TRALAC - Trade Law Centre

AGOA Supporters in US Fighting to Extend AGOA

Monday, 04 September 2006

Source: The East African (Kenya)

American advocates of increased trade with Africa are warning that Kenya’s clothing-export sector will soon be devastated if Congress fails to amend the Africa Growth and Opportunity Act (AGOA).

At issue is a section of Agoa that ends preferential access to the US market next year for African clothing exporters who continue using fabrics made in Asia or in "third parties" apart from the US or Africa.

US clothing importers are thought likely to begin shifting orders away from Kenya and other Agoa-eligible countries in the coming months unless the third-party fabric allowance is extended well beyond its current expiration date of October 2007.

"Time is running out for hundreds of thousands of Africans who depend on jobs in the continent's apparel sector," warns a coalition of US-based trade groups. A refusal by Congress to extend the fabric allowance for several more years will effectively deal "a death blow to one of the continent's new industries," the coalition is telling US lawmakers. Weakening Agoa in this way will also undercut "one of the most successful US economic initiatives toward Africa in recent times," the advocates say.

Kenyan officials say that the country has already lost about 6,000 of the 30,000 jobs created as a result of Agoa’s enactment nearly six years ago. Those losses are due to last year’s termination of an international quota system that limited clothing exports to the US market by Asian competitors.

Because all the clothing exported to the US from Kenya is made from non-African fabric, thousands of additional jobs would be likely to be lost if the current Agoa fabric provision is not changed soon. An even more dire forecast was offered last week by The Wall Street Journal.

"The bottom line is that if the provision on using outside fabric dies, so will Africa's assembly industry, which is a particularly important source of jobs for women," the journal declared in an August 30 editorial. But a few powerful political figures in the US are calling for a multi-year extension of Agoa’s third-party fabric allowance.

Among them is Bill Frist, the majority leader of the US Senate. Mr Frist was one of the original architects of Agoa and has long championed efforts to assist Africa’s development.

Washington insiders say Frist wants the Senate to approve an extension of the fabric provision before he leaves office at the end of this year – probably in order to prepare for a 2008 presidential campaign.

Little time remains, however, for action on Agoa in 2006 by the highly deliberative US Senate. And even if Mr Frist does manage to prod his colleagues into amending Agoa, it is by no means certain that the US House of Representatives will give its required assent to a fabric-allowance extension.

The chairman of a House committee that would review a proposed extension is on record as opposing such a move. In addition, some Agoa supporters favour a different approach to saving endangered apparel manufacturing jobs in Kenya and other African countries.

Charles Rangel, a senior House member representing New York’s Harlem district, is backing an alternate scheme devised by a US-Africa trade lobbying group. This proposal aims to promote vertical integration of the textile and apparel industry in Kenya and elsewhere in Africa by requiring African producers to gradually make use of African-origin fabrics.

Supporters of this approach say it will more effectively encourage growth of an African fabric-making industry than will an extension of the third-party fabric allowance. Movement toward vertical integration was intended to be one of Agoa’s chief outcomes. But little progress has occurred in that direction in Kenya or other Agoa-eligible countries since the preferential trade system took effect in 2000.

The Wall Street Journal and other supporters of extending of the third-party fabric allowance argue that the value-added proposal favoured by Rangel and the US-Africa trade coalition has much less chance of winning approval from the US Congress. The value-added approach to rescuing Agoa "simply isn't going to work if fabric-making is not to Africa's comparative advantage right now," the journal wrote last week. Apparel makers are likely to shift their production elsewhere because of uncertainty along the production chain. This could kill Africa's assembly business. As one US apparel importer said, "You can't imagine how harmful the uncertainty is."