Workers and industry are bracing for the end of a longstanding U.S. trade agreement that gave African exporters preferential treatment and now leaves businesses vulnerable to new competitive pressures and tariffs.
The African Growth and Opportunity Act (AGOA) will terminate as scheduled on Sept. 30 amid uncertainty over renegotiations and the looming impact of new tariffs announced by the White House in April.
AGOA is a multilateral trade agreement that has given thousands of products from qualifying African nations duty-free access to U.S. markets since 2000.
A key example of the deal’s impact can be found in Kenya, where it has allowed the country’s textile and apparel sector – makers of jeans, for instance – to effectively compete with Asian exporters such as in Bangladesh and Vietnam.
“If AGOA goes away we have zero chance to compete with the Asian countries,” said Pankaj Bedi, owner of United Aryan, an apparel manufacturer in Nairobi that exports Levi’s and Wrangler jeans to the United States.
Textile and apparel exports from Kenya to the U.S. have grown from around $50 million when AGOA was first introduced to around $500 million today.
“I will be asking (Trump) for the U.S. to consider seriously renewing and extending AGOA for at least a minimum of five years,” Kenyan president William Ruto said last week at the UN General Assembly in New York. “It is a platform that connects Africa and the U.S. in a very fundamental way.”
AGOA had also given African countries hope that major elements of their export economies would be exempt from blanket tariffs of 10% – and in some cases much higher – announced by the U.S. earlier this year.
Kenya is already paying 10% on non-AGOA exports, which are not many. Kenyan manufacturers will struggle to compete with rivals in Asia, even though some Asian countries may face a higher U.S. tariff, because of the limited domestic supply chain in Kenya where most of the raw materials are imported, as well as higher energy costs, lending rates, and operating expenses.
Mr. Ruto and other African leaders are pushing for a last-minute renegotiation of AGOA while also scrambling to sign new bilateral agreements with the U.S. They are doing so amid a period of seismic change in global trade dynamics and with a White House that shows a mixed commitment to Africa.
“African countries including Kenya must be alive to the possibility that AGOA won’t be extended, AGOA won’t be remodified, and … America won’t be interested in having a trade pact,” said Raphael Obonyo, a public policy expert at UN Habitat.
Mr. Ruto said last week that Kenya and the U.S had made “good progress” toward a bilateral agreement that could be signed by the end of this year.
AGOA has mostly benefitted African economies in both big and small industries. The agreement has helped both the continent’s largest exporters – Nigerian and Angolan oil, South African autos, and Kenyan clothing – as well as some of its smallest economies where exports are highly concentrated, such as Lesotho and Eswatini.
Some African economies, like Nigeria and Lesotho, are likely to face “notable adverse effects” from the end of AGOA and new U.S. tariffs, researchers at the German Institute of Development and Sustainability wrote in a brief.
While there may be limited macroeconomic effects across Africa as a whole from changes to U.S. trade, these assumptions “likely understate the full impact of new Trump-era tariffs and do not capture the indirect effects like reduced foreign investment, weakened supply chains, rising poverty, or the loss of capacity-building,” the researchers added.
AGOA-dependent industries likely employ some 1.3 million people whose jobs are now at risk – in countries where many people have few if any other options in the case of sudden unemployment.
In Kenya, more than 66,000 people, many of them women, were employed through now-vulnerable textile and apparel exporters to the U.S. In the garment districts of Kenya’s bustling capital, job cuts and fears over livelihoods have already begun.
United Aryan said this week that it will shed some 1,000 jobs or 10% of its workforce amid trade uncertainty.
For Julia Shigadi, a machinist at United Aryan, the end of AGOA is a huge threat.
“This has been my bread and butter,” said Ms. Shigadi. “I only depend on this job.”
This story was reported by The Associated Press.
