Part V — Trade Series: AGOA & AfCFTA — Will the Next Two Decades of AGOA Be Like the Last Two?

As the African Growth and Opportunity Act enters its third decade, questions abound about its future trajectory and its interplay with the African Continental Free Trade Area. AGOA, enacted in 2000, has been pivotal in facilitating trade between the United States and Sub-Saharan Africa, granting duty-free access to the U.S. market for thousands of products. As AfCFTA seeks to create a single, integrated African market, the dynamics of AGOA's impact and relevance may shift — will the next two decades mirror the last two, or are significant changes on the horizon?

The Legacy of AGOA: Achievements and Challenges

Over two decades, AGOA has significantly expanded trade between the U.S. and Sub-Saharan Africa, facilitating billions of dollars in exports and supporting economic growth and job creation in eligible countries — particularly in textiles and apparel. Ethiopia's textile industry has thrived under AGOA, attracting foreign investment from brands like H&M and Levi's that leverage duty-free access.

The impact has not been uniform, however — benefits have concentrated in a few nations with the capacity to meet stringent requirements, notably South Africa, Kenya, and Nigeria, while others have struggled to maximize its potential due to structural and capacity constraints. ARISE IIP's initiatives in Benin and Togo show how smaller economies can leverage AGOA through special economic zones and industrial platforms.

AGOA has faced legitimate criticism over its limited scope and duration, stringent eligibility criteria, and lack of capacity-building support — periodic renewals have created uncertainty that affects long-term planning and investment. It has also functioned as a political tool: eligibility is not based solely on economic factors but on compliance with U.S. foreign policy objectives, leading to suspensions of Eswatini (2015, labor and political rights concerns), Zimbabwe (excluded since inception), Uganda (2023, anti-LGBTQ+ legislation), and Ethiopia (2022, conflict-related human rights concerns). Using AGOA as a political tool undermines its primary objective — for it to succeed on fair trade grounds, it should be insulated from political maneuvering.

AfCFTA: A Game Changer?

Launched in January 2021, AfCFTA aims to create the world's largest free trade area by connecting 54 African countries into a single market — boosting intra-African trade, promoting industrialization, and fostering economic diversification. The interaction with AGOA raises real questions: the two could complement each other, with AGOA's U.S. market access combined with AfCFTA's intra-African integration providing a dual pathway to global markets. But potential conflicts loom too — increased focus on intra-African trade might divert attention from AGOA, and AfCFTA's rules of origin could complicate compliance with AGOA's eligibility criteria.

The Future of AGOA

To remain relevant, AGOA may need significant reform: extending its duration for investor certainty, simplifying eligibility criteria, and enhancing capacity-building support. A coalition of African trade ministers and business leaders recently backed a bill for a 16-year renewal — seen as crucial for the stability long-term investments require and for aligning AGOA more effectively with AfCFTA's goals.

A key criticism has been AGOA's focus on raw material exports over value addition — Ghana's cocoa industry, traditionally exporting raw beans, could capture far more value by investing in processing facilities and exporting finished chocolate products. AGOA can also strengthen regional value chains by promoting cross-border investments and partnerships — textiles produced in one African country transformed into apparel in another, leveraging comparative advantages across regions.

Infrastructure, Capacity, and SME Support

The future success of both AGOA and AfCFTA depends heavily on digital and physical infrastructure — robust digital networks, e-commerce platforms, and digital payment systems facilitate trade, while roads, ports, and railways remain essential for the physical movement of goods. Standard Bank Group's TradeSuite solution, for example, gives African businesses the tools to navigate international trade complexity and capitalize on AGOA benefits.

Building institutional capacity within African governments and trade bodies is crucial to implementing trade policy effectively and negotiating agreements — organizations like AFI (Africa For Investors) emphasize improving the business environment and regulatory framework to attract and sustain investment. Specific programs supporting SMEs — access to finance, technical expertise, market information, export readiness programs — can enhance their ability to compete globally and meet the requirements of both AGOA and AfCFTA.

The next two decades of AGOA will not be a simple continuation of the past. By reforming and aligning AGOA with AfCFTA's objectives, investing in infrastructure, and supporting SMEs, African countries can create a synergistic trade environment that leverages the strengths of both initiatives — with collaboration between governments, the private sector, and international partners key to unlocking the continent's full potential.

Originally published on LinkedIn: https://www.linkedin.com/pulse/part-v-trade-series-agoa-afcfta-next-two-decades-like-akugri-fnuqe/