the U.S. increased modestly from 2000 to 2003. But in 2005, the trade flow between the two countries increased substantially, and since then trade is continuing to increase. In 2005, U.S. imports from Nigeria under AGOA were valued at $22.5 billion, up from $15.4 billion in 2004. This upward trend continued in 2006. The rise in agricultural exports from Nigeria under AGOA in 2006 was encouraging. As indicated by the Office of U.S. Trade Representatives (USTR), the first quarter of 2006 witnessed an increase in agricultural exports of almost 300 percent from what it was the same period in 2005.44 There are several potential growth areas for diversification that have been highlighted in the AGOA Competitiveness Report prepared by USTR in July 2005. These potential growth sectors include: - Agriculture, fisheries, and agro processing, including cocoa, cashews, and sesame. - Manufacturing, including leather products. - Minerals and metals, including tantalum and niobrium ores. The value of trade between the U.S. and Nigeria from 2000 to 2006 is summarized in Table 7 below:
Table 7: U.S. Trade with Nigeria Since 2000 Figures in U.S. Dollars (approximated to the nearest million) YEAR EXPORTS TO NIGERIA IMPORTS FROM BALANCE OF TRADE NIGERIA
2000 721.9 10,537.6 -9,815.7 2001 955.1 8,774.9 -7,819.8 2002 1,057.7 5,945.3 -4,887.6 2003 1,016.9 10,393.6 -9,376.7 2004 1,554.3 16,248.5 -14,694.2 2005 1,621.2 24,239.4 -22,618.2 2006 2,059.9 25,706.4 -23,646.5
SOURCE: Compiled from U.S. Census Bureau, Foreign Trade Division, Data Dissemination Branch, Washington, D.C. 20233. Available online at: http://www.census.gov/foreign-trade/balance/c7530.html
44 Ibid.
80 Table 7 presents a different pattern from what we saw in the tables for the 1990s. The export column indicates increase in the value of export over time. For example, export value rose from $721.9 million in 2000 to $2.05 billion (250%) in 2006. This is a huge increase in six years. Likewise, the import column indicates a great increase for the six-year period although there is a slight decrease in the value of import in 2001 and 2002. This could be attributed to the activities of AGOA which have created better economic environment through some reform initiatives. But looking at the figures for the period, one observes that import value more than doubled--from $10.5 billion in 2000 to $25.7 billion (150% increase) in 2006. To get a sense of which products witnessed increase in export and import, it is important to look at Tables 8 and 9 that list commodities and their values for export and import for the period between 2000 and 2006.
Table 8 U.S. Commodity Export to Nigeria 2000-2006 Figures in USD
2000 2001 2002 2003 2004 2005 2006 Year
Commodity
All Commodities 721,803,395 955,063,541 1,057,765,943 1,016,861,767 1,554,314,906 1,621,181,459 2,230,798,010
Nuclear Reactors, Boilers, Machinery Etc.; 251,055,059 344,937,099 339,583,118 265,168,806 575,959,178 378,488,351 686,169,159 Parts
Cereals 151,902,374 217,882,148 263,776,021 269,241,711 391,370,694 519,380,137 459,976,847
Ships, Boats And 65,225,979 20,241,575 19,848,382 12,085,549 12,660,517 12,399,029 12,549,288 Floating Structures
Vehicles, Except Railway Or Tramway, 31,772,141 53,779,015 39,547,936 80,291,672 87,192,875 140,424,293 252,554,381 And Parts Etc
Electric Machinery Etc; Sound Equip; Tv Equip; 29,753,829 72,422,751 90,204,815 116,751,085 125,297,878 117,477,503 194,986,542 Pts
Plastics And Articles 18,696,877 21,363,897 22,103,939 19,863,131 39,351,579 40,266,188 73,196,019 Thereof
81
2000 2001 2002 2003 2004 2005 2006 Year
Commodity
Articles Of Iron Or Steel 16,720,372 26,444,174 30,165,191 17,773,953 35,515,625 29,855,669 67,192,648
Aircraft, Spacecraft, 16,189,450 21,423,370 50,451,852 40,396,454 56,275,868 146,511,015 68,233,909 And Parts Thereof
Special Classification 14,494,234 11,434,590 13,041,168 11,502,890 25,991,684 20,313,971 36,403,288 Provisions, Nesoi
Miscellaneous Chemical 11,266,635 16,410,008 12,691,330 10,276,848 12,717,096 22,672,033 34,914,913 Products
Tobacco And Manufactured Tobacco 11,155,020 8,398,718 7,703,843 9,037,685 8,412,049 7,175,099 8,947,099 Substitutes
Mineral Fuel, Oil Etc.; Bitumin Subst; Mineral 10,901,427 15,959,506 26,965,575 13,894,912 23,834,241 27,575,349 111,084,252 Wax
Animal 0r Vegetable 7,994,207 7,056,141 15,813,794 16,190,854 15,721,347 17,808,121 6,909,134 Fats, Oils Etc. & Waxes
Printed Books, Newspapers Etc; 7,771,356 13,807,277 9,788,975 7,211,728 10,278,041 7,776,594 11,730,019 Manuscripts Etc
SOURCE: U.S. Import and Export Merchandise trade statistics. Compiled by US Bureau of the Census: Foreign Trade Division
Table 9 U.S. Commodity Import from Nigeria 2000-2006 Figures in USD
Year 2000 2001 2002 2003 2004 2005 2006
Commodity
All 10,537,620,482 8,774,837,744 5,945,387,628 10,393,591,566 16,248,524,885 24,239,356,731 27,916,439,321 Commodities
Mineral Fuel, Oil Etc.; 10,505,568,458 8,744,231,971 5,911,227,229 10,325,671,258 16,202,790,121 24,132,063,000 27,868,144,954 Bitumin Subst; Mineral
82 Year 2000 2001 2002 2003 2004 2005 2006
Commodity
Wax
Ores, Slag 15,278,554 11,881,159 712,859 33,225 633,219 And Ash
Special Classification 3,440,330 3,533,628 11,609,910 11,832,818 19,034,791 33,146,090 14,223,245 Provisions, Nesoi
Works Of Art, Collectors' 2,888,857 1,282,912 1,764,723 1,720,690 3,181,957 4,993,341 3,636,862 Pieces And Antiques
Food Industry Residues & 2,270,344 5,103,485 3,431,563 3,876,737 5,682,563 4,693,703 6,194,667 Waste; Prep Animal Feed
Organic 1,287,616 2,892,513 4,290,432 Chemicals
Special Import Provisions, 1,013,025 920,324 574,893 991,086 1,587,429 2,329,441 2,802,719 Nesoi
Wood And Articles Of 816,040 402,233 338,061 351,351 356,578 449,559 243,432 Wood; Wood Charcoal
Rubber And Articles 813,749 235,545 434,868 4,766,374 3,193,399 9,501,789 Thereof
Lac; Gums, Resins & Other 811,804 555,673 67,000 710,223 914,740 3,432,830 2,351,606 Vegetable Sap & Extract
Raw Hides And Skins (no 497,666 1,688,506 1,193,672 302,829 166,211 1,508,703 600,286 Furskins) And Leather
Cotton, 420,854 122,170 36,615 273,518 172,105 3,039 25,805 Including
83 Year 2000 2001 2002 2003 2004 2005 2006
Commodity
Yarn And Woven Fabric Thereof
Coffee, Tea, 311,184 292,066 291,211 509,593 1,006,308 1,472,149 918,451 Mate & Spices
Cocoa And Cocoa 290,988 1,042,070 8,189,430 39,886,708 1,488,442 48,696,586 1,784,814 Preparations
SOURCE: U.S. Import and Export Merchandise trade statistics. Compiled by US Bureau of the Census: Foreign Trade Division
From Table 8, it can be seen that nuclear reactor, heavy equipments, machinery and chemicals made up the highest value of U.S. export to Nigeria. Agricultural commodities constitute less than one-quarter of the export trade value. Of the total $721.8 million worth of U.S. export commodities to Nigeria in 2000, only $15.9 million (about 2%) is for agricultural commodities. Out of a total of approximately $2.2 billion worth of U.S. export commodities to Nigeria in 2006, only approximately $467.9 million (less than 25%) is for agricultural products. Under import, Table 10 shows that solid minerals and oil constitute the bulk of U.S. import from Nigeria between 2000 and 2006. Out of a total commodity import valued of $10.53 billion, minerals and oil account for $10.50 billion (more than 99%). All other commodities (agricultural and non-agricultural) account for only $0.03 billion or $30 million (less than 1%). This is of interest to this research given that AGOA targets increase in agricultural commodity trade between the U.S. and participating Sub-Saharan African countries. From what we have seen in Tables 8 and 9, one can say that the value of trade in agricultural products showed some increase between 2000 and 2006 ($15.9 million to $30 million). But this increase in the value of agricultural products is not significant when compared with the value of energy products the U.S. imported from Nigeria within the period. In other words, under AGOA, there have been signs of improvement and increased incentives for better and enhanced trade relationship between Nigeria and the
84 U.S. but the targeted sector is yet to show real improvement. The increase in trade figures is a reflection of the overall expansion of Nigeria’s economy. It is encouraging that in 2005, the Nigerian economy had a 5.8 percent growth rate, including a rebound in the agricultural sector that helped boost growth in the non-oil sector by 8.2 percent.45 However, what these figures do not tell us is the reason behind the increase we have observed. Since we are interested in the possible influence of AGOA in this regard, we cannot say without further investigation what role AGOA scheme might have played in the changes. Consequently, it is pertinent to highlight the changes occasioned by AGOA. In order to do this, we have to examine the AGOA implementation in Nigeria.
AGOA Implementation Status in Nigeria Implementation Efforts When the AGOA was enacted, the U.S. Government articulated the major benefits of the scheme for the participating African countries. As compiled by the Nigerian Federal Ministry of Commerce, the benefits of AGOA can be summarized as follows: a. Duty-free treatment and quota-free access of all exports to the U.S. from the beneficiary country up to 30th September, 2008 (this has been extended to 2015); b. Duty-free treatment for export of Sub-Saharan African Apparel, some of which may be made with Sub-Saharan textile and yarn as against apparel for suppliers from a non-AGOA beneficiary country which will continue to attract regular tariff duties averaging 17.5% of the value of the apparel products; c. Establishment of U.S. Sub-Saharan African Trade and Economic Cooperation Forum which institutionalized a presidential and cabinet level dialogue between the U.S. and the countries of Sub-Saharan Africa; d. Expanded support from the Overseas Private Investment Corporation (OPIC) and the U.S. Export-Import Bank that will increase the interest of
45 Notes on Nigeria and AGOA” made available to me by the Office of U.S. Trade Representatives, Washington, D.C.
85 American exporters and investors in undertaking projects in Sub-Saharan Africa.46 In preparation for the implementation of AGOA in Nigeria, the Federal Government considered certain reforms necessary. Given the listed benefits, the Nigeria Government, as part of its efforts to revamp the ailing Nigerian economy and to position Nigeria for the AGOA benefits, began a process of implementing some economic and political reforms. The reforms were aimed at improving the dilapidated infrastructural facilities, and the restructuring of political and economic institutions. As indicated in the Ministry of Commerce Report on AGOA Implementation in Nigeria, the “Administration has also made concerted efforts to upgrade and develop the facilities at the sea ports and airports to meet with the timeliness of deliveries in export business, as well as remove bureaucratic red-tapism on customs, ports and aviation procedures” (2003: 3). As we could see in the previous sections of this chapter, in addition to developing a new trade policy that is consistent with the emerging challenges in the global economy, the Federal Government of Nigeria is also refining its import and export policies, while at the same time putting in place modalities for government creation/establishment of Free Zones. Specifically, the new Free Zones policy intends to cater for commercial activities, transshipment, or free port services and industrial processing to add value for both export and domestic markets (Federal Ministry of Commerce, 2003). Creating an enabling business environment is also a concern for the government. Recognizing that business thrives in an atmosphere of good governance and political stability, the government pursued the policy of transparency, due process in government business, and war against corruption. As a practical step in this effort, the government constituted the Independent Corrupt Practices Commission, with the objective of fighting corruption at all levels in the country. In addition, the government created the Economic and Financial Crimes Commission (EFCC) aimed at curbing economic and financial crimes both at the public and the private sectors of the economy. The activities of these
46 The enumerated benefits are contained in a document entitled “African Growth and Opportunity Act (AGOA): Brief and Implementation so Far in Nigeria” prepared by the Federal Ministry of Commerce, Abuja, Nigeria in June, 2003.
86 Commissions have led to the indictment, prosecution, and incarceration of some government official involved in stealing and graft practices. Cases of recovery of stolen government funds have been recorded (Nkwazema, 2007; Uwugiaren, Owete and Offor, 2007). In July 2006, Nigeria was removed from the Financial Action Task Force list of Non-Cooperative Countries and Territories (USTR, 2007). To ensure a better implementation of AGOA, the Federal Government of Nigeria, in June of 2000, inaugurated a ten member National Implementation and Advisory Committee on AGOA, with the Minister of Commerce as Chairman, and the representatives of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the Manufacturers Association of Nigeria (MAN) and Small Scale Industrialists as active members from the private sector.
