Findings Query AGOA Benefits

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By Wezi Tjaronda WINDHOEK Concerned that the Africa Growth and Opportunity Act (AGOA) is a temporary trade arrangement, there is feeling that Namibia should rather further diversify its export markets and move away from any AGOA dependency. AGOA, which is an arrangement initiated by the United States of America to benefit Sub-Saharan African countries, encourages trade and investments between the US and Africa through reduction of tariff and non-tariff barriers. The Act offers tangible incentives for African countries to continue their efforts to open their economies and build free markets According to the findings of a Bank of Namibia’s research team, titled, “How Namibia can benefit further from AGOA”, which were presented yesterday, “AGOA is temporary and does not provide long-term secure markets for trade and investment.” The research also noted: “The trade arrangement remains vague because it does not state how it’s intended free zones with Sub-Saharan African countries would be established, nor does it spell out any time frame for doing so,” the research added. Participants were concerned over the sustainability of the trade arrangement noting that other arrangement such as the Cotonou Agreement, which Namibia qualifies for with the European Union, was far more sustainable than the one with the USA. Some of the critical questions that came out of the seminar concerned the sustainability of AGOA, whether the USA is a relevant export destination and what trade policy decisions the Namibian Government was making. A good part of the discussions was centred on textile company Ramatex Textiles, which many feared if it happens to close would result in the loss of more jobs. The seminar noted that Namibia has no skilled personnel and no technology transfer at the textile company to enable it to run to after the investors move out. Rainer Ritter, an economist and business consultant, said most products identified for AGOA had more value on the EU market as producers got more in Europe than in the US. He said South America remains the US’s most important trading partner compared to Africa. “The USA’s interest in AGOA was of political consideration for the US to get involved to get Africa influenced by making a trade arrangement for the continent,” he said. Most of Namibia’s products, noted Ritter, are exported to the EU and not to the US, because Africa was colonised by Europe, which had a moral guilt on its part to assist Africa. “In the long term, it makes more sense to deepen the arrangement with a partner with whom we have more strength,” he added. According to the research, which was done by Vitalis Ndalikokule, Ben Biwa and Esau Kaakunga, Namibia has a comparative advantage in the production of cotton seeds, hides, karakul pelts, raisins, beer, grapes, fish, beef, wool, eggs in shell (ostrich) and processed canned fish. However, some of the products such as beer and wool are not on the AGOA list of eligible products. The research paper recommended that the Ministry of Trade and Industry should continue to promote investment in the textile industry and garment sector. As for now, most benefits derived by the country come from the sector. Recommendations were also that the ministry should promote vigorously the export of value added minerals and base metals such as polished diamonds, zinc, and process marble stones to the US to increase export earnings. The research team noted that at the moment, Namibia’s main exports to the US include energy related products, minerals, base metals, textiles and apparel. Of these, the export of minerals, metals, textiles and apparel have been increasing since 2002. The export value of textile and apparel have gone up from N$36 million in 2002 to N$468 million in 2004, while that of minerals and metals have also increased from N$66 million in 2002 to over N$702 million in 2004. At country level, Namibia trails behind in export performance due to the fact that the better performances of other countries are due to oil exports. Nigeria, with a performance of N$36 billion and South Africa with N$24 billion, are the first and second in performances respectively, While Nigeria export contributions could be attributed to oil, the South African one is due to agricultural products, motorcars, textile and apparel. Jurgen Hoffman, a trade advisor with the Agricultural Trade Forum, said Namibia needs to diversify its export markets and not just focus on AGOA and the EU. Hennie Fourie, the Chief Executive Officer of the Namibia Manufacturers Association, suggested that Namibia use opportunities offered by AGOA to develop the country’s competitive advantage and be able to be competitive when AGOA comes to an end. Other recommendations of the research team are that Namibia should encourage investment in the production of items such as high value crops, wine, grapes, leather products, gas and semi-precious stones, among others. While the Green Scheme is a step in the right direction, the paper feels that this should be complemented by value addition of its products. AGOA offers the potential of free access for over 6 000 products to the US market from 48 Sub-Saharan countries.