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South Africa’s AGOA forum: Crafting future pathways for US-Africa trade partnership

South Africa’s AGOA forum: Crafting future pathways for US-Africa trade partnership
Published date:
Tuesday, 14 November 2023
Author:
KESTER KENN KLOMEGAH

Ultimately the African Growth and Opportunity Act (AGOA) could be extended by 16 years, that means until 2041, indicating its importance for strengthening Africa’s trade and economic cooperation with United States.

That was, in fact, the main focus during Johannesburg’s early November forum that brought together more than 30 trade ministers, astute investors plus representatives from the regional economic blocs and the African Union.

At the forum, Africa’s geopolitical alliance with collective expectations and ambitions to shape the long-term future trade and economic architecture was obvious, and this featured prominently throughout all the speeches and discussions.

As an established fact, Africa trades more with the European Union and the United States, and now China, than  any other countries in the world.

That is the reality, despite the diverse interests and political preferences African countries have in this emerging reconfiguration.

Nearly all the forum speakers advocated for a long-term trade agreement, after reviewing progress and challenges.

Both African and American participants renewed collective interest in forging ways to strengthen U.S. trade relations with Africa. It was further acknowledged that United States has the largest African diaspora, close-knitted business, educational and cultural links with African countries. This helps to support official efforts in promoting bilateral economic relations with Africa.

With the rapid changes around world, Africa has to look beyond the crafted political narratives and focus on the economy, reconcile the diverging priorities, share views on the prospects and find strategic pathways in promoting trade and economic development on the world stage. The desire for a multipolar, of course, simply implies building better cordial integrated partnerships.

Despite heightened criticisms, the United States undoubtedly remains the most attractive for many of African countries and its leaders, politicians, entrepreneurs, students and ordinary citizens.

Without mincing words, AGOA offers a clear well-defined roadmap to track and evaluate the commercial processes through which Africa, to a considerable degree, can leverage the opportunities, utilize its collective capacity to influence and enhance trade, especially now within the context of the African Continental Free Trade Area (AfCFTA) as an integral part of the African Union’s Agenda 2063.

Noticeably, African leaders have long ago started serious negotiations for extension of the African Growth and Opportunity Act. The U.S. flagship trade programme with Africa was first launched in 2000, the African Growth and Opportunity Act grants exports from qualifying African countries duty-free access to the United States – the world’s largest consumer market. 

With its expiration due in September 2025, African countries are pushing for an early 10-year renewal with some additional improvement and updates to reassure potential businesses and investors. These leaders really valued this trade partnership agreement and would not afford to loose it, so top-level discussions for its prolongation started since 2021. It also featured during the mid-December 2022 during the U.S.-Africa leaders summit held in Washington.

With geopolitical confrontation and tensions deepening, the United States, as one key global players, is turning its focus on Africa. In practical terms, AGOA has become an important instrument for strengthening the connectivity between both regions, which ultimately supports the burgeoning investment potential of U.S.-Africa relations in this emerging multipolar world.

Over $10 billion worth of African exports entered the United States duty free in last year under the programme. However, the U.S. International Trade Commission earlier this year highlighted major shortcomings. More than 80% of duty-free non-petroleum AGOA exports, for example, have come from just five countries – South Africa, Kenya, Lesotho, Madagascar and Ethiopia – in recent years. “We see that there is opportunity to shape a stronger and forward-looking vision for U.S.-Africa trade,” U.S. Trade Representative Katherine Tai, who headed the U.S. delegation, told the African ministers.

“There are so many reasons for the United States to be investing in and enhancing our relationship with Africa,” she said. “We have a very strong interest for continuing to articulate our vision for how the United States can show up as a strong reliable and promising partner.”

In addition, Tai said one of the developments the US wants to ponder is the launch of the African Continental Free Trade Area, which the World Bank says can lift 30 million people out of extreme poverty. The United States is also looking at how to improve utilization rates under AGOA, which is aimed at poor countries, while also focusing on how to support those who succeed in winning middle-income status.

