African Growth and Opportunity Act (AGOA)

African Growth and Opportunity Act (AGOA)

July 25, 2014
African Growth and Opportunity Act (AGOA)
Overview
Opposing Views—Opposition to AGOA comes primarily
What is AGOA? AGOA, the cornerstone of U.S. trade
from U.S. producers that may face increased import
policy toward sub-Saharan Africa since 2000, is a non-
competition from AGOA countries. Due to the relatively
reciprocal U.S. trade preference program that provides
small level of U.S. imports under the program, such
duty-free access to the U.S. market for most exports from
concerns may be relatively limited. Many observers are
eligible sub-Saharan African countries. In addition to this
generally supportive of AGOA, but would like reforms.
preferential market access, the Act also requires an annual
forum, known as the AGOA Forum, held between U.S. and
Key Aspects of AGOA
AGOA country officials to discuss trade-related issues.
Additionally, AGOA provides direction to select U.S.
Trade Preferences—The primary component of AGOA is
government agencies regarding their trade and investment
the duty-free treatment of U.S. imports of certain products
support activities in the region.
from beneficiary countries. This tariff savings can
potentially help AGOA exporters compete with lower-cost
What countries are eligible? AGOA lists 49 sub-Saharan
producers in other countries.
African countries that are potential candidates for AGOA
benefits. AGOA eligibility criteria address issues such as
Relation to the Generalized System of Preferences—The
trade and investment policy, governance, and worker rights,
Generalized System of Preferences (GSP) is another U.S.
among other issues, which countries must satisfy to be
preference program, but unlike AGOA, GSP is not
beneficiaries of the AGOA preferences. The President
regionally based. The AGOA preferences include all
annually reviews and determines each country’s AGOA
products covered by GSP, as well as some products
eligibility. There are currently 41 AGOA-eligible countries.
excluded from GSP, such as autos and certain types of
This includes Madagascar, whose eligibility was reinstated
textiles and apparel. In both GSP and AGOA, additional
in June, as well as Swaziland, whose eligibility will be
benefits are granted to least-developed countries.
removed effective January 1, 2015.

Apparel and Third-Country Fabric Provision—AGOA’s
What is the authorization status? The AGOA preference
duty-free treatment on certain apparel products is
program was initially enacted in 2000. It has been amended
significant because (1) apparel articles face relatively high
five times, including one overall extension in 2004, as well
U.S. import tariffs; (2) they are excluded from GSP; (3)
as technical modifications and extensions of time-limited
they can be manufactured in developing countries as their
provisions (e.g., third-country fabric provision). AGOA
production utilizes lower-skilled labor and requires little
authorization is currently set to expire on September 30,
capital investment; and (4) production in this sector can be
2015.
a first-step toward higher value-added manufacturing. The
What’s the goal? Through AGOA, the U.S. Congress
third-country fabric provision in AGOA, which some argue
seeks to increase U.S. trade and investment with the region,
is critical for AGOA countries’ competitiveness in the
promote sustainable economic growth through trade, and
sector, allows some U.S. apparel imports from
encourage the rule of law and market-oriented reforms.
least-developed sub-Saharan African countries to qualify
for duty-free treatment even if the yarns and fabrics used in
their production are imported from non-AGOA countries.
“[T]o keep our trade growing, we need to renew
AGOA. But we’ve also got to make some decisions
Trade Capacity Building—Unlike other U.S. preference
about how we can make it more effective.”
programs, AGOA directs the President to provide U.S.
President Obama, July 1, 2013
government technical assistance and trade capacity building
(TCB) in AGOA beneficiary countries. This assistance is
intended to encourage governments to (1) liberalize trade
Supporting Views—Supporters of AGOA argue that the
policy; (2) harmonize laws and regulations with WTO
program affords African producers a vital competitive
membership commitments; (3) engage in financial and
advantage in the U.S. market, thereby enabling exports,
fiscal restructuring; and (4) promote greater agribusiness
encouraging investment in the region, boosting private
linkages. The United States Agency for International
sector activity and economic growth, and ultimately
Development (USAID) administers certain TCB-related
generating demand for U.S. goods and services as the
projects in support of AGOA, including funding for the
region’s economies develop.
three African Trade Hubs, which work to increase AGOA
utilization by beneficiary countries.
www.crs.gov | 7-5700

