China in Africa: taking advantage

US-Africa trade received a welcome boost with the signing of the African Growth and Opportunity Act (AGOA) back in May 2000, which enabled African countries to export over 4,000 products, including apparel, quota-free and duty-free to the US. Geared to support the integration of African countries into global markets, AGOA has enjoyed cross-party support in US legislature that is often divided, especially on trade. It has been renewed several times by different presidents. Helping Africa, it seems, is something everyone can agree on.

But they might, unwittingly, have been helping China, too.

A paper from the Centre for the Study of African Economies suggests that savvy Chinese companies have set up shop in Africa as a route to get their products into the US, with the added incentive of all those juicy AGOA benefits.

The logic is impeccable. Not only does an Africa platform get them duty-free access to US markets; they can also avoid punitive quotas on China’s exports, imposed under previous protectionist measures enacted by the rich world such as the Multifibre Arrangement.

Because AGOA did not contain ‘rules of origin’ provisions, the door was wide open. “Restrictive quotas on Chinese apparel exports in the US and preferential treatment for African exports resulted in quota-hopping transhipment from China to the US via AGOA countries” the researchers say.

Chinese and Taiwanese producers are said to comprise the bulk of a textile “diaspora” in Lesotho, Madagascar and Kenya. In one Kenyan processing zone, 80 per cent of the 34 garment plants had Asian owners. While some outfits doubtless have in-country assembly – and therefore generate jobs and incomes for Africans – fieldwork cited in the paper suggests that several are little more than transporting docks for foreign-sourced, fully assembled goods ready to go on to their final destination, tax free.

Chinese entrepreneurs made no bones about it. In one survey quoted by the CSAE they gave ‘taking advantage of international trade agreements’ as one of their top five motives for investing and operating in Africa.

A version of this article was published on Thursday by the FT’s This is Africa

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, FT