AGOA illustrates inter-dependence of Africa and the US

The African Growth and Opportunities Act exemplifies the growing inter-dependence between African countries and the United States of America.

“AGOA exemplifies the growing inter-dependence between Africa and the US. Don’t forget there are 40 million African Americans in the US,” says honourary Professor of International Relations at the University of the Witwatersrand, John Stremlau.

The act is an initiative of the United States and is aimed at giving duty-free market access for producers in eligible countries in sub-Saharan Africa.

 According to the Office of the United States Trade Representative, AGOA has been at the core of US economic policy as well as commercial engagement with the African continent. The Office of the United States Trade Representative further adds that by “providing new market opportunities, AGOA has helped bolster economic growth, promoted economic and political reform, and improved US economic relations in the region”.

South Africa hosted the 20th AGOA Forum in early November. The three-day session held in Johannesburg followed on the short, physical meeting held in Washington DC, in the US in December 2022.

One wouldn’t have been wrong to wonder how the meeting – which alternates between the US and the African continent annually – would pan out, given what appeared to be strained relations between South Africa and the US. This, following the Lady R matter in which US Ambassador to South Africa, Reuben Brigety, accused South Africa of having weapons intended for Russia, loaded onto the container ship that docked near Cape Town in December last year.

However, an independent panel appointed by President Cyril Ramaphosa found no evidence that weapons had been loaded.

Despite the outcome of the panel, the seeds of doubt had already been sown and what followed was a wait-and-see game of how the meeting would unfold, despite Cabinet’s welcoming of the acknowledgement of US National Security Advisor, Jake Sullivan, of the seriousness with which  President Ramaphosa had addressed the matter.  In a statement in October, Cabinet welcomed the affirmation of the strong relations between South Africa and the United States. 

In October, Sullivan spoke to President Ramaphosa’s National Security Advisor Sydney Mufamadi and the two officials reaffirmed the strong relations between the two countries.

In an interview with SAnews, Stremlau reflected on relations between South Africa and the US recalling how then US President Ronald Reagan in 1986 vetoed a bill that would have imposed sanctions on the apartheid government of the day. However, the US Congress overruled the President and sanctions were imposed.

“…South Africa is a really special case for America because of its own history of racism and South Africa’s history of racism… and the fact that you have Joe Biden in the White House now, who championed the overturning of the Reagan veto back in 1986 for the comprehensive ending [of] apartheid legislation that imposed sanctions on South Africa.”

He added that while there was a “sordid history” in which he was referring to “the tacit alliance between the Apartheid regime and successive US regimes during the Cold War era but also reflective of racism that was the sediments of slavery in the US that are ebbing but still pollute politics there,” the two countries “are moving on.”

“AGOA exemplifies the current complexity of the relations between the US and South Africa which have been good in the fundamental sense but strained over Russia and I suppose now the Israel –Palestine [matter],” Stremlau explained.

Enacted in 2000, the Act has been at the core of US economic policy and commercial engagement with Africa.

“The point is that both for the US and for South Africa, this relationship is important and was reaffirmed by the US Special Trade Representative Catherine Tai when she came here for the forum and by [Trade, Industry and Competition] Minister Ebrahim Patel and everyone else in the government.”

In a recent Cabinet statement, government asserted that AGOA provides an opportunity for the US to strengthen its economic relationship with Africa.

“And even though the South Africans and the Americans agree to disagree on Russia, which is a peripheral issue, it’s not the peripheral issue for the Ukrainians or the United States… and I think that’s the maturity in the relationship that you can differ on particular policies but still maintain the overall relationship and for AGOA, South Africa is the most important country,” he explained.

Impact

Currently, 35 countries in sub-Saharan Africa have been designated as eligible for AGOA benefits and Stremlau shared his thoughts on whether the Act has lived up to expectations.

“For Lesotho’s textile exports, it’s been a boon. It may be a possible example of where China, the US and African countries can have a positive sum game going. The point is, some countries have benefitted a lot; other countries not so much.

