US says it might extend AGOA to 2025

As China continues to make inroads into Africa, some commentators have been of the view that the United States and other western countries risk falling behind.

Perhaps in response to this on some level, the Obama administration is looking to extend the African Growth and Opportunity Act (AGOA), which is set to expire in 2015, through to 2025, Assistant Secretary of State for African Affairs Johnnie Carson has said, citing the measure’s success in enhancing trade levels between the US and the African continent.

Speaking at the Centre for Strategic and International Studies in Washington, Carson said AGOA “remains the centrepiece of our trade and investment policy with Africa,” and has “made progress in creating jobs, spurring economic growth and facilitating a dialogue on key economic and political challenges” since the legislation took effect in 2000.

In 2000, US exports to Africa were valued at US$5.9 billion and its imports totalled $23.4 billion. Thanks to AGOA, those levels rose to $17.1 billion in exports and $64.3 billion in African imports in 2010, Carson said. But, he added, neither the US nor African nations should “become complacent” about the increase in trade and economic opportunities over the past 10 years. “Africa still faces huge challenges and we need to continue and revitalise our economic partnership,” he said. The region “has not experienced a genuine economic revolution”. The continent also continues to struggle to compete in an increasingly competitive global economy. “For these reasons I am fully committed to revitalising AGOA,” Carson said.

The assistant secretary said the US also wants to extend AGOA’s Third Country Multi-Fiber provision through to 2022. That provision allows AGOA member states to obtain their raw materials from other countries while maintaining preferred access to the US market. He also said the administration wants to add South Africa to the provision.

In prepared remarks at the same event, Deputy US Trade Representative Demetrios Marantis said AGOA is “at the heart of our Africa policy,” and it has defined the US trade relationship with the continent for three presidential administrations. But because many studies show that African economies continue to face constraints, a lack of trade capacity, or are “otherwise insufficiently competitive to take advantage of export opportunities,” the Obama administration is asking “tough questions” about the impediments to Africa’s continued economic growth, he said.

Trade between China and Africa has doubled every three years for the past 15 years according to Standard Bank, while China buys one-tenth of Africa’s total exports. Although China stands out as Africa’s largest overall trade partner, the US remains the largest single destination for African exports, according to the bank. The extension of AGOA will ensure that the US continues to be a big player in helping drive development and trade on the continent.

Article written by the Imara Africa Securities team. Imara is an investment banking and asset management group renowned for its knowledge of African markets.