Agoa.info - African Growth and Opportunity Act
TRALAC - Trade Law Centre
You are here: Home/News/Article/Testimony of United States Trade Representative Michael Froman Before the Senate Finance Committee on AGOA

Testimony of United States Trade Representative Michael Froman Before the Senate Finance Committee on AGOA

Testimony of United States Trade Representative Michael Froman Before the Senate Finance Committee on AGOA
USTR Mike Froman
Published date:
Thursday, 31 July 2014
Author:
USTR
Source:

Thanks very much Chairman Wyden, Ranking Member Hatch, Members of the Committee, and thank you for inviting me here to today to testify about AGOA. 

AGOA, as you’ve noted, has been the cornerstone of America’s economic engagement with sub-Saharan Africa for the past fourteen years. And it has had some very important successes. U.S. imports from AGOA countries have grown from $8.2 billion in 2001 to $26.8 billion in 2013, a threefold increase. Non-oil AGOA trade has increased almost fourfold during the same period from $1.4 billion to almost $5 billion. US direct foreign investment (FDI) stock in sub-Saharan Africa has also increased from approximately $9 billion to $35 billion. And according to the African Coalition on Trade, AGOA-related investment has resulted in the creation of some 300,000 jobs in sub-Saharan Africa and almost 120,000 jobs here in the United States. 

But there clearly is more work to be done. Utilization of AGOA is low and uneven. The bulk of U.S. imports under AGOA come from a handful of countries. And although we are beginning to see increasing diversification, exports under the program are still concentrated in a few sectors.  And finally, while the growth in exports has been impressive over the life of AGOA, in absolute terms the level of exports is quite low. We can and must do better.

And to that end, last August I launched a comprehensive review of AGOA to examine both its successes over the last 14 years, as well as areas where it might be improved. And as we undertook this exercise, we were mindful too that the Africa of 2000 is not the Africa of 2014. Six of the ten fastest growing economies in the world are in Africa. And African countries are increasingly moving away from unilateral preference programs and entering into reciprocal trading relationships, including with the European Union.  As we think about AGOA’s future, we need to consider how the U.S.-Africa trade relationship should evolve over time as well.

We draw three main conclusions from our review:

First, while tariff preferences are important, they are not sufficient. African countries face constraints to trade that range from inadequate and high cost infrastructure, particularly in the energy and transportation sectors; burdensome customs procedures and other border barriers impacting Africa’s regional and global trade; difficulties complying with agricultural, safety and marketing standards (including sanitary and phytosanitary requirements); limited skilled labor; and low productivity and competitiveness in non-oil, value-added products.  And, despite growing business interest in Africa, AGOA countries also continue to face difficulties finding partners in the United States.

For AGOA to reach its full potential, it must be situated at the core of a comprehensive trade and investment strategy, an AGOA compact that targets the full range of the supply-side constraints to trade in Africa that creates new markets for African products, harnesses growing private sector interest in trade and investment, and promotes regional integration and value-added production. Now this also includes moving forward with implementation of the WTO Trade Facilitation Agreement concluded in Bali last year, which, by OECD estimates, could lower trade costs for developing countries in trade by up to 15 percent if fully implemented.

Second, there are some areas in which the AGOA program itself can be updated and improved.  This, of course, is the province of Congress, but the findings of our review may be helpful as you consider these issues.  For example:

  • The Length of Extension.  Our research suggests that it is important to extend the program for a sufficient period of time to encourage investment in critical industries in Africa. 
  • Product coverage:  As you said Mr. Chairman, most AGOA beneficiaries enjoy duty-free treatment for virtually all of their products. (97.5 percent of the tariff lines are covered)  However, there are still 316 tariff lines that continue to lie outside the program, and we believe Congress should consider whether any new products can now be added to the program keeping in mind domestic sensitivities. 
  • Rules of Origin:  AGOA has some of the most flexible rules of origin of any preference program.  There are, however, areas of the program where flexibility has been constrained.  For example, there are limits on the “cumulation” of labor costs across AGOA countries and a cap on the use of U.S. inputs in meeting the requisite “regional value content” rules.  Elimination of these limits could encourage greater integration into regional and U.S.-Africa value chains. 
  • Eligibility Criteria:  AGOA’s eligibility criteria have played an important role in raising standards and improving rule of law throughout the continent.  However, they have not been updated since AGOA was first established.  Updating these criteria for example to include provisions relating to eliminating unwarranted SPS barriers and employment discrimination could be an important way to modernize the program.
  • Eligibility Review Processes:  AGOA’s mechanism for ensuring countries meet eligibility criteria currently is all-or-nothing.  An approach that allows for partial and more immediate withdrawal may allow the Administration to take a more tailored and nimble approach to drive positive changes in beneficiary countries.
  • We look forward to working with you as you explore these and other issues in the process of moving forward with renewal.

    Third, and finally, while the administration remains firmly committed to securing AGOA renewal, we need to begin  working with our African partners to develop a vision of a trade relationship that goes beyond one-way preferences in the mid- to long-term.  As I said, today’s world is different from the one when AGOA was first enacted, both in Africa and in its relations with major trading partners. Against this backdrop, we need to consider the way ahead and how different tools – from unilateral preference program, to reciprocal trade agreements – might evolve to be used with different partners to help us achieve our goals of broad-based economic growth and prosperity. 

