The Impact of the African Growth and Opportunity Act (AGOA) on Sub-Saharan African Economies

Abstract

The AGOA, a nonreciprocal U.S. trade preference program enacted in 2000, had provided duty-free access to the U.S. for eligible Sub-Saharan Africa countries. While the policy was expected to be of significant aid to the growth of the eligible countries, many past studies have shown results in opposition to this expectation. In addition, there are limited research in the difference in growth of valid and invalid SSA countries after the enactment of SSA countries as well as analysing all market and exporting items as a whole. Therefore, as the AGOA is coming to an end after several extensions, the paper aims to explore the growth rate of the SSA countries – both eligible and ineligible – and the influences of the act on the included countries. This paper employed a more holistic set of data compared to past papers from 1990 to 2023, estimating two-way fixed effects and event-study models of AGOA eligibility on GDP, GDP growth and trade openness. The analysis showed that there are no statistically significant effects of AGOA egilibility on GDP, GDP growth or trade openness. The event study showed that there are no significant pre-trend in GDP growth, but also no notable post-treatment effect. In contrast, the trade openness records a significant downward trend, invalidating the parallel trends assumption. To conclude, it seemed that preferential market access is not enough to shift the aggregate GDP or growth for AGOA beneficiaries, and domestic structural factors are more important than trade-preference effects in influencing the economy of SSA countries at the aggregate level.