New lease of life for Agoa?

As African leaders make a final feverish push to secure the renewal of the Africa Growth and Opportunity Act (Agoa), which expires tomorrow, there are indications that the deal – impacting several countries on the continent, including South Africa (SA), Kenya and Lesotho – could see a new lease of life, notes Legalbrief. According to News24, a new initiative to extend Agoa has gained momentum over the past week. The extension hinges on the nod of US President Donald Trump, which a top Trump adviser suggests could be possible. While, SA and the US are discussing a substantial text to define their new trade, there is hope that Agoa will be extended for another two years, with SA remaining eligible for benefits. At the same time, South African President Cyril Ramaphosa confirmed last week that SA and the US have finally begun detailed negotiations on a trade deal through the exchange of a lengthy text, which SA Department of Trade, Industry, &  Competition (dtic) officials are now discussing within the government more widely. The text, which is based on SA’s original offer to the US, includes commitments to improving US access to the SA market for poultry and pork, and a pledge to buy liquefied natural gas from the US. The US responded to the SA offer at the beginning of September. The revised text also addresses US concerns around the taxation of digitally delivered products  and includes domestic issues around black economic empowerment and the US’ demand that US companies be excluded from its provisions. However, insiders said the text was substantial and would take some time to work through.

Meanhwile, over the past week, support for an extension of Agoa has gained new traction in Washington. SA Government sources who were in the US last week, a staffer from the US House of Representatives’ Ways and Means Committee, and a second trade expert, a regular adviser to African governments, confirmed on Friday that there has been renewed support for the extension. It is unclear how Agoa would relate to the tariffs imposed by the Trump administration, but there is optimism that African countries could retain a tariff-free regime for some African goods. The trade expert said that the extension could be done easily and quickly by attaching it to any other existing Bill before the House. He said there had been no indication that the extension would include specific references to exclude SA. However, a few months ago, an attempt that had enjoyed strong bilateral support to incorporate a short-term Agoa extension in the Big Beautiful Bill, ran aground after the administration in the White House indicated it was not in favour of the extension. An effort by some in the previous Congress in December also came to nothing.

According to News24, in the strongest indication that the latest attempt could succeed, Trump’s Africa adviser, Massad Boulos, told the Financial Times on Friday that the administration 'agreed with the objectives' of Agoa. Agoa is a 25-year-old free trade agreement allowing African countries free US market access. While it has little impact on the US market and economy because of the relatively small volume of African imports (1% of the total), it has been a lifeline to some African countries and industries. In SA, the loss of Agoa will devastate the auto industry and wine, citrus and nut export. The SA Reserve Bank has projected that the loss of Agoa rights will result in 100 000 job losses. It will be particularly devastating for Lesotho, which, under Agoa, has become an apparel exporter, supplying companies like Levi’s and Wrangler. The possibility of the last-minute renewal of Agoa is a surprising turn of events after the rash of unilateral tariffs imposed by the Trump administration on 2 April. Many of those have since been moderated downwards.

Lesotho’s Trade Minister has also said the US plans to extend Agoa, after returning from a visit to Washington. News24 reports that Lesotho initially got hit with the world’s highest tariff of 50% on 7 April – ruinous for the kingdom’s export-led development model, which was almost entirely dependent on textile factories selling jeans and T-shirts to the US. Trump reduced it to 15% in August. A Lesotho trade delegation visited the US from 15 to 19 September. Minister of Trade, Industry & Business Development Mokhethi Shelile, who led the delegation, said they met US officials responsible for Agoa on the House of Representatives Ways and Means Committee and the Senate Finance Committee. ‘They all agreed that Agoa has to be extended and they promised us that by November or December (at) the latest, it will be extended by a year,’ Shelile said. But a spokesman for Democrats on the Senate Finance Committee told Reuters: 'The Trump administration hasn’t informed Finance Committee Democrats (of) its position on renewing Agoa.'

The International Monetary Fund (IMF) says the sudden and destabilising shift in US trade policy has shaken the foundations of Lesotho’s fragile economy, threatening its vital textile industry and the livelihoods of approximately 30 000 workers, mostly women, a GroundUp report noes. Garments make up 80% of Lesotho’s exports to the US, which accounts for roughly 20% of the country’s total exports. The first blow was the newly imposed 15% tariff on Lesotho’s textile exports. The IMF says this has weakened a central pillar of an economy already struggling with low growth and high unemployment. This coupled with the threat of a much higher tariff means significant new orders for the US market are unlikely to resume until the uncertainty is lifted. The immediate fallout is already visible. The threat of steep tariffs has halted new US orders, and the IMF warns that without clarity, demand for Lesotho garments will not recover. This is devastating for a sector that, even under the duty-free Agoa, was ‘already struggling’ to remain competitive. Lesotho was already losing ground to regional rivals like Kenya and Tanzania, which now face less of a tariff threat. The IMF document estimates that prohibitive tariffs could slash Lesotho’s US exports by 50% in just one year, and by as much as 70% in the medium term. The result: a permanent 0.5 percentage point cut in GDP growth.

Kenya’s President William Ruto said his country expects to sign a trade deal with the US by year-end and that he will be pushing Washington to extend its duty-free agreement with Africa for at least five years, reports CNBC Africa. Ruto last week met with US Secretary of State Marco Rubio to discuss Agoa, according to news reports. Ruto had intended asking Rubio for the US to consider seriously renewing and extending Agoa for at least a minimum of five years, 'because it is a platform that connects Africa and the US in a very fundamental way, and it can go a long way in solving some of the trade deficits and challenges that exist at the moment’. Ruto said he believes the US administration has increased its appreciation for Agoa. ‘Agoa gives both Africa and the US the best chance to expand and deepen trade,’ Ruto said. The US and Kenya have made ‘good progress’ on a bilateral trade agreement, Ruto said, adding that he expects to sign a deal before the end of 2025. In April, Trump imposed a 10% tariff on Kenyan goods. Kenya is looking for access to the US market for its apparel, textile and agricultural products including tea, coffee and avocados. Ruto wants to explore new areas including mining and fishing. If a deal is reached, it would be the first of its kind between a sub-Saharan African nation and Washington.