AGOA, decoding for a successful 2025 closure
In September 2015, president Obama renewed the African Growth and Opportunity Act (“AGOA 5”) for an additional 10-year bringing its closure to 2025. AGOA has drawn mixed results and a successful 2025 closure will need a change of recipe both from the US and African countries. How can African countries therefore change their game, decode and achieve a successful 2025 closure?
AGOA extends the US Generalized System of Preferences (GSP) to Sub-Saharan African (SSA) countries and allow them to export around 7,000 products to the US with no duties or customs.
A SSA country becomes eligible when it complies with a set of criteria that runs from sound economic rules to credible poverty reduction policies implemented.
The results of 15 years of AGOA’s trading are mixed. AGOA is believed to have created 300,000 jobs in Africa and 120,000 in the US. 480 billions USD worth of commodities were exported under the program with a 10% increase per year in export since its inception in 2000.
Despite those bright achievements, the objectives of the program were not fully achieved. The three key objectives of AGOA for African countries were: diversification of SSA economies, increased access to the US market, and consolidation of sound economic policies.
Though many SSA countries have embarked on structural reforms [1] and the overall trade volume of SSA countries to US increased on AGOA’s watch, the diversification objective was not fully achieved. 90% of AGOA’s export was on a single product out of the 7,000 listed: OIL. In addition 90% of the non-oil products were exported from only 3 countries out of the 39 listed: South Africa, Nigeria and Angola. The identification of the causes of the diversification failure is critical.
To that end the finding of strategies that will help SSA countries take full advantage of AGOA is paramount in bringing a successful 2025 closure.
Three ingredients may help achieve a successful 2025 closure: an increase in the private sector lead over national AGOA task forces, a better integration of AGOA into countries’ national comprehensive development plan, and a rather sub-regional approach that will contrast with the current national individualistic one.
Few SSA countries have set up an AGOA task force (e.g. Cote d’Ivoire[2] ) or committee and give out few seats to industries associations in those AGOA committees. The private sector is at the heart of AGOA as the private sector drives the production and the export of a country. There is the need to have AGOA committees not only implemented across SSA countries but also driven by the private sector. In that line awareness campaigns [3] are needed in bringing AGOA opportunities to all at a national level and in each country.
In addition to the private sector drive, an integration of AGOA to countries’ national emergence and development plans is a key ingredient. Many African countries are currently forging their “emergence” plans following the Abidjan declaration on African countries’ emergence [4] and AGOA should be taken into account in setting reforms trajectories, policies target, strategic sectors, target markets, and structural transformation paths in those plans.
Beyond the emergence plan integration, SSA countries need to embrace AGOA not as a national issue but as a sub-regional issue. AGOA committees should move to regional levels with planned specialization at country levels and based on countries’ competitive advantage [5]. Thus an ECOWAS’ (West African Countries’ Economic Union) AGOA committee could take the lead of the existing individual 15 national committees at country level. Such a committee could identify and advise Cote d’Ivoire in farm producing Cola based on their advantage in producing the Nitida Cola and Nigeria in processing to Cola powder with cross stake ventures.
Could “AGOA 5” bring a successful 2025 closure? The answer is yes, though with a new recipe and SSA countries’ policy makers may use the three AGOA 5 decoding’s tools: private sector lead, integration to emergence plan, and sub-regional task forces. SSA countries will then have diversified economies, sound economic environment, and increased share in international trade. That is a wish SSA’s policy makers can bring to pass.
- Notes / references
[1] Ackah, C., & Morrissey, O. (2005). Trade policy and performance in sub-Saharan Africa since the 1980s (No. 05/13). CREDIT Research Paper Business, D., & Design, D. B. (2012). Doing Business. The World Bank. 2012a. http://www.doingbusiness.org/about—us
[2] http://www.apex-ci.org/fr/activites/agoa.html
[5] Smith, A. (1937). An Inquiry into the Nature and Causes of the Wealth of Nations
Guest submission by Samuel Mathey, Ph.D. [This email address is being protected from spambots. You need JavaScript enabled to view it.]
Dr. Mathey is professor of economics, strategy and management. He holds a Ph.D. in Economics from the University of Delaware, an MBA from the Ohio State University, and a Masters in Econometrics and Monetary Economics.
