African Growth and Opportunity Act (AGOA): Background and Reauthorization

African Growth and Opportunity Act

(AGOA): Background and Reauthorization

(name redacted)

Analyst in International Trade and Finance

June 16, 2015

Congressional Research Service

7-....

www.crs.gov

R43173

African Growth and Opportunity Act (AGOA): Background and Reauthorization

Summary

The African Growth and Opportunity Act (AGOA) is a nonreciprocal trade preference program

that provides duty-free treatment to U.S. imports of certain products from eligible sub-Saharan

African (SSA) countries. There are 49 candidate SSA countries with 39 currently eligible for the

preference benefits. Congress first authorized AGOA in 2000 to encourage export-led growth and

economic development in SSA and improve U.S. economic relations with the region. Its current

authorization expires on September 30, 2015.

Bills to renew the preference program (H.R. 1891/S. 1009) were introduced in the House and

Senate in April. H.R. 1891 was reported by the House Committee on Ways and Means without

amendment. The Senate Finance Committee reported a related measure, S. 1267, with two

amendments. On May 14, the Senate passed the provisions of S. 1267, by including them as an

amendment in the nature of a substitute to H.R. 1295. On June 11, the House passed a further

amended version of H.R. 1295. The two chambers must resolve the differences in H.R. 1295

before the AGOA renewal legislation can be sent to the President and become law.

In terms of tariff benefits and general eligibility criteria, AGOA is similar to the Generalized

System of Preferences (GSP), a U.S. trade preference program that applies to more than 120

developing countries. AGOA, however, covers more products and includes additional eligibility

criteria beyond those in GSP. Additionally, AGOA includes trade and development provisions

beyond its duty-free preferences.

U.S. imports from AGOA beneficiary countries (AGOA countries) represent a small share (1%)

of total U.S. imports and are largely concentrated in energy-related products. Oil is consistently

the top duty-free U.S. import from AGOA countries, accounting for 68% of such imports in 2014.

Despite remaining the top U.S. import under AGOA, U.S. oil imports from the region have fallen

by 80% or nearly $40 billion since 2011. Among non-energy products, apparel is the top export

for a number of AGOA countries. U.S. apparel imports typically face relatively high tariffs and

are excluded from duty-free treatment in GSP, but are included in the AGOA preferences, giving

AGOA countries a competitive advantage over other apparel producers. A handful of countries,

primarily Lesotho, Kenya, and Mauritius, make significant use of the apparel benefits. Apart from

apparel and energy products, South Africa accounts for the bulk of U.S. imports under AGOA. As

the most economically advanced country in the region, South Africa also exports a much more

diverse range of manufactured goods than other AGOA countries; vehicles in particular have

become a major South African export under AGOA.

Most observers agree that AGOA has successfully led to increased and more diversified exports

to the United States from sub-Saharan African countries. Despite this, Congress may wish to

address a number of issues and challenges as it considers possible reauthorization of AGOA.

Among these challenges is how current and potential AGOA beneficiaries can better utilize the

AGOA program and its duty-free benefits. Studies suggest that even among some countries that

do make significant use of the AGOA preferences, the lower-skill apparel production which

AGOA has spurred has not led to the production of higher-skill manufactured products. Other

issues relate to the nonreciprocal nature of the AGOA preferences. Some argue that the United

States should focus more on two-way trade agreements with the region, particularly with more

advanced countries such as South Africa, given improving economic conditions in Africa in

recent years. The European Union (EU), for example, has negotiated Economic Partnership

Agreements (EPAs) with several African countries that provide some reciprocal tariff benefits,

potentially placing U.S. firms at a competitive disadvantage relative to European firms in some

markets.

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

Contents

Introduction...................................................................................................................................... 1

Key Provisions of AGOA ................................................................................................................ 2

Unilateral Trade Preference Program ........................................................................................ 2

Product Coverage ................................................................................................................ 3

Rules of Origin .................................................................................................................... 3

Textile and Apparel Provisions .................................................................................................. 4

Third-Country Fabric Provision .......................................................................................... 5

Eligibility ................................................................................................................................... 5

Least-Developed Country Status ......................................................................................... 6

AGOA Forum ............................................................................................................................ 6

Technical Assistance and Capacity Building ............................................................................. 7

Annual Report to Congress ....................................................................................................... 8

U.S. Imports under AGOA and GSP................................................................................................ 9

Impacts of AGOA .......................................................................................................................... 12

Reauthorization Debate.................................................................................................................. 13

Considerations for Potential Reforms...................................................................................... 15

Length of Reauthorization ................................................................................................. 15

Country Eligibility............................................................................................................. 15

Intra-African Trade............................................................................................................ 16

Two-Way Trade ................................................................................................................. 16

Country Participation ........................................................................................................ 17

Trade Capacity Building (TCB) ........................................................................................ 17

Product Coverage .............................................................................................................. 17

Rules of Origin .................................................................................................................. 18

Trade Disputes—Poultry and South Africa ....................................................................... 18

Duty-Free Quota-Free (DFQF) Beyond Africa ................................................................. 19

Proposed Renewal Legislation ................................................................................................ 20

Figures

Figure 1. Non-Energy U.S. Imports from SSA under AGOA and GSP ......................................... 10

Figure 2. Top AGOA and GSP Exporters excluding Energy Products .......................................... 11

Figure 3. Oil and Non-Oil Imports from SSA under AGOA and GSP .......................................... 12

Tables

Table 1. U.S. Imports of Apparel Products by Country ................................................................. 10

Table A-1. AGOA and GSP Eligibility, U.S. Imports, and GSP/Capita, by Country..................... 21

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

Appendixes

Appendix. Sub-Saharan African Countries .................................................................................... 21

Contacts

Author Contact Information........................................................................................................... 22

Acknowledgments ......................................................................................................................... 23

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

Introduction

In 2000, Congress passed the African Growth and Opportunity Act (AGOA), a U.S. trade

preference program, in order to help spur market-led economic growth and development in

sub-Saharan Africa (SSA) and deepen U.S. trade and investment ties with the region.1 Since its

enactment, Congress has amended AGOA several times, making some technical changes and

renewing the trade preferences through September 30, 2015. Bills to renew the preference

program (H.R. 1891/S. 1009) were introduced in the House and Senate on April 17 and April 20.

A related measure, H.R. 1295, which includes AGOA reauthorization among other tariff reforms,

passed the House and Senate in different forms requiring the two chambers to resolve the

differences in the bill before it can be sent to the President and become law (see “Proposed

Renewal Legislation” section for details).

According to the United States Trade Representative (USTR), “AGOA has been the cornerstone

of America’s economic engagement with sub-Saharan Africa over the past fourteen years.”2

Economic conditions in Africa have changed considerably since Congress passed the initial

AGOA legislation. Annual real gross domestic product (GDP) growth in SSA was a half

percentage point lower than global GDP growth (2.7% vs. 3.3%) in the decade leading up to

AGOA’s passage (1990-2000).3 Since AGOA was enacted (2001-2013), however, SSA’s growth

averaged 6.3%, more than 2 points higher than the 3.9% world average. While the region still

contains many of the world’s poorest countries and faces significant economic challenges, some

observers and policymakers argue that changing economic conditions warrant an evolution in

U.S. policy toward SSA, focused more strongly on private sector investment and increasing twoway trade.4 In recent years, SSA’s growing economic potential and abundant natural resources

have attracted other foreign investors, including state-supported enterprises from countries such

as China, which is now the region’s largest trading partner.

Some Members of Congress, the Obama Administration, and many African governments have

highlighted the successes of AGOA and have called for an expedited reauthorization process. As

part of this process, Congress may wish to consider whether AGOA, in its current form, is

achieving the initial goals of the program, including whether it addresses effectively the changing

economic circumstances in Africa. Most interested observers are positive about the AGOA

preference program, but some have expressed concerns about specific provisions of the program,

such as the lack of coverage for certain agricultural products, or would like to see the AGOA

preferences granted to a broader range of least-developed countries beyond just Africa. Others

would like to see a broader program that addresses concerns over U.S. businesses’ ability to

effectively compete in the region, though this could also be addressed in complementary

1

Trade preference programs give nonreciprocal duty-free U.S. market access to select exports of eligible lessdeveloped countries.

