Africa seeks bigger US trade slice for AGOA to make sense

Africa seeks bigger US trade slice for AGOA to make sense
Published date:
Wednesday, 11 January 2023
Author:
LUKE ANAMI

African countries may need more trade privileges with the US even as Washington reviews the African Growth and Opportunity Act (Agoa) meant to expand what the continent will export.

At the end of the US-Africa summit in December, Washington pledged to renew Agoa, bringing clarity to uncertainties that had befell exporters from countries such as Kenya.

But now experts say the narrow view of Agoa should be expanded to allow them to export more goods and hence benefit more countries that are able to make a diversified list of goods.

“Agoa has to be expanded in two ways; expanded in its product coverage and in terms of country coverage,” said Melaku Desta, Coordinator of the African Trade Policy Centre, UN Economic Commission for Africa.

“Agoa also excludes processed products as Africa is allowed to export Iron and ore but not steel products. So, it has to be expanded in terms of product coverage. It also has to be expanded in terms of country coverage.”

Agoa’s legislation was first passed by the US Congress in 2000. It expires in 2025, having been extended four times before. Initially, it was meant to last until 2007 but was amended to clarify on preferential treatment of African goods and other standards required of goods.

Too many exclusions

It offers almost 6,500 products duty-free access to US markets. Many of these exporters are small and medium enterprises, enterprises that can grow by leveraging Agoa to their benefit.

As of December 31, 2022, only 36 sub-Saharan Africa countries are eligible for Agoa.

In an interview with The EastAfrican, Mr Melaku said plans by the United States to renew Agoa should include proposals on how to include agricultural products which is the mainstay of the African economy.

“In terms of product coverage, the three African countries that have benefited the most from the Agoa are Ethiopia, Kenya and Lesotho because they export apparel,” said Melaku.

“When you look at the product coverage, it excludes agricultural products. For a continent like Africa, excluding agriculture is like excluding everything. So, what we are saying as Africa is that Agoa should be renewed to cover more products.”

The Under Secretary of State for Economic Growth, Energy, and Environment Jose Fernandez, while discussing the outcomes of the recently concluded US-Africa Leaders’ Summit said Agoa was subject of the discussion at the summit and called on more countries to take full advantage of it.

Finding remedies

“One aspect of Agoa that’s become clear is that we would like African nations to take more advantage of it. We feel, frankly, in some countries that Agoa is underutilised, and we spent a lot of time at the summit speaking about why that is and how we could take steps to remedy that situation,” said Fernandez.

“Agoa – the US is a big market, and I think if we can – if we can help African nations make better use of Agoa, I think our partnership can only grow.”

Fernadez said Agoahas been at the core of US trade and investment policy with sub-Saharan Africa because, ‘it provides eligible countries with certain duty-free access to the economy and also helps to drive investment in the continent, creating thousands of jobs, promoting regional integration, and enhancing Africa’s export competitiveness’.

He added, “It has also incentivised many African countries to undertake key political and economic reform.”

The ECA Coordinator of the African Trade Policy Centre said Agoa covers only 36 African countries and should include the remaining 18 African countries that have been excluded.

Fragmenting continent

He said it should be expanded to include Mediterranean Africa to avoid it being viewed as a divisive factor in US-trade policy on Africa.

“Agoa is based on a very old and archaic differentiation of Africa. It is based onsSub-Saharan-Africa on the one hand and Mediterranean Africa on the other,” observed Melaku.

“Agoa should be extended for another 10 years. But it must be expanded in terms of products and countries otherwise it becomes a subject of a factor in fragmenting Africa rather than uniting Africa.”

President Joe Biden’s regime is keen in 2023 to spend more time trying to strengthen economic and business relations with Africa.

As the US Secretary of State Antony Blinken observed at the end of the summit, there is a need to expand trade with Africa and as Agoa at the heart of it.

“We have been listening, and we’ve been hearing loud and clear ideas for better utilising Agoa. And we look forward to working with you to ensure that we maximise its full potential going forward,” said Blinken.

“If we manage to increase our share of imports and exports by just one percent, we will generate an additional $34 billion in revenue for Africa, $25 billion in revenue for the United States — and create more than 250,000 good-paying jobs as a result.”

 

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