African Growth And Opportunity Act Economics Essay

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Exploring socio-cultural factors that hinder trade between the United States and Sub Sahara Africa: A case study of the African Growth and Opportunity Act (AGOA)

Introduction

Trade between nations has evolved from simple import-export transactions of goods or services to a broad cooperation between nation-states, creating an economic collaboration beyond national borders. Such cooperation is regulated by free trade agreements (FTAs) that are a “specific policy measure to make international trade easier and more efficient…. FTAs are regarded as essential to ensure the ongoing competitiveness for exporters in key markets.” (Battisti & Perry, 2008, pp. 2-3). For this reason, the United States has established the African Growth and Opportunity Act (AGOA) “a legislation that was approved by the United States Congress in May of 2000 to assist the economies of Sub-Saharan Africa and to improve economic relations between the United States and the region” (Abdul, 2009, p. 1).

The African Growth Opportunity Act (AGOA) has undoubtedly bridged trade between the United States and Sub Sahara Africa. Pan, Tworoger and Helen (2004) affirmed that the agreement has been credited with many good positive results such as “increased industry productivity and competitiveness through technology transfer by American partner companies; inter-country networking and partnerships among firms across Sub-Sahara Africa; and increased investment by other nations seeking to take advantage of AGOA” (p.1).

Despite benefits mentioned above, trade between the United States and Sub-Sahara Africa under the African growth opportunity act (AGOA) is far from reaching its full potential. Previous empirical qualitative researches blamed underperformance of the African Growth and Opportunity Act (AGOA) on trade policy arguing that “the legislation is a contradiction with World Trade Organization (WTO) rules and that it is a one-sided agreement as there was little African involvement in its preparation” (Abdul, 2009, p. 4). Recommendations were made to policy maker for a “transformation of the AGOA from a nonreciprocal to a reciprocal trade agreement and the envisaged expansion of African markets” (Abdul, 2009, p. 5).

Other researches took theoretical and statistical approaches. Seyoum (2007) for instance encouraged to

Establish the relative importance of AGOA compared with other variables such as GDP, population or exchange rates in influencing African exports to the USA by using time-series regression analysis that would help donors and recipients devise appropriate policies to help encourage the growth and diversification of exports. (p. 2)

Numerous qualitative and quantitative researches tend to relate underperformances of the African growth opportunity act (AGOA) and “other aspects such as growth, foreign direct investment, inflation, poverty and migration” (Normaz, 2010, p. 1) but fail to understand that international trade depends on a linkage of “four major environmental conditions: socio-cultural, political-legal, economic, and educational” (Prasad & Tata, 2003, p. 8).

The present research will strive to demonstrate that underperformance of the African growth opportunity act (AGOA) can be explained and curbed by incorporating socio-cultural factors such as such as Sub Sahara Africa’s colonial and post-colonial trade patterns; language, level and quality of education that have been neglected in previous researches.

Problem Statement

Openness to international trade has a positive impact on economic growth. The reason for the argument is partly based on the conclusions of many empirical studies such as the one produced by Omoko (2010) who claimed that “outward-oriented economies consistently have higher economic growth rates than inward-oriented economies” (p. 1).

This assertion implies that there is causal relationship between financial development, trade openness and economic growth. However, trade between the United States and Sub Sahara Africa under the African Growth and Opportunity act (AGOA) shows no evidence to support the above assertion because of continuous decrease in trade activities. In fact, statistics released by the International Trade Administration (2012) shows that

In 2012, U.S. total trade (exports plus imports) with sub-Saharan Africa (SSA) reached $48 billion, a decrease of 24 percent compared to the same period in 2011. U.S. imports from SSA decreased by 29 percent, falling to $27 billion and representing only 2.4 percent of total U.S. imports from the world. During this timeframe, AGOA imports totaled $18.7 billion, 29 percent less than in the same period in 2011. (p. 1)

A review of findings from empirical researches, the Office of US Trade Representative (USTR), the Congressional Library, the Regional African Trade Organizations, amendments of trade policy and implantation of theoretical approaches such as time-series regression model had “positive but not significant effect on beneficiary exports to the USA for all country groups…Similarly, AGOA’s effect is positive but not significant for all major exporters” (Seyoum, 2007, p. 1).

