Trump’s uneasy silence on Agoa
Seventeen years ago, when former US president Bill Clinton proposed a trade act for Africa, the African Growth and Opportunity Act (Agoa), it was touted by Congress as possibly the most significant US initiative for Africa. With the benevolent ideal of raising Africa out of poverty, it targets sub-Saharan African countries, which, once deemed eligible, are given duty-free access to the US market for some
6 500 products, including agricultural goods, steel, car components, apparel and footwear and wine, among others. Agoa also aims at increasing manufacturing on the continent, helping Africa become a player in the global economy, while boosting market access and investment between the two parties.
To qualify for this incentive, Agoa countries are expected to implement a range of economic, commercial and social reforms, and also comply with a number of legislative conditions, among them:
- working towards the removal of trade and investment barriers to the US
- improving human rights
- upholding the rule of law
- poverty reduction
- working towards a market-based economy
- progress in healthcare initiatives and workers’ rights
- combating corruption
Eligibility is reviewed each year by the incumbent US president, who has the power to withdraw or award beneficiary status at his discretion. With no recourse for affected countries (no provision has been made for dispute-settlement), this makes Agoa a tenuous agreement seemingly open to the whim of an individual.
What has Agoa achieved?
Historically Agoa exports to the US have exceeded imports, which initially created a trade surplus in Africa, but that by 2014 had declined significantly. Fast-forward to 2017 and there are currently 38 countries on board. By January 2017, Agoa exports were at $843 million, with South Africa, Angola and Nigeria being the largest Agoa exporters. Oil is the largest commodity being traded and according to the 2016 Agoa Implementation Report, machinery, aircraft, vehicles, mineral fuels, and cereals feature among the other big US exports. South Africa has been a leading non-oil beneficiary because of its diverse export products; cars are the leading category followed by steel, chemicals, and agricultural produce.
On the downside, other countries have been struggling with capacity issues and low production and therefore unable to tap into the Agoa benefits available to them.
About Agoa, SA minister of Trade and Industry, Rob Davies has said, “… it is potentially a win-win… mutually beneficial for both SA and US, and SA’s participation contributes to regional integration…” Since inception, Agoa has created around 120 000 jobs in both the US and Africa, with around 62 000 jobs in South Africa. The US has also gained access to new markets and investment opportunities on the resource-rich African continent.
And while the elimination of trade barriers is a no-brainer for impoverished Africa, conversely it allows US goods to compete with local goods, often undercutting local producers. Case in point is the chicken-dumping debacle in South Africa.
Prior to the expiry of Agoa in September 2015, South Africa and the US had been in conflict over US chicken imports. South Africa had instituted an anti-dumping duty because US chicken portions were being sold at below the local production cost. The US insisted that South Africa remove it, the implication being that if it did not, this would impact on its inclusion in the new Agoa.
Subsequently, a poultry deal was struck that saw 65 000 tons of US chicken hitting South Africa and in return, the country was fully included in the new Agoa. Two months later, the Barak Obama Administration succeeded in forcing South Africa into opening its poultry market even further by threatening to suspend its Agoa benefits. The resultant impact on local production and jobs is common knowledge.
Could Agoa be canned?
In 2015 the initial 15-year validity of Agoa was extended to 2025 after much negotiation and deal-brokering. But now with Donald Trump at the helm, and his ‘America First’ focus, Agoa once again hangs in the balance. Trump has questioned aid to Africa as being squandering of American money, also pointing out that corrupt regimes are being supported through the US imports of petroleum products. Then there’s the trade deficit of $8bn in 2016 that Agoa created for the US… Predictions are that Trump will pull out of economic, humanitarian, security and other initiatives established by previous administrations. Most recently he removed the US from the Trans-Pacific Partnership trade agreement fuelling speculation about Agoa being next on his agenda.
Revision or cancellation of Agoa would obviously have huge ramifications for the economies, industries and jobs on the continent. Senior economist at Agri SA, Hamlet Hlomendlini, in his article Question Marks Over the Future of Agoa wrote: “At this stage, no one knows what is going to happen with Agoa, and trying to read or predict what is going to happen might be very risky. However, it is important to consider all the possible scenarios that the Trump Administration might explore…”
Perhaps with the heavy presence and investment from the Chinese in Africa, Trump may not want to ‘lose out’, while some administration insiders feel that the massive job creation spin-off may keep Trump from ditching Agoa. Also in Agoa’s favour is that the Trump Administration has emphasised increasing manufacturing with the result that these additional goods need a market. With imports from sub-Saharan Africa forming only a small percentage of overall US imports, some political analysts are of the opinion that Agoa will not be a priority for Trump. But for now, all Agoa beneficiaries can do is wait and see if an assistant secretary of state for Africa will be appointed, and hope for the best.