Posts Tagged ‘AGOA’

Did AGOA just divert Chinese exports through Africa?

29 August 2012

I’ve followed the African Growth and Opportunity Act for a long time. This piece of US legislation gave preferential market access to exports from designated African countries, particularly in textiles and apparel. African economies experienced significant export growth in the early 2000s; the question was whether that growth should be attributed to AGOA and the EU’s Everything But Arms initative. The policy debate has been interesting in various ways: AGOA came under fire from both libertarians and Joe Stiglitz while finding favor with those in between.

The most favorable interpretation of the policy was that its temporary advantage would launch manufacturing clusters in Africa. And when researchers found that AGOA had a strong positive impact on African exports, it looked like the policy was spurring industrial growth.

That makes new research (pdf) from friend-of-the-blog Pierre-Louis Vezina (co-authored with Lorenzo Rotunno and Zheng Wang) very intriguing:

During the final years of the Multifiber Agreement the US imposed strict import quotas on Chinese apparel while it gave African apparel duty- and quota-free access. The combination of these policies led to a rapid but ephemeral rise of African exports. In this paper we argue that the African success can be explained by a temporary transhipment of Chinese apparel driven by quota-hopping Chinese assembly firms. We first provide a large body of anecdotal evidence on the Chinese apparel wave in African countries. Second, we show that Chinese apparel exports to African countries predict US imports from the same countries and in the same apparel categories but only where transhipment incentives are present, i.e. for products with binding quotas in the US and for countries with preferential access to the US unconstrained by rules of origin. Using input-output linkages, we then show that African countries imported quasi-finished products with little assembly work left to do, rather than primary textile inputs. We estimate that direct transhipment may account for around half of AGOA countries apparel exports.

The abstract certainly caught my attention; I look forward to reading this paper.