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Wednesday, February 17, 2010

U.S. Trade and Investment Relationship with Sub-Saharan Africa: The African Growth and Opportunity Act

Vivian C. Jones
Specialist in International Trade and Finance

Following the end of the apartheid era in South Africa in the early 1990s, the United States sought to increase economic relations with Sub-Saharan Africa. President Clinton instituted several measures that dealt with investment, debt relief, and trade. Congress required the President to develop a trade and development policy for Africa. 

The economic challenges facing Africa today are serious. Unlike the period from 1960 to 1973, when economic growth in Sub-Saharan Africa was relatively strong, since 1973 the countries of Sub-Saharan Africa have grown at rates well below other developing countries. There are some signs of improvement, but problems such as HIV/AIDS and the debt burden are constraining African economic growth. The global economic crisis and its aftermath have also profoundly affected the region. 

In May 2000, Congress approved a new U.S. trade and investment policy for Sub-Saharan Africa in the African Growth and Opportunity Act (AGOA; Title I, P.L. 106-200). U.S. trade with and investment in Sub-Saharan Africa have comprised only 1%-2% of U.S. totals for the world. AGOA extends preferential treatment to imports from eligible countries that are pursuing market reform measures. Data show that U.S. imports under AGOA are mostly energy products, but imports to date of other products have grown. AGOA mandated that U.S. officials meet regularly with their counterparts in Sub-Saharan Africa, and six of these meetings have been held. 

AGOA also directed the President to provide U.S. government technical assistance and trade capacity support to AGOA beneficiary countries. Government agencies that have roles in this effort include the U.S. Agency for International Development, the Assistant U.S. Trade Representative for Africa (established by statute under AGOA), the Overseas Private Investment Corporation, the Export-Import Bank, the U.S. and Foreign Commercial Service, and the Trade and Development Agency. In addition to bilateral programs, the United States is a member of several multilateral institutions that provide trade capacity building. 

In AGOA, Congress declared that free-trade agreements should be negotiated, where feasible, with interested Sub-Saharan African countries. Related to this provision, negotiations on a freetrade agreement with the Southern African Customs Union, which includes South Africa and four other countries, began in June 2003, but were suspended in April 2006. 

Several topics may be important to the 111th Congress in the oversight of AGOA and in potential legislation amending the act. First, S. 1141 (Feinstein, introduced May 21, 2009, the TRADE Act of 2009) seeks to establish a trade preference program for least-developed countries such as Afghanistan, Bangladesh, and Yemen. Second, an emerging area of concern for Sub-Saharan African countries is growing interest in Congress over reforming trade preference programs by combining existing programs, some of which are due to expire at the end of 2010, into a unified package. H.R. 4101 (McDermott, introduced November 18, 2009) proposes such an approach. Some African leaders have expressed concern that a preference program giving trade benefits similar to those enjoyed by AGOA countries, or creating one trade preference program for all developing countries, would lead to erosion of the preferences granted to African countries under AGOA, and place them in direct competition for U.S. market share and investment with other developing and least-developed countries such as Bangladesh and Cambodia. 

Date of Report: February 4, 2010
Number of Pages: 35
Order Number: RL31772
Price: $29.95

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