How African unity is cracking over AGOA trade benefits with US

By Herald Onyango

Posted on Thursday, 9 February 2023 11:16
US President Joe Biden poses with African leaders during the U.S. - Africa Leaders Summit on December 15, 2022 in Washington, DC. (Photo by Kevin Dietsch / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

Africa’s effort to have a unified voice to bolster its bargaining power in negotiations with the US over the renewal of the Africa Growth and Opportunity Act (AGOA) is coming under strain as self-interest and protectionism build up.

The future of the 23-year-old programme that grants eligible countries duty-free access to the world’s largest consumer market is uncertain as critics in Washington call for reciprocity and African nations consider having their own individual bilateral trade deals with the US.

Meanwhile, some in Africa want more say in shaping the AGOA programme after America’s unilateral suspension of Ethiopia, a key participant in the programme, scared off investors and hurt regional economies.

The tension comes as the African Continental Free Trade Area (AfCFTA), which was expected to be the anchor body lobbying for AGOA’s renewal ahead of its expiration in 2025, is still struggling to take off.

Amid concerns that the US was falling behind China and Europe in its engagement with the trade bloc, the Office of the US Trade Representative signed a memorandum of understanding with AfCFTA during the US-Africa Leaders Summit in December that calls for an annual dialogue and formation of technical working groups.

Meanwhile, the Common Market for Eastern and Southern Africa (COMESA) is now arguing that Africa may be better off if it has buy-in into how AGOA is structured. The 21-nation bloc is currently spearheading a tripartite free trade agreement (TFTA) with the East African Community (EAC) and the Southern African Development Community (SADC) that could become the second largest trade grouping on the continent, behind the AfCFTA.

Pending bottlenecks

“As Africa what we long for is to try and make AGOA a bilateral agreement if we are to make it a long-term development strategy,” says Christopher Onyango, COMESA’s director for trade and customs. “At the moment when it is unilateral, they [the US] can decide when there is a problem, they decide to withdraw the privileges if you don’t agree with them.”

The Joe Biden administration, in keeping with the law’s provisions, suspended Ethiopia over human rights violations in Tigray at the end of 2021. The US has also suspended Mali, Guinea and most recently Burkina Faso following military coups in those countries.

“That makes investors not very sure of what to expect,” Onyango says. Making it harder to suspend participants “ties down investment prospects in various areas. So it is a good thing in the long run.”

A market created by both the AfCFTA and the TFTA could provide extra leverage for AGOA renewal on Africa’s terms. The TFTA boasts a combined GDP of about $1.6trn, but it includes several states that are not currently eligible for AGOA, which could undermine its unity when negotiating with Washington.

As Africa what we long for is to try and make AGOA a bilateral agreement if we are to make it a long-term development strategy.

The Biden administration for its part is keen to renegotiate AGOA’s terms but is less interested in starting a whole new set of bilateral trade deals.

Dwindling US interest

Still, some experts caution that Africa needs to start thinking beyond AGOA.

“Some people argue that reciprocal trade arrangements between the US and Africa may not [be] in Africa’s best interest,” says Paul Ryberg, president of the African Coalition for Trade, a Washington-based group that has lobbied on AGOA issues on behalf of African business associations.

“But I think this view overlooks the fact that AGOA is not permanent, and at some point, there is a serious prospect that the US will lose interest in renewing unilateral preferences for Africa.”

Bilateral deals may cause a split between African countries that have different preferences in how to approach trade with the US, creating possible cracks in intra-Africa trade agreements. Nevertheless, Ryberg says future US administrations may well want to pursue more reciprocal trade deals even if AGOA is unlikely to be succeeded by FTAs – whether bilateral or regional – before its scheduled expiration date in 2025.

“Sooner or later, the policy choice for Africa will be FTAs with the US or no AGOA,” he says.

EU factor

African trade negotiations with the European Union add to the complexity.

Several African countries have entered into reciprocal free trade deals known as Economic Partnership Agreements (EPAs) with the European Union. The US should insist on FTAs with African nations in order to “level the playing field” with the EU, Ryberg says.

According to the Kenya Association of Manufacturers (KAM), a lobby group active in the ongoing US-Kenya trade talks, the only realistic option is for the US Congress to extend AGOA under its current non-reciprocal terms, preferably for at least 10 more years to avoid wiping out current economic benefits to the continent. This would also allow sufficient time for US policy on the future of AGOA to be developed and implemented.

“When it comes to bilateral, there are chances that the rules of engagement would change,” says Abel Kamau, trade policy manager at KAM. “There is a possibility that some of the rules would become strict and Africa will have to give something in exchange. Variable geometry and principles need to be taken into consideration.”

At some point, there is a serious prospect that the US will lose interest in renewing unilateral preferences for Africa.

Kenya is pressing for the renewal of AGOA by the end of 2023. Simultaneously, Nairobi is pursuing parallel Strategic Trade and Investment Partnership (STIP) talks with the US later this month as the Biden administration revamps the Free Trade Agreement talks that started under President Donald Trump.

“The problem with prolonged delay in the extension of AGOA is [increased] jeopardy because of investors’ uncertainty. How are we sure AGOA will be renewed?” Kenyan Trade and Investment Cabinet Secretary Moses Kuria tells The Africa Report.

Kenya also signed an interim EPA with the EU early last year, which should be finalised by mid-year.

Parallel US-Kenya trade deal

STIP negotiations focus on 10 pillars, including agriculture, digital economy, climate change and trade facilitation and customs procedures. East Africa’s biggest economy insists that the bilateral negotiations with the US, which will be a benchmark for the rest of Africa, should not undermine AGOA talks.

“The strategic trade and investment partnership that we are negotiating with the US does not affect AGOA in any way,” Kuria says. STIP “has got other benefits that are of mutual interest. We are doing it for completely different reasons.”

Kuria acknowledges however that market access, which is also an issue under AGOA, will be part of the discussions when Kenyan officials visit Washington. Kenya will likely be expected to lift some tariffs as the US prefers trade deals that benefit both sides.

Already, Kenya has lifted its ban on the cultivation and importation of genetically modified maize, of which the US is a major producer. The US Grains Council, a trade group, praised the decision as a “key turning point in the development of Kenya’s food and feed market.”

However, even if AGOA does get renewed, the protectionist battle among regional economic blocs already points to a weak link. Within the EAC bloc, for instance, members are clashing over preferential Rules of Origin and tariffs regarding sugar, the automotive sector, textiles and apparel, and goods produced in Special Economic Zones (SEZs).

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