The African Growth and Opportunity Act and the African Continental Free Trade Area

The African Growth and Opportunity Act and the African Continental Free Trade Area
Photo credit: John Hogg | World Bank

01 Dec 2017

This essay assesses and evaluates the extent to which the African Growth and Opportunity Act (AGOA) increased imports from AGOA eligible countries to the United States from 2001 to 2015.

The essay then examines how African countries can make the most of the preferences granted under AGOA, arguing that AGOA national utilization strategies have proven successful. In the final part, the essay explores options for future U.S.-Africa trade relations after the AGOA expires in 2025, proposing approaches that would best support African development.

In this regard, this essay argues that, since Congress is unlikely to renew AGOA in its current form and since AGOA will likely be replaced with an arrangement requiring some degree of reciprocity, it will be very important for (1) the African Union’s Continental Free Trade Area (CFTA) to be implemented before any new U.S.-Africa trading arrangement comes into force and (2) for negotiations for any future U.S.-Africa trading arrangement not to mimic the negotiations conducted for the Economic Partnership Agreements with the European Union.

AGOA’s Impact on Africa’s Exports to the United States from 2001 to 2015

AGOA stimulated Africa’s exports until 2008. However, the trend in the value of Africa’s exports to the United States has been downward since then, with a brief increase between 2009 and 2011. By 2015, U.S. imports from Africa had fallen to pre-AGOA levels. This is largely due to a sharp decline in the U.S. demand for fuel and falling fuel prices. Indeed, AGOA exports to the United States other than petroleum have remained relatively flat since 2001, when AGOA was first enacted.

Using United States International Trade Commission data, every year since AGOA was established, fuels have never accounted for less than 65 per cent of the United States’s annual imports under AGOA from the current list of eligible countries. While Africa’s nonpetroleum exports to the United States have not increased much under AGOA, eligible countries’ exports to the United States have become slightly more diversified and industrial in nature. The largest increase in exports was primarily in textiles and apparel, vehicles, and machinery. However, only a small subset of AGOA-eligible countries has benefitted from these increases. These include Ethiopia, Kenya, Lesotho, Malawi, Mauritius, Swaziland, and South Africa. AGOA-eligible countries’ exports of manufactures to the United States increased, from a very low base, by around US$1.6 billion in real terms (2015 dollars) between 2001 and 2015, an increase of around 40 percent. From 2001 to 2014, eligible countries’ manufacturing value-added increased by around 75 percent, or US$62 billion (in 2015 dollars). These figures are based on the author’s calculations from United Nations Conference on Trade and Development and Trade Law Centre data. The fact that manufacturing output increased at a faster rate than exports of manufactures to the United States suggests that other factors may have been at work in increasing Africa’s manufacturing competitiveness. A number of alternative explanations are possible, including the fact that many of these countries have pursued an aggressive program of investing in infrastructure and building industrial parks to support the development of their industrial sectors.

The Future of Trade Relations Between the United States of America and Africa after AGOA

Both a 2016 report from the United States Trade Representative and the reported statements of U.S. President Trump suggest that AGOA is unlikely to be renewed in its current form and that the new administration is likely considering whether some degree of reciprocity should be required in a post-2025 U.S.-Africa trade relationship. In theory, the introduction of reciprocity in terms of market access could result in negative terms-of-trade effects on Africa, or negative dynamic effects on the continent’s industries. These effects are likely to adversely impact the livelihoods of many individuals in Africa who directly or indirectly rely on jobs that produce exports to the United States under AGOA. In order to forestall such negative effects on Africa, it will be important for Africa to ensure that the CFTA currently being negotiated among African states under the auspices of the African Union is in force before 2025.

