RÉDHA TIR: Expanded Agoa offers best chance for real change to African trade development
With the act set to expire this year, there are questions about nations’ capacity to put up a collective defence of this crucial tool
23 January 2025 - 05:00
byRédha Tir
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The African Growth and Opportunity Act (Agoa) has, since its passage in 2000, been one of the cornerstones of trade relations between the US and Sub-Saharan Africa. Preferential access to the US market for more than 1,800 products in terms of this legislation has contributed to the African continent’s economic growth, creating hundreds of thousands of jobs in the process in addition to supporting structural reforms of beneficiary countries.
But with Agoa set to expire later this year, a number of questions arise about US strategic priorities and the capacity of African nations to put up a collective defence of this crucial tool. Two dates can be seen as milestones in this determinant period.
The first was the swearing-in of Donald Trump as US president on January 20, which is already altering the course of US policy and economic focus, with trade policy likely to assume a far more transactional tone. In less than a month, a summit of African heads of state will present a critical opportunity to synchronise collective action in the call for the renewal of Agoa. The meeting is of strategic importance to Africa, as long as the need to underline its autonomy and interests vis-à-vis this world power is underlined.
Though Agoa, created by the US to give African products preferential access to the US market, holds immense promise, in reality many constraints have got in its way. Of these, the origin rules under Agoa are considered particularly rigid, especially regarding the clothing industry, which has inhibited the diversification of African exports to the US.
The unilateral nature of this trade regime also created arbitrary eligibility criteria set by the US itself, and has therefore brought with it instability and uncertainty over how long and for whom such tariff advantages apply. The temporary nature of Agoa adds to this uncertainty, discouraging businesses and investors from making long-term investments.
In addition to these constraints there are several other challenges, including high quality requirements, bureaucratic paperwork and visa limitations that affect the development of trade relationships, especially in industries requiring skills and technological transfers. Setting aside these issues, lack of appropriate trade infrastructure, high logistical costs and political or economic instability in several regions of Africa further complicate the continent’s ability to maximise the benefits of Agoa.
However, these challenges can be tempered through such continental initiatives as the African Continental Free Trade Area (AfCFTA), regional customs unions and common markets, to drive regional economic integration. Being one of the flagship projects of the AU, AfCFTA is intended to increase intra-African trade through preferential tariff treatment for 90% of goods over time, thus harmonising trade regimes across the continent.
This will create a wide single market that is conducive to local industrialisation and reduced dependency on exports of raw materials by African countries. A customs union, one of the critical stages of economic integration, entails far more than just eliminating internal tariffs and creating a common external tariff on imports originating from non-African states.
This has a number of benefits, such as reducing the cost of administering trade and simplifying customs procedures for African businesses. However, full implementation of a customs union is not without its challenges, especially in the areas of aligning tariff policies among member states and equitably redistributing customs revenues among countries. A common market allows for free movement of goods, services, capital and people.
The most important strategic opportunity for a real change to trade and economic development in Africa involves the creation of an expanded, improved Agoa to include an all-Africa free-trade arrangement by seamlessly incorporating Agoa into AfCFTA.
Harmonising the two agreements would allow for the development of solid regional value chains, a platform for the acceleration of industrialisation and export diversification, and allow investment stimulation to become a reality through improved competitiveness of African economies.
However, to achieve this, Agoa will require substantial reform so that it moves beyond its unilateral character and provides more equity and sustainability for trade.
Upgrading Agoa to a genuine free-trade agreement for all African countries that are parties to the AfCFTA represents a core interest without any regional or geographical distinction. Such an extension will set in concrete Africa’s trade unity, promote closer regional co-operation, and open integration prospects into the global value chain.A further long-term perspective might be created, one that will be more likely to favour steady investment and a strategic plan as far as economic policy is concerned, with the extension of Agoa’s validity until 2041.
There is also the importance of reassessing Agoa eligibility criteria to avoid unilateral designations of its conditions of access. Agoa could be a true lever for development that is better suited to the realities and priorities of the continent, because it would develop closer participation in decision-making by African countries through harmonisation of standards and policies.
This way, it could ensure real bilateral co-operation through common interests in a sustainable partnership. It thus provides a rare opportunity to make African trade an engine of growth and development, as the reformed and strengthened Agoa would be incorporated into the AfCFTA, then into the customs union and common market.
Refurbishing this relationship with the US must be based on principles of equity, transparency and mutual respect; not only a conquest for Africa but an added value to the global economy. It follows that this agreement must be redefined if it is to become an effective tool for actual economic development on the African continent during the coming decades.
