[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]





  HEARING ON TRADE WITH SUB-SAHARAN AFRICA AND H.R. 4103, THE ``AGOA 
                       ACCELERATION ACT OF 2004''

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 29, 2004

                               __________

                           Serial No. 108-66

                               __________

         Printed for the use of the Committee on Ways and Means



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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM MCCRERY, Louisiana               JIM MCDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania           LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona               EARL POMEROY, North Dakota
JERRY WELLER, Illinois               MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri           STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                         SUBCOMMITTEE ON TRADE

                  PHILIP M. CRANE, Illinois, Chairman

E. CLAY SHAW, JR., Florida           SANDER M. LEVIN, Michigan
AMO HOUGHTON, New York               CHARLES B. RANGEL, New York
DAVE CAMP, Michigan                  RICHARD E. NEAL, Massachusetts
JIM RAMSTAD, Minnesota               WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington            XAVIER BECERRA, California
WALLY HERGER, California             JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania
JIM NUSSLE, Iowa

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                                                                   Page

Advisories announcing the hearing................................     2

                               WITNESSES

Bread for the World, Reverend David Beckmann, on behalf of 
  Partnership to Cut Hunger and Poverty in Africa................    40
Corporate Council on Africa, Stephen Hayes.......................    36
Gap, Inc., Jill Kiley............................................    33
International Trade and Regional Cooperation, Mauritius, African 
  Trade Ministers' Conference, and African Union, Hon. Jaya 
  Krishna Cuttaree...............................................    15
Lesotho Minister of Trade and Industry, Hon. Mpho Meli Malie.....    11
Mast Industries, Inc., Lucy Soares-Demelo, on behalf of Limited 
  Brands and National Retail Federation..........................    27
Republic of Kenya, His Excellency Dr. Yusuf Abdulrahman Nzibo....    18
Royce, Hon. Edward R., a Representative in Congress from the 
  State of California............................................     9
Services Group, Robert Kirk......................................    45
Unite!, Mark Levinson............................................    48
Vanity Fair Corporation, Jeffrey Streader........................    31

                       SUBMISSIONS FOR THE RECORD

African Coalition for Trade, Inc., Paul Ryberg, letter...........    62
AGOA Civil Society Network, statement............................    63
American Chamber of Commerce, Port Louis, Mauritius, Aleda 
  Koenig, letter.................................................    64
Aquarelle Clothing, Ltd., Quatre, Mauritius, Eric Eynaud, New 
  Island Clothing, Ltd., Quatre, Mauritius, Elvis Cateaux, 
  Consolidated Fabrics, Ltd., Solitude, Mauritius, Eric Thorel, 
  and Socota Textile Mills, Ltd., Solferino, Mauritius, Olivier 
  Stekelorom, joint letter.......................................    65
Birkins, Rodney, Jr., J.C. Penney Purchasing Corporation, Plano, 
  TX, statement..................................................    73
Brink, B., South African Textile Federation, Bruma, South Africa, 
  letter and attachment..........................................    88
BMD Textiles, Ltd., Cape, Republic of South Africa, Dr. H. 
  Prader, letter.................................................    66
Cateaux, Elvis, New Island Clothing, Ltd., Quatre, Mauritius, 
  joint letter...................................................    65
Consolidated Fabrics, Ltd., Solitude, Mauritius, Eric Thorel, 
  joint letter...................................................    65
Dollar General Corporation, Goodlettsville, TN, statement........    67
Duro Industries, Fall River, MA, William J. Milowitz, letter.....    68
Eastman Chemical Company, Voridian Division, Kingsport, TN, 
  Richard L. Johnson, letter.....................................    69
Eynaud, Eric, Aquarelle Clothing, Ltd., Quatre, Mauritius, joint 
  letter.........................................................    65
House of Dreams, Inc., New York, NY, Stanley Lerman, letter......    70
Jaysix USA, Inc., Fredericksburg, VA, Guy Prudhomme, letter......    72
J.C. Penney Purchasing Corporation, Plano, TX, Rodney Birkins, 
  Jr., statement.................................................    73
Johnson, Richard L., Eastman Chemical Company, Voridian Division, 
  Kingsport, TN, letter..........................................    69
Koenig, Aleda, American Chamber of Commerce, Port Louis, 
  Mauritius, letter..............................................    64
de Latour, Maurice Vigier, Mauritius-U.S. Business Association, 
  Inc., statement................................................    76
Lerman, Stanley, House of Dreams, Inc., New York, NY, letter.....    69
Mauritius Export Processing Zone Association, Port Louis, 
  Mauritius, Danielle Wong, letter...............................    75
Mauritius-U.S. Business Association, Inc., Maurice Vigier de 
  Latour, statement..............................................    76
Milowitz, William J., Duro Industries, Fall River, MA, letter....    68
New Island Clothing, Ltd., Quatre, Mauritius, Elvis Cateaux, 
  joint letter...................................................    65
New River Industries, Inc., Radford, VA, Paul Poandl, letter.....    79
Nien Hsing Textile Company, Ltd., Taipei, Taiwan, statement......    80
Nigerian-American Chamber of Commerce, Imo State, Nigeria, Mazi 
  Felix Fon Oji, letter..........................................    83
Office of the Special Advisor to the President on AGOA, Abuja, 
  Nigeria, G.M. Sasore, letter...................................    84
Oji, Mazi Felix Fon, Nigerian-American Chamber of Commerce, Imo 
  State, Nigeria, letter.........................................    83
Poandl, Paul, New River Industries, Inc., Radford, VA, letter....    79
Posner, Jeff, USI Sportswear, New York, NY, letter...............    90
Prader, Dr. H., BMD Textiles, Ltd., Cape, Republic of South 
  Africa, letter.................................................    66
Prudhomme, Guy, Jaysix USA, Inc., Fredericksburg, VA, letter.....    72
Retail Industry Leaders Association, Arlington, VA, statement....    85
Rheeder, Ian, YKK Southern Africa, Ltd., Bryanston, Johannesburg, 
  letter.........................................................    91
Ryberg, Paul, African Coalition for Trade, Inc., letter..........    62
Sasore, G.M., Office of the Special Advisor to the President on 
  AGOA, Abuja, Nigeria, letter...................................    84
ShopKo Stores, Inc., Green Bay, WI, statement....................    87
Socota Textile Mills, Ltd., Solferino, Mauritius, Olivier 
  Stekelorom, joint letter.......................................    65
South African Textile Federation, Bruma, South Africa, B. Brink, 
  letter and attachment..........................................    88
Stekelorom, Olivier, Socota Textile Mills, Ltd., Solferino, 
  Mauritius, joint letter........................................    65
Thorel, Eric, Consolidated Fabrics, Ltd., Solitude, Mauritius, 
  joint letter...................................................    65
USI Sportswear, New York, NY, Jeff Posner, letter................    90
Wong, Danielle, Mauritius Export Processing Zone Association, 
  Port Louis, Mauritius, letter..................................    75
YKK Southern Africa, Ltd., Bryanston, Johannesburg, Ian Rheeder, 
  letter.........................................................    91

 
  HEARING ON TRADE WITH SUB-SAHARAN AFRICA AND H.R. 4103, THE ``AGOA 
                       ACCELERATION ACT OF 2004``

                              ----------                              


                        THURSDAY, APRIL 29, 2004

             U.S. House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 1:35 p.m., in 
room 1100, Longworth House Office Building, Hon. Philip M. 
Crane (Chairman of the Subcommittee) presiding.
    [The advisory and revised advisory announcing the hearing 
follow:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON TRADE

                                                  CONTACT: 202-225-1721
FOR IMMEDIATE RELEASE
April 20, 2004
TR-4

                 Crane Announces Hearing on Trade with

                 sub-Saharan Africa and H.R. 4103, the

                   ``AGOA Acceleration Act of 2004''

    Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade 
of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on trade with sub-Saharan Africa and 
H.R. 4103, the ``African Growth and Opportunity (AGOA) Acceleration Act 
of 2004.'' The hearing will take place on Thursday, April 29, 2004, in 
the main Committee hearing room, 1100 Longworth House Office Building, 
beginning at 1:00 p.m.
      
    Oral testimony at this hearing will be from both invited and public 
witnesses. Any individual or organization not scheduled for an oral 
appearance may submit a written statement for consideration by the 
Subcommittee and for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    In an effort to address the trade and development needs of sub-
Saharan Africa, the Committee on Ways and Means in the 105th Congress 
began moving legislation to create a trade preference program specially 
tailored for that region. The bipartisan Africa Growth and Opportunity 
Act (P.L. 106-200) was enacted in 2000, creating a landmark trade 
program that provides extensive preferential duty-free access for 
eligible African countries and offers tangible incentives for African 
countries to continue their efforts to open their economies, build free 
markets, and encourage investment in the region. Two years later, 
President Bush signed into law trade-enhancing amendments to AGOA on 
August 6, 2002, as part of the Trade Act of 2002 (P.L. 107-210).
      
