Africa: AGOA - Good for Africa, Warts and All?

24 July 2019

Cape Town — The African Trade and Opportunities Act (AGOA), established by the United States government on May 18, 2000, has been described as the cornerstone of the U.S. economic engagement with sub-Saharan Africa, where it has invested more than U.S.$7 billion towards trade capacity initiatives. Some say AGOA was the U.S. government's answer to China's growing presence on the African continent. But what is the U.S. strategy as AGOA nears its end, and the impact of Africa's "growing youth tsunami" as the  African Continental Free Trade Area starts being realised?

In a briefing with Assistant Secretary for the Bureau of African Affairs Ambassador Tibor Nagy and Constance Hamilton, the Assistant US Trade Representative for Africa, the U.S. government stressed that Africa is a top priority. "We see tremendous opportunities in this relationship. We want to work with our partners to unlock these gains," Nagy said.

Increasing trade and investment with the continent would be the mechanism for growing the continent's prosperity and providing jobs - for what he called the "Africa's growing youth tsunami" - who are in need of well-paying jobs.

Hamilton said, "Only by easing the ability of the private sector to start and grow their businesses can African countries hope to provide the jobs for Africa's youth and maximize the potential of the youth bulge."

Countries need to take an active role in creating competitive conditions in which companies, entrepreneurs and farmers can thrive, Hamilton urged. "By easing the way for private sector to operate and do business would also assist in creating jobs for youth, as well as easing of constraints for small businesses," she said.

Hamilton acknowledged the strides made by AGOA, but said that there were shortcomings.

Hamilton said AGOA benefits are "uneven, and more needed to be done to realize the full potential of U.S., Africa Trade. The benefits, she said, have not been broadly shared by all the countries that are part of the program".

Trade diversification was another concern raised, where petroleum products accounted for 67% of the AGOA trade imports.

When questioned on Nigeria's participation in AGOA, Hamilton said "I think that Nigeria has not taken advantage of AGOA because they send us mainly oil, so in a certain extent, they actually are taking advantage of it, probably more than some of the other countries but it is petroleum. And oil doesn't really create the kind of jobs or other benefits from trade that I think that countries are looking for. So I think that Nigeria, and I think the new government is talking about trying to expand and go beyond just petroleum production and get into other things, but that really is a question for what Nigeria wants to see happen," Hamilton said.

Nagy and Hamilton, speaking on AGOA and its end date of 2025, confirmed that discussions are under way on replacing it. "We're starting the conversations now with our partners to talk about what comes next. We do think that a free-trade area agreement builds on the success of AGOA in ways that it helps lock in the benefits the countries have already with AGOA, but it also provides the incentive to U.S. investors to do more on the continent," Hamilton said.

The African Continental Free Trade Agreement, AfCFTA, was founded by the African Union to bring African regions closer, to encourage intra-Africa trade and make the continent stronger within itself. But will the AU's plan for free trade between the continent's countries, and the ECOWAS single currency creation program for the Francophone West African nations, enhance the AGOA's goals, or create barriers or conflicts?

Hamilton said the government supports "a lot of the objectives of the AfCFTA".

"We do believe that lowering barriers to trade and investment and boosting competitiveness, attracting investment, those are things that we have long supported in our own engagement with the continent, so we are very pleased about the progress that they're making. We compliment the African Union, its partner states, all the stakeholders who have worked tirelessly to get this thing launched. We think this is something great for the continent."

Nagy said that the plan for ECOWAS is to introduce an ECOWAS currency in 2020: "They had planned that several times in the past, and they've had to delay the implementation, and we'll just see what happens in 2020. Obviously, the United States of America supports the sub-regional trade blocs and organizations like ECOWAS in Africa, but that is purely a decision for ECOWAS to make regarding its own economic interests."

Nagy, on a question on the US engagement efforts with Zimbabwe through the U.S. embassy in Harare, whether Zimbabwe would meet the remaining need-gap to becoming AGOA-eligible for 2020, he explained the AGOA membership process in some detail. "What happens is we in Washington get a considerable amount of information about each of the countries. Some comes from our embassy, some comes from independent sources, NGOs and various other sources. Then we get an inter-agency government team together that is chaired by the U.S. Trade Representative, and we discuss each of the countries. We discuss whether or not they meet the criteria. We discuss special concerns, problems that the countries may have, and it is a remarkably consensus-oriented process. Up to now there has never been really a dispute between U.S. government activities as to who does, who does not meet it.

"Then the recommendations go to the White House. The president will announce the eligible countries on January 1st. One other consideration is if there is a change in status, right, in any of the countries, then the president needs to notify Congress 60 days in advance of that. So it's a very thorough process, but it's remarkable that oftentimes - well, in government there are different points of view on a number of issues - but on this one there has been just remarkable consensus in how we view the eligibility criteria of the various African countries."

Zimbabwe has had sanctions imposed on it by the United States for what it says are 84 individuals engaged in corruption, the violation of human rights and undermining democratic institutions.

Gambia's Truth Reconciliation and Reparations Commission has opened hearings into abuses carried out during former president Yahya Jammeh's more than two decades in power. He is accused of killing journalists, torturing and killing political opponents, and sponsoring a campaign that allowed "witch doctors" to abduct hundreds of people and force them to drink unknown substances. Yammeh's family has also been banned from entering the United States.

Sudan has seen the ouster of Omar al-Bashir as president and a transitional government consisting of the military and civil society established. Al Bashir has been wanted by the International Criminal Court for war crimes and the killing of hundreds of Sudanese people during his presidency.

South Sudan, Africa's youngest country which split from Sudan after conflict that was largely about the former's oil, has also been at the centre of political wrangling between President Salva Kiir and Riek Machar who served as inaugural vice president of the country from its independence in 2011 until his dismissal in 2013.

All four countries are looking to join AGOA Hamilton said that The Gambia is eligible for AGOA.

"It's been brought back into the program. Countries like Zimbabwe and South Sudan ... we are very transparent in the concerns that we have when a country is not in AGOA. We don't always publicly notify, you know, put something in the press about this, but we make sure that the governments understand exactly where the shortcomings are and what we're looking for. So when we do the review, looking at a country like South Sudan or looking at a country like Zimbabwe, we make sure that we communicate with the government where the problems are and what we're looking for in terms of what they need to do to get eligibility.

"So we're very clear that we don't want governments to try to guess what they have to do. We want to make sure that they're very clear about the concerns that we have, and the concerns are always based around the eligibility criteria. Market access, human rights, labor issues, all of those are things that are important in this process, because without those in place, being in a program like AGOA is not going to make any difference. You're not going to be able to use the program, really, anyway."

Hamilton is looking to discussing "new trade initiatives" at the forum being held in Abidjan in August. "I think there's going to be interesting conversations with the trade ministers to make sure that they can utilize these new initiatives in the best possible way. AGOA's been around for almost 20 years, and as we continue to have this conversation and discussion during the forums, we all need to think about what should come next, and hopefully part of the conversation will focus on that as well. But we are looking forward to a very productive and informative AGOA forum, and Ambassador Lighthizer is looking forward to being there, as well as all of the U.S. delegation."

The full transcript of the AGOA session with Ambassador Nagy and Ms Hamilton.

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