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AFRICAN GROWTH AND OPPORTUNITIES ACT AND NIGERIA- UNITED STATES TRADE RELATIONS, 2000- 2011
The study examined the effects of African Growth and Opportunity Act on Nigeria- United States trade relations between 2000 and 2011. The thesis attempts to answer the following questions: Did the preferential access to US market under African Growth and Opportunity Act increase the volume of textile export from Nigeria to the US between 2000 and 2011? Did the framework of AGOA increase the volume of export of agricultural products from Nigeria to US between 2000 and 2011? Did the duty –free access to US market under African Growth and Opportunity Act reduce Nigeria’s non-oil export deficit to US? In order to be in tune with reality, we predicated our analysis on the complex interdependence theory and argued that the letter and spirit of AGOA were both in consonance with the neoclassical model of growth for SSA designed by the US. We noted that this free flow of goods enunciated by United States in Sub-Saharan Africa through AGOA was equally to further enhance US penetrative capacity to this under developed markets in Sub-Saharan Africa. Data for the study was collected and analyzed through qualitative methods. The study arrived at the following findings: the preferential access to US market under African Growth and Opportunity Act did not increase the volume of textile export from Nigeria to the US between 2000 and 2011; the framework of AGOA did not increase the volume of export of agricultural products from Nigeria to US between 2000 and 2011; and the duty –free access to US market under African Growth and Opportunity Act did not reduce Nigeria’s non-oil export deficit to US. Finally, the study made useful suggestions aimed at maximizing the benefits inherent in the Nigeria- United States trade partnership. CHAPTER ONE Introduction 1.1 Background of the Study The period from 1960 to present has witnessed development failures in most Sub Saharan Africa (SSA) countries including Nigeria and other Sub- Saharan African (SSA) countries. These countries were sunk into socio-economic crisis. Hence, poverty, diseases (HIV, AIDS, Malaria), illiteracy and internal strives have rapidly increased in the region. In fact, the countries of the region including Nigeria arguably face severe developmental crisis. According to the United Nations Development Programme (UNDP), human development is a process of enlarging the range of people’s choice by increasing their opportunities for education, healthcare, income and employment and covering the full range of human choices from a sound physical, environment to economic and political systems” (UNDP, 1992:2). Hence, from human development perspective, development should ensure that individuals in society have access to health services, education facilities, opportunities to earn income and access to other social welfare services (UNDP, 2003). Africa had lost over 50 years or five decades of development. Hence, in the 1980s and the 1990s, the World Bank and the International Monetary Fund (IMF) prescribed Structural Adjustment Programmes (SAPs) as one of the solutions to African economic problem. This impromptu policy led to ‘devaluation of currency, reduced government spending in social service ministries such as the education and health sectors across the SSA countries (Mkandawire & Soludo, 1990). SAPs also led to liberalization and privatization of government enterprises. Notably the implementation of SAPs in Africa did not result in economic recovery. Indeed, Africa has remained the central focus of this global unequal distribution of national resources partly because of the neo-liberal arguments which suggest that a causal relationship exist between Africa’s poverty and her subordinate position in an increasingly globalized world economy; and partly that African economies are relatively closed to the wonders of free trade, capital flows, trade liberalization and export orientation, which offers viable development policy prescriptions. Faced with the complexity of development challenges, US, as one of the major purveyors of the contemporary globalization and a prominent crusader of trade as the pillar of global prosperity and security, encourages, as one of its major priorities, economic prosperity via trade and investment in Africa as panacea to the endemic crisis of development in the region. In 2000, the United States government began the implementation of duty free access for products from Sub-Saharan Africa under African Growth and Opportunities Act (AGOA). There was tremendous excitement that a window had been opened for the countries to develop their non-oil exports for economic growth. But over twelve years into the scheme, that initial euphoria seemed to have become a forlorn. According to the U.S, the AGOA scheme was intended to be mutually beneficial for both African and American entrepreneurs, but the focus of the administrations since its passage in 2000 has been on increasing African exports to the United States and the resultant job growth on the African continent. In fact, AGOA was presented to Africa by the United States as the new path for Africa’s economic recovery. This is better grasped from the address of President George Bush Jr. to members of Foreign Service in 2001. The President remarked that America must