Trade and development implications of the U.S. African growth and opportunity act

Abstract

ABSTRACT Trade agreements aim to boost exports among member nations. The U.S. African Growth and Opportunity Act (AGOA) targets enhanced trade between the U.S. and selected African countries. Unlike prior studies focusing on individual nations, our research evaluates AGOA’s overall and specific impacts on member-country exports and products. We employ the synthetic control method for estimation, with robustness checks using the difference-in-differences and event-study approaches. Analysing U.S.-AGOA trade data from 1993 to 2015, we find that AGOA member nations experienced an average annual export increase of $818.11 million, a significant 42% growth compared to expected levels without AGOA. The impacts varied across countries and exported product types: agricultural exports grew by 42%, mineral exports by 15%, and textile and apparel exports by 52% annually. Factors such as ICT infrastructure, institutional integrity, labour regulations, and macroeconomic indicators primarily influenced varied export gains among AGOA member countries. The heterogeneity in AGOA’s impact can be attributed to differences in beneficiary countries’ trade and economic characteristics. Our findings suggest that trade agreements like AGOA can yield positive effects, but careful consideration of various factors is necessary to maximize their benefits.