- African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/US seeks new trade deal with a changing Africa as AGOA talks kick off

US seeks new trade deal with a changing Africa as AGOA talks kick off

US seeks new trade deal with a changing Africa as AGOA talks kick off
Published date:
Monday, 12 August 2013

It is a longstanding policy of the United States to grant preferential trade deals to developing countries, in order to promote good relationships and to support growth for smaller economies. But what happens when those developing countries begin picking up the pace, leveraging their resources as they benefit more and more from favorable export agreements -- possibly at the expense of their more developed trade partners?

That's the question facing U.S. and sub-Saharan African officials in Ethiopia's capital city of Addis Ababa this week, as policy makers gather to discuss the African Growth and Opportunity Act, or AGOA. AGOA was signed into law in 2000; it offers incentives - mostly in the form of duty-free trade access - to 39 eligible sub-Saharan economies to liberalize their markets and build connections with American trade partners. The agreement expires in 2015, and U.S. and African officials aren't wasting any time on setting fresh terms for its renewal.

The 12th annual AGOA forum is taking place Aug. 12 and 13, and both sides hope to make modifications that will benefit their own economies.
Much has changed since AGOA was first implemented; African exports under the agreement grew by than 500 percent between 2000 and 2011, and African economies are witnessing growth at breakneck speeds. Despite rampant poverty and underdevelopment across the continent, middle classes are swelling and urban hubs of enterprise are thriving. Last month, the International Monetary Fund projected that economic growth in sub-Saharan Africa should reach 6.1 percent next year, exceeding the expected global average of 4 percent.  

Trade between sub-Saharan Africa and the United States consists mostly of commodities exported from Africa. Last year, U.S. exports to the region totaled nearly $22.6 billion, while its imports from the continent were more than twice that at $49.7 billion -- 86 percent of which comprised petroleum products. Unsurprisingly, Nigeria and Angola - countries rich in hydrocarbons - were the top exporters to the United States, sending goods valued at $19.1 billion and $9.8 billion, respectively. South Africa, the continent's largest economy, was the only close contender for third place with nearly $8.7 billion in exports. 
African officials are well aware that lessening their dependence on hydrocarbons would benefit the continent. Fatima Haram-Acyl, commissioner for trade and industry at the African Union Commission (which acts as the executive/administrative branch of the African Union) spoke highly of AGOA for opening up markets and generating 1.35 million jobs, directly and indirectly. "However," she told the Nigerian Tribune, "it is unfortunate that about 90 percent of these exports are still oil products, which underscores Africa’s need to diversify its exports and negotiate better terms for non-oil products with the US."

On the bright side, she added, "the volume of non-energy exports to the U.S. has increased by 275 per cent, from $1.2 billion to $4.5 billion between 2001 and 2011. The number of countries exporting non-oil products under AGOA has also increased from 13 to 22 during this period." Across the pond, American politicians and business leaders are increasingly realizing the incredible opportunities Africa presents -- not just as a source of commodities, but as a burgeoning manufacturing center and a fast-growing market for consumer goods. U.S. President Barack Obama traveled to sub-Saharan Africa in June to forge better trade relationships with African leaders, but many called the visit - only his second after five years in office - too little, too late.
Indeed, other superpowers have already beat Washington to the punch. China surpassed the U.S. to become Africa’s biggest bilateral trade partner in 2009, and Beijing’s Ministry of Commerce reports that total exchanges with the continent amounted to $198.5 billion last year. That figure is growing fast; it is expected to exceed $380 billion by 2015.

The European Union is also angling for a closer relationship with Africa; it is expected to sign a trade agreement by next year that could present more enticing deals to African economies than AGOA presently offers.
Competition with global powers is only half the story; ramping up duty-free trade with Africa might present some American businesses with unfair competition, especially if the continent continues to grow so quickly. U.S. producers of agricultural goods like cotton, citrus fruits and peanuts, for instance, have reason to be wary of lenient policies for African imports. “As we think about renewing AGOA, we certainly do not want US firms to be put at a competitive disadvantage in the rapidly growing and dynamic African market,” said US Trade Representative Mike Froman in Addis Ababa, according to the Financial Times.
American and African officials will be walking a fine line this week as they try to guarantee access to key international markets without endangering their own economies.

