What is AGOA?
Established in 2000 as an extension of the Generalized System of Preferences, the African Growth and Opportunity Act (AGOA) is a preferential trading program aiming to boost U.S.- Africa trade, open markets, and encourage African countries to contribute to the global economic market. AGOA provides duty-free treatment to goods from specially designated sub-Saharan African nations. While AGOA symbolizes the United States’ continued efforts to strengthen U.S.-Africa trade relations, it is set to expire in 2025.
AGOA initiatives
Key AGOA initiatives include:
- developing U.S. policies and initiatives to increase international trade and investment on the African continent;
- establishing the Overseas Private Investment Corporation (OPIC) Infrastructure Fund to facilitate investment in pivotal transportation, power, and infrastructure projects as well as promote trade finance expansion via the U.S. Export-Import Bank;
- formulating a plan to establish a free trade agreement with sub-Saharan countries; and
- expanding Africa’s participation in the global trading system through technical assistance.
Critiques of AGOA
In 2024, thirty-two African countries are AGOA eligible. Uganda, Central African Republic, Gabon and Niger were recently removed from AGOA eligibility for their respective human rights violations and challenges to democracy. Despite this, the goal of AGOA remains clear – to ensure African countries receive opportunities to effectively participate in the increasingly intricate international trade landscape.
There are important critiques, however, pertaining to African nations’ economic growth since AGOA’s implementation and whether the Act has a meaningful economic impact on the continent. For example, there are critiques surrounding AGOA’s achievements related to labor and human rights protections, trade diversification, and economic growth. Others concern the imbalance of benefits of the agreement. For example, of the AGOA-eligible nations, only five nations produce 80 percent of duty-free non-oil exports to the United States. Finally, AGOA critics note that imports to the United States from AGOA beneficiaries have not lived up to the agreement’s potential, peaking in 2008 and composing around one percent of U.S. imports in 2021.
What does AGOA’s expiration mean for trade relations?
In November 2023, South Africa hosted its annual AGOA forum to discuss the future of the trade agreement and the state of U.S.-Africa trade relations. Discussions surrounding amendments to the agreement and implementing ways to maximize the potential of AGOA have received bipartisan support. Further, President Biden’s Africa strategy outlines goals to increase investment and trade with Africa by working with Congress to extend AGOA, especially considering China’s increased presence on the continent.
With AGOA’s expiry in 2025, renewal of the trade agreement and capitalizing on the formation of the African Free Continental Trade Area would allow for the potential to renew and expand U.S.-Africa trade relations. As United States Trade Representative Katherine Tai noted, “There are so many reasons for the United States to be investing in and enhancing our relationship with Africa. We have a very strong interest for continuing to articulate our vision for how the United States can show up as a strong partner.”
Although Congress is set to consider AGOA reauthorization in 2025, several potential updates to the program are already being discussed, including:
- incentivizing digital trade and e-commerce initiatives;
- providing opportunities to create stronger manufacturing ties between American companies and African nations;
- encouraging policy reform to support the integration of regional African economic trading blocs and entry of African nations into the global trading market;
- promoting two-way preferential trading between U.S. and African nations;
- updating the eligibility criteria to reflect human rights, environmental and other policy concerns, and
- incentivizing greater two-way investment.
The Senate Finance Committee is also planning a hearing for June 5, 2024 to consider ways to revitalize and renew AGOA, along with the Generalized System of Preference (GSP) and other preference programs.
Conclusion
A reauthorized AGOA can help build strong cross-continental economic relations, including through potential increased jobs, greater export diversification, more resilient supply chains, and economic growth for both sides – including the companies that use the program. It can also strengthen U.S. national security interests as geopolitics and trade flows on the African continent continue to shift. With AGOA’s expiry fast-approaching, the U.S. Congress and U.S. Administration will be interested in the stakeholders’ views on the program’s future.
Next steps
If you are interested in learning more about AGOA or its 2025 reauthorization, Hogan Lovells is well-positioned to assist you.
Authored by Kelly Ann Shaw, Khaosara Akapolawal, and Feven Yohannes.
