On 2-4 November, South Africa hosted its annual forum to discuss the future of the African Growth and Opportunities Act (AGOA). The focus of this year’s forum was the future of AGOA after its current iteration expires in 2025. While the specific details of the renewed act are yet to be determined, the overall shape of AGOA’s next iteration will be driven largely by the United States’ geopolitical priorities, particularly around China.
Trade ministers from more than 20 African countries and a high-level delegation from the US attended the forum, which was held in Johannesburg. South African President Cyril Ramaphosa gave the keynote address and attendees included Trade Representative Katherine Tai, Deputy Secretary of Commerce Don Graves as well as representatives from the United States Agency for International Development (USAID) and the US Export-Import Bank (US Exim).
AGOA allows eligible African countries tariff-free access to the US market for several goods. It is also a unilateral trade deal: eligible states do not have to grant reciprocal access to US goods, and the US president determines which countries are selected.
It is our view that AGOA will likely be renewed well before its expiry in September 2025. US President Joe Biden has encouraged Congress to reauthorize AGOA and will seek to ensure its passage regardless of the November 2024 US election outcome. The US will likely make amendments to AGOA to help build trade relations with Africa and counter Chinese influence on the continent. While these amendments should be broadly favourable for economies and investors in Africa, the unilateral nature of AGOA will continue to cause uncertainty. New provisions around critical minerals, even if not proposed as part of a new amendment, will likely be included in an AGOA renewal or subsequent arrangements.
Making friends, influencing countries
The US’ stated intent to extend AGOA is a shift from previous indications that it would move towards more bilateral trade deals. This aligns with changing US priorities: while bilateral agreements were intended to open greater commercial opportunities for US companies, the US is now more concerned about its geopolitical influence compared to that of rivals – particularly China. Additionally, one-on-one deals require long negotiations with individual countries and cannot be easily revoked once entered. AGOA, in contrast, is not only unilateral but covers most of the continent. The US can leverage the prospect of revoking eligibility to push foreign policy priorities.
To be an effective tool for influence, AGOA needs greater uptake. According to the US Federation of American Scientists, nearly 90% of non-energy imports under AGOA in 2022 came from just five countries. This has been attributed to limited awareness of the agreement among both African and US businesses, the perceived-stringent rules on product standards including keen US focus on workers’ rights, and the existence of other trade arrangements. In particular, the US Generalised System of Preferences (GSP) – until its expiry in 2020 – allowed preferential access to US markets for the poorest countries globally in a comparable manner to AGOA.
To address these issues, the US will not just renew AGOA but amend it. Republican Senator John Kennedy introduced a bill for a “clean” renewal in September. Since, US Secretary of State Antony Blinken has given statements indicating support for changes, and Democratic Senator Chris Coons has sponsored a bill proposing specific amendments. These amendments seem specifically designed to address the concerns of African governments and encourage greater uptake of the benefits of AGOA. They include:
- A 16-year extension of AGOA until 2041, longer than the 10-year extension granted in 2015. Ramaphosa requested a longer extension on the basis that it would encourage longer-term investments across the continent, such as factories looking to take advantage of the US market access offered by AGOA. Countries that become “high-income” will also only lose their AGOA eligibility once they have maintained that status for five years.
- A modification of AGOA’s rules of origin to better integrate with the African Continental Free Trade Agreement (AfCFTA). Under the proposed changes, inputs from North Africa would count towards the 35% local value requirement products must meet to qualify for preferential US market access. While North African countries are currently not eligible for AGOA, they would be required to meet its eligibility requirements to participate in the proposed broadened rules of origin allowances (which would effectively expand to them the economic leverage the US can exert through AGOA).
- A reduction in bureaucratic checks. This includes changing the required annual review of AGOA eligibility to every three years, eliminating textile visa requirements, and reducing product verification requirements for US Customs and Border Protection.
The above amendments – and AGOA’s renewal – will need to be ratified by the US Congress (legislature), which is not guaranteed given the body’s divided state less than a year before an election. At the same time, AGOA is one of the few pieces of legislation that enjoy bipartisan support. There are plenty of influential voices likely to support the renewal of the act before a new president potentially takes office or before any major shift in the prioritisation of African affairs.
African governments and investors will likely welcome these expected changes, but AGOA’s unilateral nature will still create uncertainty, limiting engagement.
In 2022, Burkina Faso, Mali, and Guinea were all expelled from AGOA following military coups; Ethiopia was removed that same year due to the Tigray conflict (2020-22); and the US announced on 30 October – prior to the forum – that it would expel Gabon, Niger, the Central African Republic (CAR), and Uganda from eligibility – the first two for military coups and the latter two for poor human rights records. Several US lawmakers have called for South Africa to be removed as well due to maintaining close ties with Russia despite the war in Ukraine: The US Senate Committee on Foreign Relations also criticised the forum being held in South Africa. Senator Coons’s proposed amendments included an immediate out-of-cycle review of the country’s eligibility.
Eligibility criteria cited as the reason to remove AGOA benefits eligibility (2000-23)
|Rule of Law/ Political Pluralism
|Labour and Human Rights
|Labour and Human Rights
| Labour (including forced and worker rights)
|Elimination of Barriers to US Trade
|Labour and Human Rights
Source: US International Trade Commission
Further removals are likely while the US uses AGOA to exert influence in an increasingly volatile geopolitical environment. Like South Africa, other countries will likely fall foul of the US government as governments across the continent fail to align with the US’ stance on global crises or geopolitical disputes. So long as AGOA eligibility can be revoked on a unilateral basis, export-orientated investments in Africa will still face uncertainty around their long-term preferential access to the US market.
Successive US administrations have voiced concern over US supply of critical minerals. President Joe Biden’s administration has taken steps – for example, through the Inflation Reduction Act – to remove Chinese influence from the supply chains of minerals required for the transition to clean energy, such as lithium and cobalt. Although not listed among Coons’s proposed amendments, AGOA’s renewal would offer the US an opportunity to further advance efforts to secure critical mineral supply chains. The creation of a separate AGOA eligibility category, as has been done for the textiles and apparels sector, could be done for the critical minerals sector.
In an early sign of this push to facilitate access to minerals, the US announced plans in September to develop the Lobito corridor, which seeks to connect the centre of copper mining operations at Ndola (Zambia) to the Lobito port (Angola) via the mineral-rich Lubumbashi and Kolwezi in southern Congo (DRC). US diplomats are keen to facilitate similar deals elsewhere in the continent and adding critical minerals to AGOA eligibility would provide a pathway to simplify US-African private sector engagement in the mining sector and support industries including infrastructure, the latter of which is dominated by Chinese companies.
As the renewal of AGOA approaches, the act’s function as a strategic fulcrum for the US to tip the scales of global influence will demand close monitoring from businesses and investors.