Eckart Naumann, tralac Associate, discusses the outcomes of the 2013 AGOA Forum in the context of growing anxiety and uncertainty regarding AGOA’s future

The 2013 United States–Sub-Saharan Africa AGOA Forum concluded yesterday at the African Union headquarters in Addis Ababa, Ethiopia. It featured integrated private sector, civil society, womens’ entrepreneurship and Ministerial programs that facilitated lively discussion and debate among stakeholders. Senior government representatives from 39 AGOA countries and the United States were in attendance – the latter whose delegation included recently appointed US Trade Representative Mike Froman, members of Congress, the State Department, and various other agencies.

The 2013 Forum took place against a backdrop of growing anxiety – particularly in Africa – on AGOA’s future. Originally signed into law late in 2000, the legislation and associated trade preferences expire in September 2015. If AGOA is not renewed (or a similar replacement program put in place), this leaves many current AGOA beneficiaries in a significantly worse position than is currently the case. While most will fall back on the US GSP regimes, this will hardly be a consolation, not least because the latter contains far fewer products, remains subject to regular renewal, graduation and other volume restrictions, apart from not applying to key sectors such as the clothing industry. Just days ago (on 31 July 2013), the current US GSP lapsed without a timely renewal by Congress, meaning that thousands of products shipped from the poorest countries of the world no longer enjoy preferential market access (the same situation occurred a few years ago, and was only remedied by Congress many months later). This reminds of the last-minute extension last year in September of the critical AGOA third country fabric provisions (TCFP), causing major uncertainty, economic damage to exporters and a loss of confidence in the program at the time.

Given these recent experiences, there is broad support to avoid a similar situation regarding the AGOA legislation. President Obama during his recent Africa visit repeatedly expressed support for a seamless renewal of AGOA (see related article), sentiment echoed at the AGOA Forum by US and African government representatives, the private sector, civil society representatives as well as other African representative bodies. Yet the story of Africa today is substantially different to what it was at the time when AGOA was originally enacted. At that time, a prominent international publication labeled Africa the ‘hopeless continent’. A decade later, it described Africa as a continent of hope, featuring more than half of the ten fastest growing economies of the world. While general sentiment initially having changed from aid to (aid for) trade, the US sees Africa today not (just) as a strategic partner of growing importance in various fora but as a continent representing commercial opportunity, a viable sourcing market and an increasingly lucrative export destination. While exports under AGOA more than doubled between 2000 and 2012 (and increased four-fold in the period to 2008), the US more than tripled its own exports to Africa. African countries on the whole continue to enjoy a substantial trade surplus in their trade with the US.

The appetite for a simple AGOA renewal for an extended period, or even making it some kind of open-ended preference scheme has probably waned, not least given the more recent mood within the US Congress. In fairness, the US Administration and key members of Congress have indicated, at the Forum, that no AGOA ‘design’ options for post-2015 would be excluded outright and that the Administration would be guided by a comprehensive review process, starting now, informed by stakeholders on both sides of the Atlantic. USTR Froman and others have however alluded to the possibility of some form of reciprocity going forward (see transcript of remarks at the AGOA Forum), citing the preferences that many AGOA countries are providing European firms under the yet-to-be concluded Economic Partnership Agreements (EPAs). Senator Johnny Isakson acknowledged as much at the Forum, bearing in mind that Congress will likely need convincing to pass any trade legislation that offers continued sweeping trade preferences to Africa without some kind of quid pro quo that does not put American firms at a disadvantage (vis-à-vis their European counterparts). Notwithstanding these challenges, Senator Isakson and Representative Karen Bass have both committed their strong support to a renewal of AGOA.

On the way forward, USTR Froman also alluded to the possibility of graduating products or sectors, and even countries out of AGOA preferences, especially where African export sectors are considered globally competitive. Without mentioning South Africa by name, this is a priority concern for the country and should be seen in the context of South Africa’s exports to the US in some high value-added sectors, such as the automotive sector, as well as stalled progress on concluding a comprehensive reciprocal trade agreement with SACU. At the Forum, South Africa re-iterated its position that there should be no graduation under AGOA, and that any changes should not divide and undermine regional integration initiatives. There generally also appeared to be little, if any, appetite for reciprocity, at least not in the context of AGOA or otherwise outside of separate reciprocal partnerships like the one that the East African Community (EAC) is embarking on with the US.

On the African side, earlier calls (by a group of African Ambassadors) for a renewal of AGOA by 15 years were echoed in the formal submissions read out at the conclusion of the private sector, civil society and ministerial sessions, recommendations. Specifically, the group of African Ministers adopted the following recommendations:

• Enhanced political dialogue, including a summit-level meeting with the US in 2014;

• Re-authorisation of AGOA for a further 15 years by October 2014, and that the TCFP rules involving fabric be made coterminous with AGOA;

• Capacity building to generate increased private sector engagement, not least in the area of sanitary and phytosanitary measures (SPS);

• Increasing trade and market access, inter alia by (AGOA beneficiaries) developing and implementing national AGOA export strategies, for the US to develop an AGOA (financial) compact for countries that have developed AGOA strategies, to review and amend the Rules of Origin in sectors of high export potential and to expand trade preferences (product coverage);

• Encouraging (greater) US investment in Africa (given the present situation whereby Africa accounts for less than 1% of global US investment), inter alia through tax breaks for US companies investing in Africa; and to

• Uphold AGOA preferences and that these not be undermined by developments in the trans-pacific partnership and DFQF developments under the WTO umbrella.

With two years remaining pending the expiry of AGOA, African countries and the US now go into a period of increased uncertainty regarding their bilateral trade and investment relationship. It is probably unlikely – notwithstanding efforts by leading members of Congress, along with the US Administration – that the AGOA legislation will simply be extended “as is” or in another form anytime very soon. The AGOA review process will take some time, and is unlikely to be concluded this year. Some hope remains for a short-term extension if such an amendment is tagged onto other legislation that is likely to enjoy bi-partisan support and easier passage through Congress.

However Congress, in the eyes of many observers, does not have a particularly good record in timeous extensions of this nature, given recent experiences involving the TCFP extension, the GSP expiry and so on, and inevitable questions on how the “cost” of non-reciprocal trade preferences will be offset. In the end, however, no price can be placed particularly on the goodwill created (or potentially lost) within the broader AGOA framework both in Africa and the US, while remaining mindful of the fact that trade preferences by definition benefit not just sellers of goods and services, but buyers and final consumers too. A concerted and urgent effort by all interested and affected stakeholders is required to ensure a favourable outcome, and a deepening of the US-Africa trade, investment, strategic and political relationship.

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