Africa: AGOA Reauthorization Offers an Opportunity for Expanded Commitments to Development, Labor, and Climate in Sub-Saharan Africa

Congress faces a critical opportunity to support workers in the United States and Africa while diversifying supply chains and protecting the climate by authorizing a strengthened African Growth and Opportunity Act next year.

With the African Growth and Opportunity Act’s (AGOA) authorization set to lapse in 2025, it is now time for Congress to consider how to improve the preferential trade program in line with changes to economic conditions in Africa and the United States, the climate, and the needs of workers on both sides of the relationship. The world has changed a lot since AGOA’s enactment in 2000: Supply chains are more interconnected than ever; there is a far better understanding of the link between trade flows and the changing climate, as well as the importance of using trade to create decent work and sustain communities; and it’s become clear how important competition in Africa is to the competitiveness of the United States vis-a-vis nonmarket competitors such as China.

Congress should therefore consider how best to align AGOA with the needs and realities of the 21st century when it undertakes reauthorization—and that different and better outcomes from AGOA will require more than just a simple reauthorization.

In other words, AGOA has the potential to be an important source of good for both the United States and African beneficiary countries. But reaching this potential means addressing several failings, including low utilization, the dominance of fossil fuels among goods traded under AGOA, and a lack of environmental and climate standards. And this, in turn, will almost certainly require direct investment in African productive capacity, infrastructure, and communities, as well as in the U.S. government personnel needed to help American manufacturers partner with new AGOA-eligible suppliers to fuel production in the United States.

Low utilization among some countries and dominance among others

As of June 2024, 32 countries are beneficiaries of the AGOA trade program. However, utilization rates—the percentage of an AGOA beneficiary’s exports to the United States that are made under AGOA versus their total exports to the United States—vary significantly. Countries such as Kenya and Lesotho boast exceptionally high utilization rates, with 57 percent of Kenya’s exports and 74 percent of Lesotho’s exports to the U.S. market in 2023 qualifying for zero-tariffs treatment.

On the other hand, AGOA beneficiaries average a utilization rate for nonoil and gas items, such as textiles, metals, and agricultural products, of just slightly more than 20 percent, meaning that many have even lower utilization rates. This lopsided utilization means that even though AGOA utilization overall has grown, its benefits are not widespread. Kenya’s and Lesotho’s high utilization rates are almost entirely driven by the textile and apparel industries, with 88 percent and 99 percent ,  respectively, of the countries’ AGOA exports being apparel products. Similarly, manufacturing has grown to 53 percent of nonpetroleum AGOA imports, but this balance is dominated by South Africa’s auto sector. Most AGOA beneficiaries struggle to produce goods eligible for the preferential tariffs, which keeps utilization rates low and limits the program’s potential.

Several AGOA-eligible markets are also able to export duty-free to China, meaning that any commercial advantage offered by AGOA is frequently overtaken by market dynamics that can favor selling from Africa to China, instead of the United States.

This shortfall is compounded by a lack of U.S. personnel capacity. The U.S. Department of Commerce currently maintains a limited Foreign Commercial Service (FCS) presence in sub-Saharan Africa—perhaps with no more than a dozen officers covering a land area large enough to fit the United States, China, India, and others with room to spare, as well as an economy that has the potential to be one of the world’s largest in the coming decades. What is more, the FCS staff who are stationed in the region are tasked with promoting American exports to Africa and with attracting foreign direct investment from Africa into the United States—neither of which fulfills the mission of AGOA. The U.S. International Development Finance Corp. (DFC), U.S. Agency for International Development, and U.S. Trade and Development Agency all face similar staffing shortages in Africa, no doubt limiting the value that these agencies can provide to African suppliers looking to use AGOA, or American manufacturers looking to import from the continent. As a result, potential African exporters often find it difficult to find the expertise or counsel necessary to benefit fully from AGOA’s duty-free access to the U.S. market.

Moreover, several AGOA-eligible markets are also able to export duty-free to China, meaning that any commercial advantage offered by AGOA is frequently overtaken by market dynamics that can favor selling from Africa to China, instead of the United States.

Eliminating oil and gas dominance

AGOA’s uneven utilization extends beyond exporting nations, to sectors as well. Since the program’s inception, crude oil and other oil and gas products have been the largest category of goods traded under AGOA. In 2023, crude alone accounted for $4.2 billion of a total $9.7 billion of imports under AGOA, chiefly from Nigeria, Ghana, Angola, and the Republic of Congo. This concentration poses several concerns relative to AGOA’s policy aims. Around the world, oil and gas products generally receive low- or zero-tariff treatment and are traded in a highly open global market, meaning that the additional economic value AGOA has created for African economies trading in these products is marginal. For example, the United States imposes a tariff of around 5 cents per barrel on crude oil from trading partners with which it does not have a free trade agreement, excepting Russia, Cuba, and North Korea; the European Union imposes no tariff at all.

