Should the US pay to trade with Africa? | Star Interview: Serge Ekué, President of BOAD
Should the US pay to trade?with Africa?
The US should pay ‘negative tariffs’ in Africa – essentially targeted manufacturing subsidies – to help revive its faltering African Growth and Opportunity Act (AGOA), according to a new report from the Washington-based Center for Global Development (CGD).?
CGD’s Justin Sandefur and Arvind Subramanian estimate that $291m in negative tariffs could create $1.5bn in new trade and would fit with US “friend-shoring” efforts – manufacturing and sourcing from geopolitical allies. They found that AGOA initially performed very well - but only until 2005, when “arcane” global textile treaties expired and Chinese competition, particularly in garments, flooded the market.?
The authors say that their proposal for negative tariffs could kickstart the flagging scheme. "Since AGOA tariffs are already at zero, the only way to open up a price incentive for production in Africa at this stage without totally tearing up the World Trade Organization (WTO) rules would be to cross into negative rates.?While unconventional, we find that such tariffs – think of them as targeted manufacturing subsidies for extremely lagging regions – would be both effective and cheap.”?
It's an unusual idea that might not find favour with US legislators - and would also require supply chain investments - but as the US considers the renewal of AGOA in 2025, it is clear that fresh ideas are needed if US-Africa trade to reach its full potential.
-?David Thomas, Editor, African Business
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