CORNHUSKER ECONOMICS

CORNHUSKER
ECONOMICS
University of Nebraska–Lincoln Extension
June 19, 2013
Institute of Agriculture & Natural Resources
Department of Agricultural Economics
http://agecon.unl.edu/cornhuskereconomics
The Impact of the African Growth and Opportunity Act (AGOA): An Empirical
Analysis of Sub-Saharan African Agricultural Exports
Market Report
Yr
Ago
4 Wks
Ago
6/14/13
Livestock and Products,
Weekly Average
Nebraska Slaughter Steers,
35-65% Choice, Live Weight. . . . . . . .
Nebraska Feeder Steers,
Med. & Large Frame, 550-600 lb.. . . .
Nebraska Feeder Steers,
Med. & Large Frame 750-800 lb. . . . .
Choice Boxed Beef,
600-750 lb. Carcass. . . . . . . . . . . . . .
Western Corn Belt Base Hog Price
Carcass, Negotiated. . . . . . . . . . . . . .
Pork Carcass Cutout, 185 lb. Carcass,
51-52% Lean.. . . . . . . . . . . . . . . . . . .
Slaughter Lambs, Ch. & Pr., Heavy,
Wooled, South Dakota, Direct. . . . . . .
National Carcass Lamb Cutout,
FOB. . . . . . . . . . . . . . . . . . . . . . . . . .
$119.05 $125.96 $120.50
176.20
163.68
154.00
155.19
137.96
140.89
197.82
207.49
201.62
96.10
89.13
101.78
90.12
91.27
99.53
146.50
115.00
120.00
340.49
282.65
282.05
5.79
6.90
6.83
6.21
6.98
7.05
13.55
15.14
15.12
9.88
12.11
12.05
3.30
3.95
4.24
207.50
*
*
140.00
227.50
225.00
97.50
*
217.50
211.50
226.00
231.00
70.38
92.50
91.00
Crops,
Daily Spot Prices
Wheat, No. 1, H.W.
Imperial, bu. . . . . . . . . . . . . . . . . . . . .
Corn, No. 2, Yellow
Nebraska City, bu.. . . . . . . . . . . . . . . .
Soybeans, No. 1, Yellow
Nebraska City, bu.. . . . . . . . . . . . . . . .
Grain Sorghum, No. 2, Yellow
Dorchester, cwt. . . . . . . . . . . . . . . . . .
Oats, No. 2, Heavy
Minneapolis, MN , bu. . . . . . . . . . . . .
Feed
Alfalfa, Large Square Bales,
Good to Premium, RFV 160-185
Northeast Nebraska, ton. . . . . . . . . . .
Alfalfa, Large Rounds, Good
Platte Valley, ton. . . . . . . . . . . . . . . . .
Grass Hay, Large Rounds, Good
Nebraska, ton. . . . . . . . . . . . . . . . . . .
Dried Distillers Grains, 10% Moisture,
Nebraska Average. . . . . . . . . . . . . . .
Wet Distillers Grains, 65-70% Moisture,
Nebraska Average. . . . . . . . . . . . . . .
*No Market
About $1 trillion in foreign aid has been lavished on SubSaharan Africa (SSA) since 1960, to little avail, Dambissa
Moyo (2010), a Zambian economist, has argued. Annual per
capita income growth has averaged less than 0.2 percent since
1976; per capita income adjusted for inflation is almost
identical to the level reached in the late 1970s; and almost half
the people in the region are living in extreme poverty (less than
$1.25 per day in terms of 2005 purchasing power), a figure that
has changed very little over the past 30 years (authors’
calculations using World Bank data). Moyo and others have
suggested that greater access for African exports to markets in
high-income countries offers a better avenue for growth and
development than foreign aid. In 2000, the United States
government adopted the African Growth and Opportunity Act
(AGOA), which aims to increase trade and investment between
the United States and eligible SSA countries by reducing or
eliminating tariffs applied to African goods, promoting
economic development and reform and supporting increased
access and investment opportunities. Of the 48 SSA countries,
41 are eligible for AGOA trade preferences. The U. S. and other
foreign aid donors continue to provide foreign aid (about $126
billion in 2012, according to the Organization for Economic
Cooperation and Development, OECD). But AGOA, a similar
program of the European Union known as “Everything but
Arms,” and recent initiatives by OECD countries to provide
support for the development of infrastructure and the legal
framework related to trade (“Aid for Trade”), suggest that a
shift in the development strategies of governments in highincome countries may be underway (Moyo, OECD).
