The 20th African Growth and Opportunity Act (AGOA) Forum, held in Johannesburg, South Africa in November 2023, reignited debates about the future of AGOA and its effectiveness in improving United States-Africa trade relations. AGOA, which aims to promote broad-based trade, economic development, product diversification, and human rights in beneficiary countries, has faced long-standing criticism for not fully meeting these expectations.
AGOA remains the cornerstone of Africa-U.S. preferential market access, and the legislation accounts for virtually all of Sub-Saharan Africa’s non-MFN exports to the U.S. Through AGOA, beneficiary countries only still face approximately 300 residual tariff lines that are not duty-free on entry into the U.S. In order to qualify for preferences, (a) a country must be a current AGOA beneficiary, (b) the product must be eligible for AGOA preferences as per the relevant special program indicator in the U.S. tariff book, and (c) products must originate in AGOA beneficiary countries in accordance to the rules of origin.
Key Points:
- Selective Impact– Out of the 31 AGOA beneficiary countries, over 80% of duty-free non-oil exports come from just five countries: South Africa, Kenya, Lesotho, Madagascar, and Ethiopia. This concentration highlights the need for more inclusive benefits across all eligible nations.
- Expiration Looms– AGOA is set to expire in 2025, prompting discussions between the U.S. Congress (House Ways and Means Committee) and African delegations in Washington, D.C. on how best to renew the trade-preference program.
- Trade Preferences and Economic Development– Preferential trade programs, like AGOA, are based on the idea that mutually beneficial North-South trade is more effective than aid. While AGOA has provided duty-free access to the U.S. market, its impact varies widely across sectors and countries. Other factors, such as production costs, competitiveness, non-tariff barriers, and standards, also play a crucial role in trade performance.
- Natural Resources and Exports– Many AGOA beneficiaries have relied on natural resources for their exports. However, a comparative analysis reveals that while AGOA countries faced the lowest tariffs since 2000, this group also experienced the lowest trade growth. Preferences remain relevant but have less impact than underlying competitiveness and other factors.
- Reimagining AGOA– Policymakers should seize this opportunity to re-imagine AGOA and enhance its economic offer. A predictable and stable trade relationship with sub-Saharan Africa (SSA) is essential, one that promotes fair, inclusive, and sustainable economic development in the region.
Given that AGOA expires in September 2025, there’s an opportunity to package together the renewal of Generalized System of Preferences (GSP) and AGOA in 2024, potentially avoiding delays with AGOA reauthorization. The commitment to adjust AGOA due to governance and human rights concerns has led to the suspension of several countries and the reinstatement of Mauritania as a beneficiary after a 16-year absence AGOA remains a cornerstone of Africa-U.S. preferential market access, supporting non-MFN exports from Sub-Saharan Africa to the U.S. market.
In a nutshell; AGOA’s renewal will continue to present an opportunity to strengthen trade ties, foster economic growth, and advance sustainable development across the African continent.