Resuscitation of Agoa gets few cheers in SA

Very few champagne corks popped in South Africa, probably, when US President Donald Trump signed legislation on Tuesday to revive and extend the African Growth and Opportunity Act (Agoa) for a year.

The tariff-free entry into the US market, which Agoa has given for several African products over the past quarter century, has been a great boon to many South African exporters, particularly of automobiles, fruit and wine. But so much has changed since Trump entered the White House last year that the benefits have largely evaporated, some analysts say.

Agoa expired on 30 September last year, and many thought it was dead. But then the US Congress introduced legislation to resuscitate it. First, they tried to extend it by three years, but the White House would only agree to a one-year extension. So legislation for an extension until the end of 2026, backdated to 30 September last year, was tacked on to a wider Bill to keep the US government funded and passed on Tuesday. Trump immediately signed it into law – because of the urgency of keeping government ticking over, not because of Agoa.

The reasons for a rather muted response in SA are several, the main one being that the punitive 30% duties which Trump slapped on SA last year, among the global 2 April (“Liberation Day”) “reciprocal” tariffs, or the 25% he applied to vehicle imports, greatly override Agoa benefits.

Then there is the lurking suspicion that Trump could, in any case, explicitly exclude SA from the revived Agoa by presidential decree or by ordering an “out of cycle review” (as provided for in the Agoa legislation) of SA’s eligibility to enjoy Agoa benefits. The long list of grievances which Trump feels against SA, mostly unrelated to trade, strongly suggests it would not pass such a review.

‘Stop-gap measure’

However, Eckard Naumann, independent economist and associate of Stellenbosch’s Trade Law Centre (Tralac), said the renewal of Agoa was “obviously a relief, more so in that it signals a willingness to again entertain non-reciprocal trade preference programmes rather than being of too much value at this point. Renewal to the end of this year, backdated to when Agoa expired end September last year, offers some duty relief for goods already entered into the US since the expiry, but also preferential access for the remainder of the year.

“Of course, this short-term renewal on its own won’t result in any new investment by African businesses or any longer-term planning by US businesses sourcing from Africa. It’s a stop-gap measure at best.”

But Donald MacKay, director of XA Global Trade Advisers, told Daily Maverick, “I think it’s a bit of a non-event. I’m firstly quite surprised that Trump didn’t bring out his fat koki and delete South Africa out of Agoa. “

“And remember, the Agoa benefits only affect the MFN (Most Favoured Nation) rate, so that is a rate of duty before the ‘Liberation Day’ tariffs were applied, the 30%.” He added that Agoa also would not override the so-called “section 232” tariffs, which Trump also imposed on a range of products from all over the world, including cars, steel, copper, aluminium and pharmaceuticals.

“And so for companies like Mercedes-Benz, (which enjoyed good sales to the US through Agoa), the problem doesn’t really now disappear. Having said that, the MFN rate, which underpins this, averages out at 3.5%, so it’s certainly better to pay 26.5% than 30%, or 30% instead of 33.5%, but this does not really shift the needle. The Liberation Day tariffs are far bigger than what this would be, so I don't really think it means anything.

Precious metals, agricultural products exempt

MacKay added that, on the other hand, many exports of SA precious metals to the US were already exempt from import tariffs, as were many agricultural products such as citrus and macadamia nuts.

He said winemakers, who had enjoyed duty-free entry to the US market under Agoa, might gain marginally from its revival. But when one considered that SA’s 30% reciprocal trade tariffs were so much higher than those of competing wine-exporting countries such as Chile or Peru, which had rates of around only 15%, Agoa would not make a real difference.

Other analysts have pointed out that if SA could persuade the US to reduce that 30% import tariff to no more than 15%, Agoa could make SA exporters competitive with the likes of Chile or Peru.

SA’s Minister of Trade, Industry and Competition Parks Tau said this week that, “The Agoa extension comes at a time when South Africa continues to engage constructively with the United States on an Agreement on Reciprocal Tariffs (ART), which seeks to reduce the 30% tariff imposed by the US on goods exported from South Africa.

“We continue to engage constructively with the US administration and believe that a healthy trade relationship benefits both our countries”, Tau said in a statement responding to the US Senate passing the Agoa extension – before it was also passed by the House of Representatives and signed into law by Trump.

“This extension will provide some relief to South African products exported under the scheme,” Tau said. “We are, however, concerned by the short nature of the extension, and we hope the United States will use this opportunity provided by the short extension towards a programme that will provide certainty around investment and purchasing decisions. Agoa was designed to promote export diversification and encourage investment.”

The US Trade Representative Jamieson Greer stressed that the one-year extension was essentially an opportunity to reform Agoa.

“Agoa for the 21st century must demand more from our trading partners and yield more market access for US businesses, farmers and ranchers to build upon the benefits it has historically provided to Africa and the United States,” he said in a comment on the enactment of the Agoa extension

“We must also make sure that the programme enhances US-Africa trade and will work with Congress over the next year to modernise the programme to align with President Trump’s America First Trade Policy.”

Critical minerals

Naumann said “there are also indications that there is some serious intellectual interest in both the House and Senate about modernising Agoa and setting up something more long-term. In the meantime, there’s a real urgency on bedding down something on critical minerals, including with South Africa, so this to some extent gets Africa more into focus again in a positive way and may just add momentum to a new, updated and longer-term Agoa renewal this year. “

However, he said that 2026 was likely to be an unpredictable year with midterm congressional elections in November, but added that “perhaps this is an opportunity to get some substantive things done that reflect positively on lawmakers from both parties in Congress”.

US trade expert Stephen Lande, president of Manchester Trade, agreed with Tau, Naumann and others that the one-year extension of Agoa did not provide much security for potential new investors in Africa (who needed a guarantee of longer duty-free entry into the US of their product. The last time Agoa was extended, in 2015, was for 10 years.)

“But on the other hand… this is a real resurrection of a Bill that 95% of observers said was dead less than two months ago. So that to me is a miracle. “

But Lande said African countries and other supporters of Agoa now had to roll up their sleeves and negotiate reforms to Agoa to make it acceptable to the Trump administration. These would probably need to include providing reciprocal duty free access for some US imports and giving the US access to critical minerals.

Greer also stressed this point in his response to the passage of the Agoa extension.

“Agoa for the 21st century must demand more from our trading partners and yield more market access for US businesses, farmers, and ranchers to build upon the benefits it has historically provided to Africa and the United States.

“We must also make sure that the programme enhances US-Africa trade and will work with Congress over the next year to modernise the programme to align with President Trump’s America First Trade Policy.” DM