The Duties & Responsibilities of the National Implementation and Advisory Committee on AGOA As part of its duties, the Implementation and Advisory Committee on AGOA embarked on mobilization and sensitization of all the stakeholders with the aim of making sure that they are fully prepared for, involved in and benefit from the scheme. To devolve the duties of the Committee, and diversify its activities, the Implementation and Advisory Committee was created at the state government level. Thus, Committees were created in the 36 States of the Federation and the Federal Capital Territory (FCT). The States and FCT Committees were expected to develop strategies to ensure that enterprises in each state and the FCT are mobilized to take advantage of the trade and investment opportunities provided by the AGOA. To make their work easier, each Committee has four sub-committees, namely: textile and apparel, footwear/leather products, agriculture and other products like granite (Ministry of Commerce, 2003). Since its inauguration, the National Committee has organized several seminars and workshops across the country to sensitize the AGOA stakeholders. The United States Agency for International Development (USAID) and the U.S. Embassy have also helped the National Implementation Committee in organizing and sponsoring some workshops and seminars on how Nigeria can take advantage of the AGOA provision to expand its export market and improvement of its export products. For instance, in July 2005, the
87 U.S. Commercial Service (CS) Nigeria and the Nigerian-American Chamber of Commerce organized and promoted a three-city seminar and workshops to create awareness of AGOA in Nigeria. CS Nigeria provided guidance for the event, working closely with the Nigerian-American Chamber of Commerce and the West African Trade Hub (WATH). As reported by the Office of USTR, during these seminars, the Senior Commercial Officer in Nigeria also gave speeches on AGOA and participated in several other AGOA-related events, including the African World Expo in Lagos in August 2005. “He briefed the business community and U.S. companies at this event on how to leverage CS Nigeria’s resources to facilitate bilateral trade and investment, including AGOA related expertise and travel assistance” (USTR Comprehensive Report, 2006: 65). Furthermore, in collaboration with the U.S. based consultant, Manchester Trade Ltd, the National Implementation Committee has developed a comprehensive Strategic Export Plan for the AGOA. The Strategic Plan is aimed at: (1) identifying products and export-ready companies under the GSP and the textile and apparel benefits, (2) conducting market surveys, (3) promotion and marketing products, and (4) identification of products and companies in the U.S. as well as the review and production of promotional materials.47 In order to implement the Strategic Export Plan, the consultants carried out a national tour of some selected companies in the textile, leather/footwear, garment manufacturing, and agricultural sectors in the country. The companies visited by the consultants were selected based on a nationwide survey conducted by the various Sub-Committees. The Ministry of Commerce and Industry has encouraged active participation of the private sector by funding special trade delegations to the USA, South Africa, Mauritius, and some South Asian countries. In the delegations were manufacturers in the footwear/leather products, textile and apparel and other products (granite) sectors (Ministry of Commerce, 2003). According to the Ministry of Commerce, “such trade missions have served as linking points between the potential Nigerian exporters and the U.S. importers on the one hand, and Nigerian exporters and importers from the rest of the world on the other” (Ministry of Commerce, 2003: 6). Other results of these trade missions have started manifesting. For instance, the CIBI (a granite company based in
47 Ibid, p. 5.
88 Kaduna) has received orders from the U.S. companies; and a footwear company in Aba, Abia State, has made exports to the U.S. In accordance with the recommendations of the Implementation Committee, the Nigerian government has made some efforts in creating an enabling environment for local industries to survive. These efforts have been demonstrated by putting in place anti- dumping measures especially aimed at imported textiles from China, which in recent times has flooded Nigerian markets and sold at prices below the actual cost of production. In the view of the Ministry of Commerce, it is envisaged that these measures would allow for optimum capacity utilization of Nigerian companies thereby generating more jobs. In cooperation with the AGOA implementation efforts by the Nigerian government, the United States Agency for International Development (USAID) has also conducted a survey on export opportunities for Nigerian manufacturers in textile-based sewn products. The survey report served as a good guide for formulation of business plans for those interested in garment manufacturing. The National Implementation Committee has paid much attention to the potentials that exist in textile industry especially apparel manufacturing, which is seen as a “gateway” industry toward a nation’s industrialization. With the securing of visa for apparel following the passage of enabling AGOA Act under the amendments to Customs and Excise Management Act (CEMA) by the National Assembly, the stage is set for the industry to re-position itself for viability. The government in response to the recommendations of the National Implementation Committee on AGOA, has embarked on the pursuit of foreign direct investments (FDI) in the garment and footwear sectors with countries such as China, Sri Lanka and Bangladesh that have well-developed manufacturing base in these industries. In addition to above-discussed activities, the National Implementation Committee on AGOA also identified some of Nigeria’s commodities that have great promise and opportunities under AGOA. Such products include: coffee, cocoa beans, shelled and processed cashew nuts, gum Arabic, ginger, sesame seeds and cassava. Some of these products have started making their way into the U.S. market especially the cashew nuts. Another agency apart from the National and State Implementation and Advisory Committee that has played some useful role in AGOA implementation is the Nigerian
89 Export Promotion Council (NEPC). The NEPC was established through the promulgation of the Nigerian Export Promotion Decree No. 26 of 1976. It was formally inaugurated in March of 1977. The Act establishing the NEPC has been amended by the subsequent administrations. The last amendment was in 1992 through Amendment Decree No. 64, which was aimed at enhancing the performance of the Council by minimizing bureaucratic bottlenecks and increasing its autonomy in dealing with members of the Organized Private Sector (Nigeria Export Promotion Council, 2006). The main vision of NEPC is to make the non-oil export sector a significant contributor to Nigeria’s gross domestic product (GDP). Given that this mission statement is in congruence with the AGOA provision, the NEPC has played crucial role in AGOA implementation. Some of its major contributions in this regard which are also part of the Council’s activities can be summarized as follows: a. Promotion of the development and diversification of Nigeria’s export trade. It helps in identification of new areas and products that Nigerian manufacturers can take advantage of by conducting research on these products. Under AGOA, the NEPC has done a lot of awareness campaign for export trade diversification. a. Assistance in promoting the development of export-related industries in Nigeria. b. Spearheading the creating of appropriate export incentives. c. Coordination and monitoring of export promotion activities in Nigeria d. Collection and dissemination of information on products available for export. e. Collection and dissemination of local manufacturers and exporters information on foreign markets. f. Organization and planning of Nigeria’s participation in trade fairs and exhibition in the U.S. Recently Nigerian exporters have participated in three of such trade fairs. g. Cooperation with other AGOA stakeholder institutions on matters relating to export financing, export incentives and specialized services to exporters engaged in export promotion publicity. h. Helping AGOA exporters to find solutions to technical and other related problems they encounter in the process of exportation.
90 General Results so Far There have been results on a positive note from the efforts of the different stakeholders as presented above. It is true that U.S. trade with Nigeria is dominated by oil products but there are signs of increase in trade of other products especially agro-based ones. Following AGOA implementation, there have been visible benefits and increase in export to the U.S. of various agricultural products and small quantity of textiles from Nigeria. For instance, oil seed, starch, frozen shrimps, gum Arabic, cocoa beans, cashew nuts, etc are making their way into the U.S. market in a way that was never seen prior to AGOA. In 2003, Nigeria recorded exports of Gum Arabic totaling 1,053 tons to U.S. which is valued at US935 million (Sasore, 2005). Also, in 2003 Nigeria exported 32 tons of manioc starch to the U.S. which is valued US$18,016. As pointed out by Sasore, both Ghana and Nigeria exported manioc starch to U.S. in 2003, although Ghana’s export was lower than Nigeria’s export of the product to U.S. (32 tons for Nigeria as against Ghana’s 29 tons), in value terms Ghana’s starch was higher at US$862 per ton as against Nigeria’s US$563 per ton. This indicates the need for Nigeria to increase its quality of the product to attract better value in the U.S. (2005: 13, 14). Nigeria’s participation in the Boston Sea Food Show in the U.S. in March of 2007 has cleared the way for export to begin for the product in the U.S. Currently, Nigeria is a major exporter of shrimps to the E.U. The U.S. is a potential large market for this product. So, with the license now secured for the companies that export shrimps to do so in the U.S., the gains will soon start manifesting (Nigeria Export Promotion Council, 2007). Exporters of cashew products are witnessing increase in their exports as a result of new processing plants built in response to AGOA incentives. In textile, there are also some notable improvements in export (David, 2003). In 2004, the U.S. Department of Commerce announced a $7.4 billion non-oil export trade value with Nigeria for the first nine months of 2003, which was against the $4.3 billion recorded for the whole of the preceding year, 2002. According to the statement, “Nigeria emerged one of three top winners from trans-Atlantic trade through AGOA” (Nigeriafirst, 2004: 1). But this report did not elaborate on the specific non-oil products that constitute these export trade values.
91 Notwithstanding the results so far, and despite all the efforts by the National and States Implementation Committees on AGOA, and the assistance by the NEPC as discussed in the preceding section, there are still many obstacles and problems faced by the Nigerian business community as far as positioning itself for the AGOA gains. Some of these implementation challenges are worthy of discussion here.
Major Challenges of AGOA Implementation in Nigeria It is important to note that there are many challenges to export-led growth and diversification in Nigeria. These challenges have also affected AGOA implementation in Nigeria. Many of these challenges have been enumerated in the USTR “Notes on Nigeria and AGOA”48 and the Report on AGOA implementation by the Nigerian Ministry of Commerce. These challenges include: 1. Uncertain business environment, including limited access to capital, nearly lack of long-term credit to manufacturing establishments to enhance capacity building and expansion, high cost of inputs, and difficulties in enforcing contracts; 2. Infrastructure, including lack of good road network, poor telecommunication network, inadequate power supply, rail networks, and port facilities. Irrespective of government seeming efforts to address these infrastructural problems, the situation is yet to stabilize as to generate optimum capacity utilization of manufacturing establishments; 3. Regulatory, including lack of government transparency (which to some degree is now being addressed); 4. Labor, including labor market inflexibilities and lack of skill labor for diversification; 5. Absence of anti-dumping laws to protect the economy from the damaging effects of all sorts of importations which are unfairly sold at prices below the manufacturing costs;
48 This note was made available to me via e-mail from the Office of United States Trade Representatives in Washington, DC. It highlights the major issues in bilateral trade between the U.S. and Nigeria with regard to AGOA implementation in Nigeria.
92 6. The need for drastic measures by Nigerian industrialists to shift their industrial strategies from the traditional import substitution to export-oriented industrialization strategy; 7. Intellectual property rights (IPR) issues. In the words of a representative from the Office of USTR, “Nigeria is Africa’s largest market for pirated products. Although, I understand that some of this problem is because the Nigerian Copyrights Commission lacks the necessary resources to significantly stem IPR violations in Nigeria.”49 8. Inadequate funding of AGOA activities by government and particularly non- release of fund to enhance the takeoff activities of the Nigeria Apparel and Footwear Project (NAFP) and coordination with State Committees on AGOA. As indicated in the Ministry of Commerce Report, there was no release of funds to the National Implementation Committee on AGOA in the second half of the year 2001 and the whole of year 2002; and 9. The delay by the National Assembly in passing the bill on AGOA under amendments to Customs and Excise Management Act (CEMA) CAP 84 of 1999, until May 2003, slowed down and affected a great number of activities of the National Committee on AGOA. To summarize this chapter, one has to note the salient points made. First, the nature of U.S.-Nigeria trade relations reflect the political situation under a given government—trade decreased more between the two countries when there was political instability especially during the military regime. Trade relations between the two countries improved under the civilian administration which coincided with the period of AGOA. Second, U.S. trade relation with Nigeria in the 1990 was characterized by disincentives that decreased trade flow between the two countries. But this pattern of trade relations changed with the coming into power of a democratic government. Third, under AGOA, the trade relation is showing positive signs of improvement both in the volume of trade and diversification of traded items. The AGOA implementation review shows that on a general note not much has been achieved especially with the AGOA targeted sectors—textile and agriculture. The real cause of the increase in trade witnessed
49 Office of USTR, “Notes on Nigeria and AGOA,” p. 2.
93 so far is very complex to ascertain given the coincidence of democratic governance and the enactment of AGOA. One can argue that it was as a result of the democratic governance in Nigeria that created a more favorable environment for increase in export and import trade with the U.S. It can also be argued that AGOA, given its eligibility conditions, encouraged to a significant the implementation of some of the economic reforms that helped in trade growth. So, the two situations in combination with other factors undoubtedly have contributed to export growth being witnessed in Nigeria since 2000. Having seen the implementation status and challenges as articulated from the Nigerian Ministry of Commerce and the Office of the United States Trade Representatives, it is pertinent also to present the interview results on the AGOA implementation status and challenges in Nigeria. This is the focus of the next chapter
94 Chapter Three References Adeleye, S. (2007) “17 Nigerian Banks Among World Top 1,000 – Soludo” Saturday Independent, February 17. CIA’s factbook publication on Nigeria. Available online at http://www.cia.gov/cia/publications/factbook/geos/ni.html. David, M. (2003). “Nigeria Cotton and Products Annual 2003,” USDA Foreign Agricultural Services Gain Report #N13017, Lagos. Federal Ministry of Commerce (2003) “African Growth and Opportunity Act (AGOA): Brief and Implementation so Far in Nigeria.” A Report from FMC, Abuja, Nigeria in June, 2003. Lewis, P (1999). “Nigeria's Economy: Opportunity and Challenge” Issue: A Journal of Opinion, Vol. 27, No. 1, pp. 50-53. Nigeria Export Promotion Council, (2006). “Nigeria: Trade Mission to USA.” Abuja: NIPC. ----- (2007). “The Boston Sea Food Fair,” A Handbook Prepared by NIPC Abuja, Nigeria. Nigeriafirst (2007). “AGOA: Nigeria Export Hits $7.4 b” Available online at: http://www.nigeriafirst.org/article_2089.shtml Nkwazema, S. (2007). “We’re closing-in on Dr. Olusola Saraki, SGBN – EFCC” This Day, Friday January 26, 2007. Sasore, G. M. (2005). “Trade Opportunities under AGOA.” A Paper Presented at the Conference on Agricultural and Food Situation and Trade Opportunities in Nigeria in Kano, Nigeria on the 26th-27th of May 2005. USTR, (2007). “2007 Comprehensive Report on U.S. Trade and Investment Policy Toward Sub-Saharan Africa and Implementation of the African Growth and Opportunity Act.” Available Online at: http://www.ustr.gov/assets/Trade_Development/Preference_Programs/AGOA/as set_upload_file762_11294.pdf USTR, (2006). “National Trade Estimate (NTE) Report on Foreign Trade Barriers.” Available Online at: www.ustr.gov/Document_library/Reports_publications/2006 Uwugiaren I, Owete, F. and Offor, C. (2007). “EFCC corruption list: Atiku sues Ribadu.”
95 Daily Independent, Thursday, February 8, 2007. WTO (1998). “Trade Policy Review: First Press Release,” Secretariat and Government Summaries, Nigeria.
96 CHAPTER FOUR INTERVIEW RESULTS ON AGOA
In this research, interviews were conducted through a questionnaire completed by respondents who were identified based on their knowledge of the AGOA. Questionnaires were completed between March and April of 2007 by individuals from the Ministry of Trade and Industry of Nigeria, Nigerian Export Promotion Council, Office of the Special Adviser to the President of Nigeria on AGOA, the U.S. Embassy in Nigeria, the West African Trade Hub (WATH), Nigeria-American Chamber of Commerce, the Nigerian Textile Industry, and the Nigerian Cashew Industry. Individuals from these agencies were selected because of the role each of the agencies or establishment plays in trade-related issues in Nigeria. It is pertinent to give a brief description of the trade role of each of these bodies. 1. The Ministry of Trade and Industry: In Nigeria, this ministry is responsible for the coordination of trade-related and industrial matters both internal and external. Most international trade and businesses, and the establishment of medium and large scale industries in Nigeria are screened and coordinated by the Ministry of Trade and Industry. Although the procedure involves obtaining a registration of business with the Corporate Affairs Commission (CAC) and operating license from the body that the enterprise belongs such as bank of Nigeria (which requires license from the Central Bank), insurance (from National Insurance Commission), etc., it is this ministry that issues guidelines and regulation for FDI and internal investments in Nigeria in the areas of trade and industrial establishments. AGOA’s first port of calls in Nigeria should be the Ministry of Trade and Industry. 2. The Nigerian Export Promotion Council (NEPC): NEPC is responsible for the promotion of non-oil export in Nigeria. Since AGOA aims at trade diversification especially in areas other than oil, that makes NEPC a crucial agency and stakeholder in AGOA’s implementation in Nigeria. In fact, the NEPC has played a leading role in promoting AGOA implementation in
97 Nigeria more than any other body. Some of its activities with regard to AGOA have been discussed in chapter three. 3. Office of the Special Adviser to the President of Nigeria on AGOA: This office was created with the purpose of giving the President up-to-date information on AGOA and its implementation and impact in Nigeria. The Special Adviser to President Obasanjo on AGOA, Mrs. Gladys Sasore, who also is the CEO of Nigeria Export Promotion Council, has been involved in a lot of promotional campaign for AGOA through public presentation, leading of delegates to international trade fairs in the U.S. and other places to ensure AGOA’s success. 4. The U.S. Consulate General in Lagos, Nigeria: The U.S. Consulate General in Lagos has a commercial section that helps in coordinating trade and businesses between the U.S. and Nigeria. This office gives out vital information to the U.S. entrepreneurs, exporters and importers who are interested in doing business in Nigeria. The Embassy has helped in several ways to promote trade between the U.S. and Nigeria. It coordinates the U.S. technical assistance (TA) and trade capacity building (TCB) programs in Nigeria, and promotes U.S. trade policy initiatives. It also serves as a resource for Nigerians thinking about doing business with U.S. companies. This makes it an AGOA stakeholder with valuable research information. 5. West African Trade Hub (WATH): WATH operates under USAID's Regional Program to increase trade and economic activities within the West African sub- region. The program is funded by USAID’s African Global Competitive Initiative. WATH consists of two trade hubs, one in Dakar, Senegal and another in Accra, Ghana for the countries in West Africa. Nigeria falls under WATH. Similar trade hubs exist in East, Central and South Africa for countries within those sub-regions. These trade hubs coordinate AGOA related trade initiatives for Sub-Saharan Africa. The U.S. Government has coordinated its technical assistance, trade capacity building and workshops for the AGOA participating countries in each sub-region through the trade hubs.
