African Growth and Opportunity Act:

Lessons Learned from Other Countries' Trade Arrangements with Sub-Saharan Africa

GAO-15-393R: Published: Feb 25, 2015. Publicly Released: Feb 25, 2015.

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Contact:

Kimberly M. Gianopoulos
(202) 512-8612
GianopoulosK@gao.gov

 

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What GAO Found

In 2014, the White House proposed a strategy for investing in African trade. One part of the five-part strategy --Renew and Update the African Growth and Opportunity Act (AGOA) to Increase Market Access Opportunities for Africa--consisted of four specific recommendations:

  • Approve a long term extension of AGOA.
  • Expand AGOA's product coverage.
  • Improve rules of origin.
  • Update eligibility criteria and review processes.

GAO identified the following trade-offs associated with each of the proposed modifications, and insights derived from other developed countries' experiences.

  • Extending AGOA for a longer period of time reduces risk to investors, but it could also reduce U.S. flexibility in making changes to its trading arrangement with sub-Saharan African (SSA) countries. The EU, Canada, and Japan reauthorized their programs for a decade in conjunction with making major changes to their programs. Trade experts noted that under EU market access regulations, non-least developed countries in the African, Caribbean, and Pacific region that had previously benefited from one-way preferences must have converted to reciprocal trade agreements known as Economic Partnership Agreements by October 1, 2014, or revert to the EU's less generous GSP program if they were still eligible. The EU and Canada also lowered the income cut-off point for graduating countries. 
  • Increasing the number of products covered by AGOA could increase exports from AGOA countries to the United States, but U.S. domestic producers have expressed concern that the change could result in increased imports that could adversely impact U.S. industries. EU officials told GAO that EU agriculture industry representatives expressed concerns when the EU was contemplating expansion of preferences to cover previously excluded agriculture products under its Everything but Arms program. However, they said that the feared increase in imports did not materialize, largely because of a lack of capacity within African least developed countries to produce or export the quantity of the products that would have negatively impacted EU industries. 
  • Easing rules of origin could address African concerns that AGOA's rules of origin are complex and difficult to understand, but the change may also result in a greater likelihood that non-AGOA countries will profit from AGOA benefits. Canada and the EU have updated and revised their rules of origin, in an effort to make them easier for developing countries to understand and meet. For example, they have relaxed certain product-specific rules for the least developed country beneficiaries. 
  • Revising eligibility criteria could allow the United States to address the challenge of ensuring that preferences are focused on helping those countries that have the greatest need, but graduating countries from AGOA may negatively impact regional integration in SSA countries. Both the EU and Canada now systematically graduate countries from their trade preference programs. The EU and Canada took several preemptive steps to mitigate any disruptions caused by this change. For example, Canada will permit duty-free entry of apparel from graduated countries if they incorporate Canadian textiles.

Why GAO Did This Study

AGOA, a U.S. trade preference program, was signed into law in 2000 and offers eligible SSA countries the ability to export qualifying goods to the United States without import duties. AGOA is intended to promote free markets, stimulate economic development through export-led growth, and help integrate Africa into the global economy. The expiration of AGOA's authorization on September 30, 2015 provides Congress an opportunity to determine what, if any, changes may increase the program's effectiveness. GAO was asked to examine a range of issues relating to AGOA's effectiveness in promoting trade expansion and economic development, as well as factors affecting SSA trade with the United States and other countries. GAO addressed several of these issues, such as program eligibility requirements and reviews, in recent reports. This report examines how lessons learned from other countries' trade arrangements with SSA can clarify and provide insight into the trade-offs associated with making certain proposed modifications to AGOA.

For this review, GAO focuses on modifications the White House proposed in a 2014 fact sheet on renewing AGOA. GAO identified and reviewed documents and literature on AGOA and other countries' trade preference programs, trade agreements with AGOA countries, and SSA countries' participation in multilateral trade negotiations. In addition, GAO interviewed officials from the Departments of Agriculture, Commerce, State, and the Treasury; the Office of the U.S. Trade Representative; the U.S. International Trade Commission; and the U.S. Agency for International Development. GAO also conducted fieldwork in Geneva, Switzerland and Brussels, Belgium. GAO did not independently assess the other countries' trade preference programs and agreements with SSA countries. The information on those programs and agreements is based on interviews and both official government and secondary sources. The lessons learned discussed herein are based on the views of those GAO interviewed as well as selected academic literature.

What GAO Recommends

GAO is not making recommendations in this report.

For more information, contact Kimberly Gianopoulos at (202) 512-8612 or GianopoulosK@gao.gov

 

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