US Extends Agoa, South Africa’s Participation Hangs in Balance

Key Takeaways:

• The US House of Representatives has passed a Bill to renew the African Growth and Opportunity Act (Agoa) for three years, providing duty-free access to the US market for most exports from 32 eligible African countries.
• The Bill’s passage in the Senate is uncertain, and it is unclear whether South Africa will continue to qualify for Agoa.
• South Africa exported goods worth $3.244-billion to the US under Agoa in 2023, and thousands of jobs depend on the program in the country’s citrus sector.
• The US Trade Representative has raised doubts about South Africa’s continued participation in Agoa, and the country’s eligibility may be reviewed.
• Negotiations on tariffs between South Africa and the US are ongoing, with the US having imposed a 30% tariff on South African goods in August last year.

Introduction to Agoa and its Importance
The African Growth and Opportunity Act (Agoa) has been a crucial trade program for African countries, providing duty-free access to the US market for most exports from 32 eligible countries. The program, which was enacted in 2000, has been particularly vital for South Africa, Lesotho, and Madagascar. Recently, the US House of Representatives passed a Bill to renew Agoa for three years, which would extend the program until 31 December 2028. This move has been welcomed by South Africa’s Trade and Industry Minister, Parks Tau, who noted that the renewal would provide certainty and predictability for African and American businesses that rely on the program.

The Passage of the Agoa Extension Act
The Agoa Extension Act was approved by the House of Representatives by a vote of 340 to 54, and will now proceed to the Republican-controlled US Senate for consideration and approval. The Bill proposes to reinstate the preferential trade pact retroactively to 30 September, also reimbursing importers for duties they have paid in the interval. While the passage of the Bill in the House is a positive development, it is uncertain whether the Senate will pass the Bill, and whether South Africa will continue to qualify for Agoa. The US Trade Representative, Jamieson Greer, has raised doubts about South Africa’s continued participation in the program, and the country’s eligibility may be reviewed.

South Africa’s Agoa Fate Still Uncertain
The approval of the Agoa Extension Act by the House comes after it was passed by the House Ways and Means Committee last month. Ahead of its consideration, Greer confirmed that the Trump administration would agree to Agoa’s extension, albeit for only a year, which would give the administration and Congress time to reform it. Greer also said that he would be happy to consider removing South Africa from Agoa if Congress wanted that. The president of the trade policy consulting firm Manchester Trade, Stephen Lande, told Daily Maverick that when the Bill goes to the Senate, it is unlikely to pass as a standalone measure, and will probably be incorporated into a broader piece of legislation, such as the Budget Reconciliation Act.

Negotiations on Tariffs Continue
The US imposed a punitive 30% tariff on South African goods in August last year, which has had a significant impact on the country’s exports. The move followed months of work by South African officials to secure a trade deal with Washington to avert the tariffs. Daily Maverick previously reported that if Agoa was extended, the tariff on South African products would still apply, making Agoa superfluous unless South Africa can negotiate it down through bilateral talks. In an interview with Daily Maverick in September last year, Tau said he was "cautiously optimistic" that South Africa and the US would be able to strike a trade deal. The US Supreme Court was expected to issue a key ruling on the legality of Trump’s reciprocal tariffs, and Lande told Daily Maverick that if the Supreme Court ruled that the tariffs were invalid, the expectation was that the US would use a different law to enforce a baseline tariff of between 10 and 15%.

Conclusion and Future Prospects
In conclusion, the passage of the Agoa Extension Act by the US House of Representatives is a positive development for African countries, including South Africa. However, the uncertainty surrounding South Africa’s continued participation in the program and the ongoing negotiations on tariffs between the two countries mean that the future of Agoa and its benefits for South Africa remain uncertain. The ANC Secretary-General, Fikile Mbalula, welcomed the US House of Representatives’ vote in favor of extending South Africa’s participation in Agoa, noting that it was a step in the right direction and protected the country’s agricultural sector. As the Bill proceeds to the Senate, it is essential for South Africa to continue to engage with the US to ensure that its interests are protected and that the benefits of Agoa are maintained.