Furthermore, the oil and gas sector tends to be dominated by large state-owned firms or multinational corporations, often limiting the value of AGOA for the types of communities where development is so needed and instead entrenching power dynamics that further align the fortunes of political leaders and carbon-intensive, extractive industries. Broadening the benefits of AGOA to workers and a wider set of communities means breaking the historic dominance of petrodollars in AGOA trade so that the program can help Africa secure an equitable share of growth in climate-aligned sectors and create decent work for millions of future workers.

Oil and gas dominance of the United States’ flagship trade program with the African continent is also eminently at odds with global climate goals. If the world is to have a chance of limiting global warming to 1.5 degrees Celsius, the widespread extraction, trade, and consumption of fossil fuels must end.

Fortunately, the timing is right, since the opportunity for Congress to not only reauthorize but supercharge AGOA is occurring at a moment when advanced economies are investing hundreds of billions of dollars into their domestic clean energy industries, creating new pathways for Africa to utilize its natural resources and workforce to meet the needs of the global markets. Congress should therefore remove oil and gas products from AGOA duty-free access.

Driving high standards growth

For AGOA to reach its potential, its labor provisions must be updated, including adding employment discrimination, which is already a fundamental labor right, according to the International Labour Organization. Put simply, an AGOA that is focused only on increasing the value of trade flows, and not more specifically on employment, will fail to fully deliver the lasting benefits the arrangement could provide to the economic and national well-being of both sides. For example, Congress should strengthen AGOA’s rules-of-origin requirements to ensure that the benefits of AGOA accrue to Africa and the United States—and not a third party, which might use Africa as a transshipment point. Balancing this goal without undermining utilization rates will be critical, but so too is the goal of making AGOA a driver of decent work on the continent and in the United States.

A similar situation exists in regards to environmental standards, which Congress must prioritize in any future trade relationship, including the United States’ relationship with sub-Saharan Africa. Currently, AGOA does not include an environmental provision in its eligibility criteria. That must change.

At a moment when the international community is searching for new pathways to drive emissions reductions following a concerning global stocktake at COP28 in Dubai, a more climate-aligned AGOA could be a force for positive change and provide a meaningful safeguard against environmental backsliding—just as AGOA’s standards related to the rule of law, corruption, and free markets have forestalled backsliding on these topics over the last few decades.

A more climate-aligned AGOA could be a force for positive change and provide a meaningful safeguard against environmental backsliding

Facilitating AGOA utilization plans

The value of these high standards will be limited if sub-Saharan African countries do not fully utilize the act. To address utilization challenges, 16 of the 32 AGOA beneficiary countries have published national strategies for utilizing AGOA. Countries such as Botswana, Ghana, Kenya, Eswatini, Lesotho, and others that have begun to implement national utilization strategies have seen their exports under AGOA increase significantly. Zambia, for example, introduced a utilization strategy in March 2016 and saw an increase of more than 3,000 percent by 2019, mainly in semiprecious stones, pearls, and copper. Developing and implementing utilization strategies will help countries target and clarify policies to lead a path forward for increased attention to AGOA and the U.S.-Africa relationship.

To facilitate the development of these plans, Congress should appropriate development funds to help all AGOA-eligible countries develop utilization plans that can increase employment and facilitate exports to the United States. This must be done with a particular emphasis on using AGOA to export goods that would support the needs of U.S.-based manufacturers, further building on the idea that AGOA should benefit workers on both sides of the relationship.

Investing in AGOA beneficiaries

Moreover, AGOA will simply not reach its full potential as a job creator—either in Africa or the United States—without pairing the duty-free access to the U.S. market that AGOA traditionally provides with real investment in developing African industries and in funding the personnel necessary to help American importers identify and develop new African supply chain partners. For example, African critical mineral producers could play an important role in supplying U.S. manufacturers of electric vehicles, semiconductors, and other key industries of the future, but this will take far more than tariff-free access to the U.S. market. African critical mineral deposits are often mined by Chinese companies ,  and most are sent to China for processing after extraction, reducing local value add and contributing to excessive supply chain concentration.