Read related news articles

The AGOA Forum: Promoting sustainable growth in Africa through trade and technology

This week in Addis Ababa, Ethiopia, U.S. Trade Representative Mike Froman and senior members of the President's economic team joined trade ministers, civil society, and business leaders from across sub-Saharan Africa to focus on "Sustainable Growth through Trade and Technology" at the African Growth and Opportunity Act Forum. The Forum also kicked off the process leading to AGOA’s renewal in 2015. As the President highlighted on his trip to...

16 August 2013

Remarks: AGOA’s future – Dialogue with members of Congress

Your excellences, distinguished and honored guests, good morning. It is wonderful to be with you today in Addis Ababa, at the headquarters of the African Union, and most importantly, at the 2013 AGOA Forum. Before I begin, I want to take a moment to acknowledge and thank Florie Liser for her leadership and stellar work she has done on AGOA for many years now. I for one am grateful for the assistance she has provided my office, and the...

14 August 2013

USTR Mike Froman's address at the AGOA Forum 2013

“Good morning.  Welcome ministers and ambassadors, legislators and Members of Congress, private sector and civil society leaders, ladies and gentlemen.  It is my great honor to be back for the AGOA Forum.  Last year in Washington, I had the opportunity to share with you President Obama’s new U.S. Strategy toward Sub-Saharan Africa.   President Obama’s Strategy for Sub-Saharan Africa  “The Presidential Policy...

13 August 2013

US eyes competition with Europe for Africa trade

The United States is keeping a close watch on potential European trade deals with African nations as Washington reviews its own preferential trade initiative with the continent. African ministers and U.S. officials discussed trade relations at a forum Monday in the Ethiopian capital Addis Ababa. The U.S. is considering an extension to the popular African Growth and Opportunity Act, known as AGOA, an American law that allows sub-Saharan...

13 August 2013

Africa: AGOA not imperiled after all?

On July 31, 2013, the US Generalized System of Preferences (GSP) - a program established by the Trade Act of 1974 expired semi-surreptitiously; something that may not augur well for a more comprehensive American trade and investment program for Africa. Twin bills (download Bill H.R. 2709 alongside) in the House and Senate to extend GSP provisions until September 2015 simply did not come full circle, and anyone keen on an improved African...

12 August 2013

Kenya in AGOA 'hitch'

Kenya continues to benefit from the trade preferences to the US market in the African Growth and Opportunity Act (AGOA), but Americans are raising some concerns about corruption. "Part of our ongoing conversation with Kenya is addressing a host of issues in the business environment," David Renz, a counselor for Economic Affairs at the US Embassy in Nairobi said recently. This year's AGOA Forum is set for this week in Addis Ababa,...

12 August 2013

US seeks better access to Africa as part of AGOA review

The US will launch a review of its 13-year-old preferential trade agreement with sub-Saharan Africa on Monday that will consider asking the region to offer better commercial access to American companies. The African Growth and Opportunity Act (AGOA), originally crafted under President Bill Clinton in 2000 and renewed by George W Bush, has become a cornerstone of US-Africa economic relations worth $58bn for business on both sides of the...

12 August 2013

USTR Mike Froman encourages US-Africa economic expansion

Business and government representatives from the United States and sub-Saharan Africa should work to expand their economies together, learning from their successes and from other trading partners, says US Trade Representative Michael Froman. Speaking on the first day of the two-day forum on the African Growth and Opportunity Act (AGOA) in Addis Ababa, Ethiopia, Froman said forum representatives need to prepare for a new AGOA after the current...

12 August 2013

AGOA: African Union perspectives on its future

The African Union Commission (AUC), on 12 August 2013, hosted the Ministerial Session of the 12th Annual AGOA Forum in Addis Ababa, Ethiopia, which was jointly organized by the Government of Ethiopia and the United States of America. Addressing the forum, the Deputy Chairperson of the AUC, Mr. Erastus Mwencha stressed the importance of the theme, “sustainable transformation through trade and technology”, which was carefully selected in...

12 August 2013

Africa makes a strong case for continued preferential trade with the US

Trade relations between the USA and African countries benefiting from the Africa Growth and Opportunity Act (AGOA) come under serious scrutiny at the 12th AGOA Forum that has started in the Ethiopian capital today, to run till Tuesday 13 August. This year's edition of the annual Forum focuses on Africa's sustainable transformation through trade and technology and will mark a milestone in the Africa-US trade deal initiated in the year 2000 to...

10 August 2013

You are here: Home/News/Article/US seeks new trade deal with a changing Africa as AGOA talks kick off