A Case for the “Africa Growth and Opportunity Act”

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By Joseph Webster

WASHINGTON — Africa is and should be increasingly important to the United States. There are over 800 million individuals living on the continent. This constitutes a potentially huge consumer market. According to the Standard Bank, Nigeria alone will add approximately 7.6 million additional middle-class households in the next 16 years. Africa may very well prove to be the next “growth miracle” – with or without U.S. involvement. However, greater economic and trade cooperation between the two sides will likely prove mutually beneficial. The U.S. has two growth-enabling trade acts vis-à-vis Africa:  the Africa Growth and Opportunity Act (AGOA), an act signed into U.S. law in May 2000; and the Generalized System of Preferences, which expired in 2013. Failure to reauthorize theses acts will set back American interests and human rights in an increasingly important part of the world.

AGOA provides preferential, non-reciprocal access to the U.S. market for 6,000 goods exported from African countries. It has benefitted African human and economic development while providing substantial and growing benefits for the United States. AGOA will expire on September 30, 2015. While the goal of AGOA is to expand the diversity of African manufactured products, 2013 AGOA imports were dominated almost exclusively by raw materials. Dependency on the export of raw materials can lead to Dutch disease, corruption, and underdevelopment. Any renewal of AGOA would, hopefully, reduce dependency on raw materials. In particular, investors have complained that AGOA’s short time horizons and uncertainty of renewal have increased their investment risk. The renewal of AGOA, preferably for a period of 15 years or longer, would likely prove beneficial for the U.S. and for Africans.

The Generalized System of Preferences is similar to AGOA, except that it applies to developing countries inside and outside of Africa that meet basic human rights conditions. Trade under GSP was quite robust; in 2012, GSP imports totaled $19.9 billion. This amount can and should be expanded. The U.S. could increase the maximum amount of imports by tariff line; increase the number of tariff lines in the program; and, most crucially, reduce investor uncertainty by extending the program for 10 years or more.

It appears that the Obama administration recognizes the growing importance of Africa. The U.S.-Africa Leaders Summit in August 2014 marked the Obama administration’s commitment to formally expand the U.S.-Africa relationship. This commitment must include the extension of AGOA and the reform of GSP. Otherwise, U.S. trade with the continent will flounder and Africa’s economy will suffer, with potentially grave effects for human rights on the continent. If the U.S. cannot renew AGOA and reform GSP, it will miss an opportunity to promote its interests and values.

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