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Delays in enacting Trade Promotion Authority may require that the Trade preferences Bill pass on its own

Delays in enacting Trade Promotion Authority may require that the Trade preferences Bill pass on its own
Published date:
Thursday, 25 June 2015
Author:
Stephen Lande and Dennis Matanda
Source:
Manchester Trade Limited (Washington, DC)

It must come as a shock to many that, after the Trade Preferences Act passed both the Senate and House with 97 to 1 and 394 to 37 respectively, neither AGOA nor GSP are the law of these United States.

Of course, those in the know understand that because there was a slight difference in the bill passed by the House over the Senate version, there was need for a conference in the bicameral body.

Importantly, the real reason that AGOA has still not been renewed and enhanced is simply that its consideration has become enmeshed in the most significant piece of trade legislation that Congress has had to consider this century. Congress is still debating whether to grant President Obama the authority to negotiate two mega trade agreements --the Trans-Pacific Partnership (TPP) with 11 0ther Pacific Rim countries and the Transatlantic Trade and Investment Partnership (TTIP) with the European Union during the remaining 18 months of his term in office.

The dynamics are unique—President Obama and a handful of Democrats are working with the Republicans to give Obama another moniker – Obamatrade with tenacious opposition led by labor-oriented Democrats and Tea Party Republicans.

Nonetheless, while there are plans to pass the trade package including AGOA, this week with a key procedural vote taking place on Tuesday, June 22nd. AGOA proponents must soon start the process of considering a separate track if this plan does not succeed and TPA continues to be mired in inter and intra-party polarization.

In fact, if TPA is further postponed, it might be prudent for AGOA stakeholders to undertake a strenuous effort to urge the United States Government to consider AGOA together with other preference programs on its own track. This might mean allowing the Trade Preference Extension bill to move ahead without reference to the other pieces of trade legislation since AGOA has its own time exigencies and cannot simply wait for the trade issues to be sorted out.

Such a step would be reflective of efforts by the Administration, Congress, Trade Commissioner Fatima Haram Acyl of the African Union, the African Ambassadorial Group, the private sector and civil society to accomplish this goal. The Ambassadorial group clearly laid out African priorities for timely renewal even if significant enhancements had to be considered later.

The Administration carried out a full review of AGOA provisions with a view to enhancing the program to reflect changes in the international environment since AGOA was originally considered last century. Under instruction from the chairman and ranking members of Ways and Means and Finance committees, Congressional staff worked diligently to develop an AGOA bill that could be passed in a timely fashion. The result was agreement on a bill mainly focused on renewal with some significant but nevertheless limited enhancement.

Why is timely passage so important? There are, essentially, four reasons: All parties involved must avoid any disruption to the existing apparel trade. Thus far, the expectation is that although the bill will be passed, further delays may lead to a significant decline in Christmas season orders – an incident that occurred in the past.

If delays go up to the July 4th recess, orders could even be cancelled - with disruption to production schedules and employment levels in sub Saharan Africa. If passage of AGOA extends beyond the summer recess beginning at the end of July, this would be disastrous to the partnership between the United States and sub Saharan Africa.

Secondly, US-African economic relations have never been closer and more productive. The Obama leadership summit followed up by activities under the whole-of-government approach including Power Africa and Trade Africa and strong U.S. and African support for implementation of the WTO Trade Facilitation Agreement (TFA) by the end of the year all contribute to this closeness. Failure to enact the flagship program of the U.S. in Africa, AGOA on a timely basis will threaten this close relationship by raising serious questions on the overall U.S. commitment to the continent.

Thirdly, African countries are gearing up to take advantage of the enhanced AGOA and undue delay would undermine this effort. In fact, plans are underway to launch the AGOA Enhancement program at the annual AGOA Forum scheduled for Gabon this August. Although the African themselves decided that timely AGOA renewal should take precedence over efforts to enhance AGOA, the diligent work of the African Union, USTR and Congressional staff resulted in AGOA improvements of some significance and left open the possibility for additional ones.

For instance:

  • U.S. support is provided for AGOA utilization programs instituted by regional communities and beneficiary countries to take better advantage of AGOA duty-free access for more than 6000 products;
  • Although technically part of GSP and not AGOA, the GSP portion of the Trade Preference Extension Act allows the Administration to add the high duty tranche of the upland cotton tariff rate quota for duty-free treatment under GSP for least developed countries. Such duty-free access would be extended to Benin, Burkina Faso, Chad and Mali, the so-called C-4, countries. Efforts continue to allow the designation for duty-free treatment of other excluded TRQ products of interest to other African countries. Cash crops like leaf tobacco and groundnuts could benefit countries like the Gambia, Ghana, Kenya, Malawi, Mozambique, Nigeria, Tanzania, Uganda and Zambia by allowing an increase in these exports.
  • Allowing cumulation of African labor in AGOS products produced in more than one country provides marginal improvement to origin rules. However, the LDC origin rule exercise in the WTO could well result in more liberalized rules for non-apparel products. This is a high priority for Africa especially since such rules promote the operation of supply chains within Africa. Still, there’s concern that out of cycle reviews could add insecurity to AGOA the program, overall the changes to the conditionality rules should be welcomes.
  • Greater flexibility is allowed for USTR to avoid removing beneficiary status while steps are taken for the country to meet the eligibility requirements. USTR can reduce benefits , rather than remove complete eligibility if other means are viewed as more effective; a 60-day notification period is required to Congress before any action can be taken and there will be continuing efforts to work with peer pressures under the auspices of the African Union and the RECs to promote good governance. While there’s concern about the possibility of out of cycle reviews threatening eligibility, such reviews will probably be used only in the most extreme cases. Also, there are many African supporters of U.S. conditionality as opposed to the Chinese hands-off approach as a way of promoting the shared values between Africa and the United States. .
  • Fourth, the U.S. position favorably compares with that of the EU in Africa. Participation in AGOA is not conditional and sub Saharan African countries have developed their own AGOA utilization plans to take better advantage of the renewed program. On the other hand, very few countries voluntarily signed the EU’s flagship Economic Partnership Agreements, with the majority either not signing or signing only under duress. This advantage would be lost by further AGOA renewal delays.

 

Fifth and finally, Africa is making remarkable progress in terms of boosting internal trade and especially developing future supply chains and distribution networks. Over the past few months, the Economic Community of West African States (ECOWAS) has launched its FTA and customs union, and recently, the Tripartite Agreement of the Common Market for Eastern and Southern Africa (COMESA), the East African Community (EAC) and the Southern African Development Community (SADC) will go into effect later this year – launching a 26 country, 620 million people and $ 1.2 trillion free trade area.

The new AGOA bill has provisions that could support this effort, and one could see AGOA being replaced after it expires with a mega trade agreement—one which admittedly African members will benefit from some form of delayed staging in view of their development level. Failure to renew AGOA on a timely basis would send the clear even if incorrect signal that Africa must continue its integration efforts without relying on USG support.

However, African progress will not wait until the US passes AGOA and too long a delay will mean that Africa advances without us.

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