Order Code RL31772
Report for Congress
Received through the CRS Web
U.S. Trade and Investment Relationship with Sub-
Saharan Africa: The African Growth and
Opportunity Act and Beyond
March 10, 2003
Ian F. Fergusson
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Lenore M. Sek
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress

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U.S. Trade and Investment Relationship with Sub-
Saharan Africa: The African Growth and Opportunity
Act and Beyond
Summary
Following the end of the apartheid era in South Africa in the early 1990s, the
United States sought to increase economic relations with sub-Saharan Africa.
President Clinton instituted several measures that dealt with investment, debt relief,
and trade. Congress required the President to develop a trade and development
policy for Africa.
The economic challenges facing Africa today are serious. Unlike the period
from 1960 to 1973, when economic growth in sub-Saharan Africa was strong, since
1973 the countries of sub-Saharan Africa have grown at rates well below other
developing countries. There are some signs of improvement, but problems such as
HIV/AIDS and the debt burden are constraining African economic growth.
In May 2000, Congress approved a new U.S. trade and investment policy for
sub-Saharan Africa in the African Growth and Opportunity Act (AGOA; Title I, P.L.
106-200). U.S. trade with and investment in sub-Saharan Africa have comprised
only 1-2% of U.S. totals for the world. AGOA extends preferential treatment to
imports from eligible countries that are pursuing market reform measures. Data show
that U.S. imports under AGOA are mostly energy products, but imports to date of
other products are growing. AGOA mandated that U.S. officials meet regularly with
their counterparts in sub-Saharan Africa, and two of these meetings have been held.
AGOA also directed the President to provide U.S. government technical
assistance and trade capacity support to AGOA beneficiary countries. Government
agencies that have had roles in this effort include the U.S. Agency for International
Development, the Assistant U.S. Trade Representative for Africa (established by
statute under AGOA), the Overseas Private Investment Corporation, the Export-
Import Bank, the U.S. and Foreign Commercial Service, and the Trade and
Development Agency. In addition to domestic programs, the United States is a
member of several multilateral institutions that also provide technical capacity
building.
In AGOA, Congress declared that free-trade agreements should be negotiated,
where feasible, with interested sub-Saharan African countries. Related to this
provision, negotiations on a free-trade agreement with the Southern African Customs
Union, which includes South Africa and four other countries, are expected to begin
in April 2003.
Several topics may be important to Congress in the oversight of AGOA and in
potential legislation amending the Act. These issues concern the expiration of the
Act, rules of origin provisions concerning textiles and apparel, the use of AGOA’s
benefits by more countries, and the HIV/AIDS epidemic. This product will be
updated periodically.

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Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Perspectives on the Sub-Saharan African Economy . . . . . . . . . . . . . . . . . . . . . . . 3
Historical Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Current Perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Growth Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
HIV/AIDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
U.S. Trade and Investment Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
U.S. Trade with Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
U.S. Investment in Sub-Saharan Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
AGOA: An Update . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Beneficiary Countries and Trade Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Textiles and Apparel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Developments Since Enactment of AGOA . . . . . . . . . . . . . . . . . . . . . 11
Amendments to AGOA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Current Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
United States-Sub-Saharan Africa Trade
and Economic Cooperation Forum . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Technical Assistance and Capacity-Building . . . . . . . . . . . . . . . . . . . . . . . . 14
U.S. Agency for International Development (USAID) . . . . . . . . . . . . 15
Assistant U.S. Trade Representative for Africa (AUSTRA) . . . . . . . . 15
Overseas Private Investment Corporation (OPIC) . . . . . . . . . . . . . . . . 16
Export-Import Bank (Ex-Im) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
U.S. and Foreign Commercial Service (USFCS) . . . . . . . . . . . . . . . . . 18
Trade and Development Agency (TDA) . . . . . . . . . . . . . . . . . . . . . . . 18
Multilateral Initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Integrated Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Joint Integrated Technical Assistance Program (JITAP) . . . . . . . . . . . 20
Regional Cooperation and Free Trade Agreements . . . . . . . . . . . . . . . . . . . 20
Southern African Customs Union FTA (SACU) . . . . . . . . . . . . . . . . . 20
U.S. Trade and Investment Framework Agreements (TIFA) . . . . . . . . 21
U.S. Bilateral Investment Treaties (BIT) . . . . . . . . . . . . . . . . . . . . . . . 21
New Partnership for Africa’s Development (NEPAD) . . . . . . . . . . . . 22
European Union Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Cotonou Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
AGOA: Future Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Appendix:
Regional Economic Integration Among Sub-Saharan Africa Nations. . . . . 25
Southern African Development Community (SADC) . . . . . . . . . . . . . 25
Common Market for Eastern and Southern Africa (COMESA) . . . . . 25
East African Community (EAC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
West African Economic and Monetary Union (WAEMU) . . . . . . . . . 26

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List of Figures
Figure 1. Africa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Figure 2. U.S. Imports from Sub-Saharan Africa, 2002 . . . . . . . . . . . . . . . . . . . . 6
Figure 3. U.S. Exports to Sub-Saharan Africa, 2002 . . . . . . . . . . . . . . . . . . . . . . 6
Figure 4. U.S. Imports from Sub-Saharan Africa by Product Category, 2002 . . . 7
Figure 5. U.S. Exports to Sub-Saharan Africa by Product Category, 2002 . . . . . 7

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U.S. Trade and Investment Relationship
with Sub-Saharan Africa: The African
Growth and Opportunity Act and Beyond
Introduction
All of us share a common vision for the future of Africa. We look to the day
when prosperity for Africa is built through trade and markets.
– President George W. Bush to delegates at the African
Growth and Opportunity Forum in Mauritius,
January 15, 2003.
As reflected in the above statement by President Bush, a key element in U.S.
policy toward Africa is the potential benefit from improved commerce between the
two regions. This interest in increasing bilateral commerce began after the end of the
apartheid era in South Africa in the early 1990s. In 1993, Congress approved the end
of anti-apartheid restrictions, and later that year Commerce Secretary Ron Brown led
a business delegation to South Africa.
With the end of apartheid, President Clinton instituted numerous measures to
help the region and increase U.S. trade and investment there. In 1994, he announced
a $600 million aid and investment package for South Africa. In 1997, he proposed
the Partnership for Economic Growth and Opportunity in Africa, which offered
different levels of economic benefits to countries in sub-Saharan Africa (SSA),
depending on their economic reform measures.
At the same time, Congress was developing legislation that sought to improve
U.S.- Africa trade relations. In the 1994 legislation to implement the Uruguay Round
multilateral trade agreements (P.L. 103-465), Congress directed the Administration
to develop and implement a comprehensive trade and development policy for the
countries of Africa. Disappointed with the Administration’s first report under this
provision, some Members developed legislation to authorize a new trade and
investment policy for sub-Saharan Africa. In May 2000, Congress approved such
legislation in the African Growth and Opportunity Act (AGOA; Title I, P.L. 106-
200). AGOA offers trade preferences and other economic benefits to countries in
SSA that are pursuing market reform policies.

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CRS-2
Figure 1: Africa
Both the executive and legislative branches continue to consider ways in which
to improve trade relations between the United States and SSA. In mid-year 2002, the
Congress amended AGOA to further increase market access for products from SSA.1
The Administration plans to soon begin free-trade negotiations with the South
African Customs Union (Botswana, Namibia, Lesotho, South Africa, and Swaziland).
Furthermore, President Bush and some Members of Congress are calling for AGOA
to be extended beyond its 2008 deadline.
1Section 3108 of the Trade Act of 2002, P.L. 107-210.

