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.