The African growth and opportunities act: a review of its benefits, limitations, utilization, and results

The Generalized System of Preferences (GSP) was proposed in 1964 at the first quadrennial conference of the United Nations Conference on Trade and Development (UNCTAD), which has a lengthy association with trade preferences as a tool of development. Like the GSP, the African Growth and Opportunities Act (AGOA) and other preferential trade programs are founded upon the concept that mutually beneficial North-South trade offers a more certain and sustainable path to development than aid, and that preferences can help overcome the structural disadvantages that developing countries face. While preferential market access can, indeed, give developing countries a trade boost, that effect varies greatly by exporting country and by sector. Tariff preferences are obviously moot for any products that are already duty-free on a most-favored-nation (MFN) basis and are only of limited value when MFN tariffs are low. Even for some goods that might otherwise be subject to significant tariffs, other factors may carry equal or greater weight in determining the magnitude and diversity of sub-Saharan countries’ exports. On the importing country’s side, these include non-tariff measures such as sanitary and phytosanitary barriers, standards, and so forth; on the exporting countries’ side, these include inter alia the country’s endowments of natural resources, the capacity of its workforce, the cost and reliability of its energy system, and the efficiency of the port and shipping services on which its exporters rely.