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This report presents perspectives on the African economic trends and provides
an overview of U.S. trade and investment flows with SSA. It discusses the
provisions of AGOA and the changes that have occurred since its enactment. It
concludes with a brief discussion of issues of congressional interest.
Perspectives on the Sub-Saharan African Economy
Historical Perspectives2
The pattern of Africa’s economic growth from 1960 to present serves as a
benchmark for today’s policymakers. Between 1960 and 1973 economic growth was
reasonably strong in much of SSA. The subsequent two decades were, however, a
period of stagnation or decline for most countries.3 This period has been labeled by
some scholars as ‘Africa’s growth tragedy’.4 The roots of the malaise, according to
them, lie in a failure of governance. Some analysts have argued that this manifested
itself in inefficient public services, extensive market interventions and protectionist
and inward-looking economic policies and civil war.5 These issues of governance,
it has been argued, created political instability which in turn led to an adverse
environment for investment and economic growth.6
Africa’s slow growth and stagnation have been attributed to slow accumulation
of both human and physical capital, low productivity growth and pressures from high
population growth rates. The ratio of investment to GDP in SSA in the historical
period averaged 9.6 percent of GDP (measured in international prices) relative to
nearly 15.6 percent in other developing countries.7 It has been argued that SSA’s
stock of human capital is well below developing countries norm and the region’s
relative position has deteriorated over time, particularly with respect to attainment
of secondary education.
The data show that typically there was a single main break in the growth trends
for most African economies. This break occurred at some point between 1973 and
1980, followed by persistent stagnation until 1992. Recent data demonstrate that
many countries have made a modest recovery since about 1994, but the levels of
2This section was written by Anjula Sandhu, Research Associate, Foreign Affairs, Defense,
and Trade Division.
3A Hoeffler, “The Augmented Solow Model and the African Growth Debate”, CSAE,
University of Oxford, March 2000.
4See, for example, W Easterly and R Levine, “Africa’s Growth Tragedy: Policies and Ethnic
Divisions”, Quarterly Journal of Economics, Vol. 112, Issue 4, November 1997.
5R J Langhammer, (2000) “The Reasons for Slow Growth in Africa”, International
Economic Relations and Development Economics, The Kiel Institut of World Economics.
6L. Pritchett, “Where Has All the Education Gone?” World Bank Research Paper, #1581,
March 1996.
7 Shantayanan Devarajan, “Is Investment in Africa Too Low or Too High? Macro and Micro
Evidence,” World Bank Research Paper, #2519, January 2001.

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CRS-4
growth have tended to remain far below the first post-colonial phase.8 For the four
decades as a whole, SSA’s average per capita income growth of 0.9 percent lagged
behind that of other developing countries by 1.5% and approximately 3% below that
of the high performing African (Botswana and Mauritius) economies.9
Commentators tend to treat Africa as a single unit of analysis, thus side-stepping
the fact that many countries exist within the continent. In fact, there is a wide
variation in the growth performance of individual African countries. In a recent
study it was found that in a group of 36 African countries, 22 countries exhibited
reasonably robust growth before the long period of stagnation. The remaining 14
either experienced steep growth rollercoasters or showed persistent stagnation at
growth rates below 1.5 percent throughout the last three decades. In this study, the
growth rates achieved by Botswana and Mauritius stand out.10
The consequence of the long period of stagnation in growth for a large number
of African economies, combined with high population growth rates, is that little or
no progress has been made in raising the standards of living in these countries.11
Between 1960 and 1994, out of 35 SSA countries for which comparable data exist,
16 suffered at least 20% loss in income per capita measured in 1985 constant US
dollars. Most of the losses were registered after 1975.12 In contrast to the situation
of SSA, developed countries have sustained a remarkably steady per capita growth
of approximately 2% for about 100 years, and some newly industrializing countries
have maintained income growth rates above 3% for nearly three decades, thus
enabling them to gain significant ground on the industrialized countries.13
Current Perspectives
According to the World Bank, sub-Saharan Africa achieved a 2.7% rate of GDP
growth in 2001. This figure, although outpacing the 1.3% world GDP growth rate,
was still bested by the average 4% growth rate recorded by developing countries as
a whole. The effects of the slowdown in the global economy on Africa have been
mitigated by several factors. Most African countries were helped by lower oil prices
in 2001, thus minimizing inflation and improving the current account of these
countries. Economic reforms instituted by many African governments, including
lowering fiscal deficits, eliminating exchange controls, the adoption of flexible
8The Economist, May 13-19, 2000.
9L. Pritchett (1998), “Patterns of Economic Growth: Hills, Plateaus, Mountains, and Plains”,
World Bank Paper, July 1998, (hereafter, Pritchett)
[www.worldbank.org/wbi/attackingpoverty/ events/Turkey_0199/pritch.pdf].
10Pritchett, p.18.
11W. Easterly (1996) “Why Is Africa Marginal in the World Economy? In: G Maasdrop, ed,
Can South and Southern Africa Become Globally Competitive Economies? (New York: St
Martin’s Press, 1996), pp. 19-30.
12D. Rodrik, “Where Did All the Growth Go? External Shocks, Social Conflcit and Growth
Collapses” mimeo, London School of Economic and Political Science, August 1998.
13 Pritchett, p. 12.

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CRS-5
exchange rates, and reducing trade barriers, have been credited with improving the
climate for growth.14 Increased exports due to AGOA, and increased export
competitiveness due to the depreciation of the South African Rand and the CFA-
franc also contributed to growth.15 Growth was retarded by continued weakness of
commodity prices, drought and potential famine in certain regions of SSA, and the
growing HIV/AIDS pandemic. It has been estimated that in order for the region to
achieve one of the UN Millenium Development Goals of halving the incidence of
poverty by 2015, growth needs to be in the range of 7-8% on a sustained basis.16
Growth Challenges. Despite the region’s improved economic performance,
the economic challenges facing Africa remain enormous. First, average growth rates
mask wide disparities in economic growth among the forty-eight countries of SSA.
Second, African countries still generate too little savings and attract too little
investment. According to the UN Economic Commission for Africa, Africa must
devote at least 25% of its GDP to investment to achieve sustainable growth.17 Yet,
World Bank figures indicate that gross domestic investment (public and private) in
Africa only accounted for 17.9% of GDP in 2000. Net foreign direct investment
(FDI) at $6.3 billion was the equivalent of 2% of GDP. While FDI worldwide
remains stable, FDI flows to Africa as a percentage of flows to developing countries
as a whole have fallen from approximately 25% in 1970 to 5% today. While GDP
growth is positive for Africa as a whole, average population increases of 2.7% in the
1990s have caused per capita GDP to fall during much of the period. The average
African’s income was $474 in 2000 compared with $665 in 1980. Meanwhile, the
fertility rate, at 5.2 births per woman, is one of the highest in the world.18
HIV/AIDS. The HIV/AIDS pandemic is also straining African economies and
threatens to curtail future economic growth. SSA’s incidence of HIV/AIDS is the
highest in the world at 8.38%, but seven countries in southern Africa have infection
rates over 20%. Botswana, long considered one of the region’s most successful
economies, had an infection rate of 38.8% in 2001. Life expectancy in Botswana has
fallen to 39 years, and for the region as a whole, it has fallen to 47 years. The
pandemic not only diverts resources from education and investment to care for the
14 Alan Gelb, and Rob Floyd, “The Challenge for Globalisation in Africa,” South African
Journal of International Affairs, Winter 1999, p. 5.
15 The CFA franc is the common currency for the states of the West African Economic and
Monetary Union. See p.25 for more details. The CFA franc depreciated against the U.S.
dollar primarily because of the currency’s peg to the Euro which depreciated against the
dollar in 2001.
16Evangelos Calamitsis, “The Need for Strong Domestic Policies and International Support,”
IMF Finance and Development, December 2001, p. 11; for a description and a list of the UN
Millenium Development Goals, see the United Nations Development Program website,
[http://www.undp.org/mdg/].
17 United Nations, Economic Report on Africa 2002, pp. 37.
18 World Bank, African Development Indicators, 2002.