Judd Devermont, Biden’s special assistant on Africa, told Reuters news agency the U.S. delegation had come to Johannesburg to consult with African officials on what was possible. “We want to reauthorize AGOA as soon as possible,” he said. “The absence of the AGOA legislation would be deeply troubling for (African) economies. But, I think there are different views on how to reform it.”

Nevertheless, African governments and U.S. industry associations worry that attempts to radically alter AGOA risk bogging the programme’s renewal down in a Congress that is already struggling to pass even the most critical legislation. “We would like you to look at an extension of AGOA for a sufficiently lengthy period … to act as an incentive for investors to build factories,” South African President Cyril Ramaphosa told the forum with special underlined intonation.

Ramaphosa used the interactive platform to shed light on Africa’s industrial potential and its critical need for economic diversification in the continent. Unlocking Africa’s industrial potential as there are now young and vibrant population. The goal is to transform Africa from being mere producers of commodities to manufacturers of sophisticated industrial and consumer goods that the world demands.

Ramaphosa however cited South Africa, that AGOA has played a crucial role in job creation in South Africa’s auto industry, demonstrating its significance for regional industrial development and the integration of African economies. For over two decades, AGOA has remained the cornerstone of US-Africa commercial relations, its potential is yet to be fully harnessed within the small to medium-sized businesses.

Ramaphosa emphasized that AGOA could complement the African Continental Free Trade Area (AfCFTA). The AfCFTA aims to stimulate intra-African trade and create a single market for goods and services. By leveraging the duty-free market access provided by the United States under AGOA, it can further catalyze investment in Africa, including from the United States. Ramaphosa urged for AGOA’s extension or renewal for a substantial period to encourage investors to establish new factories in Africa.

In his concluding remarks at the AGOA forum, Ramaphosa reiterated the importance of harnessing AGOA to spur industrial development, job creation, and inclusive growth in Africa. His address underscored Africa’s industrial potential and the need for stronger trade and investment collaboration between the United States and African countries.

Generally, African governments are also pushing for more flexibility concerning eligibility criteria and a loosening of what is now an annual review of those criteria. The Biden administration said on Oct. 30 it intended to end the participation of Gabon, Niger, Uganda and the Central African Republic in AGOA over governance and rights failings.

Biden’s announcement to terminate Central African Republic, Gabon, Niger and Uganda as beneficiaries of the African Growth and Opportunity Act, has sparked mixed debates, and key African politicians reacted, and suggested re-negotiations with U.S. authorities to allow them to continue trading under the AGOA agreement. Biden said in a letter to the Senate that those African countries would not be eligible for AGOA status because they violated either the rule of law or human rights, aspects of democratic governance.

According to Biden, AGOA has been credited for helping to bolster economic growth and improve investment between the United States and the African continent. “Despite intensive engagement between the United States and the Central African Republic, Gabon, Niger, and Uganda,” Biden said, “these countries have failed to address United States concerns about their non-compliance with the AGOA eligibility criteria.”

Ugandan Trade Minister  Harriet Ntabazi,  whose country was suspended over “gross violations” of internationally recognized human rights, said such issues should be separated from trade. Ugandan government officials have linked their exclusion to an anti-homosexuality law that was passed by its parliament in May. “Mistakes are human. If they have been done, reconsider and we go into negotiations. We’ve never had this chance to sit together and agree. Give us another chance,” Ntabazi said.

That however, the door is still open for renegotiation in order to maintain or re-establish their eligibility with AGOA. In this diplomatic negotiation, the Advisory Council on African Diaspora Engagement could be very helpful, and play a significant role by offering some positive recommendations.

Unprecedented problems still remain. AGOA may face a number of challenges and obstacles, including the situation of unconstitutional changes of government on the continent. The continent is still experiencing market rules and regulations on trade which are not streamlined, most often hinder progress in the market landscape. Lack of adequate knowledge constitutes another problem, while technical and bureaucracy are basic questions with respective state administrations across Africa.

On November 3, U.S. Deputy Secretary of Commerce Don Graves hosted a briefing about his participation in the African Growth and Opportunity Act (AGOA) forum’s two-day ministerial meeting in South Africa. Then was a robust one-day on the private sector with the goal of promoting inclusive economic growth and supply chain resilience on both sides of the Atlantic. 