2

Hearing Testimony by Ambassador Michael Froman, U.S. Congress, Senate Committee on Finance, The African

Growth and Opportunity Act at 14: The Road Ahead, 113th Cong., 2nd sess., July 30, 2014,

http://www.finance.senate.gov/hearings/hearing/?id=f5251f60-5056-a032-52f0-742dc672610d.

3

Analysis by CRS. Data from International Monetary Fund, World Economic Outlook, October 2014.

4

For example, in remarks leading up to President Obama’s 2013 trip to Africa, USTR Michael Froman stated, “If we

are to achieve sustainable development, it is our view that investment must be the driver.” USTR, “Remarks by United

States Trade Representative Michael Froman to the U.S. Global Leadership Coalition,” press release, June 25, 2013

http://www.ustr.gov/about-us/press-office/press-releases/2013/june/remarks-united-states-trade-representative-michaelfr.

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

legislation or Administration initiatives.5 This report seeks to inform the discussion on the

potential reauthorization of AGOA through analysis of (1) the components of the AGOA

legislation; (2) U.S. import trends associated with AGOA; (3) the impact of AGOA on African

economies and U.S.-Africa trade; and (4) the issues surrounding the reauthorization process.

Key Provisions of AGOA6

AGOA (Title I, P.L. 106-200), as amended, is a nonreciprocal preference program that provides

duty-free access into the United States for qualifying exports from eligible SSA countries. Among

the products that qualify for this duty-free treatment, apparel products have particular economic

significance for several countries, in part due to special provisions granted to least-developed

AGOA countries (“Third-Country Fabric Provision”).7 In addition to the tariff preferences, the

AGOA legislation includes mandates for an annual meeting of U.S. and African government

officials to discuss trade and economic issues—the AGOA Forum—as well as specific guidelines

on U.S. development assistance directed toward SSA. Countries must meet specific eligibility

requirements to qualify for these benefits.

Table A-1 in the Appendix provides a list of SSA countries, as defined by AGOA. It highlights

the 39 current AGOA beneficiary countries, and notes their eligibility status for other aspects of

the AGOA preferences and the Generalized System of Preferences (GSP). It also lists U.S.

imports under AGOA and GSP for each country and its GDP/capita—a rough measure of a

country’s level of economic development.

Unilateral Trade Preference Program

At the core of AGOA are the tariff benefits that provide duty-free access to the U.S. market for

certain products from eligible SSA countries. In terms of these tariff benefits and country

eligibility requirements, AGOA is essentially an expansion of GSP, a U.S. trade preference

program that applies to over 120 developing countries, including SSA countries. AGOA builds on

GSP by providing preferential access to the U.S. market for more products, such as apparel, and

sets out additional eligibility criteria. AGOA also includes other trade and development

components, beyond preferences, that are not part of GSP.8

AGOA, like other U.S. trade preference programs, is nonreciprocal and unilateral. The

preferences apply to U.S. imports and not to U.S. exports, so reauthorization only requires action

by the U.S. government. These one-way preferences are granted to developing countries with the

goal of enhancing export-led economic growth, and typically exclude items that may be

5

For example, a bill was introduced in the 113th Congress relating to efforts to increase U.S. exports to Africa (H.R.

1777 and S. 718) and the Administration has initiated programs such as Trade Africa, which centers on a potential trade

and investment agreement with the East African Community.

6

Some of this material was drawn from a previous CRS report by (name redacted).

7

Apparel production is an important component of AGOA because it is seen as a manufacturing sector with relatively

low technological and investment barriers to entry by newly industrializing countries and as having high job-generation

potential for relatively low-skilled labor forces, both issues of relevance to many African countries.

8

In addition to AGOA, there are three other U.S. regional preference programs that have different product coverage

than GSP: the Caribbean Basin Economic Recovery Act (CBERA); the Caribbean Trade Partnership Act (CBTPA);

and the Haitian Opportunity through Partnership Encouragement (HOPE) Act.8

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considered import sensitive. This distinguishes them from other U.S. trade liberalization efforts

such as free trade agreements (FTAs) or multilateral agreements through the World Trade

Organization (WTO), which reduce and/or eliminate tariffs for both U.S. imports and exports.

AGOA included a provision requiring the President to explore potential FTA negotiations with

interested AGOA beneficiaries, suggesting that Congress envisioned AGOA as a stepping stone to

potential broader trade pacts with African countries. FTA negotiations with South Africa and its

regional partners in the South African Customs Union (SACU) sprang from this mandate in

AGOA, but were ultimately unsuccessful and suspended in 2006.9

Product Coverage

The tariff benefits provided by AGOA include all products covered by GSP, as well as additional

products the President determines are not import-sensitive with regard to imports from SSA.10

According to a report by the Government Accountability Office (GAO) in 2008, the U.S.

Harmonized Tariff Schedule (HTS) includes some 10,500 individual tariff lines for U.S. goods

imports, of which roughly 3,800 have no most-favored nation (MFN) tariff (i.e., all WTO

members may export them to the U.S. duty-free).11 GSP removes the tariff on an additional 3,400

products (4,800 for least-developed countries), and AGOA makes another 1,800 tariff lines dutyfree, though a large share of these are included in the GSP benefits for least-developed countries

(LDCs).12 AGOA extends duty-free treatment to certain apparel and footwear products, which are

not eligible under GSP (even for LDCs). Agricultural products subject to tariff-rate quotas (TRQ)

remain ineligible for duty-free treatment under both AGOA and GSP.13 AGOA beneficiaries are

also exempt from certain caps on allowable duty-free imports under the GSP program

(“competitive need limitations”).14

Rules of Origin

Products from AGOA countries must meet certain rules of origin (ROO) requirements in order to

qualify for duty-free treatment (see the textiles and apparel section for sector-specific rules of

origin). First, duty-free entry is only allowed if the article is imported directly from the

beneficiary country into the United States. Second, at least 35% of the appraised value of the

product must be the “growth, product or manufacture” of a beneficiary developing country, as

defined by the sum of (1) the cost or value of materials produced in the beneficiary developing

country (or any two or more beneficiary countries that are members of the same association or

countries and are treated as one country for purposes of the U.S. law) plus (2) the direct costs of

processing in the country. Up to 15% of the required 35% of the appraised value may be of U.S.

9

Observers cited several possible reasons for the unsuccessful FTA negotiations, including the capacity of SACU

nations to negotiate a U.S.-style (comprehensive and high-standard) FTA, and disagreements between the parties on the

scope and level of ambition of the negotiations.

10

The AGOA trade preferences, including the portion covered by GSP, are in effect through September 2015,

regardless of GSP’s reauthorization.

11

U.S. Government Accountability Office, U.S. Trade Preference Programs Provide Important Benefits, but a More

Integrated Approach Would Better Ensure Programs Meet Shared Goals, GAO-08-443, March 2008, pp. 70-72.

12

Ibid.

13

TRQs are two-tiered tariffs. In-quota import quantities face one tariff, while above-quota import quantities face

another, typically much higher, tariff.

14

CRS Report RL33663, Generalized System of Preferences: Background and Renewal Debate, by (name redacted).

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origin, and any amount of production in other beneficiary SSA countries may also contribute to

the value-added requirement (“regional cumulation”).15

Textile and Apparel Provisions

AGOA includes duty-free treatment for certain apparel and textile products, though some are

subject to quantitative limitations. These provisions in AGOA are significant, because (1) apparel

production has played a unique role in the development process of some countries; and (2) the

duty-free benefits apply to a sector with relatively higher U.S. tariff rates than average overall

U.S. tariff rates. Not all AGOA beneficiaries are eligible for the apparel provisions. Duty-free

treatment for apparel products under AGOA requires beneficiary countries to adopt an efficient

visa ("tracking”) system to prevent unlawful transshipment—production shipped through and

exported from, but not actually produced in, a given country, often for particular tariff or quota

benefits.16

Apparel production has been a significant component in some countries’ economic

development.17 Unlike textile production, it typically requires low-skilled labor and minimal

capital expenditures, allowing lesser-developed countries to become globally competitive. Some

research suggests that success in low-skill and export intensive industries such as apparel may

help lead to a more diversified manufacturing sector.18 Nonetheless, the U.S. apparel sector is

deemed “import sensitive,” and has some specific safeguards. For example, in U.S. free trade

agreements (FTAs), apparel tariff lines typically have “yarn forward” general rules of origin

(which govern how much of the product must be made in the beneficiary country and longer tariff

phase outs), and most preference programs either exclude these articles (GSP) or have caps on

duty-free treatment (including AGOA).19

The existing general restrictions on U.S. imports of apparel make AGOA’s preferential treatment

for these product lines especially advantageous. The average U.S. applied tariff on apparel is

11.4% compared to an average for all products of 3.5%.20 This relatively high preference margin

may help explain how some AGOA producers, especially the LDCs, are competitive with lowercost producers in Asia and elsewhere.21

Textile and apparel articles qualifying for duty-free treatment include

•

Apparel assembled in one or more AGOA beneficiary countries from U.S. yarn

and fabric;

15

§506A of P.L. 93-618, as added by §111 of P.L. 106-200, and amended by §7 of P.L. 108-274.

