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government-trade

U.S. May Extend AGOA Third-Party Rule

REDUIT, Mauritius — The Bush administration will consider extending the legal provision that allows the poorer nations of sub-Saharan Africa to use fabrics from Asia or elsewhere in the world and still enjoy the trade benefits granted by the...

REDUIT, Mauritius — The Bush administration will consider extending the legal provision that allows the poorer nations of sub-Saharan Africa to use fabrics from Asia or elsewhere in the world and still enjoy the trade benefits granted by the African Growth & Opportunity Act, according to U.S. Trade Representative Robert Zoellick.

Speaking Friday, the last day of the AGOA Forum held in the island nation, Zoellick told reporters and delegates that the U.S. would look into extending the third-country fabric provision, which is currently set to expire in September 2004.

Currently, more than 80 percent of the AGOA-compliant imported apparel that enters the U.S. is made from third-country fabric. About half of the region’s apparel shipments to the U.S. qualify for duty- and quota-free treatment.

The proposal is sure to draw fire in the U.S. and Africa. U.S. textile interests have lobbied against the provision, contending it amounts to granting duty and quota breaks to major textile-producing countries such as China and India.

But there is also great debate within Africa about the measure, particularly in Mauritius and South Africa, where executives and governmental officials argue that the use of third-country fabric is hurting efforts to develop a vertically integrated apparel supply chain on the continent. They contend that a vertical supply chain will be critical come 2005, when quotas are dropped on textiles and apparel among World Trade Organization nations. That development will remove much of the reason for U.S. importers to ship fabric from Asia to Africa.

Officials from countries including Kenya and Lesotho argued that their national industries need the advantage the measure provides if they’re going to develop strong cutting and sewing capacities by the time quotas expire.

Zoellick acknowledged the issue will be a thorny one.

“If the third-party fabric provisions expire, the question is whether, say, Lesotho — which has been very successful — will be able to get the fabric, the yarn, across the range of materials to create the overall apparel product,” he said. “At the same time…for sub-Saharan Africa to be competitive after the quotas come off in 2005, you need to have vertically integrated textile operations because you want to have them all in one local region. It cuts costs and cuts time.”

The third-country measure would likely be included in any package of legislation intended to extend AGOA through 2015. As reported, President Bush last week said he would ask Congress to extend the act. Congressmen at the forum said they would support its extension.

Zoellick said he would work with Congress to create a measure that could “give, if need be, more time for some countries, but also not create disincentives” to further development of the region’s textile industry.