News
Print PDF

Practice Areas

U.S.-Africa Summit Considers AGOA Extension, Sees New Trade and Customs Pacts

Monday, August 11, 2014
Sandler, Travis & Rosenberg Trade Report

The United States hosted Aug. 4-6 the first-ever U.S.-Africa Leaders’ Summit, a three-day event that included the U.S.-Africa Business Forum and the annual African Growth and Opportunity Act summit. Some observers characterized the summit as an effort to help the U.S. catch up to competitors like China and the European Union and claim a share of one of the world’s fastest-growing markets. Highlights of the new developments and discussions on customs and trade issues that took place at this event include the following.

AGOA. The White House announced Aug. 4 a comprehensive strategy to realize the potential of AGOA that includes the following elements.

Renewal. The Obama administration will work with Congress to achieve a “seamless and long-term renewal” of AGOA (which expires Sept. 30, 2015), including the third-country fabric provision. Some supporters have recommended a 15-year extension, stating that the short-term renewals that have taken place to date have made it difficult to attract major investments and restricted the scope of economic development under AGOA to those sectors that do not require significant capital investment. However, the administration has yet to make a specific proposal, and U.S. Trade Representative Mike Froman has said only that the reauthorization period should be “sufficiently long to ensure predictability for producers, consumers and investors.” One observer pointed out that U.S. importers are already warning that they will be forced to shift orders out of Africa if AGOA has not been renewed by the end of 2014.

Expansion. Congress should consider whether any of the 316 tariff lines not currently eligible for AGOA – mostly agricultural and textile products – can now be added given domestic sensitivities.

Rules of Origin. Efforts will be made to identify ways to provide greater flexibility in the rules of origin to encourage regional integration and the development of regional value chains. This could include removing limitations like those on the cumulation of labor costs across AGOA countries and the cap on the use of U.S. inputs in meeting the regional value content requirements.

Eligibility and Enforcement. The administration wants to identify ways to update the eligibility criteria to address current challenges (e.g., barriers to U.S. agriculture exports or labor rights violations) and to improve the effectiveness of enforcement efforts (e.g., by allowing partial and more timely withdrawal of AGOA benefits).

Export Strategies. A new presidential memorandum tasks federal agencies with exploring options such as supporting African efforts to develop country- and region-specific AGOA export strategies and partnering with companies and trade associations to develop private sector sourcing initiatives.

Infrastructure. The U.S. wants to link AGOA to a web of initiatives to help remove infrastructure-related constraints, including inadequate infrastructure in the energy and transportation sectors and inefficiency and corruption at the border. Efforts will include supporting the movement toward computerized and common regional customs platforms.

Capacity Building. African governments’ institutional capacity to meet sanitary and phytosanitary requirements and quality and marketing standards, and to develop domestic policies that promote economic growth, will be strengthened.

Speaking prior to the summit, USTR Froman said that given the changes that have occurred since AGOA was enacted in 2000 “we cannot think about AGOA in isolation.” The administration has therefore been conducting over the past year a comprehensive review of AGOA “that asked not only how AGOA was working but also how it fits into the broader arc of our trade and development policy.” One particularly clear finding has been that “we need to do more than focus on tariff preferences,” Froman said. The administration is therefore calling for an “AGOA Compact,” a comprehensive trade and investment strategy that “targets the full range of the supply-side constraints to trade in Africa” and “creates new markets for African products, harnesses growing private sector interest in trade and investment, and promotes regional integration and value-added production.”

The U.S. is also reportedly considering graduating South Africa from AGOA and instead pursuing a more reciprocal trade arrangement. However, South African trade minister Rob Davies said his country supports a 15-year renewal of AGOA that retains all current members and makes no significant changes. An effort to negotiate an FTA between the U.S. and the Southern African Customs Union, a five-member bloc of which South Africa is the leading economy, collapsed a number of years ago because, as Froman put it, SACU member countries were not “ready for our kind of FTA.”

TIFA with ECOWAS. USTR signed Aug. 6 a trade and investment framework agreement with the Economic Community of West African States, which comprises Benin, Burkina Faso, Cabo Verde, Cote d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo. Total U.S.-ECOWAS trade was valued at $23.3 billion in 2013, including $9.9 billion in U.S. exports (led by mineral fuel, motor vehicles and parts, machinery and parts, and wheat) and $13.4 billion in imports (led by crude oil, cocoa and cocoa preparations, rubber and rubber products, aluminum and titanium ores, and edible fruits and nuts).

Customs Agreement with Kenya. The U.S. and Kenya signed a customs mutual assistance agreement Aug. 6, the 71st for the U.S. CMAAs provide the legal framework for the exchange of information and evidence to assist countries in the enforcement of customs laws, including duty evasion, trafficking, proliferation, money laundering and terrorism-related activities. CMAAs also serve as foundational documents for subsequent information sharing arrangements, including mutual recognition arrangements on authorized economic operator programs.