98 In other words, WATH is a very important agency in the effective implementation of AGOA scheme. 6. Nigeria-American Chamber of Commerce: This chamber of commerce is a joint organization between Nigeria and the U.S. for the promotion of commerce and trade flow between the two countries. It regulates trade practices and provides over sight on trade activities between the two countries. Consequently, it has a stake in AGOA implementation, which makes it a resource for data collection on AGOA in Nigeria. 7. Textile and Cashew Industries: As the case study industries, there is obviously the need to collect data from individuals belonging to these industries. Since these industries are targeted under AGOA as potential beneficiaries, obtaining their views on how AGOA has impacted them is pertinent in this research effort. In all, 16 questionnaires were administered. Three persons were interviewed from NEPC, two from the Ministry of Commerce and Industry, one from the office of the Special Adviser to the President on AGOA, one from the U.S. Consulate General in Lagos, one from WATH, one from Nigeria-American Chamber of Commerce, three from the textile industry and four from the cashew industry. In others, at least one person completed. The questionnaire was prepared in English and the respondents completed the items in English as well. A copy of the questionnaire is found in Appendix A. The questionnaire items were designed to cover two broad aspects of the inquiry: General Questions and Case Study or Industry-Specific Questions. The general questions cover items organized under three major sub-headings, namely: (1) knowledge and procedures issues, which seek to elicit response about the level of respondents’ knowledge of AGOA provisions and its procedures; (2) questions about sovereignty/ideological issues, which were meant to elicit responses about the ideological perceptions of the respondents concerning the AGOA scheme; and (3) questions about Nigeria’s response to AGOA, which were designed to find out what Nigeria has done to position itself to benefit from AGOA provisions, what challenges it has encountered in the process, and what needs to be done to overcome the challenges.
99 For the case study or industry-specific questions, items were organized under the two industries (textile and cashew) being studied as illustrative cases. Under textile industry, questionnaire items covered issues about the state of the textile industry prior to and under AGOA, and its future prospect. Under cashew industry, items were designed to elicit responses from respondents about the general state of the industry with regard to its response to AGOA. The questions covered under the two illustrative cases were meant to assess the impact of the AGOA scheme on the non-oil sector of the Nigerian economy. It should be noted contrary to the expectation of the principal investigator, that almost all the respondents showed great willingness to complete the questionnaire, and showed their readiness to offer more information as long as such is within their knowledge. The principal investigator had expected to see hesitation on the side of the respondents to complete the questionnaire or volunteer further information given that trade issues sometimes are seen as very sensitive, and touches upon a country’s national interest. But this was not the case. Instead, respondents were willing to refer the investigator to other individuals they know may have valuable information and different perspectives from theirs. Even on short notice, those who the investigator were referred to completed the questionnaire willingly, and offered answers to follow-up questions by the investigator. However, respondents did not complete items in the questionnaire that they did not understand or feel comfortable to complete. This is the reason for seeing less than the total number of 16 respondents in some of the questions responded to. In general, the investigator saw greater cooperation from the respondents than he expected. Perhaps, the major reason for this level of cooperation is that the respondents do not consider such information as very sensitive, and had been assured that their identity is protected. Also, given the democratic atmosphere, one is entitled to his/her opinion on any national issue. Another reason is that many people in Nigeria both ministry workers and those in the private sector want to see positive changes in the economic, political and social life of Nigerians. Any information they can volunteer that has a potential to effect policy changes for the better, will be given without hesitation. In every office I entered, people talk about their desire for change in Nigeria. Many are not satisfied and are tired with the status quo.
100 Before presenting the case study or industry-specific findings, let us first of all, present the interview results from the general questions category which address the knowledge, procedure, sovereignty/ideological, and implementation issues.
Knowledge & Procedure Issues The knowledge questions deal with the degree to which respondents feel that the Nigerian government and the business community (manufacturers, exporters and importers) understand the key concepts and procedures involved in AGOA. On the question of whether the Nigerian government and entrepreneurs understand the key concepts and procedures involved in AGOA, there were mixed responses. While majority of the respondents say “yes, to an extent” others say “no” but made a distinction between the government and the private businesses. To those in this second group of respondents, while the government officials seem to have good knowledge of the provisions of AGOA, the private businesses are yet to understand the concepts, and procedures of AGOA. For example the respondents from the Ministry of Commerce and Industry and the NEPC believe that the government officials understand the AGOA concepts and procedures but do not think that this is so with the private businesses that should be on board with the AGOA scheme. On the question of whether the Nigerian government feels that it has enough information and skill to handle AGOA implementation, only two respondents: one from the Office of the Personal Adviser to the President on AGOA, and another from WATH said “yes.” Other respondents to this question from the NEPC, Ministry of Commerce and Industry, U.S. Consulate General in Lagos, Nigeria-American Chamber of Commerce, and the private industries said “no.” They think that the government does not have enough information and skilled personnel both within its circle and among the private business community to deal effectively with AGOA implementation. About the complexity of the procedures, the respondents are almost equally divided in their responses. While some say that the AGOA procedures are complex for the Nigerian government and business community to understand, others do not see any complexity in the AGOA provisions. Those who agree that the procedures of AGOA are
101 complex to understand are respondents from the private sector industries, the Ministry of Commerce and Industry, and one of the respondents from the NEPC. Responding to the question: “Does AGOA truly create new business?” a uniform “yes” answer was received from each of the respondents. In other words, the general feeling from the respondents is that AGOA truly creates new business. From the follow- up discussions on this response, there were no expressions of doubt in the minds of respondents that AGOA truly presents opportunities for new businesses. On the question of the extent to which the Nigerian entrepreneurs and business community are aware of the opportunity offered by AGOA, the responses reflected varied levels of awareness and suggestion for increase in awareness campaigns. For instance, the response from one of the NEPC respondents runs thus: “Some are aware but majority do not understand what they stand to benefit from it.” Another respondent from the NEPC, in his response to this question says: “Millions of investors in Nigeria are not aware of the enormous business opportunity provided by AGOA. Therefore, more campaign is necessary.” According to a respondent from the Ministry of Commerce and Industry, the Nigerian entrepreneurs and business community are aware of the opportunity offered by AGOA “to the extent of sensitization and mobilization campaigns embarked upon in the forms of seminars, workshops and media advertorials by the Ministry of Commerce and NEPC in some cases.” The response from the U.S. Commercial Service, U.S. Consulate, Lagos, reads: “To a very large extent. Local exporters have been approaching our office for contact information of the prospective U.S. buyers.” According to a representative of the textile company, “we in the textile industry are aware that AGOA can enhance our export vision but we are yet to fully understand the nuances involved in the apparel rules of origin and other conditionalities.”
Sovereignty/Ideological Issues Some writers especially those belonging to the civil society organization have criticized AGOA as another imperialistic tool by the U.S. to control the poor and weaker states of Sub-Saharan Africa (Kotz, 2003; Seegobin & Collen, 2002; Lallah, 2003a & 2003b; Shomade, 2004). Given this stance, the questions under this sub-heading were
102 designed to draw responses from the respondents whether they agree with such ideological views and why they think that the Act is important or not. In answer to the question about the extent to which they agree or disagree with the assertion that the ideology that informed the AGOA eligibility conditions is purely imperialistic, only two out of the eleven who responded to this question agree somewhat with the assertion. Others absolutely disagree with the assertion. One of the respondents who somewhat agrees with this assertion expressed it thus: “That is true for a few government officials I have had the opportunity of talking with. However, the ordinary local entrepreneur sees the legislation as one Africa needs to applaud the U.S. Government for as it provides immense opportunities for wealth creation and economic development.”50 The other in this group responded in this way: “I agree. Some of the eligibility conditions are aimed at achieving the U.S. aims on how countries should be governed.”51 But the rest of the respondents see it differently. One of those who did not agree with the assertion writes: “I do not agree with the assertion. I am one of those with the view that conditions for eligibility are developmental in nature—political stability, social justice, rule of law and economic upliftment are good for African countries.”52 Another respondent who does not agree with the assertion puts it thus: “I don’t agree: it’s based on the best principle that guide and promote growth and development; America is one of the best economies in the world today.”53 Other respondents who disagree with this assertion simply describe it as “doubtful.” Almost all the interviewees responded with one of these expressions: “No,” “Not at all,” and “Absolutely not,” to the question: “Does AGOA bring U.S. interference in Nigerian affairs?” One put his own response in a more elaborate way: “I do not think so. It rather enhances job creation on a large scale if properly implemented.” Another question that bothers on sovereignty or ideology: “Do you think that any aspect of the eligibility conditions undermines Nigerian sovereignty?” received a “No” or “I don’t think so” answer from all the twelve respondents who completed this item of the
50 The response is made by the representative of the U.S. Commercial Service, U.S. Consulate General, Lagos, Nigeria. 51 Response is made by a respondent from the NEPC, Abuja. 52 This is the response by Chief Administrative Officer (Multilateral Trade), Federal Ministry of Commerce, Nigeria. 53 Response by the Export Desk Manager, NEPC, Abuja.
103 questionnaire. The same general “No” or “I do not think so” answers were received for the questions: “Do Nigerians feel that AGOA is another effort by a more powerful country to impose its values on a less powerful one under the guise of trade opportunity?” and “Can AGOA be considered as another instrument of control by an advanced country over less-developed countries of Africa?” respectively. So, the general feeling among the respondents is that AGOA is not an imperialistic policy. Another question under ideological issues which received similar pattern of responses but expressed in different ways is “To what extent do you consider AGOA a benign, benevolent, fair trade policy by the U.S.?” Twelve respondents completed this item. One of the respondents writes: “To a large extent. On one hand, African exports enjoy tariff-free entry into the U.S. and on the other hand, the legislation provides incentives for attracting foreign investments into African countries especially manufacturing activities, thereby creating employment opportunities.” Another respondent put it thus: “To some extent; it results in loss of custom revenue for USA.” Two respondents from the NEPC expressed their opinions on this question in the following ways: (1) “It opens numerous investment opportunities to African countries, by removing barriers i.e. tariffs on commodities and products from African countries so that they will be able to compete with other countries. It’s really not fair to developing countries in Asia and Latin America” and (2) “It’s an opportunity for trade though in some ways the U.S. seeks to use its eligibility to keep some countries in check. More so, since it is unilateral it can be withdrawn at any time.” The three respondents to this question from the textile and cashew industries consider the legislation as “fair” and “benevolent.” The ideological section of the questionnaire also probed into the importance of the Act to Nigeria and other Sub-Saharan African countries at this point in their socio- economic and political development. Some of the responses to this questions are worthy of mention. A respondent from the U.S. Consulate General in Nigeria writes: “The conditions for AGOA country eligibility would even be helpful for creating the right environment internally to attract foreign investments and spur local enterprise.” Another respondent from the Federal Ministry of Trade asserts: “The policy is important at this point in view of the Nigeria’s and indeed Africa’s export drive of non-oil products.” A
104 textile company respondent says: “It provides opportunity for increased exports, job creation and economic development.” Another answer provided by a respondent from NEPC reads “It affords our companies the opportunity to enter U.S. market.” This answer is similar to another respondent’s who says “It makes it possible for investors to easily access the U.S. market.” To ascertain the importance of PTA beyond trade expansion, a question was asked about what advantages other than increase in trade AGOA offers to Nigeria and the U.S. Respondents have several opinions on this question. According to one of them, “Other advantages aside of increase in trade for both Nigeria and the U.S. include cultural cooperation and understanding, technical assistance projects/programs, diplomatic ties, etc. Another respondent puts it in another way: “there is improvement in trade relations, technological know how; increase in foreign exchange earnings, and emergence of new products.” Other advantages identified by respondents include: “enhanced diplomatic relations,” and “attraction of foreign direct investment (FDI).”
General Response and Implementation Issues The general reaction to the question about how Nigeria has responded in its implementation of AGOA is that Nigeria has been slow in its response. Some rate the response so far as “Poor” and “inadequate” but others look at it somewhat differently. As one respondent from the Ministry of Commerce puts it, “Nigeria is not moving fast enough to take advantage of the AGOA, the first phase of which terminates by 2008.” Another response from NEPC simply indicates: “slow but there is progress.” Only one respondent from the West African Trade Hub (WATH) responded in the affirmative by describing the response as “positive.” On whether the response so far could be described as satisfactory or not, there is a general indication from the respondents that the response cannot be described as “satisfactory.” Some respondents gave further insight into their indications. “Not satisfactory. Available data on non-oil AGOA exports to the U.S. shows Nigeria has a very insignificant size,” says a respondent from the cashew industry. In a similar vein, another respondent the Ministry of Commerce and Industry writes: “No, oil and energy products still form the bulk of our export to the U.S. markets.” Giving a different reason,
105 another respondent from the U.S. Consulate in Lagos indicates: “Not satisfactory. The private sector is not doing enough to take advantage of the process.” But the only respondent from WATH who described the response as positive, also went ahead to explain that he considered it satisfactory “because of the daily inflow of clients to the Nigeria AGOA resource centre.” Answering the question about the challenges that limit Nigeria’s full implementation of AGOA, the respondents mentioned most of the implementation challenges described earlier such as lack of adequate basic infrastructure, import bans especially on textiles, and security concerns. In addition however, most of the respondents identified lack of technical knowledge of the AGOA requirements, and administrative bottleneck as part of the challenges. It was also conjectured that not having the necessary skills required to tap into AGOA opportunity could be a setback in the implementation. But the respondents maintained that Nigerians have the basic needed skills but lack the enabling environment to put their skills into use. Another challenge to the effective implementation of AGOA which some of the respondents acknowledge is on the part of the U.S. Government, which according to them, has created trade barriers and challenges through some of its stringent technicalities, sanitary and phytosanitary standards (SPS) for agricultural products, and rule of origin for textile. In their judgments, some of these SPS are trade restrictive given that the entrepreneurs in Nigeria are not thoroughly equipped to effectively deal with these rules and technicalities. On whether AGOA has spurred inter-African cooperation among beneficiary countries, and among Nigerian businesses, most of the respondents answered “yes.” They contend that within Nigeria, cooperation among businesses has been witnessed. “At least producers of agricultural and agro-allied products now meet under the banner of Natural SPS Committee to produce to acceptable international standards,” writes one of the respondents from the Ministry of Commerce. Another respondent from the NEPC cited the example of the entrepreneurs in the textile industry who have grouped together to ship African prints to the U.S. But there was mixed reaction to the question about whether AGOA has spurred new businesses in Nigeria. This question is in line with the argument by proponents of PTAs that they create new businesses. Opinion on this question is
106 divided among respondents with half of them saying that AGOA has spurred new businesses while others do not agree. One of those who agree that AGOA has helped in creating new businesses writes: “Yes, a typical example is the tendency for garment industries trying to come up which otherwise have been non-existence.”54 A respondent who disagrees with the view that AGOA has helped to spur new businesses, was more willing to say instead, that it improves existing ones. Another issue of interest to the investigator is the success status of the response to AGOA in Nigeria. To this end, one of the questionnaire items assessed the AGOA response success so far. All respondents to this item said yes; that Nigeria has made some success in its response to AGOA so far. They identified some levels of success in some areas namely: (1) Government’s implementation of country eligibility conditions; (2) folkloric and handmade fabric products of category 9 certification being introduced into the U.S. market; (3) Nigerian companies trade missions to the U.S. which have resulted in securing orders to export products to the U.S., and (4) Some export of agricultural products has started under AGOA provision. As a representative of the Office of USTR puts it, “We are encouraged by the significant rise in agricultural exports under AGOA from Nigeria through the first few months of 2006. Through March 2006, agricultural exports are up almost 300 percent from the same period last year.”55 Although some areas of success could be identified, there is a general feeling among the respondents that overall, the success is not very significant. On which specific industrial sector in Nigeria is AGOA considered a success and why, responses were varied, some of the respondents mention the oil sector, because that is where the largest U.S. investment in Nigeria is. Some stated that the textiles and garment industries have registered some success, but that potentials exist for success to be recorded in hides and skin/leather products, and agriculture and solid mineral sectors. For instance, there is an establishment of the AGOA Garment Training Center in Nigeria that is now functional. But one respondent argues that there is no non-oil sector that could be considered a success yet. In their general view, the agricultural sector needs
54 Statement is from a respondent from the Ministry of Commerce & Industry, Nigeria. 55 Statement is contained in page 3 of a response by a representative of the Office of USTR to an interview with the investigator through a note sent to the investigator via e-mail on October 27, 2006.
