As the Trump administration’s withdrawal from the AGOA pact threatens Africa’s duty-free access to the US market, the continent must prepare for negotiations and strengthen its regional value chain to minimize the impact.
The Future of African Growth and Opportunity Act
African nations have enjoyed duty-free access to the US market for over two decades under the ‘African Growth and Opportunity Act’ (AGOA). The pact, which has been renewed several times, provides eligible sub-Saharan African countries with duty-free access to the US market for over 1,800 products. However, trade decisions by the Trump administration, including the imposition of a universal 10% tariff on all countries, threaten the future of AGOA.
The African Growth and Opportunity Act (AGOA) is a United States trade preference program that allows eligible sub-Saharan African countries to export thousands of products to the US market duty-free.
Established in 2000, AGOA aims to promote economic growth, reduce poverty, and improve living standards in participating countries.
To qualify for AGOA benefits, countries must meet certain eligibility criteria, including democratic governance, human rights, and labor practices.
The Impact of AGOA on African Economies
The loss of AGOA could result in significant job losses, hikes in commodity prices, and higher costs of doing business for African economies. According to experts, short-term job losses will be a major concern. For example, ‘Lesotho‘s garment industry’ , which is a prominent sub-Saharan African exporter of garments to the US, may face significant challenges if AGOA is not renewed.
Enacted in 2000, the African Growth and Opportunity Act (AGOA) is a US trade policy that provides duty-free access to the US market for over 6,000 products from eligible African countries.
This has led to significant economic growth in many African nations, with exports increasing by up to 300% in some cases.
AGOA has also created jobs and stimulated investment in various sectors, including textiles, agriculture, and manufacturing.
As of 2022, 39 African countries are beneficiaries of the program, making it a crucial driver of economic development on the continent.
African Economies Must Prepare for Negotiations
Africa’s ability to hold a bargaining chip in trade negotiations with the United States is limited. However, economists believe that the continent must refocus on luxury products, such as ‘ornaments and artifacts’ , which are currently not part of the products with preferential access to the US market. Strategizing for the future, African countries may need to negotiate as a collective rather than as individual countries, thereby strengthening the regional value chain.
The Role of Intra-African Trade
Boosting intra-African trade is crucial for securing Africa’s economic future. The ‘African Continental Free Trade Area (AfCFTA)’ is the world’s largest free trade area and has the potential to lift nearly 30 million Africans out of extreme poverty by 2025. By leveraging platforms like AfCFTA, African countries can strengthen their regional value chain and increase intra-African trade.
The African Continental Free Trade Area (AfCFTA) is a trade agreement among the member states of the African Union that creates a single market for goods and services in Africa.
The agreement aims to boost 'intra-African trade, increase economic growth, and reduce poverty.'
As of 2022, 54 out of 55 African countries have signed the agreement, with 29 countries having ratified it.
AfCFTA is expected to increase intra-African trade by 52% by 2035.
Conclusion
The future of AGOA is uncertain, but one thing is clear: Africa must prepare for negotiations with the United States. By strengthening its regional value chain, boosting intra-African trade, and negotiating as a collective, African countries can minimize the impact of AGOA’s discontinuation. The continent must put its house in order and secure its economic future by prioritizing growth, investment, and trade.
