Since its inception in 2000, the African Growth and Opportunity Act (AGOA) has stood as a pivotal pillar in fostering multilateral commercial relations between the United States (U.S.) and African nations. Presently, there is a shared advocacy on both sides of the Atlantic for its extension beyond 2025. However, the discourse surrounding its renewal has sparked inquiries into specific facets of the Act, prompting considerations for its modernization to align with future economic perspectives.
Renewal: A Unanimous Agreement
With AGOA set to expire in 2025, both U.S. and African representatives have started calling for its renewal, citing Africa’s industrialization and America’s diversification agendas as determining factors. For Africa’s part, an early renewal is promoted to ensure certainty and predictability for investors and buyers, preserve existing value chains, and encourage further investment into strategic sectors.
Facilitating regional integration in Africa, and as South African President Cyril Ramaphosa remarked, “If extended beyond 2025 for a sufficiently long period of time and used more effectively, AGOA can contribute significantly to the further diversification of African economies.”
Correspondingly, the renewal of the Act enjoys bipartisan support among members of Congress, with the U.S. eager to maintain its strong trade ties with the continent. Various draft legislation have been put forward, including by Senator Chris Coons and Senator John Kennedy, both of which see an extension beyond 2040. Additionally, President Biden emphasized that he is “committed to expeditiously working with Congress and our African partners to renew this law beyond 2025, in order to deepen trade relations between our countries, advance regional integration, and realize Africa’s immense economic potential for our mutual benefit.”
AGOA: A Decades-Long Trade Pact
Established by the U.S. Congress in 2000 and renewed in 2015, AGOA provides tariff-free access to the U.S. market for eligible African countries, with the basis of the Act being that trade, rather than aid, is the best strategy for bolstering development and job creation in Africa.
Under the Act, the U.S. has become Africa’s third-largest export destination, while industry and economic growth has accelerated across the continent. Currently, 35 qualifying African nations benefit from exporting their products to the U.S., with bilateral trade showing a substantial increase between 2001 and 2022. During the period, agriculture exports increased from $786 million to $2.9 billion; apparel exports from $728 million to $1.5 billion; metals exports from $256 million to $760 million; and automotive exports from $150 million to $1.5 billion, respectively.
However, the benefits of AOGA transcend direct trade, with capacity building emerging as an important feature of the Act. To support trade, capacity building-focused collaboration through the Act has served as a cornerstone of infrastructure investment, small- and medium-sized enterprise support, and skills and technology transfer. U.S. President Joe Biden explains that over 23 years, AGOA has facilitated “private sector-led economic growth across sub-Saharan Africa by increasing the competitiveness of African products, diversifying African exports, and enabling the creation of tens of thousands of new, quality jobs in Africa.”
Modernization: A Catalyst for Multilateral Growth
The renewal of AGOA presents new opportunities for its modernization, specifically with respect to trends of the past and those of upcoming decades. Enacted in 2000, the world has seen dramatic changes since AGOA’s inception, including digitalization, an energy transition and increased globalization.
In recent years, digitalization has highlighted pressing investment gaps in Africa, as well as opportunities for strengthened trade dynamics, and according to the Center for Strategic and International Studies (CSIS), a renewal of AGOA would need to address the changes brought about by digital transformation. Through technological advancements, the world has become increasingly connected, and yet Africa remains one of the world’s least-connected regions. Investment in this area would not only strengthen economic growth and job creation, but also advance trade on a global, multilateral level.
The CSIS notes: “With Africa’s changing digital landscape and evolving needs, Congress has an opportunity to make AGOA even more successful by revamping it to specifically include digital goods and services.”
Meanwhile, at the forefront of future trends is the critical minerals industry, a sector which is poised to significantly shift global trade relations. The World Economic Forum states that critical minerals have made it to the top of the geopolitical agenda, with “a global battery arms race, driven by the advent of electric vehicles, seeing a step change in demand…” By 2040, global demand for these resources is expected to increase six-fold, with U.S. demand for lithium, cobalt and nickel alone anticipated to be 23 times higher in 2035 than in 2021. For the U.S., critical minerals have taken center stage in its foreign policy and – given Africa’s substantial mineral resources – the continent has become a key market of interest.
In this scenario, the modernization of AGOA would not only serve to strengthen multilateral trade between the U.S. and resource-rich African nations, but also lay the foundation for private-led investment to flow into Africa’s evolving value chains. As President Biden stated, “In so many ways, Africa is the future – and so when Africa succeeds, the whole world succeeds.”