107 greater attention to overcome transportation logistics, and shipment conditions that limit it from meeting up with U.S. standards. To understand how solutions to the identified AGOA implementation challenges are being sourced, some questions were raised. The questions have to do with whether or not the U.S. and the Nigerian Governments are offering solutions to the problems faced by Nigerian entrepreneurs in AGOA implementation. First, on the side of the U.S., most of the respondents agreed that the U.S. Government is rendering some assistance through the West African Trade Hub (WATH).56 The U.S. has also helped in organizing training activities for Nigerian AGOA stakeholders. For example, there have been customs training for Nigerian Customs and business community; training on shea butter, handicraft, and specialty food organized by the U.S. Government through WATH. Second, the Nigerian Government is assisting in ensuring that AGOA is a success story in Nigeria through the services of Nigerian Export Promotion Council (NEPC). However, some respondents feel that Nigerian Government still needs to do more especially in terms of availability and affordability of business capital through bank loans. A representative of the U.S. Embassy in Nigeria in his response suggests that the Nigerian Government should strengthen and sufficiently equip government agencies responsible for commerce and industry, to help local companies (especially SMEs) interested in exporting, to take full advantage of the opportunity.” According to him, if only 5% of SMEs in Nigeria could be hand-held through the AGOA process, Nigeria’s economy would experience some change. In the view of the respondent from the Federal Ministry of Commerce and Industry, “Nigerian government should ensure that the business environment is conducive in terms of adequate provision of infrastructure, especially electricity supply, easy access to finance for producers to ensure quality
56 WATH operates under USAID's Regional Program to increase trade and economic activities within the West African sub-region. The program is funded by USAID’s African Global Competitive Initiative. WATH consists of two trade hubs, one in Dakar, Senegal and another in Accra, Ghana for the countries in West Africa. Nigeria falls under WATH. Similar trade hubs exist in East, Central and South Africa for countries within those sub-regions. These trade hubs coordinate AGOA related trade initiatives for Sub- Saharan Africa. The U.S. Government has coordinated its technical assistance, trade capacity building and workshops for the AGOA participating countries in each sub-region through the trade hubs. In other words, WATH is a very important agency in the effective implementation of AGOA scheme.
108 production in conformity with international standards.” Other views in this regard include: (1) Government procurement of new machinery for the targeted industries that need such machinery to access AGOA opportunity; (2) government and business community’s should be more export-oriented in their vision for economic growth of the country; (3) Provision of trade incentives by reducing interest rate to single digits; (4) Educating and enlightening of investors on the benefits of AGOA; (5) lift ban on textile so that apparel companies can get access to materials they need to produce garments and other textile products; and (6) establishment of a trade hub in Nigeria, and provision of more opportunities for trade missions/participation in trade fairs to U.S. by Nigerian entrepreneurs; and (7) aggressive drive towards capacity building, and implementation of friendly economic and social policies. Having presented the findings on the status and implementation challenges of AGOA in Nigeria, which indicated some progress made, obstacles encountered, and suggestions for improvement on a general level, there is need also to look at the industry- specific cases in order to illustrate how the non-oil sector has fared under AGOA in Nigeria given its trade diversification promise.
Industry Specific Cases A. Textile Industry in Nigeria Background: The Nigerian textile industry is a strategic non-oil industry for Nigeria. From the 1960s through the 1980s, the industry was vibrant, and used to be the second largest in Africa, after Egypt (Yarns & Fibers, 2006a). Until recently it provided about 25% of total employment in the country. But employment in the textile industry decreased, from 137,000 jobs in 1997 to 37,000 in 2006, or by almost 73% over the last 10 years, caused mainly by the large increase in illegal imports of textile products that made the companies in the industry less competitive. Although the Nigerian textile industry has suffered a great downsizing in recent past after the closure of some 28 companies and subsequent loss in jobs, it is still the largest employer in the manufacturing sector after agriculture and the oil industry (Kassim, 2007). The decreasing trend in the industry’s employment level can be seen in Figure 1 below:
109 Figure 1: Employment statistics of the Nigerian Textile Industry (1996-2006)
137 000 128 000
115 000
97 000
83 000 *figures given by ntma 72 000 60 000 50 000* 37 000*
- 73%
1996 1997 1998 1999 2000 2001 2002 2003 2006
Source: NTMA,Gherzi
Measures to Revitalize the Textile Industry When AGOA came, it found the industry almost moribund. But the awakening that the legislation brought especially through its campaign about the potential benefits to textile industry in particular has gingered efforts at reviving the ailing industry. Since 2002, the Federal Government of Nigeria has launched different intervention strategies to bring back the textile industry to lime light, and make it viable to the opportunity created by AGOA (Yarns and Fibers, 2006b). The intervention strategies include: - Presidential Saturday Forum on Textiles—launched 2002; - Presidential Committee on Textiles—inaugurated in August of 2002; - UNIDO Textile Sector Study – carried out in November of 2003; - National Cotton Forum – inaugurated in April of 2005; - Cotton Development Committee – set up in September of 2005; - Cotton Rebirth Day – declared in June of 2006; - Cotton/Textile Revival Fund Committee – inaugurated in October of 2006;
110 - Presidential Standing Committee on Cotton & Textiles –inaugurated in December of 2006; - Cotton/Textile Revival Fund – created in February of 2007. Involved in these committees and study efforts are a broad array of stakeholders—Federal and State Governments, private sector at all levels of production and scale, and regulatory and research agencies. Their terms of reference were to find ways to arrest the decline the textile industry was facing, to enhance productive capacity of the industry at all levels of government, and to ensure that the industry is positioned for export growth. The efforts of these committees and research group have yielded results which have been summarized by Kassim (2007) as follows: • Interface with stakeholders resulted in less acrimony and more consensus among them; • Direct access to government at the highest level resulted in speedy decisions; • Addressing critical needs of the sector requiring government intervention such as fiscal policy (tariff review), export incentives, input and infrastructural needs, funds, international development assistance, etc.; • Addressing the challenges of smuggling and faking. Use this forum to draw attention to the issue of smuggling. (Nigeria’s mission at the WTO is tackling the issue of faking with China at bilateral level); • Addressing market access and improving competitiveness through the EPA and WTO. Locally promoting vigorously the use of MADE-IN-NIGERIA fabrics; • Identifying beacons of HOPE in a sector that had given up. Examples of WACOT (cotton), Malone King (embroidery) and Zaria Industries (tarpaulin) clearly show that there is light at the end of the tunnel; and • Establishment of the N80 billion (about $0.7 billion) Cotton/Textile Revival Fund (CTRF) with an anti-smuggling component. Part of the purpose of the fund is to enable textile companies exploit the untapped potentials of the sub-sector, and provide companies with the credit facilities they requires at a reduced interest rate (Yarn and Fibers, 2006b). This fund has been most laudable as part of government’s commitment to ensuring that the industry is revamped (Umoru, 2007).
111 Following the increase in the demand for cotton as a result of the gradual revitalization of the industry, the number of farmers in cotton production has risen (David, 2003). There are at present 250,000 cotton farmers in Nigeria employing 500,000 laborers (Kassim, 2007). It also has a larger prospect and opportunities for protecting 30,000 jobs at the textile value chain (although cotton is not directly part of the textile industry, it is part of the raw material for textile production). The sector if properly protected and given the necessary attention it deserves, could also secure captive markets of about 250,000 tons of raw cotton for growers as well as 20 per cent increase in industrial output (Adeniyi, 2007). In fact, through the Cotton Revolving Fund created by the Federal Government of Nigeria, there has been increase in cotton production to satisfy internal demand and for export. The fund helps in supplying farmers with pure seeds and agrochemicals for improved crop yield levels (David, 2003). Also Nigeria’s lint production increased from 85,000 tons in 2003 to about 100,000 tons in 2004. The increase in the price of lint and its production reflected a strong demand by local textile manufacturers and a significant increase in exports (David, 2003). Another financial incentive which has helped textile manufacturers in export is the Export Expansion Grant (EEG). Through the assistance from this fund, several textile companies have invested huge amount of money to expand their capacity. According to Textile Intelligence, with the EEG scheme, export of textile products had increased from US$25 million in 2002 to US$45 million in 2003 while the projection of US$79 million for 2004 was met.57 As David (2003: 2) puts it, “The Government of Nigeria’s Export Expansion Grant of 20 percent is encouraging increased export of Nigerian lint.” Since it was identified that increase in dumping of undocumented, cross-border imports of textile materials was the major cause of the decline of the textile industry in Nigeria, the Federal Government of Nigeria in October, 2002 announced the ban on importation of all printed fabrics (BBC News, 2002). In January 2003 the ban became effective, and import duty on other textile materials was increased from 65 percent to 75 percent. The government also directed that all allowable textile imports would only be through its two main Lagos ports—Apapa and Tin Can Island (David, 2003). In addition,
57 Textile Intelligence, “Nigeria appeals for resumption of export incentive scheme, assures cooperation” Friday, 20th August 2004.
112 the government beefed up its crack-down on smuggling of illegal textiles into the country through its land borders. When the U.S. government granted Nigeria the AGOA textile visa, the Nigerian government in reaction to the gesture, set up a committee of weavers and spinners in the textile industry so as to make the fullest of the growth opportunity (Textile Intelligence, 2004). In furtherance of its assistance to the Nigerian textile industry to benefit from AGOA textile provisions, the U.S. government has also selected Nigeria as the only AGOA country that qualifies for AGOA’s ethnic printed fabric benefits (USTR, 2006). Nigeria textile manufacturers have benefited from the participation in international trade fairs sponsored by the U.S. government. As a result of all these incentives, the Nigerian textile manufacturing sector has experienced growth after several years of decline (David, 2003). However, there is still a general feeling that the industry has a long way to go in its efforts to rebound. More of the assessment on the industry is made by the interview respondents, whose views presented in the next section.
Interview Results on Textile Industry As stated earlier, the questionnaire items for textile industry covered issues about the state of the industry prior to and under AGOA, and its future prospect. Ten respondents in all completed the industry-specific sections of the questionnaire. In other words, ten respondents answered the questions on textile and cashew industries. On the question of what the textile industry was like before the introduction of AGOA, almost all the respondents to this item agreed that the industry was on its downward path and near extinction. As one respondent puts it, “The activities of the textile industry were declining everyday before the introduction of the AGOA programme” (Representative of the Nigeria Textile Manufacturers Association). In the words of another respondent, “It was characterized by decreasing production, frequent lay-off of workforce, and nearly total collapse” (Respondent from the Federal Ministry of Commerce and Industry). This finding is in concord with what the literature on the industry is saying. In response to the question: “Do you think the industry has opportunity to grow under AGOA?” all the respondents said yes. But they suggested different conditions
113 under which this would be possible. Some of the respondents indicated that the industry could grow by producing products that feed the garment factories and also by re- channeling productions to garment manufacturing, and fabrics that would be in high demand in the U.S. market. This group of respondents also argued that given the number of Nigerians and other Africans in the U.S. who are in constant demand for Nigerian made garments, and the fact that Nigerian yarn is in high demand in the EU, were good signs that the market exist for Nigerian textile in the U.S. Other respondents view the possibility of the industry’s growth under AGOA as one that is hinged on infrastructural improvement, fiscal incentives, and supportive government policies. To them, these ingredients are necessary to revitalize the industry and position it for full AGOA gains. On the progress made so far since Nigeria secured AGOA visa for textile materials, some respondents point to the government’s “revitalization” exercise of the industry as a major step toward progress. They also acknowledged that many textile manufacturers were getting prepared to export their products to the U.S., and that the private sector had woken from sleep. Other respondents identified the shipment of containers of ethnic fabrics to the U.S. under the category 9 certification which had already begun as a progress indicator. Many of the AGOA implementation challenges as mentioned earlier in this chapter were also identified by the respondents as the challenges that the textile industry is facing in Nigeria. These challenges include: poor infrastructural facilities, unfavorable business environment, high interest rates, etc. Some respondents also mentioned quantity and quality of the produced textile fabrics for export, which sometimes, are below the competitive rate. In addition, packaging of Nigerian fabrics, updating of the production of African prints and lace materials, and lack of new machineries constitute another set of challenges for the textile industry. But these challenges in the view of all the respondents are surmountable. Among the suggested measures to address these challenges are, more enlightenment campaigns that target the private sector with the aim of making it more proactive in embracing the opportunity in textile business, provision of credit facilities with lower interest rates, being export-oriented, keeping abreast with other manufacturers and consumers abroad by attending international trade fairs exhibitions and establishing contacts with potential
114 buyers and distributors. Others include refurbishing of equipments and procurement of new machinery as a way to make the industry more efficient in its production. In predicting the future of textile industry in Nigeria under AGOA, these are the statements of two respondents which are not different from others: (1) “Many textile industries will improve on their production, since there exists an attractive market for the products in the U.S.; more export sales will be made, more employment will be created locally, and more Africans will have access to Nigerian fabrics abroad” and (2) “If the sector is deliberately supported and encouraged by government, and through AGOA textile incentives, it would drastically boost economic growth and reduce unemployment.”58 Having presented the status of the Nigerian textile industry from the secondary and primary data sources, it is pertinent at this juncture to look at the status of the Cashew industry and findings from the interviews that examined the industry’s state of affairs prior to and under AGOA.