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CRS-6
sick and dying, but it also disproportionately strikes some of the most productive
members of society: skilled workers, teachers, and professionals.19
Debt. The debt burden carried by SSA countries has also been identified as a
drag on the economies of the region. At the end of 2002, the states of SSA owed
foreign creditors $208.9 billion. While SSA’s debt is comparable to other regions in
terms of absolute amount, per capita share ($251 per head), or debt service as
percentage of export earnings (12%), its debt burden is considered onerous because
of its high ratio of debt to income. Debt accounted for 71% of African income in
2002. Some have called the present levels of debt in Africa unsustainable and have
campaigned for its cancellation. Others maintain that outright cancellation of the debt
would create a moral hazard by, in effect, condoning bad economic and governance
policies. In 1997, the G-7 nations adopted a plan to reduce debt to sustainable levels
for highly indebted poor countries (HIPC). To date, several African countries have
taken advantage of the HIPC program, although some have criticized the scope and
pace of the program. In Sec. 121 of AGOA, Congress recognized this effort, but also
called for bilateral and multilateral debt relief programs to encourage trade and
investment, support the development of free markets and the private sector, and
promote broad-based economic growth in order to assist beneficiary countries in
reducing their debt.20
U.S. Trade and Investment Trends
U.S. Trade with Sub-Saharan Africa
The United States conducts a small share of its total trade with sub-Saharan
Africa. In 2002, the United States exported $5.9 billion to sub-Saharan Africa, or
0.9% of total U.S. exports of $629.6 billion. The United States imported $18.2
billion from the region, or 1.6% of its total imports of $1,154.8 billion.
Although U.S. trade with sub-Saharan Africa is small compared with major
trading partners, it is comparable to U.S. trade with several other developing regions.
For example in 2002, the United States traded $35 billion (exports plus imports) with
the Andean Pact countries (Bolivia, Colombia, Ecuador, Peru, and Venezuela), $32
billion with the Mercosur countries (Brazil, Argentina, Uruguay and Paraguay), $24
billion with the countries of sub-Saharan Africa, $23 billion with the countries of
South Asia (Bangladesh, Bhutan, India, Nepal, Pakistan, and Sri Lanka), and $21
billion with the Central American Common Market (Costa Rica, El Salvador,
Guatemala, Honduras, and Nicaragua).21
19 See CRS Issue Brief IB10050, AIDS in Africa, by Raymond W. Copson.
20See CRS Report RS21329, African Debt to the United States and Multilateral Agencies,
by Jonathan Sanford.
21 Regional trade figures compiled by CRS from data on the U.S. International Trade
Commission data website at (http://dataweb.usitc.gov). Although these other regions
include fewer countries than sub-Saharan Africa, most U.S. trade with sub-Saharan Africa
(continued...)

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Most U.S. trade with the region is with a small number of countries. Eighty-two
percent of U.S. imports from the region were from four countries in 2002: Nigeria
(32%), South Africa (23%), Angola (18%), and Gabon (9%). Exports were similarly
concentrated, with 60% of U.S. exports to two countries: South Africa (42%) and
Nigeria (14%). All other countries accounted for 6% or less of U.S. exports. (See
figures 1 and 2.)
Figure 2. U.S. Imports from
Figure 3. U.S. Exports to
Sub-Saharan Africa, 2002
Sub-Saharan Africa, 2002
Source: U.S. International Trade Commission data website at (http://dataweb.usitc.gov).
Natural resources dominate U.S. imports from sub-Saharan Africa. Almost
four-fifths of all U.S. imports from the region in 2002 were either energy products
(64%), which were almost exclusively petroleum, or minerals and metals (15%) (see
figure 3). Nigeria supplied 50% of U.S. petroleum imports from the region, Angola
supplied another 28%, and Gabon supplied 13%. The most important mineral/metal
imports were platinum, followed by diamonds. Other notable U.S. imports, much
less in total value, were trousers, automobiles, sweaters, and cocoa.
U.S. exports to sub-Saharan Africa were more diverse. Transportation
equipment was the leading export sector in 2002 (32% of U.S. exports to the region),
followed by agricultural products (16%), chemicals and related products (12%),
machinery (11%), and electronic products (11%). Mining equipment was the leading
export item, followed by aircraft and aircraft parts, wheat, automobiles and
telecommunications equipment (see figure 4).
21(...continued)
is concentrated in a small number of countries.

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CRS-8
Figure 4. U.S. Imports from Sub-Saharan Africa Figure 5. U.S. Exports to Sub-Saharan Africa by
by Product Category, 2002
Product Category, 2002
Source: U.S. International Trade Commission data website at [http://dataweb.usitc.gov/]
The United States is among sub-Saharan Africa’s major trading partners. In
2000 (latest data available), France was the leading industrial supplier to SSA with
10.1% of the market, followed by the United States (6.8%), Germany (6.5%), and the
United Kingdom (5.6%).22 The United States was decidedly the most important
single country destination for exports from SSA, purchasing 27.0% of the region’s
exports, followed by the United Kingdom (7.2%), France (6.3%), and Germany
(5.9%).23 The entire European Union accounted for 35.2% of SSA’s imports and
37.2% of its exports.24
U.S. Investment in Sub-Saharan Africa
Similar to trade, U.S. investment in Sub-Saharan Africa is a very small percent
of the worldwide U.S. total. At year-end 2001, the stock of U.S. direct investment
in sub-Saharan Africa was $10.2 billion, or less than 1% of the $1,381.7 billion in
total U.S. direct investment abroad.25 U.S. investment in Africa is heavily toward
resources: 11% of total U.S. investment in the petroleum sector worldwide is in
Africa (including northern Africa), compared to 3% of total U.S. investment in
manufacturing worldwide, and only .09% of total worldwide U.S. investment in
finance, insurance and real estate. About three-fourths of all U.S. direct investment
in Africa is in the petroleum industry.
Four countries accounted for 75% of the stock of U.S. direct investment in sub-
Saharan Africa at the end of 2001. South Africa was the leading location for U.S.
22Office of the U.S. Trade Representative, 2002 Comprehensive Report on U.S. Trade and
Investment Policy Toward Sub-Saharan Africa and Implementation of the African Growth
and Opportunity Act, House Document 107-216. May 20, 2002. p. 24. Data were derived
from the International Monetary Fund, Direction of Trade Statistics 2001.
23Ibid.
24Ibid.
25U.S. Department of Commerce, Bureau of Economic Analysis, Survey of Current
Business, September 2002, pgs. 93, 94.

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CRS-9
direct investment in sub-Saharan Africa, representing 29% of the total for the region.
About one-third of U.S. investment in South Africa is in manufacturing, and little is
in petroleum. South Africa was followed by Equatorial Guinea, Angola, and Nigeria,
which represented 17%, 15%, and 14%, respectively, of the stock of U.S. direct
investment in the region.26 These latter three countries are petroleum exporters.
In recent years, the United States has been the leading source of foreign direct
investment in sub-Saharan Africa. According to the United Nations Conference on
Trade and Development, the United States accounted for more than 37% of total
flows to sub-Saharan Africa from developed countries during the period 1996-2000,
followed by France (18%) and the United Kingdom (13%).27
AGOA: An Update
In May 2000, Congress approved legislation, the African Growth and
Opportunity Act (AGOA; Title I, Trade and Development Act of 2000; P.L.
106-200), to assist the economies of sub-Saharan Africa and to improve economic
relations between the United States and the region. This section examines the major
provision of AGOA and what has happened since enactment.
Beneficiary Countries and Trade Benefits
Subtitle A of AGOA authorized the President to designate sub-Saharan African
countries as beneficiary countries eligible to receive duty-free treatment for certain
articles that are the growth, product, or manufacture of that country. It directed that
in designating a beneficiary country, the President must determine that the country
(1) has established, or is making continual progress toward establishing a market-
based economy and is taking other designated actions; (2) does not engage in
activities that undermine U.S. national security and foreign policy interests; and (3)
does not engage in gross violations of internationally recognized human rights or
provide support for international terrorism.
Subtitle B of AGOA describes trade-related benefits that are available to
AGOA-eligible countries. Among these benefits is preferential duty-free treatment
for certain articles under the U.S. Generalized System of Preferences (GSP). The
GSP program is a unilateral trade preference that allows certain products from
designated developing countries to enter the United States duty-free. Certain
categories of articles (see box) are identified in statute as ineligible for this duty-free
treatment, because they are “import sensitive.” AGOA provides that the President
can grant GSP duty-free treatment to all of these articles except one category (see
box, textiles and apparel). First, however, after receiving advice from the
International Trade Commission, the President must determine that an article is not
import-sensitive in the context of imports from AGOA beneficiaries. These
26Ibid., pgs. 77, 94.
27United Nations Conference on Trade and Development. World Investment Report 2002:
Transnational Corporations and Export Competitiveness, p. 51.

