Long-Distance Industrial Policy for Africa

Justin Sandefur and Arvind Subramanian

No 689, Working Papers from Center for Global Development

Abstract: Starting in 2001, duty-free access to U.S. markets under the African Growth and Opportunity Act (AGOA) led to a brief boom in African manufacturing exports, particularly apparel, which then fizzled in the face of unfettered Chinese competition after 2005. The looming expiration of AGOA—and eroding Chinese competitiveness—offers an opportunity for the United States to think more imaginatively about actions to boost African industrialization. Re-establishing the same degree of trade preferences Africa enjoyed relative to competitors in the early 2000s would require negative tariffs, i.e., import subsidies. While unconventional, we estimate targeted subsidies equivalent to 2 percent of current U.S. aid to Africa could double the region’s light-manufacturing exports to the U.S. On the investment side, the U.S. International Development Finance Corporation could complement AGOA’s boost to structural transformation by redirecting a portion of its portfolio from banking and mining to manufacturing.

Keywords: African Growth and Opportunity Act; trade preferences; apparel exports (search for similar items in EconPapers)
JEL-codes: F14 L67 O14 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2024-04-01
New Economics Papers: this item is included in nep-int
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