Previous research studies had ignored to understand that international trade depends on a linkage of “four major environmental conditions: political-legal, economic socio-cultural, and educational” (Prasad et al., 2003, p. 8). In the case of the African Growth and Opportunity Act, the socio-cultural and educational problems that need to be associated to trade policy and economic theories are related colonial and postcolonial trade patterns, to trade language, level and quality of education.

Purpose Statement

The purpose of the present research is to explore the impact of Sub Sahara Africa’s colonial and post-colonial trade patterns, trade language, level and quality of education on trade between the United States and Sub Sahara Africa under Africa Growth and Opportunity Act (AGOA). Primary data to complete this task will be drawn from surveys and interviews of participants selected at the office of US trade office representative, Sub Sahara Africa representative missions in the United States, American and African business communities. Thorough analysis of US government documents, statements of the African Growth and Opportunity Act, internet sources, scholarly articles and book will serve as source for secondary data. Analysis of these data will sharpen the focus of the research to suggest new orientation of the African Growth and Opportunity Act (AGOA) that combines trade policy, economic theories, socio-cultural and educational factors to mitigate unbalanced trade and create competitive advantage.

Research Questions

Frazer and Van Biesebroeck (2010) who explored the performance of international trade under the Africa growth and opportunity act and find a valid conclusion leading to believe that

None of the limitations frequently cited in the Sub Sahara African context such as poor infrastructure, distorted product and credit markets, high risk, inadequate social capital, and poor public services proved to be binding constraints to expanding trade under the Africa growth and opportunity act. (p. 25)

The findings lead to explore other factors that can give plausible explanations to underperformance of the Africa Growth and Opportunity Act (AGOA). Socio-cultural and educational environments that have been ignored in previous research studies provide an underestimated potential to contribute to solving the problem. It is therefore important explore Sub Sahara Africa’s colonial and post colonial trade patterns, hurdle related to trade language, level and quality of education in order to find constrains that hinder trade between the United States and Sub Sahara Africa under Africa Growth and Opportunity Act (AGOA). To this aim, the present qualitative study will strive to answer to these questions:

Q1. What are Sub Sahara African socio-cultural factors that hinder trade performance with the United States under African Growth and Opportunity Act (AGOA) program?

Q2. To what extent colonial legacy, language diversity, quality and level of education potentially affect the African Growth and Opportunity Act (AGOA)?

Research Method

Good choice of a research method is very important because it determines how the research is conducted. As asserted by Creswell (2009), “research method involves the forms of data collection, analysis, and interpretation that researchers propose for their studies” (p. 15). Thus, researchers need to familiarize with a research method and its applied objectives.

With regard to research method, Cameron (2009) proposed qualitative research method, quantitative research method and mixed research method as the main three research designs that he briefly explained in following terms:

Quantitative method includes numerical values and measurements that help researchers to describe and determine some patterns such as social patterns.

Qualitative method deals with interpretation and exploration that guide researchers to understand and explain events and occurrences, such as humans’ phenomenon from the social patterns.

The combination of the last two methods is a foundation for developing mixed methods research. It involves philosophical assumptions, the use of qualitative and quantitative approaches, and the mixing of both approaches in a study. (pp. 111-112)

Qualitative research is the methodology design that will guide exploration of how socio-cultural and educational factors potentially hamper trade agreement between the United States and Sub Sahara Africa under the African Growth and Opportunity Act (AGOA). It will address these problems through techniques that facilitate to present complex interpretations of phenomenon without solely relying on statistical and economic theories that have been unable to resolve the issue of United States ‘trade deficit created by the African Growth and Opportunity Act (AGOA). By looking beyond numerical data of trade between the United States and Sub Sahara Africa under the African growth and opportunity act (AGOA), qualitative research design will “focus on discovering true inner meanings and new insights” (Zikmund, Babin, Carr & Griffin, 2010, p. 20) by listing and interpreting documentations, participants response to surveys and interviews.

