Hope for Africa-US trade ties as bill seeks to extend AGOA by 20 years

Sub-Saharan Africa could enjoy another 20 years of duty-free access to the US market for goods traded under the African Growth and Opportunity Act, if a new Bill is enacted.

This comes even as Kenya and the US continue to engage on a possible Strategic Trade and Investment Partnership (STIP), to further deepen trade and investment ties between.

Louisiana Senator John Kennedy has introduced the AGOA Extension Act of 2023, a bill that would extend the AGOA through September 2045, giving hope to African nations which were seeking for an extension of at least 10 years beyond 2025.

Congress first enacted the Act in 2000.It was in 2015 extended by 10 years, authorising the program through to September 30, 2025 when it expires.

It provides eligible countries, which were 36 as of last year, duty-free access to the U.S. market for over 1,800 products, in addition to more than 5,000 products that are eligible for duty-free access under the Generalized System of Preferences program.

Kenya is among the biggest beneficiaries of the Act with more than 70 per cent of exports to the US enjoying duty-free access, where the US is also a key import source for the country.

Last year, the value of Kenya's exports to the US grew 34 per cent to Sh79.9 billion up from Sh59.6 billion, the Economic Survey 2023 by the Kenya National Bureau of Statistics indicates.

“The growth was mainly due to increased domestic exports of titanium ores and concentrates; articles of apparel and clothing accessories and; coffee,” KNBS notes in its report.

The US is the largest export destination of Kenya’s apparel, accounting for over 90 per cent of garment exports every year.

Imports from the US equally increased by about 11 per cent with a value of Sh93.4 billion, up from Sh84.2 billion.

This was occasioned by an increase in the importation of vaccines for human medicine, peas and grain sorghum.

According to Senator Kennedy, trade and investment, as facilitated by AGOA, promote economic growth, development, poverty reduction, democracy, the rule of law, and stability in Sub-Sahara Africa.

Apart from creating economic opportunities in Africa, it is also supporting nearly 120,000 jobs in the US, the Senator notes in the draft.

“It is in the interest of the United States to engage and compete in emerging markets in Sub-Saharan African countries, to boost trade and investment and to renew the African Growth and Opportunity Act,” the Bill reads in part.

Since the enactment in 2000, the African Growth and Opportunity Act has been the centerpiece of trade relations between the United States and Sub-Saharan Africa and has enhanced trade investment, job creation and democratic institutions through Africa.

According to Senator Kennedy, the long-tern economic security of the US is enhanced by strong economic and political ties with the “fastest-growing economies in the world, many of which are in sub-Saharan Africa.”

The elimination of barriers to trade and investment in sub-Saharan Africa, including high tariffs,forced localization requirements, restrictions on investment and customs barriers, will create opportunities for workers, businesses, farmers and ranchers in the US and sub-Saharan African countries, he notes.

“Extending the African Growth and Opportunity Act for 20 years provides stability for all parties involved …..Congress must address its expiration,” the Senator said.

He introduced the bill on September 27.It has now been read twice and referred to the Committee on Finance.

First, a Representative sponsors a bill. The bill is then assigned to a committee for study. If released by the committee, the bill is put on a calendar to be voted on, debated or amended.

If the bill passes by simple majority (218 of 435), the bill moves to the Senate.

In the Senate, the bill is assigned to another committee and, if released, it is debated and voted on. If the Senate makes changes, the bill must return to the House for concurrence.  

The resulting bill returns to the House and Senate for final approval. From there, the President has 10 days to veto the final bill or sign it into law.

During a ministerial engagement in Washington DC, in December last year, on the sideline of the US-Africa leaders summit, ministers from the continent had called for an extension to at least 2035.

According to the ministers, AGOA is the cornerstone for US-Africa bilateral trade relations, and vital to the development of regional, continental, global value chains, the African Union economic arm said. 

The move, they said would allow the continent align it's trade and investment with the US under the African Continental Free Trade Area (AfCFTA).

The extension being considered however comes on the back of arguments that AGOA has failed to achieve an increase in the quantity and quality of exports to the US market, despite two decades in operation. 

Even so, Kenya which is the largest exporter of garments under the AGOA programme, prides itself  of manufacturing for big names such as H&M, Levi’s, JC Penny, Wrangler, and Otto, among others, according to the Kenya Association of Manufacturers (KAM) chief executive Anthony Mwangi.

“This demonstrates that local industries can produce high-quality products for local and international markets,” Mwangi said.

Meanwhile, Kenya is hoping to have a solo strategic deal with the US by next year, in the ongoing talks.

With a bilateral deal, Kenya is keen to tap at least five per cent of the US market, which has the potential to earn the country more than Sh2 trillion in export revenues annually.

Expanding bilateral trade, inclusion of women and youth and supporting Micro, Small and Medium Enterprises are part of the ongoing talks.