AGOA Renewal Imperiled?

As if the task to generate a more effective African Growth and Opportunity Act (AGOA) was not arduous enough, a bill (S. 1331) to extend the Generalized System of Preferences (GSP) was, on July 18, 2013, introduced in the U.S. Senate by Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Orrin Hatch (R-Utah). A day earlier, a similar bipartisan bill, (H.R. 2709), had been introduced Rep. David Camp (R-Mich) and Rep. Sander Levin (D-Mich), Chairman and Ranking Member respectively of the influential House Ways and Means Committee. Said to be of no cost to American taxpayers, both bills extended GSP through to September 2015, just about the same time as AGOA is set to expire.

This timing notwithstanding, GSP and AGOA are closely linked especially because they allow world wide beneficiaries to export products to the U.S. on a duty-free basis: AGOA preferences apply to approximately 7,000 items including 4,975 tariff lines currently covered by the GSP plus a further 1,800 added by the AGOA legislation. Also, where countries have met the AGOA ‘apparel visa’ requirements, their exports can be admitted on a duty-free basis into America. Thus, setting the calendar for congressional review of GSP at about the same time as AGOA expires has both pros and cons.

Optimistically, given that AGOA seems to garner more support in Congress than GSP, September 2015 could be a time for sub Saharan Africa to benefit more than GSP beneficiaries since the latter program carries the ‘baggage’ of supporting competitors like India and to a lesser extent, Brazil. For instance, while an AGOA beneficiary like South Africa is considered competitive, its baggage is shielded by the Nelson Mandela legacy and how it successfully shed a brutal past to become a rainbow nation. It is also considered an anchor country for Africa’s regional integration, a facet that India cannot claim.

On the negative side, combining GSP and AGOA adds a huge layer of complexity to the review of both programs, and this may hobble not just AGOA’s extension but its enhancement or improvement. On its own, any delay to renew a program comes at a considerable cost to stakeholders like textile manufacturers who face order cancellations. Also, the duo-programs may cause unnecessary drama in Congress since trade preference programs reduce revenue from customs. While GSP claims to be neutral, AGOA’s ‘loss’ would have to be offset by a tax increase: In an epoch where the House of Representatives will call for cuts to costs at any twist and turn, the combined consideration not only endangers the life of both programs, but also puts U.S. foreign policy and national security considerations in jeopardy.

Penultimately, a scenario where AGOA and GSP are combined for renewals in 2015 is plausible. Should this happen, the consequences cannot be underestimated. The EU’s economic partnership agreements (EPAs) are set to be enforced in October 2014, meaning that the U.S. Congress could, in 2015, legitimately ask why America should renew unilateral non-reciprocal programs like AGOA when the EU has better access to the African market. Illustratively, losers could include Mauritius, a small but relatively advanced AGOA beneficiary who has acceded to an EPA without any effort to allay the discrimination of U.S. exports in that country.

Arguably, Stephen Lande who is fondly referred to as the father of GSP suggests that the U.S. – EU reciprocity quandary could be worked out between the U.S., EU and the African Union within the context of the Trans-Atlantic Trade and Investment Partnership (T-TIP). Under these FTA negotiations, both the EU and the U.S. would allow Africa a 10-year period under which duty-free access was guaranteed and reciprocity dependent on a condition that the continent can integrate and so negotiate for a better deal as a unitary economic entity.

Ultimately, with the upcoming AGOA Forum in August 2013, it is imperative that Africa develop as unified a position as possible for what now appears to be a serious congressional review, or else, it will be another lost decade for the U.S. – Africa trade and investment relationship.

The Habari Network Editorial Board | July 22, 2013