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With the African Growth and Opportunity Act (AGOA) set to expire in 2025, the United States has an opportunity to update what its economic “offer” is to Africa. This is important work, as Africa is going to be a much bigger part of the United States’ future. The AGOA was signed into law in 2000, and it was most recently reauthorized in 2015 for 10 years. The act offers duty-free access to U.S. markets for countries in sub-Saharan Africa that meet certain conditions on rule of law, human rights, and labor protections. While not transformational, the AGOA has provided substantial diplomatic benefits and led to major growth in sectors such as apparel, with exports to the United States nearly doubling over 20 years. Congress should renew the AGOA, but this renewal offers an opportunity to update the agreement and be more ambitious.
Like the rest of the world, Africa today is very different than it was 25 years ago. The continent currently has over 570 million internet users, twice as many as when the AGOA was last renewed in 2015. Digital technology and services now account for $155 billion of economic activity. The middle class has tripled to over 300 million people, and the continent’s population of 1.3 billion is projected to reach 2.4 billion by 2050 and 4.2 billion by 2100. Demographic changes have ushered in rapid urbanization, with over 80 percent of population growth predicted to occur in cities. Amid these trends, China has overtaken the United States as Africa’s top trading partner, with $168 billion in annual Chinese-African trade dwarfing the United States’ $37 billion.
The AGOA is perhaps the only legislative “vehicle” for what the United States has to offer Africa in the near term. With seismic economic, demographic, and geopolitical shifts since the AGOA’s inception nearly 25 years ago, it would be a missed opportunity to only “copy and paste” the existing program, like Congress did in 2015. With the reauthorization deadline rapidly approaching, there are five important questions that Congress should consider.
First, should Congress act this year or wait until next year? There is a compelling case to reauthorize the AGOA now: textiles and apparel operate on a two-year business cycle, and orders for 2025 are being negotiated now. Investors will want certainty that their products will be competitive in U.S. markets, so these industries require Congress to act urgently. Otherwise, their orders will pass on Africa and go to South Asia.
Moreover, things in Congress take time. Trade legislation of any kind has become politically challenging, and 2024 is an election year, making it essential for Congress to begin pushing the matter now. Another preference program, the Generalized System of Preferences (GSP), still has not been renewed since it expired at the end of 2020, despite several attempts in Congress to do so. Reauthorization of the AGOA won’t be an exception. In the meantime, holding congressional hearings this year on the AGOA would start socializing the importance of renewal and provide some confidence to investors that Congress wants to see it renewed. AGOA renewal will require House Republican leadership, as the Biden administration has not been especially vocal about its support for the AGOA. Fortunately, the act has always enjoyed bipartisan congressional support.
Second, how should Congress consider potential digital dimensions given that the world has undergone a digital transformation since 2000? The AGOA contains no provisions on services that include digital trade. While there are no barriers to African digital trade exports to the United States, this is a good opportunity to recognize the growing importance of digital trade to both the United States and Africa. The United States should pursue a partnership that builds on emerging international standards and reduces barriers in African countries to digital trade, including cross-border data flows and internet access. Congress could include language in this year’s AGOA reauthorization directing the Biden administration to come up with a digital trade partnership within 12 months that could offer countries signing on to it additional benefits under the AGOA.
Third, how should concepts such as trade capacity building and trade facilitation be considered within AGOA renewal? Federal agencies, led by the U.S. Agency for International Development (USAID) and the Millennium Challenge Corporation (MCC), have supported the AGOA by investing in infrastructure, including roads, ports, and electricity, as well as by directly assisting exporters in priority sectors. For a number of reasons, complementary measures to the AGOA, including capacity building and opportunities to demonstrate new products and services, will need to continue but should be addressed in appropriations legislation, rather than holding up AGOA renewal.
Fourth, how should the act address critical minerals and electric vehicles? AGOA countries including the Democratic Republic of the Congo, South Africa, Tanzania, and Zambia are rich in critical minerals. The switch to electric vehicles will require production of inputs such as cobalt and lithium to increase by 40 times. To ensure that China does not dominate world production of these minerals, AGOA reauthorization should consider ways to connect mineral value chains in eligible countries. While there are no trade or tariff issues currently—mainly because there is no processing of these materials in Africa—Congress could include report language directing the Biden administration to develop a plan to extend its international partnership to include African countries and set up processing that would receive the same tariff treatment as free trade agreement countries.
Fifth, what are the chances of a deeper trade partnership beyond the AGOA? When the Trump administration began negotiations for a bilateral free trade agreement with Kenya, it was believed that a Kenyan deal could provide a model for future agreements in sub-Saharan Africa. The Biden administration torpedoed these plans, and Kenya now hopes for a something less than a bilateral free trade agreement that does not address tariff barriers. The administration’s reversal on a trade deal with Kenya should create fresh impetus for Congress to renew the AGOA.
AGOA expiration is on the horizon, and U.S. and other investors need certainty. This moment provides an opportunity to build a U.S.-Africa partnership better fit for the twenty-first century. Because this is also an opportunity to offer Americans access to affordable, quality goods and to counter China’s growing threat in the region, Congress should begin the reauthorization process now.
Daniel F. Runde is a senior vice president, director of the Project on Prosperity and Development, and holds the William A. Schreyer Chair in Global Analysis at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Thomas Bryja is a program coordinator with the CSIS Project on Prosperity and Development.
