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U.S. African Chamber of Commerce encourages better organization regarding AGOA

Published date:
Sunday, 28 June 2009

The U.S. African Chamber of Commerce says that Africans could lose the African Growth and Opportunity Act (AGOA) if not better organized.

The staff of the Senate Finance Committee late last week continued its apparent preparation for a bill altering U.S. preference programs by discussing their importance and possible program changes with officials from Colombia, India, Brazil and Kenya, according to informed sources.

In the June 19 meeting, officials from these countries provided insights into different aspects of the programs, under which the United States provides duty-free access to developing countries' exports, sources said.

They were asked for their views on the importance of these programs for their respective economies, and for their development, but also about the potential impact of graduating products from the duty free access provided by the Generalized System of Preferences (GSP), these sources said. The official representing Brazil made a PowerPoint presentation which showed that the percentage of exports from Brazil benefitting from GSP have fluctuated over the past 10 years from 16 to 9 percent. He told the staff that the Brazilian private sector believes these fluctuations are being caused by the uncertainty of the reauthorization of GSP.

He also emphasized the importance of GSP for the development of two poor regions of Brazil, but conceded there are no hard data to show the exact impact, according to sources.

The Brazilian official also made the case that whenever Brazilian products were graduated from the GSP because they met the competitiveness threshold, they lost their footing in the U.S. market and were replaced by products from China or developed countries.

He also argued that it would be a mistake to graduate products from GSP because they are not import-sensitive and 50 percent of the GSP imports are the result of intra-company trade between U.S. companies and their foreign subsidiaries.

In the meeting, India was also asked to comment on the issue of graduating products from the GSP, sources said.

Graduating products from India and Brazil from the GSP has been an important issue for Finance Committee Ranking Member Charles Grassley (R-IA). Last week, Grassley said there should be a "clear policy" for graduating advanced developing countries from the GSP, and said the benefits of the program should be spread more evenly between the more than 130 countries that currently receive GSP trade benefits.

Grassley also questioned whether the U.S. should provide benefits to countries that have not backed its demands in the stalled Doha round of negotiations in the World Trade Organization (Inside U.S. Trade, June 19).

In the June 19 meeting, the representative of Colombia focused on the importance of the Andean Trade Promotion and Drug Eradication Act in terms of job creation and exports from that country, but also emphasized that a temporary program is less attractive than the permanent market access that would be provided through the free trade agreement that the U.S. and Colombia have negotiated, according to informed sources.

The Colombian official also emphasized that even if that FTA were passed this year, Colombia would still need the APTDEA preferences until the FTA were implemented, according to these sources. The official did not address whether the ATPDEA should continue once the FTA is implemented, which is the case with the Peru FTA. This allows Peru to take advantage of rules of origin for apparel that are more favorable than those under the FTA.

The ATPDEA is now scheduled to expire on Dec. 31, 2009, and Congress is expected to debate possible reforms to that program and the GSP this year. But congressional aides and other observers say they do not expect reform legislation to pass this year.

Kenya is a beneficiary of the African Growth and Opportunity Act (AGOA), and its representative requested that the AGOA preferences be extended at least 10 years beyond 2015 during the meeting with Finance staff.

He also told the Finance briefing that preference programs should not be extended uniformly to all least-developed countries, since it would give them an unfair advantage over AGOA countries, particularly in terms of apparel exports to the U.S., according to a Kenyan official.

He cited as such competitors Cambodia, Bangladesh and even some African countries, the official said. African countries often have higher production costs, due to factors such as infrastructure and supply-side capacities, than countries such as Bangladesh, the official said.

"If you look at textiles someone would rather go and invest in Bangladesh because the cost of production would be much lower in Bangladesh than it would be in Kenya," the official said.

The African push against uniform preferences for the world's poorest countries was publicly echoed by Stephen Hayes, president and CEO of the Corporate Council on Africa in his prepared testimony in a June 24 hearing on U.S.-Africa trade relations before the House subcommittee on Africa and global health and the subcommittee on commerce and consumer protection.

"(As) egalitarian as it may sound, we would caution against extending preferences to all LDC countries," Hayes said. "Many countries such as Bangladesh and Cambodia already have advantages, and preferences extended uniformly will undercut Africa's ability to manufacture textiles and apparel, an important core of AGOA thus far."

These demands run counter to a proposal by an informal group of business associations and non-governmental organizations that want to create one preference program in the United States, with a more generous level of benefits for the world's poorest nations, and GSP like benefits for developing countries.

That proposal also foresees special treatment of AGOA countries through rules of origin and targeted capacity building.

But in order for it to be considered a viable option by policymakers, it has to have the support of AGOA countries (Inside U.S. Trade, April 10 & April 24).

The Finance Committee staff examination of preference programs is taking place at the request of Chairman Max Baucus (D-MT), and has taken place over a number of weeks involving various stakeholders (Inside U.S. Trade, June 19).

That process may lead to the introduction of a preference reform bill, if only to stimulate discussion on the issue for next year, sources said. Grassley last week said he would discuss his concrete ideas for preference reform in the summer with Baucus, and that the driver for such a bill should be changes to the GSP.

In the House, Rep. Jim McDermott (D-WA) has held off on introducing his version of a preference reform bill because he said he is now focused on the issues of climate change and health care reform. Ways and Means has discussed the possibility of a hearing on preference reform sometime this year.

"The USACC is the leading advocacy organization for U.S. African relations and emerging African markets. The USACC is the umbrella organization for African chambers of commerce and professional trade and business associations throughout the United States and abroad."

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