TRALAC - Trade Law Centre

Trump upholds AGOA trade preference eligibility criteria with Rwanda

Tuesday, 31 July 2018

Source: CNBC Africa

Today, President Donald J. Trump issued a proclamation regarding Rwanda that enforces the eligibility criteria established by Congress for trade preferences under the African Growth and Opportunity Act (AGOA). 

This proclamation suspends the application of duty-free treatment for all apparel products from Rwanda.  

“We regret this outcome and hope it is temporary,” said Deputy United States Trade Representative C.J. Mahoney.

“But if the AGOA eligibility criteria are to have any meaning, they have to be enforced—particularly where, as here, other AGOA members took action in order remain in compliance. 

The President’s action today is measured and proportional.  It suspends AGOA benefits for a class of imports that totaled $1.5 million in 2017, which accounts for approximately only 3% of Rwanda’s total exports to the United States. 

Rwanda remains eligible to receive non-apparel benefits available under AGOA, and the President’s action does not affect the vast majority of Rwanda’s exports to the United States.  We look forward to working with Rwanda to resolve this issue so that benefits in the apparel sector may be restored.”

When Congress first passed AGOA in 2000, it imposed certain eligibility criteria to encourage recipient countries to adopt free market-oriented development models and to ensure fair market access for United States firms.  The AGOA eligibility requirements include: “making continual progress toward establishing . . . a market-based economy . . . [and] the elimination of barriers to United States trade and investment.”  19 U.S.C. 3703(1)(A),(C).  The United States Trade Representative (USTR) is charged with enforcing AGOA’s requirements.

An AGOA issue relating to new barriers to United States trade and investment first arose in 2015 when the East African Community (EAC) established a plan to ban imports of used clothing and footwear.  The USTR’s engagement on this issue intensified in 2016 when the EAC announced it would phase in the ban by 2019. 

Thereafter, three EAC AGOA beneficiaries—Kenya, Tanzania, and Uganda—worked with the United States and took actions to revise their policies.  As a result, they continue to receive full benefits under AGOA.  Unfortunately, Rwanda has insisted on keeping in place a policy that has raised tariffs on imports of used apparel and footwear by more than one thousand percent, effectively banning imports of these products.

United States efforts over the past two years to address this issue with the Government of Rwanda have been unsuccessful.  As a result, on March 29, 2018, the President determined that Rwanda was not making sufficient progress toward the elimination of barriers to United States trade and investment and was, therefore, out of compliance with AGOA’s eligibility requirements. 

The President informed the Government of Rwanda of his decision in March, giving Rwanda an additional 60 days to engage with the United States to resolve this problem before the suspension of its apparel benefits under AGOA. Rwanda has, however, continued to insist on retaining its tariffs. The President, therefore, has decided to suspend Rwanda’s duty-free access to the United States for apparel products until Rwanda comes back into compliance with AGOA’s eligibility requirements.

The President believes suspension of AGOA’s benefits, instead of termination of Rwanda’s status as an AGOA beneficiary, is the appropriate remedy in this instance.  The Administration supports continued engagement with the aim of restoring market access for used apparel and bringing Rwanda into compliance with AGOA’s eligibility requirements.  The President can reinstate full AGOA benefits for Rwanda once he has determined that Rwanda is meeting the eligibility criteria laid out by Congress.

Background

On March 21, 2017, the Secondary Materials and Recycled Textiles Association (SMART) submitted a petition asserting that the EAC’s 2016 decision to phase in a ban on imports of used clothing and footwear imposes significant economic hardship on the United States used clothing industry and is inconsistent with the AGOA beneficiary criteria for countries to establish a market-based economy and eliminate barriers to United States trade and investment. 

The petition requested an out-of-cycle review to determine whether Kenya, Rwanda, Tanzania, and Uganda – the AGOA-eligible members of the EAC – are meeting AGOA’s eligibility criteria.  In its petition, SMART estimated that 40,000 United States jobs related to the collection, processing, and distribution of used clothing and footwear would be negatively affected by the ban.  SMART also asserted that the ban would negatively affect tens of thousands of jobs in the secondhand clothing sectors in EAC countries.

The USTR accepted the SMART petition and initiated an out-of-cycle review of Rwanda, Tanzania, and Uganda’s AGOA eligibility on June 20, 2017.  A public hearing was held on July 13, 2017, in Washington D.C., at which officials from Rwanda, Tanzania, Uganda, and the EAC Secretariat testified. 

The USTR determined that an out-of-cycle review of Kenya’s AGOA eligibility was not warranted due to the government’s commitment to reverse the tariff back to pre-2016 levels, effective July 1, 2017, and a commitment not to ban imports of used clothing through other policy measures.  Tanzania and Uganda made similar commitments during the course of the out-of-cycle review. 

On March 29, 2018, the President determined that Rwanda was not making sufficient progress toward the elimination of barriers to United States trade and investment, and therefore was out of compliance with AGOA’s eligibility requirements. 

In particular, Rwanda continued to impose prohibitive tariff rates on imports of used apparel and footwear and indicated its intent to continue to phase in a ban of these products.  As a result, the President notified Congress and the Government of Rwanda of his intent to suspend duty-free treatment for all AGOA-eligible apparel products from Rwanda after 60 days.

In order to qualify for AGOA trade benefits, partner countries must meet certain statutory eligibility requirements, including making continual progress toward establishing market-based economies, the rule of law, political pluralism, and elimination of barriers to United States trade and investment.

 

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