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additional articles qualifying for GSP duty-free treatment have to be the growth,
product, or manufacture of an AGOA beneficiary country, and they must meet the
GSP rules of origin as amended under AGOA. AGOA beneficiaries are exempt from
certain limits under the GSP program on allowable duty-free imports (“competitive
need limitation”).
“Import-sensitive” articles that are ineligible for preferences under GSP:
1. Textile and apparel articles which were not eligible articles for purposes of this
subchapter on January 1, 1994, as this subchapter was in effect on such date.
2. Watches, except those watches entered after June 30, 1989, that the President
specifically determines, after public notice and comment, will not cause material injury
to watch or watch band, strap, or bracelet manufacturing and assembly operations in the
United States or the United States insular possessions.
3. Import-sensitive electronic articles.
4. Footwear, handbags, luggage, flat goods, work gloves, and leather wearing apparel
which were not eligible articles for purposes of this subchapter on January 1, 1995, as
this subchapter was in effect on such date.
5. Import-sensitive semi-manufactured and manufactured glass products.
6. Any other articles which the President determines to be import-sensitive in the context
of the Generalized System of Preferences.
Textiles and Apparel. AGOA also allows duty-free and quota-free treatment
for textiles and apparel under any of the following conditions:
! Apparel must be assembled in one or more AGOA beneficiary countries from
U.S. fabric that was made from U.S. yarns and cut in the United States;
! Apparel must be assembled in one or more AGOA beneficiary countries from
U.S. fabric that was made from U.S. yarns. The apparel must be cut in an
AGOA country and assembled using U.S. thread; or
! Apparel must be assembled in one or more AGOA beneficiary countries from
fabric made in one or more AGOA beneficiary countries from yarn made in
the United States or an AGOA beneficiary country. These imports were
limited under AGOA to 1.5% of all U.S. imports (in aggregate square meter
equivalents) in fiscal year 2001, increasing to 3.5% over eight years. (This
limit was later amended; see below.) If a product is assembled in a less-
developed AGOA beneficiary country (defined as having a per capita gross
national product less than $1,500 in 1998 as measured by the World Bank),
that product qualifies for duty-free and quota-free treatment through
September 30, 2004, regardless of the country of origin of the fabric.
To receive the duty-free and quota-free treatment for textile and apparel
products as described above, beneficiary countries must adopt an efficient visa
system to prevent unlawful transshipment. They also must work with the U.S.
Customs Service to report exports and prevent illegal trade. AGOA provided that the
Secretary of Commerce must monitor for surges in imports, with the possible
withdrawal of duty-free treatment if imports surge beyond a certain level.

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CRS-11
Developments Since Enactment of AGOA. AGOA was enacted on May
18, 2000. On October 2, 2000, President Clinton recognized the first AGOA
beneficiary countries. He identified 34 out of the 48 sub-Saharan African countries
as eligible for AGOA benefits. On December 21, 2000, he granted GSP duty-free
treatment to more than 1,800 items from AGOA-eligible countries. These items were
selected after public review, advice from the International Trade Commission, and
interagency review and recommendation. (These 1,800 items are in addition to about
4,600 items already duty-free under GSP.)
During 2001, the Administration declared that 12 AGOA countries had met the
additional requirements for duty-free and quota-free treatment for apparel and
textiles. Ten of the 12 countries qualified for the provisions for less-developed
countries (see the third bullet on the preceding page). Early in 2001, in response to
interim regulations that the U.S. Customs Service had issued in October 2000 (65
Fed. Reg. 59,668), some legislators protested that the interim regulations denied
duty-free benefits for knit-to-shape articles, contrary to what they said was the intent
of the Act.28
Amendments to AGOA. In 2002, AGOA was amended in the Trade Act of
2002 (P.L. 107-210). An important change pertained to the cap that AGOA had set
on apparel assembled in an AGOA country from fabric made in an AGOA country
(see the third bullet above). The Trade Act of 2002 doubled this cap, increasing it
to 7% in fiscal year 2008. The Act, however, left the cap unchanged under the
special rule for lesser-developed countries. The Act also allowed Namibia and
Botswana to qualify for the special rule for lesser-developed countries, even though
their per capita incomes exceed the limit set under AGOA.
The Trade Act of 2002 specifically extended AGOA benefits to knit-to-shape
articles and to garments cut in both the United States and an AGOA beneficiary
country (“hybrid cutting”). It also made a correction to extend AGOA benefits to
merino wool sweaters knit in AGOA beneficiary countries.
The Trade Act included other related provisions. It stated that U.S. workers
could be found eligible for trade adjustment assistance, if U.S. production shifted to
an AGOA beneficiary country and other conditions were met. It authorized $9.5
million to the Customs Service for textile transshipment enforcement, and specified
that two permanent positions be assigned to South Africa for AGOA enforcement
and additional travel funds be allocated for verification in sub-Saharan Africa. It also
required that $1.317 million of the Customs Service budget be spent on programs to
help sub-Saharan African countries develop visa and anti-transshipment systems.
AGOA requires that the President monitor and report annually on the progress
of each country in meeting the terms for AGOA-eligibility. Under this requirement,
28On March 6, 2001, the Chairman and Ranking Member of the House Ways and Means
Committee and 8 other Members from both parties wrote to the Secretary of the Treasury
saying that the U.S. Customs Service interpretation of benefits for knit-to-shape articles was
“wrong.” See, Text: Ways and Means AGOA Letter to O’Neill, Inside U.S. Trade, March
9, 2001.

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President Bush has made, at the end of each year, annual designations of the
countries eligible for AGOA benefits for the following year.
Current Beneficiaries. At present, 38 sub-Saharan African countries are
designated as AGOA-eligible, although implementation of trade benefits for two of
these countries is not final. Of the 36 countries that may receive trade benefits, 19
have met the additional requirements to receive duty-free treatment for their textile
and apparel products, and of those, 17 qualify for the special rule for lesser-
developed countries. (See table 1 for a list of sub-Saharan African countries and their
status under AGOA.)
Imports under AGOA have been a significant share of all U.S. imports from
sub-Saharan Africa. In 2001, AGOA imports were $8.2 billion, or 39% of total U.S.
imports from sub-Saharan Africa of $21.1 billion. In 2002, AGOA imports rose to
$9.0 billion, or 49% of total U.S. imports of $18.2 billion from the region.
Considering the AGOA-eligible countries only, rather than the entire region, U.S.
imports under AGOA are an even higher 64% of all U.S. imports from those
countries.29
Imports under AGOA have been predominately energy-related products. This
sector accounted for 76% of AGOA imports in 2002, which is a decline from the
83% share in 2001. The reason for the decline is not because energy imports under
AGOA have dropped, but rather other imports have increased. For example, AGOA
imports of transportation equipment were 4% of all AGOA imports in 2001, but
those imports grew by 81% and are now 6% of all imports under AGOA. More so,
imports of textiles and apparel were 4% of AGOA imports in 2001, but those imports
have more than doubled and are now 9% of all AGOA imports.
Country Status under AGOA
(as of March 4, 2003)
Status
Countries
Not Designated as
Angola; Burkina Faso; Burundi; Comoros;
Eligible (10)
Equatorial Guinea; Liberia; Somalia; Sudan; Togo;
Zimbabwe.
AGOA Eligible Only;
Benin; Central African Republic; Chad; Republic of
Not Eligible under
the Congo; Côte d’Ivoire; Democratic Republic of
Apparel Provision (19)
Congo*; Djibouti; Eritrea; Gabon; The Gambia*;
Guinea; Guinea-Bissau; Mali; Mauritania; Niger;
Nigeria; Sao Tome and Principe; Seychelles; Sierra
Leone.
29Data from the International Trade Commission data website at (http://dataweb.usitc.gov).

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CRS-13
AGOA Eligible, Eligible
Mauritius; South Africa
for Apparel Provision,
Special Rule Does Not
Apply (2)
AGOA Eligible, Eligible
Botswana; Cameroon; Cape Verde; Ethiopia;
under Apparel
Ghana; Kenya; Lesotho; Madagascar; Malawi;
Provision, and Special
Mozambique; Namibia; Rwanda; Senegal;
Rule Applies (17)
Swaziland; Tanzania; Uganda; Zambia
* - Designated by President Bush as AGOA-eligible on December 31, 2002, but
implementation of trade benefits pending.
Source: AGOA web site maintained by the U.S. Department of Commerce at
[http://www.agoa.gov].
Not surprisingly, since petroleum imports are by far the major imports under
AGOA, Nigeria, a leading oil producer, is the major import supplier under AGOA.
Nigeria supplied 60% of AGOA imports in 2002, and together with South Africa
(15%) and Gabon (13%) accounted for 88% of all AGOA imports last year. In
comparison, 14 AGOA-eligible countries accounted for less than 1% of AGOA
imports, and of those, 5 did not ship anything.
Imports under AGOA have outpaced U.S. imports overall. From 2001 to 2002,
AGOA imports grew by 10%, while total U.S. imports worldwide grew by 2%.
Thus, although AGOA imports are a small share of the total, that share grew from
2001 to 2002. Of note, while imports under AGOA grew by 10%, imports from all
of sub-Saharan Africa actually fell by 0.1%.
United States-Sub-Saharan Africa Trade and Economic
Cooperation Forum
Under AGOA, the President was required to establish within a year of
enactment, after consultation with Congress and the other governments concerned,
a United States-sub-Saharan Africa Trade and Economic Cooperation Forum
(hereafter called the Forum). The Act stated that the President was to direct certain
top officials to host the first Forum meeting with their counterparts from AGOA-
eligible countries and countries attempting to meet AGOA eligibility requirements.30
The purpose of the Forum meeting is to “discuss expanding trade and investment
relations between the United States and sub-Saharan Africa and the implementation
of [AGOA] including encouraging joint ventures between small and large
businesses.”
30Representatives from appropriate sub-Saharan African regional organizations and
government officials from other appropriate countries in sub-Saharan Africa also could be
invited.