Read related news articles
US fashion brands urge early renewal of AGOA
US fashion companies are calling for the early renewal of the African Growth and Opportunity Act (AGOA), a trade program that allows thousands of African products to enter the United States duty-free. They argue that a longer-term arrangement would not only benefit African economies but also boost investment in the region. The AGOA was first enacted in 2000 and is currently set to expire in 2025. However, US officials have indicated that the...
31 July 2023
Rhetoric aside, the US needs South Africa inside the AGOA tent, not outside
The South African government sent a senior ministerial delegation to the US to make its case for keeping South Africa as a beneficiary of its trade preferences under the African Growth and Opportunity Act (AGOA). Most commentators focus on the benefits of Agoa to South Africa, but there are good reasons that it is very much in America’s interests to keep South Africa as a trading partner and within its sphere of influence through Agoa...
27 July 2023
South Africa asks US for early AGOA extension
South Africa has asked the US to consider an early extension to the African Growth and Opportunity Act (Agoa), saying this would provide certainty for investors and encourage them to commit additional investment on the continent. Trade, industry & competition minister Ebrahim Patel said the expeditious renewal trade agreement, which gives SA and other sub-Saharan African countries preferential access to US markets, would be beneficial not...
25 July 2023
American Apparel and Footwear Association: Renew AGOA for 10 years, restore Ethiopia's benefits in 2024
The American Apparel & Footwear Association (AAFA) recently urged the office of the US trade representative (USTR) to renew the African Growth Opportunity Act (AGOA) this year for at least another 10 years—or maybe longer—so that US companies will have the necessary certainty and timeframe they need to grow a vertical, responsible and competitive industry in Africa up to and beyond 2025. AAFA vice president for trade and customs...
10 July 2023
South Africa's official opposition DA party urges US legislators to keep SA in AGOA trade pact
The DA has urged US legislators to keep SA as a member of a trade pact that gives African countries preferential access to US markets, saying its removal will have unintended consequences for both countries. This comes ahead of the US government’s virtual hearings, starting on July 24, when 35 sub-Saharan countries, including SA, are expected to make oral representations in a bid to retain trade benefits under the African Growth and...
09 July 2023
'How the US can support the African trade that matters for the continent’s goal of economic transformation'
Trade relations between the US and Africa have centred on Congress’s ‘Africa Growth and Opportunities Act’ (AGOA) since 2000, designed to foster the continent’s economic development and prosperity via preferential access to American markets. Yet in the last decade African trade with the United States has stagnated at much the same levels as it was when the Act was passed. David Luke and Jamie Macleod consider how...
04 June 2023
** AGOA eligibility review 2023 (for year 2024): Timelines of hearings and request for comments ** [Deadline written submissions 7 July]
The Office of the United States Trade Representative (USTR) is announcing the initiation of the annual review of the eligibility of sub-Saharan African countries to receive the benefits of the African Growth and Opportunity Act (AGOA). The AGOA Implementation Subcommittee of the Trade Policy Staff Committee (AGOA Subcommittee) is requesting written public comments for this review and will conduct a virtual public hearing on this matter. In...
16 May 2023
Recalibrating US economic engagement with Africa
Nearly 23 years since the United States established the African Growth and Opportunity Act, or AGOA, the continent it was created for no longer exists. In the last two decades, there have been three major shifts that have worked together to cultivate a new Africa—an Africa that requires a different approach to trade and economic investment. First, there are China’s development initiatives, which have resulted in roads, rails, bridges, and...
18 April 2023
Kenya: Manufacturers push for 15-year AGOA extension
Kenyan manufacturers have asked the Trade ministry to request Washington to extend the existing duty- and quota-free access to the expansive US market window for another 15 years as the two countries prepare for talks over a long-term bilateral trade deal. The Kenya Association of Manufacturers, the sector lobby, argues that uncertainty over the more than two decades-Growth and Opportunity Act (AGOA) deal, which expires in two years, is...
02 March 2023
AGOA time: As 2025 approaches, opportunities for improvements eyed
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...
30 January 2023
A proclamation to take certain actions under AGOA and for other purposes [Burkina Faso]
(1) In Proclamation 7853 of December 10, 2004, the President designated Burkina Faso as a beneficiary sub-Saharan African country for purposes of section 506A(a)(1) of the Trade Act of 1974, as amended (the “Trade Act”), as added by section 111(a) of the African Growth and Opportunity Act (the “AGOA”) (title I of Public Law 106-200, 114 Stat. 251, 257-58 (19 U.S.C. 2466a(a)(1))). (2) Section 506A(a)(3) of the Trade Act (19 U.S.C....
23 December 2022
