United States removes three countries from AGOA
As of 1 January 2015 Swaziland, the Gambia, and South Sudan are no longer receiving trade benefits under the Africa Growth Opportunity Act (AGOA).
Although no specific reason was pinpointed in the official proclamation for Gambia and South Sudan’s removal from AGOA, various sources attribute the removal to human rights abuses and political instability in each of the respective countries.
According to the proclamation, “The designations of South Sudan and The Gambia as beneficiary sub-Saharan African countries for purposes of section 506A of the 1974 Act are terminated, effective on January 1, 2015.”
The 14-year-old AGOA provides duty-free access to the U.S. market for 6,400 products from 40 countries (it now is set to expire on September 30, 2015).
The United States determines annually whether countries have met eligibility requirements set out in the AGOA legislation. The US President designates countries as eligible if they are determined to establish or are making continual progress towards meeting requirements. AGOA eligibility criteria include the protection for workers’ rights, human rights or security.
Last year, the Office of the U.S. Trade Representative (USTR) had ordered Swaziland to pass a number of amendments related to industrial relations, unions, and terrorism among others. Since the Swazi government did not comply with these requirements by the December 2014 deadline, its eligibility was rescinded.
Observers note that exception from AGOA will surely impact the textile and manufacturing sectors of these countries as well as hurt private sector growth.
Swaziland is a major apparel exporter with a large share of the US market. The industry employs thousands of people. Some experts warn the sector could suffer a major blow with important export cuts and job losses following the termination of its eligibility for AGOA.
Shortly after the loss of AGOA benefits was confirmed, several textile companies in Swaziland announced massive layoffs and some like Tex Ray and Matsapha Knitwear had to shut down.
“The factory was terminating workers’ employment because of the loss of the Africa Growth Opportunity Act (AGOA)” – Swazi Member of Parliament, Mknosi Dlamini
Although The Gambia’s government recently congratulated the United States for the removal of The Gambia from AGOA, citing that Gambia never benefitted from the agreement in the first place, the revocation could further hurt an economy that had a difficult year in 2014.
In a statement released by the IMF country office on Thursday, Bhaswar Mukhopadhyay, the mission chief, said one of the factors that made 2014 a difficult year was the consequences of past fiscal slippages, which put pressure on the national budget, public enterprises, the private sector, and households. This has resulted in currency depreciation, which has led to higher import costs.
By losing eligibility to AGOA, the Gambia is not only losing the benefits of lower tariffs to the US but also benefits of cheaper imports from the US.
In addition to The Gambia, Swaziland, and South Sudan, seven other countries have had their AGOA benefits revoked (though in some cases restored, i.e. Guinea-Bissau and Madagascar in 2014) in the last few years for a variety of reasons (often due to undemocratic transitions of power).
As mentioned earlier, AGOA is set to expire this year and its extension will be a clear priority for the United States and for African countries.