US-Africa Trade Updates

africa-trade-updatesThe recent 2016 US – Sub-Saharan Africa Trade and Economic Cooperation Forum, or African Growth and Opportunity Act (AGOA) Forum, took place on September 26, 2016 in Washington, DC. The Forum looked not only at the US-Africa relationship now and how African countries could better gain from the trade preferences of AGOA, but it also started the conversation on the future of US-Africa trade and how to best design such a relationship in the years ahead after AGOA expires.

The Office of the US Trade Representative produced a report just in advance of the Forum entitled, “Beyond AGOA: Looking to the Future of US-Africa Trade and Investment.” It focuses on the variety of potential agreements or arrangements that could be pursued for the time period after 2025 when AGOA expires, and is unlikely to be renewed. The report notes a variety of possible options, including a comprehensive trade agreement (likely meaning something similar to the Trans-Pacific Partnership or the Trans-Atlantic Trade and Investment Partnership, with high standards and reciprocal access); an arrangement similar to that of the EU Economic Partnership Agreements (EPAs), which is an arrangement between the EU and Africa that is described as limited and asymmetrical; a continuation of efforts like the Trade Africa initiative that promotes and provides capacity building assistance; or a continuation of certain trade preferences that are tied to policy interests of the US, like AGOA.

While the US made the point in the report that there is not yet a determined path forward, it is clear that a lot of thought has gone into developing the US position, and it is necessary for Africa to also begin preparing a position on the matter if there is to be a continental consensus on certain issues. Trade negotiations along the style of TPP take years to develop, therefore, despite AGOA still having almost nine years remaining, negotiations would likely need to begin in the next few years if such an agreement would be the way forward.

Meanwhile, there is much that needs to be done in order to better utilize AGOA during the remaining period of the legislation. To provide some background, AGOA is a unilateral trade preference program from the United States for 38 eligible African countries that was signed into law in 2000 by President Bill Clinton. It provides duty-free access to the US market for 6,800 products from sub-Saharan Africa, with a goal of helping to develop new export products and create jobs on the continent. To date it has created more than 300,000 direct jobs on the continent, each of which is estimated to support five additional individuals, and AGOA-related trade is estimated to indirectly support as many as 1.3 million jobs across the continent. The legislation was set to expire in September 2015, but Congress voted to extend it for an additional 10 years, through 2025.

A main goal of the legislation has been to help support the economic development and diversification of African countries. Over the course of the legislation, the majority of exports to the US under AGOA have generally been made up of energy products, however new sectors have managed to successfully develop and expand under AGOA, including textiles and apparel, horticulture, and automotive exports. It is hoped that over the remaining nine years of the legislation that African countries can better take advantage of AGOA in order to be able to further diversify their economies, create and develop sectors that could continue to be competitive without a trade preference, and create jobs for the increasingly young and educated workforce on the continent. The new legislation requires the development of AGOA utilization strategies, which would, by their nature, cause African governments to look strategically for ways to better use the trade preferences, and hopefully also pinpoint and develop potential successful sectors and develop ways to better support their private sectors.

The next decade will be a key time for US-Africa trade. The Africa of today is very different from the one for which President Clinton signed the initial AGOA legislation. The Economist called Africa the “hopeless continent” in 2000, but now Africa is seen as a continent on the rise. The countries of Africa are also in the process of negotiating a Continental Free Trade Area (CFTA), which would at completion make Africa the largest free trading area in the world linking 54 countries and over a billion people, and thus a globally competitive and important market. Both Africa and the US stand to gain a great deal through determining and developing an engaging trade and investment relationship, and the years ahead will be an exciting time to be working in this field.

*The views, conclusions and recommendations of this article are solely those of its author, and do not necessarily reflect the views of the African Union or African Development Bank.

zlewisAbout the Author:  Zenia Lewis | Trade Advisor, African Development Bank – Zenia Lewis currently works for the African Development Bank on a special US-Africa Trade & Investment Promotion Initiative where she serves as a Trade Advisor to the African Union Mission in Washington, DC and works with DC-based African Embassies and Governments on US-Africa trade policy, capacity building, monitoring and evaluation, and trade promotion. Prior to this she worked with a boutique international development consulting firm, the AfDB in Tunisia, and the Global Economy program at the Brookings Institution in Washington, DC. Zenia holds a master’s degree in public policy focusing in international trade and economic development from the University of Michigan.

 

The views expressed by the author(s) of article(s) published in this newsletter are their personal views and should not be interpreted as the views of The Association of Women in International Trade (WIIT) or its individual members. See full disclaimer here.