    Reports from the Administration, businesses, civil society 
organizations, and African leaders indicate that AGOA has been a great 
success. To continue the bipartisan effort to improve trade and 
development with Africa, Chairman Bill Thomas (together with Reps. 
McDermott (D-WA), Crane (R-IL), Rangel (D-NY), Royce (R-CA), Houghton 
(R-NY), Neal (D-MA), Dunn (R-WA), Jefferson (D-LA), Weller (R-IL), 
Brady (R-TX), Payne (D-NJ), and Levin (D-MI)) introduced the AGOA 
Acceleration Act, on April 1, 2004. H.R. 4103 would help expedite 
growth in African trade and continue to strengthen the foundation for 
development in Africa by: (1) providing an overall extension of AGOA 
until 2015; (2) adding technical assistance provisions that will make 
it easier for African countries to develop the framework to participate 
in the benefits; (3) fixing interpretation issues encountered with the 
U.S. Department of Commerce; and (4) extending the third country fabric 
provision, now set to expire on September 30, 2004, for three years 
(subject to a cap) including a phase-out, in year three.
      
    In announcing the hearing, Chairman Crane stated, ``The African 
Growth and Opportunity Act is an historic piece of legislation that has 
directly helped several hundred thousand Africans improve their lives, 
but I feel we have only begun to tap into the potential of what trade 
can do in the region. We hope to build upon the success of the current 
program by passing H.R. 4103. I look forward to this opportunity to 
explore further how AGOA can promote mutually beneficial trade and 
investment opportunities between Africans and Americans.''
      

FOCUS OF THE HEARING:

      
    The hearing will focus on the impact of the current AGOA law on 
trade and development in Africa and ways that Congress can correct 
interpretive problems in the law, encourage infrastructure 
improvements, and generally accelerate the goals of the program. In 
addition, the hearing will explore H.R. 4103, the AGOA Acceleration 
Act.
      
    The Subcommittee expects several issues related to these broad 
themes to be discussed at the hearing, including: (1) overview of the 
U.S. and African textile and apparel industries and AGOA's effect on 
them; (2) the proposed extension of the AGOA program to 2015; (3) the 
proposed three year extension of the third-country fabric provision set 
to expire September 30, 2004; (4) impact of the expiration of global 
quotas on African textiles and apparel developments; (5) U.S. support 
of infrastructure to increase trade capacity and ecotourism; to support 
transportation, energy, agriculture, and telecommunications 
infrastructure; and to improve port-to-port and airport-to-airport 
relationships; (6) agricultural technical assistance; and (7) other 
AGOA-related trade issues.
      

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

      
    Requests to be heard at the hearing must be made by telephone to 
Peter Sloan or Kevin Herms at (202) 225-1721 no later than the close of 
business on Thursday, April 22, 2004. The telephone request should be 
followed by a formal written request faxed to Allison Giles, Chief of 
Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 
Longworth House Office Building, Washington, D.C. 20515, at (202) 225-
2610. The staff of the Subcommittee will notify by telephone those 
scheduled to appear as soon as possible after the filing deadline. Any 
questions concerning a scheduled appearance should be directed to the 
Subcommittee staff at (202) 225-6649.
      
    In view of the limited time available to hear witnesses, the 
Subcommittee may not be able to accommodate all requests to be heard. 
Those persons and organizations not scheduled for an oral appearance 
are encouraged to submit written statements for the record of the 
hearing in lieu of a personal appearance. All persons requesting to be 
heard, whether they are scheduled for oral testimony or not, will be 
notified as soon as possible after the filing deadline.
      
    Witnesses scheduled to present oral testimony are required to 
summarize briefly their written statements in no more than 5 minutes. 
THE 5-MINUTE RULE WILL BE STRICTLY ENFORCED. The full written statement 
of each witness will be included in the printed record, in accordance 
with House Rules.
      
    In order to assure the most productive use of the limited amount of 
time available to question witnesses, all witnesses scheduled to appear 
before the Subcommittee are required to submit 200 copies, along with 
an IBM compatible 3.5-inch diskette in WordPerfect or MS Word format, 
of their prepared statement for review by Members prior to the hearing. 
Testimony should arrive at the Subcommittee office, 1104 Longworth 
House Office Building, no later than Tuesday, April 27, 2004 at noon. 
The 200 copies can be delivered to the Subcommittee staff in one of two 
ways: (1) Government agency employees can deliver their copies to 1104 
Longworth House Office Building in an open and searchable box, but must 
carry with them their respective government issued identification to 
show the U.S. Capitol Police, or (2) for non-government officials, the 
copies must be sent to the new Congressional Courier Acceptance Site at 
the location of 2nd and D Streets, N.E., at least 48 hours prior to the 
hearing date. Please ensure that you have the address of the 
Subcommittee, 1104 Longworth House Office Building, on your package, 
and contact the staff of the Subcommittee at (202) 225-6649 of its 
impending arrival. Due to new House mailing procedures, please avoid 
using mail couriers such as the U.S. Postal Service, UPS, and FedEx. 
When a couriered item arrives at this facility, it will be opened, 
screened, and then delivered to the Subcommittee office, within one of 
the following two time frames: (1) expected or confirmed deliveries 
will be delivered in approximately 2 to 3 hours, and (2) unexpected 
items, or items not approved by the Subcommittee office, will be 
delivered the morning of the next business day. The U.S. Capitol Police 
will refuse all non-governmental courier deliveries to all House Office 
Buildings.
      

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

      
    Please Note: Any person or organization wishing to submit a written 
statement for the printed record of the hearing must send it 
electronically to [email protected], along with 
a fax copy to (202) 225-2610, by the close of business Tuesday, May 4, 
2004. In the immediate future, the Committee website will allow for 
electronic submissions to be included in the printed record. Before 
submitting your comments, check to see if this function is available. 
Finally, those filing written statements who wish to have their 
statements distributed to the press and interested public at the 
hearing can follow the same procedure listed above for those who are 
testifying and making an oral presentation. Please directly follow 
these guidelines to ensure that each statement is included in the 
record.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, in WordPerfect or MS Word format and MUST NOT exceed a 
total of 10 pages including attachments. Witnesses are advised that the 
Committee will rely on electronic submissions for printing the official 
hearing record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All statements must include a list of all clients, persons, or 
organizations on whose behalf the witness appears. A supplemental sheet 
must accompany each statement listing the name, company, address, 
telephone and fax numbers of each witness.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://waysandmeans.house.gov.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                 

                      ***NOTICE--CHANGE IN TIME***

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON TRADE

                                                CONTACT: (202) 225-6649
FOR IMMEDIATE RELEASE
April 27, 2004
TR-4-Revised

 Change in Time for Hearing on Trade with sub-Saharan Africa and H.R. 
              4103, the ``AGOA Acceleration Act of 2004''

    Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade 
of the Committee on Ways and Means, today announced that the 
Subcommittee hearing on trade with sub-Saharan Africa and H.R. 4103, 
the ``African Growth and Opportunity (AGOA) Acceleration Act of 2004,'' 
previously scheduled for Thursday, April 29, 2004, at 1:00 p.m., in the 
main Committee hearing room, 1100 Longworth House Office Building, will 
now begin at 1:30 p.m.
      
    All other details for the hearing remain the same. (See Trade 
Advisory No. TR-4, dated April 20, 2004.)

                                 

