Encouraging signs on AGOA renewal in Washington, but poultry debate presents a hurdle to be overcome

31Mar2015
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by Andrew Westbury and Zenia A. Lewis

With just months to go before the expiration of the African Growth and Opportunity Act (AGOA), discussions have been heating up in Washington, DC on how to proceed with a renewal. Policymakers in Africa and the US have indicated for years the importance of extending the legislation well before its September 2015 expiration, noting that orders of African goods in certain sectors, like textiles and apparel, must be made nine months in advance. Failing this, exporters could face both job losses and declining exports in the absence of having surety that the legislation would continue to exist. These timelines mean that ideally a vote on AGOA should have taken place before the December 2014 recess of Congress. However, the US mid-term election season prevented this from occurring. The next few weeks present a critical period during which billions of dollars of exports and hundreds of thousands of jobs hinge on Congress acting quickly. In this article we try to synthesize some of the recent developments and the key drivers that will shape the renewal process going forward.

 

Momentum gathering around AGOA

Recent events and discussions with African delegations in Washington DC demonstrate the extent to which the importance of AGOA’s timely renewal is on the radar of African countries and key players on Capitol Hill. In January, this blog reported that a high-level delegation of three African Ministers of Trade visited Washington accompanied by multiple African Ambassadors. The delegation met with 16 different members of Congress, the White House, US Trade Representative and the State Department to discuss AGOA’s renewal. Later that month, Representative Karen Bass hosted an event bringing together individuals from the Brookings Institution, the African Ambassadors Group, the US Chamber of Commerce – representing the US private sector, and a representative of AGOA exporting businesses to discuss the importance of renewal to an audience of over 200 people on Capitol Hill. In February, the African Union Deputy Commissioner, Erastus Mwencha and Fatima Haram Acyl, the African Union Commissioner for Trade and Industry, each visited Washington to discuss the importance of a renewal for regional development priorities. Commissioner Haram Acyl also used the opportunity of her visit to indicate new support to encourage better utilization of AGOA preferences on the part of African countries and continental organizations. The South African Embassy in Washington DC also recently hosted a high-level delegation from its Department of Trade and Industry, led by the country’s newly-appointed “AGOA special envoy” Faizel Ismail, focused on resolving trade issues, discussed below, related to AGOA.

The various delegations have been effective in driving home the urgency of securing AGOA’s timely renewal. Congressman Paul Ryan, Chairman of the House Committee on Ways and Means, commented at the beginning of the Committee’s hearing on the 2015 Trade Agenda that AGOA’s expeditious renewal was important, and has since noted his desire to move the legislation quickly and his recognition of the time sensitive nature of the bill and the large effects that Congress’ decisions will have on jobs in Africa and on US suppliers. Other Members of Congress have also indicated their interest in seeing legislation move forward, with strong advocates for the AGOA continuing to express support in bicameral and bipartisan fashion from multiple key committees.

 

Challenges and questions still remain

Despite clear interest to move forward, several key issues related to AGOA renewal remain unresolved and subject to ongoing deliberation and debate. For example, the means to best pass a renewal bill seems particularly unclear. The trade agenda at the US Congress has perhaps never been fuller. AGOA renewal is being discussed at the same time as the renewal of the Trade Promotion Authority (TPA), the Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), and the Generalized Systems of Preferences (GSP). Given this congested schedule, some analysts have pondered whether different trade programs might be folded into a more unified or omnibus bill, with specific speculation centered on whether AGOA might be combined with efforts to pass the Trade Promotion Authority.

This proposal is controversial, because many believe that AGOA should be evaluated on its own merits. Others contend that it could be an effective approach to combine issues given that the Obama Administration and key members of the Congressional leadership support TPA. However, there are other Members of Congress who oppose TPA and a new movement on the part of a bipartisan group of legislators has also cast serious doubt on the utility of this strategy for AGOA renewal. High-profile members of the US Congress – including Senators Carl Levin (D-MI) and Chuck Schumer (D-NY), among others – have indicated an ardent desire to leverage passage of the TPA as a means to force the US Government to toughen its stance against alleged international currency manipulators. Supporters of a more robust strategy against the perceived trend of currency manipulation have now seemingly pinned their hopes on the TPA, announcing last month concerted efforts to force such provisions into a potential bill. This eventuality will only add to the controversy surrounding the TPA and does not bode well for related efforts to pass AGOA.    

