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Inaction by Senate Democrats Said to Threaten Extension of Key Africa Legislative Initiative

Published date:
Friday, 21 May 2004

In a remark at an Ethio-American Business Community Forum luncheon held the previous Thursday at the Hilton, Ambassador Aurelia E. Brazeal, said that she hoped to see Ethiopian entrepreneurs and the public at large significantly increase their share of the benefits from AGOA in the next couple of years. Under the AGOA textile and apparel visa arrangements, Ambassador Brazeal said, beneficiary countries can export handloomed, hand-made and folklore articles to the US but the eligible products must be determined through bilateral consultations between the individual country and the US, plus the products must be certified by the country's competent authority as a handloomed, handmade or folklore article.

To date, handloomed fabrics and hand-made articles from Kenya, Botswana, Lesotho, Malawi, Swaziland, Namibia and Zambia qualify for duty-free treatment under AGOA.

" I hope that Ethiopia soon will submit its request for bilateral consultations so it might benefit under this scheme. Ethiopia has the rugs, scarves, placemats, tablecloths, clothes and other handloomed articles to make a success in this AGOA provision," Ambassador Brazeal said.

Speaking on the occasion also, Ato Tadesse Haile, Minister of State for Trade and Industry, stated that Ethiopia did not benefit from AGOA opportunities as it should. This, he said, should be changed for the better and expressed his desire for AGOA to continue till 2008. He said his government would do everything possible to encourage those engaged in AGOA by way of providing facilities such as reduced land lease, less collateral for finishing construction of buildings, and import of secondhand machinery.

He said that there was a bright future in AGOA. Some members of the Ethio-American Business Community Forum felt that there was a need for market research for Ethiopian products in the USA. They expressed their concern that it was not easy to penetrate the American market.

United States Ambassador Addresses Ethio-American Business Forum

The US Ambassador to Ethiopia, Aurelia E. Brazeal, addressed a luncheon given at the Hilton the previous Thursday by the Ethio-American Business Forum. In her address Ambassador Brazeal stressed the importance of AGOA and urged African countries to take advantage of the opportunity offered by AGOA. Following is the text of the address.

"Esteemed members of the Ethio-American Business Forum and distinguished guests: Good afternoon! Thank you for inviting me to talk to you for the third time. I had the pleasure to speak at one of your early organizing meetings and mentioned my Embassy's interest at that time in promoting bilateral trade relations and investment in general. I also spoke at an evening event about U.S.-Ethiopian trade relations in connection with the 100th anniversary of U.S.-Ethiopian diplomatic relations. At that time I stressed our interest in supporting a faster and deeper economic reform process in Ethiopia. This time I was asked to talk about the African Growth and Opportunity Act (AGOA) - what it is, the potential benefits Ethiopian exporters could gain from it, and the challenges in getting started.

"There has been much publicizty about AGOA, the historic, bipartisan legislation enacted in the year 2000.

AGOA seeks to increase trade by allowing qualifying Sub-Saharan African countries to export many products to the United States, duty AND quota-free. AGOA provides eligible countries the same liberal access to the U.S. market, as those countries that have no Free Trade Agreement with us. Thirty-seven countries now qualify for AGOA benefits. It is clear, based on experience to date, that AGOA can change the course of trade relations between African and the United States for the long term. At the same time, it will help millions of African families find opportunities to build prosperity.

"AGOA expands the list of products, which eligible countries may export to the United States duty free under the Generalized System of Preferences (GSP). While the standard GSP covers approximately 4,600 items, the AGOA GSP applies to more than 6,400 items. This larger product coverage under AGOA provides a wider array of opportunities in a variety of sectors (not only in textile and apparel products). For example, exporters from non-AGOA countries sending the following products to the United States have to pay a duty of about 32% for sports footwear, 17.6% for handbags, 17.5% for apparel, 12.5% for glassware, 8% for luggage, 7% for peach jam, and 6.8% for roses, just to mentiona few.

Exporters of these same products to the U.S. from AGOA countries pay zero duty-quite an advantage, especially in building market share.

