TRALAC - Trade Law Centre

Agoa III

Tuesday, 24 June 2003

Source: Whitaker Group (Washington, DC)

Under the leadership of former Assistant US Trade Representative for Africa, Rosa Whitaker, the Whitaker Group has mobilized an action committee of businesses, NGOs and faith-based groups to draft, promote and see enacted and implemented critically needed enhancements to the African Growth and Opportunity Act.

These enhancements, AGOA III for short, will further strengthen the competitive position of U.S. business and investment in Africa. They will add momentum to the continent's growth and development by spurring continued reform and investment flows and by knitting Africa's 700 million people ever more closely into the global economy.

Founding Co-chairs of the AGOA III Action Committee are Rosa Whitaker, Carl Ware of the Coca-Cola Corporation and Jack Kemp of Empower America.

Where we are

AGOA provides duty-free access to the U.S. market for a wide range of products from eligible African countries, while spurring African governments to make their countries attractive to U.S. investment. The Act was signed into law in May 2000. A preliminary package of improvements and corrections -- AGOA II -- was passed last year.

The Act is making an historic U.S. contribution to sub-Saharan Africa's development. Its passage marked a paradigm shift in Washington's thinking about the continent. There is now a firm consensus that trade and investment are an essential complement to foreign aid in fostering development and self-sufficiency in the region. AGOA was the first trade legislation approved by Congress since NAFTA seven years earlier.

Africans are experiencing real gains as a direct result of AGOA. Reliable estimates indicate the initiative has thus far generated some $9 billion worth of investment in productive capacity in sub-Saharan Africa countries to take advantage of improved access to the U.S. market.

Success stories abound. Lesotho is expecting $120 million in new investment because of AGOA. Economy-wide in Kenya, AGOA is expected to create 50,000 jobs directly and another 150,000 jobs indirectly. In 2001, companies getting ready for AGOA pumped $113 million in Madagascar's textile sector, generating 43,000 new jobs. Employment in Swaziland's textile sector more than doubled from 17 000 in 1999 to 40 000 as of January 2002.

Challenges remain. Though many African countries have seen a strong investor response to AGOA, and many have taken aggressive action to ensure they qualify for the Act's benefits, most need more time, and in many cases more assistance, to reap the harvest Congress meant to sow. Currently, AGOA expires in 2008. That date, as President Bush has advocated, should be extended considerably, and steps taken to ensure that Africa's preferences are not excessively diluted by agreements with other countries and regions.

Garment importing countries will soon no longer be allowed to impose quotas on hyper-competitive exporters like China. That will reduce the value of the preferences granted Africa under the original AGOA, whose central objectives will be thereby undermined. Steps must be taken to ensure sub-Saharan Africa keeps the leg-up Congress intended.

African economies must diversify. African countries need a greater chance to become vertically integrated apparel producers, expanding their existing cotton production and developing competitive textile capacity. They need market-based incentives in all sectors where their natural and human endowments might give them a comparative advantage. They need partners and capacity-building to help them identify and exploit the broad, but as yet under-explored range of opportunities that AGOA offers.

Africa should add value to its abundant raw inputs in Africa -- rather than exporting them to be processed by other - and thus unshackle itself from the tyranny of commodity prices. In this context, the nascent African petrochemical sector, turning abundant regional resources into value-added downstream products, stands to get an important lift from an AGOA extended beyond its current 2008 cut-off date.

AGOA is popular in Africa. Supporting it makes sense for U.S. companies not only because of the direct commercial opportunities it offers them, but as a way of demonstrating commitment to the continent and solidarity with the vision for its future, which its leaders are starting to articulate through initiatives like the New Partnership for Africa's Development (NEPAD).

What has AGOA achieved so far?

It has helped Africa grow both as a market for U.S. exports and as a supplier of competitively priced imports, benefiting both consumers and many U.S. business sectors, including energy, retail and automotive.

It has advanced America's global trade agenda by fostering a real sense of partnership with African countries whose support was decisive in starting the Doha round after the debacle in Seattle.

It has continued to garner strong support from across the political spectrum, with the Bush administration embracing it as enthusiastically as its predecessor.

It has stimulated job-creating investment in beneficiaries, while simultaneously stimulating improved governance and market-friendly economic, political and regulatory reforms.

Growth, employment and reform mean stability and vaccinate countries from becoming breeding grounds for terrorists.

The tide of support for AGOA made possible the simultaneous re-launch of the Caribbean Basin Initiative.

What are the main challenges now? There is not enough time, under the Act's existing deadlines, for countries to reap the full benefits.

Many African and American businesses lack basic skills in creating modern business and marketing plans that would facilitate finding joint partners in trade ventures.

U.S.-Africa agricultural trade is hampered by a lack of understanding by producers of the working of the phyto-sanitary rules and other financial and technical obstacles.

