Condon, Niall and Stern, Matthew (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.Link to Source
The authors include 21 studies and find the following:
The authors conclude that while exports from African LDCs have increased substantially since 2000, only a small share can be attributed to AGOA. The evidence suggests that while AGOA led directly to an increase in exports for the apparel sector, it has not had any effect on exports for other sectors such as agriculture.
The evidence suggests there are at least two reasons for the limited success of AGOA in boosting exports to the USA. First, there was limited product coverage under AGOA, above what was already agreed under the Generalised System of Preferences (GSP) trade agreement with LDCs. Second, with the exception of apparel, preference margins for products included under AGOA were limited, compared with tariffs on excluded products. The reason for the increase in apparel exports appears to be the high average preference margins on apparel products and AGOA’s liberal rules of origin.
With regard to the question about the expected impact of full DFQF access to the US for all LDC products the authors report that modelling studies suggest sub-Saharan Africa would on the whole gain from extension of access, by opening the US market to agricultural exports not presently covered under AGOA. They also suggest that losses due to preference erosion for African exporters would be minimal, only for a small number of mainly apparel exporters, and mitigated by the fact that exporters only capture a minor share of preference rent.
The authors also conclude primary studies using more recent trade data could be useful to update the earlier work done on AGOA, as well as analysis of the role of rules of origin and market power in determining AGOA rents.
The African Growth and Opportunity Act (AGOA) is a preferential trade agreement between the United States (US) and sub-Saharan African countries. It facilitates access to US markets for exporters of petroleum, clothing and various other industrial and agricultural products from least developed countries (LDCs) in Africa. The Agreement operated from 2000 and is due to expire in 2015. In theory, African exporters should benefit by orienting production towards favoured sectors. In practice, it may not be possible to do so, due to supply side restrictions limiting the country’s ability to produce more in the short term, conditions of the Act such as restrictions on rules of origin, and the scale and length of time over which preferences are granted. Answering whether AGOA has benefitted African countries therefore requires empirical analysis.
To conduct a systematic review for the following question formulated by DFID policy makers: “How effective has the African Growth and Opportunity Act (AGOA) been at increasing trade from Least Developed Countries (LDCs)? What is the expected impact (on participating countries and the US) of extending Duty Free Quota Free (DFQF) access to the US market to all products from all LDCs?”
The authors included studies which focused explicitly on AGOA, and comprised primary empirical analysis using a robust methodology in attributing changes in outcomes to the intervention, including studies based on modelling (gravity models, partial equilibrium and Computer Generated Equilibrium (CGE)) and regression analysis. In addition, the authors included ex post country specific case studies to explain the findings. The authors used a comprehensive search for published and unpublished literature including bibliographic databases, search engines and gateways and specialist websites. The authors use a narrative synthesis approach to combine findings, including presentation of quantitative data in tabular format.
The systematic review includes a reasonably comprehensive search for literature and uses different evidence appropriately to answer the review question. However, the review has important limitations. The most important of these is that the review uses an approach to assess risk of bias which is not sufficiently transparent; the reason why this is so important is that the authors use a scoring threshold from the tool to determine inclusion or exclusion. We cannot be confident, therefore, that all relevant studies were included. In addition, independent screening and data extraction does not appear to have been done by 2 reviewers working independently.