Building capacity to help Africa trade better

The urgency of AGOA re-authorization


The urgency of AGOA re-authorization

The urgency of AGOA re-authorization
Photo credit: AU

The rapid reauthorization of the African Growth and Opportunity Act (AGOA) remains a critical issue for the U.S.-Africa commercial relationship, African security, and for economic development and women’s empowerment on the continent.

The African Growth and Opportunity Act (AGOA) is an Act of the U.S. Congress, signed in 2000, that offers tangible incentives for African countries to continue their efforts to open their economies and build free markets. Currently, AGOA is set to expire on September 30th, 2015.

At the last African Union Summit, held in January 2015, Heads of State and Government of all 54 African Union Member States called upon the U.S. Congress to immediately reauthorize AGOA, co-terminous with the Third Country Fabric Provision, as the foundation of the U.S.-Africa trade and investment partnership. Following President Obama’s commitment to reauthorize AGOA at the U.S.-Africa Leaders’ Summit in Washington D.C. in August 2014, expectations for AGOA’s reauthorization were high, but those expectations have not yet been met.

AGOA has served as the cornerstone of commercial relations between the United States and Africa since its enactment in 2000, with significant economic benefits accrued on both sides. Studies by the U.S. International Trade Commission and the United Nations Economic Commission for Africa have clearly demonstrated AGOA’s benefits for both the U.S. and Africa in terms of improved business and trade environments, job creation, and economic growth.

For the United States, exports to Africa have grown by 284% under AGOA, from $5.6 billion in 2000 to $21.5 billon in 2012. Since its enactment, AGOA has also granted U.S. consumers access to more affordable goods: under AGOA, U.S. imports of non-extractive products from Africa have grown by 94%, to $6.0 billion. Tens of thousands of U.S. jobs are a dependent upon AGOA trade.

AGOA drives improvements in African investment climates as well. By creating tangible incentives for African countries to improve their economic and commercial policies, AGOA reauthorization will work in complementarity with global trade initiatives such as the Agreement on Trade Facilitation, for example by streamlining customs procedures.

Concrete business opportunities for U.S. companies also arise under AGOA. Six of the ten fastest growing economies in the world are in Africa. Chinese companies are rapidly establishing their market share in Africa, and while the U.S.-Africa Leaders Summit announced $14 billion in commercial deals, this is only a first step. AGOA reauthorization will help U.S. companies continue to take advantage of the widespread opportunities that exist.

On the African side, the benefits of AGOA have been even more pronounced. 25 of the 38 countries that were eligible in 2013 exported products to the United States under AGOA; 14 of those countries exported more than US$ 10 million worth of non-extractive products.

Along with increased trade, AGOA has accounted for significant job creation in Africa. More than 300,000 jobs have been directly created as a result of AGOA, along with the millions of jobs that have been created indirectly. Many of these new jobs have gone to women and youth, contributing to women’s empowerment and increasing stability and security in Africa; research demonstrates that job creation can help mitigate the risks, in terms of instability and civil strife, associated Africa’s demographic bulge. AGOA reauthorization will also support African efforts at regional integration, including most importantly, the establishment of the African Continental Free Trade Area (CFTA).

AGOA has clear benefits for both the U.S. and Africa. However, as AGOA’s expiration approaches, investors are getting nervous. Our experience with the renewal of the third country fabric provision shows that delay and uncertainty can result in economic and job losses. One can only imagine the consequences in terms of job losses and instability if the entire AGOA program is delayed.

AGOA reauthorization presents tremendous opportunities to continue to strengthen the U.S.-Africa commercial relationship, increase African stability, and drive economic development and women’s empowerment on the continent. In order to take advantage of these opportunities, AGOA should be reauthorized well before the September 2015 expiration.

Fatima Haram Acyl is Commissioner for Trade and Industry at the African Union Commission.


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