B. The Cashew Industry in Nigeria The cashew industry is one of the agricultural industries in Nigeria that has attracted increased attention in recent times, especially with the AGOA scheme. Cashew cultivation originally started in Eastern part of Nigeria in the 1950s. Through the initiative of the then Eastern Nigeria Agricultural Development, cashew trees were planted as a way to check erosion menace in some part of the Eastern region where erosion was a great concern. When it was realized that cashew nuts could be a great source of income generation, both the Eastern and Western parts of Nigeria started the cultivation of the crop in a commercial quantity. Over the years, the cashew industry in Nigeria has developed into a significant revenue-yielding venture; it is now a source of foreign exchange earning for Nigeria. As summarized by Ezeagu (2002:10) “The first Nigerian cashew plantation dates back to 1954, with 800 hectares in the Western part of Nigeria. Its production did not greatly increase during the early 60s, with harvest not exceeding 200 tones. However, since the deregulation of the economy in 1986, its
58 The statement in (1) was made by a representative of the Nigerian Textile Manufacturers Association, while the statement in (2) was made by the representative of the U.S. Consulate in Nigeria.
115 production has substantially increased.” Under AGOA, the cashew is one of the agricultural export products that have attracted some investments.
Cashew Production in Nigeria Cashew, also known as Anacardium Occidentale L, (botanic name) is considered an important economic and environmental protection tree. It is a product that is useful for food, medicine, industrial applications, protection of erosion, and serves as shade against the scorching effects of the hot tropical sun (Ezeagu, 2002). The major cashew growing states in Nigeria are: Enugu, Abia, Imo, Anambra, Ebonyi and Cross Rivers States in the Eastern part of Nigeria. In the Western part of Nigeria, the major cashew-producing states include: Oyo, Osun, Ondo, Ekiti, and Ogun States. In the Middle Belt of Nigeria, Kwara, Kogi, Nassarawa, Benue, Taraba, Niger and FCT are known producers; while in the North-West, Sokoto and Kebbi States are major producers. In fact, the majority of export quality nuts come from the Western and Eastern parts of Nigeria (Ezeagu, 2002). According to Ezeagu (2002: 10) “The total surface under cashew cultivation in 1995 was estimated at 40,000 hectares, out of which about 60% were smallholdings and about 40% were large scale, commercial plantations.” According to 2001 survey report by the Nigerian Component of the West African Cashew Survey, much larger area has been planted with cashew between 1995 and 2001. In 2000, the cultivated areas in Nigeria had an annual average output of 176,000 tons of cashew nuts. Since then, the annual rate of production has increased. As reported by the Federal Ministry of Agriculture and Rural Development, Nigeria currently produces about 30,000 metric tons of cashew nuts annually from a total holding of 50,000 hectares. The hectares are planted with varieties whose yield is estimated at 1,000kg/hectare (Ezeagu, 2002). But a USAID (2002) estimates puts Nigeria production capacity of raw cashew at about 40,000 tons per year, most of which takes place on plantations and small holdings. Figure 2 below is a map of Nigeria showing cashew activities—production, marketing, shipping exportation, and processing—and areas.
116 Figure 2: Map of Nigeria showing cashew activities
SOURCE: Chemonics International Inc, 2002.
Cashew Processing in Nigeria Cashews are processed in Nigeria for local consumption and for export. Processing for local consumption was the practice prior to Nigeria’s deregulation in the 1980s which forced many industries to start looking beyond the local market. Consequently, processing plants have been built to process cashew kernels for export. The first processing plant for export was the one built by Premier Cashew Processing Industry at Oghe, in Enugu State of Nigeria (Ezeagu, 2002). In 1989, the factory was modernized with the installation of an ultra-modern Japanese technology which increased production to about 2000 metric tons per year. Also, in 1989, a processing plant was built in Owo, Ondo State, with a production capacity of 2,000 tons per year. The Owo factory first exported cashew kernels in 1990. In 1998, another plant was installed in Oyo State which has the capacity to process about 1,000 metric tons of cashew nuts per annum. The same type of plant with similar capacity was also built in Isolo, Lagos in 1998. There is also a factory with a 2,000 metric ton capacity plant built in Okigwe, Imo State, which also processes for export (Ezeagu, 2002).
117 Recently, other processing plants have continued to spring up making the processing capacity to also increase. For instance, in January 2007, the Governor of Kwara State in Western Nigeria inaugurated a new cashew factory to be run by international commodities giant, Olam Nigeria PLC. Its annual production of 5,000 tons boosts the country’s annual output to 16,000 tons for export, making Nigeria one of the leading cashew-processing countries in West Africa (Makunike, 2007). The U.S. is the world leading importer of cashew kernels seconded by the E.U. (Chemonics International Inc., 2002).
Efforts at Development of the Cashew Industry In addition to the efforts by the Nigerian government to accelerate food production and to increase the quantity and quality of export of industrial crops, other agencies such as USAID, Non-governmental organizations and professional bodies are implementing additional programs to develop the production and exports of cashew nut in Nigeria. Below is a summary of some of these programs as articulated in Ezeagu (2002: 8, 9): - National Accelerated Industrial Crops Production Program (NAICPP): This program which began in 1994 was aimed at stopping declining productivity of industrial crops, and to restore Nigeria’s previous position in food commodity export trade. For the cashew NAICPP project, the aim is to sensitize and encourage farmers to increase productivity by adopting improved cashew seedlings, farming mechanism and appropriate agro-chemicals. According to Ezeagu, since the start of the project, “a total of 1.1 million cashew seedlings with a value of about $50,000 have been distributed to farmers, and about 8,881 hectares of cashew holdings have been achieved” (2002: 8). - Rural Transformation Program: This program targets economic empowerment of the rural population through the development of food crops and small scale industries including cashew industry. - Cashew Development Program (Under Tree-Crop Development Program): The Federal Government of Nigeria (FGN) launched this program with the objective of achieving the following:
118 1. Rehabilitating and resuscitating less productive plantations and expansion of existing plantations; 2. Training of extension staff and farmers; 3. Providing and distributing inputs such as seedlings, agro-chemicals, etc. 4. Quality control at primary level; and 5. Strengthening the management information system in the cashew sector. This program targets improvement for a 4-year (2001-2004) which involves a total of 2,321 hectares of cashew plantation to be established, and the strengthening of research institute to develop a high-yielding, disease resistant, Brazilian cashew varieties for distribution to farmers, with a view to double the total annual output. - Food and Agricultural Organization (FAO) Technical Cooperation Program (TCP) for Tree Crops: FAO’s TCP is supporting major tree crops including cashew development in Nigeria. The support assistance has being in the areas of capacity building, seed multiplication, germplasm conservation among others. - USAID Tree Crop Program: The United States Agency for International Development (USAID) through its Tree Crop Program has chosen five agricultural products with export potential in Nigeria for assistance in their development. According to Ezeagu, “the criteria used for the selection of these products comprised their demand and export market trends, their supply constraints and potential, their competitiveness situation, the environmental impact of their cultivation and the employment generation, foreign exchange earning capacity, etc.” (2002:9). Cashew is one of the five agricultural products selected for this program. - Cocoa Research Institute of Nigeria (CRIN): This institute has done a lot of research in the area of large-scale development of cashew production in Nigeria. Research has been focused on: (a) selection and breeding of local types and introduction of improved varieties; (b) development of rapid methods of propagation; and (c) formulation of effective strategies for the control of pests and diseases, etc. So far, the CRIN has achieved a remarkable goal with its development of an improved variety of cashew known as “Brazilian Jumbo,”
119 which nuts mature as early as one year as opposed to the local wild varieties that mature after five years (Chemonics, International Inc., 2002). As noted by Ezeagu, “the local price for the new nut amounts to double of the existing varieties” (2002: 11). - The Nigeria Export Promotion Council (NEPC) and its Export Marketing of Cashew Products: NEPC coordinates various marketing activities aimed at promoting export of cashew nuts and kernels. These activities include: a. Organizing of and encouraging participation in trade fairs and exhibitions. Internationally, some of these trade fairs and exhibitions target the promotion of cashew products. For instance, exporters of cashew nuts have participated in exhibition organized in countries such as the U.S., Egypt, Japan, U.K. among others. NEPC provides free freight to a maximum of 100kg, 50% subsidy on air tickets, free space at exhibition stand and free local transport in the country of exhibition, for the companies participating in such fairs under the sponsorship of NEPC. b. NEPC provides exporters with Export Promotion Tools such as product profiles, product catalogues and brochures, posters (on specific product groups including cashew nuts) and digital media like CD-ROMs and website hosting. c. The NEPC provides up-to-date price indexes and cashew prices on local and international markets which has benefited many cashew exporters. With all these efforts geared toward improving the cashew industry, it is believed that the industry is better positioned for AGOA gains. The industry’s export performance under AGOA has been modest. Although the exports of cashew products have been fluctuating since the 1990s, a closer look at its overall performance shows relative improvement compared to other agricultural products. For instance, in 1990 Nigeria exported about 14,325 tons of cashew nuts at a cost of about $4.0 million, but in 1991 the export dropped to 12,580 tons. The highest export for the period between 1990 and 2000 was recorded in 1995 with the export of 16,938 tons of cashew, which amounts to $7.4 million. Table 10 below shows these figures in details.
120 Table 10: Exports of cashew nuts from Nigeria, 1990 – 2000 Year Quantity Value Average unit (ton) (US$ billion) value(US$/ton)
1990 14325 4.0 280.6
1991 12580 4.46 354.4
1992 12110 5.20 429.6
1993 13234 6.99 528.2
1994 12307 2.82 229.0
1995 16938 7.42 438.3
1996 12388 n.a* n.a* 1997 530 0.25 463.4
1998 13640 n.a* n.a*
1999 13136 3.41 259.4
2000 15000 7.02 467.7
Source: Federal Office of Statistics and the Nigerian Export Promotion Council *n.a - non available
As we can see from the Table, the year 2000 witnessed a greater increase after 1995 export record. The increase is attributed to international demand for cashew products. The figures for the period, 2001 to 2007 could not be obtained due to lack of publication. The major exporters of cashew nuts are: Olam Nigeria Plc., an Indian-owned Trading House with offices located in London and Singapore; Premier Agro Oil Nigeria Ltd.; and Century Exports Ltd. Among these companies, Olam Nigeria Plc., currently
121 exports some 60% of the Nigeria cashew. The other two companies together cover about 20% of the total exports. Smaller exporters handle the remaining 20%. Given that the figures for the years 2001 to 2006 are not available, it is hard to evaluate accurately what changes have taken place in terms of export values under AGOA.
Constraints to the Development of the Industry There are constraints to export development of the cashew industry in Nigeria. These constraints as identified in available literature include: 1. Bad trade practices and bad image which result in low value for Nigeria export (Chemonics International Inc., 2002). 2. Low quality of export nuts: Sometimes, poor post-harvest handling, inadequate packing and storage, and poor drying procedure among others reduce the export product standard. This has resulted in low pricing of Nigeria nuts. According to Chemonics International Inc., “Nigeria receives the lowest international prices in Africa for its raw nuts due to concerns over production, processing, and post-harvest handling” (2002: 6). 3. Inadequate supply of raw nuts. There is oftentimes competition between the exporters of raw nuts and processors on how to get the largest supply from farmers. In this competition the exporters of raw nuts pay higher prices for supply than the processors. This can pose a challenge for external supply for both the exporters of raw nuts and processed kernels. 4. High export of unprocessed nuts and low export of value-added processed kernels which result in low foreign earnings and loss of employment opportunities 5. Technological difficulties: most of the technological equipments adopted from different countries such as Japan, Italy, and India lack after-sales service. As Ezeagu observed, “In an attempt to ‘manage’ and adjust, local technicians and engineers ended up destroying the equipment” (2002: 22). 6. Lack of adequate infrastructure limit the capacity of the cashew industry. In some cases, basic electricity, access road, telephone services, and potable water supply may be lacking in the areas where the processing plants are located. Efforts by the companies to arrange for these services add to production cost that that may in turn render the industry less-competitive in product pricing.
122 7. High interest rate that discourage investors from obtaining loans from banks. 8. Many existing Nigerian cashew trees are ageing. Some have reached the end of their productive cycle, and majority that still bear fruit produces small nuts of low value (Chemonics International Inc. 2002).
Potentials in the Cashew Industry under AGOA The cashew industry in Nigeria presents great potentials under AGOA. These potentials include income generation and job creation, which engender economic growth. Cashew has a great potential as a “cash crop” to generate foreign exchange, create employment especially for women. According to Chemonics International Inc, “Nigerian stakeholders can potentially share in a long-term investment that can develop into a $74 million market in Nigeria over the next ten years (from 2003-2012), with an almost threefold increase in the industry’s employment level” (2002: 6). This projection is represented in Table 11 below:
Table 11: Potential Income Generation and Job Creation from the Cashew Industry
Criteria Base yr (2003) 2 yrs (2005) 5 yrs (2008) 10 yrs (2012) $6.0 M $8.0 M $19.0 M $38.0 M Traditional Kernel Export Organic Kernel Export $ 0 $ 3.0 M $6.0 M $15.0 M Raw Nuts Export $17.0 M $17.0 M $19.0 M $21.0 M Total $23.0 M $28.0 M $44.0 M $74.0 M Total Job Creation (processing) 122, 000 153, 000 246, 000 375, 000
Source: Chemonics International Inc, Washington, D.C. The large and growing regional market for surplus kernels and other cashew products offers opportunity for the industry to expand and diversify its production capacity. Since West Africa is now the major supplier of raw nuts to the Indian processing giant, cooperation among major exporting countries in the sub-region will help to increase the prices of the commodity. With the assistance of USAID project in Nigeria, Nigeria is better positioned to produce large quantity of organic cashews which are of higher demand and market value. With all these potentials, the cashew industry is
123 well positioned to take advantage of the AGOA as long as the constraints identified are being addressed by the various stakeholders.
Cashew Industry under AGOA: Interview Results Much of what has been written about the cashew industry in Nigeria reveals more of the industry’s potentials than what it has accomplished in terms of export activities under AGOA. For example, Chemonics International Inc, (2002: 4) summarizes the state of the industry’s potentials in a laid down action plan with the following expressions: “There are two major global cashew markets to target: the raw nut market worth $500 million, and the cashew kernel market worth $1 billion. There are also niche markets, such as organic cashew, which receives a 25% premium over traditional cashew kernels.” The industry has been modest in its overall performance. However, to capture the state of the industry’s performance under AGOA, it is pertinent to look into the results of the interviews conducted with some of the stakeholders in the industry. As stated earlier, the interviews were intended to elicit responses on what the status of the cashew industry has been since the introduction of the AGOA scheme. The first question: “What can you say about the cashew industry under AGOA?” has responses that suggest readiness and prospect of the industry under AGOA. As one respondent, a cashew researcher, puts it, “Nigeria cashew is well developed; it has good cashew-derived products both retail and bulk which has market prospects in the U.S.” Other respondents see the industry under AGOA as essentially struggling to combine export of raw nuts with processed nuts (kernels) which will attract more demands in the U.S. So, a movement from the production of mainly primary product to processed one has been the new emphasis under AGOA. On the type of prospects that exist for the cashew industry under AGOA, which is the second item in this industry-specific section of the questionnaire, many of the respondents described it as “very huge.” One respondent writes, “A lot of prospects. Supply base is strong. We need specific market for industry to produce for.” Two other respondents hinge the prospects on the establishment of processing facilities, and proper harnessing of the opportunity.
