- Until the Biden Administration, US-Africa trade relations had remained remarkably consistent.
- AGOA is a unilateral US offer to qualified African countries south of the Sahara for preferential – effectively duty-free – access to the US market for qualifying commodities.
- Reimagining the AGOA could help boost US-Africa trade relations, boosting economic growth.
Consistent US-Africa trade relations
Until the Biden Administration, US-Africa trade relations had remained remarkably consistent. Africa Growth and Opportunities Act (AGOA), in place since October 2000 through five separate US administrations, has been the ‘centrepiece’ of this consistency.
AGOA is a unilateral US offer to qualified African countries south of the Sahara for preferential – effectively duty-free – access to the US market for qualifying commodities. Since its inception, AGOA has primarily focused on facilitating “reciprocal and mutually beneficial trading agreements, including the prospect of creating free trade zones.” The United States has had a clear and public goal to eventually replace AGOA with ‘comprehensive US-style trade accords’ with particular nations.
Momentum had developed in that regard with the Trump administration’s commencement of talks for the first such Free Trade Agreement (FTA) between the United States and Kenya in 2020, which would have provided a model for others.
However, the Biden administration has overseen a significant change in US-Africa trade relations. Thus, the US trade policy has proven introspective, with an ideological dispute resolving across an existing model of economic democratization, which has guided US trade policy objectives for decades, and fresh trade agendas revolving around an ‘unionised worker-centric trade policy,’ as well as climate, environmental, and security goals.
This trend has resulted in a devaluation of free trade agreements. Katherine Tai, the US Trade Representative (USTR), condemned them as a “20th-century tool” in 2022. In response, the US terminated the US-Kenya FTA discussions in July 2022.
With the AGOA expiring in 2025, the US can update its economic “offer” to Africa. This is important work, as Africa has constantly proven to be a much bigger part of the United States’ future. Moreover, reimagining the AGOA could help boost US-Africa trade relations, boosting economic growth.
AGOA’s impact and value
AGOA has done more than people give it credit for, but not nearly enough that it could and should do. This is according to former Assistant US Trade Representative Florizelle Liser. Liser, now president and CEO of the Corporate Council on Africa, supervised the trade preferences program implementation during her time at USTR under Presidents George W. Bush and Barack Obama.
Moreover, Katherine Tai has previously touted AGOA’s importance while calling on lawmakers to work with Biden’s administration to find ways to improve its uneven utilization-a significant issue in a probe by the US International Trade Commission into AGOA and its usage.
Africa could be the engine that drives economic growth and prosperity for the next phase of globalization,” she added. “But it will require us to think big and be creative because the tools we have so far have not done what we need to do in this next phase.”
AGOA’s effect underestimated
Liser contends that AGOA’s impact is sometimes underestimated, noting that it has had meaningful effects on small businesses and workers even in countries that conduct little trade with the United States. In addition, she says, data on AGOA trade captures only final assembled products – not intermediate steps in the supply chain – and, accordingly, does not provide a full picture of the program’s impact.
But the United States can do more, she says, to spur value-added production on the continent, which accounts for less than three percent of global trade.
“We have to have something that will incentivize investment into value addition, beneficiation, processing of Africa’ss raw materials so that they can ship those products further up the value chain, get more money for it, get better jobs, more jobs … and capture a larger share of global trade,” she said.
Landry Signé, a senior fellow in the Global Economy and Development Program and the Africa Growth Initiative at the Brookings Institution, similarly contends that US-Africa trade relations and investment should not be conceived as “just the transaction between the United States and Africa.”
Trade and investment figures do not tell the whole story
In aggregating across a continent and looking only at the headline numbers – which are determined by much more than just by AGOA – it is easy to underappreciate where AGOA has been valuable. Many African countries have recorded specific successes in goods exported under AGOA to the US.
According to the World Bank, as much as 70 per cent of these exports were destined for the US in 2019, driven by the savings of up to 32 per cent on the value of finished garments exported from Ethiopia because of AGOA.
Comparatively, the United States’ foreign policy towards Africa has somewhat of a China obsession. The US policymaking elites have chastised themselves for losing out to the country in Africa in terms of trade since 2012. Yet what African countries export to the US matters far more than what they export to China.
Though China is now the second biggest destination for Africa’s exports after the EU, the continent exports almost three times more manufactures to the US than it does to China and 35 percent more agricultural goods. The US offers the third largest destination of African exports of manufactures after the EU and intra-African trade. In contrast, 87 percent of Africa’s exports to China are fuels, ores, and metals.
