WASHINGTON — After a successful Congressional fight last year to have the African Growth & Opportunity Act renewed, the U.S. Trade Representative’s office is reviewing and developing a long-term view on trade with the continent.
USTR Michael Froman led a hearing Thursday to gather input from the private and public sectors to help the Obama administration develop policy recommendations for Congress on “deepening the U.S.-Africa trade and investment relationship.”
“For Africa, deepening trade and investment ties with the United States will be increasingly critical in the face of the sudden economic headwinds the continent is encountering,” Froman said. “With commodity prices falling and China transitioning toward lower growth, China’s imports from Africa appear to have fallen by half in a single year, from above $110 billion in 2014 to barely $50 billion in 2015. Africa’s next decade of sustainable growth will require new sources of demand — in agricultural and manufacturing trade, internal integration, and in capitalizing on the continent’s boom in Internet access and mobile use, rather than the resource boom of the last 10 years.
“America needs Africa and Africa needs America, but how do we go forward from here?” he asked.
Congress passed a 10-year renewal of the AGOA trade preference program last summer, marking the longest extension in the program’s history.
Froman said the Obama administration, which conducted a yearlong review last year on the trade preference program, is now reviewing whether the U.S. needs to develop new trade policies for the “new Africa.”
“This is a question that is also on Congress’ mind, with the AGOA extension legislation passed last summer asking us to assess the prospects of putting us on a path to more permanent, reciprocal trade arrangements,” Froman said, noting it is not necessarily a one-size-fits-all proposal. “What we do know is that certainly new winds are blowing. Countries – including in Africa – are increasingly moving toward more stable, permanent and mutually reciprocal arrangements. The United States has [free-trade agreements] with 20 countries today, compared to three in 2000, though none with sub-Saharan Africa.”
African countries are also pursuing regional integration and have signed reciprocal agreements with the European Union, Froman said, pointing to Canada and the European Union as “increasingly refocusing the scope of their preference programs on the poorest countries.”
“We know — after a yearlong review of AGOA — that tariff preferences standing alone are often not sufficient to generate significant new trade and investment,” Froman said. “Developing regional markets and consistent regional policies are important, and capacity constraints such as thick borders and poor infrastructure can have a dramatic effect.”
The program is an important one for the U.S. fashion industry. Industry officials keep 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.
From 2000 to 2014, apparel imports to the U.S. from Africa under AGOA tripled. Between 2013 and 2014 alone, there was a 22 percent increase in imports to $1.1 billion, with the top five apparel-exporting countries being Kenya, Lesotho, Mauritius, Swaziland and Madagascar. Tanzania and Ethiopia were also emerging and attracting new business.
Stephen Lamar, executive vice president at the American Apparel & Footwear Association, testified to three key points: Africa can produce a vertical, responsible and competitive industry.
“Africa features prominently in the business decisions of our members,” he said. “In a recent survey, half our members told us they are currently sourcing in Africa. Sixty percent of those not sourcing there now tell us they expect to start shortly. Many point to the African Growth and Opportunity Act and its 10-year renewal as a main reason why they are in Africa and why they are now looking at expanding their business there.”