Africa Growth and Opportunity Act

The United States Senate launched panel hearings seeking to renew the nation’s trade policy with Africa, including the supposed bipartisan Africa Growth and Opportunity Act (AGOA). This had been preceded by bills seeking to reauthorize the AGOA framework for 16 years through 2041. The bill allows qualifying African countries to have duty-free access to the US market and expires in 2025, raising concerns about the expected terms and conditions.

The African Growth and Opportunity Act (AGOA) has been a significant instrument in fostering trade relations between the United States and sub-Saharan Africa. While the AGOA framework has been instrumental in driving sales, such as on Textile, which realized a value of sh4.5 billion exports in 2023 for Kenya, services and labor mobility elements remain excluded. As the reorganization of the programs takes shape, a critical concern emerges on how it can be revitalized to better meet the needs of the African people in contemporary times. Expanding the framework to encompass services and relaxing visa requirements for East African Community members should take center stage.

A Shifting Service and Labor Landscape

As is the case with the rest of Africa, economic growth in the East African Community region is increasingly being driven by services accounting for over 50% of the GDP, although some countries fall below this mark. This landscape, whose success lies in the mobility of labor within and abroad, includes activities such as tourism and financial services, telecommunication, professional services, and competencies in information technology. The decline in manufacturing and agricultural sectors notwithstanding, with EAC countries seeking to diversify economies and reduce primary commodity redundancy for exports, expanding service exports further represents what would be a watershed moment for the region.

The AGOA framework’s current dynamics overlook the service sector and largely limit the export of services to the expansive American market. This has an associative effect on exports of EAC services to other developed nations, which hinders the EAC countries from capitalizing on their comparative advantage in labor exports. While East Africa enjoys competence in information technology, business process outsourcing, and healthcare, among other sectors, the repressive visa regime to the American market is another considerable handle.

While the EAC proposed flexible US market access under AGOA, visa denials for citizens and, by extension, all Africans remain significantly higher than anywhere else, which impacts labor mobility. The US, for instance, responded with a threat of visa restrictions among Ugandans in 2023 on the implementation of the anti-gay laws passed in Kampala. Without increased visa restriction relaxation for the EAC, service export under the AGOA would significantly remain law, denying the region a much-needed foreign exchange advantage.

Services in the New AGOA

The East African Community (EAC) presents a compelling case for piloting the inclusion of services in AGOA. The EAC boasts a rapidly growing services sector, a young and tech-savvy population, and a burgeoning digital infrastructure. Thus, integrating services in the AGOA framework would allow EAC countries to diversify their export portfolios, underscoring the potential of sectors of information technology, finance, and professional services to become significant export earners for EAC nations. For example, Kenya’s burgeoning tech industry, often called “Silicon Savannah,” could significantly benefit from access to the U.S. market. Opening the US market to a broader range of African services would create new export opportunities for EAC nations, leading to job creation, economic diversification, and increased foreign exchange earnings.

East African Business Council chief executive John Bosco Kalisa during the launch of the Barometer on Trade in Services/HANDOUT

US companies stand to gain access to a large and growing pool of skilled African professionals in various service sectors, fostering innovation, improved efficiencies, and reduced hiring costs for US businesses. The service sector is also typically more labour-intensive than manufacturing, offering substantial employment opportunities. In a region with high youth unemployment at 57%, expanding service exports can create jobs, reduce poverty, and enhance socio-economic stability.

It is not lost on the EAC countries’ need to enhance the export of services, particularly to developed nations. Engaging in high-value service exports necessitates the development of specialized skills and expertise for the region, opening access to additional global markets and making EAC professionals more competitive. This can lead to broader educational and professional development, raising the overall skill level of the workforce and driving innovation.

Visa Relaxation on Trade and Investment

Services and labor mobility into the developed world depend highly on visa restriction relaxation. Visa restrictions between the U.S. and EAC countries can hinder business travel, professional exchanges, and investment opportunities. The community, therefore, stands to gain considerable ease with visa relaxation measures. East African business professionals would enjoy a simplified move into the US market. This can lead to more direct business engagements, partnerships, and investments while elevating the unemployment challenges in the African region. Entrepreneurs and executives could explore new markets, attend trade fairs, and negotiate deals more effectively.

The East African region should have insight into visa relaxation measures due to the potential of knowledge transfer and capacity building for professionals in the United States. Professionals from the EAC could gain exposure to best practices and innovations in the U.S., which they can then implement in their home countries. Conversely, American professionals can bring their expertise to the EAC, fostering collaborative ventures and skill development.

The Economic Trickle-Down Benefit

Integrating services and relaxing visa requirements under AGOA can create a positive feedback loop, enhancing economic growth and regional integration in the EAC. Expanding the scope of AGOA to include services will likely increase the trade volume between the U.S. and EAC, where services such as ICT, finance, and tourism can complement traditional goods exports, creating a more balanced trade relationship. Consequently, service and goods exports can allow for increased diversification and improved service delivery, enhancing the resilience of EAC economies. By reducing dependency on a narrow range of commodities, EAC countries can better withstand global economic shocks and fluctuations in commodity prices.

The proposed reorganization of AGOA to include services and relax visa requirements represents a forward-thinking approach to modernizing trade relations between the U.S. and the EAC. EAC countries can diversify their economies, create jobs, and enhance global competitiveness by embracing these changes. However, achieving these outcomes will require concerted efforts to build capacity, develop infrastructure, negotiate for better AGOA terms, and harmonize regulatory frameworks.