Academic journal article Current Politics and Economics of Africa

African Growth and Opportunity Act (Agoa): Background and Reauthorization*

Academic journal article Current Politics and Economics of Africa

African Growth and Opportunity Act (Agoa): Background and Reauthorization*

Article excerpt

INTRODUCTION

In 2000, Congress passed the African Growth and Opportunity Act (AGOA), a U.S. trade preference program, in order to help spur market-led economic growth and development in sub-Saharan Africa (SSA) and deepen U.S. trade and investment ties with the region.1 Since its enactment, Congress has amended AGOA five times, making some technical changes and renewing the trade preferences through September 30, 2015.

According to the Assistant U.S. Trade Representative, (USTR) for Africa, -AGOA is the cornerstone of America's trade and investment policy with sub-Saharan Africa."2 Economic conditions in Africa, however, have changed considerably since Congress passed the initial AGOA legislation. Annual real gross domestic product (GDP) growth in SSA was nearly a full percentage point lower than global GDP growth (2.3% vs. 3.2%) in the decade leading up to AGOA's passage (1990-2000).3 Over the last 10 years, however, SSA's growth averaged 5.7 %, 2 points higher than the 3.7% world average. While the region still contains many of the world's poorest countries and faces significant economic challenges, some observers and policymakers argue that changing economic conditions warrant an evolution in U.S. policy toward SSA, focused more strongly on private sector investment and increasing twoway trade.4 In recent years, SSA's growing economic potential and abundant natural resources have attracted other foreign investors, including statesupported enterprises from countries such as China, which is now the region's largest trading partner.

Some Members of Congress, the Obama Administration, and many African governments have highlighted the successes of AGOA and have called for an expedited reauthorization process. As part of this process, Congress may wish to consider whether AGOA, in its current form, is achieving the initial goals of the program, including whether it addresses effectively the changing economic circumstances in Africa. Most interested observers are positive about the AGOA preference program, but some have expressed concerns about specific provisions of the program, such as the lack of coverage for certain agricultural products, or would like to see the AGOA preferences granted to a broader range of least-developed countries beyond just Africa. Others would like to see a broader program that addresses concerns over U.S. businesses' ability to effectively compete in the region, though this could also be addressed in complementary legislation or Administrative initiatives.5 This report seeks to inform the discussion on the potential reauthorization of AGOA through analysis of (1) the components of the AGOA legislation; (2) U.S. import trends associated with AGOA; (3) the impact of AGOA on African economies and U.S.-Africa trade; and (4) the issues surrounding the reauthorization process.

KEY PROVISIONS OF AGOA6

AGOA (Title I, P.L. 106-200), as amended, is a nonreciprocal preference program that provides duty-free access into the United States for qualifying exports from eligible SSA countries. Among the products that qualify for this duty-free treatment, apparel products have particular economic significance for several countries, in part due to special provisions granted to least- developed AGOA countries (-Third-Country Fabric Provision").7 In addition to the tariff preferences, the AGOA legislation includes mandates for an annual meeting of U.S. and African government officials to discuss trade and economic issues-the AGOA Forum-as well as specific guidelines on U.S. development assistance directed toward SSA. Countries must meet specific eligibility requirements to qualify for these benefits.

Table A-1 in the Appendix, provides a list of SSA countries, as defined by AGOA. It highlights the 41 current AGOA beneficiary countries, and notes their eligibility status for other aspects of the AGOA preferences and GSP. It also lists U.S. imports under AGOA and GSP for each country and its GDP/capita-a rough measure of a country's level of economic development. …

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