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Obama’s trade boost prompts African relief

Obama’s trade boost prompts African relief

When President Barack Obama finally put pen to paper on the African Growth and Opportunity Act (AGOA) in late June, producers across the continent – from Nigerian footwear makers to Lesotho trouser stitchers – breathed a collective sigh of relief.

The 10-year renewal of AGOA, a trade agreement which gives 39 sub-Saharan African states duty-free access to the US market, will allow for the continuation of trade incentives that have allowed some African exporters – particularly in metals, vehicles and the garments industry – to flourish.

That extension is much needed in order to quell recent declines in US-Africa trade. According to figures from the US Department of Commerce, AGOA imports to the US totalled $14.2bn in 2014, a huge 47% decline on the previous year. The drop was largely blamed on a decrease in imports of petroleum products.

US trade with sub-Saharan Africa meanwhile totalled just $52.1bn last year, a decrease of 18% on 2013. Even before the fall, many believed that US engagement with Africa was meagre and slow-footed.

Obama’s renewal until September 2025 represents the longest extension in the history of the act – a move that Witney Schneidman, a nonresident fellow at the Brooking Institution’s Africa Growth Initiative, says will provide greater certainty to African exporters.

“The Senate’s new reauthorisation bill provides exactly the type of stability and predictability required for beneficiary countries to utilise AGOA more effectively and for companies to make long-term investment decisions in the continent,” he wrote in a blog post.

As reported in African Business in June, it is estimated that some 350,000 direct and 1m indirect jobs have been created on the continent as a result of AGOA.

The act has been transformative for a number of industries, creating some 35,000 jobs among Lesotho textile producers and 85,000 jobs in South Africa’s citrus industry.

According to Schneidman, the renewed AGOA will contain a new focus on agriculture, offering particular support to businesses and sectors that assist women farmers and entrepreneurs.

Other specific measures include technical assistance for African agribusiness and a boost in support personnel for agriculture programmes.

Significantly, the act will also introduce new pathways for dealing with countries the US deems to be in contravention of the human rights, labour freedom and political plurality provisions of AGOA.

The US had previously expelled countries including Madagascar, South Sudan, The Gambia and Swaziland – expulsions blamed for decimating industries and jobs dependent on trade with the US. In a December 2014 interview with Bloomberg, South African and Swazi billionaire Natie Kirsh was particularly outspoken over the US decision to exclude Swaziland from AGOA.

“That translates into 150,000 or 200,000 people having nothing to eat. Bill Clinton initiated AGOA, George W. Bush nurtured it and Barack Obama is destroying it,” he said, arguing that each Swazi worker supports up to 10 people.

The US will now be able to ramp up assessments on countries falling short, but nations will also be given a 60-day warning if their trade preferences are to be withdrawn.

AGOA was first introduced under the Clinton administration in 2000 with the intention of boosting trade links with the continent. The act arguably represented a new phase in relations – one rooted in trade as a means to expand development and poverty reduction. The popularity of the act was reflected in three extensions under the Bush administration. 

But despite bipartisan political support in the US and the fact that recent engagement with Africa pales in comparison to that of China’s, the renewal of AGOA was by no means assured. And uncertainty around the renewal caused some imports into the US to dry up in earlier 2014 amid fears that AGOA would be sunk in wider political battles over US trade. 

Part of the reason for the act’s eventual success lies with AGOA’s popularity among US industry groups. As well as giving African states preferential access to the US market, it is envisaged that AGOA will open up new markets for American products too.

“The measures included in the trade preferences bill passed today are critically important to our industry,” said Juanita Duggan, chief executive of the American Apparel & Footwear Association on the day the act was renewed.

“Renewal of programmes like AGOA…provides sourcing stability, ensuring that US companies doing business with those regions can do so without disruption.”

David Thomas

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Written by David Thomas

David Thomas is deputy editor at African Business Magazine. He has also been published in the Financial Times, the Wall Street Journal, the Economist and South Africa's Cape Times.

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