Factors That Can Affect Trade Preference Program Performance

Various factors can affect the performance of a trade preference program. AGOA Has Differences from and Similarities to Other Countries’ Trade Preference Programs and Differences Have Affected Program Performance

AGOA has several notable differences from and similarities to other  countries’ nonreciprocal trade preference programs, including programs  in Canada, China, the EU, and India. Available studies of AGOA and the EU’s preference programs suggest  that these differences have affected program performance in terms of  creating new trade flows (trade creation), increasing the range of products  that are traded (diversification), and program utilization. AGOA and Other Countries’ Programs Offer Fairly Comprehensive Duty-Free Coverage of Products, But Exclude Some Important SSA Exports

The United States, Canada, the EU, and Japan’s preference programs  provide comprehensive duty-free coverage for almost all products that  enter their country or region from eligible LDC beneficiaries, including  most SSA countries. 2). Others, such as Japan’s, have restrictive cumulation  rules. Some developed countries have made efforts to make cumulation rules  less restrictive. Trade Creation

The USITC identified several studies that found that when compared with  the United States, the EU has had greater overall success in increasing  trade with Africa. Insights from Recent Trade Negotiations between SSA Countries and the EU Could Inform the Direction of Future Trade Negotiations

The negotiations between SSA countries and the EU that have resulted in  EPAs indicate that achieving the goal of transitioning from unilateral trade  preference programs to reciprocal trade agreements with SSA countries  may require many years to finalize and implement,  the establishment of time frames to end access to trade preference  programs, a willingness to consider limiting the initial scope of the agreements, an acknowledgment that aspects of the agreements may have trade- offs and could constrain SSA countries’ ability to integrate into the  global economy. For example, although full or expanded access to EU  markets may help SSA countries integrate more fully into the global  economy, EPAs may diminish SSA countries’ leverage in future  negotiations with other trading partners, according to trade experts. Recent Multilateral Trade Negotiations Involving SSA Countries Provide Insights That Could Inform Future Negotiations

An examination of the involvement of SSA countries in recent multilateral  negotiations at the WTO yields insights about impediments to SSA  country participation in multilateral negotiations, efforts to overcome those  impediments, and what impact SSA country participation could have in  future WTO negotiations. In part as a result,  SSA country participation at the WTO has been expanding. The  legislation reauthorizing AGOA states that, among other things, it is in the  interest of the United States to boost trade between the United States and  SSA countries and that it is a U.S. goal to stimulate economic  development in Africa and diversify sources of growth in sub-Saharan  Africa. The Senate report  accompanying the legislation reauthorizing AGOA stated that the United  States should seek all opportunities to deepen and expand its ties with  SSA countries through accession by SSA countries to the WTO. Agency Comments

We are not making any recommendations in this report. Appendix I: Objectives, Scope, and Methodology

In conducting our work, we identified and reviewed documents, data, and  literature on the African Growth and Opportunity Act (AGOA) and other  countries’ trade preference programs, trade agreements with AGOA  countries, and sub-Saharan African (SSA) countries’ participation in  multilateral trade negotiations. We selected  countries and regions for comparison that are major export markets for  sub-Saharan Africa, including the European Union (EU), China, and India. The information on those  programs and agreements is based on interviews and both World Trade  Organization (WTO) and other official sources. and representatives from think tanks  To examine how selected countries’ trade preference programs compare  with AGOA in terms of key characteristics and performance, we focused  on those countries that had the highest levels of trade in dollar- denominated nominal terms—not adjusted for inflation—with AGOA  countries and for which trade preference program information was  available from official sources including the WTO, the United Nations  Conference on Trade and Development (UNCTAD), and country provider  government documents. Country eligibility. Product coverage and exclusions. Rules of origin. Some countries  that had been eligible for preferences offered by the European Union  (EU) have transitioned from the EU’s preference programs to Economic  Partnership Agreements.
Why GAO Did This Study

AGOA was signed into law in 2000 to offer SSA countries trade preferences that stimulate export-led economic growth and facilitate their integration into the global economy. This legislation was recently reauthorized, and the accompanying Senate report stated that the United States should seek all opportunities to deepen and expand its ties with SSA countries through accession by SSA countries to the WTO and negotiation of bilateral trade agreements. GAO was asked to identify lessons learned from other countries' trade preference programs and SSA countries' recent trade negotiation experiences.
This report (1) compares AGOA with selected countries' trade preference programs in terms of key characteristics and performance, and (2) examines AGOA countries' participation in trade negotiations. GAO reviewed and analyzed documents and data, including information from the WTO to determine what portion of the imports from AGOA countries to major trade partners could enter under preference programs. GAO also interviewed officials from U.S. government agencies, African and other foreign governments, and international organizations. GAO selected countries and regions for comparison that are major export markets for sub-Saharan Africa, including the EU, China, India, and Japan.

What GAO Found

The United States' African Growth and Opportunity Act (AGOA) has differences from and similarities to 26 trade preference programs offered by other developed and developing countries in three key areas that can affect program performance in increasing and diversifying trade.
Country eligibility. AGOA is unique in that it focuses eligibility on sub-Saharan African (SSA) countries. Most other countries' trade preference programs do not restrict eligibility to SSA countries.
Product coverage. AGOA and some other countries' trade preference programs provide fairly comprehensive coverage of products, but exclude some agricultural and other products that are important SSA exports.
Rules of origin. Like other countries' trade preference programs, AGOA has rules of origin that determine which products qualify for coverage. Some countries, including the United States have recently made their rules of origin less restrictive, to make it easier for beneficiary countries to take greater advantage of these programs.
In 2014, the United States International Trade Commission reviewed studies comparing the performance of trade preference programs and found that the European Union's (EU) preference programs have had overall greater success in increasing trade with Africa and that AGOA had more success in increasing diversification in the range of products exported from Africa. Research on China's and India's trade preference programs suggests that their fairly new programs could have significant impacts on SSA trade and that they are among the biggest and fastest growing markets for sub-Saharan exports.
As the United States continues to pursue expanded trade and a more two-way trade relationship with African partners at the World Trade Organization (WTO) and elsewhere; SSA countries' recent participation in bilateral and multilateral trade negotiations provides insights that can inform future U.S. negotiations. For example, years of bilateral negotiations between SSA countries and the EU have recently resulted in Economic Partnership Agreements with 32 SSA countries. Trade experts and SSA and EU officials GAO spoke with provided information about these negotiations that indicates that transitioning from non-reciprocal trade preference programs, such as AGOA, to two-way trade agreements like the Economic Partnership Agreements with SSA countries may require:
many years to finalize and implement,
the establishment of timeframes to end access to trade preference programs,
a willingness to consider limiting the initial scope of the agreements, and
an acknowledgment that aspects of the agreements may have tradeoffs and could constrain SSA countries' ability to integrate into the global economy.
The involvement of SSA countries in recent multilateral negotiations at the WTO also yields important insights for U.S. agencies when negotiating with these countries. SSA and WTO officials told GAO that several Impediments, such as inadequate funding and staffing, can hamper SSA countries' ability to participate fully in multilateral negotiations. However, recent bilateral and multinational funded training and other efforts have helped expand SSA country participation at the WTO.

What GAO Recommends

GAO is not making any recommendations in this report. Agencies' technical comments on GAO's draft were incorporated into this report.