“South Africa is the biggest economic partner of America in Africa with 600 US companies operating here and  vis-a-vie exports of manufactured products particularly automobiles is vital, as evidenced by comments on both sides at the forum. I think you can safely say it depends on the expectation of the country involved.”

He added that overall, African trade with America is only at 1 or 2 % but has a big impact “on the development of a particular African country.”

“It boils down to jobs and the income of sectors. Governments should be free to negotiate that or try to get to a positive sum and in the case of the US, South Africa and AGOA, I think that they have got that positive sum.”

In his address at the forum, Patel said more African countries could benefit from AGOA while Tai reiterated her country’s commitment to strengthening the US-Africa trade and investment relationship to deliver real opportunities across societies.

Tai also announced that her country backs the implementation of the African Continental Free Trade Area (AfCFTA) under the US-AfCFTA Memorandum of Understanding (MoU) on Cooperation for Trade and Investment. 

This after the AfCFTA Secretary General, Wamkele Mene, and Tai signed the MoU during the US-Africa Leaders’ Summit last December.

US Secretary of State, Antony Blinken has reiterated US President Joe Biden’s commitment to extend the act beyond the expiration date of September 2025.

This comes after the US Congress in 2015 passed legislation extending the programme to 2025.

Extension

In his remarks at the forum, President Ramaphosa said an extension of the act for a longer period of time could act as an instrument to entice investors to pour more resources into the African continent adding that shorter periods of extension “impeded investment ambitions.”

Meanwhile, the Department of Trade, Industry and Competition (dtic) said that African trade ministers had prior to the forum, met and agreed on a common position calling on the US to extend AGOA for at least 10 years when it expires with all existing AGOA-eligible countries retained in the programme.

Stremlau said there are now discussions on improving AGOA going forward.

“Now that I’ve seen the draft bill that [US Democratic Party Senator] Chris Coombs is tabling that would extend the AGOA 16 years to 2041 and read the [Senator] Jim Risch’s (Republican from Idaho) letter that criticises South Africa’s relationship with Iran and Russia and I think on the Middle East too, I’m of the view that there’s only one sentence in Coombs’s bill about South Africa and it calls for the President – who would be Joe Biden at least until February 2025 – to within 30 days do a review. I  think they will push for a renewal. I take [the] Coombs bill as a very positive sign, despite the fact that it calls for a Presidential review of South Africa. So long as Biden does it, South Africa has nothing to worry about in my view,” said Stremlau.

According to the draft bill, which was released following the forum, the long-term extension of the expiration date would “provide businesses the certainty needed to invest in sub-Saharan Africa, supporting economic growth and development in the region.”

On eligibility, the bill notes that the current statute requires the President to undertake an annual review of all 49 AGOA eligible countries to evaluate their continued eligibility for the program. The AGOA Renewal Act would reduce that obligation, requiring a review of each country at least once every three years.  It further adds that the “President would retain the authority to conduct an out-of-cycle review of the eligibility of any country at any time, and the bill requires that USTR [Office of the US Trade Representative] undertake an immediate out-of-cycle review of South Africa.”

On integration with the AfCFTA, the renewal act would “modify AGOA’s rules of origin to allow inputs from North African AfCFTA members to count toward the requirement that 35% of a product’s value originate in the region.”

On whether South Africa could be booted out of AGOA, Stremlau said he would be “surprised” if this were to occur.

“If you look at the Coombs bill, there is a provision for graduation where it requires middle income status [for a qualifying country] for five years before the review occurs even.

“The one thing we have to remember and one thing that is worth highlighting is that the bill is not a trade bill. It is an initiative by the US Congress so it has a lot of political conditions such as the rule of law, freedom of the press, periodic credible elections and South Africa passes all of those of course, even if it’s the most unequal country in the world,” he said. –SAnews.gov.za