AGOA: Cornerstone of US-Africa economic engagement set for extension and enhancement
Since its passage by Congress in 2000 and subsequent signing into law by President Bill Clinton, the African Growth and Opportunity Act (AGOA) has played a pivotal role in shaping US economic engagement with the countries of Sub-Saharan Africa (SSA).
This long-term commitment, supported by both Democrats and Republicans, has undergone several legislative enhancements, with the latest being the Trade Preferences Extension Act (TPEA) of 2015.
As AGOA approaches its reauthorization deadline in 2025, discussions are underway to assess its impact, explore potential improvements, and extend its reach to maximize trade benefits between the United States and Africa.
AGOA’s Evolution and Current Context
The TPEA, signed into law by President Barack Obama in 2015, reauthorized AGOA and the “third Country fabric” provision for a decade, extending its validity through 2025. Recognizing the importance of AGOA and the need to improve utilization rates, the African Union Ministers of Trade met in Washington, DC in December 2022 to discuss strategies for enhancing AGOA’s effectiveness. The consensus among high-level officials was the necessity to extend AGOA beyond 2025, encompassing all African countries. This recommendation has been presented to the US Administration, demonstrating the desire for closer US-Africa trade ties.
The Vision of the Biden-Harris Administration
The current administration, under the leadership of President Joe Biden and Vice President Kamala Harris, has expressed a strong commitment to strengthening US-Africa trade relations. Ambassador Katherine Tai, the United States Trade Representative (USTR), has actively engaged in discussions with African nations, including ongoing negotiations with Kenya for a strategic trade and investment partnership. This signals the administration’s belief in the vast potential of Africa as a future economic hub.
Challenges and Opportunities
The underutilization of AGOA benefits remains a significant challenge, primarily due to stringent requirements from US trade regulatory authorities and limited industrialization capabilities in Africa. As a result, AGOA exports have seen a decline in recent years, affecting sectors such as textiles, apparel, and automotive industries. However, African countries are working towards export diversification, growth, and industrialization, exploring regional and continental value chains. These efforts create ample opportunities for US companies to tap into the vast African Continental Free Trade Area, which presents significant growth potential.
The Call for Extension and Expansion
To further strengthen US-Africa trade relations, stakeholders are recommending the extension of AGOA for at least ten years beyond 2025. They propose including all African countries in the program to ensure comprehensive engagement. Additionally, calls have been made for Africa to speak with a unified voice in all trade and investment negotiations with the US. Enhanced commercial diplomacy between the two regions is also emphasized to facilitate mutually beneficial outcomes. South Africa has been designated as the host for the next AGOA Forum, emphasizing the commitment to ongoing collaboration.
Investment and Sector Priorities
A renewed US policy on AGOA should prioritize investment in specific sectors that can drive sustainable development and job creation. Areas such as trade, financial services, health, climate, food security, tourism, and logistics, including gateway initiatives and the digital economy, are identified as crucial focus areas. Targeted investment, in collaboration with AGOA-eligible countries, can catalyze American investment and technology transfer, promote innovation, instill best practices, and foster youth employment, bridging gaps in markets across the continent.
AGOA’s Achievements and Cost
AGOA’s impact over the past two decades cannot be understated. It has created hundreds of thousands of direct jobs in Africa, particularly in the textile, agricultural, and automotive industries, while also contributing to job creation in the United States. Moreover, the program has facilitated healthcare and education access, protected workers’ rights, and advanced the rule of law and political pluralism. Importantly, AGOA’s cost to US taxpayers remains nominal when compared to overall development aid to Africa, highlighting its effectiveness as a trade preference agreement.
AGOA in the Face of Challenges
Despite its successes, AGOA faces challenges in maintaining utilization rates and addressing emerging obstacles. Uncertainty surrounding its extension impacts investment potential in AGOA-eligible countries, particularly in the apparel sector. Moreover, the economic impact of the COVID-19 pandemic and geopolitical tensions, such as Putin’s conflict in Ukraine, pose threats to US-Africa trade and investment, jeopardizing gains made over the past two decades. It is imperative to safeguard and reinforce the gains achieved through AGOA, ensuring its continued transformative impact.
AGOA has served as a cornerstone of US economic engagement with Sub-Saharan Africa, fostering trade, job creation, and development over the past two decades. As AGOA approaches its reauthorization in 2025, discussions and deliberations are ongoing to enhance, expand, and extend its provisions. The Biden-Harris Administration, alongside Congress and African stakeholders, seeks to strengthen US-Africa trade relations, maximize the potential of AGOA, and explore new avenues for collaboration. With Africa poised to become a major consumption hub in the future, AGOA’s continued evolution and strategic enhancements hold the promise of creating a mutually beneficial partnership for years to come.
