With a little over a year to go until the trade preference program’s expiration, the Africa Growth and Opportunity Act (AGOA) Forum in Washington, D.C. brought together stakeholders from across the globe to discuss its future.
Over the course of three days last week, senior government officials from the U.S. and AGOA-eligible nations, along with representatives from the continent’s regional economic organizations, the private sector and civil society, gathered for a number of talks about how to boost the program’s utilization, promote worker-centric trade policies and drive opportunities for Americans and Africans alike.
But two central questions loomed large over the proceedings.
When will AGOA be renewed? And for how long?
Much to the consternation of suppliers, brands and other advocates intent on fueling Sub-Saharan Africa’s growth as a sourcing hub for apparel and textiles, concrete answers remain elusive.
In a briefing on the outcome of the AGOA Forum on Monday, Constance Hamilton, Assistant U.S. Trade Representative for Africa, told press that she was unable to predict when the trade preference program, which has enjoyed more than two decades of broad bipartisan support, might be reinstated.
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“Let me just say that Congress is completely in charge of the legislation being written, approved, and passed,” she said. “I am very confident that it will happen before AGOA is set to expire in 2025. I do think, as we look at the timeline and all the things that are happening here, it may be unlikely to happen in 2024, but certainly in early 2025 I expect to see it completed.”
Joy Basu, Deputy Assistant Secretary of State in the Bureau of African Affairs overseeing Economics and Regional Affairs across Sub-Saharan Africa, acknowledged that the question was asked “many times during the Forum,” and indicated that the State Department is pushing for “a reauthorization as soon as possible.”
“Obviously, our colleagues in Congress hold the pen, but if you look at a number of bills that have been introduced already, I think you will see that a longer extension period—at least a stable extension period—is on the table right now, which we would be happy to see in order to give companies and businesses that stability over the period that Congress allows,” she added. Basu said similar bills have seen “positive trends” toward renewals of between 10 and 20 years.
Widespread government support
President Joe Biden has been effusive in his support for the renewal of AGOA throughout his time in office. Before the Forum kicked off on Wednesday, the Commander in Chief again called upon Congress “to quickly reauthorize and modernize this landmark Act.”
“For more than two decades, the bipartisan African Growth and Opportunity Act has formed the bedrock of America’s economic partnership with African nations,” he added. “In sub-Saharan Africa, it has increased the competitiveness of African products, led to the creation of tens of thousands of quality jobs, and helped advance human rights.”
The program has also created investment opportunities, new consumer markets and fresh sourcing alternatives for American companies intent on diversifying away from China. “On both sides of the Atlantic, AGOA has promoted sustainable economic growth and resilient supply chains,” Biden said.
Secretary of State Antony Blinken doubled down on the agreement’s ability to help bolster U.S. industry.
“By allowing products from sub-Saharan countries to enter the United States without paying tariffs, AGOA has let entrepreneurs expand to new markets to grow their businesses,” he said in his opening remarks at the Forum. “It’s helped companies further diversify and strengthen their supply chains so that consumers can benefit from more affordable, more innovative products.”
U.S. Trade Representative (USTR) Katherine Tai called AGOA “the cornerstone of our economic partnership,” with Africa. “I don’t mean it in the abstract—it has positively touched so many people’s lives already. And it has the potential to do so much more.”
Updates and improvements
Amid the outpouring of goodwill for the program were clues about why, despite the seeming ubiquity of positive sentiment, Congress is running down the clock on its renewal.
Throughout the Forum, officials alluded to the need for updates and improvements to the 24-year-old treaty. Recapping those conversations, Assistant USTR for Africa Hamilton said there’s a need to modernize AGOA across a few key areas.
“What we really want to do is strengthen the usage of the program, especially by the least developed countries,” she explained. “When we look at the experience of AGOA, we’re finding that maybe four or five countries are using it fully, and maybe one or two is using it more than everyone else, but the least developed countries are barely using the program.”
One of the “major outcomes” the federal government has been looking for is a tangible boost for smaller nations. “It’s really not happening in the program when we look at the experience of today,” she said.
Hamilton said some countries have invested in developing utilization strategies, but many are still not taking advantage of the free-trade benefits.
Half, or 16 of the 32 AGOA beneficiary countries, have published national strategies for utilizing AGOA, according to the Center for American Progress. Botswana, Ghana, Kenya, Eswatini, Lesotho, and others that have implemented such frameworks “have seen their exports under AGOA increase significantly,” the group wrote in a report last week. Kenya and Lesotho have “exceptionally high utilization rates,” with 57 percent of Kenya’s exports and 74 percent of Lesotho’s exports to the U.S. last year entering the country duty-free.
Hamilton also said the U.S. government has been exploring updates to the program that promote investment in supply chain integration to foster resilience and competitiveness, as well as possible updates to eligibility criteria surrounding human rights and worker rights.
