What happens if Trump trashes the AGOA pact?

Donald Trump (ANI file photo)

The African Growth and Opportunity Act (AGOA), a trade agreement at the core of US economic policy on Africa, is soon set to expire.
The US Congress enacted the AGOA Trade Act in May 2000. The pact has been renewed several times, most recently in 2015, when Congress extended it to September 2025.
Since its implementation, AGOA has provided eligible sub-Saharan African countries with duty-free access to the US market for over 1,800 products.
However, trade decisions by the Trump administration, including the imposition of a universal 10% tariff on all countries, threaten the future of AGOA.
Tsonam Akpeloo, President of the Association of Ghana Industries, told DW that Trump’s move could result in people losing their jobs.
“One of our member companies producing fabrics and supplying them to the US market is employing over 5,000 people here in Ghana because of the AGOA, which has a ready market in the US,” Akpeloo said.
“If AGOA is no longer in place, that company will have to pay more taxes and it would mean that the people employed will be affected,” he added.
Trump has imposed steep tariffs on some member countries under AGOA, including Lesotho, with a 50% tariff slapped on the mountainous nation.
Although the tariff imposition is enjoying a 90-day freeze from Trump, experts across the continent are unsure about what lies ahead.

US-Africa trade relations

Between 2017 and 2020, the US was the third-largest destination for Africa’s industrial products after the European Union and intra-African trade, according to the London School of Economics.
Data from the World Economic Forum also suggests that sales from apparel in Kenya under AGOA grew from $55 million (€48 million) in 2001 to $603 million in 2022, accounting for nearly 68% of the country’s total exports to the US.
For these reasons, many fear that an end to AGOA may have a dire impact on the 32 countries trading under the agreement.
If Trump does not renew the pact, economists warn that short-term job losses, hikes in commodity prices and higher costs of doing business will harm African economies.

Is Africa prepared to negotiate with Trump?

“It’s like a big brother is doing you a favor and you have no room to negotiate,” Jane Nalunga, a Ugandan economist, told DW.
For many observers, Africa’s ability to hold a bargaining chip in trade negotiations with the United States is limited.
A area of possible agreement now, experts believe, is the continent’s rare earth minerals, which are of interest to Trump.
For Akpeloo, the continent must refocus on luxury products, such as ornaments and artifacts, which are currently not part of the products with preferential access to the US market.
He also strongly suggests that the continent negotiate an extension to the agreement and prepare measures to mitigate any fallout from its discontinuation.

Strategizing for the future

Economists believe it is better for Africa to negotiate as a collective rather than as individual countries, thereby strengthening the regional value chain.
Ghana’s Tsonam Akpeloo suggests leveraging platforms like the African Continental Free Trade Area (AfCFTA) as a key strategy for the continent’s economic future.
The AfCFTA is the world’s largest free trade area, both in terms of its geographical scope and the number of participating countries. It comprises 54 countries with a combined population of 1.3 billion and a GDP of about $3.4 trillion.
The World Bank projects that by 2025, the framework will lift nearly 30 million Africans out of extreme poverty and increase intra-African trade by 81% if it is implemented effectively.

Boosting intra-African trade

“What needs to be done in Africa now is for the leaders of Africa to begin to analyze and take major steps in favor of securing the continent. The first thing that readily comes to mind is intra-African trade,” Akpeloo said.
Jane Nalunga, Executive Director of the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI), called on Africa’s trade policymakers to return to the drawing board.
“Africa should put its house in order. The failure to do so will continuously shortchange the continent,” Nalunga told DW.
“If we don’t put our house in order, we are going to continue exporting raw commodities, raw materials in the same way so it comes back to us. Whether we get AGOA back or not, it doesn’t matter,” Jane added.

Criteria for joining AGOA

According to the Office of the United States Trade Representative, for any nation to join AGOA’s preferential export terms to the US, they must establish or make continual progress toward establishing a market-based economy.
Participating nations must also uphold the rule of law and embrace political pluralism. In addition, countries must remove barriers to US trade and investment, enact policies that help reduce poverty, fight corruption, and respect human rights.