The African Growth and Opportunity Act (AGOA) has been extended and reauthorized on four occasions, most recently in 2015 until 2025 underpinning U.S. trade with sub-Saharan Africa.
AGOA provides exports from sub-Saharan Africa preferential access to the U.S. market.
The U.S. also provided preferential access for sub-Saharan Africa exports under its Generalized System of Preferences (GSP), a program that applies to exports from most developing countries. The GSP expired in 2013, but under AGOA GSP preferences remain available for AGOA-eligible countries.
AGOA, combined with the GSP, provides duty-free access to the U.S. for 6,400 product lines from 38 countries in sub-Saharan Africa. Of total U.S. imports from AGOA countries, around 70 percent enter under AGOA.
From 2001 to 2013, exports under AGOA increased from $7.6 billion to $24.8 billion but declined over 50 percent in 2014 to $11.6 billion mainly due to reduced petroleum exports to the U.S. Anecdotal and survey-based evidence has found that African businesses view AGOA as very important for their trade with the U.S.
By enabling increased trade, AGOA supports local businesses and their integration into the global economy. AGOA has also stimulated foreign investment in sub-Saharan Africa, often by companies taking advantage of the new market access opportunities back in the U.S. For instance, U.S. retailers such as Gap, Target, and Old Navy source goods in Africa for export to the U.S.
AGOA is also an important tool for achieving broader U.S. goals such as promoting market reforms and building democracy. These goals are achieved through its role in strengthening growth opportunities in sub-Saharan Africa broadly. In fact, in order for a country to be eligible to receive AGOA’s trade preferences, compliance with the following conditions is necessary:
The country must be making progress towards a market-based economy, enhanced rule of law, elimination of trade barriers and systems to combat corruption, and the protection of worker’s rights;
The country must not be engaging in activities that undermine U.S. national security;
The country must not be engaging in gross violations of human rights.
AGOA-eligible countries in sub-Saharan Africa are making significant economic reforms that are improving their capacity to grow and providing new opportunities to deepen their economic relationship with the U.S. The 2015 World Bank Ease of Doing Business Report found that sub-Saharan Africa accounted for the largest number globally of regulatory reforms that reduced the cost of doing business. Democratic governance is also on the rise in sub-Saharan Africa. According to a Freedom House report, the largest gains in freedom over the last five years have been in sub-Saharan Africa.
Notwithstanding the growth in U.S.-African trade since AGOA, there remains significant scope to increase its depth and range. For instance, Africa exports 10 times as much to Europe as it does to the U.S. The European “equivalent” trade scheme—the “Everything but Arms” initiative—has a higher utilization rate than AGOA and is estimated to have generated almost twice as many exports than AGOA. The conclusion by the European Union of Economic Partnership Agreements with a number of countries in sub-Saharan Africa is also providing enhanced market access.