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GAO Examines Impact of AGOA as Congress Considers Reauthorization

Friday, February 20, 2015
Sandler, Travis & Rosenberg Trade Report

Countries eligible for benefits under the African Growth and Opportunity Act have fared better on some economic measures than ineligible countries since AGOA was enacted in 2000 but the extent to which this outcome is attributable to AGOA is unclear, according to a recent report from the Government Accountability Office. The report to Congress, which also examines how the annual AGOA eligibility review process has considered economic, political and development reform objectives, comes as lawmakers consider the renewal of AGOA ahead of its scheduled Sept. 30 expiration.

The GAO states that the following factors make it difficult to isolate AGOA’s contribution to overall economic development in eligible countries.

Export Share. In 2013, AGOA exports accounted for less than 0.5 percent of overall exports for 23 of the 39 AGOA-eligible countries (including four that had no AGOA exports at all), compared to more than ten percent for just five.

Energy Prices. More than 80 percent of U.S. imports under AGOA from 2001 to 2013 was accounted for by petroleum products, and Nigeria, Angola and Chad accounted for 90 percent of such shipments. During this period these three countries had slightly lower annual income levels per person compared with all other AGOA-eligible countries considered as a group but a much higher average annual growth rate in income per person (4.5 percent versus 1.4 percent). This difference can be explained in part by global prices for petroleum, which rose 272 percent during the period at issue.

Governance. Prior to the implementation of AGOA in 2000, the group of sub-Saharan African countries eligible for AGOA benefits in 2012 had higher governance scores than ineligible countries, and those differences were still largely the same in 2012. Given that governance is considered in the annual eligibility review, AGOA-eligible countries may also have benefited from an ongoing incentive to sustain or improve the quality of their governance institutions. Because there is a positive relationship between the quality of governance institutions and economic growth, the persistent differences in that quality between AGOA-eligible and ineligible countries could have contributed to the differences in the economic growth they have experienced.

Foreign Aid and Investment. Compared with ineligible countries, AGOA-eligible countries on average have received more foreign aid per person and higher levels of foreign direct investment, which could play a role in economic development and poverty reduction. Moreover, being eligible for AGOA may itself have improved the ability of countries to attract aid and investment.

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