On
Thursday of last week and with a vote of 97-1, the U.S. Senate approved the
“Trade Preferences Extension Act of 2015,” which includes reauthorization of
the African Growth
The legislation now goes to the U.S.
House of Representatives. As this bill moves closer toward becoming a reality,
it is important to review the specific changes that the Senate’s version of
AGOA reauthorization entails for African beneficiaries and their counterpart in
the U.S. Here, we briefly evaluate the key revisions of the program, broadly
classified as the “good” and the “to be determined.” Importantly, opportunities
still exist to modify AGOA reauthorization, and several amendments could
strengthen the bill.
The “Good”
Long-term extension: AGOA reauthorization extends the
program until September 30, 2025—a 10-year time horizon, which crucially also
includes continuation of the third-country fabric program for the same period.
Together, these provisions stand as the longest extension the bill has ever
received. Short-term extensions and an uncertain renewal process have been the
largest obstacles to AGOA’s success. The Senate’s new reauthorization bill
provides exactly the type of stability and predictability required for
beneficiary countries to utilize AGOA more effectively and for companies to
make long-term investment decisions in the continent.
Targeted and flexible eligibility
reviews: The Senate’s version of the AGOA
reauthorization provides increased flexibility with and advance warning for a
country whose eligibility
is in question. In
addition to an annual review and request for public comment on whether
beneficiary countries conform to the eligibility criteria, the president may
now initiate “out-of-cycle” assessments. The president must also provide the
country in question a 60-day warning if its preferences are to be withdrawn.
Additionally, the U.S. government will have more flexibility in dealing with
beneficiary countries not meeting the eligibility criteria. The Senate
legislation provides for the “withdrawal, suspension, or limitation” of
duty-free treatment. This gives the president a more targeted way to penalize
violations. For example, if this new approach had been in place during
Madagascar’s 2009 coup, which led to the country’s exclusion from AGOA from
2010-2014, the U.S. may have been able to preserve the several thousands of jobs
that were lost (largely by women), while pursuing more focused actions against
the interests of those perpetrating political instability.
A focus on agriculture and women: This AGOA renewal recognizes the critical role of the agricultural sector and specifically mandates
support to “businesses and sectors that engage women farmers and
entrepreneurs.” According to the World Bank, agriculture employs about 65
percent of the region’s overall labor force, with particularly significant
incorporation of female workers. This hortatory language is important, but the
Senate’s version of AGOA reauthorization also takes action to provide the type
of technical assistance needed to help African agribusinesses gain access to
U.S markets. In particular, the legislation lifts the cap on the number of
countries that can receive American trade capacity-building support and urges
the Department of Agriculture to increase the number of Foreign Agricultural
Service personnel assigned to staff these important programs to 30. The
Senate’s leadership on this issue is commendable, but the fulfillment of these
provisions will ultimately hinge on the performance of the federal agencies
involved in providing trade capacity building and, unfortunately, history is
not the best guide. For many years, the U.S. Commerce Department’s Foreign
Commercial Service on the African continent was understaffed, and this trend only
recently changed under the leadership of Secretary Penny Pritzker.
Movement toward reciprocal trade
agreements: AGOA provides unilateral access for
African imports into the United States. While this continues to be a stimulus
for economic development and U.S. investment, there is a need to begin to move
to a more mutually beneficial trade relationship with Africa, especially as
many African countries have initiated reciprocal trade preference programs (the
Economic Partnership Agreements) with the European Union. Sub-Saharan Africa
remains one of the only regions in the world where the United States lacks any
type of comparable free trade agreement (FTA). The Senate legislation
appropriately requires the Office of the U.S. Trade Representative (USTR) to
report on plans for negotiating such agreements within a year and to notify
Congress of any African country that has expressed an interest in an FTA. While
this is very positive aspect of AGOA reauthorization, the USTR reports should
be issued more frequently than every five years, as presently provided for in
the Senate legislation.