"Another AGOA opportunity I get excited about because Ethiopia produces these articles is the provision on hand loomed, handmade and folklore articles. Under the AGOA textile and apparel visa arrangement, beneficiary countries can export hand loomed, handmade and folklore articles to the U.S. but the eligible products must be determined through bilateral consultations between the individual country and the U.S., plus the products must be certified by the country's competent authority as a handloomed, handmade, or folklore article. To date, handloomed fabrics and handmade articles from Kenya, Botswana, Lesotho, Malawi, Swaziland, Namibia and Zambia qualify for duty-free treatment under AGOA. I hope that Ethiopia soon will submit its request for bilateral consultations so it might benefit under this scheme. Ethiopia has the rugs, scarves, placemats, tablecloths, clothes and other handloomed articles to make a success in this AGOA provision.

"Let me continue to elaborate on AGOA's concrete benefits for the African continent. AGOA has already delivered results. Since its enactment in 2000, many Sub Saharan African economies have expanded- despite a worldwide economic contraction. U.S imports under A GOA (excluding GSP) have almost doubled from their 2001 level of $ 7.6 billion to their 2003 level of $ 13.2 billion. At the same time, 150,000 AGOA-related jobs have been created along the $ 340 million in foreign investment in only the five leading AGOA countries. The positive results of AGOA demonstrate Africa's potential to increase its share of world trade.

"Please be patient with me as I quote some more statistics.

Total African exports to the U.S. in 2003 under AGOA increased 55 percent to $14 billion, well over half of Sub-Saharan Africa's overall exports to the United States.

"Excluding energy products, AGOA exports in 2003, including products covered by GSP provisions, increased by 32 percent to just under $3 billion. After oil, the biggest AGOA export has been apparel. Sub-Saharan Africa exported over $ 1.2 billion in a apparel under AGOA in 2003, almost 50 percent more than in 2002. Other AGOA exports include transportation equipment, minerals and metals, agricultural products, and chemicals. AGOA has been successful in crating thousands of jobs across the continent.

"I could give examples of more concrete success stories from Lesotho to Kenya but I would rather simply quote an Ugandan diplomat who spoke about AGOA and Africa, in 2003. Ambassador Edith Ssempala said "African nations are extremely grateful for the aid they receive but they would much rather have increased levels of international investment and trade than aid." She said, "AGOA is Africa's attempt at drawing the attention of the international community and showing them just how much potential Africa has. " "We hope," she continued, "through AGOA, the would will see the benefits American trade and investment companies enjoy throughout Africa, and then develop an interest in the continent." "AGOA is a step in the right direction for the economic future of Africa," Ambassador Ssempala conluded.

I agree with her points.

"The main point I want to stress, is that the passing of the AGOA legislation signaled that the United States wanted Africa to become an important trading partner. And Africa has responded. Please let me provide one concrete example from Ethiopia. In Ethiopia, Dr. Worku Zewde was the pioneer to take advantage of the benefits offered by AGOA, by manufacturing and exporting sportswear to the united States. His company, Garment Express P.L.C., manufactures high quality baseball, basketball and football uniforms and other sportswear for export to the U.S. Garment Express P.L.C. is now the largest AGOA exporter from Ethiopia. Recently, the state-owned Nazareth Garment Share Company also started exporting garments to the U.S. In Marc 2004, that company exported some $50,000 worth of garments, counting for about 63 percent of Ethiopia's AGOA exports. It is clear that, given its potential, Ethiopia can expand its advantages under AGOA. When the garment manufacturing and other factories which are in the pipeline become operational, Ethiopia's exports in the textile categories under AGOA should increase even more.

"Let me briefly address some challenges African countries face in taking advantage of AGOA. Most of the challenges are supply-side constraints which include low levels of local production capacity, of economic efficiency and of in fastructure-specifically transportation and communications-that continue to hinder producers from competing effectively in the marketplace. When we look at the major winners from AGOA, they have a combination of factors in their favor: a reasonably conducive business framework that allows businesses to set up and operate relatively freely, an investment-friendly governmental policy environment, a relatively robust infrastructure, good transportation connections, and a stable political environment.