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CRS-14
AGOA also required the President to encourage non-governmental
organizations and the private sector to hold similar annual meetings, and it required
the President to instruct U.S. delegates to the Forum to promote a review of
HIV/AIDS in each sub-Saharan African country and the effect on economic
development. It required the President to meet, to the extent practicable, with heads
of governments of sub-Saharan African countries at least every two years to discuss
expanding trade and investment relations, and the first such meeting should be within
one year of enactment.
AGOA was enacted May 18, 2000, and almost a year later, on May 16, 2001,
President Bush established the Forum and announced plans for its first meeting in
Washington in October 2001. The first Forum was held October 29-30, 2001, in
Washington, D.C. President Bush addressed the Forum and announced several
initiatives: (1) a $200 million Overseas Private Investment Corporation (OPIC)
support facility to give U.S. firms access to loans, guarantees, and political risk
insurance for investment projects; (2) a regional office of the Trade and Development
Agency (TDA) in Johannesburg to help attract new investment; and (3) the Trade for
African Development and Enterprise Program, initially funded at $15 million, to
establish regional hubs to help African businesses in the global market. (These
initiatives were established; see later sections.) Also at the first Forum, U.S. Trade
Representative Zoellick signed two agreements: (1) the U.S.-Nigeria Joint
Declaration on Electronic Commerce; and (2) a Trade and Investment Framework
Agreement with the Common Market for Eastern and Southern Africa.
The second Forum was held January 13-17, 2003, in Port Louis, Mauritius. In
a videotaped message, President Bush announced that he would ask Congress to
extend AGOA beyond its 2008 deadline. He also outlined other U.S. support for
Africa, including: assignment of U.S. agricultural officials to the regional business
hubs established after the first Forum; a fiscal year 2004 budget request for a 50%
increase in development assistance; and an additional $200 million over five years
for education and teacher training to the region.
The second Forum had three segments. The segment for civil society was
attended by representatives from non-governmental organizations. The segment for
businesses included a trade exhibition. The segment for government officials was
attended by representatives from all 38 AGOA-eligible countries. U.S. Trade
Representative Zoellick led the 25-member U.S. delegation. Representative Thomas,
Chairman of the House Ways and Means Committee, led a separate congressional
delegation.
Technical Assistance and Capacity-Building
AGOA legislation directed the President to target U.S. government technical
assistance and trade capacity building in AGOA beneficiary countries (Sec. 122).
This mandate includes assistance to both government and non-governmental actors.
The Act directs the President to target technical assistance to governments- (1) to
liberalize trade and exports; (2) to harmonize laws and regulations with WTO
membership; (3) to engage in financial and fiscal restructuring, and (4) to promote
greater agribusiness linkage. The Act also includes assistance for developing private
sector business associations and networks among U.S. and sub-Saharan African

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CRS-15
enterprises. Technical assistance is also to be targeted to increasing the number of
reverse trade missions, increasing trade in services, addressing critical agricultural
policy issues, and building capabilities of African states to participate in the World
Trade Organization, generally, and particularly in services. Between 1999-2001, the
United States spent approximately $192 million on trade capacity building assistance
to sub-Saharan Africa.31
U.S. Agency for International Development (USAID). AGOA’s mandate
to encourage trade related technical assistance primarily is being implemented by
USAID’s Trade for African Development and Enterprise (TRADE) program. The
Agency’s TRADE initiative is designed to provide technical assistance to help
Africans reform their trade and investment policies, promote U.S.-African business
linkages, support African regional trade integration, and to take full advantage of the
provisions of AGOA. Three “Regional Hubs for Global Competitiveness” have been
established in Botswana, Ghana, and Kenya to further technical assistance
objectives.32 The TRADE initiative supplants USAID’s Africa Trade and Investment
Policy Program (ATRIP) which operated from 1998-2003.
Several AGOA-related initiatives originate from AID field offices. Capacity
building programs involving the Southern Africa Development Community (SADC)
have provided assistance to increase the level of SADC duty-free exports to the
United States under AGOA. It has also developed programs to assist in customs
reform, to promote local entrepreneurs, and to work for the establishment of a
regional free-trade area. USAID claims that through this technical support, an
additional seven states in SSA have become eligible for AGOA.33
As mentioned above, AGOA encourages the establishment of private sector
linkages between U.S. and SSA businesses. To this end, two International Business
Linkages have been established by the Corporate Council on Africa with funding
provided by USAID. The linkage programs assist African companies to prepare
business plans, to achieve International Standards Organization (ISO) certification,
to participate in U.S.-led trade delegations, to attend trade shows in the United States,
and to identify public and private sector export financing. The linkage programs also
assist U.S. firms by identifying trade and investment opportunities in Africa, by
steering U.S. firms to appropriate government and private sector contacts, and by
identifying sources of financing. The Southern African International Business
Linkage (SAIBL) program has recently increased its scope with a two-year pilot
program to Botswana, Tanzania, and Zambia. The West African International
Business Linkage (WAIBL) also hosts regular business forums in West Africa.
Assistant U.S. Trade Representative for Africa (AUSTRA). Sec. 117
of AGOA supported the creation of this position to serve as the “primary point of
contact in the executive branch for those persons engaged in trade between the
31AGOA, 2002 Comprehensive Report, p. 41.
32 The website for the hub in Gabarone, Botswana is, [http://www.satradehub.org/].
33 U.S. Agency for International Development, 2003 Budget Justification to the Congress-
Annex I: Africa, p.428.

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CRS-16
United States and sub-Saharan Africa,” and the chief adviser to the U.S. Trade
Representative (USTR) on trade and investment issues pertaining to Africa. This
position previously had been established by President Clinton in 1998. One primary
function of AUSTRA is to make the yearly determinations as to which countries are
eligible for AGOA benefits generally, and also its special textile and apparel benefits.
The AUSTRA also coordinates regional technical assistance seminars in Africa
composed of interagency delegations from the United States and their African
counterparts and funded by AID. Two of these forums held in Cameroon and
Uganda in March 2002 were attended by over 1000 delegates from countries in
central, eastern, and southern Africa. The AUSTRA also sponsors projects for WTO
training for SSA trade negotiators, provides support for the newly established Trade
Advisory Committee on Africa, and maintains the www.agoa.gov website.
Overseas Private Investment Corporation (OPIC). In 2001, OPIC
initiated the Africa Millennium Fund in response to Sec. 123 of AGOA. It committed
$227.5 million to the fund and seeks to leverage that amount with $122.5 million
from private investors for a total capitalization of $350 million. This initiative will
fund telecommunications, transport, electricity, water, and sanitation. The legislation
also calls for the fund to invest in projects from women entrepreneurs and to
“innovative investments that expand opportunities for women and maximize
employment opportunities for poor individuals.” At this point, the fund has not been
fully subscribed, and hence, its funds including the matching funds from OPIC have
not begun to be disbursed.
On October 29, 2001, President Bush announced the creation of a $200 million
OPIC support facility for additional projects. This facility is seen as a soft earmark
to distribute existing funds and does not require the creation of additional OPIC
instruments.34 In FY2001, OPIC invested in five new finance or insurance projects
with a value of approximately $31.8 million in Côte d’Ivoire, Kenya, Nigeria,
Uganda, and Zambia. The total stock of OPIC commitments in Africa reached nearly
$1 billion in 2001 with $713.8 million in loan guarantees (11% of all OPIC backed
loan guarantees) and $274.9 million in risk insurance (3% of all OPIC risk
insurance).35 Several projects announced in FY2002 include a $15 million loan
guarantee to support construction of low-income housing in South Africa, a $22
million loan for the rehabilitation of a rail link between Mozambique and Malawi,
a loan for the extension and upgrade of a wildlife preserve in Mozambique, financing
for well-drilling in Uganda, and with the Department of Energy, a loan to provide
alternative cooking technology (solar powered ovens) to Ugandan households.36
Export-Import Bank (Ex-Im). AGOA expressed the sense of Congress to
continue to expand the bank’s financial commitments to its loan, guarantee and
insurance programs to African countries. The legislation also commended the Bank’s
sub-Saharan Africa Advisory Committee for its work in fostering economic
cooperation between the United States and SSA. This committee was recently
34Conversations with OPIC official, October 31, 2002; February 5, 2003.
352001 OPIC Annual Report, p.25, 40.
36OPIC Press Release, January 15, 2002, August 29, 2002.

