TRALAC - Trade Law Centre

Swaziland: New Labour Legislation Passed to Retain AGOA

Monday, 19 April 2004

Source: The East African (Nairobi)

A few influential Republicans and Democrats in the US Congress are jointly urging that a provision in the Africa Growth and Opportunity Act (Agoa) trade law, crucial to Kenya, be extended for three years beyond its scheduled expiration in September.

Under a new proposal known as the Agoa Acceleration Bill, Kenya and other eligible African countries could continue using Asian-made fabrics in their clothing exports to the US until 2007.

Kenya's representatives in Washington are lobbying hard for this extension because the country still produces little fabric of its own. Failure to extend the rule allowing use of fabric made outside of Africa or the US is likely to result in the loss of the 40,000 Agoa-related jobs that the Kenya Association of Manufacturers says were created in the past two years. The Agoa initiative grants duty-free entry to the US for many African products.

Retaining current Agoa fabric rules for another three years will empower millions of women in sub-Saharan Africa, says Kenya's ambassador to the US, Yusuf Nzibo.

"Women are the backbone of our economies and our hope for a bright future in Africa. By empowering women, Agoa will empower the whole of sub-Saharan Africa," Dr Nzibo said.

The move in Congress to extend the third-country fabric provision is consistent with the recommendations of a new World Bank study on the effects of the four-year-old Agoa.

"It is crucial that the liberal rules of origin for clothing products are not replaced, as planned, by restrictive rules in 2004," says the study by two World Bank economists. "The liberal rules of origin have stimulated and facilitated trade in clothing; their removal will substantially reduce the value of Agoa preferences for many of the beneficiaries."

But the same World Bank study finds that the Agoa initiative has been of scant benefit to most sub-Saharan nations, including Tanzania and Uganda. [Note: A copy of this study is available for download in AGOA.info's Research Reports download section]

More than 95 per cent of the economic benefits generated by Agoa have been reaped by only seven of the 38 countries eligible for the programme, the World Bank notes. Kenya is among those fortunate seven due to the value of its clothing sales to the US, but clothing exports account for only a small portion of US-Africa trade conducted under the terms of Agoa.

Two-thirds of the total value of Agoa trade in 2002 took the form of oil exports from just two African producers - Nigeria and Gabon.

The new Agoa Acceleration proposal seeks to incorporate a few additional forms of aid into the programme.

American technical assistance would be provided to improve Africa's tourism-related infrastructure and to enable more African farm exports to meet US sanitary standards.

The Bill, introduced early this month, would also extend the overall life of the Agoa programme to 2015. It is currently scheduled to expire in 2008.

Sponsors of the Agoa Acceleration Bill express optimism that it will be approved by the full US Congress and be signed into law by President George W Bush.

But even if the Bill wins approval, Kenya and other beneficiaries of Agoa's clothing provisions are likely to see their US exports shrink sharply in the coming year.

In accordance with a World Trade Organisation agreement, quotas on international textile and apparel sales will be eliminated at the start of 2005.

As a result, producers in Asia could gain a much greater share of the American clothing market.