The coming global elimination of quotas may expose African textile and garment industries, which the Act intended to support, to excessive competition before they are in a position to compete.

U.S. Customs continues to create uncertainty in the market with overly narrow and hard-to-understand interpretations of what may or may not enter the U.S. duty free under AGOA.

African countries still face considerable constraints in developing and administering effective trade policies.

A preliminary list of what AGOA III might contain

Enhancements are needed to build on the positive momentum that AGOA has already generated for economic reform, and to remove obstacles African countries and their U.S. partners continue to face as they grasp AGOA opportunities. Possible provisions:

Extend, enhance and protect meaningful AGOA preferences well beyond 2008 Already suggested by President Bush, this would give African countries more time to become competitive players in the global economy, and would create a more predictable playing field for U.S. business.

Simplify and clarify product and origin definitions currently subject to narrow and exclusionary interpretation by U.S. Customs.

Encourage the provision of technical assistance to African and U.S. businesses interested in trade.

Support African compliance with U.S. phyto-sanitary standards for agriculture by providing technical assistance to producers.

Encourage the use of U.S. Department of Agriculture programs to promote the sale of American agricultural products, African trade-related infrastructure and loan programs for U.S.-Africa trade ventures.

Enhance textile and apparel benefits for least developed African countries by allowing some use of non-African, non-US fabric in duty-free apparel beyond the current 2004 cut-off date.

Protect AGOA incentives for investment to promote a vertically integrated fiber, yarn, fabric and apparel industry in Africa.

Strengthen the Foreign Agricultural Service presence throughout the region.

Create a "short supply" standard for yarn and fabric not produced in the US but which would be allowed duty-free access if produced in Africa.

Exempt African textile and apparel production from economic impact criteria for Ex-Im Bank and OPIC support.

Encourage World Bank Group and African Development Fund financing for textile and apparel production.

Address transportation cost and scheduling issues that affect the competitiveness of African goods in the US market.

The AGOA III Action Committee

The AGOA III Action Committee will:

* Initiate and build a coalition of both the import and export business communities,

* NGOs, the faith-based community and the African diplomatic corps to promote AGOA III,

* Help draft the legislation,

* Coordinate the constituencies and groups mobilized behind the initiative,

* Respond to media and other inquiries and coordinate the Coalition's public message,

* Represent the AGOA III constituency before Congress,

* Lead a bipartisan advocacy campaign to secure passage,

AGOA III was launched officially on June 10 to commemorate the third anniversary of the passage of the first AGOA legislation. Tributes were paid to 10 Congressional champions of the original AGOA legislation and Uganda President Yoweri Museveni, the first African President to endorse AGOA.

The Structure of the AGOA III Action Committee

The new AGOA III Coalition is a 501(c)(6) tax-exempt, non-profit corporation. We expect that major American corporations operating in Africa will be the principal dues-paying co-chairs of this organization, and, as members of the Action Committee's Leadership Committee, they will be key players in the national public relations and advocacy efforts for the AGOA III Action Committee. Their respective sectoral expertise and input will be crucial to the passage of the legislation.

The AGOA III Coordinating Committee members will be at the forefront of policy development by establishing and managing sectoral working groups. This group will be composed of a number of business leaders of the first AGOA coalition effort. Selected members of the AGOA III Coordinating Committee will be invited to sit on the Leadership Committee.

Individual and small business members will be asked to contribute as supporting members of the Committee, and NGOs and faith-based organizations will be invited to join the Committee without a membership fee. These members will be encouraged to take an active part in the Coalition's working groups and in efforts to promote AGOA III among the general public.

The Committee will comprise three sectoral working groups, on agriculture, export credit agencies and textiles and apparel, and four functional working groups, focusing on advocacy and outreach, the executive branch, Congress and the media.

What the Whitaker Group brings to the table

The Whitaker Group is a premier consulting firm that facilitates trade, investment and commerce in Africa.

Rosa Whitaker, President and CEO, served as the first Assistant U.S. Trade Representative for Africa in both the Clinton and Bush Administrations. She was one of the hands-on architects of AGOA and helped develop the bipartisan Trade and Investment Caucus. in the U.S. Congress. She started USTR's office of African Affairs and was the Administration's lead negotiator for trade agreements with African countries.

Simon Barber, Strategic Partner, played a key role explaining to and developing support for AGOA in South Africa, and beyond, as Washington correspondent for Business Day, South Africa'leading U.S. business newspaper. Now with the W.G., he brings a unique set of research, analytical and advocacy skills, and background understanding, to advance the AGOA agenda.

Gregory Simpkins, Senior Associate, has worked on AGOA in three capacities since its introduction: helping gain its passage while working for the House Subcommittee on Africa, building business support while working for the Corporate Council on Africa and working to provide necessary technical assistance to implement AGOA with the Foundation for Democracy in Africa. Most recently, he was instrumental in the establishment of the AGOA Civil Society Network.