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A view from Washington

AGOA needs fixing to help the ailing African textile industry, but when and how are the pressing questions

When African ministers came to Washington for the annual forum of the African Growth and Opportunity Act (AGOA) more than a week ago, they had hoped for some indication from Washington about the future of this U.S. trade law, which has given a big boost to African trade and economic growth from Uganda to Mauritius.

They heard many speeches about how the U.S. government and private sector are committed to promote economic growth and democracy throughout the African continent. And they participated in lively discussions about what elements of AGOA need to be fine-tuned or expanded in order to make the law more useful to African exporters.

But they returned home with a rather fuzzy image about the future of AGOA, with unclear signals as to just what might be changed in the law, and when it might get done. They wanted a commitment from the Bush administration and the U.S. Congress to extend until 2015 AGOA's third-country fabric provision, which expires late next year.

Most African countries are not yet able to sew sufficient quantities of cloth for the apparel they can produce, and the third-country provision allows them to export duty-free to the United States clothing made in AGOA-eligible African countries using cloth produced outside of Africa. Over 85 percent of apparel exported to the United States from AGOA countries in 2005 was made with material from Asia.

But it's not yet known where the Bush administration stands on all this. Florizelle Liser, Assistant United States Trade Representative for Africa, told participants at the Forum that the U.S. government does not yet have a position on what should be in the AGOA renewal. "We're very involved, are talking to stakeholders and hearing their views. We must consider the African textile and apparel producers, as some producers don't want the extension," she said. "Our goal is to make the African apparel and textile industry more globally competitive."

Complicating the picture even further is the fact that there are two different bills now circulating in Congress to renew AGOA.

One proposal, developed by African cotton and textile industries and endorsed by the Mauritian government and private sector, would establish a new value-added rule of origin. It would extend the third-country fabric rule until 2015 with full benefits for all AGOA beneficiary countries, including Mauritius and South Africa, which are now excluded. And it would offer incentives to use African-origin yarns and fabrics, which will encourage vertical integration of the African textile industry, and extend duty-free benefits to yarns, fabric and made-ups produced in any AGOA certified country.

The second bill, offered by former Assistant United States Trade Representative Rosa Whitaker, who now heads her own consulting firm in Washington advising on AGOA affairs, takes a different approach.

Her proposal would extend the third-country fabric rule until 2015, but it does not include Mauritius or South Africa.

Whitaker says her plan will boost the African textile sector by allowing AGOA apparel containing more than 50 percent or more African or U.S. fabric to have unrestricted preferential access to the U.S. market. "We think this will stimulate strong demand for African yarns and fabrics that are competitive in price and quality," she said, adding that Congress should also approve technical assistance to link African textile producers and U.S. apparel importers.

She also wants duty free status for cotton and synthetic yarns, textiles and made-ups from the poorest of AGOA-eligible countries.

Supporters of the first bill find her plan unworkable and inflexible.

Such division within the ranks of AGOA supporters will not be helpful as the bill moves through Congress and it could significantly delay congressional action as lawmakers try to find a compromise.

Another factor is that some lawmakers who normally support AGOA also disagree about provisions of the law's renewal. Rep. Bill Thomas, R-Ca., told African ministers that he is not enthusiastic about extending the third-country fabric provision, while other lawmakers favor it.

Against this backdrop is an urgent plea from many African countries. They say that unless the third-country fabric provision is extended - preferably this summer - most of the economic and job-creating gains under AGOA in the African textile and apparel industry will be lost. And the winners will be producers in low-cost Asian countries, most specifically China.

They argue that AGOA countries need more time to develop fabric-making capacity since AGOA has not generated the investment in textile mills that had been expected.

They say that AGOA's creators were too optimistic that Africa could quickly develop a vertically integrated textile and apparel industry.

In addition, there are some AGOA followers in Washington who believe that the United States should turn AGOA into a free trade agreement between the United States and Africa.

"The U.S. should begin work now transforming AGOA into a free trade agreement by its expiration in 2015," said Brett D. Schaefer and Daniella Markheim, authors of the paper published by the conservative Heritage Foundation, a Washington think-tank.

They suggest that the United States require eligible AGOA countries to lower tariffs on U.S. imports beginning in 2010, with the target of eliminating tariffs on 95 percent of goods by 2015, and demand that eligible countries eliminate tariffs on essential medicines and medical equipment by 2007.

They urge U.S. policymakers to exploit AGOA "as a lever to lower trade barriers on essential medicines and supplies from abroad" and spur a new region-wide customs arrangement in Africa.

All this adds up to a rather uncertain situation for AGOA.

China invests heavily in Africa

While African ministers complain about losing an edge to textile producers in Asia, the Chinese are aggressively moving into all corners of the continent, expanding their influence by offering economic, financial and military assistance.

A series of reports and press articles have documented the explosive growth of Chinese investment, fueled largely by China's insatiable appetite for energy resources such as oil to supply its booming economy and population, and its desire to find new markets for goods and services.

China has always had an interest in Africa. In the 1960s and 1970s, China's interest centered on building ideological ties to advance communism and counter the influence of countries like the United States. Today, the interest is more pragmatic: trade, investment and energy. The Chinese have invested in oil fields in the Sudan, financed roads and railways in Kenya, Rwanda and Nigeria, sent 15,000 Chinese doctors, built hydroelectric dams, upgraded ports and built pipelines.

In many ways, this investment has been good for Africa, according to reports, providing new outlets for African minerals and oil and low-cost consumer goods.

But others see a downside, calling the Chinese the new "colonial masters," replacing the British and the French. Many Africans say the influx of cheap goods is hurting local companies and local economies. Chinese clothing imports to South Africa and Lesotho, for example, have been blamed for thousands of layoffs in the textile sector.

Critics, especially those in the United States, further complain that the growing presence of China undermines efforts to promote democracy and human rights on the continent, as China makes business deals without regard to a country's politics. China maintains close ties to troubled governments in Angola and Nigeria, Sudan and Zimbabwe, and Chinese officials say they intend to interfere with internal affairs of such countries.

But despite these concerns, it appears that the Chinese - whether perceived as friends or foes - will be around in Africa for a long time. And perhaps this could offer a new opportunity.

As the African textile industry endures a difficult transition period to become more globally competitive, China could be called in.

"We need the help of Europe, the United States and China to create a sustainable apparel business," said John Hargreaves, a Mauritian who is vice president of the Madagascar Export Promotion Association. "The biggest investment right now in Africa is from the Chinese."

a m e r i c a n   s c e n e

WEEK-END --- dimanche 18 juin 2006