Apr 06, 2015 - 11:00am

Trade’s Unfinished Business: The African Growth and Opportunity Act

President, U.S.-Africa Business Center
Sr. Vice President, U.S. Chamber of Commerce

As Washington debates renewal of Trade Promotion Authority (TPA), several other pieces of pending trade legislation also are calling out for attention. One of these is the African Growth and Opportunity Act (AGOA).

Since it was enacted in 2000, AGOA has become the cornerstone of U.S. trade and investment policy with regard to sub-Saharan Africa. However, absent congressional action, it will lapse on September 30, 2015.

Across Africa, U.S. companies of all sizes and sectors see a vast array of business opportunities. The 15 years since AGOA was enacted have witnessed a surge in economic growth across the continent: According to an analysis by The Economist, six of the world’s ten fastest-growing economies in 2000-2010 were in sub-Saharan Africa, and that growth continues today.

In the 2002-2014 period, the continent’s two-way merchandise trade with the United States rose by 47% to reach $72.5 billion. This increase in trade has led to the creation of thousands of American and African jobs and has fostered an impressive expansion of Africa’s middle class to nearly 350 million consumers.

However, the domestic economic policies of many African nations continue to serve as a drag on intra-regional trade and investment. Underdeveloped infrastructure links limit intra-regional trade. Further, trade with the United States has consisted largely of oil, gas and minerals. In this context, AGOA’s expiration in September provides the opportunity to review U.S.-Africa economic relations.

AGOA’s first objective is to “promote stable and sustainable economic growth and development in sub-Saharan Africa,” and it appears to be a big success on that score. As noted, Africa has seen unprecedented levels of economic growth since AGOA’s enactment. While only a fraction of this growth can be attributed to AGOA itself, the expansion in Africa’s trade generally played a significant role in this growth.

Further, it has been estimated that AGOA directly supported the creation of more than 300,000 jobs in sub-Saharan Africa, and AGOA-related trade indirectly supports as many as 1.3 million jobs across the continent. This growth in commerce also has supported the creation of as many as 100,000 jobs in the United States.

Looking ahead, the focus should be on the area of Africa’s non-energy exports to the United States, which have increased by more than 275% since 2000 — rising from $1.2 billion to $4.5 billion in 2013.

Apparel remains the largest non-energy category, followed by automobiles and other manufactured goods. Enhancing and extending for a longer duration the AGOA third-country fabric provision is one step the Chamber supports to build on these gains.

South Africa, Lesotho, Kenya and Mauritius are among the countries most extensively utilizing the benefits from AGOA. While AGOA is currently a one-way trade preference program, it could lay the foundation for a broader agreement securing permanent market access for both the United States and Africa.

Clearly, other countries also see huge opportunities in Africa. Many other major trading nations have been active in securing preferential trade agreements with Africa, including the Economic Partnership Agreements of the European Union, as well as agreements with Brazil and China.

However, while others forge ahead, the United States may be falling behind. AGOA’s looming expiration may already be undermining business and investor certainty. Companies operate with long planning horizons, and sourcing decisions are made many months or even years in advance.

For this reason, the expiration of AGOA in just six months is already beginning to affect business decisions. This looming deadline will have a dampening effect on trade in the months ahead.

The time to act is now. Action by Congress this year to begin the legislative process for AGOA renewal would send a strong signal of confidence in the U.S.-Africa economic partnership. The Chamber urges Congress to renew AGOA swiftly.

About the Author

About the Author

President, U.S.-Africa Business Center
Sr. Vice President, U.S. Chamber of Commerce

Scott Eisner is president of the U.S.-Africa Business Center (USAfBC) at the U.S. Chamber of Commerce.