    Chairman CRANE. I want to welcome all of you folks to this 
hearing of the Committee on Ways and Means Subcommittee on 
Trade to focus on the impact of the African Growth and 
Opportunity Act (AGOA) (Trade and Development Act of 2000, P.L. 
106-200) on the trade development in Africa and ways that 
Congress can correct interpretive problems in the law, 
encourage infrastructure improvements, and generally accelerate 
the goals of the program. In addition, the hearing will explore 
the AGOA Acceleration Act of 2004 (H.R. 4103) (P.L. 108-274). 
It is my pleasure to welcome our witnesses and distinguished 
guests to our hearing, but particularly one who will not be 
testifying but is in our audience, the Prime Minister of 
Swaziland and ministers and ambassadors from all over Africa.
    The AGOA, which I authored, was originally enacted in 2000 
and was the product of nearly 5 years of bipartisan cooperation 
with my colleagues on the Committee, Jim McDermott, Charlie 
Rangel, William Jefferson and others. The AGOA has proven to be 
one of the most effective means of helping African nations 
develop and attract investment and enhance the standard of 
living for their citizens. The AGOA has also made a strong 
positive impact on the U.S.-sub-Saharan African relations by 
helping to expand our trade relationship. Expanded trade 
opportunities not only help those countries develop a 
sustainable economic base, but also foster efficient government 
practices, political stability, and a well-grounded rule of 
law.
    More importantly, AGOA has helped develop a more stable 
Africa, a step which strengthens security for America and the 
world. Africa has benefited greatly from the ex-trade 
preferences with the United States. United States imports under 
AGOA, excluding the generalized system of preferences, have 
almost doubled from their 2001 level of $7.6 billion to their 
2003 level of $13.2 billion. At the same time, 150,000 AGOA-
related jobs have been created, along with $34 million in 
foreign investment in the 5 leading AGOA countries. The AGOA 
has also begun to have a positive effect on other areas by 
improving business practices in Africa and encouraging regional 
integration. However, despite these positive developments, many 
countries have not yet been able to benefit fully from AGOA, 
just as a key provision is set to expire.
    House Resolution 4103, the bipartisan AGOA Acceleration 
Act, provides the means for African countries to develop a more 
prosperous economic environment, a well-grounded rule of law, 
and efficient and acceptable government practices. By building 
on early successes, this bill will attempt to distribute more 
widely AGOA's benefits. The new legislation concentrates on 
four items: first, an overall extension of AGOA until 2015; 
second, technical assistance, encouragement of activities to 
support infrastructure development, and capacity-building 
studies to enable Africa to utilize the program fully; third, 
language fixing several implementation problems which have 
arisen since the program's enactment to encourage further 
integration among the region's economy; four, an extension of 
the expiring provision which allows use of third-country fabric 
that is non-U.S. and non-African fabric in garment 
manufacturing for African lesser developed countries (LDCs). I 
realize a strong regional economy needs to be based on more 
than just the textile and apparel industries. Modernizing 
infrastructure, diversification into other industries like 
agriculture, and building on natural strengths like ecotourism 
will help Africa secure a more stable future.
    The AGOA Acceleration Act includes several provisions aimed 
at just that, encouraging activities in support of 
infrastructure to increase ecotourism and trade capacity; 
encouraging activities in support of transportation, energy, 
agriculture, and telecommunications infrastructure; and 
identifying eligible sub-Saharan Africa countries that have the 
greatest potential to increase marketable exports of 
agricultural products to the United States, but also the 
greatest need for technical assistance. I believe helping 
Africa through trade will contribute to more fundamental 
improvements and governance and overall quality of life in 
Africa. Critical benefits for our African partners will expire 
soon if Congress does not take immediate action. I strongly 
support the AGOA Acceleration Act, and I look forward to its 
positive consideration by Congress in the coming weeks based on 
its strong bipartisan support. Now I yield to the Ranking 
Member on our Subcommittee, Mr. Levin.
    [The opening statement of Chairman Crane follows:]

  Opening Statement of The Honorable Philip M. Crane, Chairman, and a 
         Representative in Congress from the State of Illinois

    Welcome to this hearing of the Ways and Means Trade Subcommittee to 
focus on the impact of AGOA on trade and development in Africa and ways 
that Congress can correct interpretive problems in the law, encourage 
infrastructure improvements, and generally accelerate the goals of the 
program. In addition, the hearing will explore H.R. 4103, the AGOA 
Acceleration Act. It is my pleasure to welcome our witnesses and 
distinguished guests to our hearing, particularly the Prime Minister of 
Swaziland and Ministers and Ambassadors from all over Africa.
    The Africa Growth and Opportunity Act, originally enacted in 2000, 
has proven to be one of the most effective means of helping African 
nations develop and attract investment and enhance the standard of 
living for its citizens. AGOA has also made a strong positive impact on 
U.S.-sub-Saharan African relations by helping to expand our trade 
relationship. Expanded trade opportunities not only help these 
countries develop a sustainable economic base but also foster efficient 
government practices, political stability, and a well-grounded rule of 
law. More importantly, AGOA has helped develop a more stable Africa--a 
step which strengthens security for America and the world.
    Africa has benefited greatly from the Act's trade preferences with 
the United States. U.S. imports under AGOA (excluding the Generalized 
System of Preferences) have almost doubled from their 2001 level of 
$7.6 billion to their 2003 level of $13.2 billion. At the same time, 
150,000 AGOA-related jobs have been created along with $340 million in 
foreign investment in the five leading AGOA countries. AGOA has also 
begun to have a positive affect on other areas, by improving business 
practices in Africa and encouraging regional integration. However, 
despite these positive developments, many countries have not yet been 
able to benefit fully from AGOA just as a key provision is set to 
expire.
    H.R. 4103, the bipartisan AGOA Acceleration Act, provides the means 
for African countries to develop a more prosperous economic 
environment, a well-grounded rule of law, and efficient and acceptable 
government practices. By building on early successes, this bill will 
attempt to distribute more widely AGOA's benefits.
    The new legislation concentrates on four key items: (1) an overall 
extension of AGOA until 2015; (2) technical assistance, encouragement 
of activities to support infrastructure development, and capacity 
building studies to enable Africa to utilize the program fully; (3) 
language fixing several implementation problems that have arisen since 
the program's enactment and encourage further integration among the 
region's economies; and (4) an extension of the expiring provision that 
allows use of third-country fabric (i.e., non-U.S. and non-African 
fabric) in garment manufacturing for lesser-developed African 
countries.
    I realize that a strong regional economy needs to be based on more 
than just the textile and apparel industries. Modernizing 
infrastructure, diversification into other industries like agriculture, 
and building on natural strengths like ecotourism, will help Africa 
secure a more stable future. The AGOA Acceleration Act includes several 
provisions aimed at just that: encouraging activities in support of 
infrastructure to increase ecotourism and trade capacity; encouraging 
activities in support of transportation, energy, agriculture, and 
telecommunications infrastructure; and identifying eligible sub-Saharan 
African countries as having the greatest potential to increase 
marketable exports of agricultural products to the United States and 
the greatest need for technical assistance.
    Critical benefits for our African partners will expire soon if 
Congress does not take immediate action. I strongly support the AGOA 
Acceleration Act and I look forward to its positive consideration by 
Congress in the coming weeks based on its strong bipartisan support. I 
believe helping Africa through trade will contribute to more 
fundamental improvements in governance and overall quality of life in 
Africa.

                                 

    Mr. LEVIN. Thank you, Mr. Chairman. I am going to have the 
rare privilege of yielding to Mr. Rangel, the Ranking Member. 
He usually yields to me. I want to say just a few words before 
I do that. I am pleased to join my colleagues here for the 
consideration of this bill. I regret that I am going to have to 
leave to depart Washington and catch a plane. I am going to 
take this testimony with me and read it on the plane. This is 
vital, this legislation, in many respects. We simply cannot 
allow expiration of AGOA. There has to be its renewal, point 
one.
    Point two, I would hope its continuation will spark all of 
us to take a look at one of the critical areas, textile and 
apparel, and to do so in a broader way and not only in terms of 
one continent or one region. Some of us have been urging that 
that be done, and it really has not been.
    The last point I wanted to make is I am glad there is the 
addition of our distinguished colleague Mr. Royce and the 
distinguished representatives of several countries testifying 
here, and that we are going to have another panel, and that it 
will be diverse in its backgrounds and to some extent diverse 
in its points of view. Expansion of international trade is not 
a simple matter. It has complexities, and if we are going to 
come up with the right answers, we need to dip into a diverse 
group, a diverse set of views about how we expand and shape 
international trade. So, this is an important hearing. It is 
now, as I said, my privilege to yield to the distinguished 
Ranking Member of the entire Committee, Mr. Rangel of New York.
    Mr. RANGEL. Thank you very much. I want to thank the 
Chairman of the Subcommittee, Mr. Crane for holding this 
hearing. I cannot think of anything in the last few years that 
have brought Bill Thomas and I together except the AGOA bill. 
Quite frankly, most trade bills this time of the election cycle 
are dead on arrival, but the enthusiastic support of expanding 
and not allowing the success of AGOA to expire is due in a 
large part to the sophistication and the diligence of the 
African diplomatic corps. Some of them are in the audience from 
Swaziland, Kenya, Mauritius, Lesotho, and the other diplomatic 
corps have learned a lot from the manner and the cooperation 
and the knowledge that you have managed to share with 
legislators who want to do the right thing, but needed the 
sophistication of how we can do it best.
    I want to thank the members of the apparel industry who are 
here from Vanity Fair (VF), Gap and mass industries because 
they, like my late and dear friend Ron Brown, realize that 
business and democracies need more than just a flag and a gun. 
You need jobs, dreams; you need hopes; you need to care for 
people. If we are going to be the beneficiary of free trade, we 
have to deal with countries that respect their workers, that 
give them an opportunity to get disposable income so they can 
continue to buy America's goods and services.
    So, tremendous progress that has been made not only in the 
creation of jobs, but living by the rule of law, providing 
assistance to trade unions, and removing tariffs is really what 
Democrats and Republicans should be all about rather than the 
politics of today. This legislation and the cooperation of this 
Committee, from the House and Senate, from the private sector 
and the diplomatic corps, shows that bipartisanship works. Mr. 
Chairman, I want to thank you for constantly reaching out to 
find areas of cooperation. I do hope we can speedily get this 
bill to the President.
    Chairman CRANE. I thank you, Mr. Rangel, and I thank all of 
our colleagues that are able to be here today. Our first 
witness is the Chair of the Africa Subcommittee of the 
Committee on International Relations, the Honorable Ed Royce 
from California. Mr. Royce, I yield to you for your 
presentation.

