Working Papers

AGOA at 10: Reflections on US-Africa trade with a focus on SACU countries

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29 Nov 2010

Author(s): Eckart Naumann

The African Growth and Opportunity Act (AGOA) has formed the basis for preferential US-African trade over the past decade. However, AGOA is about more than just trade, but represents a policy framework covering issues such as the development of trade capacity, general development assistance, investment, healthcare assistance and security-related cooperation. Trade remains an important focal point, however: since inception, US policy has taken the approach that export-led growth would play a key role in assisting Africa’s development. A slight change in emphasis was expressed by US Secretary of State Hilary Clinton and other officials when addressing the 9th AGOA Forum in Nairobi last year, where the importance of regional trade and the removal of regional trade barriers were repeatedly highlighted. This stance was reinforced at the 10th AGOA Forum held recently in Washington.

Midway through 2003, the countries of the Southern African Customs Union (SACU) began negotiations with the US for a Free Trade Area (FTA). These were intended to be concluded within 18 months, but were postponed indefinitely a year later as a result of widely divergent views on the scale and scope of the proposed agreement. In July 2008, SACU and the US then signed a Trade, Investment, and Development Cooperative Agreement (TIDCA) whose stated objective was to ‘promote an attractive investment climate and to expand and diversify trade between SACU and the United States’. The TIDCA established a platform for bilateral consultations on a range of trade issues, including trade facilitation, technical barriers to trade, and trade and investment promotion, but also to act as a stepping stone for a future SACU-US FTA. This remained a longer term objective for both negotiating parties, and new signals are emerging that this issue may soon be revisited more formally. In the meantime, South African officials have been reported as favouring an extension of AGOA and South Africa’s continued participation and eligibility under AGOA.

Given recent legislative proposals, there appears to be some consolidation in US policy on preferential trade. Some of this legislation has originated in the House of Representatives – one of the two chambers of Congress – while similar reform proposals are expected in the Senate shortly. Proposed changes to the AGOA legislation include an extension to 2019 (and beyond, subject to conditions). Aspects of the proposed legislation could pose a serious threat to Africa’s exports to the US and would for the post-2015 period see a number of high-profile countries lose their eligibility status under the Act. Also included is an extension of trade preferences to other least-developed countries (such as Bangladesh and Cambodia) through an extension of the US GSP, which would erode current AGOA preferences especially in the critical textile sector.

This paper provides an overview of the current AGOA legislation and tracks legislative amendments over its first decade. This is followed by an analysis of African exports to the US, with a more detailed focus on three sample sectors (the automotive sector, the clothing manufacturing sector and the fruit and fruit juice sector) that benefit from AGOA and which are of relevance to SACU. A review of trade between SACU member states and the US (bi-directional) reveals that most SACU exports enter the US duty-free (mostly under AGOA, but also in other duty-free categories), whereas SACU imports from the US are still to a significant extent subject to tariff barriers. The paper concludes by reviewing the proposed legislative amendments that are currently being considered by the US Congress, some of which are likely to have a significant impact on current recipients of AGOA preferences.

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