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AGOA’s successes in Africa demand an extension
Since its enactment in 2000, the African Growth and Opportunity Act (AGOA) has been at the core of commercial and economic engagement between African countries and the United States of America. Currently, policymakers from both regions are meeting in the South African city of Johannesburg to discuss what the future of the game-changing trade agreement should look like, with some voices calling for it to be turned into a longer-term deal and others decrying its structures.
AGOA came to the fore when the continent’s trade relations were heavily skewed in favor of former colonial masters Britain and France. As the pre-eminent power of the world, America has looked at Africa as a possible avenue to source raw materials for its leading industries and an avenue to enhance trade ties as it diversifies away from its traditional supply chains with arch-rival China. The years before the deal had seen a lot of aid flows to the continent, with little if any returns. The idea among Western think tanks and economic circles was that the best way to raise living standards and create badly needed jobs was through trade, not aid.
Through AGOA, eligible African countries are allowed to export some of their produce to U.S. markets without paying taxes, meaning they are cheaper for U.S.-based consumers to buy, and so they should buy more. Of the 54 sovereign countries, only 35 are currently trading under the agreement, and more than 1,800 products are covered in the deal, including cut flowers, assembled vehicles, and textiles. South Africa was the largest exporter in the agreement in 2021, generating nearly $2.7 billion in revenue, ahead of Nigeria at $1.4 billion and Kenya at $523 million, according to statistics from the U.S. International Trade Commission (ITC) and the U.S. Department of Commerce.
However, the pact has faced legitimate criticism concerning the numerous strict conditions that participating African countries are required to meet to qualify to trade under the program. These include the removal of barriers to U.S. trade and investment, support for democracy, protection of internationally recognized human rights, and not engaging in activities that undermine U.S. national security or foreign policy interests.
Critics have also lamented how America has used the deal as a soft power tool to pressure African governments. Earlier this week, U.S. trade officials announced that they will terminate Uganda, Gabon, Central African Republic (CAR), and Niger from the program as they have yet to take significant measures to curb human rights violations. Madagascar and Ethiopia have also felt the wrath of Washington in recent years.
Moreover, AGOA has failed to equally benefit countries in Africa. The U.S. International Trade Commission (USITC) in a report earlier this year highlighted such shortcomings. For example, more than 80% of duty-free non-petroleum AGOA exports came from a handful of countries, Ethiopia, Kenya, Lesotho, Madagascar, and South Africa.
“Some countries have benefited greatly from AGOA, but the majority have not,” Constance Hamilton, the Biden administration’s top trade official for Africa, said last week, calling for Congress to consider changes that would “make the program more impactful.”
“AGOA has to be expanded in two ways; expanded in its product coverage and terms of country coverage,” said Melaku Desta, Coordinator of the African Trade Policy Centre, UN Economic Commission for Africa in January. “AGOA also excludes processed products as Africa is allowed to export iron and ore but not steel products. So, it has to be expanded in terms of product coverage. It also has to be expanded in terms of country coverage.”
With AGOA expiring in 2025, policymakers are examining what the future holds for trade between Africa and the world’s only superpower. Should the pact not be renewed, one sector that stands to suffer the most is the textile industry, whose growth has been sparked by a robust market in the United States.
Textiles are AGOA’s biggest gain to Africa
For industrialists in export processing zones littered across sub-Saharan Africa, the AGOA pact was heaven-sent. Many companies like United Aryan Limited (UAL) – Kenya’s largest garment producer – have emerged and grown into profit-making behemoths, taking advantage of the preferential access to American markets the pact provides. Since its inception, AGOA has more than any other trade deal created an enabling environment for the creation and growth of textile industries that produce affordable clothing for exports. Around half a million jobs are estimated to have been created so far, and African textile exports reached about $1.4 billion last year, double the figures recorded pre-AGOA.
In Ethiopia, AGOA’s impact has been immense in driving the country’s rapid economic growth. Before its brief suspension in 2021, Ethiopian exports to the United States had grown from $28 million in 2000 to about $300 million in 2021, nearly half of which was textiles. The industry employed more than 200,000 people, becoming one of the leading employment sectors in the second most populous country in Africa.
Without an extension, industries set up primarily to feed American markets will come under severe pressure to find other export markets. In the lead up to the AGOA forum, some industrialists have urged their governments to push for a ten-year extension, similar to the one granted in 2015. The risk of unemployment and political instability is very high, especially as African countries grapple with currency devaluations and high inflation.
While AGOA has been vital in boosting the export textile market, it can also be accused of stifling the local market. Under the terms of the agreement, African countries were required to take in second-hand clothing imports from America. That has led to friction in recent years, with Rwanda being temporarily suspended in 2018 due to its government’s decision to ban such imports.
Secondhand clothes, while being affordable to the majority of citizens, have stunted local cloth manufacturing businesses. In 2016, the East African Community (EAC) member states collectively agreed to stop importing used clothes by 2019, causing ripples in Washington, D.C. The EAC accounted for almost 13% of second clothing imports in 2015, worth about $274 million, according to a study by the U.S. Agency for International Development (USAID).
To counter this move, a U.S. trade organization called the Secondary Materials and Recycled Textiles Association (SMRTA) filed a petition with the Office of the U.S. Trade Representative (USTR) in objection to the EAC’s decision, saying that it would impose “significant economic hardship” on America’s used-clothing industry. About 40,000 U.S. jobs and $124 million in exports were in danger of being wiped out.
Aside from Rwanda, Uganda has also faced the wrath of America for going ahead with the decision. In negotiating for an extension, African policymakers ought to advance proposals that will usher in a gradual reduction in second-hand clothing imports to achieve an equilibrium balance that doesn’t hurt local manufacturing.
AGOA vs AFCTA
For starters, the African Growth and Opportunity Act (AGOA) and the African Continental Free Trade Area (AfCFTA) are two distinct trade initiatives, with little, if any overlaps between both. However, there is concern that focusing on AGOA could potentially derail the implementation of the AfCFTA since African countries may prioritize maintaining their AGOA eligibility and export opportunities over fully committing to open markets for regional countries. Industries set up to feed American markets may be slow to join regional supply chains that offer significantly lower returns.
Moreover, as the AfCFTA aims to harmonize trade regulations and standards across the continent, countries participating in AGOA might face challenges in aligning their standards and regulations with those of AfCFTA, potentially delaying the implementation of common market rules. There is also a risk of diverting resources that could be spent to build infrastructure to ease movement with regional countries in favor of ports and gateways for outside export markets.
However, AGOA’s beneficial impact on Africa outweighs any lingering concerns and criticisms. For example, when Madagascar was temporarily suspended in 2009, around 70,000 jobs were lost, while Ethiopia also lost 100,000 jobs when it was suspended last year. An extension of the pact, possibly with a few alterations to take in concerns of local textile manufacturing industries, is necessary for the continent to maintain its upward economic trajectory.
Citations
Coulibaly, Souleymane, and Woubet Kassa. “Trade Impact of the AGOA: An Aggregate Perspective.” Africa in the New Trade Environment: Market Access in Troubled Times (2022):1775.
Jewel Kirungi. AGOA forum: Has the U.S. trade pact helped Africa? BBC News. Retrieved November 2nd, 2023 from
Luke Anami. Africa seeks bigger U.S. trade slice for AGOA to make sense. Daily Nation. Retrieved November 3rd, 2023 from