STATEMENT OF THE HONORABLE EDWARD R. ROYCE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. ROYCE. Thank you, Mr. Chairman. I thank you very much 
for inviting me to testify before you on the AGOA Acceleration 
Act of 2004. As one of its original cosponsors, I have enjoyed 
working with your Committee on this bipartisan legislation. I 
would like to take this moment to commend our Ranking Member, 
Charlie Rangel, and to commend our Chairman, Bill Thomas, and 
certainly you for your involvement in this process, and also 
Ranking Member Levin. We have several original cosponsors on 
the dais with you. One is Mr. Jefferson; another is Ms. Dunn, 
and we thank them for their important work on this legislation 
as well. I will approach my support for H.R. 4103 from the 
position of chairing the Africa Subcommittee since 1997. Since 
taking the Chairmanship, I have worked with you and others on 
your Committee to see that Africa does not fall off the world 
economic map, where, in my view, it is teetering.
    Today, 3 years into the program, we know that AGOA has 
worked. While many of us wish that more African countries and 
more African industries, particularly agricultural industries, 
were taking advantage of AGOA, we do know it has managed to 
draw hundreds of millions of dollars of foreign investment to 
the continent, creating hundreds of thousands of desperately 
needed jobs across Africa. Several Members, in fact, have had 
the opportunity to visit apparel plants in Africa and see this 
encouraging development firsthand. We have also seen AGOA spark 
very difficult economic reforms across Africa. We have seen 
this happen as African countries have strived to maintain their 
AGOA eligibility. The AGOA, in just a few short years, has 
given many Africans experience with the export-led economic 
growth that has lifted hundreds of millions of people out of 
poverty worldwide. This makes AGOA the most effective 
development aid program for Africa that I am aware of.
    The AGOA also has bolstered our political relations with 
many African governments. Few African officials with whom I've 
met haven't taken the opportunity to express their support and 
their appreciation for AGOA. I think this is important 
diplomatic capital that we have gained. In considering this 
legislation, I would like to underscore that the African 
continent is at a crossroads. The vision many of us have been 
working on for years is one of an increasingly stable and 
democratic Africa, one that is combating Human Immunodeficiency 
Virus/Acquired Immunodeficiency Syndrome (HIV/AIDS) and 
exporting and importing more goods and services. The AGOA has 
been central to our joint effort with Africans to see that this 
vision is their future. The other very different path Africa 
could get caught on leads to even greater poverty, hunger, 
conflict, disease and environmental degradation.
    To my mind, it is unclear which way Africa is headed. Its 
challenges are immense. What is quite clear is that our Nation 
would suffer considerably, our growing security and economic 
interests on the continent would suffer, as would our 
humanitarian character, should Africa find itself on this 
downward path. If Congress fails to pass this legislation 
before the third-country fabric provision expires in September, 
we will be undoing much of the good that AGOA has done.
    Intensified competition from China and other countries is 
coming soon as apparel trading rules are set to change. Unless 
we act, this will surely wipe out much of Africa's emerging 
apparel industry and many African jobs that have been created, 
and much hope will be wiped out as well. Already I am told 
apparel orders for Africa are being put on hold, or in some 
cases are being canceled due to the uncertainty over Congress' 
action. Our credibility as a nation that takes an interest in 
the plight of the world's poorest continent is on the line. So, 
the stakes of this seemingly modest legislation are high. 
Today, Mr. Chairman, I am pulling an alarm for Africa and for 
America. Let us act and do our part to direct Africa away from 
the hopeless path.
    Finally, I will mention that this legislation has trade 
capacity-building provisions that the Africa Subcommittee will 
soon review with a hearing. We have long recognized that 
African countries can use some help to take advantage of AGOA's 
preferential market access. This is an important part of H.R. 
4103. Thank you, Mr. Chairman. I know that you and Chairman 
Thomas are committed to quick action to help Africa and to help 
along our many interests on the continent. I would also like to 
thank the other Subcommittee Members here today, and mention 
Mr. Amo Houghton, who is an original cosponsor of this bill as 
well.
    [The prepared statement of Mr. Royce follows:]

    Statement of The Honorable Edward R. Royce, a Representative in 
                 Congress from the State of California

    Thank you Chairman Crane for inviting me to testify before your 
Subcommittee on H.R. 4103, the ``AGOA Acceleration Act of 2004.'' As 
one of its original co-sponsors, I've enjoyed working with your 
Committee on this bipartisan legislation. I'd like to commend Chairman 
Thomas, Ranking Member Rangel, and you, Mr. Chairman, who has been 
involved since the beginning of the AGOA process, as well as Ranking 
Member Levin.
    I'll approach my support for H.R. 4103 from the position of 
chairing the Africa Subcommittee (of the International Relations 
Committee) since 1997. Since taking the chairmanship, I've worked with 
you and others to see that Africa doesn't fall off the world economic 
map, where it's teetering.
    Today, three years into the program, we know that AGOA has worked. 
While many of us wish that more African countries and more African 
industries, particularly agricultural industries, were taking advantage 
of AGOA, it has managed to draw hundreds of millions of dollars of 
foreign investment to the continent, creating hundreds of thousands of 
desperately needed jobs. Several Members, in fact, have had the 
opportunity to visit apparel plants in Africa and see this encouraging 
development first hand. We've also seen AGOA spark difficult economic 
reforms, as African countries have strived to maintain their AGOA 
eligibility. AGOA, in just a few short years, has given many Africans 
experience with the export-led economic growth that has lifted hundreds 
of millions of people out of poverty worldwide. This makes AGOA the 
most effective development aid program for Africa that I'm aware of.
    AGOA also has bolstered our political relations with many African 
governments. Few African officials I've met with haven't expressed 
their support and appreciation for AGOA. This is important diplomatic 
capital that we've gained.
    In considering this legislation, I'd like to underscore that the 
African continent is at a crossroads. The vision many of us have been 
working for is an increasingly stable and democratic Africa, one that 
is combating HIV/AIDS and exporting and importing more goods and 
services. AGOA has been central to our joint effort with Africans to 
see that this vision is their future. The other, very different path 
Africa could get caught on leads to even greater poverty, hunger, 
conflict, disease and environmental degradation. To my mind, it's 
unclear which way Africa is headed. Its challenges are immense. What is 
quite clear though is that our nation would suffer considerably--our 
growing security and economic interests on the continent would suffer, 
as would our humanitarian character--should Africa find itself on this 
downward path.
    If the U.S. Congress fails to pass this legislation before the 
third country fabric provision expires in September, we'll be undoing 
much of the good that AGOA has done. Intensified competition from China 
and other countries is coming soon as apparel trading rules are set to 
change. Unless we act, this will surely wipe out much of Africa's 
emerging apparel industry, the many African jobs it has created, and 
much hope. Already, I'm told, apparel orders for Africa are being 
cancelled due to the uncertainty over Congress' action. Our credibility 
as a nation that takes an interest in the plight of the world's poorest 
continent is on the line.
    The stakes for this seemingly modest legislation are high. Today, 
Mr. Chairman, I'm pulling an alarm for Africa--and for America. Let's 
act, and do our part to direct Africa away from the hopeless path.
    Finally, I'll mention that this legislation has trade capacity 
building provisions that the Africa Subcommittee will soon review with 
a hearing. We've long recognized that African countries can use some 
help to take advantage of AGOA's preferential market access. This is an 
important part of H.R. 4103.
    Thank you again Mr. Chairman. I know that you and Chairman Thomas 
are committed to quick action to help Africa, and to help along our 
many interests on the continent. I'd also like to thank the 
Subcommittee Members here today for their focus on this key issue.

                                 

    Chairman CRANE. Thank you, Mr. Royce. Are there any 
questions for Mr. Royce? If not, I express appreciation to you 
for being here, and we hope you catch your flight. We now 
welcome our first panel, which includes the Honorable Mpho 
Malie, Minister For Trade and Industry in the Kingdom of 
Lesotho; the Honorable Jayakrishna Cuttaree, Minister of 
Foreign Affairs from Mauritius; and His Excellency, Dr. Yusuf 
Nzibo, Ambassador, the Republic of Kenya.
    Gentlemen, let me welcome you to the Committee and let you 
know how much we appreciate you coming and testifying and how 
important your input is to the legislation that will address 
some of the problems you may be facing. If you would try and 
keep your presentations to approximately 5 minutes, then we 
will open it up to questions and answers after all of you have 
testified. With that, we will start with the Honorable Mpho 
Malie from Lesotho. He will be followed in turn by Mr. Cuttaree 
and then Dr. Nzibo.

