ISSUE BRIEF

Congress Should Upgrade

the African Growth and Opportunity Act
Brett D. Schaefer, Charlotte M. Florance, and Anthony B. Kim
No. 4255 | JULY 29, 2014
T
he House Ways and Means Trade Subcommit-
tee will convene a timely hearing on the Afri-
can Growth and Opportunity Act (AGOA) on July
29. The hearing takes place at a critical juncture
for Americas engagement with Africa. AGOA, rst
enacted under President Bill Clinton and amend-
ed and extended by legislation three times under
President George W. Bush, enjoys broad bipartisan
support, represents the most signicant economic
arrangement between the U.S. and African nations,
and has helped to expand trade and investment.
The current AGOA legislation is set to expire on
September 30, 2015, and Congress and the Admin-
istration need to act quickly to ensure that uncer-
tainty does not undermine the progress that has
been made under AGOA. Ideally, Congress should
lead the way and ensure that AGOA enhances the
current economic partnership beyond a trade pref-
erence arrangement, encourages African economic
integration, and sets the stage for a future free trade
agreement (FTA) between the U.S. and the region.
Strengthen Americas Economic
Engagement with Africa
AGOA has become the backbone of Americas
economic and development engagement with Afri-
ca. AGOA ofers duty-free access to the U.S. market
for a wide variety of African products from coun-
tries that are making progress toward market-
based economies, democracy, the rule of law, elimi-
nating corruption, lowering barriers to trade and
investment, reducing poverty, improving health
and education, and improving human rights. Coun-
tries are granted AGOA eligibility based on their
record and continued progress; if they retreat, their
AGOA eligibility can be rescinded. Currently, 39
countries are AGOA eligible.
1
Africas place in todays world has changed con-
siderably since Congress passed the initial AGOA
legislation in 2000. Despite ongoing political and
security turmoil in some countries, overall trade
and investment policy has gradually improved and
contributed to increased economic growth.
According to the Index of Economic Freedom, an
annual data-driven economic policy analysis by The
Heritage Foundation and The Wall Street Journal,
African economies as a group have moved toward
greater economic freedom since 2000.
2
Mauritius is
now the worlds eighth-freest economy. Other Afri-
can nationssuch as Cape Verde, Angola, Botswana,
Liberia, and Sierra Leonehave also made notable
improvements. These policy reforms have coincided
with high economic growth. On average, since 2000,
African countries have registered consistent annu-
al growth rates of approximately 5 percent, which
were only temporarily interrupted by the global eco-
nomic downturn.
3
AGOA has contributed to these positive out-
comes. U.S. total merchandise trade with AGOA-
eligible countries has more than tripled from $18.7
billion in 1999 (before AGOA) to $60.9 billion in
2013.
4
U.S. exports to AGOA-eligible countries
This paper, in its entirety, can be found at
http://report.heritage.org/ib4255
The Heritage Foundation
214 Massachusetts Avenue, NE
Washington, DC 20002
(202) 546-4400 | heritage.org
Nothing written here is to be construed as necessarily reecting the views
of The Heritage Foundation or as an attempt to aid or hinder the passage
of any bill before Congress.
2
ISSUE BRIEF | NO. 4255
JULY 29, 2014
increased from $5.1 billion in 1999 to $22.8 billion
in 2013.
5
U.S. imports from AGOA-eligible coun-
tries increased from $13.6 billion in 1999 to $38.1
billion in 2013.
While AGOA has facilitated trade expansion, a
trade preference arrangement does not maximize
American engagement with the region. As Michael
Froman stated in his rst public speech after becom-
ing the U.S. Trade Representative last year, there is
still more [the U.S.] can do to build on AGOA.
6
Upgrading AGOA
Africa ofers untapped opportunities and devel-
opment potential, as evidenced by recent market
research showing that investment interest by multi-
national corporations is not just growing rapidly, but
is also expanding beyond the traditional extractive
industries to other fast-developing sectors in Africa.
7
Signicantly, this potential could be greatly
enhanced by regional market integration being pur-
sued by the African Union (AU) in an efort to estab-
lish a Continental Free Trade Area (CFTA) by 2017
and integration of the Regional Economic Commu-
nities into a single customs union by 2028.
8
A 2013
study projects that African nations would realize sig-
nicant economic benets from regional integration
and free trade.
9
If AGOA is renewed but remains sole-
S0
S20
S40
S60
SS0
Sl00
l999 2000 200 20l0 20l:
CHART 1
Source: U.S. De,etet o Coece teetoe' eoe
Aosteto eoeStets Lx,ess. Netoe' eoe Dete
|tt,.tse.ex,ot.oSLSLHoe.es,x (eccesseo ..',
23 2O4`.
IN BILLIONS OF CURRENT U.S. DOLLARS
U.S. Trade with AGOA Nations
|etee.o 3 42
U.S. Imports
from AGOA
U.S. Exports
to AGOA
U.S. Imports
from AGOA
U.S. Exports
to AGOA
1. The countries eligible for AGOA benets are Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Cape Verde, Chad, Comoros,
Republic of Congo, Cote dIvoire, Djibouti, Ethiopia, Gabon, The Gambia, Ghana, Guinea, Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali,
Mauritania, Mauritius, Mozambique, Namibia, Niger, Nigeria, Rwanda, Sao Tome and Principe, Senegal, Seychelles, Sierra Leone, South Africa,
Tanzania, Togo, Uganda, and Zambia. Madagascar and Mali were restored to AGOA eligibility in 2014, and Swaziland is scheduled to lose its
eligibility in 2015. International Trade Administration, AGOA Eligibility: General Country Eligibility Provisions,
http://trade.gov/agoa/eligibility/index.asp (accessed July 28, 2014).