For more information, see Department of Commerce, Office of Textiles and Apparel (OTEXA) Summary of AGOA

textile and apparel provisions at OTEXA website, http://otexa.ita.doc.gov.

17

Karina Fernandez-Stark, Stacey Frederick, and Gary Gereffi, The Apparel Global Value Chain, Duke Center on

Globalization Governance and Competitiveness, November 2011.

18

Paul Collier and Anthony Venables, Rethinking Trade Preferences to Help Diversify African Exports, Centre for

Economic Policy Research, June 2007.

19

A “yarn forward” rule means that, in order to qualify for trade benefits under an FTA, all products in a garment from

the yarn stage forward must be made in one of the countries that is party to the agreement.

20

World Trade Organization, World Tariff Profiles—United States, 2012.

21

For a discussion of challenges faced by African firms, see Ann E. Harrison, Justin Yifu Lin, and L. Colin Xu,

Explaining Africa’s (Dis)Advantage, National Bureau of Economic Research, Working Paper 18683, January 2013.

16

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•

Apparel made of SSA (regional) yarns and fabrics, subject to a cap until 2015;

•

Apparel made in a designated LDC of third-country yarns and fabrics, subject to

a cap until 2015;

•

Apparel made of yarns and fabrics not produced in commercial quantities in the

United States (determination must be made that the yarn or fabric cannot be

supplied by the U.S. industry in a timely manner, and to extend preferential

treatment to the eligible fabric);

•

Certain cashmere and merino wool sweaters;

•

Textiles and textile articles produced entirely in an LDC SSA beneficiary

country; and

•

Certain handloomed, handmade, ethnic printed fabrics, or folklore articles

(certain countries only).22

Third-Country Fabric Provision

AGOA’s third-country fabric provision is a special rule that allows U.S. apparel imports from

least-developed SSA countries to qualify for duty-free treatment even if the yarns and fabrics

used in the production of the apparel are imported from non-AGOA countries. This provision,

which was reauthorized in August 2012 (P.L. 112-163), is currently set to expire in September

2015, along with the overall AGOA program.

Eligibility

Eligibility for the AGOA trade preference program consists of two separate steps. First, the

country must be included in a statutorily created list of sub-Saharan African countries, described

in AGOA (19 U.S.C. 3706). This list has been updated periodically by new legislation (e.g., the

112th Congress added South Sudan in P.L. 112-163).

The second step requires the President to determine annually which eligible countries, from those

on the list of SSA countries defined by Congress, should become beneficiaries of the AGOA

preferences. There are two different sets of criteria for the President’s consideration in this

process: Section 104 of AGOA (19 U.S.C. 3703) and Section 502 of the Trade Act of 1974, or

GSP (19 U.S.C. 2462).

•

Section 104 is specific to AGOA and requires the President to consider a number

of factors related to the prospective AGOA country’s economy; rule of law;

elimination of barriers to U.S. trade and investment; poverty reduction efforts;

protection of worker rights; support of terrorist activities; and interference with

U.S. national security and foreign policy efforts.

•

Section 502, as amended, sets out the eligibility requirements of the Generalized

System of Preferences (GSP), which must also be met by any AGOA beneficiary

country. These also include a number of economic and political factors.

22

Department of Commerce, Office of Textiles and Apparel (OTEXA) Summary of AGOA textile and apparel

provisions at OTEXA website, http://otexa.ita.doc.gov.

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In two separate proclamations in 2014, the Obama Administration has made changes to AGOA

country eligibility. In June, the President reinstated AGOA eligibility for Madagascar effective

immediately, and terminated AGOA eligibility for Swaziland, due to issues with worker rights,

effective January 1, 2015.23 Swaziland has been a top exporter under AGOA—the fifth largest,

excluding energy products, in 2014. In December, the President reinstated benefits for GuineaBissau, and terminated benefits for South Sudan and The Gambia, due to issues with human

rights.24

Least-Developed Country Status

AGOA, like GSP, has additional benefits for least-developed beneficiary countries (LDCs). Under

GSP, these countries qualify for duty-free treatment on an additional 1,400 products. Under

AGOA, the additional benefits are more flexible rules governing the duty-free treatment of

textiles and apparel. Unlike GSP, which provides the President broad latitude in determining LDC

status, AGOA defines LDCs as countries with a per capita gross national product (GNP) of less

than $1,500 in 1998 as measured by the World Bank.25 Botswana, Namibia, and Mauritius are

also explicitly granted LDC status in AGOA, despite GNP per capita levels above that threshold.

This exemption is particularly economically significant for Mauritius; it is the fourth-largest

exporter under AGOA (excluding oil trade) and exports primarily apparel products under the

preference program.

AGOA Forum

AGOA requires the President, in consultation with Congress and the other governments

concerned, to hold annually a United States-Sub-Saharan Africa Trade and Economic

Cooperation Forum.26 The purpose of the Forum, which is held in alternate years in the United

States and Africa, is to “discuss expanding trade and investment relations between the United

States and Sub-Saharan Africa and the implementation of [AGOA] including encouraging joint

ventures between small and large businesses.” The Forum typically includes a Ministerial among

government officials, as well as sessions focused on civil society representatives and the business

community. The 13th AGOA Forum took place in Washington DC, from August 4-6, 2014, as part

of the larger U.S.-Africa Leaders Summit, and focused heavily on AGOA’s potential

reauthorization.27 In his speech at the 2014 Forum, Secretary of State John Kerry announced that

the 2015 AGOA Forum will be held in Gabon, a first for Central Africa.28

23

The June 26, 2014 proclamation may be found at http://www.whitehouse.gov/the-press-office/2014/06/26/

presidential-proclamation-agoa. Additional information on the changes in eligibility status is available via USTR’s

website at http://www.ustr.gov/about-us/press-office/press-releases/2014/June/President-Obama-removes-Swazilandreinstates-Madagascar-for-AGOA-Benefits.

24

The December 23, 2014 proclamation may be found at https://www.whitehouse.gov/the-press-office/2014/12/23/

presidential-proclamation-take-certain-actions-under-african-growth-and-.

25

19 U.S.C. §2462(a)(2) and 19 U.S.C. §3721(c)(3).

26

Representatives from appropriate sub-Saharan African regional organizations and government officials from other

appropriate countries in sub-Saharan Africa also could be invited, and generally are. African countries hosting the

Forum must be nominated by their participant peers and be able to sponsor associated costs.

27

For more information, see CRS Report R43655, U.S.-Africa Leaders Summit: Frequently Asked Questions and

Background, coordinated by (name redacted).

28

U.S. Department of State, “Remarks at the African Growth and Opportunity Act (AGOA) Ministerial,” press release,

August 4, 2014, http://www.state.gov/secretary/remarks/2014/08/230178.htm.

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Technical Assistance and Capacity Building

Unlike other U.S. preference programs, AGOA directs the President to target U.S. government

technical assistance and trade capacity building (TCB) in AGOA beneficiary countries.29 This

assistance is intended to encourage governments to (1) liberalize trade policy; (2) harmonize laws

and regulations with WTO membership commitments; (3) engage in financial and fiscal

restructuring; and (4) promote greater agribusiness linkages. AGOA also includes assistance for

developing private sector business associations and networks among U.S. and SSA enterprises.

