AGOA and Next Steps for African Trade
International trade has rocketed into the headlines in 2015. Never has there been so many trade acronyms bounded around with such vigor. One such acronym has profound significant for both the U.S. and nearly the entire African continent.
The reauthorization of the African Growth and Opportunity Act (AGOA) passed Congress on June 25 with President Obama signing it into law on June 29, to very little fanfare. Indeed, it seemed to be almost entirely overshadowed by the far more contentious votes on the Trade Promotion Authority (TPA) and the international trade negotiations that have been underway, particularly the Trans-Pacific Partnership between 12 nations in North America and Asia-Pacific and the Transatlantic Trade and Investment Partnership (TTIP) between the US. and E.U.
As AGOA is a trade preference program and unilateral grant, it is not negotiated between countries and thus has had less headline grabbing battles.
AGOA was first passed into law in 2000 for 15 years and would have therefore expired this year. After negative per capita growth rates in the mid-1990s, African trade was seen as a key plank in international relations. With bipartisan support, the Clinton administration agreed to a set of trade incentives on certain goods from African countries that led to the Act.
While the ten-year reauthorization may have been overshadowed by other trade issues, it’s breadth should not be underestimated. With just under 7,000 tariff lines, AGOA has already provided for nearly $12.5 billion of aggregate exports to the U.S. in the 2015 year-to-date through May. Since 2000, trade from Africa has nearly tripled, with the biggest beneficiaries being the apparel industries. Many African countries have gone from negative to healthy growth levels due to their level of exports.
The Act is not without its controversies. First, nearly three quarters of the benefits go to petroleum products, arguably one of the products in the least need of assistance. Second, while there was great optimism from the August 2014 African Summit in Washington that AGOA might be extended and enhanced, little has changed in its reauthorization.
Third, with the current trade negotiations under way, many other countries—particularly in Asia—could gain a competitive advantage over their African counterparts with unrestricted free trade. Other peripheral issues exist as well, such as the contentious Export-Import Bank, whose charter has not yet been renewed but is still referenced in the Act.
Some soundings by the current U.S. Trade Representative, Michael Froman, on the possibility of agreement between the U.S. and the EU on African trade could enhance the AGOA reauthorization. For now, while it still represents a massive trade benefits grant, other trade negotiations may take a bite out of the U.S. import pie.
Frank Samolis is a partner at Squire Patton Boggs LLP and co-head of its international trade practice group. He previously served as counsel to the Subcommittee on Trade of the Committee on Ways and Means for the U.S. House of Representatives.