Enacted on May 18 2000, the African Growth & Opportunity Act (Agoa) is a unilateral, nonreciprocal trade preference programme granting eligible nations duty-free access to the US market for more than 6,800 products.
While the programme is only set to expire in September, US policymakers have made calls for an earlier exclusion of SA from the programme, arguing that its legal challenge against Israel at the International Court of Justice and its close relationship with China and Russia are undermining US national security and foreign policy interests.
This is not allowed under Agoa’s eligibility criteria, nor under the new Trumpian trade policy, which weaponises trade in pursuit of US hegemony.
Many commentators have described this as a potential disaster for SA. According to one business-orientated daily newspaper “the disastrous impact on key industries in SA cannot be overstated”. DA leader John Steenhuisen has claimed that “SA is a prime beneficiary, getting preferential access for about 7,000 products, including wine and citrus which we currently send to the US duty-free […] many of the products we export are only competitive due to our Agoa benefits.”
These fears and statements are much ado about nothing: exaggerated and often false. That the loss of Agoa isn’t such a big deal has already been shown by recent economic modelling of the impact of its loss, published by the Brookings Institution. While some individual companies may be drastically affected if they do not proactively manage their Agoa dependency risk, the modelling found that “the impact of a loss of Agoa on exports and GDP would be small. Our model suggests that at worst SA’s total exports to the US would fall by about 2.7%. In total, a loss of Agoa benefits would lead to a GDP decline of just 0.06%.”
Moreover, this is under the unrealistic assumption that no alternative markets are found for these lost exports.
Those who reluctantly acknowledge that, unlike political hysteria, sober economic analysis suggests that the economic and financial stakes of SA in Agoa just aren’t such a big deal, yet still have made much ado about the assumed importance of Agoa for SA’s automobile manufacturing sector — and for certain agricultural exports, such as oranges. But even here the story is such that it does not justify panic and even less for pandering to US President Donald Trump’s economic blackmail and bullying. The reasons are the following:
- Agoa is a unilateral legal instrument from the US towards Africa and not a negotiated trade agreement. If a product does not have Agoa status it does not mean SA cannot export it to the US, and it also does not mean that product will necessarily face a higher tariff — in the context of Trumpian tariff strong-arming, which in any case does not respect agreements or the international rules-based order any more.
- The degree of preferential access provided through Agoa and the Generalised System of Preferences is often minimal. It is surely not the case, as Steenhuisen claims, that “many of the products we export are only competitive due to our Agoa benefits”. On average, across all sectors preferential access amounts to no more than 2.5% below the general duty SA products faced under the new tariffs .
- It is a myth that all SA exports to the US fall under Agoa, or as Steenhuisen claimed that SA gets preferential access for “about 7,000 products”. The fact is that over the past 10 years on average only 20% of SA’s exports to the US were claimed under Agoa (2014-24, with 2024 about 26%) — with duty-free access for only about 1,800 product lines.
- While the automotive sector to date is the single largest beneficiary under Agoa (in value terms), a reality check is required. The US administration has targeted the global automotive industry as one of the sectors where the administration is aspiring to relocate production in this sector back to the US. The automotive global value chain decision-making is centralised within the global automotive sector, and the US administration is thus focusing on the decisionmakers (not simply plants located in different parts of the world).
In addition to the relocation drive (to the US), a growing challenge is that the “Western” automotive industry (including production plants in SA) are under siege from mainly Chinese competitive pressure being exported overseas — and no major region is immune from these effects. The US and Canada remain essentially the only two markets in the world to which China does not export its cars. In this sense, paradoxically, the US tariffs will probably benefit the ongoing expansion of Chinese brands in the global market outside North America.
In addition to these geopolitical automotive competitive developments, technology competition is also heating up, with China placing a strong focus on expanding to new energy vehicles (NEVs), while the US has just made a U-turn on this topic, with the administration reversing some of the previous pro electric vehicle (EV) policies, signalling a potential slowdown in EV adoption in the US (contributing in part to Elon Musk’s recent frustration with the US administration).
In this context, whether SA’s automotive sector’s Agoa benefit continues or not, given these developing trends the writing is arguably on the wall for the SA internal combustion engine automotive production sector — unless the government is willing to protect the industry for even longer.
Agoa’s administrative requirements are onerous and many exporters opt not to spend the resources to attempt to qualify for Agoa. Trump’s attempts at upending the global trade order are likely to add many further layers of administrative burden, complexity and uncertainty in exporting to the US — but continued Agoa membership is unlikely to change this.
Hence, as we argued in our previous article in Business Day, SA should see the wood for the trees as far as its trade relations with the US are concerned (“How SA can beat Trump at his tariff war”, April 11). Offering golf clubs to Trump, engaging in a fireside discussion about SA’s domestic crime situation with a man who has just illegally and unilaterally bombed a sovereign nation, or to try to argue that the 30% tariffs just slammed on SA imports to the US are based on inaccurate data — as if the Trump administration is concerned about facts and being accurate — is a waste of time.
Obsessing over Agoa amounts to flogging a dead horse. In this context it only distracts the country and locks it into a passive response, delaying what is sorely needed: a comprehensive export diversification strategy supported by appropriate expansionary monetary and fiscal policies and tangible and pragmatic implementation of diversification. SA has much to offer to the world, and the country’s leadership should focus on expanding trade and engagement with the willing, rather than focusing so much energy to please the unwilling.
• Dr Naudé is visiting professor in technology, innovation, marketing & entrepreneurship at RWTH Aachen University in Germany; distinguished visiting professor at the University of Johannesburg; and a fellow of the African Studies Centre at Leiden University in the Netherlands. Dr Cameron, a quantitative economist, is MD of Trade Research Advisory, a company that was spun out of North-West University.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.