Another unresolved issue related to AGOA renewal is whether the legislation will include provisions – as desired by some of the AGOA beneficiaries – to address obstacles to increased trade, including lack of capacity, import restrictions, and the eligibility process for receiving AGOA preferences. A plethora of ideas have been proposed over the years, but it remains to be seen which will resonate at the US Congress. Some have even argued that AGOA should be passed in its original form to avoid controversy and other potential complications. This concern, however, has not stopped analysis on how to improve things. Last month, the release of the Government Accountability Office report on the effectiveness of eligibility provisions for the program, sparked a debate on whether and how inclusion in AGOA should be used to encourage the economic policy reforms that could lead to greater growth. Senior Fellow at the Center for Global Development Ben Leo criticized the GAO report and proposed options to enhance AGOA efforts to incentivize “market-friendly reforms”. Leo’s analysis prompted Brookings scholars Josh Meltzer and Witney Schneidman to publish a piece, arguing that Leo’s recommendations “would have a minimal effect of improving the business environment in Sub-Saharan countries and would reduce the opportunity that AGOA provides countries to grow their economies through trade”. Adding to the dialogue on AGOA enhancements, Josh Meltzer also published a new piece at the end of February focused on how to increase agricultural exports as a part of a renewed AGOA by addressing product eligibility and tariff rate quotas, and tasking the “Department of Agriculture with a specific role in helping AGOA-eligible countries meet US SPS standards”. Brookings Senior Fellow, Mwangi Kimenyi also wrote an article recently that promotes utilization of country export strategies, calls on the US Government to support productivity increases in AGOA-eligible countries and pushes for a different paradigm based on value-added exports in determining the success of AGOA.

Related to the above issues, there continues to be confusion about the resolution of the 15-year long dispute over US poultry exports to South Africa. US exporters contend that US exports of chicken to South Africa have been unable to access the South African market for more than a decade due to anti-dumping measures and health restrictions, while beef exports had been blocked for 12 years and pork exports for two years. South Africa imports almost US $500 million worth of these products from other countries. Meanwhile South Africa has concerns with the US over its own exports of citrus and avocados. Earlier this month a delegation comprising South African Government and poultry industry representatives travelled to Washington in a bid to resolve the impasse. Discussions are ongoing, and it is hoped that a solution will be found in the coming weeks.  

In the meantime, Senators Chris Coons (D-DE) and Johnnie Isakson (R-GA) – who represent the USA’s largest chicken-producing states – and have long and passionately advocated for AGOA. However, the poultry issue has complicated their stance. The latest evidence of this unexpected dynamic is the reported position that Isakson and Coons are advocating for a shorter renewal period for AGOA. On February 20, Inside U.S. Trade’s World Trade Report recounted that these Senators are pushing hard for a 5-year renewal, opposing efforts on the part of the Obama Administration to re-authorize the bill for a full 15 years, which would allow for the certainty and stability needed for long-term investment. Repercussions for AGOA apart from a shortened renewal period could also include delaying the introduction of an AGOA bill or eliminating South Africa’s AGOA preferences.

 

All eyes on Washington

The upcoming weeks will be critical. African countries, civil society and private sector stakeholders from the US and Africa are continuing their strong advocacy for expeditious renewal and working closely together to achieve this. While decisions on enhancements to the legislation continue to be a question and item of discussion, the poultry issue has suddenly become the most urgent item in terms of the renewal timeline because it is unlikely that Members of Congress will allow this point of leverage to be waived without some form of resolution. The progress of the bilateral negotiations between the relevant governments and private sectors on the poultry issue are very much in the spotlight, and it is hoped that this sticking point won’t delay or negatively impact this important trade preference for the continent.

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Author bios:

Andrew Westbury

Andrew Westbury is the associate director of the Africa Growth Initiative at Brookings. He has worked for more than 10 years on economic development in Sub-Saharan Africa, serving with small grassroots organizations, large international charities, the US private sector, and the United Nations.

Zenia A. Lewis is a US-Africa Trade and Investment Specialist working with the AfDB in Washington, DC. She has worked extensively on African trade and economic development issues with the AfDB, the Brookings Institution and within the private sector.


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