Protection likely for African countries that outgrow AGOA
The improved agreement of the African Growth and Opportunity Act (AGOA), due to expire in 2025, is likely to have fewer requirements for graduation from the programme to avoid beneficiaries losing out on the lucrative commercial ties with the US, says a top Washington diplomat.
The legislation, which was enacted in 2000 and allows Sub-Saharan African countries preferential access to US markets, requires that beneficiaries be graduated out of the programme once they reach a certain level of development.
But US trade representative Katherine Tai says this part of the legislation is counterproductive as Agoa beneficiaries graduated from the programme are required to start from scratch in terms of their trade relationship with the US. It puts “you kind of back to square one in terms of your economic relationship with the US just like anybody else. But then we’ve spent 20 years trying to foster a relationship and a partnership,” she said.
“I’m not saying we should have all the answers by the time of the reauthorisation of Agoa, [but] a new version of Agoa should at least start articulating a vision [of] what happens to good graduation partners.”
SA has been a beneficiary of Agoa since its enactment. Agoa provides preferential access for about 20% of its exports to the US, or 2% of its exports globally. Major sectoral beneficiaries in 2021 included vehicles, iron and steel, edible fruit, organic chemicals, and precious stones.
SA is the largest trading partner on the continent of the US, with two-way trade in goods of $21bn in 2021. SA’s participation in the programme came under threat in 2014 because it is an upper-middle-income country while Agoa support measures are aimed at lower-income countries. As a unilateral trade agreement, it was up to the US to decide on SA’s future inclusion or exclusion.
Earlier this year, it was feared that SA would be booted out of the programme after a request in June by a bipartisan group of US legislators to secretary of state Antony Blinken, national security adviser Jacob Sullivan and Tai to hold the Agoa forum in another country because of SA’s alleged relationship with Russia.
Beneficiaries of Agoa are prohibited from engaging in activities or implementing policies that undermine US national security interests. These fears subsided after Blinken, Tai and US President Joe Biden endorsed the extension of Agoa during the Agoa forum hosted by SA last week. Four beneficiary countries — Uganda, Niger, the Central African Republic and Gabon — were kicked out of the trade programme on the eve of the forum’s annual summit in Johannesburg, partly because of human rights issues.
Agoa requires US legislators to conduct eligibility reviews of beneficiaries yearly. Eligibility criteria include that beneficiaries should not engage in gross violations of internationally recognised human rights, support acts of international terrorism or engage in activities that undermine US national security or foreign policy interests.
African trade ministers at the forum lobbied the US to reconsider the exclusion of the four countries because it will disrupt regional value chains and thus reduce the contribution of Agoa to the structural transformation of the continent.
Tai said the exclusion of these countries was not taken lightly and that the US would work with affected countries to ensure they are brought back into the fold. Trade, industry & competition minister Ebrahim Patel echoed the sentiments of Tai in his remarks at the closing ceremony on Saturday. Patel said Agoa beneficiaries are not seeking a complete reconstruction of the trade pact but rather for it to be improved.
“We’re looking for refinements. And the reason for that is [that] every African minister who spoke emphasised that time is of the essence. Investors have pressed the pause button. Procurers are beginning to press pause buttons. And an early decision will unpause those buttons,” he said.
“We’re not looking for Agoa to be scrapped and a complete rewrite.”
African countries are looking for an early extension of the trade pact before its expiry and for the pact to be extended by another 10 years.
Its extension requires a bipartisan consensus in the US Congress to secure the necessary backing for its renewal.