AGOA Reauthorization passes both Houses of Congress
The United States House of Representatives passed legislation to reauthorize the African Growth and Opportunity Act (AGOA), today. Now that both houses of Congress have passed the legislation, the bill will go to President Obama for signature, before it becomes law. The President is supportive of extending AGOA and is expected to sign the legislation. The reauthorization will extend the program for 10 years. It’s longest extension, ever.
AGOA is the United States of America’s flagship trade program with over 40 African nations. For months, Africa stakeholders in Washington have been urging Congress to renew the legislation which is a key factor in U.S.-Africa trade relationships. AGOA, which is largely supported by both Democrats and Republicans in the U.S. Congress, got tied into a political wrangle over other trade legislation which saw President Obama’s other trade legislation loose the support of his traditionally democratic allies in the Congress. It was a majority of Republicans and pro-trade Democrats that were finally able to carry the bill forward.
Since AGOA was originally passed, 13 countries have lost their eligibility, out of which 7 have been restored, according Government Accountability Office (GAO), a non-partisan research and audit agency of the U.S. Congress. The six countries that never regained their eligibility include The Central African Republic, Republic of Congo, South Sudan, Eritrea, Gambia and Swaziland. While these countries likely lost eligibility for political and human rights issues, South Africa was able to stay off this list, despite warnings from Members of Congress, over a trade dispute. The dispute was over South Africa’s decision to impose anti-dumping duties on most imported U.S. poultry. The U.S. Government was also concerned about South Africa signaling a possible change in its laws, requiring foreign firms to relinquish 51% of ownership to South Africans. Cognizant of the importance of this subsidy to their trade balance, the South Africans sent a high powered corporate and government delegation to the United States to meet with members of congress earlier this month and reversed their position.
Qualification for the preferential status is based on conditions set forth in the legislation. It expands the duty free benefits originally available under each countries Generalized System of Preferences (GSP) program, giving African businesses a leg up and incentive to trade with the United States. There are approximately 7000 product lines that receive preferential tax status under this bill. Currently, about 4o countries in Sub-Saharan Africa qualify for the subsidy. This fluctuates as the bill gives the U.S. government flexibility to terminate, withdraw, suspend, or limit benefits of the subsidy. Stakeholders are afforded the right to petition any action taken through the Office of the U.S. Trade Representative.
Aggregate exports to the United States in 2015 totaled $6.502 billion from AGOA eligible countries alone. AGOA eligible products accounted for 45% of those exports. The most popular product line covered by the legislation is apparel with 26 countries having qualified for that specific preference. As a result, more and more American companies are setting up shop in African countries in addition to Asia. One of the key requests from corporate lobbyists was a longer period of extension to ensure less disruption in operations over uncertainty as to weather the bill will be extended. It was granted.
While apparel is the most popular, leading non-oil exports under AGOA for 2015 include Metal, Apparel and Accessories, Transportation equipment, petroleum and coal products and chemicals. Leading AGOA exporters include South Africa, Chad, Angola, Nigeria, and Kenya.
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