Technical assistance must be targeted to increasing the number of reverse trade missions;

increasing trade in services; addressing critical agricultural policy issues; and building

capabilities of African states to participate in the WTO, generally, and, particularly, in services. In

FY2013, the United States reported obligating approximately $209 million in TCB assistance to

AGOA countries, up from $191 million in 2012, but down considerably from 2006-2011, during

which TCB funding averaged over $600 million per year.30 From 2001 to 2013, TCB assistance

has been provided primarily through the Millennium Challenge Corporation (MCC, 58%) and the

U.S. Agency for International Development (USAID, 31%), with 53% of funds obligated for

trade-related infrastructure, 15% for trade-related agriculture projects, 11% for trade facilitation,

and 21% for other TCB categories.31

In addition to these broad mandates, AGOA includes language pertaining to the following

agencies:

•

Overseas Private Investment Corporation (OPIC). Section 123 expresses the

sense of Congress that OPIC should exercise its authority to support projects in

SSA and directs OPIC to increase funds directed to SSA countries.

•

Export-Import Bank (Ex-Im Bank). Section 124 of AGOA expresses the sense

of Congress that the Ex-Im Bank should continue to expand its financial

commitments to its loan guarantee and insurance programs to African countries

and commends the Bank’s sub-Saharan Africa Advisory Committee for its work

in fostering economic cooperation between the United States and SSA.

Established in Ex-Im Bank’s 1997 reauthorization legislation, the advisory

committee originally was set to expire in 2001. Subsequent Ex-Im Bank

reauthorizations have typically extended the committee’s termination, most

recently through September 30, 2014.32 The current Ex-Im Bank reauthorization

(through June 30, 2015), however, did not explicitly authorize the committee, and

it is not currently operational.33

•

United States Trade Representative (USTR). Section 117 supports the creation

of an Assistant USTR for Africa to serve as the “primary point of contact in the

executive branch for those persons engaged in trade between the United States

29

Section 122 of P.L. 106-200 (19 U.S.C. §3732).

U.S. Government Accountability Office, African Growth and Opportunity Act, USAID Could Enhance Utilization by

Working with More Countries to Develop Export Strategies, GAO-15-218, January 22, 2015, pp. 8-9. USAID, which

administers the collection and dissemination of the data on TCB, reports the MCC funding in the year it is granted,

though the distribution of the funds occurs over several years. See http://tcb.eads.usaidallnet.gov/.

31

Ibid.

32

Export-Import Bank Reauthorization Act, 12 U.S.C. 635(b)(9)(B)(iii).

33

For further information, see Ex-Im Bank, “Sub-Saharan Africa Advisory Committee,” http://www.exim.gov/about/

whoweare/sub-saharan-africa-advisory-committee.cfm.

30

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and sub-Saharan Africa,” and the chief adviser to the U.S. Trade Representative

(USTR) on trade and investment issues pertaining to Africa. This position

previously had been established by President Clinton in 1998.

•

U.S. Foreign Commercial Service (CS). Section 125 notes that the CS presence

in SSA had been reduced since the 1980s and the level of staffing in 1997 (seven

officers in four countries) did not “adequately service the needs of U.S.

businesses attempting to do business in sub-Saharan Africa.”34 Accordingly, the

legislation required the posting of at least 20 CS officers in not less than 10

countries in SSA by December 31, 2001, “subject to the availability of

appropriations.”35 According to data provided by the Department of Commerce

for FY2014, there are 15 CS officers in sub-Saharan Africa, up from 5 in

FY2012. These are located in Angola (4), Ethiopia (1), Ghana (1), Kenya (2),

Mozambique (1), Nigeria (2), South Africa (3), and Tanzania (1).

•

U.S. Agency for International Development (USAID). Aside from MCC

compacts that include TCB, USAID funds much of the trade capacity building

efforts related to AGOA ($1.6 billion since 2001). In 2011, the Administration

announced the African Competitiveness and Trade Expansion (ACTE) initiative,

a trade and investment initiative with funding of up to $30 million annually,

subject to appropriations.36 ACTE supports the three African Trade Hubs, one of

USAID’s most oft-cited AGOA-related projects.37 Based in Ghana, Kenya, and

Botswana, the Trade Hubs attempt to help potential exporters become globally

competitive and make full use of their AGOA benefits.38 As part of the

Administration’s Trade Africa Initiative, the East Africa Trade Hub has been

renamed the East Africa Trade and Investment Hub and is expanding its focus to

include two-way trade and investment between the United States and the East

African Community.39

Annual Report to Congress

Originally, AGOA also required the President to submit an annual “comprehensive report on the

trade and investment policy of the United States for sub-Saharan Africa.” In a subsequent

reauthorization of the AGOA trade preferences, this requirement was not extended. The most

recent report was in 2008.

34

AGOA, §125(a)(4).

AGOA, §125(b).

36

USAID, “U.S. Announces New African Trade Capacity Building Initiative at AGOA Forum,” press release, June 9,

2011, http://www.usaid.gov/news-information/press-releases/us-announces-new-african-trade-capacity-buildinginitiative-agoa.

37

For example, see Hearing Testimony by Earl W. Gast, U.S. Congress, Senate Committee on Foreign Relations,

Subcommittee on African Affairs, Economic Statecraft: Embracing Africa’s Market Potential, 112th Cong., 2nd sess.,

June 28, 2012, S.Hrg. 112-604 (Washington: GPO, 2012), p. 10.

38

Each of the three regional Trade Hubs has its own website with information on its activities. For more information

see West Africa, http://www.watradehub.com; East Africa, https://eatradehub.nationbuilder.com/; and South Africa,

http://www.satradehub.org/.

39

For more information, see http://www.whitehouse.gov/the-press-office/2013/07/01/fact-sheet-trade-africa.

35

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U.S. Imports under AGOA and GSP40

U.S. imports from AGOA countries represent a small share of overall U.S. imports. In 2014, the

United States imported $2,314 billion in goods, of which $25.6 billion, or slightly more than 1%,

came from AGOA countries. 56% of these imports ($14.2 billion) received duty-free treatment,

under either AGOA or GSP, though crude oil accounts for a significant portion of this. Excluding

crude oil, 35% of U.S. imports from AGOA countries received duty-free treatment under AGOA

or GSP.41

Energy-related products (e.g., crude oil) dominate U.S. imports from SSA under AGOA and GSP,

representing 69% of such imports in 2014, though these imports have fallen sharply in the past

three years.42 Given SSA’s abundant natural resources and the already low U.S. tariff on oil

($0.05-$0.10 per barrel), much of this trade would likely occur regardless of the preference

program. The discussion that follows focuses on non-energy trade between the United States and

SSA. (See the text box below for more information on U.S. oil imports under AGOA.)

In 2014, U.S. imports from SSA under AGOA and GSP, excluding energy products, were $4.4

billion (Figure 1). These imports have increased nearly three-fold (up from $1.3 billion) since

2001, the first full year of AGOA eligibility. They fell by $500 million from 2013 to 2014, but

this was primarily due to lower auto imports from South Africa. Apparel products remain one of

the largest non-oil import categories; however, these imports peaked in 2004 prior to the

dismantling of the complex multilateral quota system, known as the Multifiber Agreement

(MFA). The MFA limited U.S. apparel imports from certain countries, thus eliminating the extent

of competition faced by AGOA apparel exporters. Though U.S. apparel imports still face

relatively high tariffs, removal of these strict quantitative limitations reduced the AGOA

countries’ competitive advantage in producing apparel. U.S. apparel imports under AGOA,

though very significant for some AGOA countries, represent only 1% of overall U.S. apparel

imports. U.S. apparel imports totaled $82.7 billion in 2014, with $30.7 billion from China, $9.2

billion from Vietnam, and less than $1 billion total from AGOA beneficiaries (Table 1).

While U.S. apparel imports from AGOA countries have declined from their peak in 2004, imports

of other products have been rising rapidly. Vehicle imports have seen strong growth, rising from

$289 million in 2001 to nearly $2.2 billion in 2013, although they declined considerably to $1.4

billion in 2014. These and other more advanced manufactured products, such as chemicals, come

almost exclusively from South Africa. Imports of products with more widespread origins have

grown on a more modest scale. U.S. imports of food and agriculture products under AGOA and

GSP, including nuts, fruits, cocoa, sugar, beverages, and tobacco, have increased from $139

million to $467 million during the same period. Such imports grew by $20 million from 2013 to

2014.

40

AGOA and GSP overlap in their product coverage so this discussion considers them jointly. Trade data in this

section come from the U.S. International Trade Commission’s dataweb, http://dataweb.usitc.gov/, and

http://dataweb.usitc.gov/africa/trade_data.asp.