International trade plays an important role in the economic
development of African countries, accounting for about a third
of the Gross Domestic Product (GDP) in SSA (World Bank,
2010). Exports are often concentrated in a small number of
primary commodities (e.g., cocoa, coffee, copper, bauxite or
petroleum) so that higher commodity prices are very important
for economic growth (World Bank, 2010). When markets in
other countries are protected by trade barriers, world
commodity prices are depressed, and in addition often become
E xtension is a D ivision of the Institute of A griculture and N atural R esources at the U niversity of N ebrask a–Lincoln
cooperating with the C ounties and the U .S . D epartm ent of A griculture.
U niversity of N ebrask a E xtension educational program s abide with the non-discrim ination policies
of the U niversity of N ebrask a–Lincoln and the U nited S tates D epartm ent of A griculture.
more volatile. These conditions make it difficult for lowincome countries in SSA to finance needed investments and to
implement long-term development strategies. Reducing trade
barriers has become an important objective for governments in
both high-income countries and SSA, and AGOA represents
a promising approach to this goal.
The African Growth and Opportunities Act
Because most of Africa was colonized by Europeans
searching for raw materials to feed industrial development in
their home countries, African trade has historically been
oriented toward Europe. In 2011, almost 35 percent of African
merchandise exports were destined for European countries,
compared with about 15 percent sold to the U.S. and 11
percent to China (authors’ calculations based on data from the
World Trade Organization, WTO). Eighty-six percent of U.S.
imports from Africa consist of petroleum and minerals, while
agricultural goods imported from the eligible AGOA countries
account for less than two percent of total U.S. agricultural
imports (WTO and
FAS/USDA). There have
been relatively few
studies of the impact of
AGOA on exports from
the eligible SSA
countries, and even fewer
that focus on agricultural
trade. These studies were
often carried out in the
early years of AGOA,
when the program was
not fully established. For
both total merchandise
exports and agricultural
exports, most studies find
that the impact of AGOA
on SSA exports to the
U.S. appears to be small,
although this may be due
in part to data limitations
(see Nouve and Statz,
2003; Condon and Stern,
2010). The research
reported in this
newsletter focuses on agricultural exports from the AGOA
countries -- using a longer time frame and divided into a preAGOA period (1990-99) and a post-AGOA period (20002011).
The economic model estimated for this study traced the
evolution of agricultural exports to the U.S. from 35 eligible
countries over the period 1990-2011. The statistical results are
consistent with other studies in finding that the AGOA trade
preferences do not have a statistically significant impact on
U.S. agricultural imports, although it appears that greater
access to the U.S. market has been of benefit to several
countries. These results are not surprising, given that trade
barriers were only reduced on agricultural products that do not
compete with goods produced in the U.S. The top five
commodities imported from the AGOA countries by the U.S.
in 2012, coffee, rubber, cocoa, tree nuts and wine, account for
71 percent of all agricultural imports from these countries
(FAS/USDA). Products such as sugar, peanuts, cotton, tobacco,
dairy, beef and processed agricultural goods such as dried garlic
or canned fruits are not covered by the AGOA tariff or quota
reductions. Sugar, cotton and peanuts are important export
commodities in many African countries, and their exclusion
from the AGOA trade barrier reductions lessens the impact of
this program. Peanuts and peanut products account for 18
percent of Senegal’s agricultural exports (FAOSTAT), for
example, but no peanuts, peanut oil or other peanut products are
imported from Senegal by the U.S.
