Building capacity to help Africa trade better

AGOA Forum 2019: Reflections and new developments


AGOA Forum 2019: Reflections and new developments

AGOA Forum 2019: Reflections and new developments

The 2019 AGOA Forum took place early August in Abidjan, Côte d’Ivoire, under the banner of “AGOA and the Future: Developing a new trade paradigm to guide US-Africa trade and investment”. In the context of recent United States trade policy developments, especially insofar as it relates to Africa, this was of course an entirely relevant theme. The United States is looking to deepen its trade and commercial relationship with sub-Saharan Africa, and is seeking to do this on a more even playing field, ideally through some form of reciprocal arrangements, the shape and size of which remain largely undefined.

AGOA forms part of US legislation since May 2000, and builds on the country’s Generalised System of Preferences (GSP), a trade preference program similar to that of numerous other industrialised nations, offering preferential market access to developing countries around the world. AGOA benefits are limited to qualifying sub-Saharan African countries only, 39 on current count (this may change following the review process currently underway), and significantly improve on the GSP, inter alia by adding additional products including in many ‘sensitive’ sectors (leading to a combined total of around 6,900 tariff lines), as well as extended benefits through the much longer expiry dates (the GSP expires from time to time and requires periodic re-authorisation by Congress).

AGOA has exactly 6 years to go before it concludes – in terms of the current legislation – at the end of September 2025 [see 19 U.S.C. 2466b]. While the US Congress may decide to renew, amend, or discontinue (by default) the non-preferential AGOA preference scheme, there seems in any case little chance that things will be business as usual after that date. In December 2018, US National Security Advisor John Bolton announced the current administration’s new Africa strategy, and while somewhat lacking in detail, it would be based on enhanced reciprocal commercial ties with Africa, on security collaboration, and on more judicious and targeted distribution of US aid where this supports US interests.

At the recent US-Africa Business Summit in Maputo, more details about ‘Prosper Africa‘ were announced by senior US government and USAID officials. The AGOA Forum in Abidjan then provided a useful platform for adding some flesh to the bones: Prosper Africa is a program that intends to help unlock opportunities to do business in Africa, for the benefit of “companies, investors, and workers both in Africa and the United States”, and by doing so substantially increase (or double, depending on source) two-way trade and investment between the US and Africa.

While Prosper Africa is not a heavily-funded US program, it represents a refocusing, realignment and trade-facilitating coordination effort of the work (relative to US-Africa trade and investment) of at least 15 US government agencies, including the Departments of State, Commerce, Agriculture and Energy, the Office of the US Trade Representative, USAID, and so forth. The focus is on more efficient, transparent and on-the-ground work in reducing US-Africa trade and investment barriers.

Also involved in this initiative is the US International Development Finance Corporation (DFC), the US government’s new development finance institution, an outcome of the Build Act (Better Utilisation of Investments Leading to Development Act) and set to launch in October 2019. Apart from more than doubling the Overseas Private Investment Corporation (OPIC) investment cap to $60 billion, the DFC will offer the full range of development finance, trade and investment support tools and complement the work of other US government aid programs. It is also intended as a more transparent development finance facility to counter the “opaque and unsustainable debt traps being laid by Beijing throughout the developing world”.

The aim of Prosper Africa, as informed by senior US government officials at the AGOA Forum, is about facilitating and catalysing US commercial engagement with Africa, helping US companies navigate (and reduce) African trade and investment barriers, providing financial, technical and administrative support, facilitating transactions and mitigating associated risk. As such, it is focused not on aid but on expanding trade and investment. As already seen and experienced under AGOA, the US is taking active steps in support of deeper US-Africa business engagement; Prosper Africa aims to take this to the next level.

The support for fulfilling these objectives is expected to be, for example, in the form of one-stop shops on trade and investment facilitation set up in African countries, with their own deal-making teams, possibly based at US embassies, Trade Hubs or similar facilities, where US and African businesses can access US government services. The focus, however, is unmistakably on US businesses access and engagement in and into Africa, with dedicated staff present to make it happen.

