The African Growth and Opportunity Act (Agoa) has been a cornerstone of US-Africa trade relations since its inception in May 2000.
Agoa is recognised for the mutual benefits of fostering economic growth through trade and investment by focusing on trade as a sustainable development lever which has helped diversify economic interactions beyond traditional aid.
As we approach the end of Agoa's current term in 2025, the Agoa Renewal and Improvement Act of 2024 proposes a substantial enhancement of the programme with an extension to 2041.
Agoa provides eligible sub-Saharan African countries with duty-free access to the US market for over 1,800 products, invigorating essential sectors such as agriculture, textiles, and apparel. US apparel imports for example have risen from $953 million in 2001 to $1.4 billion in 2021, benefiting countries, according to the US ITC 2023 Report.
This has provided a platform for nations to diversify economically and reduce dependency on single-market exports. The sectors catalysed by Agoa have in turn generated substantial employment opportunities—directly and indirectly—for over a million individuals, with women comprising a significant portion.
In June 2023, the United Nations Conference on Trade and Development (UNCTAD) released The African Growth and Opportunities Act: Limitations, Utilization, and Results report assessing Agoa's impact. It underscores varying effects of preferential market access based on exporting countries and specific sectors with four analytical segments evaluating Agoa's programme at different levels.
One segment examines the overall interplay between poverty, trade preferences, and tools aimed at fostering economic development. Another section highlights the positive, yet restricted impact of preferences fostered by the programme. Notably, tariff preferences exert less influence on products that already enjoy duty-free status.
The latter part of the report focuses on sectoral perspectives, spanning materials such as apparel, minerals, and other commodities and explores the potential of upgrading imports like hydrocarbons, cocoa, and cotton.
It involves exploring how the programme could complement the African Continental Free Trade Agreement (AfCFTA), which will facilitate access to regional markets, and bolstering production networks, equipping domestic industries for the global stage.
The report underscores that while Agoa's preferences have positively impacted exports and encouraged US foreign direct investment, the programme's 2025 expiration jeopardises investments in critical sectors and recommends extending AGOA's preferences indefinitely or for at least a decade.
The Agoa Renewal and Improvement Act of 2024 is therefore a welcome legislation for the continent as it proposes several critical enhancements to address these implementation lessons.
The Act proposes extending Agoa by 16 years and pushing back the programme’s expiration from 2025 to 2041, mirroring the 16-year sunset provision included in the US- Mexico - Canada Agreement. It suggests streamlining the eligibility review process from annual to biennial assessments, freeing up resources for more effective programme implementation.
The current statute requires termination of a country’s Agoa benefits if that country does not meet the programme’s eligibility criteria. To address this, the proposed Act introduces a more subtle enforcement option, allowing for tailored responses that align better with dynamic economic and political landscapes.
The menu of options proposed include full termination of benefits, termination of benefits for certain products, issuance of a warning letter providing notice that benefits will be terminated in the following year without corrective action, and the option to take no action if US interests are best served by taking no action.
A notable amendment is the proposed alignment of Agoa with AfCFTA, enhancing intra-African economic integration. By allowing inputs from North African AfCFTA members to count towards the 35 percent regional value requirement, the Bill supports broader African economic collaboration, thus enhancing the continent’s overall economic stability and appeal as a trading partner in turn supporting the development of intra-African supply chains.
Moreover, the Bill proposes a nuanced approach to economic fluctuations in developing economies by extending the period a country is considered "high-income" before it loses Agoa benefits. This adjustment aims to cushion economies against the potential shocks of losing preferential access, facilitating a smoother economic transition.
The introduction of support mechanisms for countries to develop and implement clear Agoa utilisation strategies marks a significant step towards maximising the programme's benefits. By providing trade capacity-building assistance, the US is helping these nations leverage Agoa effectively, fostering the growth of robust local industries and enhancing their export capabilities.
The Agoa Renewal and Improvement Act of 2024 represents a significant step forward in US-Africa economic relations addressing both structural and operational challenges within Agoa and aligning it with broader economic initiatives like AfCFTA.
These amendments aim to establish a more inclusive, sustainable, and mutually beneficial economic relationship and as such if passed, AGOA would remain a vital instrument in US foreign economic policy, poised to continue driving economic growth and prosperity across Africa.
The writer is the senior advisor, Global Lead, Industry and Commerce at the Tony Blair Institute for Global Change.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