41

Though only 35% of non-oil imports entered the United States under AGOA or GSP, an additional 57% of non-oil

imports entered duty-free because they face no import tariff in the United States. In total in 2014, over 90% of U.S.

non-oil imports from the region entered the United States duty-free.

42

Unless otherwise specified, energy-related products refers to HTS chapter 27.

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U.S. imports from SSA under AGOA and GSP are heavily concentrated in a few countries.

Figure 2 highlights the top exporters of non-energy products to the United States under both

programs. Excluding energy products, U.S. preferential imports from South Africa totaled $3.1

billion in 2014, accounting for 70% of all such U.S. imports from SSA. Other top non-energy

exporters under AGOA/GSP in 2014 were the major apparel producers: Kenya ($423 million),

Lesotho ($289 million), Mauritius ($227 million), and Swaziland ($77 million), as well as Cote

d`Ivoire ($70 million) and Malawi ($60 million), who exported primarily cocoa products and

tobacco under the preference programs, respectively. Aside from these top countries, however, the

preferences were not heavily utilized. U.S. preferential imports were less than $1 million for over

half of the 40 AGOA beneficiary countries in 2014.

Figure 1. Non-Energy U.S. Imports from SSA under AGOA and GSP

Source: Analysis by CRS. Data from U.S. International Trade Commission (ITC).

Notes: Imports for consumption basis. Metals defined as HTS chapters 76 and 72; vehicles as HTS chapter 87;

apparel as HTS chapters 61 and 62; and energy as HTS chapter 27.

Table 1. U.S. Imports of Apparel Products by Country

(in millions of U.S. dollars, 2014)

Top Overall Countries

Import Value

Top AGOA Countries

Import Value

China

$30,369

Kenya

$379

Vietnam

9,184

Lesotho

290

Indonesia

4,862

Mauritius

223

Bangladesh

4,708

Swaziland

55

Mexico

3,854

Madagascar

20

Source: Analysis by CRS. Imports for consumption data from U.S. ITC trade dataweb.

Notes: Imports for consumption basis. Apparel products defined as HTS chapters 61 and 62.

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Figure 2.Top AGOA and GSP Exporters excluding Energy Products

Source: Analysis by CRS. Data from U.S. ITC.

Notes: Imports for consumption basis. Energy products defined as HTS chapter 27. Stars represent preferential

treatment on over 75% of total exports to the United States, including energy products. Map only includes

countries eligible for AGOA benefits in 2014.

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U.S. Oil Imports Under AGOA and GSP

Crude oil has been the top U.S. import from SSA under AGOA and GSP since AGOA’s first full year of duty-free

treatment in 2001 (Figure 3). The following are key facts regarding U.S. oil imports under AGOA and GSP.

•

The top 5 AGOA-eligible oil exporters are Angola, Nigeria, Chad, Gabon, and Republic of Congo.

•

Both AGOA and GSP grant duty-free status to U.S. crude oil imports.

•

GSP only affords this treatment to least-developed countries (LDCs).

•

Nigeria is not considered an LDC under GSP and so depends on AGOA for duty-free treatment of its crude oil

exports to the United States. It is the only major AGOA-eligible oil exporter that is not considered an LDC

under GSP.

•

The high market value of oil coupled with a low U.S. import tariff, $0.05-$0.10 per barrel, makes AGOA and

GSP’s crude oil tariff benefit relatively insignificant.

•

U.S. crude oil imports from SSA have declined by more than 80% from 2011 to 2014 (a nearly $40 billion

decrease), which may be partially due to the increased U.S. production of shale oil, a direct competitor with oil

from some SSA countries due to its similar composition.43

Figure 3. Oil and Non-Oil Imports from SSA under AGOA and GSP

Source: Analysis by CRS. Data from U.S. ITC.

Notes: Imports for consumption basis. Oil defined as HTS 4-digit category 2709.

Impacts of AGOA

Through AGOA Congress set out to improve the economic development of SSA and increase

U.S. trade ties with the region. A handful of countries have made strong use of the preference

program and have increased employment in economic sectors that benefited from duty-free

treatment under AGOA. For example, the government of Lesotho, one of the major apparel

exporters under AGOA, estimates that employment in manufacturing rose from 19,000 in 1999 to

43

Javier Blas, “Victim of Shale Revolution, Nigeria Stops Exporting Oil to U.S.,” Financial Times, October 2, 2014,

Beyondbrics.

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

45,700 in June 2011.44 A peer-reviewed economic study found a direct link between the AGOA

preferences and increased U.S. imports from beneficiary countries, and concluded that these

increased SSA exports were not merely diverted from other potential export destinations (e.g., the

European Union).45 This relationship was strongest for the apparel sector and other sectors with

high U.S. import tariffs.

Despite these achievements, challenges remain, such as the limited number of countries making

significant use of the preferences, and doubts as to whether AGOA countries have been able to

translate these short-term preference benefits into transformative changes in their manufacturing

capabilities and overall competitiveness.46 As highlighted above, the majority of AGOA non-oil

imports come from South Africa. Among the other countries that have made significant use of the

preferences, apparel exports account for most of their AGOA exports. While the apparel sector

has been acknowledged as a potential launching point for more advanced manufacturing

industries, the manufacturing sectors in many AGOA beneficiary countries remain highly

underdeveloped. One study asserts that AGOA apparel production is concentrated in the lowestskill tasks with little knowledge transfer to local workers and that the global competitiveness of

AGOA exporters still depends on their preferential treatment.47

In addition to AGOA’s tangible goals related to economic development and trade, AGOA also

supports the achievement of other strategic objectives. AGOA serves as a focal point for U.S.

economic relations with SSA. If the recent period of high economic growth in much of SSA

continues, the United States may have an increasing interest in the region’s potential as a

consumer market and destination for both U.S. exports and foreign direct investment (FDI). A

study by McKinsey estimated that the number of African households making above $5,000 per

year, the point where discretionary spending begins, would rise from 85 million in 2008 to 128

million in 2020.48 Though AGOA focuses specifically on U.S. imports, it spurs dialogue between

the United States and SSA countries on two-way trade and investment issues through the annual

AGOA Forum. Through the eligibility criteria required for the program, the United States

maintains some influence over the political and economic structure of the beneficiary countries.

These strategic aspects of AGOA may become more important as other foreign countries, such as

China, continue to increase their commercial and political ties with SSA.

Reauthorization Debate

AGOA’s authorization is set to expire on September 30, 2015. President Obama,49 some Members

of Congress, officials from beneficiary countries, and other stakeholders support renewing the

44

Central Bank of Lesotho, Africa Growth and Opportunities Act (AGOA): Economic Impact and Future Prospects,

CBL Economic Review No. 131, June 2011, p. 3.

45

Garth Frazer and Johannes Van Biesebroeck, “Trade Growth under the African Growth and Opportunity Act,” The

Review of Economics and Statistics, vol. 92, no. 1 (February 2010).

46

Niall Condon and Matthew Stern, The Effectiveness of African Growth and Opportunity Act (AGOA) in Increasing

Trade from Least Developed Countries, EPPI-Centre, Social Research Unit, Institute of Education, University of

London, March 2011.

47

Lawrence Edwards and Robert Z. Lawrence, AGOA Rules: The Intended and Unintended Consequences of Special

Fabric Provisions, National Bureau of Economic Research, Working Paper 16623, December 2010.

48

McKinsey Global Institute, Lions on the Move: The Progress and Potential of African Economies, June 2010, p. 22.

49

The White House, “Remarks by President Obama at Business Leaders Forum,” press release, July 1, 2013,

http://www.whitehouse.gov/the-press-office/2013/07/01/remarks-president-obama-business-leaders-forum.

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

preferences, and have various suggestions for reform. The Obama Administration, in order to

inform its reauthorization proposals, initiated a review of AGOA during the 2013 AGOA Forum,

which ultimately included a request for four investigations by the U.S. International Trade

Commission (ITC). The ITC published its first report on AGOA’s trade and investment

performance in April 2014 following a public hearing in January.50 The other three reports, which

cover AGOA’s impact on U.S. industries and consumers, rules of origin, and the EU-South Africa

FTA, are confidential.

