AGOA: The U.S.-Africa Trade Program
U.S. trade with sub-Saharan Africa has declined in recent years, prompting analysts to question the effectiveness of a preferential trade program for the region.
By Claire Klobucista Last updated March 18, 2022
Summary
Launched in 2000, AGOA is a preferential trade program that allows countries in sub-Saharan Africa to export products to the United States tariff-free.
Many experts say the program has failed to live up to expectations, and the region’s exports to the United States have dipped below what they were when AGOA began.
In 2022, the removal of several countries, including Ethiopia, from AGOA added to uncertainty about the program’s future.
Introduction
The cornerstone of U.S. economic relations with sub-Saharan Africa since 2000 has been the African Growth and Opportunity Act, or AGOA. The program offers more than three dozen participants preferential access to U.S. markets by eliminating import tariffs.
Policymakers hoped that AGOA, as the primary U.S. trade policy for the region, would foster economic and political development in Africa. However, the outsize roles of oil and apparel in African export growth have raised questions about whether AGOA can diversify the region’s economies and increase its competitiveness in global markets. Moreover, after peaking in 2008, U.S. trade with AGOA’s participants has dropped to near its pre-AGOA total. Meanwhile, African trade relationships with other countries, particularly China, have greatly expanded.
Why was AGOA created?
AGOA is a trade preference program established in 2000 as part of broader legislation President Bill Clinton enacted to strengthen U.S. trade ties with Africa and the Caribbean. The act is unilateral, meaning it does not require African countries to lower their own barriers to U.S. goods, though it encourages them to do so. President Clinton saw the policy as a way to boost growth and bolster democratic ideals across the continent. He also said it would strengthen the U.S. economy by opening markets with “hundreds of millions of potential consumers” to American producers.
The act is an extension of the Generalized System of Preferences, a U.S. trade preference system introduced in 1974 that allows more than one hundred countries, mostly low-income nations, to export many of their goods to the United States duty-free. AGOA goes even further, offering this access to more than six thousand products from its thirty-eight current participants. It also mandates the executive branch to increase U.S. development assistance to sub-Saharan African countries in areas including agriculture and HIV/AIDS prevention. It was set to expire in 2008 but has since been renewed four times.
Which countries take part in it?
Only sub-Saharan African countries are eligible to be beneficiaries of AGOA, and the legislation outlines requirements candidates must fulfill, such as upholding the rule of law and human rights and liberalizing their economies. However, U.S. presidents can disqualify countries at their discretion and have done so, citing reasons such as rights violations and protectionist policies. Participants graduate out of AGOA [PDF] if per capita gross national income reaches $12,535, the World Bank’s lower limit for high-income countries.
Of the forty-nine potential beneficiaries in the region, thirty-six countries currently take part. A dozen are currently suspended: Burundi, Cameroon, Guinea, Equatorial Guinea, Eritrea, Ethiopia, Mali, Mauritania, Somalia, South Sudan, Sudan, and Zimbabwe. The Seychelles graduated out of the program in 2017.
What is the future of AGOA?
AGOA was last renewed in 2015 and is set to expire in 2025, though U.S. Trade Representative Katherine Tai has so far signaled that her office will try to improve upon the existing program as Congress considers AGOA’s future.
In early 2022, the United States removed Ethiopia, Guinea, and Mali from AGOA, citing human rights abuses and military coups in violation of the program’s rules. While Guinea and Mali send less than 1 percent of their exports to the United States, Ethiopia relies heavily on AGOA’s benefits to support its textile industry. The Joe Biden administration has emphasized that the countries can be readmitted if they return to compliance, but experts say the expulsion could push the countries to strengthen trade ties with other powers; some Ethiopian business leaders, for instance, have argued in favor of moving closer to China, given Beijing’s no-strings-attached approach to investment.
More:
https://www.cfr.org/backgrounder/agoa-us-africa-trade-program
