AGOA Forum Ends Without Greater Clarity About the Scheme’s Future

17 August 2017

African and US officials, private sector representatives, and members of civil society organisations gathered last week in Lomé, Togo, for two days of discussions during the 16th AGOA Forum. The forum addressed the implementation of the African Growth and Opportunity Act (AGOA) and considered ways to strengthen economic ties between the US and sub-Saharan Africa.

Enacted in 2000 under President Bill Clinton, AGOA is a unilateral preference scheme that grants eligible countries in sub-Saharan Africa duty-free access to the US market for about 6’500 product lines. Since its adoption, the act forms the cornerstone of trade relations between sub-Saharan African economies and the US.

The AGOA bill was renewed in 2015 for an additional period of 10 years, and is thus expected to expire in 2025 unless changes are made to the current legislation (see Bridges Africa, 1 July 2015).

Held annually, the AGOA Forum serves as a platform to foster closer economic relations between the two sides and to discuss various issues related to trade relations under the scheme, including its utilisation by African countries.

This year’s edition was closely scrutinised by many observers as it was the first to be held under Donald Trump’s presidency, but the interventions made by US Trade Representative (USTR) Robert Lighthizer and his delegation in Lomé failed to provide certainty about the future of the programme.

The Togolese Minister of Trade and Promotion of the Private Sector Bernadette Essossimna Legzim-Balouki, who chaired the meeting, indicated that the US and AGOA-eligible countries agreed on a number of broad aims. These included the development of a plan to take more fully advantage of the scheme, the start of bilateral talks between eligible countries and the US, as well as the importance of establishing a mechanism that helps African countries deal with the issue of price volatility.
 

Under-utilisation

As in previous editions of the forum, the consensus that emerged from the two-day meeting is that the AGOA scheme is under-utilised by eligible African countries (see Bridges Africa, 29 September 2016 and 3 September 2015).

Speaking during the opening ceremony of the Forum, Legzim-Balouki emphasised that despite the significant opportunities offered by AGOA, its impact on trade flows has remained limited and benefited only a handful of sectors.

Peter Barlerin, Deputy Assistant Secretary in the US Bureau of African Affairs, echoed her remarks during the forum, underlining that “the number of countries benefiting from AGOA is very limited, as is the number of sectors.”

“The constraints of supply capacity, the lack of infrastructures, certain institutional and cultural gaps are amongst the causes linked to a limited utilisation of AGOA by the eligible countries,” said Legzim-Balouki.

A similar point of view was expressed by Albert M. Muchanga, the African Union’s Commissioner for Trade and Industry, who insisted on the importance of developing the needed skills to manufacture goods, but also to strengthen market intelligence and quality infrastructure, in order for African countries to be able to sustainably take advantage of market access opportunities in the US through AGOA.

During the last decade, trade between AGOA-eligible African countries and the US has declined significantly, from a peak of US$100 billion aggregated two-way trade in 2008 to $32 billion in 2016. During the same period, exports from AGOA-eligible countries to the US have decreased from $82 billion to $20 billion.

 

This collapse is mainly due to the decrease in oil imports from AGOA countries such as Nigeria, Angola, or Chad, as US domestic production of shale oil has dramatically increased over the past decade, with oil’s share in total African exports under AGOA falling from 89 to 58 percent between 2008 and 2016.

The oil sector has historically constituted the bulk of African exports to the US under AGOA. A few other sectors, however, have also benefitted from the scheme, and have shown timid but encouraging export growth during the last three years, including transportation equipment, apparel, and metals. As far as non-energy products are concerned, South Africa alone accounts for more than half of exports under AGOA.
 

No clear signal from the US

Although trade has featured prominently on Donald Trump’s agenda both during his presidential campaign and since his election, the US President and members of his administration have been remarkably silent about Africa and the way they intend to engage with the continent.

Regarding AGOA specifically, the administration’s stance was not clear before the forum, leaving some commentators wondering whether Washington would like to seek a change in the current legislation or see it keep its current form until 2025.

The interventions made last week by Robert Lighthizer, who led the US delegation at the meeting, did not bring absolute clarity on this issue, as the USTR did not address the issue in concrete terms. His remarks seemed, however, to indicate that the Trump administration does not intend to call into question the current version of AGOA in the short term, but wants to transition to greater reciprocity in its economic relations with African economies in the longer term.

“Let us focus on ways we can achieve deeper commercial engagement now while working towards greater reciprocity in the future to ensure that sustained political support for our trade relationship goes forward,” said Lighthizer in opening the forum.

Remarks made by US Commerce Secretary Wilbur Ross at the US Africa Business Summit in June had triggered concerns about the future of AGOA, as he said that the US needs to continue its transition from an “AID-based” to “TRADE-based” relationship with Africa.

“To that end, having two-way trade agreements, not just temporary trade preferences, would create long-term, sustainable improvements to quality of life on both sides of the Atlantic,” said Ross.

The question of reciprocity is not, however, a new topic. In the run-up to last year’s AGOA Forum, former US president Barack Obama unveiled a USTR report which highlighted “greater reciprocity” as one of the key principles that should guide US-Africa trade relations following AGOA expiration in 2025 (see Bridges Africa, 29 September 2016).

“Bilateral trade that benefits both U.S. and African exporters and service providers lies at the core of our Africa trade policy. I encourage our AGOA partners to promote fair trade, foster an improved business environment, and create economic opportunity that lays the groundwork for the next stage in the U.S.-Africa trade relationship,” said USTR Lighthizer in his concluding remarks at the forum.
 

“Out-of-cycle” review

The forum took place against the backdrop of an “out-of-cycle” review of trade benefits to Rwanda, Tanzania, and Uganda under AGOA, announced in June by the USTR.

The review was triggered by a petition filed by the Secondary Materials and Recycled Textiles Association (SMART), which has been complaining against a March 2016 decision by members of the East African Community (EAC) to phase out the imports of second-hand clothing by 2019. While the EAC decision was taken with the objective of fostering the development of regional textile and leather industries, SMART has argued that it violates AGOA eligibility criteria.

A public hearing has already taken place in mid-July, but a decision has yet to be announced as to whether the three East African countries will be able to preserve AGOA benefits.

“The hearing was just one of the first steps in gathering information to determine whether or not the allegations in the petition were true or false, and we’ll continue working on that issue,” indicated Constance Hamilton, Acting Assistant US Trade Representative for Africa, during a press briefing in early August.

Gathered on the sidelines of the AGOA Forum, African trade ministers issued a joint communiqué in which they expressed concerns about the use of out-of-cycle reviews by the US, emphasising that AGOA must promote the continent’s industrialisation efforts.

“The review process should not be used in a way that would be detrimental to the spirit of AGOA and ministers urged the United States to consider legitimate public policy issues that are critical to Africa’s development, in considering petitions for out-of-cycle reviews,” reads a communiqué releases by South Africa’s Department of Trade and Industry.
 

ICTSD reporting; “Africa-U.S. AGOA trade talks end with no decision, waning enthusiasm,” REUTERS, 10 August 2017; “No clarity on AGOA following African forum with US officials,” ENCA, 15 August 2017. “Trump administration's Africa policy in focus at AGOA trade talks,” REUTERS, 8 August 2017.

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