Agoa: Navigating trade hurdles under 'America first' policy

As we stand on the precipice of significant changes in the US trade policy, the African Growth and Opportunity Act (Agoa) looms large on the frontline of international commerce.

Established in 2000 to promote US–African trade, Agoa has allowed eligible sub-Saharan African countries, including Kenya, to export goods duty-free.

This arrangement has been a lifeline for the Kenyan economy, particularly its apparel sector, which averages $500 million (Sh64 billion) in exports annually.

However, as the expiration of Agoa draws near in September this year, all eyes are on the potential impact of President Trump’s ‘America First’ policy and the shifting global trade landscape.

Under Trump’s administration, the prevailing doctrine has been ‘Reciprocity,’ a principle that prioritises American interests and has often translated into a more protectionist trade posture.

With the US Congress currently deliberating on extending Agoa for another 16 years, the future of this vital trade framework hangs in the balance.

Trade agreements

Given Trump’s history of prioritising direct trade agreements over blanket policies, there is a distinct possibility we may see Agoa abolished in favour of bilateral Free Trade Agreements (FTAs) that hinge on reciprocal trading relationships.

For Kenya, the implications of such a shift could be profound. The apparel industry is not just a significant export driver; it supports about 50,000 jobs, predominantly in low-tech and low-wage areas.

However, Kenya’s performance under Agoa tells a story of unrealised potential. Despite being ahead of many other African countries in terms of exports to the US, Kenya has utilised less than six out of the 6,000 tariff lines offered under Agoa.

This dismal utilisation underscores an alarming trend: much of the fabric used for apparel-making is imported from China. Consequently, even as the country excels in exporting finished garments, it remains heavily reliant on outside sources for raw materials.

The ongoing trade war between the US and China complicates the situation further. US tariffs are aimed squarely at Chinese products, including textiles, which have been significant sources for many African nations.

Should US manufacturers seek to reshuffle their supply chains, they could very well require at least three transformations of textile production: from cotton to ginning, fabric to apparel.

However, under the current structure, many Kenyan Export Processing Zones (EPZs) companies handle only one transformation—stitching.

This positions Kenya at a disadvantage, limiting its ability to fully integrate into a more resilient and diversified supply chain and complicating its export dynamics further.

Moreover, while Agoa was initially heralded as a sweetheart deal for Africa, it often served as a strategic manoeuvre by the US to foster its own economic interests.

The US has used this framework to enable the export of second-hand garments, chicken feet, and chicken drumsticks to African markets, which limits local industries’ growth and perpetuates a cycle of dependency.

Trump administration

No wonder President Biden’s Strategic Trade and Investment Programme (STIP) has prioritised the chicken value chain, further entrenching this reliance on American agricultural products.

As African nations navigate these complex trade waters under the Trump administration, they risk becoming consumers of second-hand clothes and poultry imports, rather than thriving producers and exporters.

This extractive posture can have significant implications for nations that dare to challenge the status quo. For instance, South Africa, which refused imports of US chicken drumsticks, faced expulsion from Agoa benefits.

Similarly, Rwanda’s rejection of secondhand clothing imports resulted in its removal from the programme. These instances underscore a stark reality: Agoa, despite its promotional rhetoric, is as much about advancing U.S. economic interests as it is about fostering development in Africa.

The trade war dynamics also create significant uncertainty for African economies.

An escalation of tariffs and trade barriers could lead to unintended consequences, potentially isolating African markets from American consumers who are increasingly price-sensitive.

Kenyan exports could further struggle in a market already grappling with the complexities of international demand.

In conclusion, as the expiration of Agoa approaches, Kenya’s economic future hangs in the balance.

The interplay between US trade policies, domestic priorities, and international relationships will shape the contours of this journey.

Kenyan policymakers must engage proactively with US stakeholders to clearly articulate the mutual benefits of continuing with Agoa.

This will position Kenya not as a competing nation but as a prosperous partner in America’s trade ecosystem.

The choices we make today will determine if the apparel industry thrives or merely survives, and it will shape the broader narrative for sustainable economic growth across the African continent. The time to act is now.

- The writer is a public policy expert and former CEO, Kenya Association of Manufacturers