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CRS-17
reauthorized to September 30, 2005.37 The recently passed legislation reauthorizing
the Bank also created an Office of Africa that was charged with “increasing Bank
activities in Africa and increasing visibility among United States companies of
African markets for exports.”38
The Ex-Im Bank does not finance imports into the United States. However, it
does provide loans and guarantees for U.S. exports to the region, some of which can
be used to manufacture goods eligible for import to the United States under AGOA.
This financing can cover manufacturing equipment, the purchase of U.S. fabric, yarn,
and thread necessary for eligibility under AGOA textile provisions, or other raw
materials or components used for manufacturing. Ex-Im operates in 37 SSA
countries, although Bank activity and eligibility for specific programs vary according
risk factors. In FY2002, Ex-Im made no long-term loans to Africa, and Africa
accounted for 2.3% of the loan guarantees and 5% of the medium-term insurance
instruments funded by the Bank with a total exposure of $3.2 billion.39 By contrast
in FY2001, Africa accounted for 0.6% of the loans, 4.5% of the loan guarantees, and
1.3% of the medium-term insurance instruments funded by the Bank with a total
exposure of $2.5 billion.40 The largest Ex-Im transaction involving Africa in FY2002
was a long-term guarantee for a Nigerian purchase of a General Electric liquified
natural gas plant for $135 million.41
In order to increase its lending activities in Africa, the Bank began its Africa
Pilot Program (STIPP) in 1999 to provide short-term export credit to sub-Saharan
African countries, many of whom are not eligible for other Ex-Im financial
instruments. This program was initially funded at $100 million. Ex-Im also
announced in 2000 a pilot program to provide export credits to African countries to
purchase U.S. HIV/AIDS medicines.42 This program allows countries to extend
payment of these pharmaceutical purchases to five years from standard repayment
terms of six months. These export credits have covered two contracts valued at $15
million for medicines and HIV detection equipment to Nigeria and Togo.43 In
addition, the Bank reported that as a result of Paris Club sovereign debt restructuring
negotiations, it had entered into agreements to restructure or to forgive public sector
debt obligations totaling $92 million with eight sub-Saharan African nations in
FY2002. These agreements wrote-off all of the Bank’s public sector debt exposure
in Mozambique, Tanzania, and Uganda.44
37Export-Import Bank Reauthorization Act, 12 U.S.C. 635(b)(9)(B)(iii).
38 12 U.S.C. 635a.
39 Ex-Im Bank, 2002 Annual Report, pp. 22-25.
40 Ex-Im Bank, 2001 Annual Report, pp. 20-23, 29.
41 2002 Annual Report, p. 31.
42 See “Short-Term Africa Pilot Program,” [www.exim.gov/africa-i/afr02fac.html].
43 Conversation with Export-Import Bank Official, February 6, 2003.
44 Ex-Im, 2002 Annual Report, p. 39.

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CRS-18
U.S. and Foreign Commercial Service (USFCS). In Sec. 125 of AGOA,
Congress found that USFCS presence in SSA had been reduced since the 1980s and
that the level of staffing in 1997 (seven officers in four countries) did not “adequately
service the needs of U.S. businesses attempting to do business in sub-Saharan
Africa.”45 Accordingly, the legislation required the posting of at least 20 USFCS
officers in not less than 10 SSA by December 31, 2001 “subject to the availability of
appropriations.”46 Presently, USFCS has officers in Côte d’Ivoire, Ghana, Kenya,
Nigeria, and three offices in South Africa with a total of 28 Commercial Officers,
Specialists, and Assistants. USFCS seeks to comply with AGOA by opening
additional offices in Botswana, Cameroon, Senegal, and Tanzania. In FY2003, the
agency received budget authority to hire eight additional USFCS officers to staff
these country offices.47
Commercial Service officers seek to facilitate the development of markets for
U.S. exporters in the countries where they are stationed. Officers assisting U.S.
exporters provide evaluations of potential business partners in the country, facilitate
U.S. business contacts with local firms, identify potential local distributors or agents
of U.S. exports, provide local financing options, and arrange partner background
checks. Commercial Service officers also prepare the Country Commercial Guides
which chronicle the business environment of the country.
Sec. 125(c) of the legislation directs the International Trade Administration
(ITA) to develop an initiative (a) to identifythe best U.S. export prospects to the
region; (b) to identify tariff and non-tariff barriers that impede U.S. exports to Africa;
(c) undertake discussions with African states to increase market access for these
goods and services. This activity is being carried out by the ITA in its Market Access
and Compliance Unit (MAC). The Unit states that U.S. firms face entrenched tariff
and other trade barriers in many African countries, and that its current staff of nine
staffers is not adequate to cover the SSA region. In FY2003, MAC was given budget
authority to add four analysts and negotiators to address these issues.48
Trade and Development Agency (TDA). Although not tasked with
specific directives in AGOA, the TDA contributes to trade capacity building in
Africa by funding project planning studies, including feasibility studies, training
programs and orientation visits (reverse trade missions in which foreign government
officials visit U.S. manufacturers). TDA targets activities that could generate
significant U.S. export potential, that could facilitate access to natural resources
important to the United States, and that are a priority for host nations and
international development efforts. In FY2002, TDA contracted 71 projects in SSA
45 AGOA, Sec. 125(a)(4).
46 AGOA, Sec. 125(b).
47International Trade Administration, “Budget Estimates FY2003,” Exhibit 13, p.99;
Conversation with ITA official, March 6, 2003.
48 International Trade Administration, “Budget Estimates FY2003,” Exhibit 13, p. 65;
Conversation with ITA official, March 6, 2003.

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CRS-19
for a total of $9.7 million, or approximately 13% of its program expenditures.49 At
the first AGOA Forum in October 2001, the President promised a regional TDA
office in Johannesburg, South Africa. TDA subsequently established an office there.
Multilateral Initiatives
In addition to domestic agency programs, the United States participates in
several multilateral institutions that provide technical capacity building. Two that
operate in Africa are the Integrated Framework and the Joint Integrated Technical
Assistance Program.
Integrated Framework. The Integrated Framework (IF) was created by six
multilateral institutions [the International Monetary Fund (IMF), the International
Trade Center (ITC), the United Nations Commission on Trade and Development
(UNCTAD), the United Nations Development Program (UNDP), the World Bank
and the World Trade Organization (WTO)] to coordinate their development
activities to bolster the developing countries’ performance in the multilateral trading
system. Its activities are designed to encourage developing countries to integrate
trade development into their development assistance programs, known as Poverty
Reduction Strategy Papers (PRSP). After the completion of a three-nation pilot
program that included the African countries of Madagascar and Mauritania and a
third, non-African country, the IF is being expanded to 11 other nations including
Malawi, Senegal, Lesotho, Ethiopia, Eritrea, Djibouti, Burundi, Guinea, and Mali.
As of March 2002, contributions to the IF trust fund amounted to $9.8 million.50
The nations involved with the IF implement this process with the World Bank.
First, the Bank prepares a diagnostic trade integration study that assesses the
obstacles to a country’s full integration to the multilateral trading system and its
economic competitiveness. From this survey, an action plan is developed by the
Bank, in consultation with the local governments and businesses, detailing technical
assistance that can overcome these obstacles. Then a country’s PRSP is amended to
reflect these technical assistance priorities in order to be considered for funding by
donor organizations.51
Several issues have been raised with regard to the IF. First, coordination of
resources to avoid duplication of effort has been cited as a concern, both within the
IF partner organizations and between the IF and bilateral donor organizations. In
many countries, coordination is an ad hoc activity, achieved as a result of personal
relationships rather through any institutional coordination. A second concern is that
heightened expectations among the recipient nations may not be fulfilled by the IF
process. Thus far, IF work has centered on preparing strategies for implementation.
Yet the details of the implementation strategy for these proposals have not been
49 U.S. Trade and Development Agency, 2002 Annual Report,
[http://www.tda.gov/abouttda/report2002/pabr_africa-me.html]), accessed January 22, 2003.
50 “IF at a Glance,” [www.if.wto.org/glance_e.htm].
51 Ibid.

