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U.S. to Conduct Wide-Ranging Review of AGOA, Expand Trade Work with East Africa

Wednesday, August 14, 2013
Sandler, Travis & Rosenberg Trade Report

U.S. Trade Representative Mike Froman announced several new initiatives to enhance U.S. trade with Africa during a recent trip to that continent. Among these are a comprehensive review of the African Growth and Opportunity Act to inform its expected reauthorization and an expanded trade work program with the five-nation East African Community, which is also the initial focus of the Trade Africa initiative the Obama administration announced earlier this summer.

AGOA. Froman said AGOA “has truly transformed the way the United States and Africa interact on trade and economic issues.” He pointed out that U.S. total trade with sub-Saharan Africa has grown more than 250% under AGOA, from $28.2 billion in 2001 to $72.3 billion in 2012. While petroleum products still account for the largest portion of U.S. imports from Africa under AGOA, non-oil AGOA trade totaled $4.8 billion in 2012, more than triple the amount in 2001. Sectors with sizeable increases during this period included vehicles and parts ($2.0 billion in 2012 compared to $289 million in 2001), apparel ($815 million in 2012; $359 million in 2001), and fruits and nuts ($121 million in 2012; $29.4 million in 2001).

The U.S. is interested in a “seamless” renewal of AGOA before it expires on Sept. 30, 2015, Froman added, but modifications are needed to reflect the changes in the global economic situation since the program was created in 2000. “We are doing things differently around the world,” Froman said, citing ongoing trade negotiations with Europe and a dozen Asia-Pacific countries as an example, “and Africa deserves the same thoughtful, innovative thinking we have given the rest of our trading partners.”

As a result, the U.S. is launching a review to “lay the foundation for AGOA 2.0.” This review will consider:

- issues such as where exports are growing and why, which non-commodity exports have the greatest potential, how to increase and diversify AGOA utilization, how AGOA can promote regional integration, and how to use initiatives like the Partnership for Growth, the Millennium  Challenge Corporation compacts and the Trade Africa program to increase AGOA utilization and address the issues beyond AGOA that damage Africa’s competitiveness;

- what products should be eligible for AGOA duty-free treatment, country eligibility criteria, which AGOA countries should qualify to export certain products and why, and whether specific sectors or countries should be graduated from the program if they become more globally competitive;

- rules of origin, science-based regulatory measures, trade facilitation, customs harmonization and infrastructure development;

- what can be learned from development success stories and trade strategies in Asia and Latin America, African nations’ trade relationships with China and other emerging economies as well as the European Union, and other developments;

- the possibility of transitioning from AGOA toward two-way, reciprocal trade agreements; and

- how AGOA can help promote greater value-added production in Africa and how the U.S. and its AGOA partners can work together to avoid “bad policies and common pitfalls like rigid localization requirements that serve as barriers to trade and hinder the development of competitive industries.”

Froman said USTR will “go into this process with an open mind and look[s] forward to a robust and insightful review” but acknowledged that “at the end, it is very possible that we will conclude that AGOA should just be renewed as is.” (A recent Congressional Research Service report on AGOA reauthorization issues can be found here.)

East African Community. Following a ministerial meeting with the East African Community, a regional economic organization comprised of Burundi, Kenya, Rwanda, Tanzania and Uganda, Froman said the U.S. and the EAC have agreed to:

- launch formal negotiations on a trade facilitation agreement;

- add to their Trade and Investment Partnership new elements focused on sanitary and phytosanitary measures and technical barriers to trade;

- transform the U.S. Agency for International Development’s East Africa Trade Hub into a U.S.-East Africa Trade and Investment Center to expand U.S. regional trade programs, spur private investment, and scale up business-to-business and association-to-association partnerships;

- form a new partnership between the U.S. and TradeMark East Africa, an organization dedicated to supporting greater regional integration by breaking down barriers at the border and facilitating trade; and

- continue to work toward an investment treaty.

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