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The State of U.S. Trade in Sub-Saharan Africa

January 07, 2016
With President Obama’s visit to Kenya and Ethiopia in July, sub-Saharan Africa has been in the news recently. The greater region—often broken down into West Africa, Central Africa, East Africa, and Southern Africa—is making noticeable strides to become a viable player in the global economic arena. Just seventy years after the beginning of widespread decolonization, Africa is entering a new era.

by Harrison Newman, C’17

While South Africa has long been considered the largest economy in Africa, Nigeria made headlines in 2014 when it took the crown after updating national accounts for the first time in two decades–oil reserves, a budding tech hub, telecoms, banking, “Nollywood,” and a rapidly growing population greatly contributed to the significant economic increase. [1]. Additionally, a 2012 IMF report listing the twenty fastest growing economies globally, eight countries in the region were featured [2]. With opportunities abound, how has the United States postured itself to participate in the action?

[3] Countries in green are classified by the United Nations as sub-Saharan Africa; Sudan (light green) is sometimes categorized as North Africa.[3] Countries in green are classified by the United Nations as sub-Saharan Africa; Sudan (light green) is sometimes categorized as North Africa.

The African Growth and Opportunity Act

The most consequential piece of trade legislation between the U.S. and sub-Saharan Africa is the African Growth and Opportunity Act (AGOA), authorized by Congress in 2000. The act allows many African products to enter the United States duty-free. Currently, thirty-nine of the forty-nine candidate countries in the region are eligible for benefits under the AGOA. Nevertheless, imports from these countries comprise a mere 1% of total U.S. imports. Energy products (i.e. crude oil) are far and away the top AGOA import, accounting for 69% of total AGOA imports in 2014. In non-energy products, South Africa is the U.S.’s largest partner through the act, followed distantly by Kenya, Lesotho, Mauritius, and Swaziland [4]. Critics of the act have suggested that in the wake of economic growth in various countries in the region, the U.S. should instead seek reciprocal trade agreements.

 Following overwhelming bipartisan support in Congress, President Obama signed a ten-year AGOA extension in June; the act was originally set to expire in September [5]. The reauthorized AGOA gives the U.S. more control when dealing with potential problem nations. The president can now make an on-demand call for an assessment of a country’s eligibility in addition to yearly reviews [6].

While the AGOA is widely viewed in a positive light—Brookings estimates that full duty- and quota-free access to U.S. markets, a step further than the what the AGOA guarantees, would cost the U.S. less than $10 million while boosting African exports by $72.5 million[7]—there is an ultimate need to shift toward reciprocal trade agreements, a model that many European Union member states have successfully implemented. With the AGOA set to remain in effect until at least 2025, it appears that developments on that front will remain on the back burner for the time being.

Other Relevant Legislation

Additionally, the United States currently has eleven Trade and Investment Framework Agreements (TIFAs) with sub-Saharan African nations and groups of nations. Together, these TIFAs have helped create settings for representatives of the United States to meet with those of other nations to find areas of mutual interest with the ultimate goal of finding more opportunities in which to trade and invest on both sides. Such areas have included “market access issues, labor, the environment, protection and enforcement of intellectual property rights, and … capacity building”[8].

Balance of Trade

In a surprising turn of events considering historical precedent, the U.S. saw a modest trade surplus of $3.49 billion ($38.08 billion in exports and $34.59 billion in imports) with sub-Saharan Africa in 2014, a trend that is set to continue in 2015. This development follows significant trade deficits every year going back to 1997, the earliest year of available U.S. Census data on trade with Africa[9].

The Future

Despite the prevalence of the AGOA in all things trade between the U.S. and sub-Saharan Africa, American businesses have recently found success exporting various goods to growing markets in the region. Top export categories include machinery, vehicles, mineral fuel, agricultural products, and aircraft[10].

Perhaps the largest obstacle to increased U.S. trade relations with sub-Saharan Africa is a lack of political stability. Many military dictatorships in the region have maintained rule for years, yet does it make sense to consider these countries politically stable? The Arab Spring showed the world just how quickly tyrannical order, or at least what appears to be so from the outside, can break down. Even democratic nations with multi-party systems have been highly susceptible to violence and corruption come election and presidential transition time. The failed Burundian coup in May—in the midst of civil unrest surrounding President Pierre Nkurunziza’s announcement that he would seek a third term in office despite a constitutional two term limit, a decision ruled constitutional by the Burundian Constitutional Court amid threats to the justices—illustrates just the latest case. Furthermore, corruption even within legitimate governments usually runs unchecked in the region. Transparency International’s 2014 Corruption Perceptions index, which scores countries from 0 (highly corrupt) to 100 (very clean), lists only one country (Botswana) with a score above 60, and three more with scores above 50 (Cape Verde, Seychelles, and Mauritius)[11]. The U.S. will look to increase trade with sub-Saharan African nations as their economies grow, but the region as a whole must find a way to increase stability in order to take the next step to being a viable trading partner with the world.

 

References: 

  [1] “Africa’s New Number One.” economist.com. The Economist Newspaper Limited. April 12, 2014. Accessed August 6, 2015.

 

    [2] “Africa.” ustr.gov. Office of the United States Trade Representative. Accessed August 6, 2015.

[3] Credit: By Jcherlet: Jcherlet derivative work: Jcherlet (HDImap_spectrum2006_Africa.png) [Public domain], via Wikimedia Commons.

    [4] Williams, Brock. “African Growth and Opportunity Act (AGOA): Background and Reauthorization.” crs.gov. Congressional Research Service. April 22, 2015. Accessed August 6, 2015.

 

    [5] Kuhnhenn, Jim. “Obama Signs Trade (incl. AGOA), Worker Assistance Bills into Law.” agoa.info. African Growth and Opportunity Act. June 29, 2015. Accessed August 6, 2015.

 

    [6] Schneidman, Witney, and Andrew Westbury. “AGOA Moves Forward: Reviewing Last Week’s Reauthorization in the U.S. Senate.” brookings.edu. The Brookings Institution. May 20, 2015. Accessed August 6, 2015.

 

    [7] Ibid.

 

    [8] “Trade & Investment Framework Agreements.” ustr.gov. Office of the United States Trade Representative. Accessed August 6, 2015.

 

    [9] “Foreign Trade - Trade in Goods with Africa.” census.gov. United States Census Bureau. August 5, 2015. Accessed August 6, 2015.

 

    [10] “Africa.”

 

    [11] “Corruption Perceptions Index 2014: Results.” transparency.org. Transparency International. Accessed August 6, 2015.

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