Recent visits by senior leaders, the US-Africa Summit and the United States Trade Representative (USTR) negotiations with Kenya all point to an effort by the United States to reinvigorate its economic outreach. Critics claim that the effort is either too little, too late or a thinly veiled attempt to blunt the influence of China and Russia, and skeptics remain unconvinced, having seen previous US administrations express interest in Africa before. Whether past will turn out to be prologue remains to be seen.

However, the current attempts occur under very different conditions in the context of an African Continental Free Trade Agreement (AfCFTA), the major developing economies of India and China beginning to outpace the US in trade with the continent, and a system of international trade governance that could be losing steam.

Evolution of the economic relationship between the US and Africa

Historically, the US has viewed its economic engagement with Africa primarily in the context of development aid and the extraction of natural resources. But recent US administrations claim to be changing the focus. Commerce Secretary Gina Raimondo, speaking at the recent US-Africa Summit, explained that the US wants to move from aid to an increased focus on investment and growth led by the private sector.

US trade with Africa has been flat for most of the past decade, following a temporary but large increase in trade that was almost entirely driven by oil. That may make these goals of deeper engagement look distant. At the same time, however, manufactured goods trade has been steady and is now beginning to rise. US imports of textiles products, jewelry and some other manufactured goods are increasing, as are refined non-ferrous metals. In 2022, 28 percent of US imports were oil, gas and minerals, while manufactured goods had risen to 63 percent and showed some diversification. The US imported products under 6,139 unique (harmonized system) HS-10 codes in 2022, compared to approximately 4,900 a decade ago. Services trade is growing, too, with travel and education being one of the largest US import categories.

On the investment side, foreign direct investment (FDI) between the US and Africa has remained flat and shows little sign of dynamism. In 2021, the US direct investment position in Africa totaled US$44.8 billion, a small decrease from where it was a decade earlier. Although total US FDI has stagnated, employment in the companies engaged in FDI has risen. US-owned companies in Africa employed 292,600 people in 2020, compared to 216,700 in 2012. African FDI in the US, on the other hand, has been rising, reaching US$10.3 billion in 2021. US employment in these firms has recently doubled, rising from 4,500 in 2012 to 9,800 in 2020.

Investment and trade between the US and Africa is modest and has not shown the levels of dynamism of trade with other regions. There is room for improvement. Bringing the economies closer together through improved infrastructure, better regulatory procedures and improving access to intermediate inputs and business services can help countries diversify their economies and expand trade linkages. The AfCFTA, the African Growth and Opportunity Act (AGOA), new trade agreements and other efforts to connect economies and reform trade rules can help support this important work. In addition to the AGOA, the US has only one other free trade agreement with an African nation—Morocco—which came into effect in 2006.

View full image: US goods imports from Africa (PDF)

The AGOA and preferential market access

The African Growth and Opportunity Act (AGOA) was established in 2000 as a US legislative initiative to go beyond the Generalized System of Preferences (GSP) and create a unique preferential program for most African nations.

The AGOA program added approximately 1,800 additional tariff lines for 35 sub-Saharan African countries, in addition to the 5,100 tariff lines already covered by the GSP. Most of the tariff lines not covered by either program are already effectively tariff-free under World Trade Organization commitments. The US Congress last renewed the AGOA in 2015, and it is due for renewal again in 2025.

For the past two decades, AGOA-eligible trade consisted primarily of oil exports, mainly from Nigeria and Angola, and—to a lesser extent—from Chad and the Republic of Congo. Non-oil imports under the AGOA have tripled since the program was introduced, fitting the broader pattern of diversifying trade. Oil products, motor vehicles, jewelry, ferrochromium and apparel were the largest import categories under the program in 2022. A recent review of the program by the US International Trade Commission (USITC) found that it was particularly effective in supporting the development of apparel industries in sub-Saharan Africa. The AGOA preferences covered 34 percent of all imports from AGOA-qualifying countries in 2022, with South Africa, Nigeria, Ghana and Kenya being the largest users.

Despite the benefits of the program and the near-term focus on its renewal, unilateral preference programs such as the AGOA and GSP have limited reach. They are, by nature, temporary, nonreciprocal and cover only selective goods. The USITC report found that the AGOA contributed little overall to sub-Saharan African growth, outside of a select few industries and countries. The AGOA is far less ambitious than other kinds of trade programs, such as free trade agreements (FTAs) or similar agreements.

An FTA between the US and one or more of the AGOA beneficiary countries is not imminent. In the meantime, the focus will be on preserving the market access benefits provided by the AGOA while finding other ways to move the relationship forward. The 2022 US-Africa Summit produced new engagement tracks, and the USTR continues to negotiate a partnership arrangement with Kenya. These initiatives signal a desire by some to change the nature of trade relations between the US and the nations of Africa.

