This week in Washington, everyone was talking about U.S.-Africa trade policy as government and business leaders from the United States and nearly 50 African nations convened for the first-ever U.S.-Africa Leaders Summit. Throughout the week, USFIA participated in meetings and events—and got the word out about the need for quick, long-term renewal of the African Growth & Opportunity Act (AGOA).
In the recent weeks, much of the conversation about Africa in Washington has focused on AGOA and ideas for an updated “AGOA 2.0.” (WWD has more.)
If you’re paying attention to AGOA, you already know that the program will expire on September 30, 2015. And aside from two subcommittee hearings in the House and Senate last month, Congress has not taken any action to renew it—despite the fact that it’s a non-controversial program with nearly universal support as one that’s good for business in the United States and good for economic growth and development in sub-Saharan Africa.
And if you’re utilizing AGOA, you know that while there’s still one year before the program expires, time has almost run out for industries with complex supply chains like the fashion industry, so we hope the conversations this week will lead to quick renewal.
On July 29th, USFIA President Julia K. Hughes published an op-ed in Apparel Magazine about the need for quick, long-term renewal of the program, telling the story of one of our members who has been using AGOA and the problems they face as the expiration date approaches.
Overall, AGOA has been a successful agreement, but the fashion industry is one of its most striking success stories. In fact, sub-Saharan Africa’s apparel exports increased from $359 million in 2001, a year after the program was enacted, to $815 million in 2012. Most of the increase can be attributed to a provision called the third-country fabric benefit, which allows apparel producers in most of the 40 AGOA beneficiary countries to use fabric from a third, non-AGOA country and still get duty-free treatment in the United States. According to the U.S. International Trade Commission (USITC), in 2013, 98.48 percent of apparel imported into the U.S. from AGOA-eligible countries was duty free. It’s clear, then, that AGOA not only allows U.S. companies to provide quality, affordable apparel for their customers, but also provides much-needed jobs and economic opportunities in sub-Saharan Africa.
Without duty-free treatment, however, sourcing apparel from sub-Saharan Africa would be cost-prohibitive for most companies. In addition to the rising cost of raw materials, companies must pay more to get those materials to the factories and then transport the finished products to a port in this region with many landlocked countries and a lack of the integration necessary for an efficient supply chain.
And while companies are very happy with the finished products from the AGOA region and have told us they want to do even more business there, the supply chain is not only expensive, but also takes much longer than supply chains in other integrated regions with more experience in the apparel industry, like Southeast Asia. As a result, to source from an AGOA country, a company must plan sourcing at least six to twelve months in advance of the time they need the product to actually hit store shelves. We encourage you to read our op-ed about one particular company’s story about what will happen if AGOA isn’t renewed soon.
During the week, USFIA also met with representatives from the African apparel industry while they were in Washington. We are leading an effort for an industry-wide statement to build on all the good feelings from the summit and push to extend AGOA before the end of 2014. Congress only is scheduled to be in session for 40 days before the November elections, and the most likely timing for any action on trade, including AGOA renewal, is during a lame duck session after the election. While this will not be an easy task, USFIA members know better than anyone that the clock is ticking before companies start to pull back orders from AGOA. Our colleagues at ACTIF estimate that 30,000 jobs were lost in Africa due to the late extension in 2012.The impact could be even worse this time since many companies are just now moving new production to AGOA.
Discussions also focused on development in Africa, and how trade can help. On August 5th, we participated in a Global Business Dialogue and Cordell Hull Institute event titled “African Countries and the Problem of Multiple Trade Negotiations.” The speakers from the United States and South Africa discussed the need to integrate the new, multilateral trade negotiations—like the Trans-Pacific Partnership (TPP) and the Transatlantic Trade & Investment Partnership (TTIP)—with the global trading system that already exists so as to include Africa, an increasingly important trading bloc due to its sheer size. As the Doha Round remains uncertain, the Cordell Hull Institute is working with six developing-country institutes to discuss the restoration of multilateral cooperation (and trade liberalization) in the WTO system.
We are closely watching the AGOA discussions, hopeful that they can continue placing orders and expand their business with the relationships they’ve cultivated in the region. As the leaders discuss “AGOA 2.0” and plans for increasing trade between the United States and Africa, we urge them to focus first on renewing this existing program that has already been proven to work well—and renew it quickly.