Will US replace African Growth and Opportunity Act with Continental Free Trade Agreement?

15 Dec 2022

This possibility arose this week at US President Joe Biden’s major summit in Washington with African leaders which gathered 49 African governments to meet with Biden and his Cabinet as well as US business representatives, civil society, and diaspora and youth leaders.

Does the US intend to replace Agoa — the African Growth and Opportunity Act — which has benefitted so many SA exporters, with a free trade agreement with the African Continental Free Trade Agreement (AfCFTA) when Agoa expires in 2025?

This possibility arose this week at US President Joe Biden’s major summit in Washington with African leaders which gathered 49 African governments to meet with Biden and his Cabinet as well as US business representatives, civil society, and diaspora and youth leaders.

After a US-Africa business forum at the summit, Biden said the US had signed a new agreement with AfCFTA secretary-general, the South African Wamkele Mene, which would give US companies access to 1.3 billion people and a market valued at $3.4-trillion.

"When Africa succeeds, the United States succeeds. Quite frankly, the whole world succeeds as well," Biden said.

This raised the question of whether Washington wants to phase out Agoa, which comes up for renewal in 2025. Launched in 2000, Agoa gives duty-free and quota-free access to the lucrative US market for exports from qualified African countries.

The African countries do not have to offer such concessions to US imports in return.

Agoa has greatly benefited South African exporters, in particular, especially the makers of autos and processed fruit, helping to balance South African trade with the US. Nigeria and Angola have also benefitted from their oil exports to the US. But few other countries have.

And so South Africa especially, but also other African countries, would like the US Congress to renew Agoa in 2025 — as it last did in 2015. But US business is believed to be opposed to a renewal, demanding reciprocal access to African markets, and especially to the relatively sophisticated SA market.

The US companies complain that they are being disadvantaged in the markets of South Africa and some of its neighbours relative to European exporters, especially after six southern African countries signed the reciprocal EU-SADC Economic Partnership Agreement in 2016.

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The US companies may well get support from an increasingly protectionist Congress, especially after Republicans took control of the House of Representatives in last month’s midterm elections.

US Deputy Commerce Secretary Don Graves did not answer directly when Daily Maverick asked him in an online media briefing on Thursday whether the US regards the agreement it signed with the AfCFTA as a substitute for renewing Agoa.

He made clear that the US intended to modernise and improve Agoa so African countries get more out of it. What he did not say was whether he meant the US would do this only up to the scheduled expiry of Agoa in 2025.

“We are very focused first on making sure we take advantage of everything that Agoa offers, making sure that we create as many opportunities for trade and investment as possible under Agoa,” Graves answered.

He noted that US Trade Representative Katherine Tai had hosted several African trade ministers at an Agoa ministerial meeting on Monday. Tai said the ministers told her Agoa was not enough and what was needed was more US investment in Africa to produce the kinds of goods which could then be competitively exported into the US under Agoa.

She agreed and told the summit that Agoa needed to be modernised and improved to make it more relevant to a world much changed since it was introduced in 2020. She suggested that one way of adapting Agoa would be to move it some way — but not all the way — towards a traditional reciprocal free trade deal.

Graves said: “We all agree there is a need to strengthen implementation and to modernise Agoa so that we can move from talking about this agreement to concrete benefits for the people.”

On the question of renewing Agoa, he echoed Tai in saying Agoa was an act of Congress and so the Biden administration would engage with Congress closer to the Agoa expiration date of 2025.

“We at the Commerce Department are working and will be working very closely with the US trade representative, will be working closely with congressional committees and our African counterparts to deal with this issue. At the end of the day, we all need to come together to figure out the best way to increase our connectivity, our trade relationships with the [African] continent as well as bilaterally with countries on the continent.”

Graves said the AfCFTA was “an unbelievable opportunity that countries of the continent have been able to come together to found the largest free trade area in the world.

“It’s going to create great opportunities to grow, to develop into major global trading companies that we all believe are in Africa’s future. We know that we need to do more to lift up our relationship.”

Once negotiated and implemented, the AfCFTA would eliminate most tariffs and non-tariff barriers across Africa and streamline access to service between African countries.

“That’s important. Because it makes the continent a much more attractive market for the US because it creates a much more level playing field, provides harmonisation of rules and allows American businesses to operate more consistently across the continent.”

And so he expected that as a result of the AfCFTA — and, he implied, the US’s proposed free trade agreement with it — the African market would become an increasingly attractive market, competitive with all other global markets.

“We’re very excited about it. That’s why I and so many other leaders across the administration have been having these conversations with the secretary-general [Mene] to find ways we can use this to support a growing trade between the US and counties all across Africa.”

The deal between the US and the AfCFTA is also seen as a means for the US to close the large gap between its trade with Africa and that of China and the European Union. China and the EU each trade about four times the amount the US does now.

According to a Eurasia Group analysis — quoted by Reuters — in 2021 China-Africa trade totalled $254-billion and EU-Africa trade reached €288-billion versus US-Africa trade of just $64.3-billion. DM

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