AFRICA NEWS: Africa: How the Biden Administration can Make Agoa More Effective

dWeb.News Article from Daniel Webster dWeb.News

AFRICA NEWS:

Washington, DC — The African Growth and Opportunity Act (AGOA) has served as the cornerstone of the U.S.-Africa commercial relationship for more than two decades but it is set to expire on September 30, 2025.

While the unilateral trade preferences of the legislation have brought economic benefits to countries in sub-Saharan Africa’s, AGOA is still underutilized. The United States must now address the possibility of reauthorization and focus on ways to improve the use of AGOA in order to maintain U.S.-African trade ties.

A renewal of AGOA will not be enough to realize this vision. Instead, the Biden administration needs to intensify its partnership with AGOA beneficiaries. It should also ensure that each country makes more use of the program through National AGOA Strategies in a way that promotes regional as well as continental value chains.

This analysis includes Ethiopia, Guinea, and Mali, which are set to lose their AGOA benefits on January 1, 2022 because, as the Biden administration determined in a statement to Congress, they are no longer in compliance with the legislation’s eligibility requirements.

AGOA has been successful, but remains underutilized

When assessing the future of the program, it is important that we recognize where AGOA has succeeded. The data, which excludes crude oil exports under AGOA, shows that certain African products have significantly improved their export competitiveness, particularly apparel. For instance, from 2010 to 2020, textile/apparel exports under AGOA grew by approximately 64 percent.

Moreover, apparel exports from Lesotho, Ethiopia, Mauritius, Madagascar, and Kenya have not only led to the creation of tens of thousands of jobs but these countries have become reliable producers for the U.S. market and American consumers. Lesotho and Kenya in particular have enjoyed the highest AGOA utilization rates: between 2010 and 2020, apparel products from Kenya accounted for 88 percent of the country’s total exports to the United States under AGOA ($3.6 billion in value); apparel products from Lesotho accounted for 99 percent of the same ($3.2 billion). The percentage of U.S. exports to a beneficiary country under AGOA is called the utilization rate. It is a proportion of total U.S. trade from that country.

Heavy production has also been a success under the AGOA. The US has been importing South Africa’s automobiles under AGOA. This has created hundreds of thousands jobs in South Africa as well as in the auto supply chain in neighboring countries. Overall, light and heavy manufactured imports under AGOA accounted for 87 percent of all imports under AGOA from 2010 to 2020.

Although the program has been a success, not enough countries in Africa have received it at a level sufficient to tip the balances in terms of economic development, growth of business opportunities and job creation. This trend, as Ambassador Tai pointed out during the recent AGOA Ministerial was partly due to low utilization of the program by many beneficiaries. In an effort to address this deficit, Congress called for–but did not require–participating countries to develop and publish national “utilization strategies” during the 2015 reauthorization of the legislation.

Countries with national AGOA strategies have increased AGOA utilization

These strategies are prepared by governments in sub-Saharan Africa as part of their planning to enhance the use of AGOA. These strategies are developed by governments in sub-Saharan Africa to enhance the use of AGOA. These plans were created to enable beneficiary countries to fully take advantage of the U.S. market’s preferential access. According to trade data, the creation of AGOA strategies is positively related with higher AGOA utilization rates.

To date, only 18 out of the 39 beneficiary countries have developed a national utilization strategy for AGOA. These countries are Botswana and Eswatini.

Out of the 16 countries reporting data since the publication of a national AGOA utilization strategy, 14 have seen an increase in non-crude exports under AGOA. These increases in exports range from 2 percent to more than 3,000 percent. In particular, Mali, Mozambique, Togo, and Zambia, who had very low utilization rates, experienced an increase in exports of over 90 percent following establishment of a utilization strategy. Here are some relevant examples:

Kenya published a utilization strategy in 2012. Kenya’s exports to the United States under AGOA subsequently doubled between 2012 to 2020. Apparel products were the largest export source during this period.
Ghana published a utilization strategy in 2016. Ghana’s non-oil exports, which include yuca plant root, apparel products, and travel goods rose by 91 percent from 2017 to 2020.
Madagascar published a utilization strategy in 2015. Madagascar’s exports to the United States under AGOA subsequently saw a 390 percent increase from 2015 to 2020. This period saw major exports of apparel, chocolate and basket-weaving material.
Mali published a utilization strategy in June of 2016. Mali’s exports to the United States under AGOA increased by 397 percent from 2016 to 2018. The largest share of total exports was made by agricultural and manufactured goods. This includes buckwheat and travel goods.
Mozambique published a utilization strategy in May of 2018. Exports from Mozambique under AGOA saw an 813 percent increase from 2018 to 2020. The bulk of exports were made from agricultural products such as tobacco, sugar, and nuts.
Togo published a utilization strategy in August of 2017. Exports from Togo under AGOA saw a 91 percent increase between 2017 and 2020. The largest export source was agricultural products (including wheat, legumes and fruit juices) during the period.
Zambia published a utilization strategy in March of 2016. Exports from Zambia under AGOA saw over a 3,000 percent increase by 2019. The largest share of exports was made from semi-precious stones and pearls. Copper was also exported.

Unfortunately, less than half of AGOA beneficiaries have developed national AGOA strategies. There are still four years of AGOA legislation to go, so there’s still time for beneficiaries countries to get better results. Moreover, a renewal of AGOA for another 10 years would provide even more time to make national strategies as beneficial as possible while further deepening U.S.-Africa commercial ties.

Witney Schneidman , Nonresident Fellow – Global Economy and Development, Africa Growth Initiative, is a senior international advisor for Africa at Covington & Burling LLP where he has been since 2012. Kate McNulty is an associate in the Washington office of Covington & Burling LLP. Natalie Dicharry is an international trade economic analyst at Covington and Burling LLP.

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