TRALAC - Trade Law Centre

Expiring provision extended, but little to 'strengthen' the law

Tuesday, 20 November 2012 Published: | Politifact.com

Source: Politifact.com

Barack Obama came to the White House promising to "strengthen the African Growth and Opportunity Act to ensure that African producers can access the U.S. market and will encourage more American companies to invest on the continent." As we approach the end of his first term, he did achieve a legislative victory -- but it was largely to keep the status quo, rather than expanding the law.

The African Growth and Opportunity Act, signed by President Bill Clinton in 2000, allows several dozen sub-Saharan African countries to export to the U.S. duty-free. The program is set to expire in 2015.

The most concrete legislative action during Obama's term was the enactment of H.R. 5986, which included provisions affecting AGOA as well as trade with the Dominican Republic and Burma (sometimes called Myanmar). The bill extended provisions within AGOA that allowed African nations to import raw textiles from non-African nations, process them in Africa, and then export them to the United States duty free. This commerce totals $1.3 billion in products, said Rosa Whitaker, who heads the Whitaker Group, a consulting group specializing in trade with Africa.

When the law was written, this "third country” provision had been scheduled to expire as the African textile industry gradually improved its infrastructure, said Nathaniel Adams, a senior associate with the Whitaker Group. But the expected improvements never materialized, and policymakers realized that the sudden expiration of the "third country” provision threatened to throw perhaps 150,000 African textile workers out of a job.

The bill faced scheduling and procedural challenges in Congress, its substance wasn't controversial, Adams said. In fact, the House and Senate both easily passed the measure on the same day -- Aug. 2, 2012 -- the House by a voice vote and the Senate by unanimous consent. Obama signed it eight days later. "AGOA continues to be critical to expanding and diversifying our trade and investment relationship with Africa,” the White House said in a statement announcing Obama's signing of the bill.

Still, the bill Obama signed was essentially legislation to keep the status quo, rather than to "strengthen the act,” as Obama had promised. By contrast, an effort undertaken in 2009 by Rep. Jim McDermott, D-Wash., to extend the act to 2019 and expand its reach died in the 111th Congress and was not repeated in the 112th Congress.

There's one feature of the legislation that does expand AGOA, at least in a technical sense. The measure signed by Obama adds South Sudan to the list of nations that qualify for trade status under AGOA. South Sudan voted for independence in 2011, meaning it didn't exist as an independent state when the law was written.

In addition, Obama has made a number of other moves that could eventually bolster trade with Africa. In June 2011, the U.S. announced an African Competitiveness and Trade Expansion initiative to provide up to $120 million over four years to improve Africa's trade capacity, including for products that can enter duty-free under AGOA. The same month, the United States proposed a new partnership with the East African Community that would include a possible regional investment treaty and other trade agreements. Finally, Obama used his executive powers to designate 40 sub-Saharan African countries eligible for AGOA benefits in 2012.

Obama hasn't exactly fulfilled his promise to "strengthen the African Growth and Opportunity Act,” but he did push for extension of a crucial provision that was about to expire, and he expanded the roster of eligible countries to South Sudan. He also made some other moves to promote trade with Africa on the periphery of the act. We rate this promise a Compromise.