Africa Trade Promotion Act Passes U.S. Senate
Supporters of African Trade Deal Say Increased Exports to U.S. Will Stimulate African Economy
The U.S. Senate has passed the Africa Growth and Opportunity Act (AGOA), which could potentially support small businesses and smallholder farmers in Africa, helping to improve the vast region’s economy and quality of life by facilitating exports to U.S. markets.
The bill, which passed by a vote of 99 to 1 and was almost lost in the ‘sturm and drang’ surrounding the controversial renewal of presidential ‘fast track’ trade promotion authority, defines trade relationships between the United States and Sub-Saharan Africa. While the existing authorization will expire on Sept. 30, 2015, the Senate bill extends that authorization until 2025.
“AGOA renewal has been on the Congressional agenda since 2013, but the increasing partisanship in Congress has held it hostage to domestic politics,” says economist Helmo Preuss, noting that the AGOA “is a unilateral trade agreement, as the U.S. alone determines who benefits and [it] does not require reciprocal trade benefits from the Sub-Saharan African nations that are party to the pact.”
U.S. President Bill Clinton launched the AGOA in May 2000 for an initial eight-year period to promote two-way trade and investment between the U.S. and African countries, and since then U.S. exports under AGOA increased more than 500 percent, from $8.15 billion in 2001 to $53.8 billion in 2011.
In 2013, 70 percent of total imports from Sub-Saharan Africa (SSA)—$26.8 billion of $39 billion—came in under AGOA rules, almost quadrupling the $7.6 billion created during AGOA’s first full-year in 2001.
But with a majority of the total goods exported to the U.S. under AGOA entering the country in the form of oil, gas and minerals, the Senate reauthorization was predicated on modifications to emphasize non-energy exports and help Sub-Saharan small businesses and farmers grow their operations and create jobs.
AFRICAN TRADE AGREEMENT HAS ITS PROPONENTS AND DETRACTORS
According to the Office of the U.S. Trade Representative, U.S. exports to Africa support more than 120,000 jobs in the U.S. and has created some 350,000 direct jobs and 1 million indirect jobs in Africa.
Although 70 percent of SSA exports to the U.S. in 2013 were oil-related, non-oil AGOA trade has more than tripled since 2001 with apparel being the major beneficiary. Clothing exports to the U.S. have grown from $355 million in 2001 to $907 million in 2013.
The other major beneficiary of non-oil-related trade has been South African exports of vehicles to the U.S., with vehicle imports rising from $289 million in 2001 to nearly $2.2 billion in 2013. These and other more advanced manufactured products come almost exclusively from South Africa.
Critics of AGOA have said the trade incentives have failed to benefit as many African countries as hoped, with half the 38 countries eligible for participation in the program exporting less than $1 million per year to the U.S.
The program has also come under fire for dropping and adding AGOA-eligible countries on a yearly basis, creating a potentially risky climate for potential investors; others say the greatest barrier in taking full advantage of AGOA is not eligibility, but a lack of trade and infrastructure in eligible countries.