Looking beyond AGOA

By George Boateng

Reposted from Africa Up Close

The African Growth and Opportunity Act (AGOA), a non-reciprocal trade agreement between the United States and selected countries in Sub-Saharan Africa, was reauthorized in 2015 for a 10-year period. This one-way preference is granted to African countries to enhance value addition through export-led economic growth. AGOA functions to support countries committed to the rule of law, economic reforms, political freedoms, and poverty reduction.

It also continues to enhance U.S. market expansion in Africa, especially access to Africa’s extractives. The success story of AGOA has been told: total African exports under AGOA have tripled since the program’s inception. It has created 300,000 direct jobs in beneficiary countries, predominantly in the apparel sector, and created an estimated 120,000 American jobs.

Despite its success, will AGOA be renewed after 2025? Most likely not. AGOA is seen by the United States as a stepping stone to a broader trade pact with Sub-Saharan African countries. At the recent World Economic Forum in Kigali, U.S. Trade Representative Michael Froman stressed that African economies have changed since the United States first started offering duty-free access to certain countries under the AGOA, and trade relations need to evolve accordingly, implicitly acknowledging that the United States wants trade pacts with Africa to be bilateral. The global trade environment is changing, most notably with the EU’s preferential trade agreements with African, Caribbean, and Pacific (ACP) countries. These new agreements, called economic partnership agreements, place U.S. firms at a disadvantage by providing European firms access into African markets, while AGOA provides access to the United States without any such reciprocity for U.S. firms. With the Trans-Pacific Partnership (TPP) agreement all-but-ratified, Sub-Saharan African countries must ensure that they are not left out of the future of global trade.

Beyond AGOA: Positioning Africa to Succeed After 2025

As promising as AGOA may seem, Sub-Saharan African countries have underutilized it. In 2014, only around 1 percent of U.S. imports came from AGOA countries. Most worrying is the fact that petroleum products comprise around 68 percent of all AGOA imports, led by Nigeria and Angola. In 2014, U.S. imports from Sub-Saharan Africa decreased by 32 percent, falling to $26.7 billion, mostly due to a 51 percent decrease in mineral fuel and oil imports. Oil released by hydraulic fracking now accounts for more than half of all U.S. oil output, which has increased U.S. domestic production of light crude oil and reduced its imports of foreign oil. Non-oil and non-mineral exports to the United States under AGOA increased almost fourfold since 2001, albeit to the small sum of $5 billion. This growth rate is too slow and inadequate.


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