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AGOA-AfCFTA to offer a trade highway to the US until 2041

NEW legislation revamping the trade pact would ramp up trade and help Washington keep the continent within the US geopolitical sphere.

FORTY African nations could have duty-free access to U.S. markets until 2041, as Congress considers a bipartisan bill extending the African Growth and Opportunity Act (AGOA).

Senators Chris Coons (D-Delaware) and James Risch (R-Idaho) tabled a revised AGOA Renewal and Improvement Act of 2024 in Congress, which now explicitly integrates it with the African Continental Free Trade Agreement (AfCFTA).

This alignment incentivises more African countries to join the regional trade agreement by linking AGOA’s trade benefits directly to membership.

“The President is authorized to designate a country as an eligible AfCFTA country if — that country has signed and ratified the African Continental Free Trade Agreement,” reads the proposed congressional bill in part.

Coons insist the strategy is to foster the development of intra-African supply chains.

The move would boost the utilisation of the trade pact by African states and set the stage for increased trade between Africa and the world’s largest economy.

“Over the past 24 years, AGOA has created jobs and economic growth in one of the fastest-growing regions of the world and created investment opportunities for American businesses,” said Coons.

“The Act is necessary to support continued economic development on the continent while further strengthening ties between the United States and partners in Africa.”

The proposed new Act further streamlines the AGOA eligibility review process to ensure that any enforcement action is timely, fair, and clearly communicated.

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It also incentivises beneficiaries to develop a “utilisation strategy” to increase exports under the program.

As of May 2023, only 35 eligible African countries leveraged the U.S. trade program, though AGOA utilisation and performance metrics show significant divergence.

Kenya and Lesotho are top performers, with 88% and 99% of their exports to the U.S., respectively, receiving zero-tariff treatment, mainly in apparel.

However, nearly half of the beneficiary countries had utilisation rates of 2% or less, meaning 98% of their exports to the U.S. faced tariffs. That could change as Africa diversifies and ramps up exports.

Brookings Institute cites several factors that may account for the varying utilisation of AGOA, such as disparities in business environments, limited access to credit and high production costs and bottlenecks.

AGOA, which facilitates duty-free entry for certain goods, first enacted in 2000, is an essential element of U.S. economic strategy in Africa.

When it was last renewed in 2015, there was speculation it might be the final extension, with expectations shifting towards reciprocal free trade agreements.

However, the current geopolitical competition highlights the strategic value of continuing non-reciprocal trade benefits as a tool for US’ diplomatic and strategic advantage.

“AGOA plays a significant role in U.S.-Africa trade and investment, as well as in U.S. foreign policy,” Senator Risch said.

Critics of AGOA argue that the U.S. needs to foster deeper, more reciprocal trade relationships that encourage sustainable development rather than unilateral concessions.

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AGOA has been a cornerstone of U.S.-African policy, allowing eligible nations to enjoy preferential trade conditions.

Besides bolstering economic growth and development across Africa, it has also served as a tool for the promotion of political and economic reforms.

Its extension comes at a time when global powers like China, India, Turkey, Russia and the Gulf states are intensely vying for influence in Africa.

China’s expansive Belt and Road Initiative and increasing Russian security ties with key African states have prompted the U.S. to reassess its strategies in the region.

Experts suggest that the extension of AGOA will likely fortify U.S.-Africa relations and provide a platform for American businesses to expand their reach across the continent.