TRALAC - Trade Law Centre

USTR urges extension of AGOA's textile provision

Thursday, 10 May 2012

Source: Tax News - Global Tax News

The United States Trade Representative has confirmed that the Administration is committed to boosting trade with African nations through the African Growth and Opportunity Act (AGOA) and, in that respect, renewal of its Third-Country Fabric (TCF) provision is seen as crucial.

AGOA was signed into law by President Clinton in May 2000, with the objectives of expanding US trade and investment with sub-Saharan Africa, stimulating economic growth, promoting a high-level dialogue on trade and investment-related issues, and facilitating sub-Saharan Africa’s integration into the global economy.

Total two-way goods trade with sub-Saharan Africa countries during 2010 was USD82bn. The top US export markets in sub-Saharan Africa for 2010 were South Africa, Nigeria, Angola, Ghana and Ethiopia. Non-oil imports under AGOA totalled USD4bn and included value-added products such as textiles and apparel, footwear, processed agricultural products and manufactured goods.

AGOA is described as the cornerstone of America’s trade and investment policy with sub-Saharan Africa. At the centre of AGOA are substantial trade preferences that, along with those under the US Generalized System of Preferences (GSP) tariff treatment, allow almost all goods produced in the AGOA-eligible countries to enter the US market duty free.

While general GSP covers approximately 4,600 items, AGOA GSP applies to more than 6,400 items. AGOA GSP provisions are in effect until September 30, 2015.

However, AGOA’s performance and effectiveness are said to be closely tied to its TCF provision, which is set to expire in September 2012, as that provision is said to be crucial to the continued survival of Africa’s textile and apparel industry. Under the TCF provision, lesser-developed beneficiary countries enjoy an additional preference in the form of duty-free/quota-free access for apparel made from fabric originating anywhere in the world.

The TCF provision has, the US government says, “generated hundreds of thousands of jobs in sub-Saharan Africa, and has helped American retailers reduce their costs, diversify their supply chains, and provide greater low-cost apparel options for US consumers”.

Congress has extended the TCF provision twice before with bipartisan support. However, with global sourcing decisions for apparel typically made up to nine months in advance, failing to extend the TCF provision now means that apparel buyers could move production out of AGOA beneficiary countries, which will likely result in significant job losses and factory closures in Africa.