2023-11-04 20:00:00
In South Africa, the 20th summit of AGOA, the African Growth and Economic Opportunity Act, was held from November 2 to 4 in Johannesburg. Since 2000, this American law has allowed eligible sub-Saharan African countries to export to the United States without having to pay customs duties. This currently concerns 35 countries, which exported more than $10 billion in this way in 2022. Interview with Eckart Naumann, economist and senior associate at the Trade Law Center (Tralac), co-founder of the Agoa.info site.
Africa Point: What were the main issues of this 20th Agoa forum?
Eckart Naumann: This is a particularly important forum at the moment, because we are less than two years away from the expiration of AGOA, in September 2025. In 2015, the renewal was voted on only a few days before the expiration, this had been very destabilizing for many businesses. We must avoid this scenario at all costs. American importers and investors, and African exporters want a little assurance, they want to know if there is going to be continuity, because that could have an impact on investment decisions. The main demand of African countries is therefore to obtain confirmation of the renewal of AGOA.
The Biden administration has now come out in favor of this renewal: President Biden wrote a letter imploring Congress to renew AGOA. And prominent and influential senators have also written to Senate leaders imploring them to put the AGOA renewal process on the legislative calendar as soon as possible. There is also this consideration of having a twenty-year renewal instead of ten years.
But ultimately the decision to renew rests with Congress.
President Biden announced earlier this week the planned suspension of Gabon, Uganda, Niger and the Central African Republic from January 1, 2024, for non-compliance with eligibility criteria. Aren’t these suspensions also a factor of uncertainty?
These eligibility criteria are considered to be too strict and a very blunt instrument to punish or encourage a country to improve its situation. Concerning Niger and Gabon for example, they lose their eligibility because they have experienced unconstitutional changes of power. So what actually happens is that because of decisions by leaders or the military for example, it is ultimately the traders, the workers, the families, the consumers who are punished. It is therefore a very brutal instrument to influence or put pressure on the situation, punishing bad actors. A number of countries have therefore expressed concern, and put forward the possibility of moving from an annual review process to a five-year review process, which would allow these countries to be evaluated every five years. And if there are clear violations of the eligibility criteria, then yes, the country should be suspended.
Africa is also in the process of setting up its own free trade area, the Zlecaf (African Continental Free Trade Area). Is AGOA, which only concerns sub-Saharan African countries and 35 beneficiaries to date, likely to come into conflict with this initiative?
This is another question that emerged from this forum, to improve Agoa: linking Agoa preferences a little more closely to what is happening in terms of regional integration on the continent with this African free trade area. The Zlecaf has not been officially adopted, but it is a strong commitment in terms of trade agreements, and it will have an impact.
The United States has said it wants to support Zlecaf, and an innovative way to do so would be, for example, to link Agoa’s rules of origin to the possibility of sourcing from non-Agoa countries on the African continent. This therefore means that a country like Ivory Coast could subcontract certain raw products to non-Agoa countries, such as North African countries, and process them locally, to then export them to the United States as a product. finished Agoa. This would encourage regional value chains.
After twenty-three years of operation, what are Agoa’s failures?
One thing Agoa has failed to achieve is capture a larger share of the US market. When it was first adopted during the Bill Clinton administration, the share of US imports from Agoa beneficiary countries was just over 1%. Today, it’s less than 1%. As African countries, we are unable to capture more share of the American market.
Furthermore, not all countries have benefited equally from AGOA. Agoa has greatly benefited certain countries: Kenya, Lesotho, Madagascar, South Africa, Ivory Coast, Mauritius… A good dozen have really benefited from it, and others not at all .
That being said, it must be taken into account that the benefits are underestimated, as the Agoa data does not reflect the magnitude of the related trade. For example, Zambian copper is made into cables in Botswana, which are then exported to South Africa for the automobile industry, and these cars are exported to the United States. Botswana, Zambia and South Africa therefore benefit, but only the export of the finished car from South Africa is taken into account.
There is also a whole section of trade with the United States that is not taxed under American trade policy. In 2022, this concerns 37% of exports from Agoa beneficiary countries. Exports of Agoa products represent 40% of exports, resulting in 97% of total trade to the United States untaxed. We cannot therefore criticize AGOA for not being broad enough: only 3% of exports fall under normal commercial relations, and these are mainly exports of aluminum and steel from South Africa.
The problem is that there is often a very difficult customs process, the cost of logistics, the difficulty especially for SMEs of navigating the American regulatory environment… all problems that make exports difficult. There are a lot of things to improve on that side.
Doesn’t the rigid side of AGOA risk encouraging African countries to turn to other trading partners?
The United States certainly considers that rapprochements with Russia or China are, if not worrying, a problem that must be resolved and which requires vigilance so as not to find itself left behind. And I think that really plays a role in the renewal of Agoa. While there was some uncertainty regarding this extension, it is now certain that the United States cannot afford not to keep the Agoa beneficiary countries on its side. There is a shared desire to proceed quickly with this renewal, to lock in this relationship and prevent the influence of Russia or China from taking advantage of a potential vacuum.
In terms of soft power, fostering this economic and political relationship is absolutely essential for the United States. Before Agoa, the United States had virtually no trade relations with Africa.
But this goes both ways: African countries also greatly value this commercial relationship.
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