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worked out, thus raising questions as to whether they will be executed by the IF
organizations or by bilateral donors.52
Joint Integrated Technical Assistance Program (JITAP). An initiative
of the WTO, ITC, and UNCTAD, this program works to strengthen human and
institutional capacity specifically in the African states of Benin, Burkina Faso, Côte
d’Ivoire, Ghana, Kenya, Tanzania, Tunisia, and Uganda. New states included in the
launch of JITAP II in January 2003 include Botswana, Cameroon, Malawi, Mali,
Mauritania, Mozambique, Senegal, and Zambia.53 This program assists participating
countries with negotiations in the Doha round; and advises on implementation of the
existing Uruguay Round agreements, including assistance with the adjustment of
national legislation and regulation; the development of effective customs programs;
and the provision of effective export promotion and financing strategies.54 Thirteen
donor nations (Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Ireland, the Netherlands, Norway, Sweden, Switzerland and the United Kingdom)
had contributed approximately $12.6 million to this fund as of September 2002.55
Regional Cooperation and Free Trade Agreements
AGOA declares the policy that free trade agreements (FTAs) should be
negotiated, where feasible, between interested countries in SSA and the United
States in order to serve as a catalyst for increasing trade and investment. In addition,
regional economic agreements have also been encouraged. Attention in this regard
has focused on South Africa and regional economic organizations to which it
belongs. On November 4, 2002, USTR Robert B. Zoellick notified Congress that
negotiations would be initiated with the members of the Southern African Customs
Union (SACU). These negotiations are expected to begin in April 2003.
Southern African Customs Union FTA (SACU).56 SACU is a customs
union composed of South Africa, Botswana, Lesotho, Namibia, and Swaziland. The
original SACU agreement dates from 1910 and was revised in 1969. A new
agreement to more fully integrate the smaller states into decision-making for the
area, which was previously dominated by South Africa, was signed on October 21,
2002. The agreement is characterized by free movement of goods within SACU, a
common external tariff, and the common revenue pool which is apportioned among
the member states.
52 Discussion among participants of the Washington International Trade Association
program on Trade Capacity Building Initiatives, Washington D.C., November 6, 2002.
53 WTO News: “Donors pledge substantial support to JITAP II,” December 20, 2002,
[www.wto.org/english/news_e/pres02_e/pr328_e.htm].
54 “Joint Integrated Technical Assistance Program” [ww.jitap.org/clusters]
55 WTO News: “JITAP Management Meeting,” September 17, 2002,
[http://www.wto.org/english/news_e/news02_e/jitap_manag_meeting_17sep02_e.htm])
56 For more information, see CRS Report RS21387, United States - Southern African
Customs Union (SACU) Free Trade Agreement: Background and Potential Issues, by Ian
F. Fergusson.

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CRS-21
A large degree of economic integration exists among the SACU states because
of the agreement, perhaps contributing to the U.S. decision to negotiate an FTA with
SACU, rather than just South Africa. However, South Africa is the dominant
economy of the region, accounting for 87% of the population, and 92 % of the gross
domestic product of the customs area. U.S. exports to SACU totaled $3.1 billion in
2001, led by aircraft, vehicles, construction and agricultural equipment, and
computers. U.S. imports from SACU totaled $4.8 billion, composed of minerals
such as platinum, diamonds, and titanium, textiles and apparel, vehicles, and
automotive parts.57
Potential issues in negotiating an FTA with SACU concern the openness of the
South African telecommunications industry; services trade; intellectual property
rights, especially with regard to the sensitive issue access to HIV/AIDS medicines;
and the existence of certain import, export, and exchange controls in the SACU
countries. The ability to negotiate and to implement an FTA with the United States
may also become an issue to resolve, especially among the smaller states of SACU.
South Africa currently has a free trade agreement with the European Union that,
while not including the other members of SACU, is considered by some observers
to put U.S. firms at a competitive disadvantage compared to their European
counterparts.
Although discussion of potential partners for free-trade agreements revolves
around South Africa and SACU, several other regional groupings may prove to be
partners for future trade agreements with the United States. The Southern African
Development Community (SADC), the Common Market for Eastern and Southern
Africa (COMESA), the East African Community (EAC), and the West African
Economic and Monetary Union (WAEMU) have all taken steps to begin the process
of economic integration, either through trade liberalization or through steps to
promote monetary union. While these groups are being encouraged in their attempts
at regional integration, they are not immediate prospects for FTAs with the United
States. Background on these groups appears in an Appendix.
U.S. Trade and Investment Framework Agreements (TIFA). The
United States has negotiated TIFAs with Ghana, Nigeria, and South Africa, and with
the COMESA and WAEMU regional arrangements. Generally, TIFAs commit the
signatories to expand trade of goods and services, to encourage private sector
investment, and to resolve problems and disputes through consultation and dialogue.
To facilitate these objectives, the signatories of each agreement have established a
Council on Trade and Investment to provide a venue for consultation on trade issues
of interest or concern to the parties, and to work toward the removal of impediments
to trade and investment flows. TIFAs are often considered to be first steps to the
negotiation of free trade agreements.
U.S. Bilateral Investment Treaties (BIT). The United States has signed
BITs with Cameroon, Republic of the Congo (Brazzaville), Democratic Republic of
Congo (Kinshasa), Mozambique, and Senegal. The goals of the BIT are to protect
U.S. investments abroad, and to encourage market oriented domestic policy in host
57U.S. International Trade Commission data website at [http://dataweb.usitc.gov]

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CRS-22
countries. Generally, BITs ensure national treatment for U.S. investments, limits on
expropriations, free repatriation of funds, limitations on the imposition of trade
distorting or inefficient practices on U.S. investments-including requirements in
hiring, and the right of submission of investment disputes to international arbitration.
These treaties are promoted by the U.S. government as a method of encouraging the
development of international law and trade standards within the partner country.
New Partnership for Africa’s Development (NEPAD). NEPAD is a key
policy vehicle of the African Union (AU), whose leaders formulated and adopted the
initiative in July 2001. Described by its proponents as a multi-sector, sustainable
development policy framework, NEPAD seeks to reduce poverty, increase economic
growth, and improve socio-economic development prospects across Africa. Major
NEPAD aims are to attract greater investment and development aid to Africa, reduce
the continent’s debt levels, and broaden global market access for African exports.
NEPAD emphasizes increased democratization, political accountability, and
transparency in governance in African states as primary means of achieving its
goals.58
European Union Activity. By way of comparison, the European Union (EU)
has also been active in promoting trade between itself and the countries of sub-
Saharan Africa. The EU-South Africa Agreement on Trade, Development, and
Cooperation entered into force on January 1, 2000. This agreement creates a free-
trade area between the participants during a 12-year asymmetric transition period.
The EU pledges to remove tariffs on 95% of imports from South Africa during a 10-
year period with most products granted duty-free status in 2002. South Africa will
remove duties on 86% of its tariff lines during a 12-year period with most
eliminations occurring between 2006-2012. Notably, the agreement does not provide
tariff relief to several important South African agricultural exports, nor to aluminum.
Cotonou Agreement. This agreement, signed in Cotonou, Benin between
the European Union and 71 African, Caribbean, and Pacific nations (ACP) in
February 2000, extends non-reciprocal, duty-free access for industrial and processed
agricultural goods to the EU market granted by the 4th Lomé Convention to the end
of 2007. The extent of the duty-free access conferred by Cotonou was subsequently
enhanced in March 2001 by the “Everything but Arms” initiative, which granted
developing countries tariff-free access to all goods, except for sugar, rice, and
bananas, for which products a tariff-rate quota system will be maintained during a
phase-out period ending in 2009. Provisions of the Cotonou Agreement call for the
negotiation of trade liberalization agreements with regional economic partnerships
that could include the regional African groupings discussed below. Preliminary
negotiations on the Regional Economic Partnership Agreements began on September
27, 2002.
58 This paragraph was prepared by Nicolas Cook, Analyst in African Affairs. For more
information, see: CRS Report RS21353, New Partnership for Africa's Development
(NEPAD) and CRS Report RS21332, The African Union.