Deputy Secretary Graves has twice visited since appointment under Joseph Biden. He looks at the importance of African allies to the global economy and how the U.S. has been able to prioritize trade over aid.  According to him, fostering new economic engagement with African countries is a top priority for the Biden-Harris administration. And since that mid-December summit held in Washington, the administration has helped close 75 new commercial trade deals between the United States and African countries, for a total estimated value of $5.7 billion in two-way trade and investment.   

It is very important for us to note that earlier 2023, the Department of Commerce’s Africa Strategy, which will help create even more economic opportunities for business, workers, and communities on both sides of the Atlantic, helping to promote supply chain resilience and economic security for the U.S. and African countries.  The goals of that strategy are clear:  it aims to strengthen and expand bilateral relationships across the continent, particularly through commercial and investment dialogues. The ability tapping into the potential of AGOA within the framework of the African Continental Free Trade Area  – the flagship project of Agenda 2063 of the African Union.

But most of all, the U.S. whole-of-government approach to work with African countries to build an infrastructure capable of unleashing the full power of digital technologies, connectivity, and trade. And this is to emphasize the indispensable focus on private sector partners play in meeting the most pressing global challenges. 

This article has already mentioned the role of the African Diaspora in the United States in forging ties to the continent. At least, there is a comprehensive, consistent and effective support system for the diaspora-owned firms to engage with stakeholders, a unique source of competitive advantage for the U.S., through the Global Diversity Export Initiative. 

More than 30 African countries participated in the forum, ended November 4. In a statement released at the closing session, U.S. lawmakers expressed support for the extension indicating AGOA remains the explicit unbreakable cornerstone of the U.S. economic partnership with Africa. “Africa is on the precipice of an unprecedented demographic boom. The timely reauthorization of AGOA is important to provide business certainty and show the United States’ continued support towards Africa’s economic growth,” said House Foreign Affairs Committee chairman Michael McCaul and ranking member Gregory Meeks in a statement.

Democratic Senator Chris Coons, a leading voice on U.S.-Africa policy, is also convincing law makers to prolong the program for 16 years. The pact has bipartisan support in Washington, the White House and the Biden’s administration are all in full-fledged support for its extension for Africa. Senator Chris Coons, a member of the Senate Foreign Relations Committee, has already sponsored a bill that seeks to integrate AGOA and the African Continental Free Trade Agreement, which includes the majority of African nations.

The Atlantic Council Africa Center has a report titled – The Future of U.S.-Africa Trade and Investment, which analyzes the future of the AGOA. The report was issued at the mid-December summit last year, and the first recommendation is straightforward: just extend AGOA as primary basis to provide longer-term certainty of economic relations between the United States and Africa.

Monitoring and research indicate that American business groups, with explicit ties to Africa, have said that African countries would be able to take advantage of a global push to reduce dependence on Chinese manufacturing. It is an instrument for incentivizing investments that will create jobs, bolster economic development and ultimately strengthen U.S.-Africa relations especially this time of global reconfiguration and the scramble for Africa’s landscape.

In a wrap up of the three-day deliberations, the critical take-aways are how to use the preferential trade pact in building back better and stronger trade and economic influence in Africa, especially this time taking into account the creation of the African Continental Free Trade Area. In addition, U.S. business associations are banking hopes and certainty over AGOA if Africa is to take advantage of a current push to reduce their dependence upon Chinese manufacturing.

Beyond the Biden administration, the U.S. (both public and private sector) have to ‘save’ the newly agreed comprehensive, concrete trade initiatives and work with consistency on various investment projects within the frame work of the AfCFTA to be more appealing to the hearts and minds of African leaders, entrepreneurial community and their people. In practical terms, this is the last moment and the last resonating knock on the door. Washington has to use the existing AGOA as an invaluable instrument and its various aspects to deepen more useful and effective partnerships as possible and to ultimately narrow the yawning gap with sub-Saharan Africa.

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