Skip to main content
Support
Blog post

April's Last Word

Food-map-of-Africa-for-Apr-Last-Word

 April's Last Word

"Looking Back at AGOA's History to Inform its Future"

by Steve McDonald, Director, Africa Program and the Project on Leadership and Building State Capacity

Recently, I gave a presentation on Capitol Hill on the development and hopefully continued support for the African Growth and Opportunity Act, or AGOA (Title I, Trade and Development Act of 2000; P.L. 106–200). AGOA was approved by the U.S. Congress in May 2000 and then signed into law by President Clinton with the purpose to assist the economies of sub-Saharan Africa and to improve economic relations between the United States and the region.   The original language of the bill touted trade and investment as not only promoting economic development, but for encouraging broad participation in a political process in "which freedom can flourish."  It stated:

"Increased trade and investment flows have the greatest impact in an economic environment in which trading partners eliminate barriers to trade and capital flows and encourage the development of a vibrant private sector that offers individual African citizens the freedom to expand their economic opportunities and provide for their families."

The AGOA bill surmised that offering the countries of sub-Saharan Africa enhanced trade preferences would encourage both higher levels of trade and direct investment in support of the positive economic and political developments under way throughout the region; and encouraging the reciprocal reduction of trade and investment barriers in Africa would enhance the benefits of trade and investment for the region as well as enhance commercial and political ties between the United States and sub-Saharan Africa. Not only did it envision encouraging increased trade and investment between the United States and sub-Saharan Africa, but it hoped to do the following:

  1. Reduce tariff and nontariff barriers and other obstacles to sub-Saharan African and United States trade;
  2. expand United States assistance to sub-Saharan Africa's regional integration efforts;
  3. negotiate reciprocal and mutually beneficial trade agreements, including the possibility of establishing free trade areas that serve the interests of both the United States and the countries of sub-Saharan Africa;
  4. strengthen and expand the private sector in sub-Saharan Africa, especially enterprises owned by women and small businesses;
  5. facilitate the development of civil societies and political freedom in sub-Saharan Africa; and
  6. establish a United States-Sub-Saharan Africa Trade and Economic Cooperation Forum.

AGOA also established the position of Assistant U.S. Trade Representative (USTR) for Africa, a post first held by Rosa Whitaker and now by Florizelle Liser. Those in support of the bill urged OPIC and ExIm Bank to take certain steps like establishing an equity fund for Africa and requested the Secretary of Commerce to take steps to ensure that at least 20 full-time Commercial Service employees are stationed in sub-Saharan Africa, with full-time Commercial Service employees stationed in no less than 10 different sub-Saharan African countries.

The triumph of this remarkable legislation was the partnership that brought it about, with executive and legislative branch, private sector and governmental, and democratic and republican cooperation.  That bipartisan spirit remains intact today with the determination of many Congressional members and the executive branch of government wanting to see to the renewal of AGOA.

However, before legislative action on an initiative of this potential can be commenced, we must acknowledge that AGOA has been inadequate in transforming Africa's sectors into equitable partners of global supply chains and distribution networks. This possibly was because AGOA came at a time when, except for a handful of economic success stories, Africa's development lagged behind the rest of the world.  But AGOA has only worked for a few countries, and some of its gains in textile production and job creation in Africa have been lost to Chinese competition, among other factors.  ExIm Bank and OPIC have not yet taken the lead that the legislation had hoped.  The 20 requested Commerce officials are not out there.

The United States must not live in the past. Today, entrepreneurs from Brisbane to Sao Paulo, Seoul and Beijing, reap incredible profits from their Africa ventures; in fact, Africa brings the highest return on investment in the world.  And in overly relying on the inadequate trade provisions in AGOA, the U.S. loses strategic ground each day to third countries.

From this standpoint, those advocating simple continuity of AGOA or pushing for small ball reform independent of the bigger picture may actually be the undercutting  a more progressive U.S. - Africa policy - even more dangerous to American progress than traditional protectionist  and isolationist views.   Now may be just the right time and right environment for the U.S. to craft a more expansive program and economic initiative for Africa - an enhanced AGOA.  Instructively, as America's most significant Africa program, AGOA presents a baseline for a more equitably beneficial partnership.  While we now have the Transatlantic Trade and Investment Partnership with the European Union and the Trans Pacific Partnership, there is no such equivalent for Africa.

What is needed is coordination and consultation across the spectrum of stakeholders – private sector, Congress, the White House, State Department, Commerce, and all the specific agencies taxed with trade policy – and with Africa governments and private sector.  A comprehensive policy will only emerge if we are all talking to each other.

The Corporate Council on Africa (CCA) just announced their publication titled, Promoting Shared Interests: Policy Recommendations for the Second Term of the Obama Administration. CCA shares my belief in a need for policy coordination. The report's opening statement expresses the central theme of the recommendations:

"There is grave concern in the U.S. business community that America is being squeezed out of the 21st century African economy.  Without a much better and more focused effort, the United States may lose its pivotal chance to play a substantial role in the development of a region that is of major importance to us, and also miss a chance to help our own economic recovery."

While underlining the need for better policy coordination, we are comfortable with looking at AGOA as the focus of these efforts.  It needs to be dealt with before this Congress ends and it can be the basis around which a more comprehensive policy can emerge, as long as it is understood that AGOA needs enhancement and expansion.

What should an enhanced AGOA look like?

There are specific steps that can be implemented by the Administration and Congress to achieve an ambitious bipartisan transatlantic partnership between the U.S. and Africa. Government must start by incorporating AGOA into a legislative endeavor that ultimately supports an expanded U.S. commercial presence in Africa.  The old mantra, "Trade not Aid," must be made a reality.  African governments are increasingly better placed to take care of their own people which, on its own, creates the foundation for a perfect situation for business in Africa, since the U.S. can shift precious resources towards economic development activity.

To help Africa achieve a more sustainable path to development, the U.S. must make the support of regional integration a much higher priority than currently is the case, an original goal of AGOA when it was first designed. There's no question that if Africa is to reach middle income status in the foreseeable future, it must be integrated into the supply chains and distribution networks which increasingly dominate international trade. Sub-Saharan African countries are at the stage where an enduring partnership is necessary for their emergence. The economies of almost all of the 48 countries into which Sub-Sahara Africa is subdivided are too small to effectively participate in world class supply chains and distribution networks.  Beyond that, there is a need to add agricultural products to the list of duty-free goods.  While not listing them all here, there are many other suggestions for a new, enhanced AGOA. I am optimistic that this conversation will continue with the full support of my programs, and hopeful that steps will be taken to make a new and improved AGOA legislation will become a reality.

Related Program

Africa Program

The Africa Program works to address the most critical issues facing Africa and US-Africa relations, build mutually beneficial US-Africa relations, and enhance knowledge and understanding about Africa in the United States. The Program achieves its mission through in-depth research and analyses, public discussion, working groups, and briefings that bring together policymakers, practitioners, and subject matter experts to analyze and offer practical options for tackling key challenges in Africa and in US-Africa relations.    Read more