Why hasn’t AGOA been more successful?

By Gregory Simpkins

At the recent 123rd National Black Business Conference in Atlanta, Georgia, I told a panel audience that I have been blessed to be in the right place at the right time on the African Growth and Opportunity Act (AGOA) and Prosper Africa. I was part of the initial discussions about what AGOA was supposed to be and what it was supposed to accomplish as part of the team that spearheaded its initial passage. When I arrived at the U.S. Agency for International Development (USAID), it was at the formation of the Prosper Africa initiative, and I was able to provide initial input on the shaping of that program as well.

What is this AGOA?

AGOA was written to address the lack of federal policy regarding US-Africa trade. By offering duty-free, quota-free treatment beyond what African countries could access under the Generalized System of Preferences (GSP) trade process, AGOA was intended to create wealth for African societies by making it easier to sell goods to the lucrative US market. It has always been import-focused. Unfortunately, most of the US government agencies working on trade are focused on exports.

At the time AGOA was written, US trade was centered on Europe, Asia and Latin America – all of whom had experience in exporting and importing with the US. Africa did not and lacked necessary transportation links, and many experienced other challenges that made such trade more difficult. AGOA did not initially address or even identify these deficiencies, especially since it was a trade process to be used and not an institution established to control policy implementation.

Instead, the Office of the US Trade Representative declares which countries participate considering advice primarily from the Commerce Department, State Department and USAID. This advice is often skewed by an export focus or because of diplomatic concerns that do not adequately factor in the needs of businesspeople on either side of the Atlantic Ocean.

Moreover, AGOA has no funding to use in terms of grants of subsidies of private sector entities, which many in Africa and the US don’t realize.

Having done AGOA training in several African countries, I must say that there have been too many US officials who do not have much faith in African or Diaspora commercial capacities, which diminishes AGOA’s chances of success. That probably has contributed to the situation in which nearly a quarter of a century after it was signed into law, too many people in Africa and even in the US don’t fully understand this trade process. At the conference, I relayed my experience at hearing a high-ranking African official get up in the opening session of an AGOA Ministerial in Washington and ask: “So, what is this AGOA?”

On two separate occasions, I heard AGOA Civil Society Forum participants ask why AGOA couldn’t charter ships to take goods to and from the continent. This portrays a serious lack of understanding of how business is supposed to work and what AGOA really is. Of course, given the fact that AGOA has too often operated as a government-to-government matter rather than a business-to-business venture may have led to this misunderstanding.

Prosper Africa was created to provide a coordinating structure for US-Africa trade, building on AGOA to some extent but also involving the private sector more actively than AGOA does. For example, Prosper Africa – through its 17 US agency partners – collaborates with the African Continental Free Trade Area (AfCFTA) Secretariat and the Regional Economic Communities. It operates on four pillars: US exports to Africa, African exports to the US, US investment in Africa and African investment in the US.

Navigating AGOA/Prosper Africa flaws

Unfortunately, several flaws have prevented both AGOA and Prosper Africa from being as successful and as impactful for Diaspora businesspeople and investors. First of all, most US government agencies focus on exports rather than imports, but trade works best when it’s two-way. Not just because it’s fair to buy from those who sell to you, but logistically, it costs exporters more to have to pay for empty space in containers when there aren’t balanced loads going and coming.

Only USAID, and to a lesser extent the African Development Foundation, work to facilitate African exports to the US. Import regulations are created and enforced by Customs and Border Protection, the Department of Agriculture and the Food and Drug Administration. Even though the mandates of agencies such as the Department of Commerce are skewed toward exports, there have been behind the scenes struggles to effectively broaden the scope of Prosper Africa to actively facilitate imports from Africa.

Second, there has always been a government bias toward big business. Early on, African textile producers were steered toward large US retailers who they could not satisfy in terms of their amount of production, but these US buyers also did not source African clothing except on an occasional basis. When I worked with the Prosper Africa Secretariat, there was a saying that made the rounds: “It takes as much effort to work on a US$100,000 deal as it does a US$100 million deal.” So, you can see why there’s a big business bias since larger dollar figures for US-Africa trade help justify Prosper Africa’s existence.

Third, when Prosper Africa was created, the intention was not only to increase the dollar amount of trade, but also the number of jobs produced in the US and Africa. It takes small and medium enterprises to accomplish that goal, which is where Diaspora businesses should be featured. Our businesses also stand the best chance of creating solid, lasting relationships, which is the basis for successful African commercial interactions, as acknowledged in the founding documents of Prosper Africa.

Fourth, perhaps the most troubling challenge to success in US-Africa trade is the US government interpretation of the harmonized tariff schedule that defines what a product is – not what the producer thinks it is, as my colleague Shaquana Teasley pointed out on our panel. For example, a t-shirt is often worn as an outer garment, especially when adorned with character images or company logos, but Shaquana relayed that the prevailing definition of t-shirts is an undergarment. This difference in opinion about what a t-shirt represents can cause an African export to fail to qualify for benefits in a specific category. She said other items, such as pullovers and sweaters, also can be mischaracterized, leading to failure to qualify for the expected categories.

Diaspora trade

The US government, the Corporate Council on Africa and the US Chamber of Commerce have all said the Diaspora is an important element in US-Africa trade and investment, but they don’t seem to know how to effectively facilitate Diaspora commercial involvement with Africa. These entities can help identify likely business and investment partners and intervene in cases where US or African government regulations prove to be obstacles to trade and investment, but once partners are identified, it must be up to Diaspora businesses to make and maintain relationships. That’s why it is up to the Diaspora to propose solutions to the current stalemate.

My first recommendation would be for a Diaspora trade and investment coalition to be created with members who have operated in Africa, currently operate there or can realistically enter into African trade and investment relationships. A large enough contingent of such commercial entities will guarantee respect and cooperation by the US government, African governments, international financial institutions and development financial institutions, as well as potential African business partners.

Second, we must create policies that enable SMEs in the US and Africa to interact with each other more successfully. That means we need to weigh in on the next version of AGOA, which will begin once the current version expires in June 2025. Policy recommendations from the NABB conference and from the policy conference they have scheduled for next February in Washington should have a focus on how to make AGOA and Prosper Africa more effective and inclusive of Diaspora companies. There is an ongoing effort to extend AGOA, but it is geared to continuing AGOA in its current form, which mostly benefits large companies and does not effectively involve Diaspora companies to any significant degree. That is why the Diaspora must engage in its own effort to revise AGOA – as well as Prosper Africa – to make them more inclusive of Diaspora interests.

Third, Diaspora companies must begin the process of establishing enduring connections with African chambers of commerce and business councils in the Regional Economic Communities. The US government and African governments can help, especially the USAID regional hubs, but we have to work directly with our commercial counterparts and rely on governments only where necessary.

Early in the 20th century, Marcus Garvey, expanding on Booker T. Washington’s economic principles, attempted to create Diaspora commercial linkages with Africa through Liberia. That effort failed for several reasons, but we have an opening in the 21st century to make Garvey’s dream come true. Depending on the follow-up, the NABB conference can produce progress not seen previously, and we must take advantage of that opportunity to make the long-desired commercial connection between Africans and their Diaspora counterparts.

Gregory Simpkins, a longtime specialist in African policy development, is the Principal of 21st Century Solutions. He consults with organizations on African policy issues generally, especially in relating to the U.S. Government. He also serves as Managing Director for the Morganthau Stirling consulting firm, where he oversees program development and implementation. He further acts as a consultant to the African Merchants Association, where he advises the Association in its efforts to stimulate an increase in trade between several hundred African Diaspora small and medium enterprises and their African partners.