build trade relations across Africa and help nations that are adding to the freedom and stability of this continent. He added that “the first place to start on the economic front is to make sure that we have free and fair trade with the African continent (cited in Lewis, 2001:11). Thus, US economic policy under African growth and Opportunity Act (AGOA) concentrates on increasing Africa’s integration into the global economy. Okolie (2006: 73) argued that: Following the dismantling of the Soviet bloc, the US had refocused its foreign policy to trade and investment. In fact, post cold war trade relations between US and the rest of Africa rested on the basic principles contained in AGOA. As the centre –piece of US trade policy to Africa, AGOA seeks to accord African countries unlimited duty free and quota free access to the US for nearly 6500 products excluding textiles. No doubt AGOA has both strengths and limitations in theory and practice. Meanwhile, AGOA merely amended the US Generalized System of Preferences to grant duty–free treatment of specialized products from eligible countries. The purpose of the African Growth Opportunity Act was to use preferential trade access to the US market as a catalyst for economic growth in sub-Saharan Africa. This was expected to encourage governments to open their economies and build free markets (Schaefer & Markhiem, 2006). Two years later, President Bush signed the AGOA Accelerated Act of 2004 which extended preferential access for imports from eligible Sub-Saharan African countries enter United States duty-free until 2015. Eligibility for AGOA is, however not open to all African countries. The President of America designates countries that are eligible for AGOA’s benefits based on those countries progress towards establishing market based economy, representative government, combating corruption, strengthening the rule of law, eliminating barriers to US trade and investments among others. And based on these conditions 37 out of 48 countries in sub- Saharan African countries are currently eligible for AGOA’S benefits. Notably, Nigeria is one of the sub-Saharan countries that meet the conditions for benefiting from AGOA’s benefit. We have to reiterate that African Growth and Opportunity Act which was ostensibly enacted to encourage trade as a way to enhance economic growth not only in Nigeria but in sub-Saharan Africa and the seemingly prospective and in fact rewarding exchange trade relations between Nigeria and US and considering that Nigeria remains the largest trade partner (in terms of value of trade) of the US in Sub-Saharan African with total trade increasing rapidly in the recent years, it is often expected that trade relations between Nigeria and the US under AGOA should reduced the poverty rate in Nigeria. However, Nigeria concentrates on export of crude oil, textiles and agricultural products to US. Expectedly, these exports would address the argument of unequal trade and investment relations between Nigeria and US. Against this background, this study examines the effect of African Growth and Opportunity Act on Nigeria- United States trade relations between 2000 and 2011. 1.2 Statement of the Problem In most extant literature, states are divided as either living or dying political economies. Nigeria is regrettably categorized under the latter. Hence, the US and the rest of the West encourage bilateral and multilateral trade initiatives with the sub- Saharan African countries essentially to entice the economies of Africa. Akinyemi et. al. (1989:17) averred that “the intense economic intercourse between Nigeria and the US has necessitated condition of political and policy misunderstanding between the two countries”. Olusanya and Akindele (1986:6) also noted that “America had consistently frowned at Nigeria for protracted military rule, yet economic relations between both countries continued smoothly because of US economic interest in Nigeria”. Shapouri and Trueblood (2003) specifically argued that the United State has made an attempt to assist in reversing the worsening economic trends by passing the African Growth and Opportunity Act (AGOA), which was signed into law in May of 2000, as part of the Trade and Development Act of 2000. They also noted that AGOA provided preferential access to United State markets for eligible products from designated countries of Sub-Saharan Africa (SSA) as well as improved access to US credit and technical expertise. In a related development, Asobie (2004) contends that AGOA is a United States trade legislation which seeks to open US market to African exports particularly African fabrics, fashion and agricultural products duty free. According to the him, AGOA seeks to promote good relationship between Africa and the United States and develop partnership through trade and investment incentives particularly with African countries undertaking economic and political reforms. Similary, Nafukho (2003) argued that AGOA was designed to facilitate socio-economic growth in selected Sub-Saharan African countries through trade rather than aid. In addition, Mattoo and Subramanian (2002) observed that AGOA aims broadly at improving economic policy- making in Africa, enabling countries to embrace globalization, and securing durable political and economic stability. However Eme, (2009:198) contends that despite the large volume of investments