Ambassador Froman identified some of the Administration’s main conclusions from its AGOA

review and subsequent recommendations for AGOA’s reauthorization in his July 2014 written

testimony before the Senate Committee on Finance.51 These include the need for a sufficiently

long renewal, potential expansion of product coverage, more flexible rules of origin, updated

eligibility criteria with a more flexible review process, and eventually a more reciprocal trade

program with the region. He also suggested that the Administration’s review of AGOA pointed

largely to “supply-side” constraints, such as inadequate infrastructure, as the main barriers to

greater AGOA utilization.

Congress, too, has sought greater study of the AGOA preference program, and various Members

have expressed interest in its renewal. During the 113th Congress, relevant committee leadership,

bicameral and bipartisan, requested that GAO report on the effectiveness of AGOA, including

utilization of the preferences and its impact on two-way trade.52 GAO has published four reports,

which address (1) AGOA import competitiveness and diversification; (2) ways to enhance

AGOA’s trade capacity building (TCB) component; (3) AGOA’s eligibility process; and (4) other

countries’ trade agreements with sub-Saharan Africa.53 A primary observation was the need for

better development of country export strategies. In addition, both the Senate Committee on

Finance and the Trade Subcommittee of the House Committee on Ways and Means held hearings

in July 2014 to examine AGOA and its potential reauthorization, during which committee

leadership expressed strong support for the program.54 At the start of the 114th Congress,

Chairman Ryan of the House Committee on Ways and Means cited AGOA’s reauthorization as a

top legislative priority.55

50

U.S. International Trade Commission, AGOA: Trade and Investment Performance Overview, Publication 4461, April

2014, http://www.usitc.gov/publications/332/pub4461.pdf. Testimony and submissions for the hearing can be found

through the USITC’s website or at http://agoa.info/downloads/hearings.html.

51

http://www.finance.senate.gov/hearings/hearing/?id=f5251f60-5056-a032-52f0-742dc672610d.

52

http://foreignaffairs.house.gov/press-release/bipartisan-congressional-leaders-push-increase-effectiveness-agoalandmark-legislation.

53

U.S. Government Accountability Office, African Growth and Opportunity Act: Observations on Competitiveness and

Diversification of U.S. Imports from Beneficiary Countries, GAO-14-722R, July 21, 2014, http://www.gao.gov/

products/GAO-14-722R; AGOA: USAID Could Enhance Utilization by Working with More Countries to Develop

Export Strategies, GAO-15-218, January 22, 2015, http://www.gao.gov/products/GAO-15-218; AGOA: Eligibility

Process and Economics Development in Sub-Saharan Africa, GAO-15-300, February 12, 2015, http://www.gao.gov/

products/GAO-15-300.; and AGOA: Lessons Learned from Other Countries’ Trade Arrangements with Sub-Saharan

Africa, GAO-15-393R, February 25, 2015, http://www.gao.gov/products/GAO-15-393R.

54

U.S. Congress, House Committee on Ways and Means, Subcommittee on Trade, Advancing the U.S. Trade Agenda:

Trade with Africa and the African Growth and Opportunity Act, 113th Cong., 2nd sess., July 29, 2014; and U.S.

Congress, Senate Committee on Finance, The African Growth and Opportunity Act at 14: The Road Ahead, 113th

Cong., 2nd sess., July 30, 2014.

55

House Committee on Ways and Means, “Ryan Opening Statement: Hearing on U.S. Trade Policy Agenda,” press

release, January 27, 2015, http://waysandmeans.house.gov/news/documentsingle.aspx?DocumentID=397950.

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

Other stakeholders have also added their voices to the debate on AGOA. The AGOA

Ambassadors Working Group, the AGOA civil society network, and the East African Community

(EAC) have all produced recommendations for AGOA’s potential renewal. In addition, several

think tanks, non-governmental organizations, and business groups have weighed in on AGOA’s

reauthorization.56

Considerations for Potential Reforms

The following are some of the issues identified through these various studies and policy

proposals, which may merit congressional consideration during AGOA’s reauthorization debate.

Length of Reauthorization

Private sector actors have argued that uncertainty regarding the duration of AGOA preferences,

due to periodic reauthorizations, hinders investment in the region. Some have called for a longer

and uniform reauthorization (i.e., 10-15 years) for all AGOA preferences, including the thirdcountry fabric provision in order to reduce uncertainty and encourage greater capital investment,

which, they argue, will be necessary to generate more value-added production in the region.57

Lengthened periods of authorization, however, could also limit the incentive for more advanced

economies, such as South Africa, to engage in more comprehensive trade liberalization efforts,

such as FTA negotiations, or as part of the World Trade Organization (WTO) Doha Round

negotiations.

Country Eligibility

A range of ideas have been proposed to modify AGOA’s eligibility criteria. For example, some

argue that the existing criteria increase investor uncertainty, putting firms and workers at risk of

shutdowns due to government actions beyond their control. Others see these as an effective tool

and some support additional criteria in areas ranging from the business environment to worker

rights. Removing portions of the eligibility criteria could decrease the potential leverage AGOA

provides to encourage economic and political reform in beneficiary countries, while adding

additional criteria could limit country participation.

Stakeholders, including the Administration, have also argued for modifications in the enforcement

of eligibility criteria including the timing and scope of the withdrawal of preferences. For

example, some recommend more precise targeting for failure to meet mandatory eligibility

criteria, such as removal of preferences for a particular industry rather than an entire country.

Debate over the timing of the withdrawal of preferences includes both proponents of shorter and

longer phase-outs. Some argue that immediate withdrawal of preferences following failure to

meet eligibility criteria would be more effective while others suggest a longer phase-out would

ensure businesses have time to reallocate resources. Currently, termination of benefits occurs at

the start of the year immediately following the President’s proclamation that a country has failed

to meet eligibility criteria.

56

Many of these position papers were included in the USITC hearing on AGOA, and can be found at http://agoa.info/

downloads/hearings.html.

57

The Corporate Council on Africa, Promoting Shared Interests: Policy Recommendations on Africa for the Second

Term of the Obama Administration, April 2013, p. 18.

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

Intra-African Trade

Intra-African trade and economic integration have been cited as a critical but often absent

component of economic development in the region.58 Regional integration efforts are one way to

improve intra-African trade ties, and AGOA calls for “expanding U.S. assistance to sub-Saharan

Africa’s regional integration efforts.” In the first decade of AGOA’s enactment, African intraregional trade stayed flat at around 10%.59 It may be worthwhile to evaluate the impact, if any,

that AGOA and corresponding U.S. development assistance have had in improving regional

integration efforts and intra-African trade, and determine whether AGOA should further address

these issues.60 Graduation of more advanced AGOA countries, discussed below, could impact

intra-African trade integration goals, as these countries are typically also the largest markets in

the region and may be important in regional supply chains.

Two-Way Trade

Like other U.S. preference programs, AGOA provides preferential access to the U.S. market with

no reciprocal preferential U.S. access to the beneficiary countries. In light of economic

improvements in the region, some observers are calling for a greater focus on two-way trade in

AGOA. One related goal included in the original AGOA legislation mandates that the

Administration seek out possible FTA partners among SSA nations. Subsequent negotiations with

South Africa and its regional partners in SACU began in 2003, but were ultimately unsuccessful

and postponed indefinitely in 2006. The European Union (EU), however, successfully concluded

an Economic Partnership Agreement (EPA) with South Africa and other countries in the region,

providing reciprocal preferential tariff treatment to EU exports, though these agreements exclude

a range of products. GSP currently includes language related to such occurrences, declaring a

country ineligible if it “affords preferential treatment to the products of a developed country, other

than the United States, which has, or is likely to have, a significant adverse effect on United

States commerce.”61

Several relevant policy questions follow: (1) is the United States willing to negotiate less

comprehensive and high-standard FTAs than it normally negotiates to gain greater access to

emerging markets like South Africa, or are countries in the region more prepared to engage in

comprehensive, reciprocal trade talks; (2) should AGOA include its own graduation process,

which, like that for GSP, removes more economically advanced countries from the preference

program once they reach a certain level of economic development (e.g., GDP/capita level); (3)

should AGOA include language requiring the removal of benefits if a beneficiary country affords

preferential treatment to a third party; (4) what is the policy on enforcement of the existing GSP

rules on this issue; and (5) how would the removal of such benefits impact other AGOA goals

such as increased intra-African trade?

58

Africa’s trade with itself accounts for 11% of its total trade, compared with 50% in developing Asia and 70% in

Europe. United Nations Conference on Trade and Development, Intra-African Trade: Unlocking Private Sector

Dynamism, Economic Development in Africa Report 2013, July 2013.

