Collier Warns Against Expanding AGOA

TO NON-AFRICAN LEAST DEVELOPED COUNTRIES.


-- Eminent development economist Dr. Paul Collier, Director of the Center for the
Study of African Economies at Oxford University, warned on Monday that expanding the
trade preferences currently reserved for eligible African nations by the African
Growth and Opportunity Act (AGOA) to all Least Developed Countries (LDCs) would be
disastrous for African economic development.
Speaking at the Leaders Forum on the 10-Year Anniversary of AGOA in Washington , DC
, Dr. Collier described how proposed legislation in the US Congress to extend
duty-free and quota-free access to the US market to big apparel exporting LDCs like
Bangladesh and Cambodia would destroy Africa ’s much smaller apparel manufacturing
sector.

Trade preferences are the “pump priming mechanisms” for the creation of the
manufacturing clusters of mutually-supporting industries necessary for building a
labor-intensive and globally-competitive sector, he said, adding that apparel
sectors in countries like Bangladesh, Cambodia and China were already benefiting
from such clustering and had achieved critical economies of scale, but that the
African apparel sector had not yet reached that threshold.
“We know where trade preferences should go, and where they should be kept out
because if we let in one huge manufacturer, it would cut out all the little
manufacturers,” Dr. Collier said. “These large manufacturers must be kept out
because they are not entrants into manufacturing. Bangladesh doesn’t need privileged
access. There are many ways to help Bangladesh because it is still poor, but trade
preferences [to benefit its apparel sector] is not the way.”
In 2008, the value of apparel exports to the US from all 48 sub-Saharan African
(SSA) countries combined was a little over $1 billion. Bangladesh alone sold $3.5
billion worth of apparel to the US, and Cambodia $2 billion. With the onset of the
global economic downturn, African apparel exports to the US dropped by over 10
percent in 2008, while imports from Bangladesh grew more than 11 percent.

“One reason [trade preference reform] is on the political agenda is because there
will be big money for companies importing from Bangladesh,” Dr. Collier said. US
retailers stand to gain about a $1 billion in recovered duties if the US Congress
enacts trade preference reform in its present form.
He added that rather than diluting AGOA, now was the time to scale it up. “There is
a real opportunity for AGOA to go global. If we had a Super AGOA that included
Europe and Japan, it would make life so much easier for Africa,” he said.
Dr. Collier also noted that climate change was already adversely affecting African
agriculture and it was critical for Africa to break into light manufacturing where
employment can be scaled up rapidly.
The Leaders Forum was co-hosted by the AGOA Action Committee and a coalition of
organizations that support AGOA. It was organized by The Whitaker Group, a premier
US-based consultancy that facilitates trade and investment in Africa.