Not all qualitative methods are appropriate for every inquiry situation. Study of trade between the United States and Sub Sahara Africa under the African Growth and Opportunity Act (AGOA) presents particularity and complexity of a single case whose activities need to be understood within important circumstances that only case study research approach has goodness of fit with the research questions.

Case study is no longer that “simplest form of fieldwork” (Shank, 2006, p. 126). More case study types have been advocated by Schram (2006) who makes a distinction between intrinsic case study, instrumental case study and collective study. He explicitly argued that

Intrinsic case study refers to the idea that case itself is of interest; the researcher is focused on teasing out what can be learned about that particular case.

Instrumental case study refers to the idea that a case can facilitate understanding of something else; the researcher is focused on developing insight into an issue or external interest through the case.

Collective case study is an instrumental case study extended to a number of cases; the researcher is focused on moving toward a better understanding, perhaps better theorizing, about a more general phenomenon or condition. (p. 107)

This latter category of case study will be the inquiry approach that best feet to respond to research questions aimed at studying trade between the United States and Sub Sahara Africa under the African Growth and Opportunity Act (AGOA) program for which responses will deal with “people as primary unit of analysis; major events as descriptive units of analysis; and various places, sites, settings or locations before doing cross-setting pattern analysis” (Patton, 2002, p. 439). Another advantage of collective case study will be its use of various methods that include “interviews, participant observations, and field studies” (Patton, 2002, p. 298). These inquiry methods will contribute to useful evaluation, practical problem solving, real-world decision making, action research, policy analysis, and organizational development of trade between the United States and Sub Sahara Africa under the African Growth and Opportunity Act (AGOA).

Data Collection

Research questions will be well served using people-oriented inquiry through “observations, surveys and interviews” (Patton 2002, pp. 27, 47) conducted among twenty participants selected at the office of US trade office representative, Sub Sahara Africa representative missions in the United States, American and African business communities.

Data Analysis and Report

Creswell (2009) contended that data analysis “involves preparing the data for analysis, conducting different analysis, moving deeper and deeper into understanding the data, representing the data, and making an interpretation of the larger meaning of the data” (p. 183). To this end, data organization and review will initially start during the collection process of primary data gained through surveys, and interviews techniques and secondary data drawn from US government documents, statements of the African Growth and Opportunity Act, internet sources, scholarly articles and book.

After data organization and review, the coding process will unfold to “generate a description of the setting or people as well as categories or themes” (Creswell 2009, p. 189) into segments and labels while paying close attention “to convergence in order to figure out what things fit together and divergence by examination of data that doesn’t seem to fit including deviant cases that don’t fit the dominant identified patterns” (Patton, 2002, p. 467).

Categories and themes coding will lead to the next step of thick description “that provides the foundation for qualitative analysis and reporting” (Patton 2002, p. 437). At this stage, case study on trade between the United States and Sub Sahara Africa under the African Growth and Opportunity Act (AGOA) will describe in depth trade operations, events and activities of “officials of the United States government, officials of the governments of sub-Saharan African countries and nongovernmental organizations from sub-Saharan” (US Congress 2001, p. 5). After describing findings in line with the purpose of study translated in research questions, the next step will focus on thick interpretation in order to give meanings and elucidate findings from study participants before presenting findings in a descriptive, narrative form. Thick description will be the vehicle for communicating a holistic picture of trade between the United States and Sub Sahara Africa under the African Growth and Opportunity Act program (AGOA).

Significance of Research

The research study about trade between the United States and Sub Sahara Africa under the African Growth and Opportunity Act (AGOA) is intended to contribute to the body of knowledge, enhance government trade policies and motivate more researchers to increase their interest and attention to the African Growth and Opportunity Act.

Findings will be reported in the way that they provide to the reader all the information necessary to understand the case in its uniqueness.

“As the Asian, South American and East European markets are getting saturated, the US government, other developed countries and businesses are already looking towards Sub Saharan Region for business”( Ehiobuche, Mensah & King, 2011, p. 1), the benefits of the study will be the creation of awareness of relationship between socio-cultural, educational factors and trade performance because trade agreements with the Sub Sahara Africa based solely on policy, theoretical and statistical have yielded limited success in the case of the African Growth and Opportunity Act (AGOA).