2. Terry Miller, Anthony B. Kim, and Kim R. Holmes, 2014 Index of Economic Freedom (Washington, D.C.: The Heritage Foundation and Dow Jones
& Company, Inc., 2014), http://www.heritage.org/index.
3. World Bank, The Africa Competitiveness Report 2013,
http://www.worldbank.org/content/dam/Worldbank/document/Africa/Report/africa-competitiveness-report-2013-main-report-web.pdf
(accessed July 28, 2014).
4. U.S. Department of Commerce, International Trade Administration, TradeStats Express: National Trade Data,
http://tse.export.gov/TSE/TSEHome.aspx (accessed July 28, 2014).
5. Ibid.
6. U.S. Trade Representative Michael Froman, Remarks to the U.S. Global Leadership Coalition, Ofce of the United States Trade Representative,
June 25, 2013, http://www.ustr.gov/about-us/press-ofce/press-releases/2013/june/remarks-united-states-trade-representative-michael-fr
(accessed July 28, 2014).
7. Jonathan Wakely, More Good News for Foreign Investment in Africa, CovAfrica, June 23, 2014,
http://www.covafrica.com/2014/06/more-good-news-for-foreign-investment-in-africa/ (accessed July 28, 2014).
8. James M. Roberts, 2014 Global Agenda for Economic Freedom, Heritage Foundation Special Report No. 153, May 2, 2014,
http://www.heritage.org/research/reports/2014/05/2014-global-agenda-for-economic-freedom.
9. Simon Meval et al., The African Growth and Opportunity Act: An Empirical Analysis of the Possibilities Post-2015, Brookings Institution,
July 2013, http://www.brookings.edu/~/media/research/les/reports/2013/07/agoa%20beyond/130729%20agoa%202013webnal.pdf
(accessed July 28, 2014).
3
ISSUE BRIEF | NO. 4255
JULY 29, 2014
ly a trade preference arrangement, the U.S. will fail to
fully capitalize on Africas progress toward econom-
ic integration.
In addition, if the U.S. fails to advance AGOA
beyond a trade preference arrangement, it risks los-
ing ground to European and other nations eager to
enter into more robust partnerships with African
economies. Instead of simply renewing AGOA, the U.S.
should craft it to encourage African economic integra-
tion and set the stage for eventual free trade between
the U.S. and Africa. Specically, the U.S. should:
n Renew AGOA through at least 2025. Failure to
renew AGOA on a long-term basis risks discour-
aging investment and long-term trade contracts
and undermining Americas credibility as a reli-
able economic partner in the region.
n Encourage regional economic integration.
The AU has announced its intent to nalize
agreements for regional economic communities
by 2014, integrate them between 2015 and 2016,
and establish a continental free trade area by
2017.
10
Economic analysis indicates that regional
economic integration would provide signicant
economic benets, and the U.S. should encourage
these eforts through AGOA.
n Further incentivize AGOA-eligible countries
to pursue greater economic freedom. The U.S.
cannot furnish these nations with the political
will needed for controversial policy changes, but
by demonstrating serious, committed interest
in freer trade and advancing AGOA into a great-
er future, the U.S. can ensure that its advice and
concerns are taken into account.
n Facilitate greater private-sector-to-private-
sector engagement. Thriving private sectors
are the best source of inclusive and broad-based
economic growth as they seek out opportunities
for trade, investment, and partnership. Undeni-
ably, the private sector in both the U.S. and Africa
has been playing an indispensable role in turn-
ing the promise of AGOA into tangible economic
reality. The U.S. currently has some initiatives to
encourage private-sector market access such as
regional trade hubs, but these eforts are unde-
rutilized and poorly coordinated. AGOA should
address these shortfalls by specically incorpo-
rating plans to enhance private-sector-to-private-
sector engagement.
n Express Americas support for Africas plan
to enact a continental FTA and incorporate
that plan into AGOAs reauthorization. While
AGOA is useful, it is an incomplete approach to
increasing U.S.African trade that ignores the
advantages of free trade within Africa and the
mutual benets that Africans and Americans
would realize from free trade.
AGOA Deserves Concrete Action,
Not More Rhetoric
The coming expiration of AGOA presents a timely
opportunity to upgrade the arrangement to solidify
Americas engagement with Africa and benet indi-
vidual Americans and Africans. Congress should
seize the opportunity to upgrade AGOA into an
instrument that advances dynamic expansion of the
private sector in Africa, efectively encourages eco-
nomic integration within the region, and sets the
stage for an FTA between the U.S. and Africa.
Brett D. Schaefer is Jay Kingham Fellow in
International Regulatory Afairs in the Margaret
Thatcher Center for Freedom, of the Kathryn and
Shelby Cullom Davis Institute for National Security
and Foreign Policy, at The Heritage Foundation.
Charlotte M. Florance is a Research Associate
for Economic Freedom in Africa and the Middle
East in the Douglas and Sarah Allison Center for
Foreign and National Security Policy of the Davis
Institute. Anthony B. Kim is a Senior Policy Analyst
for Economic Freedom in the Center for Trade and
Economics, of the Institute for Economic Freedom and
Opportunity, at The Heritage Foundation.
10. African Union, Decisions, Resolutions and Declarations, Assembly of the Union Eighteenth Ordinary Session, January 2930, 2014,
http://www.au.int/en/sites/default/les/ASSEMBLY%20AU%20DEC%20391%20-%20415%20%28XVIII%29%20_E.pdf
(accessed July 28, 2014).