Is the US Farm Bill undermining the objective of AGOA?

Conradie, C. F. G. (2004-03)

Thesis (MBA)--Stellenbosch University, 2004.

Thesis

ENGLISH ABSTRACT: This study investigates both the African Growth and Opportunity Act (AGOA) that was signed into US law in May 2000 and the subsequent US Farm Bill, signed in May 2002. AGOA is a temporary, non-negotiated, non-reciprocal law by the USA to allow dutyfree and quota-free access to almost all products produced in Sub-Saharan Africa (SSA). Many people in SSA are dependant on agriculture to provide employment and livelihood. In the agricultural sector The Farm Bill is a unilateral law by the USA granting enormous subsidies to its farmers for a wide variety of products. It is the purpose of this study to investigate both these laws and to determine whether or not the Farm Bill undermines the objectives of AGOA. AGOA was studied and the real reasons for US interest in SSA determined. The main reason found for the inception of AGOA was US interest in the oil resources of SSA as well as other commodities like precious metals and textiles. The USA is also interested in SSA to find new markets for its own products as it can produce far more food and fibre than it can utilise in its domestic market. The study investigated the potential benefits of AGOA for SSA as well as the real benefits that were realised in the first two and a half years since its inception. It was found in the study that the real benefits were far less than the potential benefits and several reasons are offered for this phenomenon. The trade data between the USA and SSA was analysed to determine the effect of AGOA on trade and the major products traded. It was found that by far the largest product group was in the petroleum sector. The Farm Bill was investigated to determine the provisions of the Bill, the products involved and the conditions for subsidy payments. The payments include direct payments, counter-cyclical payments and marketing loan gains or loan deficiency payments. The detail of the calculation methods for the payments and a sample calculation of the subsidies are given, other provisions of the Farm Bill that apply to specific commodities like sugar and dairy products are also listed as these are important commodities for SSA. The Farm Bill was investigated in terms of AGOA and it was found in the study that the Farm Bill does indeed undermine the objectives of AGOA by reducing commodity prices. Both AGOA and the Farm Bill were further investigated in the context of the World Trade Organisation (WTO) to determine their consistency with the rules of the WTO. It was found that AGOA is consistent with the WTO rules, but the subsidies of the Farm Bill are trade distorting and therefore not consistent with these rules. There is a WTO limit set for the US support programmes and it is expected that the payments would exceed the limit during times of low commodity prices.

AFRIKAANSE OPSOMMING: In hierdie studie word beide die 'African Growth and Opportunity Act' (AGOA) wat in Mei 2000 deel van die Amerikaanse wetgewing geword het sowel as die daaropvolgende 'US Farm Bill' wat in Mei 2002 goedgekeur is, ondersoek. AGOA is 'n tydelike, eensydige, nie-wederkerige wet deur Amerika wat tariefvrye en kwotavrye toegang tot die Amerikaanse mark toelaat vir bykans alle produkte wat in Afrika Suid van die Sahara (SSA) geproduseer word. Baie mense in SSA is afhanklik van landbou vir werk om vir hulle families te kan sorg. Dit is juis in die landbousektor waar Amerika die 'Farm Bill' as eensydige wet goedgekeur het wat enorme landbousubsidies vir 'n wye reeks produkte aan sy boere toeken. Die doel van die studie is om beide hierdie wette te ondersoek en vas te stel of die 'Farm Bill' die doelwitte van AGOA ondermyn, al dan nie. AGOA is eerste ondersoek en die werklike redes vir Amerika se belangstelling in SSA is bepaal. Daar is bevind dat die hoofrede vir die ontstaan van AGOA die strategiese belangstelling van Amerika in SSA se olie en ander kommoditeite soos edelmetale en tekstiele is. Amerika stel ook belang in SSA om nuwe markte te vind vir sy eie produkte omdat Amerika baie meer voedsel en vesel kan produseer as wat sy plaaslike mark kan absorbeer. Die studie het die potensiele voordele van AGOA vir SSA asook die werklike voordele wat in die eerste twee en 'n half jaar gerealiseer het, ondersoek. Die studie het getoon dat die werklike voordele baie minder as die potensiele voordele was en verskeie redes word vir die verskynsel aangevoer. Die handelsdata tussen Amerika en SSA is ondersoek om die effek van AGOA op handel asook die hoofhandelsprodukte vas te stel. Die data het getoon dat by verre die grootste produkgroep wat verhandel is, olie en verwante petroleumprodukte is. Die 'Farm Bill' is ondersoek om die bepalings van die wet vas te stel, watter produkte betrokke is en onder watter voorwaardes subsidiebetalings van toepassing is. Hierdie betalings sluit direkte betalings aan boere, wederkerige betalings en bemarkingslenings in. Die detail van die berekeningsmetodes van die verskillende dele van die subsidies asook 'n voorbeeld-berekening word getoon. Ander bepalings van die wetgewing wat van toepassing is op spesifieke kommoditeite soos suiker en suiwel word ook gelys omdat hierdie produkte baie belangrik vir SSA is. Die 'Farm Bill' is ook met betrekking tot AGOA ondersoek en daar is getoon dat die 'Farm Bill' inderdaad die doelwitte van AGOA ondermyn deur die pryse van kommoditeite te laat daal. Beide AGOA en die 'Farm Bill' is verder ondersoek in die konteks van die Wereldhandelsorganisasie (WHO) om vas te stel of elkeen van hierdie wette voldoen aan die handelsreels van die WHO. Daar is bevind dat AGOA wel voldoen aan die WHO reels, maar dat die subsidies van die 'Farm Bill' handel verwring en daarom nie voldoen aan die vereistes van die WHO nie. Daar bestaan 'n WHO-beperking vir Amerika op die hoeveelheid ondersteuning wat aan die boere toegestaan mag word en daar word verwag dat die beperking oorskry kan word in tye van lae kommoditeitspryse.

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