African governments are looking for an extension of African Growth and Opportunity Act (Agoa) beyond 2025. H law enacted in 2000 to “encourage increased trade and investment between the United States and sub-Saharan Africa.” We asked David LukeWHERE specializes in African trade policy and trade negotiations, what benefits Agoa has brought to eligible African countries and how it can be improved.
To what extent has Agoa’s goal been achieved?
Tariff- and quota-free access to the US market granted by Agoa has helped boost trade and investment between sub-Saharan Africa and the US. Many of the qualifiers African countries have recorded specific successes on goods exported under Agoa to the US. These include textiles and clothing from Kenya, Ethiopia, Mauritius, Lesotho, Ghana and Madagascar. In Kenya, for example, clothing dominated Agoa sales have grown from US$55 million in 2001 to US$603 million in 2022, accounting for 67.6% of the country’s total exports to the US.
South Africa has the most diverse list of sub-Saharan African exports. Its value automotive industry US sales grew 447.3% between 2001 and 2022 under Agoa. South African vehicle exports to the US increased by 1,643.6% in Agoa’s first year, from 853 units in 2000 to 14,873 units in 2001.
Other country-specific successes include Ghana, where non-oil products such as plant roots, textiles and travel goods are accessing the US market under Agoa. of Ghana exports to the US increased from US$206 million in 2000 to US$2.76 billion in 2022, although only 26% of this trade was under Agoa.
The Agoa window has also picked up chocolate and basketry materials Mauritius; buckwheat, travel goods and musical instruments from Yes (suspended in 2022); Mozambiquesugar, nuts and tobacco. and To gowheat, legumes and fruit juices.
Maybe Ethiopia, which was suspended from Agoa in January 2022, better reflects the impact of the trade window on Africa’s industrialization.
According to The World BankEthiopia has attracted the world caution with its ambitious industrialization plans, especially through industrial parks. The industrial parks, which produce mainly textiles and clothing, have thrived with duty-free and quota-free access to the US market.
In less than a decade, Ethiopia’s industrial parks was created 90,000 direct jobs, mostly for women aged 18 to 25. Employment of this group is typically associated with a range of positive social and economic impacts.
Ethiopia’s exports to the US Increased from US$29 million to US$525 million in 2020, 45.3% of which under Agoa. Textile and clothing exports which until 2014 represented just 10% of trade rose steadily to 69% during the period.
The industrial parks they are attracted 66 foreign companies are investing approximately US$740 million since 2014/15, with Agoa being the main driver of industry investment and job growth and export earnings.
What has been the impact of Agoa on Africa’s exports?
Between 2017 and 2020, the US became the third largest destination on Africa’s post-EU manufactured goods and intra-African trade. Agoa is part of the reason for this. This means that Agoa has stimulated significant value addition to the region, traditionally known for exporting unprocessed goods.
The positive impact on value chains explains why African countries such as Kenya, Lesotho and Mauritius have devoted so much diplomatic capital and, at times, lobbying funding, to formulating a ongoing case for the renewal of Agoa.
African countries have taken advantage of the window to sell their manufactured goods to the US. That’s the kind of trade that really matters on Africa’s goal of economic transformation through “processing, industrialization and value addition“.
In comparison, during 2017-2020, 87% of Africa’s exports to China were fuel, ores and metals.
What kind of deal are the US and Kenya negotiating?
The US and Kenya are not negotiating a bilateral free trade agreement, as is commonly misunderstood. What they are negotiating is a strategic trade and investment partnership which cannot be characterized as a free trade agreement as it does not include new market access arrangements.
The main objective of the partnership is to increase investment and promote inclusive economic growth. It is intended to benefit workers, consumers and businesses (including small ones). Its other objective is to support the regional economic integration of Africa.
Given the prevailing global economic inequalities, if African countries are to develop, they need commercial concessions such as Agoanot bilateral reciprocal free trade agreements.
How can Agoa be made more beneficial to sub-Saharan Africa?
First, Agoa should be extended for at least 20 years. This will ensure predictability of granting market access and enhance confidence among investors with sufficient time frame for investment recovery. Second, North African countries should be included in Agoa. This will expand Agoa to all African countries and support the continent’s trade integration African Continental Free Trade Agreement.
Third, Agoa should stop punishing investors for the mistakes of governments. It is unfortunate that countries that do not meet Agoa’s eligibility requirements, which include governance and human rights standards, are suspended from the system. This penalizes the private companies that invest and trade and the people who depend on those companies for jobs. However, the US is not likely to change the eligibility requirements.