WASHINGTON — Trying to boost the African Growth & Opportunity Act, a U.S. trade official on Tuesday said the Obama administration wants to extend a provision in the trade preference program that allows companies in sub-Saharan Africa to use fabrics from outside the region.
Connie Hamilton, deputy assistant U.S. trade representative for Africa Affairs, said in a conference call that the U.S. has already begun a dialogue with lawmakers on Capitol Hill about extending the entire AGOA, a U.S. trade preference program with 37 sub-Saharan African countries, beyond the expiration date of Sept. 30, 2015. Hamilton said the third country fabric provision, which expires on Sept. 30, 2012, needs to be addressed immediately. The provision allows companies making apparel in 25 eligible sub-Saharan African countries — those that are less developed — to use fabrics from outside of the region and still receive duty free benefits.
“We are not intending to expand it,” Hamilton said in response to a question about the third country fabric provision. “We are simply intending to extend it, probably for the life of AGOA, which is currently to 2015.”
The U.S. plans to send a high-level delegation to Lusaka, Zambia, for the 10th annual AGOA forum from June 8 to 10, where 1,000 delegates from the private and public sector are expected to attend. AGOA, which was enacted in 2000, was touted as a positive trade model to help the poverty-stricken countries in Africa develop economically by linking trade with aid for the region.
Apparel producers, lured by the duty free benefits in the trade program, originally saw the region as a new low-cost production platform and made investments there, but many subsequently ran into logistical and infrastructure challenges in Africa, while competition from Asia started to erode the benefits of AGOA. Apparel imports to the U.S. fell significantly over the past few years.
Retailers and apparel brands such as J.C. Penney Co. Inc., Wal-Mart Stores Inc., Levi Strauss & Co. and Gap Inc. have all had production in sub-Saharan Africa under the AGOA program.
Apparel imports from AGOA countries showed some improvement in the first quarter of the year, rising to 57 million square meter equivalents from 53 million SME a year earlier, according to the Commerce Department’s Office of Textiles and Apparel. Apparel imports from the region were valued at $192 million in the first quarter and reached $813 million in the 12 months ending March 31.
Hamilton said the U.S. is urging AGOA countries to diversify away from apparel production because there are many “unrealized” opportunities in other products.
“We think that apparel production will continue to be important on the continent, and we certainly encourage investors who are looking for a good place to do business and produce clothing to think about sub-Saharan Africa,” Hamilton said. “But we also know that the competition is really tough, and while I think a lot of producers on the continent are very competitive, we do think there are other things they can do.”