59

Brookings Africa Growth Initiative, Accelerating Growth through Improved Intra-African Trade, January 2012, p. 2.

60

The Administration’s Trade Africa initiative, which centers on a new trade and investment partnership with the East

African Community (EAC). This may eventually include a bilateral investment treaty (BIT) and a trade facilitation

agreement with the EAC. http://www.whitehouse.gov/the-press-office/2013/07/01/fact-sheet-trade-africa.

61

19 U.S.C. §2462(b)(2)(C).

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Country Participation

Over half of the current AGOA beneficiaries exported less than $1 million to the United States

under AGOA in 2014. Many of these are LDC AGOA countries that are eligible for duty-free

treatment on apparel exports and enjoy the more flexible rules of origin (“Third-Country Fabric

Provision”), giving them a competitive advantage over other producers. A handful of AGOA

countries, particularly Kenya, Lesotho, and Mauritius, provide the bulk of apparel exports under

AGOA. Congress may wish to examine why these countries have been so successful in utilizing

the preference program, and if there are potential AGOA reforms that could help spur similar

success in other AGOA LDCs.

Trade Capacity Building (TCB)

AGOA country exporters face numerous challenges. These include poor infrastructure,

inadequate access to electricity, and skilled labor shortages. AGOA sets out broad aims for TCB,

which are administered through different agencies, particularly USAID. Since 2001, $5 billion

has been allocated to TCB funding in AGOA countries by various U.S. government agencies,

particularly USAID and MCC.62 Yet discussions on AGOA often center on the need for more

TCB funding, with many suggesting this amount is inadequate or ineffective. In 2011, GAO

reported that USAID needed better evaluation of its TCB programs, and in its most recent AGOA

report, GAO argued that USAID could enhance AGOA utilization with a greater focus on and

assistance toward the creation of country strategies.63 Beneficiaries may also be able to improve

their utilization of AGOA through the timely implementation of the recent WTO Trade

Facilitation Agreement. Congress may wish to consider how AGOA-directed TCB funding could

support this implementation process.

On August 4, during the U.S.-Africa Leaders Summit, President Obama announced an initiative

to develop a government-wide TCB strategy that includes among its goals improving AGOA

utilization.64 The steering group established for this task, which includes representatives from

related government agencies, is to report to the President on this strategy within 180 days of the

announcement. Depending on the timing and dissemination of this strategy, it could impact TCB

considerations in AGOA’s reauthorization.

Product Coverage

AGOA and GSP provide duty-free access on U.S. imports of approximately 5,200 tariff lines,

which together with the products already duty-free in the U.S. tariff schedule, grant AGOA

beneficiaries duty-free access to roughly 86% of U.S. products. While a majority of products are

covered under AGOA, some of the excluded products are competitively produced in AGOA

countries, particularly agricultural products.65 Though some agriculture products are included in

62

GAO-15-218, AGOA: USAID Could Enhance Utilization.

U.S. Government Accountability Office, The United States Provides Wide-ranging Trade Capacity Building

Assistance, but Better Reporting and Evaluation Are Needed, GAO-11-727, 2011, http://www.gao.gov/products/GAO11-727.

64

White House, “Presidential Memorandum—Establishing a Comprehensive Approach to Expanding Sub-Saharan

Africa’s Capacity for Trade and Investment,” press release, August 4, 2014, http://www.whitehouse.gov/the-pressoffice/2014/08/04/presidential-memorandum-establishing-comprehensive-approach-expanding-su.

65

GAO, Options for Congressional Consideration to Improve U.S. Trade Preference Programs, Prepared Statement

(continued...)

63

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

AGOA, those subject to tariff-rate quotas (TRQs) are limited in the amount that may enter dutyfree. Congress may wish to examine expanding the products or quantities covered under AGOA,

which could potentially allow a greater number of AGOA beneficiaries to make use of the trade

preference program.

To address related U.S. import sensitivities, some have suggested reassigning current quota

allocations as an alternative method to expand agricultural market access for AGOA countries.

For some products, such as chocolate, these groups argue, a portion of the quota is not assigned to

a specific country and may go unfilled. They assert that allocating this quota to AGOA countries

could be politically feasible and also encourage downstream production in some cocoa exporting

countries.66 Others contend that changing quota allocations could require approval from the

WTO, limiting its feasibility.67 In addition to challenges posed by tariffs and quotas, agriculture

producers in AGOA countries may also face difficulty exporting due to failure to meet U.S. food

safety standards, suggesting that such exporters may also benefit from targeted TCB funding to

help them better meet these standards.

Rules of Origin

In comparison with other preference programs, AGOA has relatively liberal rules of origin. For

example, the third-country fabric rule allows for a certain quantity of AGOA apparel exports to be

produced from yarns and fabrics of any origin. AGOA, unlike GSP, also allows for regional

cumulation, whereby multiple AGOA beneficiaries can contribute toward a product’s required

35% regional value content, and the United States can contribute 15% of the 35%.68 Despite this

existing flexibility, restrictions remain, which some groups would like to ease. These stakeholders

seek, for example, an increase in the allowable value content attributed to the United States or

easing technical constraints on what costs count toward cumulation. In addition, certain AGOA

countries have argued that existing rules of origin prevent canned tuna from qualifying for AGOA

preferences, and have sought a general modification of the rules or a product-specific exception.

They argue it is difficult to achieve the 35% threshold as most of the value in canned tuna is the

fish itself, which is attributed to the country of the fishing vessel. Press reports suggest the U.S.

tuna canning industry opposes such a change.69

Trade Disputes—Poultry and South Africa

Some Members of Congress who support AGOA have concern over South Africa’s imposition of

antidumping duties on U.S. poultry exports.70 These Members support AGOA conditioned on

(...continued)

for Hearing, GAO-10-262T, November 2009, p. 4.

66

Kimberly Ann Elliott, AGOA’s Final Frontier: Removing US Farm Trade Barriers, Center for Global Development,

July 28, 2014, http://www.cgdev.org/publication/ft/agoa-final-frontier-removing-us-farm-trade-barriers.

67

“U.S. Faces Key Questions as It Mulls Adding Ag Products to AGOA,” Inside U.S. Trade, September 4, 2014.

68

GSP does allow for cumulation among specified associations of countries, such as the West African Economic and

Monetary Union (WAEMU).

69

“Mauritius, Other Press for Liberalizing Tuna Rule of Origin Under AGOA,” Inside U.S. Trade, September 4, 2014.

70

Letter from Senator Johnny Isakson and Senator Christopher A. Coons to The Honorable Michael Froman, United

States Trade Representative, January 27, 2015, http://www.isakson.senate.gov/public/_cache/files/26c427ec-10ce49b2-8fb9-f73674069753/U.S.%20Trade%20Representative%20Michael%20Froman%20Letter.pdf.

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

resolution of this dispute, arguing that they “will need to consider strengthening AGOA to prevent

South Africa from benefitting from duty preferences while continuing to discriminate against U.S.

goods, specifically poultry.” AGOA’s current eligibility criteria require beneficiary countries to

make progress toward the elimination of barriers to U.S. trade and investment, including bilateral

trade and investment disputes.71 In June 2015, a joint statement released by the United States and

South Africa stated that industry and government officials agreed to renew market access in South

Africa for U.S. exports of certain poultry products.72 Press reports suggest that the details of the

agreement include the removal of a prohibitive anti-dumping duty on 65,000 tons of U.S. chicken

exports, annually. 73 Exports under this threshold will be charged South Africa’s MFN duty.

Recent statements from Members who had been pressuring the South African government on this

issue suggest that the agreement may resolve their concerns.74

Duty-Free Quota-Free (DFQF) Beyond Africa

AGOA’s tariff benefits, which include apparel products, are broader than those provided by GSP.