    With that, let me thank you again with the invitation to testify, and I am happy to take your questions.

     

    Read related news articles

    Renewal of AGOA a benefit to both US and Africa

    Following the conclusion of the US-Africa Summit in Washington DC last week, it is opportune to reflect on some of the outcomes for SA and Africa. On the eve of the summit, ministers of trade from those African countries that are eligible for the trade preferences under the African Growth and Opportunity Act (Agoa) called upon the US to seamlessly and timeously extend Agoa for at least 15 years, without conditions. This message was...

    13 August 2014

    Rep. Karen Bass - Pictures from forum Cannon House event (during 2014 AGOA Forum)

    Growth and Opportunity in Africa Forum in coordination with the U.S.-Africa Leaders Summit Tuesday, August 5, 2014  [Please note - this event has concluded]   9:00 AM - 12:30 PM Cannon Caucus Room (345 Cannon House Office Building) U.S. House of Representatives Washington, DC 20515 Panel One 9:00 – 10:30 am Moderator: Dr. Monde Muyangwa Africa Program Director, Woodrow Wilson Center   H.E. Erastus Mwencha Deputy Chair,...

    11 August 2014

    14 years of AGOA: Why no real Africa intra-trade?

    When President Bill Clinton signed the African Growth Opportunities Act (AGOA) into law 14 years ago, he offered incentives for African countries to open their economies and build free markets, to move the continent from an aid dependency to a viable trading partner. That is why at their summit hosted by US President Barack Obama in Washington, 50 African heads of states, including our own President Jacob Zuma, smilingly reminisced about how...

    07 August 2014

    African Union head cautions US on Africa

      If the United States does not take more interest in Africa it is going to lose out, African Union commission chair Nkosazana Dlamini-Zuma said on Thursday. “It's in their advantage to know what's happening in Africa because if they don't come to the party eventually the party will happen without them,” she said in Washington. “Business people really know about Africa from the media and American media is not really kind on...

    07 August 2014

    US-Africa Leaders Summit: CEOs promise to push AGOA further

    The United States House of Representatives on Wednesday hosted an event titled “A Dialogue With African CEOs” that brought together women and minority business owners, chief executives from across Africa and US and SME entrepreneurs. The focus of the panel discussion was to examine possible business partnerships between African business and government with their American counterpart through the African Growth Opportunity Act (AGOA) that...

    07 August 2014

    US urged by Africa's leaders to extend AGOA trade programme

    African leaders urged the US on Monday to renew a trade benefits programme giving duty-free access to billions of dollars of African exports for 15 years, saying it would help cement trade relations and boost development in sub-Saharan Africa. President Jacob Zuma, one of nearly 50 African leaders in Washington to attend a three-day summit, said the renewal of the African Growth and Opportunity Act (Agoa) when it expired next year was one of...

    06 August 2014

    South Africa welcomes Obama's backing of AGOA

      South Africa has welcomed the commitment by US President Barack Obama to support the continuation and enhancement of the African Growth and Opportunity Act (Agoa). Obama made the remarks at the US-Africa Business Forum in Washington on Tuesday. His backing of a new Agoa term came as a pleasant surprise to many, who have been waiting to hear Obama's position on the issue. US law makers are expected to vote on the renewal of Agoa when...

    06 August 2014

    Kenya: President Kenyatta's presence at US Africa summit 'expected to end frosty relations'

    The US has recently cut down its embassy staff in Nairobi and also pushed back funding for various projects and programmes in the country. This has impacted negatively on business and stakeholders are hoping that President Uhuru Kenyatta's presence at the ongoing US-Africa leadership forum in Washington DC will end the frosty relations between Kenya and the US. "We hope the issue of lifting travel advisories will feature prominently. We are...

    06 August 2014

    Africa seeks technological partnership at US-Africa summit

    Africa is looking to the United States for help modernizing industry and combating terrorism, according to the deputy chairman of the African Union (AU). Erastus Mwencha also said AU officials are negotiating with Washington at the U.S.-Africa summit to improve the trade framework in the African Growth and Opportunity Act (AGOA) to include investment opportunities for American businesses and investors as the U.S. Congress readies to begin...

    06 August 2014

    AGOA Forum: Nigerian Entrepreneur seeks removal of barriers on AGOA

    An Abuja-based Agriculture entrepreneur, Mrs Esta Charles-Ayede, has urged the U.S Government to remove barriers inhibiting some African countries from fully utilising the benefits of the African Growth and Opportunity (AGOA). Ayede made the submission at a roundtable between local entrepreneurs in Abuja and the U.S Assistant Secretary of Commerce for Economic Development Jay Williams. The discussion was held via a Digital Video Conference...

    06 August 2014

    Obama sees US opportunities in Africa

    US President Barack Obama said the fast growing economies of Africa represent one of the greatest opportunities for the US to extend its commercial reach and doing so requires a concerted effort by business and government. The president highlighted $33 billion (R356 billion) in commitments to Africa: $14 billion in investments by companies including General Electric and Coca Cola, $7 billion in financing to promote US exports and $12 billion...

    06 August 2014

    You are here: Home/News/Article/Testimony of United States Trade Representative Michael Froman Before the Senate Finance Committee on AGOA