The African Growth and Opportunity Act (AGOA) was passed in 2000 to serve as a major trade pillar. One of the most successful initiatives of the past 20 years, AGOA has positively impacted trade between the US and sub-Saharan Africa. Spurring Economic Growth AGOA supports sustainable economic development by providing duty-free access to U.S. markets for more than 1,800 different products from eligible sub-Saharan African countries. Consequently, it has increased FDI flows in textiles, steel and agricultural goods. As the act approaches its expiration date in September, so does the uncertainty of its fate. President Trump’s trade war is forcing some serious considerations about the future of this long-standing beloved program.
At the moment, 32 African countries enjoy the benefits of the African Growth and Opportunity Act (AGOA). For a quarter century, AGOA has been the pillar of U.S.-Africa trade policy. Kenya’s AGOA exports exploded from $55 million in 2001 to a staggering $603 million in 2022, demonstrating the program’s effectiveness at increasing trade flows. At the same time, there are growing worries that the production and packaging requirements will disproportionately hurt smaller countries by giving the upper hand to wealthier economies.
Impact of Tariffs on Trade Relations
Second to COVID-19, the Trump administration’s trade policies were AGOA’s biggest enemy. The expanded imposition of tariffs on other goods further aggravated this uncertain and dangerous landscape. Yet economic analysts have cautioned that the higher export costs caused by these tariffs would reduce competitiveness between African exporters. Cheta Nwanze, an analyst at SBM Intelligence, stated that “increased export costs would reduce competitiveness, potentially decreasing revenue and destabilizing economies.” This reaction is emblematic of a larger concern. The tariffs threaten to undo the progress that AGOA has made over the past two decades.
These changes have unleashed a wave of grassroots advocacy urging Congress to negotiate. Some are already calling for the creation of a new US bilateral trade agreement with African countries. The Presidency of South Africa emphasized this need, asserting that “the tariffs affirm the urgency to negotiate a new bilateral and mutually beneficial trade agreement with the US, as an essential step to secure long-term trade certainty.” Negotiations like these may well be decisive in determining whether African countries are able to keep their foot in the door of U.S. markets.
The Shift in Global Trade Dynamics
AGOA has been hugely impactful in increasing trade between Africa and the U.S. Today, changing global trade dynamics are undermining its importance. Notably, China has overtaken the U.S. as Africa’s top trading partner and is now one of the continent’s largest bilateral lenders. This shift brings into focus the strategic importance of AGOA for African economies in the years to come.
There’s no denying AGOA’s opened up U.S. markets to African manufacturers. Critics say that its rigorous criteria tends to favor larger economies, putting smaller nations at a disadvantage. In fact, South Africa’s automobile exports only represent 0.99 percent of the total U.S. automobile imports. Furthermore, auto parts exports are only 0.27 percent of the documented U.S. exports. These statistics underscore difficulties that more underdeveloped, yet eligible, economies encounter in taking advantage of all that AGOA has to offer.
Regardless of these obstacles, there is still a firm resolve among many African countries to continue AGOA’s life. Nwanze remarked on this sentiment, stating that “African countries aren’t known for making firm geopolitical stances, so many of them will try to hold on to AGOA,” suggesting that even if AGOA does not receive renewal, it may persist in a diminished capacity.
The Road Ahead for AGOA
With the expiration date of September fast approaching, what AGOA’s stakeholders — the African countries that benefit from AGOA trade and U.S. How the act is renegotiated or replaced could set the tone for U.S.-Africa trade relations for years to come. How willing the Trump administration would be to negotiate on this remains to be seen. The lack of clarity creates anxiety for African countries that rely on AGOA for economic lifeblood.
Ongoing negotiations could be thrown into disarray by a rapidly evolving international trade environment. Or that China is in the process of monopolizing Africa. To stave off American interests from falling further into decline, U.S. policymakers need to completely recalibrate their approach. Strengthening relationships with African nations via new trade agreements will be an important factor in staying competitive in this growing market.