 STATEMENT OF THE HONORABLE MPHO MELI MALIE, MINISTER OF TRADE 
                     AND INDUSTRY, LESOTHO

    Mr. MALIE. Thank you. It is a great honor and privilege for 
me to appear and testify before the Subcommittee on the AGOA 
Acceleration Act. Allow me on behalf of the government of 
Lesotho to register our sincere appreciation, gratitude and a 
sense of hope for the introduction of the legislation to 
accelerate AGOA. We were very much delighted to witness the 
continued bipartisan initiative to improve trade and 
development with Africa on April 1, 2004, when the Honorable 
Bill Thomas, the Chairman of the Committee on Ways and Means, 
accompanied inter alia by you, Mr. Chairman, Representatives 
McDermott, Rangel, Royce, Houghton, Payne, Brady and others, 
introduced the AGOA Acceleration Act.
    We are talking about an act that is affecting over 700 
million people living in the poorest part of the world with 
over 80 percent of the world's LDCs within that region. We are 
talking about a region that has the highest unemployment rate 
in the world, and also the world's highest HIV infection and 
AIDS cases, and certainly we are hoping that what this 
initiative is doing will help us a lot.
    The AGOA is an initiative by the American government to 
give a helping hand that will allow sub-Saharan African states 
to pull themselves up by the bootstrap. It is a bootstrap 
initiative, and I would proudly like to indicate is working and 
has been extremely successful. In my country since our 
certification in April 2001, we have been able to increase 
employment in the textile and clothing sector from 19,000 in 
the year 2000 to currently just over 50,000. We have also 
increased our exports into the United States from $140 million 
in 2000 to just over $400 million in the year 2003. All of this 
is directly attributable to AGOA.
    The U.S. Administration has been sensitive to 
implementation problems; hence, AGOA II to address the need to 
shape and the inclusion of Botswana on the list of lesser 
developed economies for our session on third-country fabric 
benefits. Serious problems have arisen, the major one being the 
end of the third-country fabric sourcing window which comes to 
an end September 30. Because of the lack of vertical 
integration within our textile industries, this window has been 
responsible for foreign direct investment flows in our 
countries throughout the CMTs. Closure of that window ends the 
competitiveness we have had with respect to China, which is 
going to come to an end. Thence, uncertainty of the extension 
of this facility has resulted in cancelation and suspension of 
orders. Lesotho, currently we have 40 million U.S. dollars of 
suspended and canceled orders which has affected 23 factories 
and 37,000 jobs within those factories. Consequences of 
nonextension or delays of the extension would be too ghastly to 
contemplate. Layoffs already loom, job losses, shutdowns, the 
economy slowdowns are inevitable. The above scenario would 
exacerbated by the expiring of the multifiber arrangement come 
January 2005.
    Mr. Chairman, this bill will, to a large extent, ameliorate 
the impact of the above phenomenon. This bill injects hope into 
the muscles of our countries. It is a bill of hope. The hope of 
integrating 80 percent of the world's lesser developed 
countries (LDC) onto the mainstream of world trade, the hope of 
fighting HIV and AIDS in the world's most infected countries, 
the hope of eradicating poverty and joblessness in those 
countries lies in the passage of this bill into law. One could 
not agree more with Section 2 of the bill on findings. Those 
findings within the bill are nothing else but the truth. The 
policy statement gives courage and hope to all of us, and 
Congress' support of the many aims and efforts are really 
encouraging.
    Inclusion of expansion of social services, education and 
health with priorities to addressing HIV/AIDS, malaria and 
tuberculosis are to be commended, as is addressing agriculture, 
sanitary standards and capacity building. This is at long last 
development targeted to the masses, seeing as most of the sub-
Saharan Africa economies are centered on agriculture, with my 
own country, Lesotho, having 85 percent of its population 
rural.
    Mr. Chairman, as indicated, the bill is a bill of hope. One 
cannot overemphasize the urgency of having this bill in the 
statute books by June 2004. We would also like to record our 
appreciation of development dimensions of the sections of the 
bill in reaction to the technical assistance provisions that 
will make it easier for sub-Saharan Africa to develop the 
framework to participate in the benefits and take full 
advantage of the proposed extension by 3 years of the third-
country fabric provision.
    In conclusion, I would like to reiterate that AGOA has 
facilitated new investment, created jobs and helped form 
commercial linkages which continue to foster new investment 
opportunities and increased prosperity in sub-Saharan Africa 
over the long term. We have seen in Lesotho $140 million 
investment in a denim mill which is now bringing about 
international trade with over 50,000 metric tons of cotton per 
month from the region. Mr. Chairman, we remain confident that 
our hopes will turn into reality and that this bill of hope 
will be treated with the urgency it deserves and move through 
both houses by June this year, allowing even those sub-Saharan 
African states that are still to be certified and benefit of 
this great initiative to come on board. I thank you, Mr. 
Chairman.
    [The prepared statement of Mr. Malie follows:]

  Statement of The Honorable Mpho 'Meli Malie, Minister of Trade and 
      Industry, Cooperatives and Marketing, The Kingdom of Lesotho