African Growth and Opportunity Act (AGOA)
Executive Branch Initiatives—AGOA encourages the
Renewal Debate
President to seek partners in the region for reciprocal free
trade agreements (FTAs). Negotiations were initiated with
AGOA appears to enjoy broad bipartisan congressional
the South African Customs Union (SACU), but were
support. Despite general support, there is ongoing debate
eventually suspended in 2006. Until the provision expired
regarding potential changes to the program, including those
in 2008, AGOA also required the President to provide an
that could help better achieve its stated trade and
annual report to Congress on U.S. trade and investment
development goals. In addition, African countries’
willingness to implement the recent WTO trade facilitation
policy with sub-Saharan Africa and AGOA
agreement may affect support for the program. Key issues
implementation. AGOA also includes directives for the
regarding AGOA’s reauthorization include:
Overseas Private Investment Corporation (OPIC), the
Export-Import Bank, and the U.S. Foreign Commercial
Country eligibility and reauthorization—Many views
Service on expanding their activities in sub-Saharan Africa.
exist regarding the appropriate strength and coverage of
AGOA eligibility criteria and the length of AGOA
AGOA Forum—AGOA requires the President to convene
authorization. Some stakeholders would like less stringent
an annual forum to discuss expanding trade and investment
eligibility requirements, less frequent reviews, and a longer
relations and the implementation of AGOA. The 13th
or indefinite reauthorization period, while others argue that
AGOA Forum is to take place in Washington D.C. on
shorter authorization terms allow for greater congressional
August 4, 2014, in conjunction with the larger African
oversight and that strong eligibility requirements and
Leaders Summit and will likely focus on AGOA’s renewal.
annual reviews encourage reform.
U.S. Imports Under AGOA
Utilization of benefits—Nearly 75% of U.S. non-energy
imports under AGOA come from South Africa alone, and in
2013, over half of AGOA beneficiaries’ exports to the U.S.
U.S. non-energy imports under AGOA have grown from
market were each worth less than $1 million. Creation of
$1.3 billion in 2001 to $4.9 billion in 2013, but they remain
AGOA country export strategies and greater targeting of
highly concentrated in select countries and industries.
TCB toward potentially competitive sectors is viewed by
• U.S. imports under AGOA were $38.2 billion in 2013. some as an important way to increase use of the program.
• Crude oil accounted for 75% of U.S. AGOA imports,
Product coverage—AGOA covers most products, but
but crude imports have declined by $30 billion since
some, mostly agricultural products, remain excluded.
2011, largely due to U.S. production. Nigeria, Angola,
Including more products under AGOA may increase use of
Chad, Republic of Congo, and Gabon are the major
AGOA benefits, but may be opposed by U.S. producers.
oil exporters under AGOA.
Trade capacity building funding—Many supporters argue
• Non-energy imports (excluding crude and refined
that AGOA may be underutilized due to beneficiary
petroleum products) were $4.9 billion, with much of
countries’ inability to take advantage of AGOA benefits.
this coming from South Africa ($3.7 billion, with $2.2
Although AGOA mandates that TCB assistance be
billion in South African autos alone). Other top
provided to increase use of the program, there is debate
products were apparel and metals.
over the appropriate types and levels of TCB, as well as the
• Aside from South Africa and the oil producers,
effectiveness of TCB overall.
Kenya, Lesotho, and Mauritius, which export mostly
apparel products, are the top users of the preference
Duty-free, quota-free beyond Africa—Some argue that
program. Together with South Africa these countries
all least-developed countries, including non-African ones,
accounted for 93% of all U.S. non-energy imports
should receive AGOA preferences, but others are concerned
under AGOA in 2013.
that this could erode the competitiveness of African exports
to the United States, as they might face greater competition.
Figure 1. U.S. Non-Energy Imports Under AGOA
Reciprocal access and two-way trade—Given recent
(2013, in million U.S. dollars)
economic growth in Africa, some observers are now calling
for a greater focus on two-way trade in AGOA and a
All Other
355
greater push for reciprocal trade agreements with some
AGOA-eligible countries. There is particular focus on those
Mauritius
199
countries that have already negotiated reciprocal
Lesotho
321
agreements with other parties. Such agreements, like that
between South Africa and the European Union, could
Kenya
343
disadvantage U.S. exports to Africa.
South Africa
3,668
For a more detailed look at AGOA, see CRS Report
0
1,000
2,000
3,000
4,000
R43173, African Growth and Opportunity Act (AGOA):

Background and Reauthorization, by Brock R Williams.
Source: Analysis by CRS. Data from USITC.
Brock R. Williams, bwilliams@crs.loc.gov, 7-1157
Notes: Non-energy refers to al goods except HTS Chapter 27.
IF00041

www.crs.gov | 7-5700

Document Outline

Overview

Key Aspects of AGOA

U.S. Imports Under AGOA

U.S. non-energy imports under AGOA have grown from $1.3 billion in 2001 to $4.9 billion in 2013, but they remain highly concentrated in select countries and industries.

 U.S. imports under AGOA were $38.2 billion in 2013.

 Crude oil accounted for 75% of U.S. AGOA imports, but crude imports have declined by $30 billion since 2011, largely due to U.S. production. Nigeria, Angola, Chad, Republic of Congo, and Gabon are the major oil exporters under AGOA.

 Non-energy imports (excluding crude and refined petroleum products) were $4.9 billion, with much of this coming from South Africa ($3.7 billion, with $2.2 billion in South African autos alone). Other top products were apparel and metals.

 Aside from South Africa and the oil producers, Kenya, Lesotho, and Mauritius, which export mostly apparel products, are the top users of the preference program. Together with South Africa these countries accounted for 93% of all U.S. non-energy impo...

Renewal Debate