How Uganda Agoa ban will impact East Africa

The United States is pitching a new kind of Africa Growth Opportunity Act (Agoa) trading arrangements with the continent, even as it signals further lockout for those it considers errant.

The new extension, if approved by the Congress, may not be good news for Uganda, Central Africa Republic and Gabon, who could all face job losses, drop in foreign exchange earnings, low utilisation of local raw materials, and slow value chain build-up across many sectors including with neighbours, experts warned this week. 

At the close of the 20th Agoa Forum in Johannesburg, South Africa on Saturday, American officials spoke of Agoa importance in fighting poverty in Africa. But they also spoke of intent to tailor it to existing challenges. 

“A lot of what we discussed over the last three days was precisely on this topic. Making the program more effective and relevant to today’s challenges, like growing inequality and the climate crisis. Improving usage by smaller African economies so they too can share in the benefits,” said Katherine Tai, the US Trade Representative, in Johannesburg at the closing ceremony on November 4. 

“And as we discussed during the session on 'What’s Next in our US-Africa Trade Relations', we must also explore additional areas of cooperation and other trade tools to complement our Agoa relationship.

The US wants trade to craft a fairer and more equitable future for Africa; driving inclusive economic growth. But it will come with stricter strings attached. Workers will have to be empowered, and all people will be involved without discrimination. Which is why those with laws that sound isolationist will be excluded.

Ahead of the meeting, US President Joe Biden handed down two decisions: requesting the Congress to strike out Uganda and other peers for violations, and asked legislators to extend the law that has been in place since 2000.

Biden said he wants the law “modernised”, probably upgraded to remove certain weaknesses.

“I strongly support re-authorisation of the African Growth and Opportunity Act — a landmark, bipartisan law that has formed a bedrock for US trade with sub-Saharan Africa for more than two decades. Agoa is facilitating private sector-led economic growth across sub-Saharan Africa by increasing the competitiveness of African products, diversifying African exports, and enabling the creation of tens of thousands of new, quality jobs in Africa. The benefits are felt on both sides of the Atlantic,” he said, noting that Agoa is a key point of relations with Africa.

At the meeting in South Africa, Washington sent a strong delegation led by US trade representative Katherine Tai, her deputy for African affairs Constance Hamilton, Deputy secretary of commerce Don Graves and commerce deputy assistant secretary for the Middle East and Africa Thomas Bruns.

It also included US Export-Import Bank (Exim) president and chair of the board of directors, Reta Jo Lewis; US Department of Agriculture (Usda) foreign agricultural service administrator, Daniel Whitley; United States Agency for International Development (Usaid) assistant administrator for Africa, Monde Muyangwa, and Prosper Africa coordinator, British Robinson; Deputy assistant secretary of the treasury for Africa and the Middle East, Eric Meyer; and National Security Council (NSC) senior director for African affairs, Judd Devermont.

“Agoa is a cornerstone of the US trade relationship with Africa,” said US Sectary of State Antony Blinken.

“At this forum, the United States looks forward to constructive dialogue with African partners in government, the private sector, trade unions, and civil society about Agoa’s s strategic value and impact.”

The extension of the deal won’t be celebrated in Kampala at least until Congress responds to Biden on Uganda’s fate. Uganda could be locked out of Agoa’s $1.03 billion duty-free market access, becoming the fourth country in the region to face the penalty. Burundi, Rwanda and South Sudan have all been whipped in the past.

The US is punishing Uganda for passing harsh anti-same-sex law that Washington describes as a tragic violation of universal human rights.

“I am taking this step because I have determined that the Central African Republic, Gabon, Niger, and Uganda do not meet the eligibility requirements of section 104 of the Agoa,” Biden said on Tuesday.

“Despite intensive engagement between the US and the CAR, Gabon, Niger, and Uganda, these countries have failed to address United States' concerns about their non-compliance with the Agoa eligibility criteria,” Biden also said in a letter addressed to the speaker of the US House of Representatives.

“The enactment of Uganda’s Anti-Homosexuality Act is a tragic violation of universal human rights. No one should have to live in constant fear for their life or be subjected to violence and discrimination. Other countries are being punished for their poor record on human rights owing to military coups that have taken place in states such as Gabon, and Niger while the CAR is being beaten down for refusing to rectify local governance issues."

But Uganda’s President Yoweri Museveni has fronted defiance, saying he won’t allow external pressure to interfere with local culture.

Experts say the suspension of the trade deal could hurt Uganda’s economy at the time the country is looking for markets for its products abroad,

“I don’t think we can satisfy Americans over human rights. We have to bear with the hurricane and adjust,” said Development policy analyst, Dr Fred Muhumuza.

The economic effects could spill over to Tanzania, Rwanda, DR Congo, Burundi, and Kenya as the apparel and clothing value chain is heavily integrated. For instance, Uganda’s Fine Spinners supplies cotton yarns and fabrics to a Kenyan textile and apparel facility that is owned by the same parent company. 

The Agoa forum was introduced in 2000 to give eligible sub-Saharan African countries duty-free access to the US for more than 1,800 products. Now, even the US admits it needs changes, in spite of extension.

Last week, the assistant US trade representative for Africa Constance Hamilton said a study carried out by the US International Trade Commission reveals that while some countries benefited a lot in specific sectors such as textiles and apparel, other countries did not.