    Mr. Chairman, Congressman Philip M. Crane, Members of the 
Committee, members of the diplomatic corps, distinguished guests, 
ladies and gentlemen.
    It is a great honour and privilege for me to appear and testify 
before this Honourable Subcommittee on the AGOA Acceleration Act.
    Allow me on behalf of the Government of Lesotho to register our 
sincere appreciation, gratitude and a sense of hope for the 
introduction of the legislation to accelerate the African Growth and 
Opportunity Act. We were very much delighted to witness the continued 
bipartisan initiative to improve trade and development with Africa on 
April 1, 2004 when Honourable Bill Thomas, the Chairman of the House 
Committee on Ways and Means, accompanied, inter alia, by you, Mr. 
Chairman, Representatives McDermott, Rangel, Royce, Houghton, Payne, 
Brady and others, introduced the AGOA Acceleration Act.
    I have carefully studied the AGOA III text and am deeply 
encouraged, and believe that my colleagues in the sub-Saharan African 
(SSA) countries share the same views. I share the same sentiments that 
this bold step would help expedite growth in African trade and continue 
to strengthen the foundation for development in Africa.
    Mr. Chairman, the fact that the bill aims to legislate, amongst 
others, that the textiles and apparel provisions under AGOA should be 
interpreted in a broad and trade-expanding manner is encouraging. Also, 
modification of the rules of origin on third country produced cuffs and 
collars is most welcome. In addition, we heartily welcome the new 
initiatives in the bill on promotion of investment in infrastructure, 
an impediment that has curbed the dynamism of AGOA I and II.
    The involvement in the agricultural sector through provision of 
technical assistance and capacity building in sanitary and 
phytosanitary standards issues to help us to meet the U.S. 
requirements, will contribute towards the development of this important 
sector that affects the lives of millions of our rural communities. In 
Lesotho, about 85% of the population lives in the rural areas and is 
dependent on agriculture for its livelihood.
    Chair, the bill is a bill of hope. Our hopes for the acceleration 
of the development of most of our economies in the SSA countries are 
pinned on this bill.
    I am here to provide testimony on the urgent need for action on 
AGOA III. It is important that we send proper signals to both investors 
and retailers as the implications of the uncertainty clouding the 
extension of AGOA and the third country fabric benefits are already 
being translated into unpalatable consequences of cancelled and 
suspended orders. To be specific, Mr. Chairman, in the case of Lesotho 
alone, as we speak orders to the value of about U.S. $40 million have 
been affected. Clearly, the prospects are not encouraging as job 
losses, lay-offs and economic slow-down is looming and AGOA's potential 
to expand and encourage economic growth in the certified AGOA 
beneficiary countries is at stake.
    AGOA's purpose is to help spur prosperity and development in sub-
Saharan African countries and integrate our economies fully in the 
global economy by giving us greater access to the U.S. market. Most of 
us in the sub-Saharan Africa bear testimony today that AGOA is working. 
In particular, Lesotho has seen, since the inception of AGOA in 2000, 
and certification on 21 April in 2001, dramatically positive changes in 
her economic landscape. Today, there are about 50,000 jobs in the 
apparel industrial sector as against 20,000 jobs in the year 2000, 
making the private sector the number one employer, exceeding government 
employment for the first time since our independence in 1966.
    The value of Lesotho's exports to the United States was U.S. $140 
million in 2000, U.S. $215 million in 2001, U.S. $320 million in 2002 
and increased to U.S. $400 million in 2003. Thus, the increase of 
Lesotho's exports to the U.S. for the years 2001 to 2003 is directly 
attributable to the AGOA initiative.
    The AGOA trade directly contributed to 34% of Lesotho's GDP in 2003 
and with multiplier effect it was around 40%. AGOA trade enabled us to 
improve our trade balance by approximately U.S. $100 million. As a 
result, Lesotho's balance of payments firmly remained above 5 months of 
imports cover. The AGOA initiative contributed to 13% of our total 
revenue in 2003 and thereby improved our fiscal balance.
    The sustained growth experienced in Lesotho in the last 3 years, 
driven mainly by the AGOA trade, provides the basis for poverty 
reduction on a sustainable basis in the country. Clearly, Lesotho as a 
least developed country bears testimony to the important role that AGOA 
can play in turning around the economies of the poor sub-Saharan 
African countries, if given adequate time and an enabling environment.
    Mr. Chairman, distinguished ladies and gentlemen, the government of 
Lesotho and indeed most of the sub-Saharan African countries that are 
classified as least developed countries and as such beneficiaries of 
the AGOA and the current third country fabric benefits, surely, have 
reason to rejoice at the news of the impending and bipartisan 
initiative to introduce the AGOA Acceleration Act of 2004. We welcome 
this timely intervention for which the House Committee on Ways and 
Means, under the able leadership of Congressman Thomas, deserves 
commendation. Passing this legislation will profoundly and positively 
impact on the socio-economic development programmes of job creation and 
poverty eradication, which are our primary national goals.
    In December 2003, my colleagues and I (Trade Ministers from AGOA-
eligible countries) met with President Bush and senior U.S. 
administration officials in Washington, D.C., during the AGOA Forum 
(third U.S.-sub-Saharan African Trade and Economic Cooperation Forum). 
We were particularly pleased and encouraged by President Bush's 
personal, visionary and unwavering support, and commitment to AGOA and 
his personal assurance to work closely with Congress in ensuring 
extension of AGOA thereby encouraging African support for open markets 
and multilateral trade liberalization.
    Mr. Chairman, to reiterate, AGOA has facilitated new investment, 
created jobs, and helped form commercial linkages that continue to 
foster new investment opportunities and increase prosperity in sub-
Saharan Africa over the long term. In the case of Lesotho, we have 
witnessed foreign direct investment in the textiles and clothing sector 
to the value of U.S. $140 million for production of denim fabric and 
yarn, we have started importing cotton from SSA cotton producers for 
this mill which will be producing around 2 MSME of denim fabric per 
month and importing around 50,000 tons of cotton per month at full 
production. The prospects are bright and we cannot let AGOA fail.
    The consequences of non-extension in general, and the third country 
fabric benefits in particular, would be too ghastly to contemplate as 
our nascent textile and clothing industry is struggling to position 
itself for the stiff global competition it has to contend with after 
the expiry of the AGOA benefits, and the removal of quotas under the 
WTO agreement on textiles and clothing in January, 2005.
    Mr. Chairman, AGOA is a growth and development initiative designed 
to meet the needs of the region in a sustainable manner by fostering 
regional integration. In this regard, the extension of AGOA to 2015 
would provide eligible sub-Saharan Africa countries to fully integrate, 
particularly their textile and apparel industries.
    We wish to record our appreciation of development dimension of the 
sections of the bill in relation to the technical assistance provision 
that will make it easier for African countries to develop the framework 
to participate in the benefits and take full advantage of the proposed 
extension by three years, of the third country fabric provision which 
is set to expire on 30 September, 2004.
    We are gratified once more that the bill will be introduced in the 
House of Representatives shortly and hope that it will quickly go 
through to the floor of the Senate. Therefore, it is our fervent hope 
that the Senate will also recognize the critical importance of AGOA and 
challenges thereon. On this note, I urge both the House of 
Representatives and the Senate to use their best endeavours to fast-
track the tabling of the bill through Congress in such a manner that 
AGOA Acceleration Act of 2004 will be in the U.S. statute-book by June 
2004.
    Mr. Chairman, we remain confident that, once again, our friends at 
the Capitol Hill will resolutely and decisively respond to our clarion 
call at this hour of need.
    I thank you all for your attention.

                                 

    Chairman CRANE. I thank you, Minister Malie. Now Minister 
Cuttaree.

 STATEMENT OF THE HONORABLE JAYA KRISHNA CUTTAREE, MINISTER OF 
FOREIGN AFFAIRS, INTERNATIONAL TRADE AND REGIONAL COOPERATION, 
 MAURITIUS, CHAIRPERSON, AFRICAN TRADE MINISTERS' CONFERENCE, 
                AND SPOKESPERSON, AFRICAN UNION

    Mr. CUTTAREE. Thank you, Mr. Chairman and Members of the 
Committee, for giving me an opportunity to talk to you this 
afternoon. The enactment of the AGOA in May 2000 was a bold new 
step in the economic relations between the United States and 
sub-Saharan Africa. Until then, these relations had been based 
solely on aid and a rather condescending attitude toward 
Africa, which could be summed up as benign neglect. In fact 
very few, if any, departments of the U.S. Administration had 
Africa desks, and those that existed were of minor interest. 
Indeed until the passage of the AGOA, there was no Africa desk 
at the U.S. Trade Representative's Office, which reflected this 
unwillingness to consider Africa, and sub-Saharan Africa in 
particular, as a serious economic partner to the United States.
    The AGOA introduced a new concept that through trade and 
commercial development, there could be created sustainable 
economic development in Africa. Through the development of 
trade between the United States and Africa, genuine jobs could 
be created, a manufacturing basis could develop, women could 
play a greater role in the economic development of their 
country, and African countries could participate in the global 
economy. The spinoff from this development would be greater 
investment in infrastructure, the higher demand for education 
to have skilled workers, and the growth of both political and 
economic democracy.
    The success of AGOA has gone beyond the hopes of its 
promoters. Hundreds of thousands of jobs have been created in 
Lesotho, Kenya, Botswana, Mozambique, Madagascar, Senegal and 
Mali. New opportunities have been created from automobile 
production by Bavarian Motor Works in South Africa to 
information technology development in Senegal and Ghana. Africa 
has ensured an effective presence in Washington, D.C., through 
the African Ambassador's Group in the U.S. Capitol, which 
allows to increase the flow of money and interest into Africa 
in such sectors as the fight against HIV/AIDS and the combat 
against poverty.
    While AGOA I was enacted in May 2000, there has now been an 
AGOA II also enacted, and an AGOA III which is presently making 
its way through Congress. This reflects the dynamic 
relationship between the United States and Africa and the 
extension and the expansion of economic partnership between the 
two continents. We certainly hope that this dynamism will 
continue and extend AGOA to the most important area of African 
concern, agriculture, so that our continent can change from 
being a net food importer to again being a major food exporter 
to the world. Certainly textile and apparel have helped African 
countries to develop their economies, but until the fundamental 
issue of agricultural production and export is faced and 
achieved, Africa will remain the poor relative to the global 
economy.
    At the present time, however, African countries are faced 
with a serious dilemma. Almost all sub-Saharan Africa countries 
are allowed to use fabric from anywhere in the world to start 
up their clothing industry. This provision stops on September 
30, 2004. Hundreds of thousands of jobs referred to above are 
now in serious jeopardy if this provision is not renewed. That 
will not only create serious economic hardship for the infant 
industries in sub-Saharan Africa, but will also certainly 
create political and social disruption for those countries that 
have begun their manufacturing development. With the end of the 
multifiber agreement on January 1, 2005, these African 
countries will be faced with direct competition from 
traditional major exporters such as China, India and Pakistan, 
which all have integrated industries, producing their own 
cotton, spinning and weaving, and then making the clothing. 
Unless urgent action is taken to pass the AGOA III, there will 
be serious effects on African textile and clothing production.
    The AGOA has been a catalyst for new thinking in Africa. 
Its provisions not only require that African countries take 
concrete steps toward political and economic democracy, but 
they encourage an essential element in the African Renaissance, 
which is a steady movement toward regional integration. The 
drive by regional trading blocs such as Southern African 
Development Community, Common Market for Eastern and Southern 
Africa, and Economic Community of West African States to lower 
tariffs among member states has resulted in an increased total 
intra-African trade volume, and an increase in the proportion 
of recorded trade. This means that the African governments are 
gaining an increased revenue from legitimate trade between our 
countries.
    The AGOA is the keystone of the economic partnership 
between the United States and Africa. It has encouraged a sea 
change in these relations by forcing the U.S. Administration to 
take Africa seriously and to create Africa-specific departments 
in the executive. It has managed to create a bipartisan 
coalition in Congress, and ensured that help for poorer 
countries can transcend political divides in the United States. 
It has empowered African countries in the reality of new 
business and investment, but also in the ability of Africa to 
be heard on Capitol Hill and within the U.S. Administration. 
Indeed, with AGOA, we certainly believe that a new dawn has 
opened in U.S.-Africa economic relations.
    [The prepared statement of Mr. Cuttaree follows:]

