Time for a New Economic Partnership with Africa

World

The Biden administration has an opportunity to develop smarter, more flexible economic partnerships with African counterparts. It should build on and support the achievements Africa has made in creating a more dynamic, integrated market—including the African Continental Free Trade Area (AfCFTA) agreement—while addressing the competitive disadvantages U.S. companies increasingly face vis-à-vis European and other firms, and do so in a framework that enhances the United States’ ability to engage with Africa more strategically.  This will entail a true transition from the African Growth and Opportunity Act (AGOA), the unilateral trade preference program that has served as the centerpiece of U.S. economic engagement with Africa, toward a more reciprocal set of trade and investment arrangements. It also means better integrating U.S. trade policy toward Africa with broader strategic political and economic engagement to make it more coherent, and more successful.

The Future of AGOA

The United States must decide what to do with AGOA. First passed in 2000, AGOA was intended to support the development of African economies by providing duty-free access to the U.S. market for 1,800 goods not available to other regions. AGOA’s record has been distinctly mixed. In its favor, AGOA offers access to the U.S. market for a number of products that provide real opportunities for African companies—such as automobiles, textiles, and apparel—which are not included in other trade programs like Generalized System of Preferences (GSP). On the other side of the ledger, few countries have used AGOA to its full extent (and only 18 of 39 have finalized an AGOA utilization strategy), suggesting that simply providing access to the U.S. market is not sufficient. Furthermore, AGOA does not cover many of the sectors with the greatest potential, including the growing trade in financial, digital, travel, and business services. AGOA also does nothing to counteract the growing disadvantages faced by U.S. companies exporting to or investing in Africa with regard to tariffs and rules of origin, particularly when competing with European firms.

When AGOA was last extended in 2015, Congress made it clear that it did not intend to re-extend the program upon its expiration in 2025. A number of leading sponsors of the legislation noted that African economies had developed significantly since 2000 and called on the executive branch to develop strategies to transition trade and investment relations with African countries to reciprocal agreements (e.g., free trade agreements or FTAs). Indeed, they note that U.S. competitors such as Europe transitioned long ago from offering unilateral market access to proto-FTAs with a range of Economic Partnership Agreements.

In 2025, AGOA’s proponents will likely press for continued access on a range of grounds—including as part of a broader agenda, from promoting jobs to combating terrorism. At the minimum, there will be calls for provisions to maintain access for the least developed countries, particularly for textiles and apparel, including third-party fabric provisions.

FTAs for All?

While largely ducking the question of what to do with AGOA, the Trump administration proposed concluding one or more FTAs with sub-Saharan African countries that could then serve as models for other countries. A handful of African countries indicated they would be willing to enter negotiations, and the United States began FTA talks with Kenya. While the Trump administration never laid out a precise process or strategy, public comments suggested that the intention was for countries to evaluate the final terms of the Kenya agreement, and ideally announce they were ready to sign on to their own FTAs with the United States, hopefully with only minimal changes. It was not entirely clear how a series of FTAs would be brought together into a harmonized whole, and it is unlikely African countries had an answer to that question either. The United States and Kenya have yet to agree on a text, which would ultimately have to be harmonized with Kenya’s commitments to its neighbors under the East Africa Community (EAC), and ultimately with the terms of the AfCFTA agreement when it is finalized. The fact that it will take more time to complete the Kenya FTA does not argue against concluding it; it does suggest that the road of bilateral FTAs will be longer and more complex than the Trump administration expected and that the Biden administration should not make this its only, or even its primary, vehicle to pursue trade policy in Africa.

The Worst of Both Worlds

The program could be extended—again—for some “limited” period (e.g., five or ten years). This would be the worst option, however, as it would undercut any motivation for African countries to engage the United States on reciprocal agreements like an FTA. Equally problematic would be to let AGOA expire without renewing it. While this would require no action on the part of the United States, it would provide no transition for those companies and countries that have made use of it, particularly as African countries look to recover from the first continent-wide recession in 25 years. Moreover, an end to AGOA may discourage African stakeholders from exploring options to maintain African access to the U.S. market. As tempting as it may be to pursue a “clean” decision—end the program or extend it—the administration will need to come up with something more nuanced.