The AGOA countries with the largest agricultural exports
to the U.S. in 2012 were South Africa (21% of total AGOA
agricultural exports to the U.S.), Ghana (17% of the total),
Liberia (12%), Kenya (9%) and Ethiopia (8%). In most cases,
exports from these countries were dominated by a single
commodity. Thus, 85 percent of Ghana’s agricultural exports to
the U.S. were made up of cocoa and cocoa products, while
virtually all of Liberia’s
exports consisted of
rubber and related
products. Exports from
South Africa and Kenya
were somewhat more
diversified, but still
concentrated in a limited
number of commodities
(coffee and tree nuts in
Kenya; wine, fresh fruits
and vegetables and tree
nuts in South Africa).
Coffee made up 74
percent of Ethiopia’s
exports to the U.S.
(FAS/USDA, 2013). In
general, the major
agricultural commodity
exports from SSA are
cocoa, coffee, cotton,
peanut oil, palm oil,
sugar and tobacco.
Because commodities
such as coffee, cocoa
and palm oil are not produced in the U.S. in significant
amounts, it is unlikely that there were extensive trade barriers
on these commodities prior to the adoption of AGOA. As a
result, the potential impact of trade liberalization for these
commodities was probably limited, as the barriers were already
low. On the other hand, the inflation-adjusted average value of
total agricultural exports from the AGOA countries to the U.S.
between 2000 and 2012 was about 70 percent greater than the
average for the period 1990-99, although not all of this increase
can be attributed to AGOA (authors’ calculations based on data
from FAS/USDA).
Conclusion
Although AGOA may not have had a substantial impact on
SSA agricultural exports to the U.S., it may have brought about
gains for particular countries exporting such classic tropical
products as coffee, cocoa or rubber. In addition, while the im-
pact on agricultural trade may have been modest, the effects of AGOA in such sectors as textiles and apparel may have been more
significant (Condon and Stern, 2011). As wages in China and other emerging economies increase, these countries will lose their
competitive advantage in textiles and apparel, and this may lead to increased development of these industries in lower-wage countries
in SSA. AGOA may contribute to this transition and, by extension, to increased economic growth and development in SSA. With
respect to agriculture, however, the impact of AGOA is likely to remain limited as long as markets for commodities such as sugar,
tobacco, peanut oil and cotton are not fully opened to African exports.
References:
AGOA (African Growth and Opportunity Act, 2011/2012) accessed at: http://agoa.info/
Condon, Niall and M atthew Stern (2010). “The Effectiveness of African Growth and Opportunity Act (AGOA) in Increasing Trade from
Least Developed Countries: A Systematic Review.” London: EPPI-Centre, Social Science Research Unit, Institute of Education,
University of London.
FAOSTAT (2013). “FAOSTAT: Trade, Crops and Livestock Products.” Food and Agriculture Organization at:
http://faostat.fao.org/site/535/DesktopDefault.aspx?PageID=535#ancor
FAS/USDA (2013). “Global Agricultural Trade Statistics (GATS).” Foreign Agricultural Service (FAS), USDA at:
http://www.fas.usda.gov/gats/ExpressQuery1.aspx
Moyo, Dambisa (2012). Dead Aid: Why Aid is Not Working and How There is a Better Way for Africa. New York: Farrar, Straus and
Giroux.
Nouve K. and J. Staatz (2003). “The African Growth and Opportunities Act and the Latent Agricultural Export Response in Sub-Saharan
Africa.” Paper presented at the 2003 Annual Meeting of the American Agricultural Economics Association in Montreal, Quebec,
Canada, July 27-30.
OECD (2011). Aid for Trade at a Glance 2011: Showing Results. Paris: Organization for Economic Cooperation and Development.
W orld Bank (2010).Global Economic Prospects, Sub-Saharan Africa Annex, January 2012. W ashington, DC: The W orld Bank.
W TO (2013). “Statistics Database: Time Series on International Trade.” W orld Trade Organization at:
http://stat.wto.org/Home/W SDBHome.aspx?Language=
Addisalem Zenebe, Research Assistant
Dept. of Agricultural Economics
University of Nebraska-Lincoln
[email protected]
E. Wesley F. Peterson, (402) 472-7871
Professor
Dept. of Agricultural Economics
University of Nebraska-Lincoln
[email protected]
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