South Africa remains Africa’s gateway to both Agoa and EU trade and investment programmes due to the country’s resilient market economy and constitutional democracy.
The African Growth and Opportunity Act (Agoa), a pivotal piece of legislation that has remoulded trade and political relations between the United States and sub-Saharan Africa since 2000, is under the spotlight as beneficiaries begin pushing for an early renewal, underscoring the shifting dynamics of international relations.
The emerging dominance of China as a competing economic and political force in Africa and globally has given Agoa beneficiaries some leverage in their trade and political negotiations with the West.
With China’s burgeoning influence in Africa over the past 25 years, Agoa has served as America’s counter-offensive. Recent global events, such as Russia’s ambitions to reshape the political global order, have underscored the strategic importance of Agoa for the US.
From the perspective of the US Congress, Agoa is not simply a trade or economic development instrument; it’s also a political tool to shape political conditions in Africa in its favour. Agoa is essentially part of the US’s Development Aid programme, aimed at advancing American political and economic interests within Africa. An early renewal for both parties would dispel uncertainties and ensure that the Agoa framework remains beneficial for the US, particularly in light of escalating global competition.
The 2023 Agoa Forum, taking place in Johannesburg from 2-4 November, aims to explore ways to make Agoa more effective and encourage more African companies to capitalise on it. However, at a political level, the forum is about ensuring the continued establishment and cementing of liberal democracies in Africa, aiming to guide already qualifying sub-Saharan African countries on how to maximise Agoa benefits.
At its core, Agoa offers non-reciprocal trade benefits to eligible African countries, functioning effectively as a development aid instrument. Under Agoa, African producers can export over 4,000 product lines to the US without facing tariffs, while US producers contend with standard World Trade Organisation (WTO) tariffs when exporting to African countries. This non-reciprocal arrangement makes Agoa a developmental aid instrument to African countries.
To qualify for these benefits, however, African countries must demonstrate adherence to certain economic and political policies. These include establishing a market-oriented economy, promoting political pluralism, upholding the rule of law, eliminating barriers to US trade and implementing policies aimed at reducing poverty, improving healthcare and education, curbing corruption and promoting human rights.
Essentially, Agoa is a tool for promoting liberal social democracies in Africa.
Agoa in the current geopolitical landscape
The African Growth and Opportunity Act finds itself in a challenging situation. With China’s strategic approach to Africa, which takes advantage of the continent’s current political and economic state, the US’ aspirations to fundamentally transform both the economic and political landscapes through Agoa face significant obstacles.
China’s approach (as perceived by many African countries) has lower transformational and transactional costs structurally, making it a more attractive option. This presents a challenge not only for the US but also for the EU.
Beyond attempts at making the current Agoa features more effective through the current forum, and to navigate the Catch-22 situation presented by competition from China, a potential short-term solution for US Congress could be to decouple Agoa’s economic aspirations from demands for revised structural and political conditions.
The current requirements for political transformation could also be scaled down, and a more stepwise approach adopted that considers the political transformation costs borne by often weak African governments.
Essentially, the US strategy would need to be more attuned to the prevailing conditions if it hopes to compete with China for short-term gains.
However, this approach comes with its own set of challenges.
First, there may be no guarantees that political transformations towards liberal markets and democracies would materialise in the future (most preferred outcomes for the US and the EU). It is additionally unlikely that the US Congress would endorse a strategy devoid of positive political future guarantees for the US.
To truly achieve Agoa’s goals in Africa, the US would have to figure out how to limit China’s influence and economic incentive programmes on the continent. This, however, would prove to be a lengthy (even impossible) task as things stand. Thus, the situation remains a Catch-22 for the US and the EU, highlighting the complexities of international trade and politics.
These conditions, for many African countries, are potentially favourable in their trade and political negotiations with the West.
The impact of AfCFTA
The implementation of the African Continental Free Trade Area (AfCFTA) also presents an exciting development concerning Agoa. The AfCFTA aligns with Agoa’s aspirations of deepening regional integration and trade, mirroring many of the goals of the WTO.
But like many other alternative and competing trade arrangements, the AfCFTA also potentially competes with some Agoa goals, especially for currently non-qualifying African countries. The AfCFTA presents lower transformational and transactional costs for qualifying.
The one challenge with the AfCFTA is that many African economies are underdeveloped and produce few value-added products. South Africa remains an exception.
While these competing forces may not directly influence the Agoa Forum, they could or should impact future revisions of Agoa as an aid and political tool of the US government. The AfCFTA, if implemented successfully (in the long term) would also pose competition to China’s trade incentive programmes.
Again, this remains a pipeline dream as many of the AfCFTA partners are yet to develop their manufacturing capacities for value-add on raw products and product diversification.
De-risking the supply chains
Considering the efforts by the US and Western allies to “de-risk” their supply chains, Agoa beneficiaries should stand to gain significantly, particularly if de-risking implies diversifying supply chains (and export destinations).
The current global focus on controlling Africa, primarily due to resource availability and the potential for diversifying input locations and final product destinations, presents enormous potential for the continent. Successful implementation of the AfCFTA could further emphasise this potential.
Consequently, the need to de-risk supply chains further provides African countries with more leverage in trade negotiations overall. These are strong arguments to be made for greater US and EU infrastructural investments on the continent.
In all of this, South Africa remains Africa’s gateway to both the Agoa and EU trade as well as investment programmes because of the country’s resilient market economy and constitutional democracy.
The likelihood of the country losing its Agoa benefits in 2025 seems very low. In fact, the success of Agoa on the continent heavily depends on South Africa’s liberal economic and democratic political successes.
The US and EU policymakers are likely to have recognised these interconnections, which could partly explain why South Africa has still not failed, despite all its internal political and economic challenges.
While Agoa has had its share of early victories, its long-term effectiveness has mainly been undermined by the rise of China as a dominant trade partner for the continent.
The current forum presents an opportunity to reassess and recalibrate the strategies to ensure the continued relevance and effectiveness of Agoa. DM
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