The countries benefiting most from AGOA also have improved customs operations, increased access to credit for the private sector, have government policies committed to fighting corruption and increasing transparency, and finally have policies in place to build strong government and non-governmental institutions.

"Another important challenge is that the current global system of quotas on textile and apparel is set to expire on January 1,2005. What happens at the point is that textile and clothing trade will be integrated into the normal WTO rules-after 30 years of restrictions. Africa, under AGOA, would still have the advantage over competitors elsewhere in the world to export duty-free apparel to the U.S., but there would no longer be any U.S. restrictions on the quantity that, for example, china could export to the U.S. Africa producers will then have to compete more effectively and gain market share based on competitiveness rather than quotas. So the time to get moving is today.

"Now let me look to the future. There has been much speculation, in the media and in conversation, about the next version of AGOA. A bipartisan group led by House Committee on Ways and Means Chairman Bill Thomas introduced the African Growth and opportunity (AGOA)Acceleration Act on April 1, 2004. on that day, Congressman Thomas stated, "Expanded trade through AGOA has done more to improve fundamental economic conditions within Africa than aid. Many jobs have been created, allowing many poor Africans to support themselves and their families for the first time. That is what we have introduced bipartisan legislation that will accelerate AGOA."

This new legislation (AGOA III) includes the following four priorities:

1. Providing an overall extension of AGOA until 2015, in line with President Bush's commitment to see AGOA extended beyond 2008;

2. Adding technical assistance provisions that will make it easier for African countries to develop the framework to participate in the benefits;

3. Fixing problems encountered with Customs: and

4. Extending third country fabric provisions for 3 years (from September 2004 until 2007) for the lesser-developed African countries, such as Ethiopia, including a phase-out of benefits in year three. In the existing AGOA legislation, under a special rule those eligible countries which had a per capita GNP under $ 1,500 in 1998, will enjoy until September 30, 2004, duty-free access for apparel made from fabric originating anywhere in the world. African courtiers including Ethiopia have expressed a strong desire to extend the third-country fabric provision, because sufficient fabric-making capacity still does not exist in the region, and because the countries are expecting a significant drop in orders with the elimination of world-wide apparel quotas in January 2005.

"AGOA III has not yet been passed by the U.S. Congress, but the Ways and Means Committee of the Hose of Representatives held a hearing on May 5. An uncommon spirit of bipartisanship prevailed with both republicans and Democratic members expressing support. Congressman Thomas said at the session that he expected the bill to move through the House of Representatives and become law without much opposition. The bill would then have to go to the senate and then on to the president for signature.

"With the continued improvement in the investment and business climate we see in Ethiopia. My Embassy is witnessing increased interest from U.S. and other businesses to invest in Ethiopia. Recent investor experiences highlight positive developments that have happened at the federal level to improve support services for foreign and domestic investors.

Several U.S. agricultural investors have told us that "the time is ripe" for starting investments in Ethiopia, though some investors still experience bureaucratic problems at the regional and local levels. We believe that the total potential investment from U.S. investors in the agricultural sector alone could reach several hundred millions of dollars in the next few years, if the improvements in the investment climate continue at the current pace. We also hope that Ethiopia can become qualified to access the new U.S. Government program, the Millennium Challenge Account (MCA), even from next year provided potential and economic reforms continue, because grants from the MCA can help spur economic growth and attract the investment needed to finance Ethiopia's future.

"But let me conclude by returning to AGOA. As I mentioned earlier, since its implementation, AGOA has facilitated substantial new investments, created jobs, and helped form business linkages that will foster new investment opportunities and increase prosperity in Sub-Saharan Africa.

It has helped to promote Sub-Saharan Africa's integration into the multilateral trading system and fostered a more active Sub-Saharan African role in global trade. It has also contributed to economic and commercial reforms that make African countries more attractive commercial partners for U.S. companies. I very much hope to see Ethiopian entrepreneurs, and the public at large, significantly increase their share of the benefits from AGOA in the next couple of year."

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