 Statement of The Honorable Jaya Krishna Cuttaree, Minister of Foreign 
 Affairs, International Trade and Regional Cooperation, Mauritius, in 
 his capacity as Chairperson, African Trade Ministers' Conference and 
                   Spokesperson for the African Union

    The enactment of the Africa Growth and Opportunity Act (AGOA) in 
May 2000 was a bold new step in the economic relations between the 
United States and Sub Saharan Africa. Until then these relations had 
been based solely on ``aid'' and a rather condescending attitude 
towards Africa, which could be summed up as ``benign neglect''. In fact 
very few, if any, Departments of the U.S. Administration had Africa 
desks and those that existed were of minor interest. In fact, until the 
passage of the AGOA, there was no Africa desk at the U.S. Trade 
Representative's Office which reflected this unwillingness to consider 
Africa and Sub Saharan Africa in particular as a serious economic 
partner to the USA.
    AGOA introduced a new concept that through trade and commercial 
development, there could be created sustainable economic development in 
Africa. Through the development of trade between the USA and Africa, 
genuine jobs could be created, a manufacturing basis could develop, 
women could play a greater role in the economic development of their 
country and African countries could participate in the global economy. 
The spin off from this development would be greater investment in 
infrastructure, the higher demand for education to have skilled 
workers, and the growth of both political and economic democracy.
    The success of AGOA has gone beyond the hopes of its promoters. 
Hundreds of thousands of jobs have been created in Lesotho, Kenya, 
Botswana, Mozambique, Madagascar, Senegal and Mali. New opportunities 
have been created from automobile production by BMW in South Africa to 
information technology development in Senegal and Ghana. Africa has 
ensured an effective presence in Washington DC through the African 
Ambassadors' Group in the U.S. capital which allows to increase the 
flow of money and interest into Africa in such sectors as the fight 
against HIV/AIDS and the combat against poverty.
    While AGOA I was enacted in May 2000, there has now been an AGOA II 
also enacted and an AGOA III which is presently making its way through 
the U.S. Congress. This reflects the dynamic relationship between the 
USA and Africa and the extension and expansion of the economic 
partnership between the two continents. We certainly hope that this 
dynamism will continue and extend AGOA to the most important area of 
African concern, agriculture, so that our continent can change from 
being a net food importer to again being a major food exporter to the 
world. Certainly, textile and apparel have helped African countries to 
develop their countries but until the fundamental issue of agricultural 
production and export is faced and achieved, Africa will remain the 
poor relative of the global economy.
    At the present time, however, African countries are faced with a 
serious dilemma. Almost all Sub Saharan African countries are allowed 
to use fabric from anywhere in the world to start up their clothing 
industry. This provision stops on 30th September 2004. The hundreds of 
thousands of jobs referred to above are now in serious jeopardy if this 
provision is not renewed. That will not only create serious economic 
hardship for the infant industries in Sub Saharan Africa, but will also 
certainly create political and social disruption for those countries 
that have begun their manufacturing development. With the end of the 
Multi Fibre Agreement (MFA) on 1st January 2005, these African 
countries will be faced with direct competition from the traditional 
major exporters such as China, India and Pakistan, which all have 
integrated industries, producing their own cotton, spinning and weaving 
and then making clothing. Unless urgent action is taken to pass the 
AGOA III, there will be serious effects on African textile and clothing 
production.
    AGOA has been a catalyst for new thinking in Africa. Its provisions 
not only require that African countries take concrete steps towards 
political and economic democracy but they encourage an essential 
element in the ``African Renaissance'', which is the steady movement 
toward regional integration. The drive by regional trading blocs such 
as SADC, COMESA and ECOWAS to lower tariffs among member states has 
resulted in an increased total intra-African trade volume, and in an 
increase in the proportion of recorded trade. This means that African 
Governments are gaining an increased revenue from legitimate trade 
between our countries.
    AGOA is the keystone of the economic partnership between the USA 
and Africa. It has encouraged a sea-change in these relations by 
forcing the U.S. Administration to take Africa seriously and to create 
Africa specific departments in the Executive. It has managed to create 
a bi-partisan coalition in Congress, and ensured that help for poorer 
countries can transcend political divides in the USA. It has empowered 
African countries in the reality of new businesses and investment but 
also in the ability of Africa to be heard on Capitol Hill and with the 
U.S. Administration. With AGOA, we certainly believe that a new dawn 
has opened in U.S.-Africa economic relations.

                                 

    Chairman CRANE. Thank you very much, Minister Cuttaree. Now 
we will hear from Ambassador Nzibo.

   STATEMENT OF HIS EXCELLENCY DR. YUSUF ABDULRAHMAN NZIBO, 
               AMBASSADOR, THE REPUBLIC OF KENYA

    Ambassador NZIBO. Mr. Chairman, Members of the Committee on 
Ways and Means, on behalf of the Africa diplomatic corps, the 
people of Africa and the governments, I thank you for giving me 
this opportunity to speak on behalf of millions of people, of 
Africans, whose lives depend on this particular bill, the 
extension of AGOA. I am here to speak on behalf of millions of 
women and children in Africa whose lives and expectations and 
hopes lie on the extension of AGOA. By empowering our women and 
children, you are giving us not only hope, but you are giving 
us an opportunity to sustain those values of democracy and good 
governance that we so much love.
    You, Members of this Committee, you have been the champion 
of our causes in Africa. You know best how much AGOA has done 
for us, and especially our women. By empowering our women, you 
are empowering a continent. From the shores of Senegal to the 
mountains of South Africa, AGOA has brought not only hope, but 
tremendous change in our lives. Therefore, our hopes lie with 
you to give us this opportunity. Many countries in Africa today 
are going through democratic changes, peaceful transition of 
powers have taken place, and are looking for trade and 
investment opportunities. As you have heard, regional 
integrations are bringing new hope to our people. Kenya has 
been a good example of the current democratic change that has 
taken place empowering our people to fight corruption and 
terrorism. The AGOA has brought new life and new expectations, 
created more jobs across the whole continent, created better 
livelihoods, and given our people an opportunity to acquire 
education and a means of survival. The women are the backbone 
of change, and AGOA has given them an opportunity, for if you 
empower them, you empower a continent of the future.
    Mr. Chairman, we cannot talk of U.S.-African relations 
without talking about AGOA. The AGOA for us is more than just a 
trade bill. It has become a credible source of hope, an 
effective tool to fight hunger, poverty, and diseases which 
affect over 700 million people. If you are to fight HIV/AIDS 
effectively, malaria, tuberculosis and other infectious 
diseases, it is only through AGOA that we can bring hope to 
millions of Africans. The changes that have taken place in 
Africa in the last 3 years have been incredible. We have seen 
foundations being laid in relationships between the United 
States and Africa. This partnership brings hope and expectation 
because it has transformed millions of lives of Africans and 
created opportunities and better relationships between 
governments and their people.
    Mr. Chairman, success stories in Africa cut across all 
sectors. In our country, Kenya, for example, since becoming 
AGOA-eligible in 2001, we have created over 150,000 jobs, 
textile exports have more than tripled, we have seen 
investments increase by over 23 percent, and this story can be 
told across the continent.
    More importantly, thousands of people across the continent 
have become healthier, happier, productive, and are able to 
acquire basic means of survival. Women are able to find better 
jobs and invest their incomes, and their families' lives have 
improved. These stories can be told across the continent. With 
greater technical assistance, and I am thankful that this is 
receiving positive support, women across the country have 
acquired a means of trade. Capacity building has been improved, 
and we hope that by extending AGOA, these opportunities will be 
given to us. However, if this bill is not passed, and changes 
are abruptly halted, all of the positive things I have talked 
about will end. It will bring a lot of frustrations and make it 
more difficult to sustain democracy, to fight terrorism and 
give opportunity to our people. The AGOA, therefore, brings 
real sustainable change for Africa. It is my humble opinion, 
Mr. Chairman, as I take my new job as Ambassador to Saudi 
Arabia and Iraq next week, that you give us this job for 
changing and bringing a better life for Africa, this is a win/
win situation for both Africa and the United States.
    [The prepared statement of Ambassador Nzibo follows:]

 Statement of His Excellency Dr. Yusuf Abdulrahman Nzibo, Ambassador, 
                         The Republic of Kenya