If policymakers want a different outcome—and presumably, from an economic and national security perspective, they do—then clearly additional investments coupled explicitly with stronger requirements are necessary. This almost certainly starts by 1) increasing investments in African mining and processing capabilities, through entities such as the DFC or the Export-Import Bank of the United States, and then 2) ensuring that U.S. taxpayer-funded investments include clear and enforceable standards for workers’ and environmental sustainability, as well as a requirement that any mineral or material that benefits from AGOA is mined and processed in Africa.

To do this, the United States should look to AGOA as an opportunity to demonstrate the type of modern, impactful standards that trade with the United States should entail. Paired with meaningful new investment, the United States could include standards or targets for industrywide decarbonization; high standards for mineral extraction, processing, and recycling; and a commitment to address China’s overcapacity in sectors such as steel and aluminum. In certain high-risk sectors, once a country meets the eligibility criteria, it may make sense to develop a facility-specific enforcement mechanism built around additional standards related to wages, safe working conditions, environmental and climate sustainability, and collective bargaining.

Decarbonizing heavy industry

Climate sustainability through emissions reductions must necessarily be an important consideration in the program’s future. A robust AGOA legislative package should include provisions that incentivize decarbonization of industry on the continent.

The build-out of African economies and industries will require exponentially more basic materials—namely iron, steel, and cement. The most functional situation for high-value development would be for these materials to be developed and produced on the continent, building up national and regional hubs of material deployment. The emissions of this activity, however, would be considerable. The emissions associated with African manufacturing—of which cement is the largest share and iron and steel are in the top four—currently represent 30 percent to 40 percent of Africa’s total greenhouse gas emissions. If growth were to double—following even a business-as-usual trajectory—then emissions would follow suit and also double, in a critically unsustainable fashion.

Direct U.S. support for cleaner manufacturing processes—such as LC3 technology for cement and green hydrogen-based direct reduced iron—can set development on a climate-conscious pathway and establish major manufacturing hubs on and for the continent. This would require the DFC and other financing institutions to prioritize clean manufacturing, alongside—as said above—standards established in a renewed AGOA, prioritizing a pathway to decarbonizing heavy industry.

Expanding engagement and technical assistance to boost impact

Ensuring AGOA utilization, investing in African industries, and ensuring that high standards are met will require on-the-ground engagement. Congress should fund a significant expansion of the FCS footprint in sub-Saharan Africa—and then tasking new on-the-ground staff with helping African exporters utilize AGOA and U.S. manufacturers with finding new supply chain partners in Africa. While this will require a legislative change to the mandate of the FCS, it would position FCS officers in a role far more reflective of the needs of the U.S. industrial base and U.S. competitiveness more broadly.

In total, a reauthorization of AGOA alongside a multibillion appropriation to support additional DFC investments in sub-Saharan Africa, as well as a significant increase in the number of FCS staff in the region, would send a strong message to the United States’ African partners and U.S. industry that AGOA remains an important part of the nation’s economic and foreign policy toolkit—and a mechanism that can deliver positive results for the climate and workers in both the United States and Africa.

Conclusion

AGOA is a relatively unique program. It dates from a time of peak neoliberalism, when increasing trade was largely the goal in and of itself. In today’s hypercompetitive, interconnected, digitally enabled, and climate change world, the opportunity provided by AGOA still exists, but achieving it will take more than simply reauthorizing the law unchanged. If Congress wants a different, better outcome from AGOA—whether in terms of utilization rates, trade flows, employment, competition with China, or decarbonization—then reauthorization must be paired with more action. This certainly includes higher standards, but also investment in Africa’s productive capacity and the personnel needed to maximize the benefits that AGOA can accrue to workers and communities on both sides of the relationship.

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What is AGOA?

The African Growth and Opportunity Act is a key pillar of the United States’ bilateral relationship with the African continent. First enacted in 2000, AGOA was last reauthorized in 2015 by the Trade Preferences Extension Act.

The law provides eligible sub-Saharan African countries with duty-free access to the U.S. market for more than 1,800 products, with the aim of spurring economic development, safeguarding labor and human rights, and deepening U.S.-Africa economic ties. The U.S. trade representative is responsible for issuing biennial reports to Congress on implementation of the act; the law also requires that an annual forum be held between participating nations.

AUTHORS
Ryan Mulholland
Senior Fellow, International Economic Policy
Doug Molof
Director
Leo Banks
Research Associate
Anne Griffin
Senior Fellow
Sadhana Mandala
Research Assistant
Trevor Sutton
Senior Fellow
Mike Williams
Senior Fellow
Kalina Gibson
Research Assistant, International Climate Policy