Taking Stock of America’s Flagship Trade Programme for Africa

Economics and Mathematics
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Economics and Mathematics
Introduction: Key Concept and Economic Theory
According to The Economist, "The African Growth and Opportunity Act (AGOA) has been the flagship programme for American trade with Africa for two decades." This program is an excellent example of interdependence, where the US depends on Africa for its raw materials. In contrast, African countries depend on the US for their exports. Interdependence is the level of interaction between economic actors, such as consumers, companies, households, workers, and governments, within and across nations to achieve economic goals. The greater the level of interaction, the greater the degree of interdependence. In this article, we will use the economic theory of comparative advantage to analyze the impact of AGOA on African countries.
Comparative advantage is a theory that states that countries should specialize in producing goods and services that have a lower opportunity cost and trade with countries with a higher opportunity cost. The theory assumes that two countries are producing two goods, each with a different production cost for each good. The land with a lower production cost for a particular good will specialize in that good and export it to the other country. In return, the importing country will export the good in which it has a comparative advantage. This theory assumes that countries will trade freely with each other without any barriers.
Important Economic Terms
Interdependence: The level of interaction between economic actors, such as consumers, companies, households, workers, and governments, within and across nations to achieve financial goals.
Comparative Advantage: The theory that states that countries should specialize in producing goods and services in which they have a lower opportunity cost and trade with countries that have a higher opportunity cost.
Trade Liberalization: The removal or reduction of barriers to trade between countries, such as tariffs, quotas, and other non-tariff barriers.
Protectionism: The economic policy of protecting domestic industries from foreign competition using tariffs, quotas, and other non-tariff barriers.
Export Promotion: The policy of encouraging and supporting domestic firms to increase their exports to other countries through various measures such as subsidies, tax incentives, and export financing.
Pre-Condition Diagram: Figure 1
Based on the pre-condition diagram, we can see that the imports from Africa were significantly lower. Before the implementation of the AGOA policy, the level of imports from Africa was bel...