124 On what steps the industry has taken to position itself for the prospects that exist under AGOA, the respondents identified the following: 1. Producers through their National Association are trying to produce to meet international standard or SPS requirements; 2. Measures are being taken to ensure that processing machines are procured and new factories built; 3. USAID has established supply base studies of producing plants which is aimed at addressing the issue of supply; 4. There has been export capacity building by NEPC; and 5. The NEPC has organized series of market promotion strategies for cashew products in the U.S. Commenting on the progress made from these steps taken, a respondent listed four identifiable areas of progress namely: (a) Five bulk industrial plants have been established under AGOA, (b) Four retail producing plants established since 2004, (c) There is capacity building that is helping the industry, and (d) Financial intermediation that is helping the industry’s financial needs. Although some progress can be identified, challenges still exist in the industry under AGOA, which need to be surmounted. Some of these challenges as mentioned by the respondents include: packaging, SPS standards, inadequate finance, lack of infrastructure in producing areas, and issues of research and development (R&D). The general feeling among the respondents is that these challenges can be addressed by adopting good packaging solutions, providing adequate finance to the industry through low interest loans and through tax holidays for the newly established processing factories. Others include, meeting all the sanitary and phyto-sanitary (SPS) requirements necessary for export of cashew, setting up of modern laboratories to ensure compliance with SPS and other TBT issues, research for better quality nuts, overcoming infrastructural problems, and encouraging education and training of stakeholders in the industry. With all these in place, in the view of the respondents, the industry will do better under AGOA. In summary, the cashew industry’s prospect under AGOA is high but there are measures to be taken in order to position the industry for full AGOA gains. As it is
125 currently, the industry’s performance can be described as modest. Given the renewed interest of the government and other stakeholder in the growth and development of the industry, its potentials under AGOA cannot be overestimated. Given also that cashew trees grow naturally in Nigeria without application of fertilizers and pesticides, Nigeria cashew industry is well positioned for comparative advantage in terms of production of organic cashew nuts, which demand internationally is increasing.
Chapter Summary In this chapter, the results of the primary source (interviews) are presented in two categories: general and industry-specific. These categories provided findings on general AGOA implementation in Nigeria which involves knowledge and procedure issues, ideological issues, response issues, and industry-specific issues (for the textile and cashew industries used as case studies). In most cases, the findings from the primary sources (interviews) corroborated the information from the secondary data. But in some other cases, the information from the interviews elucidates aspects of the issues that the secondary data could not address specifically like in the case study issues. In the next chapter which is the concluding chapter, these findings will be discussed in the light of the issues raised from the literature review. The implication of these findings for policy and programs will also be addressed, with suggestions made future research.
126 Chapter Four References
Adeniyi, S. (2007) “Our target is to make Nigeria the world largest producer of ‘White Gold’ - Dr. Yoriyo,” Nigeria Tribune Friday, February 2, 2007.
BBC News “Nigeria Bans Textile Imports” Thursday, 3 October, 2002. Chemonics International, Inc. (2002). “Sub-Sector Assessment of the Nigerian Cashew Industry.” Available Online at http://www.usaid.gov/ng/downloads/markets/cashew_subsector_assessment.pdf David, M. (2003). “Nigeria Cotton and Products Annual 2003,” USDA Foreign Agricultural Services Gain Report #N13017, Lagos. Ezeagu, W. (2002). “Nigeria: Assessment of the Situation and Development Prospects for the Cashew Nut Sector” A Report prepared by W. Ezeagu, Assistant Chief Trade Promotion Officer, Nigerian Export Promotion Council (NEPC) Abuja, Nigeria. Kassim, S. (2007). “Cotton and Textiles Rejuvenation: An Update.” Presented at the Extra-ordinary meeting of the National Council on Commerce and Industry (NCC&I), April 2007. Lallah, R. (2003a). “Welcome by the bourgeoisie in South Africa and Mauritius: AGOA—an instrument of the U.S. ruling class” Available online at: http://www.labournet.de/internationales/mu/lallah.pdf ---- (2003b). “AGOA—Consolidating U.S. Imperialism in Africa.” Khanya: A Journal for Activists, No. 3 Available online at http://www.khanyacollege.org.za/Documents/AgoaUSJ3.pdf Makunike, C. ( 2007). “African Agriculture: West African Trade Hub,” African News Network, Available Online at: http://africanagriculture.blogspot.com Seegobin, R. & Collen, L. (2002). “AGOA: The Sting” Available online at: http://www.labournet.de/internationales/mu/collen.pdf Shomade, N. (2004). “A Bomb is a Bomb” Available online at www.africaspeaks.com/articles/2004/0211.html Textile Intelligence, (2004a) “Nigeria appeals for resumption of export incentive scheme, assures cooperation.” Available online at http://www.textileintelligence.com/nigeria/626.html?getnewsofdate=1092960000
127 Textile Intelligence (2004b). “Nigeria to form a new textile committee to boost benefits from AGOA.” Available online at http://www.textileintelligence.com/abuja/557.html?aid=557 Umoru, H. (2007). “FG Approves N80 billion to Revive Textile Industry as Ministry of Commerce Sacks 1,000.” Vanguard, Monday, April 30, 2007. USTR (2007). “2007 Comprehensive Report on U.S. Trade and Investment Policy Toward Sub-Saharan Africa and the Implementation of African Growth and Opportunity Act” Available Online at: http://www.ustr.gov/assets/Trade_Development/Preference_Programs/AGOA/ass et_upload_file762_11294.pdf Yarns & Fibers (2006a). “Nigerian Textile Industry Chance for Survival Remains Bleak”. Available online at: http://www.yarnsandfibers.com/news/print_article.php3?id=8801 ------. (2006b). “Nigerian Government Working Out Plans to Revitalize its Extinct Textile Companies”
128 CHAPTER FIVE DISCUSSION OF FINDINGS, RECOMMENDATIONS AND CONCLUSIONS
In this chapter, the findings as contained in the previous chapter will be discussed in the light of the issues raised in the literature review about PTAs. The implications of findings as they relate to the AGOA scheme, policies and programs in Nigeria, U.S.- Nigeria present and future trade relations, and future research will be highlighted. Recommendations will be made on how AGOA implementation can be improved for the benefits of both Nigeria and the United States. Recommendations will be drawn based on the research findings. The chapter will proceed in the following outlined order: (1) summary of findings, (2) implications of findings, (3) recommendations, and (4) conclusions.
Summary of Major Findings The major findings regarding the general implementation status of AGOA in Nigeria and the industry-specific findings can be summarized as follows: - Nigerian government and the business community (manufacturers, exporters and importers) understand the key concepts and procedures involved in AGOA to the extent of the awareness created but need improvement in the technical aspects of the knowledge of AGOA conditionality. So, increase in awareness campaign is needed. - There is absolute rejection by the interview respondents of the assertion that the ideology which informed the AGOA eligibility conditions is purely imperialistic. Instead, there is unanimous agreement among the respondents that AGOA is not an imperialistic tool by the U.S. to control the weaker African nations. They see AGOA as a benign and benevolent trade policy that has potentials for Nigeria economic empowerment and growth; and praised the U.S. for the bold step. - Beyond increase in trade, AGOA fosters business cooperation and understanding; it encourages technical assistance and diplomatic ties. - Majority of the respondents see Nigeria’s implementation of AGOA as slow, and described its response to the legislation as less satisfactory. The reason given for
129 this description is due largely to the focus on the oil sector which takes an overwhelming portion of the trade volume under AGOA. The respondents are still optimistic that other sectors especially agriculture and textile have great prospects under AGOA. - There are challenges facing AGOA implementation which among other things include: inadequate infrastructure, import ban on some products by Nigeria, lack of technical knowledge, stringent technicalities (including SPS and rule-of-origin conditions) and lack of effective capacity utilization. - AGOA is spurring inter African cooperation especially through the trade hub activities and the annual AGOA Forums. But this cooperation is yet to be translated into tangible growth in trade among the participating countries. - Despite challenges, AGOA is increasing trade between the U.S. and Nigeria by spurring new businesses and increasing export of non-oil products to the U.S. It is also encouraging new socio-political and economic reforms aimed at creating a market based economy with enabling political and business environment. In other words, there is modest success in the implementation of eligibility conditions, and export of various agricultural products to the U.S. - The U.S. and Nigeria governments through different agencies have been helping to proffer solutions to the challenges. Among some of the assistance from the U.S. government include training, capacity utilization building, sponsorship of workshops and offering of technical and financial assistance. Nigerian government is also offering assistance to its business community to take advantage of the AGOA provisions. It has made some notable efforts through educational enlightenment, financial assistance to the textile industry and other agro-based industries, and also through the activities of the NEPC and Ministry of Commerce and Industry. However, both governments (U.S. and Nigeria) need to do more by increasing assistance toward capacity building, providing adequate technical support to the industries and lifting of export and import bans on some products. - Textile industry is a strategic non-oil industry for Nigeria. It has suffered years of decline but is being resuscitated under AGOA.
130 - With the various government and other external incentives under AGOA, the industry holds a great promise especially as it has been granted AGOA visa for apparel and hand-woven materials. - The challenges faced by the textile industry which include illegal dumping of textile materials through the activities of smugglers, and other financial and infrastructural setbacks are being addressed both at the national and international levels. - Following the revitalization effort of the government and other stakeholders, the textile industry has witnessed increase in the number of cotton farmers, and a rise in export (made in 2006 to the U.S.). - Cashew industry is one of the major agricultural industries in Nigeria that has attracted great interest and attention under AGOA. - Nigeria has been exporting raw cashew nuts but with AGOA, it is diversifying it export to include processed cashew kernels. The U.S. is a huge market for both the raw and processed cashew nuts. - In recent times, there has been increase in the number of processing factories and plants in Nigeria. This has boosted the quantity of processed cashew for export. - Through the efforts of the Nigerian government and other agencies—local and international such as USAID, the industry is being positioned for both capacity utilization and export growth under AGOA. However, the industry faces different challenges including packaging, SPS requirements, need for improved species, and other basic infrastructural barriers. - The cashew industry under AGOA is laden with great potentials, and could be described as fairly good story so far.
Implications of Findings In this section, the discussions will center on the implications of the enumerated findings as they relate to the theoretical and conceptual issues raised in the reviewed literature on PTAs. The section also will address the policy and program implications of the findings; and implication of findings with regard to AGOA as a policy, and also as regards U.S.-Nigeria present and future relations.
131 A. Findings Relating to Theoretical and Conceptual Issues The findings in this research have implications for the arguments and propositions made in the literature review section of the first chapter. The literature review presents many scholarly debates on the theories of PTA. Different arguments are made, and different questions raised that bother on the utility of PTAs. How the findings in this research bear out or contradict the major theoretical debates and questions on PTA is the focus here. There are three major theoretical and conceptual issues raised in the PTA debate. First, PTAs are said to undermine the development of multilateral trade agreements and hinder trade liberalization (Bhagwati, 1995). Levy (1997) in support of Bhagwati has argued that PTAs can undermine political support for advancement of multilateral trade liberalization. In the context of AGOA, this theoretical debate can only apply to the U.S., as a major world trading country—whether U.S. involvement in AGOA weakens its support for multilateral trade regime like the WTO or not. But since the U.S. is not really the focus here but Nigeria—with limited influence on multilateral trade agreements—the findings here cannot be said to support or disagree with the theoretical assertion with regard to PTA’s negative influence on multilateral trade regimes. Findings in this research to a lesser degree, lends support for the argument that PTAs can be a vehicle for administered protectionism and trade diversion. Few of the respondents indicated that AGOA’s SPS conditions and other technicalities could be viewed as a protectionist tool against some of the products that are discouraged from making their way to the U.S. markets based on these conditions. At least one respondent expressed the view that somehow AGOA is causing trade diversion against China, which has been affected by bans on certain textile materials in Nigeria. The Nigerian textile industry now looks toward the U.S. thereby reducing its textile trade volume with China. However, the SPS conditions cannot be said to be protectionist given that the long-term effect of not adhering to them can be more devastating; it can halt trade flow when consumers see evidence that the products being supplied are sub-standard. Second, PTAs are said to increase the volume of trade and encourage economic growth among members party to the agreements (McCulloch & Pinera, 1977; Pomfret, 1986 and Lusztig, 2004). The argument especially sees this economic benefit of
132 preferential trade as a good thing for developing countries. Chomo (2002) has argued that contrary to the assertion that trade liberalization with industrialized countries slows economic development in less-developed countries, evidence shows expansion of in FDI and significant economic growth. Findings in this research support Chomo’s position, and show that since the implementation of AGOA in Sub-Saharan African countries, it has increased trade between the eligible countries and the U.S. by about 115% (USTR, 2006). In Nigeria, AGOA has encouraged increase in trade not only of energy products but also of agricultural products although this increase is at the minimal level. This fact is acknowledged by interview respondents in this research. So, the theory that PTAs bring about increase in trade and job creation is supported by the findings in this research. Another gain attributed to PTAs is that they lock in reforms. AGOA in its eligibility conditions encourages socio-economic and political reforms by the participating countries. These reforms are seen as necessary conditions for trade and investment flows. In the case of Nigeria, AGOA eligibility conditions have helped the government to initiate and implement policy reforms which are making it easier for FDI. This provision of AGOA legislation is viewed by most of the respondents interviewed in this research as a welcome development. The reform conditions are described as essential and beneficial to Nigeria. In other words, the finding here agrees with the idea that PTAs promote economic and political reforms for the countries party to the agreement. Developing countries such as Nigeria need the reforms as a critical step in the journey toward economic development. After achieving these reforms, it would be difficult for subsequent governments to change the policies because such move could undermine the country’s economic interest. Third, PTAs are said to be an instrument of control by stronger nations against weaker ones. Those who oppose PTA also argue that it undermines the sovereignty of the state; weaker states can be controlled easily by using PTAs. One of the strong criticisms of AGOA is that it is imperialistic, and aimed at U.S. domination of Africa (Lallah, 2003; Shomade, 2004). Findings from this research do not agree with this assertion. At least, for the Nigerian case, the interview respondents do not see AGOA as an imperialistic tool by the U.S. to assert its control over Nigeria. They rather viewed the provision as mutually beneficial. But it is somewhat problematic to see that the U.S. has the sole power to
133 withdraw a participant under the cover of not meeting-up with the eligibility criteria, and can also terminate the scheme unilaterally without raising the imperialistic question. So even though the interviewees do not see it as imperialistic, the U.S. has encouraged such suspicion by the nature of the trade act provisions. But it can further be argued that participating countries choose to do so as a matter of choice, and can opt out of the PTA if they feel uncomfortable with its provisions. The findings here also do not make any association between PTA (in this case AGOA) and environmental degradation, which opponents of free trade allege (Brown, 1993; Nader, 1993). The questionnaire instruments did not address this issue. So, the research has no way to indicate whether or not this assertion is true with the AGOA. Also, the idea that trade agreements such as AGOA is capable of eroding cultural diversity and identity because the weaker developing countries involved in the agreements could be pressurized to accept and receive the cultural and professional services of foreign companies and individuals of the more developed stronger partner, did not receive any support from the findings. Instead, one of the findings in this research is that beyond increase in trade, AGOA can help in creating avenues for cultural understanding and cooperation. At least, through international trade fairs, and AGOA Annual Forums, avenues have been created to foster cooperation beyond trade issues alone. In an era of globalization there is no cultural island, and the pride is no longer how distinct a country is culturally but how willing a country is to learn from other cultures and integrate.
B. Implications of Findings for Policy and Programs in Nigeria Given that AGOA has helped in spurring new reform programs by the Nigerian government, which has had some effects on economic growth, there is need for these reform programs to be sustained and strengthen. Since most of the setbacks in the implementation of AGOA are infrastructure-related, the new administration of President Yar’Adua should focus as a matter of urgency on addressing the basic infrastructural needs of Nigeria. This is the only way Nigeria can fully benefit from AGOA and be able to face the challenges of economic globalization.
