How much can trade preferences do for Africa?

CGD’s Kim Elliott criticizes Paul Collier’s trade policy recommendations:

[H]e overemphasizes the role that preferences can play in boosting Africa’s chances to cross the competitiveness threshold, while underestimating the potential for the Doha Round of global negotiations to do any good.

As Collier notes, sub-Saharan apparel exports to the United States grew sharply after the African Growth and Opportunity Act (AGOA) was passed in 2000, allowing duty-free exports of apparel and other goods. But apparel exports sank after the quotas restraining China and other competitive suppliers expired in 2005. 

Renewed restraints on Chinese exports appear to have slowed the decline, but those restrictions expire at the end of next year and the future for sub-Saharan apparel exports remains very uncertain.

This suggests that the current preference margin (the difference between the zero tariff on AGOA-eligible exports and the average 15 percent on other apparel exports) is not sufficient to overcome Africa’s other competitiveness problems and that the focus should be on improving infrastructure, skills, regional integration and other supply-side constraints. Given the importance of the rural sector in Africa, Collier also said too little about the need to expand AGOA to cover key agricultural products, including sugar, peanuts, and tobacco. This would extend the benefits of AGOA beyond the five countries responsible for nearly 90 percent of apparel exports…

And what of the costs of a Doha Round failure, which Collier applauds as opening the door for a trade policy focused on the bottom billion?… Collier is right that middle-income countries such as Brazil and Thailand would capture the bulk of these gains, but what of the West African cotton farmers whose plight he laments in his book? Perhaps most import, however, are the consequences of failure for the system of rules that protect the smallest and poorest countries from arbitrary discrimination by rich countries if the WTO loses its credibility. Yes, some new rules, such as those strengthening protection for intellectual property are potentially anti-poor, but the WTO rules provide substantial flexibility and offer a far better deal for developing countries than what they face under unilateral pressure and bilateral negotiations with much larger, richer trading partners.

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