US senators drop plans to mandate immediate review of SA’s eligibility for Agoa

US senators from both parties have dropped plans for a legislative requirement that South Africa’s eligibility for the African Growth and Opportunity (Agoa) trade preference programme should immediately be reviewed.

An immediate “out-of-cycle” review for SA would have been mandated in the “Agoa Renewal Act of 2023” which Democratic Party Senator Chris Coons proposed last November, mainly to extend Agoa for a further 16 years when it expires next year.

The bipartisan Bill to extend Agoa until 2041, now also co-sponsored by strong SA critic Senator Jim Risch, the senior Republican on the foreign relations committee, and other influential senators, is about to be tabled, according to congressional sources.

They confirmed a Reuters report that the Bill had now dropped the specific reference to South Africa. But they cautioned that South Africa remained a concern to many senators because of its positions on foreign policy issues like Russia’s war against Ukraine and Israel’s war against Hamas. However, it was unnecessary to single out South Africa as the Bill already allows for out-of-cycle reviews of any eligible country.

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The sources also pointed out that in an election year, it was never likely that there would have been time for an out-of-cycle review of SA. 

Instead of focusing on SA, the drafters of the Bill took the approach of fixing Agoa to make it simpler, more predictable and more efficient. Countries would be reviewed for eligibility every other year — instead of annually, under the current statute.

But the US president and certain congressional leaders could review countries’ eligibility out of cycle at any point. Giving those congressional leaders — the chairpersons and senior opposition representatives on the foreign affairs and other relevant committees — the authority to order out-of-cycle reviews would represent a significant expansion of congressional power over Agoa. Congress may currently call for such reviews, but only the president may order them. 

However, if countries were found to be ineligible for the programme, the president would have the discretion to decide on a range of responses, from full termination of benefits to taking no action, according to the Reuters report. The current law obliges the president to terminate a country’s Agoa benefits if it is deemed ineligible.

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Agoa was extended in 2015 for 10 years, but Coons said last year when he proposed the new Bill that a longer extension was needed to give countries and investors more certainty.

“This long-term extension would provide businesses with the predictability needed to invest in sub-Saharan Africa at a time when many firms are looking to diversify their supply chains and reduce dependence on China,” Coons said.

“Increased investment by US businesses in sub-Saharan Africa supports regional economic growth and development and strengthens the United States’ position on the continent.”

The Bill would also increase predictability by dropping the requirement that an eligible country should be immediately graduated from Agoa when it attained high-income status. That has led to Mauritius moving in and out of Agoa as its economy grew or shrank.

The new Bill would only graduate a country if it remained in the high-income category for at least five years.

‘Course-corrective decision’

Agoa has significantly benefited SA exporters in certain sectors such as motor vehicles, fruit and wine. In 2022, SA exported about $3-billion to the US under the programme, which allows duty-free entry into the US for most goods.

Last year, the Biden administration kept SA in Agoa despite criticism of its stances on Russia and Ukraine and Israel and Hamas. Risch rebuked the administration for this decision and said Congress would have to take “course-corrective action”.

To help integrate Agoa with the African Continental Free Trade Agreement (AfCFTA), which is slowly coming on stream, Coons’ original Bill would have modified Agoa’s rules of origin to allow inputs from north African AfCFTA members to count toward the requirement that 35% of a product’s value must originate in the region.

“This change would help Agoa reinforce the AfCFTA’s promise to develop intra-African supply chains,” he said.  However, to participate in the expanded rules of origin, “North African countries would be required to meet Agoa’s eligibility requirements related to governance, human rights and foreign policy.”

It is not clear if this provision remains in the updated Bill. DM