Washington, DC
March 10, 2015
By Frederick Nnoma-Addison
South Africa’s African Growth and Opportunity Act (AGOA) Envoy, and former Ambassador to the World Trade Organisation (WTO) Ambassador Faizel Ishmail has called on the U.S. Congress to reauthorize AGOA in the mutual interest of U.S.-Sub Saharan trade and economic welfare. He made this call during a press conference at the South Africa Embassy in Washington last week. His call re-echoes those of several other government and corporate leaders involved in US-Africa trade.
Ambassador Ishmail led a delegation to Washington for bilateral trade talks with the U.S. Trade Representative Office (USTR) and the U.S. Department of Agriculture, to “make the case” for AGOA’s extension for at least 15 years. He described AGOA as “one of the programs that has been generally successful, and responsible for the revival of a number of sectors on the continent.”
Citing specific success stories beyond his own country’s Auto sector which has benefited from AGOA, Ambassador Ishmail stated that “AGOA is responsible for the revival of the clothing and textile industries in Lesotho, Botswana and Kenya – after its downturn in the 80’s and 90’s. AGOA has provided incentives for investors to come back and also spurred regional cooperation”
He and his delegation met with Senator’s Coons (D-DE) and Isakson (R-GA) to discuss among other topics, U.S. interests in South Africa’s poultry markets, and also address previous differences that existed. He said they “made good progress” in their meetings and hope that politics will not impede the reauthorization debate and process.
African Growth & Opportunity Act: Background and Reauthorization
The African Growth and Opportunity Act, or AGOA (Title I, Trade and Development Act of 2000; P.L. 106–200) is a legislation that was first authorized by the US congress in 2000 to encourage export-led growth and economic development in Sub Saharan Africa (SSA) and improve U.S. economic relations with the region. Its current authorization expires in September 30, 2015. AGOA is a nonreciprocal trade preference program that provides duty-free treatment to U.S. imports of certain products from eligible SSA countries. AGOA was initially signed by President Clinton into law in May 2000.
The legislation authorized the President of the United States to determine which sub-Saharan African countries would be eligible for AGOA on an annual basis. The eligibility criteria focused on improving labor rights and movement toward a market-based economy. Each year, the President evaluates sub-Saharan African countries and determines which countries should remain eligible. Countries’ inclusion has fluctuated with changes in their local political environment. In December 2009, for example, Guinea, Madagascar, and Niger were all removed from the list of eligible countries; by October 2011, though, eligibility was restored to Guinea and Niger, and by June 2014, to Madagascar as well.
Having AGOA eligibility does not imply automatic eligibility for a “Wearing Apparel” provision. To export apparel and certain textile to the United States under the AGOA duty-free, an eligible country must have implemented a “Visa System” that satisfies American authorities and proves compliance with the AGOA rules about origin.
In terms of tariff benefits and general eligibility criteria, AGOA is similar to the Generalized System of Preferences (GSP), a U.S. trade preference program that applies to more than 120 developing countries. AGOA, however, covers more products and includes additional eligibility criteria beyond those in GSP. Additionally, AGOA includes trade and development provisions beyond its duty-free preferences.
U.S. imports from AGOA beneficiary countries (AGOA countries) represent a small share (2%) of total U.S. imports and are largely concentrated in energy-related products. Oil is consistently the top duty-free U.S. import from AGOA countries, accounting for 77% of such imports in 2013. Despite remaining the top U.S. import under AGOA, U.S. oil imports from the region have fallen by more than half or nearly $30 billion, since 2011. Among non-energy products, apparel is the top export for a number of AGOA countries. U.S. apparel imports typically face relatively high tariffs and are excluded from duty-free treatment in GSP, but are included in the AGOA preferences giving AGOA countries a competitive advantage over other apparel producers. Still, only a handful of countries, primarily Lesotho, Kenya, and Mauritius, make significant use of the apparel benefits. Apart from apparel and energy products, South Africa accounts for the bulk of U.S. imports under AGOA. As the most economically advanced country in the region, South Africa also exports a much more diverse range of manufactured goods than other AGOA countries; vehicles in particular have become a major South African export under AGOA
Most observers agree that AGOA has successfully led to increased and more diversified exports to the United States from sub-Saharan African countries. Despite this, Congress may wish to address a number of issues and challenges as it considers possible reauthorization of AGOA. Among these challenges is how current and potential AGOA beneficiaries can better utilize the AGOA program and its duty-free benefits. Studies suggest that even among some countries that do make significant use of the AGOA preferences, the lower-skill apparel production which AGOA has spurred has not led to the production of higher-skill manufactured products. Other issues relate to the nonreciprocal nature of the AGOA preferences. Some argue that the United States should focus more on two-way trade agreements with the region, particularly with more advanced countries such as South Africa, given improving economic conditions in Africa in recent years. The European Union (EU), for example, has negotiated Economic Partnership Agreements (EPAs) with several African countries that provide some reciprocal tariff benefits, potentially placing U.S. firms at a competitive disadvantage relative to European firms in some markets.
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