OPINION: What is at stake for the economy after Uganda's exit from AGOA?

By Brendah Akankunda

In recent developments, the Biden administration has made the decision to remove Uganda from the African Growth and Opportunity Act (AGOA), a significant trade preference program for African nations. It should be remembered that in 2016, the US under Trump’s administration threatened to remove the same trade preferences due to the tensions over the East African Community's proposed ban on second-hand clothing imports.

While this decision might raise concerns, the impact on Uganda's market might be less significant than anticipated.

The AGOA program has indeed played a role in Uganda's trade landscape, but its direct influence has been relatively contained.

Firstly, the number of Ugandan companies significantly benefiting from AGOA is surprisingly low. Less than 50 companies have been actively engaged in trade under this initiative.

While these companies have enjoyed favorable trade terms, their overall contribution to the country's economy remains relatively limited. With Uganda’s total exports at $5.47B as of 2022, the exported goods under AGOA were worth $10.6 million.

Moreover, Uganda's reliance on AGOA has been outweighed by its trade partnerships with other economic blocs.

The country has diversified its trade relations, engaging in robust trade with various partners beyond AGOA.

Uganda's trade with regional economic communities, such as the East African Community itself, the Common Market for Eastern and Southern Africa (COMESA), and the European Union, remains substantial.

This diversified trade network acts as a buffer, diminishing the potential blow resulting from the removal from AGOA.

The European Union and neighboring African economic blocs have been key trade partners for Uganda. Hence, while the exclusion from AGOA is a notable event, its immediate impact on the country's economy is expected to be mitigated by these established trade relationships.

The removal from AGOA should not be viewed in isolation, but rather within the context of Uganda's changing trade strategies.

The AfCFTA presents a vast opportunity for Uganda to diversify its trade relations and decrease its reliance on specific markets such as the U.S.

The country has already taken steps to enhance its regional trade ties by engaging more actively within the AfCFTA framework.

When the US suspended Rwandan textile under AGOA , Rwanda leveraged this setback as an opportunity for self-reliance and embarked on an ambitious journey to strengthen its textile sector.

The government introduced supportive measures, such as investment incentives, infrastructure development, and capacity-building programs to encourage local textile production.

Through these concerted efforts and strategic initiatives, Rwanda successfully transformed its textile industry, leading to increased local production, employment opportunities, and a burgeoning manufacturing sector that played a vital role in the country's economic development post-AGOA dismissal at a growth rate of 80%. This lesson can be emulated by Uganda.

It is crucial to note that while Uganda's exclusion from AGOA might result in some adjustments for the affected companies, the overall economic impact on the nation is likely to be limited due to the country's diversified trade portfolio.

However, efforts to bolster domestic industries and expand trade relationships with various global partners will be imperative in navigating this transition.

Brendah Akankunda is trade and investment policy analyst