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CRS-23
AGOA: Future Challenges
Several issues may be important to Congress in the oversight of AGOA. These
issues concern the expiration of the Act, rules of origin provisions concerning textiles
and apparel, the spread of the benefits of AGOA to more countries, the continued
eligibility of certain countries for AGOA benefits, and the HIV/AIDS epidemic.
! Expiration. AGOA expires on September 30, 2008. Some observers contend
that this expiration date inhibits long-term investment in the region by creating
uncertainty over the extent of future tariff preferences. In addition, several
countries are slower in taking advantage of AGOA due to their need for
greater technical assistance and capacity building. Thus, their window for
profiting from AGOA is correspondingly shorter. President Bush, in his
speech to the AGOA Forum in Port Louis, Mauritius, pledged to seek an
extension of AGOA beyond 2008, but did not discuss the duration of such an
extension.
! Rules of Origin. The Act’s rules of origin provisions may dilute the potential
benefits to Africa of AGOA’s textile and apparel provisions. The “yarn-
forward” principle (see discussion of AGOA above, p.9) currently applies only
to medium-income countries, but it will be applied to the lesser developed
beneficiary countries starting on October 1, 2004. In that same year, Article
2 of the WTO’s Agreement on Textiles and Clothing (ATC) terminates the
worldwide system of quotas for textile and apparel trade. Thus, a restrictive
standard for rules of origin under AGOA, even with the program’s duty-free
and tariff-free access, could be viewed by some as a hindrance at a time when
countries are gaining duty-free access to the U.S. market without any rule-of-
origin restrictions. One study claims that the gains made by AGOA countries
may be substantially reduced due to the impact of these events.59
! Diversification of Benefits. While textile and manufacturing industries make
up a growing part of U.S. imports under AGOA, these imports are dwarfed by
AGOA imports from the petroleum and mining sectors. These industries are
highly capitalized and do not provide extensive employment opportunities for
workers. AGOA benefits are also concentrated in few countries with 87% of
AGOA imports originating in Nigeria, South Africa, and Gabon. Moreover,
several countries eligible for AGOA do not export under the program at all.
If a goal of the program is to increase African country participation, it may be
achieved by the concentration of trade capacity building and technical
assistance on the lowest performing countries. The addition of AGOA eligible
items of trade relevance to these countries may might spur greater
participation.
! Eligibility Standards. A country’s eligibility for AGOA benefits may
become the subject of controversy. Lesotho, which is considered an AGOA
59Aaditya Mattoo, Devesh Roy, and Arvind Subramanian, The African Growth and
Opportunity Act and its Rules of Origin: Generosity Undermined?, World Bank Policy
Research Paper, October 2002.

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CRS-24
success story, has been the subject of persistent complaints from indigenous
labor groups regarding working conditions in newly developed textile plants.
Two countries, Swaziland and Eritrea, have received warnings from the State
Department that their human rights record does not meet AGOA eligibility
requirements. Other countries, such as Gabon and Madagascar, recently have
conducted disputed elections. Several countries have questionable
commitment to privatization and tariff reform.
! HIV/AIDS. The HIV/AIDS pandemic is destabilizing the economies of
Africa and threatens any progress achieved by AGOA as additional income is
spent, not to raising living standards, but to treat a population afflicted with
the disease. Due to the disease, life expectancy is falling in several AGOA
eligible countries and in the region as a whole. HIV/AIDS disproportionally
strikes some of the most productive members of society such as skilled
workers, professionals and teachers. Even with the advantages that AGOA
preferences confer, investors may be deterred from the region by high medical
costs, by constant replacement of workers stricken with the disease and the
attendant training costs, and by the destabilizing risks associated with a
society containing a large, dying population.

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CRS-25
Appendix:
Regional Economic Integration Among Sub-
Saharan Africa Nations.
Southern African Development Community (SADC). This group is
composed of the nations of Angola, Botswana, Democratic Republic of Congo,
Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa,
Swaziland, Tanzania, Zambia, and Zimbabwe. Originally formed by front-line states
to lessen economic dependence on the apartheid regime in South Africa, the group
expanded to include South Africa in 1994. The 1996 Protocol on Trade committed
each signatory to remove duties and non-tariff barriers to SADC members within 12
years, to provide national treatment for each other’s goods, to bind existing tariffs at
current levels.
The economic dominance of South Africa makes economic integration of the
SADC region more problematic. South Africa accounts for 82% of the GDP of the
region, and it comprises 62% of the region’s intra-SADC imports and 70% of the
SADC region’s exports.60 With per-capita income at approximately $3,000, it dwarfs
the average per-capita income of many of the other states. In addition, smaller states
within SADC are concerned about their lack of economic competitiveness as their
home markets are opened up to goods from South Africa. The reliance of many
governments on duty revenue has also become a source of concern in implementing
reductions of tariff barriers. The relationship between SADC and the Southern
African Customs Union (SACU), especially concerning SACU’s greater access to the
South African market, has become a concern for SACU countries because they fear
the loss of market share to SADC countries.
Common Market for Eastern and Southern Africa (COMESA).
Founded in 1982 as the Preferential Trade Area of Eastern and Southern Africa,
current member states of the COMESA include Angola, Burundi, Comoros, Djibouti,
Ethiopia, Kenya, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Somalia, Sudan,
Swaziland, Uganda, Zaire, Zambia and Zimbabwe. On October 31, 2000, nine states
of COMESA (Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan,
Zambia and Zimbabwe) launched a free trade area that eliminated tariffs on goods
originating in the member states. These states have also worked towards establishing
coordinated policies in other areas such as rules-of-origin, dispute settlement,
applications of safeguard measures, and uniform customs procedures. The group
aims for a customs union with a common external tariff by 2004. The goal of
monetary union by 2025 is expected to be advanced by the introduction of limited
currency convertibility and improved coordination of fiscal and monetary policy
during this time period.
Political and economic difficulties are facing several countries within the
COMESA community. Civil war continues in the Democratic Republic of Congo;
Angola recently emerged from civil strife; and Zimbabwe is facing economic
60Beverly M. Carl, Trade and the Developing World in the 21st Century, (Ardsley, NY:
Transnational Publishers, 2001) p. 205.

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CRS-26
collapse. Drought and famine are also plaguing countries in the region. In addition,
several countries have withdrawn from COMESA: Tanzania in 2000, and
Mozambique and Lesotho in 1997.
East African Community (EAC). Comprised of Kenya, Uganda, and
Tanzania, this organization seeks to revive historic tariff-free trade that had been
established among the three British colonies in 1923. However, this cooperation
broke down in the 1970s due to widespread transhipments and the varied economic
paths of its participants. The three countries re-established the community in 1999
and have made plans for an asymmetric tariff schedule, in which Kenya will
immediately reduce its tariff to zero, while Uganda and Tanzania will have four years
in which to reciprocate. The outlook for this grouping is also complicated by a
dominant country presence. Most industrial trade in the bloc originates from Kenya,
and there is little bilateral trade between Tanzania and Uganda. Nonetheless, two
neighboring countries, Rwanda and Burundi, have been invited to join.
West African Economic and Monetary Union (WAEMU). This grouping
was originally created to administer the CFA franc (Communauté financière
africaine), a currency formerly tied to the French franc prior to its disappearance in
2000 (It is still backed by the French treasury). Its members are Benin, Burkina Faso,
Côte d’Ivoire, Mali, Niger, Senegal, Togo, and Guinea-Bissau, the sole non-
francophone member. The member states have espoused the long-term goal of a full
economic union with a common market, macroeconomic convergence, regulatory
harmonization, and a common investment policy. A preferential tariff arrangement
was concluded for member states in 1995, and a customs union with a common
external tariff of 22% became operational in 2000. While the WAEMU countries
have achieved a relatively high degree of integration, it has been reported that intra-
member trade has not greatly expanded. As in other areas, regional conflicts have
interrupted the consolidation of economic gains.

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