TRALAC - Trade Law Centre

What is the AGOA and MCA Modernization Act?

Monday, 27 November 2017 Published: | Blake Chambers

Source: The Borgen Project

The African Growth and Opportunity Act, or AGOA, was passed into law by the 200th Congress on May 18, 2000.

The bill was renewed up to the year 2025 in 2015, during the Obama administration.

The primary purpose of the AGOA legislation is to establish a new trade and investment policy for sub-Saharan Africa, along with expanding trade benefits to the Caribbean Basin.

The bill greatly improves the access that sub-Saharan African countries have to the U.S. market.

AGOA seeks to expand U.S. aid to regional integration efforts made by sub-Saharan Africa, strengthening and building upon the private sector in the area, particularly with small businesses and industries owned by women. Encouragement of investment and trade is emphasized by AGOA legislation, as it is indicative of economic development and increased participation in the political process.

To qualify to receive the benefits of AGOA, these countries must follow a set of standards included in the legislation. The eligibility standards include improving its rule of law, following core labor standards and meeting human rights goals. In addition, an acting president has the authority to take away AGOA benefits from any country if it is deemed that a country is not continuing to meet the requirements for eligibility.

“AGOA is not just about trade – it’s effectively also a broad relationship framework as I like to say – strategic, trade, aid, investment, and even military cooperation… thus any 'costs' associated with trade or a reduction of import tariffs are merely that, minor overheads in the greater scheme of things,” said South African economist and creator of the AGOA.info portal, Eckart Naumann. “The U.S. would be foolish to tamper with this, or withdraw its benefits. The knock-on effects and loss of goodwill would be significant.”

Naumann believes that AGOA has become vital to the interests of the United States along with sub-Saharan African countries. He says that Congress would most likely push back against any efforts to restrict it. U.S. companies and consumers benefit from AGOA due to free-market principles taking effect with both sides profiting from it, and the legislation helps create jobs, also in America.

Currently, Congress is considering the AGOA and MCA Modernization Act. The legislation serves as an extension of AGOA, and it promotes policies that foster trade and cooperation while also aiding eligible partners of AGOA. In addition, the AGOA and MCA Modernization Act seeks to create a website that details the benefits of the program, give the Millennium Challenge Corporation more freedom to facilitate tradeby permitting up to two compacts within one country and strengthen the accountability of the MCC by making the criteria for reporting requirements stronger. The Millennium Challenge Corporation, which was created through the Modernization Act, provides large-scale grants to help create economic growth opportunities in developing countries eligible for AGOA.

The AGOA and MCA Modernization Act was introduced to the House of Representatives in July as H.R. 3445 and to the Senate as S. 832 in April. Both the House and Senate have not yet made the decision to pass or reject the legislation.

 

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