• Prof Tir, a former president of the National Economic, Social and Environmental Council of Algeria, is founder and CEO of Sviews Professional Services.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
RÉDHA TIR: Expanded Agoa offers best chance for real change to African trade development
With the act set to expire this year, there are questions about nations’ capacity to put up a collective defence of this crucial tool
The African Growth and Opportunity Act (Agoa) has, since its passage in 2000, been one of the cornerstones of trade relations between the US and Sub-Saharan Africa. Preferential access to the US market for more than 1,800 products in terms of this legislation has contributed to the African continent’s economic growth, creating hundreds of thousands of jobs in the process in addition to supporting structural reforms of beneficiary countries.
But with Agoa set to expire later this year, a number of questions arise about US strategic priorities and the capacity of African nations to put up a collective defence of this crucial tool. Two dates can be seen as milestones in this determinant period.
The first was the swearing-in of Donald Trump as US president on January 20, which is already altering the course of US policy and economic focus, with trade policy likely to assume a far more transactional tone. In less than a month, a summit of African heads of state will present a critical opportunity to synchronise collective action in the call for the renewal of Agoa. The meeting is of strategic importance to Africa, as long as the need to underline its autonomy and interests vis-à-vis this world power is underlined.
Though Agoa, created by the US to give African products preferential access to the US market, holds immense promise, in reality many constraints have got in its way. Of these, the origin rules under Agoa are considered particularly rigid, especially regarding the clothing industry, which has inhibited the diversification of African exports to the US.
The unilateral nature of this trade regime also created arbitrary eligibility criteria set by the US itself, and has therefore brought with it instability and uncertainty over how long and for whom such tariff advantages apply. The temporary nature of Agoa adds to this uncertainty, discouraging businesses and investors from making long-term investments.
In addition to these constraints there are several other challenges, including high quality requirements, bureaucratic paperwork and visa limitations that affect the development of trade relationships, especially in industries requiring skills and technological transfers. Setting aside these issues, lack of appropriate trade infrastructure, high logistical costs and political or economic instability in several regions of Africa further complicate the continent’s ability to maximise the benefits of Agoa.
However, these challenges can be tempered through such continental initiatives as the African Continental Free Trade Area (AfCFTA), regional customs unions and common markets, to drive regional economic integration. Being one of the flagship projects of the AU, AfCFTA is intended to increase intra-African trade through preferential tariff treatment for 90% of goods over time, thus harmonising trade regimes across the continent.
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This will create a wide single market that is conducive to local industrialisation and reduced dependency on exports of raw materials by African countries. A customs union, one of the critical stages of economic integration, entails far more than just eliminating internal tariffs and creating a common external tariff on imports originating from non-African states.
This has a number of benefits, such as reducing the cost of administering trade and simplifying customs procedures for African businesses. However, full implementation of a customs union is not without its challenges, especially in the areas of aligning tariff policies among member states and equitably redistributing customs revenues among countries. A common market allows for free movement of goods, services, capital and people.
The most important strategic opportunity for a real change to trade and economic development in Africa involves the creation of an expanded, improved Agoa to include an all-Africa free-trade arrangement by seamlessly incorporating Agoa into AfCFTA.
Harmonising the two agreements would allow for the development of solid regional value chains, a platform for the acceleration of industrialisation and export diversification, and allow investment stimulation to become a reality through improved competitiveness of African economies.
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However, to achieve this, Agoa will require substantial reform so that it moves beyond its unilateral character and provides more equity and sustainability for trade.
Upgrading Agoa to a genuine free-trade agreement for all African countries that are parties to the AfCFTA represents a core interest without any regional or geographical distinction. Such an extension will set in concrete Africa’s trade unity, promote closer regional co-operation, and open integration prospects into the global value chain. A further long-term perspective might be created, one that will be more likely to favour steady investment and a strategic plan as far as economic policy is concerned, with the extension of Agoa’s validity until 2041.
There is also the importance of reassessing Agoa eligibility criteria to avoid unilateral designations of its conditions of access. Agoa could be a true lever for development that is better suited to the realities and priorities of the continent, because it would develop closer participation in decision-making by African countries through harmonisation of standards and policies.
This way, it could ensure real bilateral co-operation through common interests in a sustainable partnership. It thus provides a rare opportunity to make African trade an engine of growth and development, as the reformed and strengthened Agoa would be incorporated into the AfCFTA, then into the customs union and common market.
Refurbishing this relationship with the US must be based on principles of equity, transparency and mutual respect; not only a conquest for Africa but an added value to the global economy. It follows that this agreement must be redefined if it is to become an effective tool for actual economic development on the African continent during the coming decades.
• Prof Tir, a former president of the National Economic, Social and Environmental Council of Algeria, is founder and CEO of Sviews Professional Services.
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