Publishing utilization strategies: Despite success in key areas and
important improvements, AGOA-eligible countries have struggled to utilize their
preferential access to U.S. markets. The AGOA reauthorization seeks to address
this issue by requiring participating countries to develop and publish “utilization strategies,” which designate the sectors in which
each country believes it can be competitive and how it plans to take advantage
of this potential. This is a welcome initiative. Not only will it give more
focus and content to the annual AGOA forums, but it will provide businesses,
from Africa and the U.S., more opportunities to engage governments on how to
take advantage of the program. USTR is also required to submit an AGOA
utilization report to Congress on a biennial basis. These new reports could
support increases in the use of the program, especially if the private sector
and civil society are actively involved in the discussion.
The “To Be Determined”
The role of South Africa: The ongoing dispute over U.S. poultry exports to South Africa has been one of the most significant
obstacles to AGOA reauthorization. Lawmakers ultimately compromised over the
issue by including a provision on the AGOA reauthorization that requires the
president to commission a review of South Africa’s participation in the program
within 30 days of the AGOA extension. In many respects, this is the best
outcome given the others that reportedly were being considered, such as
excluding South Africa altogether or extending the benefits for only three
years. Given South Africa’s FTA with the EU and the growing number of U.S.
companies filing complaints to USTR about
barriers to accessing the South African market, Pretoria and Washington need to
use this moment to forge a blueprint for a more mutually beneficial trade
relationship.
Support for regional integration: AGOA reauthorization seeks to support Africa’s regional integration agenda through
improved rules of origin provisions, but more could be done to back
the region’s ambitious efforts to enact a continental free trade
agreement by 2017. While many remain skeptical about the timeline for this
initiative, leaders of the East African Community, the Southern African
Development Community, and the Common Market for East and Southern Africa are
expected to sign a “Tripartite Free Trade Area Agreement” on June 10, 2015,
which will incorporate half of the
African Union’s member countries overall, with a combined population of 600
million people and an integrated domestic product of almost $1 trillion.
More integrated African economies could be a “game changer” for the region, and
AGOA could still provide a better articulation of what the United States could
do to support this process and align U.S. trade policy with the region’s goals.
Import sensitivities and tariff rate
quotas: Perhaps the most impactful provision of
an AGOA reauthorization would be to expand product eligibility for AGOA
beneficiaries. Import-sensitive sectors like sugar and cotton are areas where
Africa could gain the most in terms of expanded trade with the U.S. In fact, in
August of last year, USTR identified 316 specific tariff lines as
priorities for possible inclusion in an AGOA renewal, but this call to action
does not seem to have resonated in Congress yet. A 2013 brief from
our colleagues at the Brookings Institution concludes that full duty-free,
quota-free access to U.S. markets would increase African exports by $72.5
million, while costing the U.S. only $9.6 million. A similar Brookings brief highlights
many areas where more could be done in terms of allocating additional quotas
for agricultural exports to AGOA-eligible countries. As feasible, legislators
could still consider these areas as measures to improve AGOA.
Next steps
The Senate’s move to reauthorize AGOA is
a major milestone for the program, but it is still far from certain that bill
will ultimately pass. There are indications that the House of Representatives
will move to vote on the Trade Promotion Authority before AGOA, leaving the
bill in a somewhat precarious position leading up to President Obama’s trip to
Kenya in July. In the interim period, most proponents of the program will
likely continue to concentrate their energies on urging Congress to take quick action. While
the focus on AGOA continues, U.S. legislators have taken other important
actions to improve U.S. investment policy in Africa. Last Thursday, Senator
Richard Durbin (D-IL) filed an amendment to the Senate’s version of the Trade
Promotion Authority, which would require the president to establish a strategy
to increase U.S. exports to the region. This amendment builds on Senator
Durbin’s previous bill, “Increasing
American Jobs through Greater Exports to Africa Act of 2012,” (with
parallel action taken in the House by Representative Chris Smith (R-NJ)), which
also called for a “Special Africa Export Strategy Coordinator” to be placed in
the White House and act as a principal lead on implementation of efforts to
support U.S.-Africa trade. The American legislators who voted overwhelmingly to
support AGOA last week should take a serious look at this amendment as they
consider the TPA before the Memorial Day recess.
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