in development aid, Sub-Saharan African countries remain little better than it was decades ago. He further argued that the gains of AGOA are limited as a result of the United States manipulation of her trade policies. Marwa (1999); Obadan (1999) and Nzeku (1999) believe that there is a transition period before sectors can expand and that there are some sectors that can expand rapidly than the others. They also argued that the textile sector has a comparative advantages and with better competitive edges over other sectors. Although these scholars were outstanding, they failed to determine whether African Growth and Opportunity Act has increased the volume of textile export from Nigeria to the US between 1999 and 2011. Meanwhile, Itua (2011); Eburajolo (2011) and Nze (2012) noted some of the factors behind the rot in the Nigerian textile industry. They also remarked that Nigeria relies more on import while its once vibrant industries are facing near extinction. Although they were extensive in discussing the manufactures and export of textile products, these scholars rarely illuminates academic debates on the role AGOA is playing in the export of textile from Nigeria to US. Again, Olusanya and Akindele (1986); Akinyemi et. al. (1989) and Shapouri and Trueblood (2003), observed that economic relations between Nigeria and United States did not necessarily engender political understanding and co-operation; instead the intense economic intercourse between the two countries has equally necessitated condition of political and policy misunderstanding between the two countries. Nafukho (2003) argued that AGOA was designed to facilitate socio-economic growth in selected Sub-Saharan African countries through trade. Stevens and Kennan (2005); Paez et al ( 2010); Blackman and Mutume (1998) and Raghavan (2000) argued that AGOA is unique from past GSP because it goes further than just removing trade barriers to African goods. Although these authors tried to uncover the debates in the subject, they regrettably overlooked the role of African Growth and Opportunity Act in enhancing the volume of US trade in Nigerian non-oil sector. Moreover, despite the fact that the contributions of these scholars are germane and illuminating, none of them attempted to determine whether AGOA has enhanced the trade relations between Nigeria and United States within the period under investigation. Against the background, we raised the following questions: 1. Agribusiness (processing, preservation, storage and marketing) for both the volume of textile export from Nigeria to the US between 2000 and 2011? 2. Did the duty –free access to US market under African Growth and Opportunity Act reduce Nigeria to US between 2000 and 2011? 3. Did the preferential access to US market under African Growth and Opportunity Act increase Nigeria’s non-oil export deficit to US? 1.4 Objectives of the Study This study has both broad and specific objectives. Broadly, the study examines the effect of African Growth and Opportunity Act on Nigeria- United States trade relations between 2000 and 2011. Specifically, the study has the following objectives: 1. To ascertain whether the preferential access to US market under African Growth and Opportunity Act increased the volume of textile export from Nigeria to the US between 2000 and 2011. 2. To determine whether the framework of AGOA increased the volume of export of agricultural products from Nigeria to US between 2000 and 2011. 3. To ascertain whether the duty –free access to US market under African Growth and Opportunity Act reduced Nigeria’s non-oil export deficit to US. 1.4 Significance of the Study This study has both theoretical and practical significance. Theoretically, this study will contribute to the literature on African Growth and Opportunity Act and Nigeria- United States trade relations. It will also contribute to the role of African Growth and Opportunity Act in the export of textile materials from Nigeria to the US and export of agricultural products from Nigeria to US. Again, the study will furnish both scholars and students with new knowledge on the relationship between African Growth and Opportunity Act and US investments in Nigerian non-oil sector. Hence, the study will serve as a secondary source of data for future researchers and add to the pool of existing literature on African Growth and Opportunity Act and Nigeria and US trade relations. Practically, the study will assist the policy makers in Nigeria to appreciate the linkages between the asymmetrical trade relationship between the western capitalist countries and the endemic crisis of development in Nigeria. The study will aid policy makers in formulation of relevant policies in the relations to Nigeria-US relations on the one hand and Nigeria – Western countries relations on the other hand in the quest for economic emancipation and sustainable development. In other words, filling the gaps in data for Nigeria will enable researchers to make more robust analysis and lead to better policy recommendations. Again, this study offers a good lesson for future policy concession, not only from the United States, but also other developed countries. It will also guide investors on business options in Nigeria. More importantly, the study shall provide the compass for facilitating autochthonous human and material transmutation of Nigeria’s fledging economy.