HomeNewsFinanceAfrica Sourcing Veteran Explains ‘Trickle-Down Effect’ of Delaying AGOA Renewal

Africa Sourcing Veteran Explains ‘Trickle-Down Effect’ of Delaying AGOA Renewal

Set to expire in 2025, AGOA gives dozens of African nations preferred, duty-free access to the U.S. market on more than 1,800 products.

The 2023 U.S.-sub-Saharan Africa Trade and Economic Cooperation Forum, otherwise known as the AGOA Forum, concluded Saturday in Johannesburg, South Africa, after several days of discussions signaling positive momentum for the the trade legislation’s potential renewal, reported Sourcing Journal’s Kate Nishimura.

Set to expire in 2025, AGOA gives dozens of African nations preferred, duty-free access to the U.S. market on more than 1,800 products. U.S. Trade Representative (USTR) Ambassador Katherine Tai led the U.S. delegation to the forum, which was co-hosted by South Africa’s Minister of Trade, Industry, and Competition, Ebrahim Patel. The event drew senior government officials from the U.S. and AGOA-eligible nations as well as representatives from regional economic organizations, the private sector and civil society.

Tai met with Mauritius Minister of Foreign Affairs, Regional Integration and International Trade Maneesh Gobin and Tanzania Minister of Industry and Trade Ashatu Kijaji to discuss worker-centered trade policy and how it can contribute to sustained economic growth. She also met with the African Union’s Commissioner for Industry and Trade Albert Muchanga, and Secretary General of the African Continental Free Trade Area (AfCFTA) Wamkele Mene on key regional integration issues. Other senior U.S. officials discussed bilateral market issues, food security and agricultural sustainability with leaders from South Africa, Kenya and Uganda.

“Let us continue to build from here, to write the next chapter of our story together, to make AGOA a beacon that shines for years to come,” Tai said on Saturday. “We have a lot of work ahead of us, but as we wrap up our time in Johannesburg, I leave optimistic and hopeful.”

Prior to Tai’s travel to South Africa on Thursday, President Biden expressed strong support for the reauthorization of the trade agreement, calling it “a landmark, bipartisan law that has formed a bedrock for U.S. trade with sub-Saharan Africa for more than two decades.”

“I encourage Congress to reauthorize AGOA in a timely fashion and to modernize this important Act for the economic opportunities of the coming decade,” he added.

Biden said the law is facilitating economic growth across sub-Saharan Africa, lending competitiveness to its products and diversifying exports while creating tens of thousands of jobs. “I am committed to expeditiously working with Congress and our African partners to renew this law beyond 2025, in order to deepen trade relations between our countries, advance regional integration, and realize Africa’s immense economic potential for our mutual benefit,” Biden said. “In so many ways, Africa is the future—and so when Africa succeeds, the whole world succeeds.”

That message was underscored over the coming days, with the U.S. delegation to South Africa highlighting the continued commitment to AGOA and its renewal. Discussions centered on how to modernize the agreement as a part of its reinstatement, with the goal of increasing AGOA utilization, promoting gender equity and inclusion within the program, and enhancing the partnership between the U.S. and sub-Saharan Africa to drive opportunities for Africans and Americans.

With bipartisan backing in Washington, AGOA’s lagging renewal has frustrated some advocates. “First and foremost, AGOA renewal needs to be approved by U.S. Congress, meaning the collaboration between the Biden administration and the legislative branch is critical,” Dr. Sheng Lu, associate professor and director of graduate studies in the Department of Fashion and Apparel Studies at the University of Delaware, told Sourcing Journal. “Ultimately, this process is political.”

Lu noted the “broad support” for AGOA’s renewal, pointing to Sen. Chris Coons’ (D-Del.) release on Monday of a discussion draft for the AGOA Renewal Act of 2023, which proposes a 16-year extension. Independent studies by the U.S. International Trade Commission highlight the growth of sub-Saharan African countries’ apparel exports to the U.S. under the agreement; U.S. imports of apparel from AGOA beneficiaries grew from $939 million in 2001 to $1.4 billion in 2021, for example.

“However, AGOA renewal still faces several major political challenges,” Lu said, adding that the Biden administration is keen to promote more regional integration with a new version of the agreement. “This could be updated rules of origin provisions that allow input from the African Continental Free Trade Area (AfCFTA) to be qualified for the AGOA benefits.”

“Some Republican legislators are concerned about the relationships between AGOA member countries and ‘adversary’ countries like China, Russia, and Iran,” he continued. And recently, human rights violations were behind Gabon, Niger, the Central African Republic and Uganda getting dropped from AGOA.

With an election year approaching, Congress is also “packed with other agendas” that could make “finding an opportune time to pass the AGOA renewal bill a challenge,” Lu said. He pointed to the Generalized System of Preferences (GSP), which has been expired for almost three years, as an example of legislation that has been allowed to languish without resolution. “Despite the strong bipartisan support, the renewal bill has not passed yet mostly due to political reasons,” Lu said.

Moving forward, “a smooth AGOA renewal is hopeful, but it requires substantial efforts and the process still evolves many uncertainties,” he added.

Jessica Ramey, CEO of Kenya-based sourcing, product development and production management firm Mercantilia Consulting said she is “confident” that the legislation will be renewed before the clock runs down. “It has been a valuable and well-supported trade preference program since its inception, and I am thankful for President Biden’s support in its timely renewal,” she said. “What we hope happens is that Congress clearly listens to the input from the private sector and understands how critical an immediate renewal is to the continued success of U.S. manufacturing in Africa.”

Ramey said she is encouraged by the possibility of bolstering AGOA’s utilization with improvements, “but most importantly, it must be renewed without a lag in the effective dates.” Mercantilia represents several U.S. buyers who previously sourced goods from Ethiopia, which lost its AGOA eligibility in 2021 due to human rights violations during the civil war. The firm’s clients were forced to choose between moving their businesses to alternate sourcing locales, “or stay[ing] and absorb[ing] the significant cost increase that comes with keeping your business with your current manufacturing partners.”

“The benefits of AGOA are a key, if not the most critical, factor in our buyers’ financial planning and strategy when they chose to manufacture in sub-Saharan Africa,” she added.

Ramey also worries that continued uncertainty about the legislation’s future will dissuade investment in the region. The longer a decision on renewal “remains in the air,” the greater the “trickle-down effect on the manufacturing sector,” she said. “It creates doubt and worry in the buyers’ minds, leading them to investigate alternatives outside of the continent,” she added.

Further delays could “stagnate discussions with potential new buyers and investors, as they wisely prefer to wait to see what the outcomes of these discussions will be before investing their time and resources into a new opportunity,” Ramey said.

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