TRALAC - Trade Law Centre

US official rebuts Africa trade criticism

Tuesday, 18 December 2012 Published: | Financial Times

Source: Financial Times

The Africa Growth and Opportunity Act, a US law passed in 2000, was geared to enable African countries to export over 4,000 products quota-free and duty-free to the US.

But a recent paper published by the Centre for the Study of African Economies at Oxford University claimed the AGOA had been inadvertently allowing Chinese apparel producers to send products to the US through Africa, gaining free access but with minimal assembly and value-added for the African countries they operated in.

Florie Liser (pictured), assistant US trade representative for African affairs, rejects the researchers’ claim.

She told beyondbrics that rigorous systems were in place for ensuring that no transhipment occurs. “Over the years under AGOA, there have been some cases of transhipment, but they have been very few and the African countries have been very good at going after transhipment”. So they ought. If transhipment occurs, any trader in the country is barred from exporting their products to the US under AGOA for a five year period. Regular visits are conducted by US customs officials to weed out potential mischief, she says, including surprise visits to production plants.

Debate about transhipment is largely about rules of origin. “ROOs” determine how much value addition should take place domestically as part of a preferential trade deal, to ensure the product exported is benefiting the country exporting it. But if ROOs require too much value to be sourced or produced locally, small economies cannot take advantage of the deal because they don’t have enough materials and inputs (even China imports many inputs for its apparel products). So under AGOA, ROOs were relaxed, but not abolished. The CSAE paper says relaxation was sufficient to enable foreign producers to use AGOA countries as essentially platforms for US entry rather than intensive production and assembly zones.

But Liser counters that Asian investment into AGOA countries in no way diminishes the African impact of the legislation, provided the minimum of 35 per cent domestic value addition is upheld*. “If China had invested in a factory in Mauritius or Lesotho and the company is producing apparel with Chinese investment and inputs but meeting all the rules of origin requirements and shipping to the US, that would not be transhipment. Transhipment would be where the apparel was being produced in China and sent to Lesotho where they illegally sew in a label that says ‘Made in Lesotho’ and then shipped it to the US”.

The arrival of foreign investors looking to utilise the opportunities of AGOA is in keeping with the globalised nature of apparel production, she says. “For all countries, we want what we do with them with our trade agreements to encourage people to invest.”

 

*AGOA.info note: The apparel rules under AGOA do not relate specifically to the general 35% rule as for other goods, but items must fit in with one of ten RoO categories, for example 'apparel made from regional fabric produced from African or US yarn', or 'apparel from foreign fabric made in a lesser developed country'.