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Friday, August 10, 2012

U.S. Trade and Investment Relations with sub-Saharan Africa and the African Growth and Opportunity Act

Vivian C. Jones
Specialist in International Trade and Finance

Brock R. Williams
Analyst in International Trade and Finance

Following the end of the apartheid era in South Africa in the early 1990s, the United States sought to increase economic relations with sub-Saharan Africa (SSA). President Clinton instituted several measures that dealt with investment, debt relief, and trade. Congress passed legislation that required the President to develop a trade and development policy for Africa.

Between 1960 and 1973, Africa’s economic growth was relatively strong, followed by a period of stagnation and decline for the subsequent two decades in many SSA countries. Current perspectives, however, indicate that many of the fastest-growing countries in the world are on the African continent, and the International Monetary Fund (IMF) projects that the SSA region will grow in terms of real GDP by 5.4% in 2012 and 5.3% in 2013.

In 2000, Congress approved new U.S. trade and investment legislation for SSA in the African Growth and Opportunity Act (AGOA; Title I, P.L. 106-200). According to U.S. trade statistics, U.S. trade with SSA has comprised 1% to 2% of U.S. total trade with the world. AGOA extends preferential treatment to U.S. imports from eligible countries that are pursuing market reform measures. Data show that U.S. imports under AGOA are mostly energy products, but imports of other products have grown significantly. AGOA mandated that U.S. officials meet regularly with their counterparts in sub-Saharan Africa, and 11 of these meetings have been held to date. The 11th AGOA Forum was held from June 14 to June 15, 2012, in Washington, DC.

AGOA also directed the President to provide U.S. government technical assistance and trade capacity support to AGOA beneficiary countries. Government agencies that have roles in this effort include the U.S. Agency for International Development, the Assistant U.S. Trade Representative for Africa (established by statute under AGOA), the Overseas Private Investment Corporation, the Export-Import Bank, the U.S. and Foreign Commercial Service, and the Trade and Development Agency. In AGOA, Congress declared that free-trade agreements should be negotiated, where feasible, with interested sub-Saharan African countries. Related to this provision, negotiations on a free-trade agreement with the Southern African Customs Union (SACU), which includes South Africa and four other countries, began in June 2003, but were suspended in April 2006.

Several topics may be important to the 112th Congress in the oversight of AGOA and in potential legislation amending the act. First, an AGOA provision allowing apparel made in lesserdeveloped countries to be made of yarns and fabrics from any country, subject to a cap, expires on September 30, 2012. S. 3326 and its companion in the House, H.R. 5986, in part, seek to amend AGOA to extend this provision, and to add South Sudan to the list of countries eligible for AGOA benefits. This bill was reported out of the Senate Finance Committee on July 18, 2012. Other bills seeking to do this included H.R. 2493 and S. 2007. Second, H.R. 4221 and S. 2215 seek to increase U.S. exports to Africa, in part, through strategies aimed at developing relationships between the United States and African countries on a government-to-government level, as well as fostering private sector U.S.-African ties. Third, H.R. 656 would create at the State Department a Special Representative for United States-Africa Trade, Development, and Diaspora Affairs that would also promote U.S. trade and investment with Africa.

Date of Report: August 2, 2012
Number of Pages: 45
Order Number: RL31772
Price: $29.95

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