How Africans can benefit from AGOA

The African Growth and Opportunity Act (AGOA) is a preferential trade agreement. Preferential trade agreements refer to a system of trade preferences that a member (mostly wealthy nations) may unilaterally extend to a trading partner(s) (mostly developing countries), such as reduced or zero tariffs.

The AGOA Act was passed in 2000 with the main objectives of strengthening trade and investment links in Africa and boosting export-led economic growth in the continent. Beneficiary nations have to abide by AGOA's requirements, which include compliance with trade and investment policies, governance, workers' rights, and human rights issues. Out of the 54 Sub-Saharan African countries, 49 are potential beneficiaries. The US President reviews eligibility annually, with 35 currently eligible. Burkina Faso, Ethiopia, Guinea, and Mali were terminated in 2022 due to rule of law and human rights issues. When analysed under realism state sovereignty is threatened.

Poverty and structural disadvantages, such as reliance on raw material exports influence the success of AGOA. These disadvantages hinder the capacity of beneficiary countries to diversify their economies and meet global standards. These constraints include gaps in resources, credit, human capital, less reliable energy, high transport and trade-facilitation costs, and difficulties in complying with voluntary standards and quality controls. Despite these disadvantages, they often outweigh the value of tariff preferences. AGOA's economic relationship with sub-Saharan Africa is more significant than foreign assistance, with total US goods imports from AGOA countries reaching $791 billion in 2001-2021 (UNCTAD, 2023). AGOA also provides trade capacity building, funding African trade and investment hubs.

In essence, analysing the merits and demerits of AGOA is useful especially if Africans are not fully equipped to fully maximise on the benefits they can get from AGOA. There is no disputing that AGOA, as a trade agreement is beneficial for trade growth. However, it's important to note that even without membership, a country can still develop through trade, trade preparedness is what is essential. The COVID-19 pandemic highlighted the need for better trade preparedness, including technological infrastructure investments and financial market volatility reduction policies. Malawi, a beneficiary of AGOA, faces energy poverty with 85% of its population lacking access to electricity, hindering production and remote working, and affecting over 20 million people.

The following recommendations are key for African countries to be able to maximize the AGOA Act;

1. Development of industries and the agricultural sector

2. Development of infrastructure

3. Specialisation and value addition to products

4. Improving governance issues and addressing corruption

5. Increasing partnerships between the private and public sectors

6. Establishing sound environmental management policies

7. Technological advancement