Indeed, the CFTA would not only help to forestall negative effects on Africa of a possible termination of AGOA; it would also benefit the United States. Harmonized rules of origin and disciplines on (or coordination of) African countries’ nontariff measures such as sanitary and phytosanitary measures under the CFTA may make it easier for American firms to trade with African countries. A single African market would make the continent a more attractive investment destination for American market-seeking foreign direct investment, since the CFTA would mean that an investor in one African country would potentially be able to sell to or invest in the entire African market. Such benefits would accrue where a U.S. investor met the requirements for benefiting from the CFTA.18 In addition, the increases in Africa’s GDP expected to result from the CFTA would further increase the attractiveness of the African market for American market-seeking foreign direct investment.

A primary impetus for the CFTA is to prepare African Union member states to more effectively trade with their external partners, including the United States. From this perspective, completing the negotiations of the CFTA is an imperative for African countries as it will lay the basis for a new Africa-U.S. trade and investment relationship after 2025. In addition, the CFTA is necessitated by the rapidly evolving global trade landscape. The CFTA could also serve as an important counterweight/corrective to other new trade instruments, including the one that will govern the U.S.-Africa trade relationship beyond 2025.

For example, ongoing negotiations of megaregional trade agreements such as the Regional Comprehensive Economic Partnership (RCEP), the Trans-Pacific Partnership (TPP), and the Transatlantic Trade and Investment Partnership (TTIP) could reshape world trade. While the future of both the TPP and the TTIP remain uncertain, momentum appears to be building towards the RCEP.

Significantly, these megaregionals are expected to have significant negative effects on Africa due to preference erosion and increased competition from firms based in the states parties to these agreements, as outlined in a computable general equilibrium model of their impacts. This is particularly the case for the RCEP. What makes the CFTA important to Africa is that if it is successfully negotiated and it comes into force, it would more than offset the possible negative impact brought about by these megaregionals on the continent.

In any case, if and when Africa negotiates a free trade agreement with the United States, it will be in the interest of both sides to avoid, as far as possible, replicating the particularly cumbersome process that the European Union has followed in negotiating Economic Partnership Agreements with African states and regional groups. Those negotiations have already taken over a decade and most African countries have declined to sign the agreements for a variety of reasons, not least because these agreements have failed to fully incorporate Africa’s development concerns. It will be important for both Africa and the United States to take into account that the United States is no longer Africa’s most important export market, having fallen to fourth behind China, the European Union, and India. This means that the trade-off for Africa between retaining full access to the U.S. market, on the one hand, and ensuring that strategic “infant industries” are protected from competition from American firms, on the other, will have shifted towards the latter compared to the past. Indeed, deepening integration between Africa and its Southern partners, particularly from Asia and the Middle East, shows the greatest potential to support Africa’s much needed diversification and structural transformation, which will be essential to support more inclusive and job-rich growth on the continent.


Whatever settlement is pursued beyond 2025 for trade between the United States and Africa, it is important for African countries to expeditiously conclude negotiations of the CFTA and begin implementing it as soon as possible – but certainly before 2025. This will be particularly important if post-2025 U.S.-Africa trade relations are anchored in reciprocity rather than the current approach of unilateral preferences.

It also seems clear that a continent-wide market would be good for facilitating Africa’s engagement with the United States beyond 2025. In any case, Africa and the United States should try to avoid repeating the process of negotiation between the European Union and African countries on the Economic Partnership Agreements. Hopefully, as Africa gains other trading partners, its negotiating position with the United States will be strengthened as the United States seeks to regain its foothold in Africa as an export market.

William Davis is affiliated to the Macroeconomic Policy Division, United Nations Economic Commission for Africa (ECA). Most of the work for this essay was done while the author was working with ECA’s African Trade Policy Centre.

This essay draws heavily on a presentation given by Simon Mevel at the first Africa Trade Week in December 2016, which was itself based on work by ECA and the African Union Commission (2016). The views expressed in this essay are the author’s own, and do not necessarily reflect those of the ECA.

Author William Davis
Source AJIL Unbound
Website Visit website
Date 01 Dec 2017
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