AGOA time: As 2025 approaches, opportunities for improvements eyed

AGOA time: As 2025 approaches, opportunities for improvements eyed
Published date:
Monday, 30 January 2023
Margaret Spiegelman

Economic integration efforts underway in Africa and new ideas about decades-old U.S. trade policy could provide a host of options for bolstering Washington’s cornerstone trade policy program with sub-Saharan African countries, analysts and former senior officials tell Inside U.S. Trade.

The African Growth and Opportunity Act, first signed into law in 2000, “has done more than people give it credit for, but it has not done nearly enough that it could and should do,” former Assistant U.S. Trade Representative Florizelle Liser said in an interview. Liser, who now serves as president and CEO of the Corporate Council on Africa, oversaw implementation of the trade preferences program during her time at USTR under Presidents George W. Bush and Barack Obama. AGOA is set to expire in 2025, a deadline that has spurred policymakers to consider if and how it should be extended.

U.S. Trade Representative Katherine Tai has touted AGOA’s importance while calling on lawmakers to work with the administration to find ways to improve its uneven utilization -- a key issue in an ongoing probe by the U.S. International Trade Commission into AGOA and its usage. On Thursday, Tai told Bloomberg the program was “set to be reauthorized” in 2025 and, accordingly, “now is exactly the right time to be reviewing what [AGOA’s] performance has been like” and “also to start thinking, how do we make this better and more effective?”

“Africa could be the engine that drives economic growth and prosperity for the next phase of globalization,” she added. “But it is going to require us to think big and to be creative, because the tools that we have so far haven't done what we know we need to do in this next phase.”

According to USTR’s 2022 biennial report on AGOA implementation, non-oil imports under the program -- described in the report as “a major source of AGOA’s job-creating value” -- were roughly $4.8 billion in 2021, the highest annual figure since 2013. The report cites high utilization by several countries of the program’s “liberal rules of origin” for apparel, as well as increases over the past two decades in imports of other goods from AGOA partners, including “vehicles and parts, sunglasses, footwear, home goods, jewelry, cut flowers, cocoa powder and cocoa paste, cassava, and macadamia nuts.”

Liser contends that AGOA’s impact is sometimes underestimated, noting that it has had meaningful effects on small businesses and workers even in countries that conduct little trade with the U.S. In addition, she says, data on AGOA trade captures only final assembled products -- not intermediate steps in the supply chain -- and, accordingly, does not provide a full picture of the program’s impact.

But the U.S. can do more, she says, to spur value-added production on the continent, which accounts for less than three percent of global trade.

“We have to have something that will incentivize investment into value addition, beneficiation, processing of Africa's own raw materials, so that they can ship those products further up the value chain, get more money for it, get better jobs, more jobs … and be able to capture a larger share of global trade,” she said.

Landry Signé, a senior fellow in the Global Economy and Development Program and the Africa Growth Initiative at the Brookings Institution, similarly contended that U.S.-Africa trade and investment should not be conceived as “just the transaction between the U.S. and Africa.”

“Why wouldn't an American investor use Africa as a base for investment to export -- of course to the U.S. -- but also to export in the rest of the world?” he asked.

Rethinking eligibility criteria

On Liser’s short list of ways to improve AGOA is to make the program’s annual eligibility reviews triennial, in line with those required under the Generalized System of Preferences -- a change she contends would help provide greater certainty to companies and investors while reducing a burden on USTR and U.S. embassies that prepare annual reports for the reviews.

“No other countries in the world have their eligibility for preference programs reviewed every single year,” she said.

The Biden administration’s suspension last year of Ethiopia’s AGOA benefits because of human rights violations sparked concern about the program’s eligibility criteria and how such suspensions affect workers in the sanctioned countries as well as neighboring nations.

In a draft paper shared with Inside U.S. Trade, veteran trade analyst and negotiator Steve Lande wrote that provisions allowing the U.S. to suspend AGOA benefits “due to political factors” were put in place during a time when the U.S. “had little experience applying other measures.” Lande, the president of Manchester Trade, a trade policy and investment advisory firm, served as assistant USTR and a negotiator for the U.S. on trade agreements in Asia, the Middle East and the Caribbean in the 1970s and 1980s.

“There are now other tools to pressure aberrant regimes to pursue responsible policies,” he wrote, adding that “trade retaliation often has unintended consequences which harms the very groups we want to help and to strengthen, U.S. investors are often put at a disadvantage to their competitors and Africans should be in the lead in its internal policing.”

Liser, however, contended that eligibility criteria are needed and that the negative impacts of suspensions could be mitigated by providing retroactive, duty-free access to countries if they requalified for the program.

During an ITC hearing held as part of the commission’s investigation, analysts last year raised concerns about other aspects of the eligibility criteria, including an income cap that can trigger what Paul Ryberg, president of the African Coalition for Trade, called a “seesaw” effect. Mauritius, he noted, briefly rose above that cap and lost its benefits before the pandemic struck and its income level fell below the threshold. ACT is a trade association based in Washington, DC, that represents private-sector interests in Mauritius and other sub-Saharan African countries.

“Now we're faced with a circumstance where in a few years they will probably recover enough to be right back again at the income cutoff, but if they exceed it, the loss of AGOA eligibility would cause their income to fall below the cutoff and then they'd be eligible again,” he said, according to a transcript issued by the ITC. Mauritius has proposed what Ryberg described as “a more flexible sort of eligibility standard to assess competitiveness rather than an arbitrary an artificial income standard.”

