What trade benefits does AGOA provide?
AGOA’s benefits go beyond simple market access, and include or have facilitated closer collaboration between the US and African countries in many other areas, technical and economic assistance, aid, investment finance, political and strategic collaboration in certain areas, and so on. For example, trade capacity building is an important feature of AGOA as the legislation directs the US President to provide support in this area to AGOA beneficiaries, for example through the US Agency for International Development (USAID) which administers certain projects in support of AGOA for example under the ATI (Africa Trade and Investment project), which work to increase AGOA utilization and regional producers’ access to international markets.
One of the key benefits however remains preferential market access to the US market that is given to over 6,000 products when these originate in the African AGOA beneficiary country.
By removing US import duties on products covered by AGOA, producers and exporters in AGOA beneficiary countries indirectly receive a competitive advantage over exporters in other countries, who may need to pay standard US import duties, which for certain textile articles might be more than 30% on the value of the product. The preference claim is always made by the US importer.
This is a win-win scenario both for African producers and exporters as well as for US importers and consumers, as AGOA preferences result in more competitive sourcing of products, compared to US importers sourcing such goods from elsewhere. When the US importer clears goods under AGOA preference, the applicable AGOA program indicator must be chosen (symbol ‘D’ when completing the paperwork). Apparel products are classified separately in the tariff database under Chapter 98 and the US import filing includes must include the specific rules of origin category under which the preference claim is made. The US GSP program uses the 'A' program indicator but only allows preferential access when the GSP is active.
‘D’ – AGOA duty-free treatment
‘A’ – Generalized System of Preferences
While even a small duty rate can translate into a significant competitive advantage for African producers exporting to the US, the competitive dynamics of the product and industry and the size of the preference margin also play an important role in determining how valuable AGOA preferences are in each scenario: the greater the potential duty saving, the greater the relative advantage of using AGOA when clearing goods for import into the US, and for ensuring that the goods meet the minimum local content and processing requirements to be considered a product of the beneficiary country. In highly competitive sectors where even a small percentage saving can translate into a valuable advantage, AGOA preferences can play an important role in helping to facilitate trade between Africa and the US.
*** See later section on ‘Origin’ and its associated requirements under AGOA