Advantages And Disadvantages Of Preferential Trade Agreement

9 In terms of trade and employment outcomes, the literature contains some references [DATA, 2003; Id21insights, 2003], gives limited emphasis to analyzing processes related to investment agreements, business behaviour and social mobilization under AGOA. For example, little is known about how investment agreements in the recipient country, under AGOA, lead to poor working conditions. Of course, there are some negative aspects related to AGOA. Issues frequently raised include the demand for sectoral reforms, changes to WTO rules, the weakness of the US market potential, the survival of AGOA, competition from other producers, the lack of support mechanisms for producers and the inability to carefully manage and use agoA`s quota, and, finally, dependence on uncertain foreign markets. Otiso [2004] argues that while AGOA is a preferential trade programme and is beneficial for Africa in the short term, its impact on industrial development is limited in the long term, as it excludes products that bring real poverty reduction. The author also questions AGOA`s ability to give a real sense of ownership through the development agenda among recipient countries, particularly because of elements such as guardianship and international goals pushed by the United States. Technology transfer was the most disappointing area. The companies, which are wholly owned by foreigners from Asian countries, use the transplanted technology. Despite preferences given during the second phase of AGOA (AGOA II) for clothing in African fabrics and yarn manufactures, the domestic web industry has not evolved in both countries. Similar cases have been observed in other parts of Africa, which prevents greater vertical integration into the textile and clothing industry. The benefits of export processing areas could be widely reaped by foreign investors [Condon, Stern, 2010]. 13In the two years since AGOA was founded, Lesotho and Kenya were the main winners [Emerging, 2003].

DATA [2003] indicated, however, that AGOA`s benefits were best demonstrated in Lesotho, as the country exported $318 million in goods to the United States and more than $370 million in 2003 under AGOA.