End of AGOA Paves the Way for AfCFTA and Emerging Markets
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JEREMY MAGGS: The African Growth and Opportunity Act, more commonly known as Agoa, concludes today after 25 years of significantly impacting trade relations between the US and sub-Saharan Africa. This agreement has been a critical aspect of US foreign policy on the continent, providing duty-free access to American markets and fostering manufacturing jobs in our country, as well as in Lesotho.
However, without clear indications from Washington on a renewal, the future of this vital agreement remains uncertain. There are reports suggesting a potential one-year extension may still be possible under something referred to as an “America First” framework, though nothing has been confirmed yet.
Listen/read: ‘Jobs bloodbath’ looms without urgent tariff response – Busa
Read: Tau optimistic about Agoa’s continuation
I’m interested in understanding the implications for both African economies and US influence in the region. Joining me is trade expert Donald MacKay from XA Global Trade Advisors. Donald, what does it mean if Agoa expires today or this week in practical terms?
DONALD MACKAY: Well, the impact would have been more significant before the introduction of Liberation Day tariffs. Currently, the net value derived from Agoa in South Africa is about 3.5%, while we also face an additional 30% tariff on top of that. Personally, losing the 3.5% will likely be offset by the larger 30% tariff.
However, the consequences for other African nations are far more severe. For instance, countries like Lesotho, which primarily export textiles to the US, would suffer greatly as their benefits under Agoa were considerably higher than ours.
South Africa has no advantages in textiles, but Lesotho does. If Agoa ends, Lesotho will go from about a 16.5% advantage to facing those tariffs along with an additional 15%. For South Africa, the impact isn’t as significant, but for the rest of Africa, it’s much more serious.
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Read: Trump’s tariffs could cost Lesotho 30,000 jobs, the IMF warns
JEREMY MAGGS: That’s positive news for South Africa, but we’ve seen troubling reports concerning Lesotho. If Agoa lapses, have you estimated how many jobs South Africa might realistically lose? Have you done that analysis?
DONALD MACKAY: Not exactly, but it’s a tough calculation. Agoa is overshadowed by the 30% tariffs. Any jobs lost will be more due to those significant tariffs rather than the expiration of Agoa itself.
Read: How the dtic is assisting SA exporters against 30% US tariffs
Looking at the most affected sectors, automotive is the most significant. There were two major car manufacturers exporting at scale, and they would face the greatest risk. If we only consider losing Agoa, perhaps we could expect around 10,000 to 15,000 job losses. I doubt the media’s figure of 100,000 is accurate.
JEREMY MAGGS: Donald, conceptually, some argue that Agoa may be outdated. Should African economies pursue a different trade approach or deal given the current climate in 2025?
DONALD MACKAY: Definitely. I would assert that the US has become an increasingly unreliable trading partner.
The key takeaway is the need to diversify markets to avoid dependency on any single country, such as the US, which has often exerted economic pressure.
Agoa was beneficial, but it was not a formal trade agreement. It didn’t provide substantial benefits for most, with a few small countries as exceptions. What we need now is more consistent preferential access and to improve our competitiveness as producers. Most of Africa, including South Africa, struggles with production capabilities, and addressing these issues would open up greater international opportunities.
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JEREMY MAGGS: Donald MacKay, considering the potential fallout, how significant could this be for the US and its influence in Africa, especially with China poised to capitalize?
DONALD MACKAY: This presents a much larger issue. The United States has effectively abandoned its global soft power, and that is a challenge likely to last for decades. They’ve ceded influence in Africa to China, and it’s unclear how they would regain it.
JEREMY MAGGS: Currently, the Trump administration seems to suggest a one-year extension under the ‘America First’ framework. What do you know about this, and how might it be implemented?
DONALD MACKAY: I can’t say for certain what that entails, which is true for many declarations from President Trump. Agoa was a negligible factor for the US. It cost them little to provide such concessions. I’m unclear what he hopes to achieve.
If he aims for African nations to purchase more US products, it’s important to note that these are small economies with limited purchasing power.
JEREMY MAGGS: Given this, how should South Africa and its neighbors quickly adapt their strategies?
DONALD MACKAY: In the short term, there’s little we can do, but medium to long-term strategies must focus on diversifying our export markets. Although this is a complex challenge, it’s essential.
The US, being a major economy, contributes to 25% of global GDP, yet only 17% of global trade. The remaining 83% is where global attention should shift. I think President Trump has successfully prompted countries to explore improved trade relationships.
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JEREMY MAGGS: If we’re discussing market diversification, should Africa pursue this collectively, or is it up to individual countries to take action?
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DONALD MACKAY: The positive aspect is that the AfCFTA [African Continental Free Trade Area] is fostering dialogue among African nations, which is a step in the right direction. Coordination would be beneficial.
However, it’s worth noting that only four countries constitute 50% of Africa’s GDP, and these nations will predominantly steer the continent’s future.
Will these key countries, including South Africa, be willing to open their markets to other African nations? Honest dialogue on this front would yield significant benefits.
If Africa can expedite infrastructure development to enhance competitiveness, it would be advantageous. Yet, it’s a complicated challenge. United, Africa would wield far more negotiating power than if countries acted independently.
JEREMY MAGGS: Donald MacKay from XA Global Trade Advisors, thank you for your insights and your time.
Read: South Africa hopeful that the US trade pact Agoa will endure
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