“This is now becoming a serious issue, especially the human rights question, and we want to make sure that our countries are aware of what the expectation is on our side and what they can do to fulfill some of those commitments that Congress is currently looking for,” she said.
Human rights concerns
Human rights issues have indeed percolated across Africa in recent years, prompting some nations to lose their AGOA benefits. Gabon, Niger, the Central African Republic and Uganda were pulled from the program this year over human rights and government-related concerns.
President Biden notably revoked Ethiopia’s eligibility in January 2022 following a devastating civil war in the Tigray region that ultimately claimed 600,000 lives, according to the Council on Foreign Relations’ Global Conflict Tracker. Mali and Guinea also lost their benefits that year under the recommendation of the USTR due to unconstitutional changes in government.
Ethiopia once looked to be a rising star for footwear and apparel production, attracting household names like H&M, Tommy Hilfiger and Calvin Klein, and was branded one of “Africa’s economic wunderkinds,” by Dorothee Baumann-Pauly of the Geneva Center for Business and Human Rights in 2021. But following the pandemic, roiling civil conflict and the cutoff of AGOA benefits, the country’s economy has been in free-fall.
On Monday, the International Monetary Fund (IMF) agreed to a “landmark” $3.4-billion bailout to support country-wide economic reforms over the next four years. One day later, the nation’s currency valuation fell 30 percent.
“We’ve had years of conversation with the Ethiopian Government as to what the government needs to do to ensure that the country…is eligible again for AGOA benefits,” the State Department’s Basu said this week. “Many of those decisions are in the government’s hands, particularly when it comes to supporting civil society and government actions when it comes to the civil unrest.”
“We don’t make countries guess as to what they have to do to get back into AGOA,” Hamilton added. “We have been very specific in our conversations with the Ethiopian Government of what we need to see in order to reinstate them in the program.”
Ethiopia’s review is now underway, and President Biden is expected to announce his decision on whether the country can re-enter AGOA or not before the end of the year, she said.
The industry’s next moves
Congress is taking its time weighing changes to the trade preference program, but continuing to defer AGOA’s renewal may come at a high cost to the private sector and the countries that depend on its free-trade benefits.
Research released this week by the U.S. Fashion Industry Association (USFIA) showed that 70 percent of American brands and retailers see a 10-year AGOA renewal as “essential” to their continued sourcing from the region. What’s more, 30 percent are already reining in sourcing from sub-Saharan African suppliers due to uncertainty surrounding the program’s reinstatement.
“With AGOA’s looming expiration—now just 14 months away—discouraging new trade and investment with African countries, the case for immediate renewal has become even more urgent,” American Apparel and Footwear Association (AAFA) president and CEO Steve Lamar told Sourcing Journal.
“Fortunately, last week’s AGOA forum brought together African and U.S. public policy leaders who all pledged to renew and strengthen AGOA,” he added. “We were pleased to see President Biden and bipartisan leaders in Congress restate their long-standing support and join this call.”
According to Lamar, the trade group hasn’t given up hope for some movement on the issue in 2024. “AAFA will continue to push for long-term renewal this year to re-establish a predictable U.S.-African trade partnership to support our industry’s sourcing and diversification efforts,” he said.
California-based apparel and gear wholesaler SanMar was present at the Private Sector Forum, with general counsel and corporate secretary Melissa Nelson telling lawmakers and stakeholders in no uncertain terms that the time for renewal is now.
According to Nelson, the 50-year-old firm has been sourcing from Africa since 2010 when it began to diversify sourcing. “At that point, 46 percent of our apparel imports were coming from China. Right now, that number is 6 percent, and it’s in large part due to programs like AGOA.”
Over the course of the past year alone, SanMar has imported 58 million garments.
“No matter how many people tell our company, ‘Don’t worry about it, it’s going to be renewed,’ we have the example of GSP, so we do not have confidence,” she said, referring to the Generalized System of Preferences, the U.S.’ oldest trade preference program, which lapsed more than three years ago.
There’s simply too much uncertainty about the timing of AGOA’s renewal and the impact of potential reforms, Nelson said. Currently, SanMar relies heavily on the agreement’s third-country rules of origin, which allow AGOA nations to use imported fabrics for the products they make under the agreement.
“In order to have the investment to do vertical integration, you need time there,” she said. “Investment in these textile facilities can cost hundreds of millions of dollars, and that’s simply not going to happen until it gets renewed.”
The company is also putting plans to expand into new countries on the back burner as it waits on a decision from Congress, and that’s eating into the time it will take to get them up and running.
Nelson’s frustration was palpable as she explained how deferring renewal is delaying the creation of jobs and the establishment of a new global supply chain without China at its center. “I do worry that what I’ve heard today is a lack of urgency,” she said.