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US senator wants AGOA in place until 2045 to deter China’s influence

US senator wants AGOA in place until 2045 to deter China’s influence
Published date:
Thursday, 19 October 2023
Author:
THANDO MAEKO

The legislation that allows Sub-Saharan African countries, including SA, preferential access to US markets could be extended by 20 years beyond 2025 if the US Congress approves a bill introduced by Louisiana senator John Kennedy.

Kennedy wants the legislation extended to 2045 because it would help deter “China’s growing influence throughout the region. This extension would allow the US to keep working closely with African nations to grow our economies, reduce poverty and ensure that US values prevail in the region,” according to a statement.

Not only is China the largest and most dominant member of the Brics grouping (Brazil, Russia, India, China and SA), it is also the largest consumer of SA commodity exports and thereby a key driver of the rand exchange rate.

According to data released by the IMF last week, China is Sub-Saharan Africa’s largest lender and a significant source of foreign direct investment.

China’s share of total Sub-Saharan African external public debt rose from less than 2% before 2005 to about 17% in 2021, providing a significant source of infrastructure financing across the continent away from traditional Western partners, which have been viewed as having strenuous conditions attached to financing.

In 2021, the US was ranked the second-largest destination for SA’s exports globally after China, followed by Germany. It was third in terms of source of imports after China and Germany. During the same year, trade between SA and the US peaked at $21bn.

The US’s African Growth and Opportunity Act (Agoa) provides preferential access for about 20% of SA exports to the US, or 2% of SA exports globally.

Kennedy introduced the bill to Congress in September. It would provide for a “clean” 20-year reauthorisation of Agoa, which would provide much-needed relief for African countries that have benefited from the trade pact since its inception in the year 2000.

Congress last extended Agoa in 2015, authorising the programme to the end of 2025.

The extension of Agoa by two decades contradicts calls by African countries that want an early extension and for the trade pact to be extended by only a decade. They plan to make that call during a meeting of the beneficiaries and US legislators scheduled for Johannesburg in November.

A bipartisan consensus is essential to secure the necessary backing that African countries seek for a renewal of Agoa as a key means to promote African industrialisation.

Officials from the department of trade, industry & competition, who spoke to Business Day on condition of anonymity, said they would closely watch the US Congress’s reaction to the bill.

SA is comfortable with an extension of only 10 years of Agoa as it provides predictably and continuity for investment.

The officials said they would prefer that the frequency of eligibility be reduced and that out-of-cycle reviews for eligibility be scrapped. Both issues are expected to be raised by SA at the upcoming Agoa Forum.

“We need to have a more predictable arrangement in Agoa ... the US is shooting itself in the foot regarding what it wants to achieve in Africa regarding development of markets [because of the frequency of reviews],” one official said.

The Agoa act requires that US legislators conduct yearly eligibility reviews of the trade pact’s beneficiaries. Eligibility criteria include that beneficiaries should not engage in gross violations of internationally recognised human rights or provide support for acts of international terrorism and that countries do not engage in activities that undermine US national security or foreign policy interests.

The US trade representative is conducting reviews for countries to receive Agoa benefits for 2024. The report is expected in November.

Fears were raised earlier in 2023 that SA would not host the Agoa Forum and it would be removed from the list of beneficiaries after a request in June by a bipartisan group of US legislators to secretary of state Antony Blinken, national security adviser Jacob Sullivan and US trade representative Katherine Tai that the forum be held in another country. The legislators pointed to SA’s perceived closeness to Russia in its war with Ukraine.

US-SA trade relations came under pressure after Washington accused SA of providing weapons to Russia in its war on Ukraine, a charge Pretoria has denied.

An inquiry commissioned by President Cyril Ramaphosa into the matter cleared SA of any wrongdoing.

“African countries seek a renewal of Agoa as a key means to promote African industrialisation and market access to the US,” according to a presentation by the department of trade, industry & competition.

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