Successes, shortcomings of Africa trade pact

“AGOA was set up to help Africans and alleviate poverty, but it has mostly benefited foreigners,” said Richard Ndubai, founder of Ricardo International, the sole Kenyan-owned garment maker. “They are taking the profits out of the country.”

Kosure agreed that most of Kenya's first AGOA-related exporters were foreigners, including “flying investors,” whom he said travel the world in search of short-term trade breaks and “then take off when opportunities dwindle.”

At the same time, he said foreign investment was critical in jump-starting Kenya's textile industry by introducing advanced technologies and international manufacturing practices, constructing factories and training workers. He said most of the speculators left Kenya when profits began to slip five years ago, amid the competition from China and Southeast Asia.

Job creation has been the trade agreement's biggest contribution to Kenya, Kosure said. Even with the recent declines, apparel sector employment is 26,000. And salaries and benefits are usually above-average because of the stringent labor requirements — such as overtime payments, no child labor and limited work hours — imposed and audited by U.S. buyers.

But even as AGOA attempts to open the door to more African trade, other U.S. policies have slammed it shut, experts say.

Large subsidies for U.S. cotton growers and other American farmers continue to block African exporters from reaching the U.S. market, according to Stephen Hayes, president of the Corporate Council on Africa, a private U.S.-based group that seeks to stimulate trade.

Kenyan officials also complain that trade is hurt by tight U.S. security policies and what they see are unnecessarily strict quality and health regulations for imports. Citing the risk of terrorism, the U.S. Department of Homeland Security last month suspended what was to be the first direct Kenya-U.S. flight by Delta Airlines, delivering a blow to Kenya's flower farmers who had hoped to speed up delivery times.

One of the biggest obstacles to increasing African exports is the continent's lack of adequate infrastructure, including good roads, educated workers, reliable electricity and stable, honest governments.

At Alltex EPZ Ltd., a foreign-owned garment-maker that was busily churning out thousands of Arrow sweat shirts recently, electricity costs are twice as high as they would be in Egypt, and frequent outages require costly backup generators, said Sudath Perera, the Sri Lankan general manager.

Labor costs, at about US$110 per worker per month, are four times that for comparable garment workers in Bangladesh, he said. One section of the road leading from the factory to Kenya's port is still made of dirt, rocks and mud holes.

Without the trade agreement, he said, his company would never have been started and would not likely survive in the current environment. But he said the real test will come in 2015, when AGOA's trade breaks are set to expire.

He's optimistic that he can use the next five years to strengthen ties with U.S. retailers and improve his factory's productivity and profits.

“I think we can do it,” Perera said. “By 2015, we should be able to compete, even without AGOA.”

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