Sourcing Journal: An uncertain future for AGOA?
Sub-Saharan Africa has both been the land of sourcing opportunity and the land where trade was most likely to remain close to status quo amid other potential adjustments to U.S. agreements.
Now, the U.S. may be set to take a closer look at the African Growth and Opportunity Act (AGOA), which affords eligible African countries duty free sourcing to the U.S. AGOA was renewed in 2015 and is set to remain in place until 2025, at which point it will again be up for renewal consideration.
Since its inception in 2000, qualifying African countries have enjoyed duty free and quota free access to the U.S. market on roughly 6,000 products.
In addressing leaders at the U.S.-Africa Business Summit in Washington, D.C. last week, Commerce Secretary Wilbur Ross, reiterated President Trump’s comment at the G7 meetings that “Africa is a place of opportunity,” and stressed that the U.S. can’t afford to ignore the region.
“Over the next five years, 19 sub-Saharan African coutnries are expected to achieve average growth rates of 5 percent or higher. And over the last five years combined, Ethiopia’s growth rate has been second highest in the world,” Ross said, according to a transcript of his speech posted by All Africa. “Africa is moving steadily on a trajectory of economic growth and increasing self-reliance—a vision this administration supports.”
And one way the Trump Administration plans to support Africa’s vision is, of course, ensuring that it aligns with its own.
According to Ross, total trade between Africa and the U.S. in 2016 was $48.3 billion, a nearly $10 billion increase since 2000. And perhaps most importantly to Trump and the leaders in trade, the U.S. trade deficit declined from $16.7 billion to $4.7 billion in that time.
“Our trade relationship is vital to the security and stability of both the United States and Africa. But our relationship with Africa has to continue its transition from being “AID-based” to “TRADE-based,” Ross said. “To that end, having two-way trade agreements, not just temporary trade preferences, would create long-term, sustainable improvements to quality of life on both sides of the Atlantic.”
Trump has been very clear about wanting little to do with multilateral trade agreements, as evidenced by his pulling the U.S. out of the 12-nation Transpacific Partnership Deal, proclaiming instead that it would be better for the U.S. to negotiate bilateral deals with the nations it wants to do big business with.
Ross’s comments fall right in line with that thinking, and now the question becomes: what’s to happen with AGOA?
Though little further was said on how the U.S. would move from trade preference programs like AGOA to bilateral deals with African nations, Ross did say, for now, the U.S. must ensure nations currently benefitting from trade privileges under AGOA must remain in compliance with the eligibility requirements.
“The administration takes these congressional requirements very seriously,” Ross said. “And in applying our laws, we will vigorously protect the rights of U.S. companies and workers in the global arena.”
No further details were disclosed on what that will mean, but Ross did say the countries that will succeed under AGOA—and any future agreements—are the ones that will open their economies, make things easy for U.S. investors, and they are those that have “fought corruption, promoted good governance and business ethics, and sought to enforce intellectual property protections.”
For now, Ross said African nations would be best served to embrace the World Trade Organization’s Trade Facilitation Agreement (TFA), which is expected to streamline customs operations, enhance transparency, remove red tape and cut costs to importers and exporters.
According to Ross, U.S. business leaders dealing in Africa recently advised Trump that: “Full implementation of the TFA is a ready-made opportunity to support the changes that Africa needs to address administrative burdens that raise trade-related transaction costs to unsustainable levels.”
The WTO has estimated that least developed countries that fully implement TFA could see a 35 percent increase in exports because of the lowered costs and improved competitiveness.