WASHINGTON — U.S. Trade Representative Michael Froman called for a “compact” with sub-Saharan Africa on Tuesday, as the U.S. considers ways to upgrade and expand the African Growth & Opportunity Act.
This includes “sufficiently” extending an apparel provision that helps retailers and brands, further reducing remaining tariffs and moving toward more bilateral or regional arrangements with some of the African countries. Froman, in a speech at the Brookings Institution, said the changing global trade paradigm is forcing the U.S. to consider new relationships with sub-Saharan Africa.
The Obama administration has undergone a year-long review of AGOA and is in consultation with Congress over renewing and updating the preference program that expires Sept. 30, 2015. Under the program, 40 of 49 sub-Saharan African countries are eligible to receive duty benefits.
“Given that Africa is home to the world’s fastest-growing middle class and six out of the top 10 fastest-growing economies in 2014, it’s easy to see why global companies like GE, Caterpillar and Procter & Gamble increasingly view engaging with Africa not as a choice, but as a necessity,” Froman said.
He said imports from AGOA countries to the U.S. have tripled, while U.S. exports to sub-Saharan Africa have increased “fourfold” to $24 billion from $6 billion in 2000.
One of the options the U.S. is considering for expanding AGOA is renewal of the third-country fabric provision for a “sufficient period of time to encourage meaningful investment and sourcing,” Froman said.
Industry officials are keeping a close eye on AGOA because Congress must renew the program and past delays have disrupted business. AGOA contains a stipulation known as the “third-country fabric provision” that helps companies producing in 27 least-developed countries that are part of the pact to use fabrics outside of the region and still receive duty-free benefits when shipping to the U.S. Apparel and textile imports from the 49 eligible countries hit 260.9 million square meter equivalents, valued at $983.8 million, for the year ending April.
Froman also noted that the U.S. is considering “expanding AGOA’s coverage while taking into account sensitivities here at home.” He said 97.5 percent of all tariffs on imported products from AGOA countries are already duty free and the U.S. is considering opening up the remaining tariffs in place. He said there are 316 tariff lines remaining on imported products, covering primarily “sensitive” agriculture and textile imports from sub-Saharan Africa.
Froman said the U.S. “does not intend to open up” tariffs on “extremely sensitive” imported products from Africa, such as certain products in the agriculture and textile areas, “but I think it bears some work to look line by line to see whether there are lines that could be opened up without violating sensitivities.”
But Froman stressed that tariff preferences alone are “not enough” for sub-Saharan Africa, which he said must also address a host of issues, ranging from infrastructure development to trade capacity building, training and support for young entrepreneurs and trade facilitation such as single border crossings consistent with customs procedures.
The Obama administration is considering moving larger African countries, such as South Africa, out of the preference program and developing bilateral relationships with them, Froman said.
William McRaith, chief supply chain officer at PVH Corp., made the case for Congress to extend AGOA and the third-country fabric provision, arguing that several major apparel and textile companies see a great potential for investment opportunity in Africa.
“In April of this year, PVH, together with several of the largest apparel companies and textile manufacturers, conducted an exploratory business mission to this region,” McRaith told lawmakers on the House Ways & Means trade subcommittee. “Many companies that went with us were skeptics, they were cynics, they really did not believe it was ready for this type of investment. After vising sites, looking at infrastructure, and meeting with ministries from different countries, our business delegation came to the realization that some African countries had already laid the foundations necessary to attract significant foreign investment and were prepared to undertake the commitments necessary to secure socially responsible investors.”
McRaith added: “There is great excitement among the apparel business community about this very near growth opportunity in Africa,” ranging from cotton growing and yarn spinning to weaving and apparel production, but it hinges on a clear commitment from Congress to renew AGOA for a lengthy period of time to spur the investment.