Links to AfCFTA

Ongoing integration efforts on the continent also could offer opportunities for boosting AGOA’s impact, analysts say. Katrin Kuhlmann, a visiting professor at Georgetown University Law Center and the president and founder of the New Markets Lab, a nonprofit center for innovation in law and economic development, said in an interview that there was “substantive overlap” between the priorities of AGOA and those of the African Continental Free Trade Area -- a point she noted was underscored in a memorandum of understanding signed last month by U.S. Trade Representative Katherine Tai and Secretary-General of the AfCFTA Secretariat Wamkele Mene. If fully implemented, AfCFTA will create a continent-wide market.

The MOU included what Kuhlmann described as “promising” references to issues like inclusive, sustainable development as well as concerns related to women, youth and underserved groups, among others. AfCFTA, she noted, builds on a history of African regional trade agreements that address gender -- also a focus of the Biden administration’s trade policy -- and the continental agreement will include a protocol on women and youth.

Kuhlmann added there could be ways to "align” rules of origin under AGOA and AfCFTA as well as countries’ implementation plans for the two agreements -- a possibility she said could help boost regional supply chain development.

Analysts noted that national utilization strategies have helped countries take advantage of AGOA benefits. But as of last year, just 16 of 36 AGOA-eligible countries had produced those plans, according to USTR’s 2022 report.

According to Liser, AfCFTA could work in tandem with AGOA as well as bilateral free trade agreements to boost regional value chains on the continent. For example, she said, AGOA’s eligibility criteria could be expanded to include progress toward implementing AfCFTA. In addition, she contended that the U.S. should pursue trade agreements that mirror market-access provisions provided by some African countries to developed trading partners, like the European Union, while ensuring that commitments under AfCFTA “take precedent.”

Such agreements, she suggested, need not require full graduation from AGOA.

“I'm not saying don't give them AGOA at all, but I'm saying put them in a special category,” she said, adding that “My view would be if you can open up to the EU, you should be able to open up to the U.S. as well.”

While Liser says AfCFTA allows countries to pursue bilateral trade agreements, some analysts have warned that bilateral initiatives-- even those, like the Biden administration’s developing arrangement with Kenya, that do not include negotiations on market access -- could pose a threat to the continental integration effort and inhibit regional trade.

Lande, meanwhile, contends that AGOA should be extended to include “all African countries,” in “parallel” to AfCFTA.

Reassessing TRQs

AGOA’s interaction with other U.S. trade policy initiatives -- in particular, tariff-rate quota systems for goods like sugar and cotton -- also deserves examination, according to some analysts.

Some TRQs, Kuhlmann noted, are based on trade patterns from decades ago. Those for raw cane sugar, for example, are derived from patterns from 1975 to 1981, according to the Agriculture Department.

Former assistant U.S. Trade Representative for Africa Rosa Whitaker has called on lawmakers to reassess those allocations.

“Why do Latin American countries like Brazil have huge quotas that allow them to ship sugar to the U.S. based on allocations were set a half century ago while there are 25 African countries are not allowed to import a single teaspoon of sugar to the U.S.?” she wrote in testimony ahead of a November 2021 House Ways & Means Committee trade subcommittee hearing on U.S.-Africa trade and investment. Whitaker, president and CEO of the Whitaker Group, played a key role in conceiving and implementing AGOA during the Clinton and George W. Bush administrations.

She contended that Africa also could be “quite competitive in cotton if slave labor from other producers was addressed -- but only if existing TRQs were ended or modified.” Cotton is a high-priority sector for enforcement of the Uyghur Forced Labor Protection Act, which went into effect last summer.

In a recent interview, Whitaker said she had seen “no progress” on the recommendations she offered at the hearing, which also included using the tax code to incentivize investment in Africa; leveraging the U.S. bond market to support infrastructure development on the continent; and adopting a “sectoral approach” to AGOA graduation.

Whitaker also expressed disappointment that the administration did not use the U.S.-Africa Leaders Summit, held last month in Washington, DC, as an opportunity to announce its support for renewing AGOA, saying there was a “full expectation at the summit” for the administration to clearly state that intent.

“The administration was not unequivocal at the summit on where it stood -- what is its position on AGOA’s renewal,” she said, adding that “I used to say -- on AGOA and overall on U.S.-Africa trade policy -- that we're running in place, but now I believe we may be going backwards."

Signé offered an optimistic outlook on the heels of the summit -- and pointed to the ITC’s March 17 deadline for delivering its report on AGOA as a key date for assessing “the next step” by the U.S.

During the summit, he said, there was “incredible alignment -- surprising alignment” on the African side "in terms of what they will be asking to the U.S.,” he said. And on the U.S. side, he contended there is “relative convergence” among lawmakers about the way forward.

“You have exceptions, of course, but overall they are aligned in what the key priorities should be,” he said.

All out in Africa

Several Biden administration Cabinet members have made trips to sub-Saharan Africa -- including, this week, Treasury Secretary Janet Yellen, who will speak about the administration’s trade policy toward Africa during a trip to Senegal followed by stops in Zambia and South Africa.

According to press guidance issued on Thursday by Treasury, Yellen “will highlight the Biden-Harris Administration’s work to deepen U.S.-Africa economic ties, including by expanding trade and investment flows and promoting sustainable and inclusive economic growth.”

In Senegal on Thursday, Yellen said the administration’s plan for engagement in Africa “is not transactional, for show, or for the short-term. We are here to work with you as friends and partners for the long haul -- through moments of stress and times of opportunity.”

President Biden during the leaders summit said he too planned to visit the continent, without specifying when or what countries he might visit.

“I’m looking forward to seeing many of you in your home countries,” he said, according to a transcript issued by the White House.

Biden last year attended a climate summit in Egypt. Tai last September visited Kenya, and Secretary of State Antony Blinken unveiled the administration’s strategy toward sub-Saharan Africa during a visit last August to South Africa, part of a trip that also included stops in the Democratic Republic of the Congo and Rwanda.

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