Transitioning toa Strategic Economic Partnership

The way forward is developing a strategic U.S. Economic Partnership with Africa, drawing on the multiple tools that the United States already has in place to foster a more reciprocal trade and investment relationship that matches the evolution of AfCFTA. It would link to annual strategic dialogues with the African Union (AU) and provide a clear framework in which to track progress on related themes. These steps would elevate the current dialogue and make the process more formal and better incorporate ongoing trade and investment discussions. They also would broaden the discussions beyond the corridors of the AU in Addis Ababa and allow more countries to participate in the process. A U.S. economic partnership would follow five broad lines of effort:

• Focus on AfCFTA as the base for reciprocal discussions: Instead of waiting for Africa to complete AfCFTA negotiations before seeking to conclude a formal trade agreement with the unified bloc, as some observers have suggested, the United States should focus on the content of specific sections in the AfCFTA agreement. To the extent that the AfCFTA incorporates terms that effectively meet some of the same benchmarks the United States would normally include in a bilateral FTA, the practical effect for U.S. companies could end up being much the same. The chapter on digital trade is perhaps the clearest case in point, with the provisions on intellectual property rights, services, dispute settlement, and payment mechanisms. More active U.S. government engagement in these sectors could significantly enhance the ability of the AfCFTA to serve as a framework for greater U.S. trade and investment in Africa. The U.S. government should step up its engagement with AU experts, as other partners are doing, on standards, digital trade, and services, among others.

•  Engage more African countries as part of international trade regimes: U.S. FTAs typically include chapters on investment, environment, and anti-corruption, as well as sectoral chapters (such as on energy performance standards). The United States can pursue a number of these subjects by working with African countries through international organizations. African countries are increasingly active participants in the World Trade Organization’s Trade Facilitation Agreement, and the Organization for Economic Cooperation and Development has set up important international standards on issues such as Principles for Responsible Investment (in coordination with the United Nations), trade and investment in clean energy infrastructure, and anti-corruption. Working with African countries to get more of them to sign on to those principles and apply them domestically would provide much of the same protection as is often found in an FTA.

• Pursue protocols with the AU to address specific topics: The United States can address some of the other chapters typically found in FTAs, including rules of origin, agricultural trade, trade remedies, and technical barriers to trade and services, through its existing U.S.-AU High-Level Dialogue, which already provides an important forum for discussing cooperation and collaboration on several of these issues. The United States and AU can formalize some of these discussions with protocols between the AU Commission and member countries on energy, environment, and illegal, unreported, and unregulated (IUU) fishing, for example. Both parties should spell out principles they agree to apply or international standards they pledge to apply, combined with technical assistance from the United States. The United States should also conclude a trade and investment protocol with the AU and interested member states to apply certain terms and principles in sectors like investment, dispute settlement, and technical barriers to trade. African countries have also expressed an interest in collaborating to develop the potential of small and medium-sized enterprises (SMEs), for which the United States could deploy its existing U.S. Small Business Administration’s Small Business Development Centers.

• Keep the door open for bilateral FTAs: The administration should conclude the FTA with Kenya and pursue harmonization discussions with the EAC as necessary. It should also be open to other countries’ expressions of interest in negotiating an FTA based on the Kenyan example. There may well be several countries that would prefer to make sure they have negotiated access to the U.S. market, rather than wait for the broader AfCFTA process. This is particularly true of upper-middle-income countries. Conducting bilateral FTA talks in this framework would continue to support the AfCFTA negotiations while also providing an incentive to conclude agreements with the United States.

• Extend the AGOA provisions on textiles and third-country fabric: The U.S. International Trade Commission’s report makes clear that the textile sector is one of the most important sectors under AGOA that several African countries have used. Particularly as global supply chains shift in the wake of China’s shifting labor dynamics and evolutions in world textile markets, continuing to offer duty-free access for this segment will support African efforts to create more manufacturing jobs and increase regional value chains. These provisions are likely to become more important than they have been over the last 20 years and could serve to create some strong proponents within African countries of pursuing deeper economic relations with the United States. Congress should not extend the rest of the AGOA provisions, instead encouraging African countries to pursue either bilateral agreements or the broader policy process with the AU.

The United States should look to wrap all these items together in a Strategic Economic Partnership with Africa. This would provide a clear framework from which to track progress on the various related themes. The United States already has an annual strategic dialogue with the AU. Forming a Strategic Economic Partnership would make the new process slightly more formalized and would better incorporate ongoing trade and investment discussions. It would also broaden the discussions beyond the corridors of the AU in Addis Ababa and allow more countries to actively participate in making progress on issues between dialogue meetings and better anchor annual discussions the United States has with African ministers of trade at the AGOA forum.  

Laird Treiber is a senior associate (non-resident) with the Africa Program at the Center for Strategic and International Studies in Washington, D.C.

Commentaryis produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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