134 Because, AGOA is creating new businesses and industries, the implication is that there should be educational programs or skill acquisition centers that should aim at preparing personnel for these new businesses. So, new investments in these programs and centers are necessary. Some trade barriers identified in this research are a direct outcome of certain policy instruments. For example, the bans on export and import of certain products especially agricultural products constitute a great obstacle to trade expansion between Nigeria and the U.S. It is time for the Nigeria government to review some or all of the bans and see how they can be lifted without adversely affecting the local economy. The findings that the two industries under study here—textile and cashew, hold great potential means that more effort is needed to translate these potential into great results. Here increase in capacity building is the key, and has to be done as soon as possible. Actually, Nigerian stakeholders should quicken their pace in addressing the constraints to AGOA full implementation. This is against the backdrop of the fact that AGOA is time-sensitive; it has duration, and can terminate at the expiration date unless renewed. From all indication, the renewal will also be dependent on the sustained mutual benefits for the U.S. and the participating countries.
C. Implication of Findings for AGOA as a Policy Findings from this research show that AGOA as a policy is working at a very slow pace in Nigeria, given its main targets of textile and agro-based products. Given that AGOA is heavily oriented toward textiles, there should be a serious review of how it is impacting the textile industry. It is still not very clear if AGOA provisions regarding textile are capable of making the industry viable and competitive in the world market. If the impact of the policy on the targeted industries or sectors is not very significant, it creates some doubts about the overall success of the policy. Table 12 below shows that the textile and agricultural sector under AGOA has not performed well in terms of actual trade flow and export of products.
135 Table 12: BILATERAL TRADE PROFILE BETWEEN UNITED STATES AND NIGERIA: AGRICULTURAL AND TEXTILE SECTORS
Value (1,000 dollars) Year-to-date Jan.-Mar. 2004 2005 2006 2006 YTD 2007 YTD Agricultural products: US Exports to Nigeria 442,980 552,662 505,599 136,112 185,020 US Imports from Nigeria 10,904 61,015 13,480 2,583 3,004 Total AGOA including GSP provisions of AGOA 226 633 1,175 266 144 - US imports under GSP from Nigeria 226 495 985 204 136 - US imports of duty-free items added under AGOA 0 138 190 62 7 Textiles and apparel: US Exports to Nigeria 10,330 11,459 11,960 2,597 2,120 US Imports from Nigeria 259 185 98 10 12 Total AGOA including GSP provisions of AGOA 50 5 21 0 0 - US imports under GSP from Nigeria 50 5 2 0 0 - US imports of duty-free items added under AGOA 0 0 18 0 0 Source: US Department of Commerce
Data provided by www.AGOA.info - the online AGOA information portal
Looking at the figures for agricultural products, one observes that the value of U.S. import of agricultural products under AGOA in 2004 was zero. Even though there was a change in subsequent years, it was not overall very encouraging. For textiles and apparel, the years 2004 and 2005 witnessed zero value import by the U.S. under AGOA. The value of textile and apparel import in part of 2006 is not enough to indicate real progress. It is true that AGOA has opened new avenues for economic cooperation between the U.S. and eligible Sub-Saharan countries on the one hand, and among the eligible countries themselves on the other but this is yet to translate into significant economic impact on the people of Nigeria in particular. The implication of this is that the policy needs to be improved upon by adding components provisions that will help address the weaknesses. The implication of the reforms encouraged by AGOA conditionalities is that such reforms can help in the overall political stability and democratic consolidation in the participating countries including Nigeria. As the U.S. foreign policy is partly aimed at ensuring that capitalist democracy takes root in developing countries, AGOA legislation is serving as a veritable tool in this regard.
136 One of the greatest obstacles to effective AGOA implementation is poor trade capacity building. This research has shown that potential exists for Nigeria to benefit from AGOA. This is evident in the two industries—textile and cashew—that are examined. According to Noble (2006), AGOA is meaningless if African traders are unable to take advantage of the preferential access it offers. Capacity building is the only way that African countries in general and Nigeria in particular can afford to become more competitive in a fast-changing global market. To this end, the U.S. can be of great assistance to overcome this obstacle. Through its agencies especially the USAID the U.S. government can target certain infrastructural and technical areas in the Nigerian economy for capacity building assistance. The U.S. agency can manage the assistance in conjunction with local stakeholders. For example, in the cashew industry’s case, we have seen that in some of the areas where the production takes place, there is lack of good access road, electricity and telecommunication. The capacity building assistance can specifically target these infrastructural needs of the industry thereby improving its capacity to produce at a larger scale, and its competitiveness due to reduction in overall cost of production. As noted earlier, the U.S. has sponsored Trade Capacity Building (TCB) projects under AGOA. These TCB projects help participating countries to evaluate their trade obstacles and access needed assistance to address such obstacles. Although the USAID has been involved in trade capacity building (TCB) through different projects under AGOA, more needs to be done. Another issue about the AGOA policy is its timeline. AGOA is not an open-ended commitment by the U.S.; it is expected to expire in 2015. Given that the effective implementation of AGOA and its subsequent full benefits may take some time as a result of the several constraints identified in this research, it is pertinent in the spirit of benevolent assistance for the U.S. Government to extend the provision to at least the year 2030. By that time, beneficiary countries such as Nigeria would have been better positioned to not only take full advantage of AGOA but also be internationally competitive.
137 D. Implication of Findings for U.S.-Nigeria Relations Prior to and (to a significant degree) under AGOA, the U.S.-Nigeria trade relationship has centered on oil. Oil products have more than 90% of the value of export trade between the two countries. Trade on other products e.g. agricultural has fluctuated to reflect the political stability under the successive administrations. Given that under AGOA, there has been increase in diversification of export trade between the two countries and improved political relationships (thanks to democratic governance since 1999) there is now a new avenue of interrelationship. Beyond those in the oil sector of the economy, relationship between American and Nigerian entrepreneurs in different industries is growing. Through AGOA-influenced forums and international trade exhibitions between manufacturers and exporters of the two countries, a new form of understanding and cooperation is being forged. The long-run implication of the growing trade and socio-political relationship is that potential issues of conflict resulting from misunderstanding and lack of confidence will be minimized. Trade can open new avenues for mutual assistance and cooperation on even non- trade related issues of international and domestic concerns. Where economic interest is very high efforts will be maximized to ensure security, stability and peaceful coexistence. The U.S. has in the past, partnered with Nigeria on matters relating to fight against AIDS, terrorism and illicit drug peddling. The more there is increase in trade relationship between the two countries, the more there will be increase relationship in other areas. With AGOA, the U.S. is asserting itself as a major trading partner with Nigeria. Before AGOA, the U.S. ranked below Britain, Germany and France as Nigeria’s major trading partner in non-oil products. Under AGOA, the U.S. is being positioned as the largest trading partner of Nigeria second to none of the countries just mentioned. Diversification of trade between the two countries is one of the implications of the findings relating to U.S.-Nigeria relationship. AGOA according to the findings is generating interest in new areas of trade and business. With such diversification of trade and export business, there will be opportunities for consumers from the two countries to start enjoying new products and services from each of these countries.
138 Recommendations In the context of this study, the success of AGOA as a PTA depends to a large extent on how to address the fundamental issues raised in this research namely: (1) the challenges facing AGOA’s implementation and (2) the maximization of existing potentials under AGOA.
1. Recommendations Pertaining to Challenges From the research findings, there are some major challenges that weaken Nigeria’s ability to take full advantage of AGOA. Crucial among these challenges are: inadequate infrastructural facilities, poor capacity utilization, overcoming SPS and other technical conditions. If these challenges are not adequately addressed, the Act will not be able to achieve its goal of trade expansion, export promotion, and general economic growth. Consequently, the challenge posed by inadequate infrastructure such as good road and railway network, steady power supply, access to telecommunication and internet services, and potable water supply, can be addressed only through the determined effort of the three levels of government (federal, state, and local) with some external assistance. Nigeria has in the past had governments at different levels that did not care much about addressing the infrastructural needs of the country. Although in recent time, some efforts have been made to privatize power supply and telecommunication, the results so far is not encouraging. Many roads in some parts of the country especially the South-East are in a state of disrepair. There is a recent move by the Federal Government to modernize the Nigerian railway lines which initial phase is estimated to cost about $1.6 billion (Ebosele and Onyedika, 2006). This is a step in the right direction; more needs to be done. It is time for the government to stop paying lip service to infrastructural development, but start doing something about it. The government should roll out an aggressive policy aimed at tackling the endemic infrastructural setbacks. The present administration of Yar’Adua should make infrastructural development its priority. As part of the U.S. assistance program, the USAID can target some investment in the area of infrastructure. This can be done in partnership with the Nigerian government and other stakeholders specifically to enhance
139 the productive capacity of some industries with great potentials for growth under AGOA. For instance, it has been indicated in the case of cashew industry that some of the production areas lack basic infrastructure which make factory owners in such areas to spend more on the provision of these basic infrastructural facilities, thereby influencing the price of production and processing. But if the government with the assistance from say the USAID, can target such areas with industrial potentials and provide them with the needed infrastructure, it will go along way in boosting the productive capacity of the industries located in those areas. Noble (2006) has suggested that the U.S. allocate more funds to USAID for sponsoring Trade Capacity Building Project (TCBP) which help developing countries improve on their capacity constraints. According to Emily Simmons in her testimony before the U.S. House of Representatives Committee on International Relations, in 2003 the U.S. allotted more than $130 million in funding trade capacity building programs in Sub-Saharan Africa.59 Increasing this fund is vital under AGOA to enable the scheme address one of its fundamental setbacks—lack of adequate infrastructure in the participating countries. The problem of poor capacity utilization, which to a significant degree is tied to the infrastructural constraints, inadequate finance, and lack of technical know-how, can be addressed through a variety of policies and programs aimed at improving infrastructural facilities (as discussed above), making it easier for farmers and entrepreneurs to obtain loans and credit facilities, and providing needed technical assistance through partnership with experts from within and abroad. Even though the Nigerian government has created some financial incentives to help some industries like the textile to overcome some of their capacity constraints, these incentives are not well managed as to benefit the targeted industries. There have been reports of fraud involving “false claims” by exporters in the case of textile Export Expansion Grant (EEG) which the Federal Government provided for revitalization of the export prospect of the industry (Textile Excellence, 2004). Such government’s financial incentive should be appropriately and effectively managed to check abuses.
59 United States House of Representatives: Committee on International Relations, Testimony of Emmy B. Simmons, Assistant Administrator for Economic Growth, Agriculture and Trade: U.S. Agency for International Development; before the Sub-Committee on Africa (May 11, 2004). Available Online at: http://www.house.gov/international_relations/108/sim051104.htm
140 On technical know-how, training of Nigerians to be technically competent to handle trade-related issues such as rules of origin, SPS requirements, anti-dumping measures, protection of intellectual property rights (IPR), etc is a desideratum. These issues especially the SPS requirement have been identified as a constraint to the full implementation of AGOA. There have been some technical assistance from the U.S. government in form of manpower training workshops and other programs aimed at helping Nigeria to tackle its technical know-how needs. More of such programs are required. Experts Exchange Program between Nigeria and the U.S. should be established to ensure that experts on trade related matters can easily be allowed exchange visits for inter-fecundation of ideas, sharing of information and training of personnel. More workshops are needed to educate Nigerian stakeholders on the technical aspects of AGOA provisions. Different industries should organize such workshops from time to time to identify their technical needs and adopt means of addressing them. The Nigerian universities and polytechnics should be adequately equipped through proper curriculum contents and educational materials to ensure that graduates are well prepared to handle technical trade issues.
2. Recommendations Pertaining to Maximization of Existing Potentials The two industries used as case studies in this research are laden with potential. Nigeria’s climate favors the production of cotton which is one of the raw materials for the textile industry. Already the number of farmers growing cotton in Nigeria is increasing each year. As a labor intensive industry, the Nigerian textile can boast of adequate labor supply given that many people are unemployed and read to be trained for such jobs. For the factories that have closed down as a result of negative dumping effects of foreign materials, their equipments can still be refurbished and used. This means that investing very huge amount to procure new equipment may not be necessary because most of the equipment is modern. To maximize the existing potential, the industry needs to put the already existing facilities into use, and establish component factories for weaving, spinning, embroidery and dressing making. Given that labor is relatively cheap in Nigeria these textile materials can be produced at a cheaper competitive rate. The textile industry can as well
141 capitalize on the privilege of Nigeria being selected by the U.S. government as the only AGOA country that qualifies for AGOA’s ethnic printed fabric benefits (USTR, 2006). The opportunity that this presents for Nigeria can be fully utilized by maximizing export to service the large demand in the U.S. In pursuit of this great opportunity, Nigerian exporters should open new link with U.S. consumers through a series of market surveys conducted in partnership with U.S. distributors. But where it proves less feasible for Nigerian textile industry to overcome its challenges and be very competitive in a sophisticated international market with more dominant players like China and India, there may be the need for Nigeria to change direction. Instead of investing billions of Naira to revitalize the textile industry, it might be in the interest of the country to invest such money into other ventures that will be more competitive, and offer better advantage for economic growth. In other words, a re- evaluation of the wisdom in resuscitating the textile industry is necessary. For the cashew industry, the potential lies in the fact that cashew grows naturally in almost every region in Nigeria. Without application of artificial fertilizer, the yield is still very high (more than 70% of those with artificial fertilizer). This makes Nigeria a potential source of supply for organic cashew products (nuts and processed kernels). With improved varieties, that produce almost all the year round, Nigeria has an advantage of uninterrupted supply. The U.S. consumers are now becoming very selective and mindful of how their food is being produced. Preference is now being given to organic food products even at higher prices over food products produced with artificial fertilizers and hormones. This potential in the cashew industry can be harnessed through government assistance in R&D, procurement of harvesting equipments (which is non- existent; nuts are still manually harvested with high climbing risks), building of new processing and packaging factories with supportive basic infrastructural facilities (access road, electricity, telephone and internet connection) to reduce overhead cost of production. In addition, there should be a SPS technical support unit established in each of the production zones—East, West and North to assist exporters to meet SPS conditions for export products. This is very essential given that one of the serious setbacks to AGOA implementation identified in this research is the SPS requirements, which some
142 respondents view as another form of protectionist instrument by the U.S. government under AGOA. The U.S. should not use the SPS as an alibi to prevent some products from making their way into the U.S. market where the fear may be the protection of a U.S. local industry that is not prepared for competition. But it must be pointed out that Nigerian exporters should be aware of the U.S. market and the consumers preference for high standard products. If they aspire to meet the SPS conditions, it will create an uninterrupted supply, which benefits the exporters at the long run. Nigeria should as a matter of urgency, review its policy on export and import bans. This is another issue that the Office of U.S. Trade Representative has voiced its concern about. As long as the bans persist, it will hamper free-flowing of export trade between the two countries. The step the Nigerian government should take is to critically re-visit the reasons for the bans with a view to lifting them as soon as possible. In general, for Nigeria to maximize its potentials for AGOA gains, the following recommendations from the Ministry of Trade and Industry should also be heeded to: a. Nigeria industrialists should go into value-added processing of some agricultural products as a means to not only insulating against frequent price fluctuations experienced in the commodities market but also as a way of proving higher return; b. Entrepreneurs should take advantage of government’s liberalized investment climate by striving to form strategic business alliances. This will not only guarantee credibility to their businesses but also serve as an easy avenue for raising of funds to acquire equipment and other foreign inputs from trade financing institutions like Ex-Im Bank; Overseas Private Investment Corporation (OPIC); Trade Development Agency (TDA); International Finance Corporation (IFC), etc.; c. Nigerian manufacturers/industrialists should also avail themselves of the opportunities and incentives offered by the Export Processing Zone or Free Trade Zones by locating industries and factories in such areas. This will enable them attract foreign partners who desire guaranteed and efficient industrial infrastructure;
143 d. Given that the U.S. market is very large, it cannot be easily dominated by a particular region, let alone one company, Nigerian manufacturers should share information and where necessary form supplies alliances in order to have a fair share of the market. They should also not see themselves as competitors, which is characteristic of a domestic market, but rather see themselves as partners; e. Government, on its part should show greater commitment in improving the infrastructural facilities in order to bring to the barest minima, the manufacturer’s costs of production; and f. Above all government should adequately fund AGOA activities so that, in collaboration with the organized private sector, improving the performance of the non-oil sector can achieve the desired benefits.
