TRALAC - Trade Law Centre

Expanding free trade with Africa through AGOA

Monday, 06 August 2018 Published: | Kathryn Quelle

Source: The Borgen Project

Originally passed in 2000 and renewed until 2025, the African Growth and Opportunity Act (AGOA) is a U.S. Trade Act that boosts U.S. market access for qualifying sub-Saharan African (SSA) countries.

The program’s goal is to boost economic growth, spur development and reduce poverty in Africa.

Currently, 40 SSA countries are AGOA-eligible and they remain eligible by working to improve human rights, rule of law and labor standards.

The AGOA built on the U.S. Generalized System of Preferences (GSP) by expanding duty-free benefits. 

Now, the combined AGOA/GSP program stands at about 6,500 product tariff lines, including categories such as apparel, agricultural products, chemicals, vehicle parts and steel. In 2017 alone, the United States Trade Representative (USTR) reported that two-way trade with SSA countries rose 5.8 percent to $39 billion. SSA exports to the U.S. have also increased threefold since AGOA’s enactment in 2000.

2018 AGOA Forum Emphasizes Importance of Trade Growth

This year’s AGOA Forum was titled “Forging New Strategies for U.S.-Africa Trade and Investment” and officials are already looking ahead to 2025, when the AGOA will expire. USTR Robert Lighthizer helped open the forum by introducing a new strategy for free trade with Africa. He said, “…while AGOA has brought important benefits, there remains much more to be done to fully realize the potential of U.S.-Africa trade.”

Lighthizer went on to say, “One-way tariff preferences can only do so much to drive trade and investment.” The U.S.’s new trade strategy involves building on and going beyond the existing AGOA program with more permanent Free Trade Agreements (FTA). Lighthizer noted that the U.S. is not abandoning AGOA in the short or long term and the U.S. intends to pursue free trade with Africa and AGOA simultaneously.

The Trump administration intends to negotiate an FTA with an SSA partner upon which it will model future FTAswith other African countries. Lighthizer stated four major benefits of pursuing a more permanent trade and investment framework between the U.S. and Africa.

The Benefits of Free Trade with Africa

Africa’s growth presents numerous expansion opportunities for U.S. businesses. Many large U.S. companies, such as Kellogg’s Cereal, Marriott Hotels and Prudential Insurance, have already made major investments in Africa over the last several years.

Africa needs infrastructure and other development projects to support its continued economic growth. U.S. businesses are well-positioned to help boost Africa’s economic growth and help African countries tap into global markets.

A number of African countries have already signed FTAs with some of the U.S.’s largest competitors, such as the EU and China. Like the U.S., many of these competitors are particularly interested in SSA countries with growing economies. Continuing to focus on free trade in Africa can help ensure that the U.S. establishes a stronger foothold in a competitive market.

Free trade with Africa would help African countries lock in AGOA benefits, lending certainty to businesses seeking long-term business decisions. Overall, a more stable and permanent trade and investment framework with the U.S. would be mutually beneficial and transformative for Africa.

The Future of Free Trade with Africa

At the AGOA Forum, Lighthizer acknowledged that the U.S. had not yet decided which African country or countries to negotiate a model FTA with, but several SSA countries at the forum expressed interest. Kenya is one potential partner.

Before the AGOA Forum began, Kenya’s trade officials said they would try to expand the country’s exports and raise the country’s share of new investments. Kenya wants to increase manufacturing to 20 percent of its GDP and grow exports to 20 percent annually by 2022. Free trade with the U.S. would draw investments to Kenya and make it easier for the country to export products.

Kenyan Trade Principal Secretary Dr. Chris Kiptoo acknowledged that AGOA has not yet been fully exploited and that Kenya must engage initiatives likely to impact the trade sector. One of the initiatives Kenya may wish to engage could be the U.S.’s new free trade strategy. Regardless of which country or countries the U.S. eventually negotiates with, the U.S. intends to move quickly and announce exploratory talks soon.

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