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Long-Distance Industrial Policy for Africa

Author

Listed:
  • Justin Sandefur

    (Center for Global Development)

  • Arvind Subramanian

    (Peterson Institute for International Economics
    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.

Suggested Citation

  • Justin Sandefur & Arvind Subramanian, 2024. "Long-Distance Industrial Policy for Africa," Working Papers 689, Center for Global Development.
    • Handle: RePEc:cgd:wpaper:689
    as

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    More about this item

    Keywords

    African Growth and Opportunity Act; trade preferences; apparel exports;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L67 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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