Some argue, including in the context of the current WTO Doha negotiations, that broader dutyfree quota-free tariff preferences should be granted to all least-developed countries, not just those

in Africa.75 LDCs throughout the world face relatively high U.S. import tariffs given the

particular items they export, such as apparel and agricultural products. For example, in 2014, U.S.

import duties on all imports from Cambodia ($460 million) were higher than on those from

France ($451 million).76 Providing broader DFQF access to LDCs would erode some of the

competitive advantage AGOA apparel producers currently receive. A recent study estimates that

apparel exports from AGOA countries would fall considerably if AGOA-like benefits were

expanded to all LDCs.77 Other studies, however, estimate that a broader DFQF program could

actually benefit AGOA LDCs by including protected sectors such as agriculture, despite potential

losses in apparel production.78 In addition, proponents of DFQF argue that apparel products

currently produced in AGOA countries could be targeted for exemption from a broader DFQF

program.79

71

19 U.S.C. §3703(a)(1).

USTR, "Joint Statement by the United States and South Africa on Agricultural Trade," press release, June 2015,

https://ustr.gov/about-us/policy-offices/press-office/press-releases/2015/june/joint-statement-united-states-and.

73

"U.S., South Africa Settle Longstanding Poultry Spat, Resolve SPS Issues," Inside U.S. Trade, June 5, 2015.

74

Office of Senator Johnny Isakson, "Isakson, Coons Announce Agreement to End South African Tariffs on American

Poultry," press release, June 5, 2015, http://www.isakson.senate.gov/public/index.cfm/news-releases?ID=55413ec1beed-4f19-8e4d-c90d2efe5c3fp; and Office of Senator Christopher Coons, "South Africa Agrees to End Tariffs on

Delaware Poultry," press release, June 8, 2015, http://www.coons.senate.gov/newsroom/releases/release/south-africaagrees-to-end-tariffs-on-delaware-poultry.

75

Kimberly Ann Elliott, Why Is Opening the U.S. Market to Poor Countries So Hard?, Center for Global

Development, January 2012.

76

Calculated duties according to U.S. ITC tariff and trade dataweb.

77

Brookings and United Nations Economic Commission for Africa, The African Growth and Opportunity Act: An

Empirical Analysis of the Possibilities Post-2015, July 2013, p. 17.

78

Antoine Bouet et al., The Costs and Benefits of Duty-Free, Quota-Free Market Access for Poor Countries: Who and

What Matters, Center for Global Development, Working Paper 206, March 2010.

79

Letter from Kimberly Elliott, Center for Global Development, to Michael Froman, USTR, June 24, 2013,

http://www.cgdev.org/publication/supporting-multilateralism-and-development-us-trade-policy-duty-free-quota-freemarket.

72

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

Proposed Renewal Legislation

Bills to renew the AGOA preference program (H.R. 1891/S. 1009) were introduced in the House

and Senate on April 17 and April 20.80 Key issues addressed in the bills include (1) a ten year

renewal of the overall program including the regional apparel article program and the thirdcountry fabric provision; (2) modifications to the rules of origin allowing for the “direct costs of

processing operations” to count toward a product’s required regional value content to qualify for

duty-free treatment; (3) changes to the eligibility review process administered by the President,

including a required 60-day notification to Congress before termination of preferential treatment

for beneficiary countries, a requirement to seek public comments and hold a public hearing on

eligibility reviews as well as establish a public petition process open at all times, authorization of

an out-of-cycle review process and a sense of Congress that the President should initiate such a

review of South Africa within 30 days of enactment, and the ability to withdrawal, suspend, or

limit preferential treatment rather than full termination; (4) sense of Congress that beneficiary

countries should develop utilization strategies together with U.S. trade capacity building

agencies; (5) policy statement to expand trade and investment by negotiating trade and

investment framework agreements (TIFAs), bilateral investment treaties (BITs), FTAs with

beneficiary countries and through accession to the World Trade Organization (WTO) agreements

for beneficiary countries; (6) a biennial report on U.S. trade and investment relations with the

region, eligibility status, regional integration efforts, and trade capacity building efforts; and (7) a

report one year after enactment and five years thereafter that discusses the status of negotiating

FTA’s with sub-Saharan African countries.

H.R. 1891 was reported by the House Committee on Ways and Means without amendment.81 The

Senate Finance Committee considered a related measure, S. 1267, which includes modifications

to the U.S. harmonized tariff schedule, in addition to the preference renewal language in S. 1009.

The Senate Finance Committee reported S. 1267 with two amendments, which would require the

President to initiate an out-of-cycle review of South Africa’s AGOA eligibility within 30 days and

would add language on “promoting the role of women in social, political, and economic

development” to AGOA’s eligibility criteria.82 On May 14, the Senate passed the provisions of S.

1267, by including them as an amendment in the nature of a substitute to H.R. 1295. On June 11,

the House passed with further amendment, the Senate amended version of H.R. 1295. The two

chambers must resolve the differences in the bill before it can be sent to the President and become

law.

80

For additional information on the bills, see http://waysandmeans.house.gov/news/documentsingle.aspx?

DocumentID=398333, and http://www.finance.senate.gov/imo/media/doc/FINAL%20Chairmans%20Mark%20%20Preferences.pdf.

81

H.Rept. 114-101.

82

S.Rept. 114-43.

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

Appendix. Sub-Saharan African Countries

Table A-1. AGOA and GSP Eligibility, U.S. Imports, and GSP/Capita, by Country

GSP

GSPLeast

Developed

AGOA

Benin

√

√

√

√

√

√

Botswana

√

Burkina Faso

√

Burundi

√

Cameroon

√

√

Cape Verde

√

√

Central African

Republic

√

√

Chad

√

√

√

Comoros

√

√

√

Democratic

Republic of Congo

√

√

Republic of Congo

√

√

Cote d’Ivoire

√

√

Djibouti

√

Country

Angola

AGOA

ThirdCountry

Fabric

Provision

U.S. Non-Energy

Imports under

AGOA/GSP*

(thousand $s, 2014)

GDP/Capita

($s, 2013)

6

5,783

√

65

805

√

√

9,460

7,315

√

√

√

41

684

√

√

4

267

√

12,990

3,767

√

338

1,329

√

NA

√

√

Equatorial Guinea

Eritrea

√

Ethiopia

√

Gabon

√

The Gambia

√

Ghana

√

Guinea

√

√

Guinea-Bissau

√

√

Kenya

√

Lesotho

√

Liberia

√

0

1,054

0

815

NA

√

√

√

√

√

333

484

933

3,167

70,460

1,529

562

1,668

NA

20,582

NA

544

40,989

505

29

11,571

52**

489

19,135

1,858

√

53

523

√

NA*

564

√

√

√

√

423,272

1,246

√

√

√

288,971

1,126

√

√

√

√

16

454

Madagascar

√

√

√

√

3,421

463

Malawi

√

√

√

√

60,031

226

Mali

√

√

√

158

715

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African Growth and Opportunity Act (AGOA): Background and Reauthorization

Mauritania

√

Mauritius

√

Mozambique

√

Namibia

√

Niger

√

Nigeria

√

Rwanda

√

Sao Tome and

Principe

√

Senegal

√

√

Seychelles

√

√

Sierra Leone

√

√

Somalia

√

√

South Africa

√

South Sudan

√

√

√

√

√

3

1,069

√

√

226,698

9,203

√

√

8,704

605

√

√

407

5,693

40

415

√

√

√

4,080

3,006

√

√

√

631

639

√

√

√

76

√

√

√

253

1,047

0

16,186

656

679

NA

NA

3,103,848

6,618

0**

√

Sudan

1,610

1,045

NA

1,753

77,175**

3,034

18,280

695

178

636

Swaziland

√

Tanzania

√

√

√

Togo

√

√

√

Uganda

√

√

√

√

1,506

572

Zambia

√

√

√

√

4,991

1,845

Zimbabwe

√

NA

953

√

Source: Analysis by CRS. Eligibility based on notes to the U.S. Harmonized Tariff Schedule published by the ITC

and presidential proclamations regarding AGOA eligibility. Trade data from the ITC and GDP data from the

World Bank’s World Development Indicators.

Notes: Import data based on imports for consumption. Import data is only listed for AGOA-eligible countries

(even if they remain eligible for GSP).

(*) Guinea-Bissau was ineligible for the AGOA preferences in 2014, but its eligibility has since been reinstated.

(**)South Sudan, Swaziland, and The Gambia’s eligibility was revoked, effective January 1, 2015.

Author Contact Information

(name redacted)

Analyst in International Trade and Finance

[redacted]@crs.loc.gov, 7-....

Congressional Research Service

22

African Growth and Opportunity Act (AGOA): Background and Reauthorization

Acknowledgments

Amber Wilhelm and Hannah Fisher provided assistance with the graphics for this report.

Congressional Research Service

23

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