AGOA is part of why and that, in turn, is why African countries, including Kenya, Lesotho, and Mauritius, have put so much diplomatic capital, and on occasion lobbying funding, into articulating a continuing case for its renewal. AGOA supports the African trade that matters for the continent’s goal of economic transformation through ‘manufacturing, industrialization and value addition.’
Bettering AGOA to Boost US-Africa trade
Efforts should now focus on ensuring a renewed AGOA is even more effective than its previous iterations. Here the US seems to be receptive, with US Trade Representative Katherine Tai saying that ‘[AGOA] is no longer enough to boost [African countries’] development and a focus on improving investment is needed’ and that AGOA needs an ‘honest assessment’ to ‘increase utilisation rates,’ suggesting openness to its redesign in some form. There are various to achieve a better AGOA to boost US-Africa trade and economic growth.
Addressing eligibility concerns
Making AGOA’s annual eligibility reviews triennial, in line with those required under the Generalized System of Preferences, remains among the most significant steps to improve the programme, boost US-Africa trade relations, and help Africa’s economic growth.
This transformation would provide greater certainty to investors and companies while reducing a burden on USTR and United States embassies that prepare annual reports for the reviews. As such, no other countries globally have their eligibility for preference programs reviewed yearly.
The Biden administration’s suspension of Ethiopia’s AGOA benefits last year because of human rights violations sparked concern about the program’s eligibility criteria and how such suspensions affect workers in the sanctioned countries and neighbouring nations.
According to a veteran trade analyst and negotiator Steve Lande, provisions allowing the United States to suspend AGOA benefits “due to political factors” were put in place when the American government “had little experience applying other measures.” Lande, the president of Manchester Trade, a trade policy and investment advisory firm, served as assistant USTR and a negotiator for the US on trade agreements in Asia, the Middle East, and the Caribbean in the 1970s and 1980s.
“There are now other tools to pressure aberrant regimes to pursue responsible policies,” he wrote, adding that “trade retaliation often has unintended consequences which harm the groups we want to help and strengthen. US investors are often put at a disadvantage to their competitors, and Africans should be in the lead in its internal policing.” This affects the US-Africa trade relations in the long run.
Last year, during a hearing held as part of AGOA’s investigation, analysts raised concerns about other aspects of the eligibility criteria, including an income cap that can trigger what Paul Ryberg, president of the African Coalition for Trade (ACT), called a “seesaw” effect. Mauritius, he noted, briefly rose above that cap and lost its benefits before the pandemic struck and its income level fell below the threshold. ACT is a trade association based in Washington, DC, representing private-sector interests in Mauritius and other sub-Saharan African countries.
AGOA’S complementary measures can boost US-Africa trade relations
The second way to improve AGOA is with complementary measures. For many of Africa’s poorest countries, market access provisions remain insufficient to motivate change.
These complementary supply-side measures include expanding US programs like Prosper Africa and Power Africa and support to the design and implementation of African countries’ national AGOA utilisation strategies, as well as using trade and investment fairs and the US deal teams’ within US embassies to boost practical trade and investment opportunities, alongside trade and investment facilitation services and trade capacity-building initiatives.
Policymakers could conceive new measures to invest in and develop green mineral value chains in Africa in alignment with broader US foreign policy priorities.
Linking AGOA to the AfCFTA
Ongoing integration efforts on the continent also could offer opportunities for boosting AGOA’s impact on US-Africa trade relations. These efforts could provide an opening for articulating a continental approach to trade that could link a beyond-AGOA deal to the AfCFTA. Practical first steps would involve introducing supportive elements into AGOA, such as cumulative rules of origin to encourage regional value chains across the continent.
According to Liser, AfCFTA could work with AGOA and bilateral free trade agreements to boost regional value chains on the continent. For example, she said, AGOA’s eligibility criteria should expand to include progress toward implementing AfCFTA.
In addition, she contended that the United States should pursue trade agreements that mirror market-access provisions provided by some African countries to developed trading partners, like the European Union while ensuring that commitments under AfCFTA “take precedent.” Such agreements, she suggested, need not require full graduation from AGOA.
While Liser says AfCFTA allows countries to pursue bilateral trade agreements, some analysts have warned that bilateral initiatives– even those, like the Biden administration’s developing arrangement with Kenya, that do not include negotiations on market access — could pose a threat to the continental integration effort and inhibit regional trade. Meanwhile, Lande contends that policymakers should extend AGOA to include “all African countries” in “parallel” to AfCFTA.