View full image: Trade in goods between the United States and AGOA beneficiaries (PDF)

The US-Africa Summit

The US-Africa Summit in December 2022 signaled the Biden administration's desire to begin to change the nature of the trade and investment environment. The Summit featured top-level government-to-government talks and private sector engagement. The US government announced new support for the AfCFTA, called for Africa Union membership in the G20, and promised US$55 billion in aid over the next three years. The work program following the Summit will include new Millennium Challenge Corporation economic integration programs, a new President's Advisory Council on African Diaspora Engagement and a new initiative on Digital Transformation with Africa. President Biden appointed a Special Presidential Representative for US-Africa Leaders Summit Implementation to coordinate work on all these commitments.

Private and public sector investment and partnership commitments totaling US$15.7 billion were announced during the US-Africa Summit, with private business leaders expecting further deals to emerge from the Summit.

Since the Summit, the Vice President, Secretary of State, Treasury Secretary and UN Ambassador have visited the continent. Further engagement—including a possible presidential visit—is likely to follow. While visits by political leaders are no substitute for sustained economic opportunities, they can often indicate the government's desire to establish an economic and political framework for sustainable growth.

US-Kenya Strategic Trade and Investment Partnership

The US-Kenya Strategic Trade and Investment Partnership (STIP) is one of several agreements the Biden administration is exploring to deepen economic engagement with selected countries and regions. The Biden administration is currently pursuing the Indo-Pacific Economic Framework for Prosperity (IPEF) with countries in Asia-Pacific, and the Americas Partnership for Economic Prosperity (APEP) in the Western Hemisphere. These initiatives differ from a traditional FTA in several ways, most notably by the absence of significant market access commitments. In other words, unlike in a traditional FTA, the STIP is unlikely to contain specific commitments for each country to receive preferential access to the other's market. Agreements featuring "market access" commitments have fallen out of favor in the US, as they are generally viewed as being out of step with the current emphasis on sourcing domestically.

The STIP was first announced in a joint statement on July 14, 2022. After the initial discussions, the USTR and Kenya announced that the STIP would cover a range of topics, including agriculture, anti-corruption, digital trade, environment and climate change action, good regulatory practices, services, domestic regulation, micro-, small- and medium-sized enterprises, workers' rights and protections, participation of women, youth and other underrepresented groups in trade, standards collaboration, and trade facilitation and customs procedures. Broadly speaking, the STIP will cover the same issues as the IPEF and the APEP.

The parties held first detailed negotiations on April 17 to 20, 2023, in Nairobi, with proposed texts on several chapters being discussed, but not released to the public. The next negotiating round has not been announced yet, though the Kenyan government expects the talks to be concluded by the end of 2023 and that the final agreement could be signed by April 2024. This ambitious timeline is similar to those the USTR has proposed for the IPEF and the US-Taiwan Initiative on 21st Century Trade.

The Biden administration is calling STIP a model of engagement with other African countries. It is, however, less ambitious than a full FTA and will not provide the same benefits to traders and investors. Kenya, for its part, believes it can leverage STIP to negotiate a full bilateral FTA with the US in the future. The Biden administration has not committed to that, but the Trump administration's previous efforts to negotiate a bilateral FTA and support for the idea by some members of Congress indicate opportunity may exist in the future. The USTR-AfCFTA Secretariat Memorandum of Understanding signed at the US-Africa Summit may be another way to eventually approach an Africa-wide deal.

View full image: US imports of AGOA-qualifying products from top five countries 2021, trade values from 2000 to 2021 (PDF)

Strong GDP growth forecasts for sub-Saharan Africa, but will sustainable actions follow?

According to the IMF, sub-Saharan Africa's GDP growth rates over the next five years will outpace the rest of the world. In the longer term, the World Bank forecasts that Africa will be home to approximately one-quarter of the global population by 2050. When Vice President Kamala Harris visited Ghana in March, USTR Katherine Tai tweeted "For the United States and the global economy—the future is Africa."

As Africa's population continues to grow and its economic potential expands, there is a growing recognition among global leaders of the need to engage more effectively with the continent. The US and other nations have expressed interest in shaping their policies to better support Africa's development, and there is a growing sense that Africa's role in the world is changing.

However, questions remain whether sustainable actions and policies will follow words and how effective these actions and policies will be. The US's choice to pursue less ambitious tools—such as the AGOA and STIP, instead of the more comprehensive FTA approach used in other regions—may be politically expedient, but will it be enough to make a meaningful impact? Conversely, can African nations make sufficient progress quickly enough in their attempts to deepen intra-continental integration to convince the private sector and foreign investors to be bolder with their initiatives? These questions loom large as countries seek to redefine their economic and trading relationships with Africa.

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