African Growth and Opportunity Act (Agoa) has received a new lifeline as the United States (US) House Committee has approved a Bill that would renew for another three years the US preferential trade programme.
The Agoa Extension Act passed by the US House Committee on Ways and Means, according to US trade representative Jamieson Greer, seeks to extend preferential US market access for eligible African countries, including Malawi.
The law first enacted in 2000, expired in September this year.
Greer was quoted by Reuters as having said that to avoid trade disruptions, the draft legislation will make imports made from October 1 qualify for Agoa benefits provided importers file claims with US Customs and Border Protection within 180 days of enactment.
Greer said the Trump administration was open to a one-year extension, but might exclude South Africa, which he described as a “unique problem”.
Agoa was last renewed in 2015 and even with the introduction of the bipartisan measure, Agoa’s future was still uncertain due to major changes in US trade policy concerning Africa and other regions.
Ahead of the possible Agoa extension, Ministry of Industrialisation, Business, Trade and Tourism spokesperson Patrick Botha said government expects that the commercialisation of agriculture, establishment of mega farms and Special Economic Zones, among other initiatives, will enhance Malawi’s capacity to increase exports under Agoa.
He said: “The expected extension of Agoa is good news for Malawi as we have been a beneficiary since its inception and our commodities such as tobacco, macadamia nuts, sugar cane, textiles and apparel have been enjoying duty free access to the US market.
“Malawi looks forward to the extension and more importantly, we are strategising on how to improve our utilisation further.”
Following the trade policy shift, the US announced a 15 percent tariff for Malawi, an indication that companies that bring foreign goods into the US will have to pay the taxes regardless of the existing trade deal, which includes Agoa.
Under the 17 percent proposed tariff, which analysts said would threaten growth, investment and development progress for Malawi and other most vulnerable economies, the United Nations data showed that Malawi could be remitting $7 million (about K12.3 billion) to the US in potential custom duties annually from the reciprocal tariff of 18 percent announced on April 5.
One of the Agoa beneficiaries is Malawi Stock Exchange-listed Illovo Sugar (Malawi) plc and its board chairperson Jimmy Lipunga earlier said there is need to salvage the Agoa trade initiative.
He said: “Illovo Sugar like those similarly situated would always welcome any measures that would facilitate flow of exports to the US and indeed other parts of the world, including the UK, the European Union bloc and indeed Africa itself.
“For those involved in export, it is also important to ensure that there is currency alignment as otherwise our exports become uncompetitive.”
In 2023, Malawi joined other African countries to push for an early 10-year extension of Agoa trade window beyond 2025
Key elements of the scheme, including its textile and apparel benefits and the third-country fabric provision, would have been preserved under the extension.
If passed, Agoa extension could offer much-needed certainty to African businesses and US importers who have been bracing for the programme’s original expiry.
Since Agoa’s inception in 2000, Malawi has exported goods worth over $1.55 billion (about K2.7 trillion) to the US market.
Before the expiry of the trade pact in September, Malawi exports to the US were duty-free.
Agoa was last renewed in 2015.