Doing Business in Africa Campaign. The DBIA Campaign was launched in November 2012 and has four main objectives: connecting U.S. businesses with African partners, supporting existing and new U.S. investment in Africa, expanding access for U.S. businesses to finance their exports to Africa, and reducing barriers to trade and investment in Africa. New commitments to support the DBIA Campaign that were announced this week include the following.

- An executive order directs the Commerce Department to establish a President’s Advisory Council on Doing Business in Africa that will be comprised of not more than 15 private-sector members and will provide information, analysis and recommendations on topics such as taking advantage of trade and investment opportunities in Africa, building lasting commercial partnerships between the U.S. and African private sectors, increasing U.S. business participation in Africa’s infrastructure and agriculture sectors, and analyzing the effect of policies in the U.S. and Africa on U.S. trade and investment interests in Africa.

- DOC will double its presence in sub-Saharan Africa by opening new offices in Angola, Tanzania, Ethiopia and Mozambique, expanding its existing offices in Ghana, Kenya, Libya and Morocco, and re-establishing a position at the African Development Bank.

- The U.S. Agency for International Development’s existing African Trade Hubs will be upgraded into U.S.-African Trade and Investment Hubs that will better support African exports to the U.S. and create new opportunities for U.S. investment in and exports to Africa.

- DOC and the U.S. Trade and Development Agency will lead ten trade missions to Africa and ten reverse trade missions to the U.S. by 2020.

- DOC has created a Web portal where U.S. businesses can learn about African markets, find financing tools, and discover potential projects, contacts and resources.

- The Small Business Administration and Ex-Im Bank will collectively support 50 DBIA Campaign-themed activities and outreach sessions over the next two years to facilitate U.S. trade finance, provide counseling and training on their programs, and conduct business development to support U.S. exporters.

- Ex-Im Bank will commit up to $3 billion in financing to support U.S. exports to Africa over the next two years and signed a memorandum of understanding with Angola to strengthen collaboration on the financing of U.S. exports to that country, including in the energy, infrastructure, railway, road, mining, telecommunications, agriculture and environment sectors.

- The Overseas Private Investment Corporation will commit up to $1 billion in financing and insurance support to catalyze private sector investments in Africa and has reaffirmed its plan to place personnel in sub-Saharan Africa to help facilitate increased U.S. trade and investment.

- The Department of Agriculture’s Commodity Credit Corporation will make up to $1 billion in financing guarantees available for agricultural exports to Africa over the next two years and will conduct outreach seminars to Africa in 2015 to promote the use of its credit guarantee program for the export of U.S. agricultural products.

Expanding Trade and Investment Capacity. President Obama established Aug. 4 a Steering Group on Africa Trade and Investment Capacity Building that will be composed of USTR; the departments of Commerce, Homeland Security, State, Treasury, Agriculture and others; and the major federal trade and development agencies. This group will submit within six months recommendations that include clearly defined goals and benchmarks for increasing trade and investment in sub-Saharan Africa; appropriate and transparent criteria for identifying priority countries, regions and sectors that have the greatest potential to contribute toward meeting these goals and benchmarks; an indication of how the recommendations complement other major U.S. government initiatives and partnerships as well as other major development partners; an outline of how to utilize programs across agencies to achieve these goals; and an explanation of how the recommendations fit within existing budget constraints and resource requests.

Statistics. U.S. exports of goods and services to Africa reached $50.2 billion in 2013, up 39 percent since 2009. Goods exports to the entire continent totaled $35 billion, up 45 percent, while goods exports to sub-Saharan Africa totaled $24.0 billion, up 58 percent. Total goods trade with and imports from AGOA countries have both more than tripled, to $60.9 billion and $26.8 billion a year, respectively.

South Africa and Nigeria are by far the largest markets for U.S. goods exports in sub-Saharan Africa and drove the growth in U.S. exports to this region from 2009 to 2013, accounting for 32.3 percent and 30.8 percent of this increase, respectively. Top goods exports to the SSA region in 2013 included oil, not crude ($3.1 billion), passenger vehicles ($2.3 billion), civilian aircraft ($1.3 billion), machinery parts ($1.1 billion) and wheat ($1.1 billion).

U.S. investment in Africa has risen 37.5 percent since 2009 to $60.4 billion. Over half of U.S. investment in Africa ($35.9 billion) is concentrated in mining industries, while the services industry accounts for another $20.8 billion.

To get news like this in your inbox daily, subscribe to the Sandler, Travis & Rosenberg Trade Report.

Customs & International Headlines