In a way, this new initiative is consistent with and complementary to the AGOA legislation’s conditions for eligibility, whose benefits in the form of US market preferences depend on, for instance, beneficiary countries not applying barriers to US trade and investment, or otherwise working to undermine (or be inconsistent with) US interests. Now, there’ll be an extra magnifying glass on many of these criteria, and where there are issues and barriers, one can expect there to be multi-agency engagement on the ground to reduce, remove or – where applicable – help navigate these barriers “on location” (rather than say at the WTO) in so far as they affect US commercial interests and engagement with Africa.

With the focus being on a better coordinated commitment to African countries on commercial grounds, the United States remains interested and committed to seek deeper reciprocal relationships with Africa in the form of trade agreements that open African markets to US exporters and investors. While it is unclear what shape such an agreement would take, with the US previously indicating that it remains willing to explore different options on scale and scope, they would undoubtedly go well beyond trade in goods and commitments on tariffs alone, and likely cover at least services, investment, intellectual property rights, and so forth. Commitments in these issues would likely be of significant mutual benefit.

While the desire for such agreements is not new – and was quite forcefully articulated by US Trade Representative Robert Lighthizer at the 2018 AGOA Forum in Washington as well as previously – the US still only has only one bilateral trade agreement with an African country (Morocco). No formal negotiations have recently started with a sub-Saharan African country (the US and SACU previously explored a bilateral trade agreement but could not agree on its scale and scope). The odds of a country-level or regional bilateral agreement between African part(ies) and the US may however ironically have lengthened over the past year, given the strides that have taken place over that period with respect to the continental integration agenda.

The African Continental Free Trade Agreement (AfCFTA) saw its operational launch in July, with all but one African country having signed the agreement and almost 30 countries having ratified it. Through the African Union (AU) representatives at the 2019 AGOA Forum in Abidjan, it was reiterated that the desire to engage on matters such as a future trade agreement with the US on a continental basis, remains. “To replace AGOA, we would like to see an agreement between the whole of Africa and the U.S.,” according to AU Ambassador Albert Muchanga (and) “Africa should negotiate with ‘one voice’ for a new trade pact after 2025.

One can speculate whether an African country might “break ranks” and negotiate individually; a consequence would be that the negotiating space for any party (country) that follows later becomes significantly restricted. Nevertheless, it would clearly be in some African countries’ own interest to enter into a binding agreement sooner rather than later in order to lock in the benefits and business certainty potentially flowing from a comprehensive trade agreement, rather than relying on a non-reciprocal program such as AGOA . Yet, a continental agreement concluded with a(ny) third party would seem in many ways desirable, albeit exceptionally ambitious if not downright unrealistic perhaps for some time to come.

In this regard, a pleasing development certainly compared to the more circumspect tone of a year previously was the signing of a joint statement between the US and the AU regarding the AfCFTA, where the parties pledged cooperation and support in realising the aims of the agreement, concluding that the US and AU “share a mutual desire to pursue deeper trade and investment ties…eventually leading to a continental trade partnership between the United States and Africa that supports regional integration”.

Nevermind any political rhetoric that may have at times suggested otherwise, the US remains deeply committed to Africa. It is acutely aware of the historic (or growing) influence and relationship that others – notably the EU and China – already have with Africa, and is now clearly aiming to re-double its own efforts in deepening its relationship albeit in a more targeted, commercially driven, and trade and investment-facilitating manner. It seems that Prosper Africa may turn out to be an inclusive and smart way of achieving this.

About the Author(s)

Eckart Naumann

Eckart Naumann is an economist with an undergraduate degree in economics and financial accounting and an M. Com in economics from the University of Cape Town. His research and consulting work spans a range of sectors and subjects, with a particular focus on rules of origin and market access issues. He has assisted the SADC, EAC and ESA EPA groups in their preparations for negotiating revised RoO with the EU, and has been part of the all-ACP Expert Group on Rules of Origin. He has undertaken assignment work for a range of organisations, including the World Bank, USAID/Tradehub, the EC, ACP Sec, ITC, ICTSD, Comsec and others.  

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