Suggestions for Future Research What we are not sure about the AGOA is that since the legislation has a time limit to it (it will end in 2015 if not renewed) one cannot predict accurately whether it would lead to permanently greater trade among the participating countries after its expiration. If the U.S. withdraws the scheme, it is not certain what the effect would be. It might be that the U.S. in the process of wooing and winning over Sub-Saharan African countries under AGOA, these countries may have lost or offended other traditional trading partners outside of the AGOA arrangement that may no longer be willing to renew such relationship after the expiration of AGOA. In this sense, the long term effect may be less favorable. But if within the time frame of the AGOA scheme, beneficiary countries like Nigeria are able to achieve higher level capacity utilization building, and have repositioned themselves more competitively in the global market, the expiration date of the scheme will not have an adverse effect. This is a potential area for future research. A study that can evaluate the short and long-term effects of AGOA as a PTA is necessary for the countries involved to know how to address such effects before hand. Future research should also look into how AGOA as a PTA has helped or is helping in fostering Sub-Saharan African integration through its trade hubs and other activities. Are Sub-Saharan African countries trading more among themselves as a result of AGOA? Are they involved in cooperative behavior or are they engaged in divisive
144 competitions within themselves as they scramble for AGOA benefits? These are questions that future research can ask. Since AGOA encourages export trade, it is pertinent to look into what the resultant effect is for local consumption. When production targets export more than it does for local market, how does it affect the local consumers? Does increased production for export affect the availability of the products and their prices at the local level? If there is a shift in crop cultivation to accommodate new demands for export, how does this affect the food crop production that has been abandoned for the cash crop and those who depend on them? So, a research that assesses the impact of this export-led industrialization of AGOA on local consumption is needed. The aim of such research would not be to discourage export production but to know how to balance production to meet local and international demands without unnecessarily upsetting either one. Another area of possible research is to examine the difference between PTA concluded with partners of equal status say, between two or more industrialized nations, and PTA entered into by partners of unequal status like the case under AGOA. This will help to ascertain the extent of the much talked about benefits that developing countries reap as a result of their participation in PTAs with larger industrialized countries. Do developing countries benefit more as PTA partners with advanced countries than do advanced countries benefit as PTA partners with themselves? In conclusion, this research has shade some light on the issue of PTA as a vehicle for economic growth. AGOA as a PTA has encouraged economic and political reforms as a condition for eligibility; and is helping in encouraging economic growth in Nigeria. However, it must be pointed out here that some other factors such as the SAP, the new democratic government, popular demand, and civil society agitations, might have also contributed in the wave of economic and political reforms witnessed in Nigeria since the year 2000, so that the credit cannot solely be ascribed to the response to AGOA eligibility conditions. Therefore, isolating the impact of AGOA from other factors that are working simultaneously to bring about socio-economic and political change in Nigeria is very difficult, and admittedly, constitutes a limitation in this study. The implementation of AGOA in Nigeria has witnessed challenges, which can be addressed in order for Nigeria to maximize the opportunity offered by the scheme. There
145 is great potential for industrial growth and export expansion under AGOA, which can be achieved by following the recommendation made in this research. Even though AGOA’s achievement in the non-oil sector in Nigeria is modest with promise for growth, the fact is that after six years of implementation, one would have expected greater impact especially on the targeted textile and agricultural products. These sectors are yet to witness significant impact under AGOA. However, this does not suggest a failure of the Act but a need to consciously re-appraise its intended objective and push harder for its achievement in Nigeria.
146 Chapter Five References
Bhagwati, J. (1995). “U.S. Trade Policy: The Infatuation with Free Trade Areas,” In Jagdish Bhagwati and Anne O. Krueger (eds.) The Dangerous Drift to Preferential Trade Agreements. Washington, D.C.: The AEI Press. Brown, E.G. (1993). “Free Trade is not Free.” In Ralph Nader et al (Eds), The Case Against Free Trade. California: Earth Island Press & North Atlantic Books. Chomo, G.V. (2002). “Free Trade Agreements Between Developing and Industrialized Countries: Comparing the U.S.-Jordan FTA with Mexico’s Experience Under NAFTA.” U.S. International Trade Commission: Office of Economics Working Paper. Ebosele, M. and Onyedika, N. (2006). “104 Years After, Nigeria Phases out Narrow Gauge Rail Lines” The Guardian, Tuesday, December 19, 2006 Johnson, J.B. & Reynolds, H.T. (2005). Political Science Research Methods (Fifth Edition). Washington, D.C.: CQ Press. Lallah, R (2003). “AGOA—Consolidating U.S. Imperialism in Africa.” Khanya: A Journal for Activists, No. 3 Available online at http://www.khanyacollege.org.za/Documents/AgoaUSJ3.pdf Levy, P. I. (1997). A Political-Economic Analysis of Free-Trade Agreements. The American Economic Review, Vol. 87, No. 4 (Sept), pp. 506-519. Lusztig, M. (2004). The Limits of Protectionism: Building Coalitions for Free Trade. Pittsburgh: University of Pittsburgh Press. McCulloch, R. & Pinera, J. (1977). Trade as Aid: The Political Economy of Tariff Preferences for Developing Countries. The American Economic Review, Vol. 67, No. 5. (December), pp. 959-967. Nader, R. (1993). “Introduction: Free Trade and the Decline of Democracy” In Ralph Nader et al (Eds), The Case Against Free Trade. California: Earth Island Press & North Atlantic Books. Noble, K. E. (2006). “The Complete Guide to Understanding the U.S./Sub-Saharan Africa Trade Relationship: Analysis & Opinions on the Ghanaian Implementation of the African Growth & Opportunity Act (AGOA)—A Case Study.” Doctoral
147 Dissertation, Submitted to the Faculty of Miami University. Pomfret, R. (1986). The Effects of Trade Preferences for Developing Countries. Southern Economic Journal, Vo., 53, No. 1 (July), pp. 18-26. Shomade, N. (2004). “A Bomb is a Bomb” Available online at www.africaspeaks.com/articles/2004/0211.html Textile Excellence, (2004). “Nigeria: Industry Appeals foe Resumption of Export Incentive Scheme, Assured Cooperation” Available Online at: http://www.textileintelligence.com/nigeria/626.html?getnewsofdate=10926000 USTR (2006). “Comprehensive Report on U.S. Trade and Investment Policy Toward Sub-Saharan Africa and Implementation of the African Growth & Opportunity Act, The Sixth of Eight Annual Reports, May 2006, pp. 1-19. World Bank (1981). Accelerated Development in Sub- Saharan Africa: An Agenda for Action. Washington, DC: The World Bank.
148 APPENDIX 1 QUESTIONAIRE
Dear Respondent, My name is Bede Eke, a Ph.D candidate at Miami University, Oxford, Ohio, USA. I am conducting a dissertation research on the topic “Preferential Trade Agreement as a Path to Economic Development: The Case of Nigeria’s Response to African Growth and Opportunity Act (AGOA).” I need your assistance in completing the questionnaire below. This questionnaire is purely for academic purpose. Your response will be treated confidentially. You are not compelled to answer any question you are not comfortable with. In other words, you are free to skip any of the questions. By answering these questions, you are contributing indirectly to policies and programs that are direct product of research outcomes such as this.
Questionnaire for Nigeria AGOA Interview
Name of Respondent: ______Establishment or Agency: ______Job Position: ______
A. General Questions
1. Knowledge and Procedures a. Do Nigerian government and entrepreneurs understand the key concepts and procedures involved in AGOA?
b. Does the Nigerian government feel that it has enough information and skill to handle AGOA implementation?
c. Are the procedures too complex and unhelpful?
149 d. Does AGOA truly create new business?
e. To what extent are the Nigerian entrepreneurs and business community aware of the opportunity offered by AGOA?
2. Questions about sovereignty/ideological issues a. Some people have criticized AGOA on the ground that the ideology that informed its conditions for eligibility is purely imperialistic. To what extent do you agree or disagree with this assertion?
b. Does AGOA bring U.S. interference in Nigerian affairs?
c. Does AGOA undermine Nigeria’s sovereignty?
d. What aspect of the AGOA eligibility condition do you feel uncomfortable with and why?
e. Do you think that any aspect of the eligibility conditions undermines the sovereignty of Nigeria?
f. Do Nigerians feel that AGOA is another effort by a more powerful country to impose its values on a less powerful one under the guise of trade opportunity?
g. Can AGOA be considered as another instrument of control by an advanced country over less-developed countries of Africa?
h. To what extent do you consider AGOA a benign, benevolent, fair trade policy by the U.S.?
150 i. Why is this policy important or not important at this point in the socio- economic and political development of Nigeria and Africa?
j. What advantages other than increase in trade do you think AGOA offers for Nigeria and the U.S.?
3. Questions about Nigeria’s response to AGOA a. How do you perceive Nigeria’s response to AGOA?
b. Can the response be considered satisfactory? If yes, why? If no, why not?
c. What are the challenges that limit Nigeria’s full implementation of AGOA?
d. Do you think that there are some local barriers (political, infrastructural and security) that impede Nigeria from fully embracing AGOA’s implementation?
e. Do you think that Nigerians have the necessary skills required to tap into the AGOA opportunity?
f. Do Nigerian industrialists have sufficient information and skill to take advantage of the opportunity offered by AGOA?
g. Are there still trade barriers in the form of ban on importation of certain products, and high tariffs on some products by the Nigerian government?
h. Are there still U.S. barriers to trade between the two countries?
151 i. Given that AGOA has enabled the creation of West African Trade Hub (WATH) and similar bodies in East and South African sub-regions to coordinate the trade activities of these sub-regions under this policy, do you think that AGOA has spurred more inter-African cooperation?
j. Has it spurred cooperation among Nigerian businesses? If yes, how?
k. Has AGOA spurred new business in Nigeria? If yes, give examples.
l. Has Nigeria made some success in its response to AGOA so far? Give examples.
m. In which industrial sector of Nigeria is AGOA considered a success and why?
n. Which industrial sector in Nigeria has recorded the poorest outcome under AGOA, and why?
o. Does U.S. help in offering solutions to the problems faced by Nigeria in AGOA implementation?
p. Does Nigeria government assist or help industries to ensure they make good use of this opportunity?
q. Are there reforms (political and economic) by the government that are aimed at helping in the AGOA implementation?
r. How can the challenges in the implementation of AGOA in Nigeria be Addressed?
152 s. What role do you think the Nigerian government should play to facilitate AGOA gains?
t. What new adjustments should Nigeria government and industries make in order to position the country to take full advantage of AGOA?
B. Case Study Questions (Industry-Specific Questions)
1. Textile Industry i. What was the textile industry in Nigeria like before the introduction of AGOA?
ii. Do you think the industry has opportunity to grow under AGOA? If yes, how?
iii. What progress in the textile industry can be attributed to AGOA since Nigeria secured AGOA visa for textile materials?
iv. What challenges limit the textile industry from taking full advantages of AGOA?
v. How can such challenges be tackled or addressed?
vi. What aspect of AGOA principle are you not comfortable with and why?
vii. What do you think can be done with such principle?
viii. How far has the Nigerian textile industry gone in overcoming such possible challenge from the “rule of origin” principle of AGOA?
153 ix. Can you predict the future of Nigerian textile industry under AGOA? If yes, what will it be like?
2. Cashew Industry i. What can you say about the cashew industry under AGOA?
ii. What prospects exist for the cashew industry under AGOA?
iii. What steps has the industry taken to position itself for AGOA gains?
iv. What progress has the industry made in this regard?
v. What challenges is the cashew industry facing under AGOA?
vi. How can the challenges be addressed?
154 APPENDIX 2
NIGERIA IN BRIEF
Official Name: Federal Republic of Nigeria Capital: Abuja Nationality: Nigerian National Date: 1st October (Independence Day) Location: On the West Coast of Africa, in the tropics, between latitudes 40 and 140 North of the equator, and longitudes 30 and 140 East of the Greenwich meridian. Land Mass: 923,768,000 square kilometers Boundaries: On the West by the Republic of Benin and Cameroun, to the East, the Gulf of Guinea to the South and Chad Republic to the North Population: 110 million people, making it the largest black nation in the world. 250 ethnic groups speaking over 4,000 languages and dialects. The ethnic groups have diverse cultural and religious backgrounds. About 39% of the population lives in the urban areas. Human Resources: The country boasts of the highest pool of highly educated and trained manpower in Africa. This in addition to its large population which offers the largest market for investors in Africa. Political system: Nigeria is a Federation of thirty-six States and the Federal Capital Territory, Abuja. It operates a presidential system of Government with a National Assembly comprising the Senate and the House of Representatives. The country also runs a three-tier system of Government, namely the Federal, State and Local Councils. Climate: Nigeria has two well-defined seasons namely, the rainy season (April – October) and dry season (November – March). Temperatures are higher in the North while fairly lower in the South. Official Language: English Currency: Naira Head of State and Government: Musa Yar’Adua, emerged as President on May 29,
155 2007 after a controversial election. He took over from Olusegun Obasanjo who ruled for eight years, from May 29, 1999 to May, 28, 2007. Legislative Branch: The National Assembly is a bi-cameral Assembly. The upper house (Senate) has 109 members while the lower house (House of Representatives) has 360 members The Judiciary: The Supreme Court is headed by the Chief Justice of the Federation. There is an Appeal Court and the Federal High Court. The 36 States and the Federal Capital Territory have judiciaries headed by Chief Judges. State and the Local Governments: Nigeria’s 36 States and 774 Local Governments are administered by Governors and Chairmen. States have Legislative Assemblies while Local Governments have same. Main Cities: Abuja, Lagos, Port-Harcourt, Ibadan, Kaduna, Abeokuta, Osogbo, Benin- City, Enugu, Calabar, Sokoto, Ilorin, Akure, Ado-Ekiti Investment Drive: Following the return of democracy, Nigeria has open its doors to investors, both local and foreign and the various obstacles to investment are being removed. AGOA has also spurred reforms through its eligibility conditions. There is massive divestment of the Federal Government from various companies and redirecting such resources to the provision of public infrastructure and an enabling environment of active private sector participation. The Federal Government has put in place a number of incentives such as the tax holding, income exemption, enhanced capital allowance etc for all types of investors. Most of these are to be reviewed periodically.
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