African countries who benefit from the African Growth and Opportunities Act will push for a 10 year extension of the agreement, the African Union (AU) commissioner for trade and industry Albert Muchanga said on the first day of a summit in Johannesburg.
Muchanga and South Africa’s Trade, Industry and Competition Minister Ebrahim Patel held bilateral meetings with all the African countries which are beneficiaries of the Agoa treaty with the US and are expected to take part in discussions on Friday.
Speaking at the start of Thursday’s talks, Muchanga bemoaned the fact that Africa had not taken full advantage of the preferential export access to US markets under the agreement, urging the countries to better leverage the deal — which expires in 2025 — in the next term.
US lawmakers are holding talks on whether the act should be extended and which countries should benefit. President Joe Biden has already recommended that congress extend Agoa, calling for a further 20 years.
Muchanga said Biden’s announcement was in line with Africa’s call for the agreement to be extended for a further 10 years.
“If the offer is 20 years then we, as Africa, will be ready to accept that. Ten to 20 years is very critical to the investment community,” he said.
“It gives them time to put their money and generate products that can be exported under Agoa. And it gives them time to generate profit outgrowing those investments. Anything lower than that would generate uncertainty.”
Muchanga said if there were any enhancements which needed to be ironed out between Africa and the US, this could be addressed after an announcement of an extension to the agreement.
Agoa, introduced under former US president Bill Clinton’s administration, gives sub-Saharan African states preferential export access in the US by exempting them from import duties.
South Africa is hosting the Agoa summit at a time when its continued participation is up for debate, with the US arguing that the country’s economy is developed to a point where the exemption should no longer apply.
The criteria to qualify for Agoa include market-based economies, the rule of law and political pluralism.
The total two-way investment stocks in 2021 came in at just more than $11.9 billion between the two countries, with $7.4 billion in US investment stocks in South Africa while local firms invested $4.5 billion in the US, Patel said.
The US is a significant market for South African goods and a key source of investment, being its second-largest national trading partner after China. South Africa is also the largest single exporter to the US on the African continent.
The US congress has in the past called for American businesses to get reciprocal duty-free access to Africa. Muchanga pushed back on this, saying it would not be prudent for African countries to agree to this.
He said his engagements with the US congress and administration had revealed some misunderstanding on how to exploit the African Continental Free Trade Area, with a number of them thinking that “they can produce goods in the United States of America and export them duty free across the African Continental Free Trade Area”.
“I told them very very frankly that that is not possible,” he said.
“If they try to export goods from the United States of America into Africa, they are going to meet national tariffs and that is going to make the cost of the exporting uncompetitive.
“This is the message that I would like us to convey to the US administration and the US congress so that, right from the beginning, they understand that they are free to take advantage of the African Continental Free Trade Area market … but it will not be possible for them to export duty free.”
He said a key issue to be considered by African countries during talks would be the connection between Agoa and the continental free trade deal, adding that various indicators showed that the two forums were interconnected.
With Africa’s market growing at an exponential rate, and the continent poised to become a global market player in the next 10 years, Muchanga said this meant that it would soon be a “source of labour”.
He noted that US business and industry had complained that the African market was not conducive to business because of its small and fragmented markets but added: “The Africa free trade area will help with fragmented economies.”
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