“If I can just start on this one, the first thing, the lessons learned from 25 years of Agoa, is that we have to do better. 

“I think that they just finished a study, at the request of Congress, to look at Agoa implementation, and it’s a very thick study,” said Ms Hamilton during a virtual press conference on Agoa. 

“But one conclusion that they made is that Agoa has not met the expectations we had in 2000, and so while they’re not saying that the programme hasn’t been useful, because some countries have benefited greatly from Agoa, but the majority have not. And so we know that we still have a lot of work to do.”

The US International Trade Commission report dubbed African Growth and Opportunity Act (Agoa): Program Usage, Trends, and Sectoral Highlights released in June this year. Congress will rely on its findings to tinker with the new law.

The extension, however, is a slight departure from what the US had shown recently, choosing specific countries like Kenya to trial out bilateral trade negotiations. Yet even with Kenya, where it is negotiating a Strategic Investment Partnership, Washington has retained age-old requirements for guarantees on human rights good governance and environmental sensibilities.

The US report shows that a number of countries in Africa are yet to either join the Agoa programme or benefit from it due to the requirements for eligibility, an issue the US government promised to review, but not necessarily abandon.

African countries have complained of stringent rules, including economic reforms, political governance, poverty reduction, human rights, and security (terrorism).

The most common reason for a loss of eligibility relates to concerns over the rule of law and political pluralism, a factor that has partly led to the expulsion of Uganda, Niger and CAR.

Further, not all countries that are eligible under the programme necessarily benefit. For instance, Burundi, Cameroon, Eritrea, Ethiopia, Guinea, Mali, Mauritania, South Sudan, and Zimbabwe are Agoa programme eligible but were not Agoa beneficiaries in 2022.

The report findings also reveal that during 2001 to 2021, US imports that claimed Agoa preferences were relatively small in magnitude, mostly from a few countries, and concentrated in a few product sectors such as energy, apparel, and transportation equipment.

This is partly because fewer than 325 products are dutiable for Agoa beneficiaries with full textile and apparel benefits.

Of these, more than 70 per cent are agricultural products, including meat, dairy, sugar, or products containing dairy or sugar.

Another factor is that since the beginning of the Agoa programme, some of the underlying trade conditions between the United States and sub-Saharan Africa (SSA) have changed, contributing to changes in US imports from Agoa beneficiaries.

“First, SSA countries have diversified their export destinations. In 2000, the US was the destination for 20.8 percent of SSA exports, but by 2020 it was the destination for only 5.1 percent,” the report says. “As SSA countries have expanded into new export markets, the US has fallen in rank from the leading export destination of SSA exports to the fourth, after China, India, and South Africa.”

Furthermore, the US imports under Agoa and GSP are concentrated in just a few countries and provide limited representation of the39 beneficiaries.

Uganda’s problems are beyond the anti-gay law, and not exclusive. In August, Mr Museveni banned the importation of second-hand clothes, a move thought to target the US, which is a major supplier of used garments to African countries.

Isaac Shinyekwa, the head of the Trade and regional integration department at the Economic Policy Research Centre described the US decision to punish Uganda as hypocritical saying the US has taken a soft stand on nations that are against same sex relationships such as those in the Middle East.

“The US is arm-twisting Uganda leveraging the unilateral trade deal which has much control over. This is hypocrisy of the West,” said Shinyekwa, describing the US market as small compared to Rwanda which, at the height of good trade relationships, had reached $200 million. 

“Uganda will continue existing. The impact of the loss of the US market is dismal,” Shinyekwa added.
Muhumuza, though, says Agoa is beyond sales.

“It’s a conversation that allows counties room to also discuss other issues on governance, diplomatic relations, and security concerns in the region which are affecting trade plus intra-Africa trade itself,” he explained

“What Uganda sells in America is not what they sell in China. These are unique products. We are not about to move them to Kenya or the Netherlands. Markets are segmented. So when you lose one market, it’s not easy that you find another,” Muhumuza told The East African. 

Senior presidential adviser on Agoa and trade Susan Muhwezi was more hopeful, promising to lobby for a change of position. “We shall engage the US team during the 2023 Agoa Forum currently taking place in South Africa,” Muhwezi told The East African.

It is not the first time the US has suspended EAC member states from the Agoa eligibility list. DR Congo was flagged in 2011 over human rights violations. However, Kinshasa was reinstated in 2021 following a peaceful transition of power two years earlier.

South Sudan and Burundi were penalised in 2014 and 2015 respectively following violence. Rwanda suffered the same fate five years back after Kigali refused to allow American second-hand clothes and shoes.

Rwanda’s textile exports to the US lost duty-free status in 2018 over the country’s refusal to rescind a decision. Other EAC member states Tanzania, Uganda, and Kenya bowed to pressure as they sought to reap economic benefits from Agoa.

Agoa though had been imbalanced and even those banned may have suffered little loss in revenues. The US report said that in 2021, South Africa, Kenya, Lesotho, Madagascar, and Ethiopia represented 81.7 percent of US non-crude petroleum imports under Agoa and GSP.  SouthAfrica alone accounted for 54.2 percent ($2.7 billion) of imports under Agoa and GSP in 2021.”