    Mr. Chairman and Members of the House Ways and Means Trade 
Subcommittee, on behalf of the Africa Diplomatic Corps and the 
governments and people of Africa, I thank you for the opportunity to 
testify before this Committee and for all your support for Africa over 
the years.
    Let me start by acknowledging that this Committee has made great 
efforts to promote trade and investments between the United States and 
Africa, of which AGOA is a central part. Today, one can hardly talk 
about U.S.-Africa relations without talking about the role, the impact 
and the importance of AGOA.
    We live today, at a time when incredible opportunities are opening 
up to reverse persistent hunger and poverty in Africa. Many countries 
in Africa are embracing democratic ideals, peaceful transitions of 
power and aggressively seeking regional and trade opportunities to grow 
their economies and improve the lives of their people. My own country, 
Kenya, is a great example of these new opportunities and has become a 
symbol of hope for many other African countries. But in order to 
sustain these democratic changes, we must be able to translate this 
goodwill into more jobs, more income and better livelihoods for our 
people.
    This is why, to Africa, AGOA is more than a trade bill. It has 
become to us an incredible source of hope and an effective tool to 
fight hunger, poverty and diseases afflicting our 700 million people. 
Africa is proud of AGOA and believes that it is one of the best U.S. 
policies towards Africa. Since its inception 3-4 years ago, AGOA has 
laid a good foundation for partnership between the U.S. and Africa, and 
helped to transform hundreds of thousands of lives in Africa through 
job creation, stable incomes and greater relationships between our 
governments and businesses.
    Mr. Chairman, there are many success stories all across Africa that 
are attributed to AGOA. The statistics clearly demonstrate its track 
record and success. My country Kenya is one example of these AGOA 
successes. Since becoming AGOA-eligible in 2001, Kenya has gained over 
150,000 new jobs; textile exports have more than tripled from $45 
million in 2000 to $150 million by late 2003; and total investments in 
AGOA-related industries infrastructure increased by 23 % from $16 
million to U.S. $21 million between 2002-03.
    Most importantly, hundreds of thousands of people have been 
transformed into happier, healthier and more productive people in 
society. Families are now able to take their children to school and 
afford basic health care. Women are able to find better jobs and invest 
their incomes to better their families' nutrition. And these stories 
are repeated over and over in many AGOA-eligible African countries. 
With greater technical assistance and capacity building for 
agriculture, markets and trade, many more lives can be changed for the 
better, because Africa is largely an agrarian economy, with over three-
quarters of the people dependent on agriculture!
    However, these positive changes could abruptly end and instead of 
hope we might have incredible frustration if AGOA is not extended now! 
Mr Chairman, when AGOA was first enacted many people dismissed it as a 
hopeless bill that could not pass in an election year! Today, we face 
the same challenge! But I am here to say that AGOA is not a hopeless 
bill. It is a symbol of hope and a symbol of what the U.S. stands for--
freedom, enterprise and equal opportunities for all! Mr. Chairman, I 
appeal to your Committee and this Congress to pass AGOA III. Lives in 
Africa literally depend on it!
    Time is of essence. Current delays are causing cancellation of 
orders and job lay-offs, rolling back the gains we have made so far. 
Africa needs AGOA III. It is good for Africa and the U.S. and we call 
on both the House and Senate to expedite the passage of this incredibly 
important Bill, without attaching other trade-related amendments that 
could bog it down.
    Thank you.

                                 

    Chairman CRANE. Thank you, Mr. Ambassador. Mr. Malie, 
Lesotho has been very successful under AGOA, and is achieving 
the results Congress intended, namely, attracting new 
investment, establishing manufacturing facilities, and, in 
textiles, being able to create a vertically integrated 
industry. What challenges did you face in taking advantage of 
the AGOA program, and how did you overcome them? Also, what 
advice would you give to other African countries that have not 
been as successful as you have?
    Mr. MALIE. Mr. Chairman, first of all, I would like to 
indicate that we addressed ourselves as the government to 
issues of stability and good governance. We came up with 
anticorruption laws and made sure that we created a conducive 
climate for investment within the country. We have made efforts 
to come up with correct infrastructure to enable the investors 
to move in, and also to come up with correctly the framework in 
terms of investment, in terms of competition and security of 
investment to try and attract investments. The core issue 
really is peace and stability and the rule of law. I think that 
has been one of the major contributing factors to us seeing 
investors coming into the country.
    We have certainly experienced a lot of serious problems 
indeed in terms of the infrastructure. We have not been able to 
provide the kind of infrastructure that is needed in terms of 
utilities, in terms of the roads, in terms of the factory 
shells that investors are looking for, and we have a lot of 
investors that are there in the pipeline. We have experienced 
growth on paper and on the ground, but there is more potential. 
The fact that the bill addresses infrastructure issues is going 
to be of great assistance to all of us. I would like to say to 
everybody within the region that stability and rule of law are 
major issues in terms of the ingredients that we need to be 
able to attract investment.
    Chairman CRANE. Minister Nzibo, I know that Mauritius 
benefits from the European Union (EU) sugar program, but how 
are EU and U.S. agricultural subsidies impacting the rest of 
Africa, and isn't it in Africa's interest to cut those 
subsidies?
    Mr. CUTTAREE. Indeed, sir. Since you mentioned the sugar 
industry of Mauritius, you know that historically Mauritius 
was, in fact, colonized for its sugar, and the people who came 
lived off the sugar industry. For years we have been selling 
our sugar to the United Kingdom, and when the United Kingdom 
joined the EU, the access of the Commonwealth countries, 
essentially Mauritius and some Caribbean islands, was 
guaranteed. This is how we benefit from the same prices and a 
quota which the European farmers get.
    Obviously, we are living today in a very dynamic situation. 
We all know that pressure within Europe under prices and the 
various subsidies paid to the European farmers are actually 
very strong. We know that inevitably there will be reductions 
in domestic support and subsidies, both in the United States 
and in Europe. This is why in Mauritius today we are reforming 
our industry. We are making it more competitive. We are making 
it leaner and a more technology-driven industry. We are going 
into other production, like to produce energy. We are going 
into ethanol. We are going from a sugar industry to a sugarcane 
industry. The end product is no longer sugar now. We think in a 
few years time we will be able to wean away from our dependence 
on the European market, and be more of a global player, but 
this demands resources, energy and vision. We are trying to do 
it this way.
    As a spokesperson for Africa, as I said in my statement 
this afternoon, the key export of Africa will be agriculture. 
This is why we support the bipartisan approach which has been 
developed, as we see it developing now, between the EU and the 
United States. Why we don't go much beyond that. I think it is 
because we feel there are certain dangers at the same time, 
because in Africa we need infrastructure. We need the capital 
to produce not only for our market, but we need to be able to 
export competitively, and this demands infrastructure, roads, 
skills, sanitary systems and a military. All these problems 
take time. This is why we welcome a program like AGOA to build 
this capacity building.
    The fear is if you have a very quick liberalization of 
agricultural trade, we might find ourselves in a situation 
where, before we can actually prepare ourselves to export in 
the world market, we find larger developing countries like 
Brazil or others taking the market, which is being opened 
essentially for us. Thank you.
    Chairman CRANE. Thank you. Ambassador Nzibo, Kenya has been 
playing a very constructive role in the World Trade 
Organization (WTO) recently. Can you comment on how your 
country hopes to benefit from negotiations in the WTO and from 
liberalization of trade worldwide?
    Ambassador NZIBO. Mr. Chairman, as you are aware, Kenya, 
like other African countries in the last few years, has made a 
tremendous change in reaching out not only to the region, but 
also to try to export to the rest of the world. We have been 
very active in WTO negotiations, and also very active in 
negotiations with U.S. authorities. Our hope lies in 
diversification. We are an agricultural country, like most 
African countries, and we want to diversify. Our textile 
industry was almost collapsing. It is AGOA that has brought 
hopes, created millions of jobs, and the spirit and effect of 
AGOA has been tremendous.
    We depend very heavily on tourism. Unfortunately, because 
of the threats of terrorism, our tourism has been badly 
affected. We are now trying to diversify. We believe it is only 
through trade and negotiating effectively with African factors 
in the world trade, and through fair means of trade, that hopes 
can begin to flow not only to Kenya, but the rest of the 
continent.
    Chairman CRANE. Thank you. Mr. Rangel.
    Mr. RANGEL. Thank you, Mr. Chairman. I thank all of you for 
your exciting testimony. It just makes us feel good to see 
democracy spreading, the rule of law improving, the quality of 
life improving, and the hope and the opportunities that are 
there. One of the major political problems we have with most 
trade agreements is the failure to include basic labor 
standards in these bills, and the countries that don't have 
laws or don't enforce their laws, and the conditions 
surrounding the work. Workers sometimes have an inability to 
organize and to strike and to get time to get off to be with 
their families and enjoy the profits of their work. Would each 
of you share with me briefly the conditions at the workplace, 
whether there is a minimum wage or health benefits or mandatory 
overtime, if there is overtime? How have you improved the 
conditions of work for your workers? Minister Malie, we can 
start with you.
    Mr. MALIE. Thank you, Congressman Rangel. I would like to 
indicate that what we are doing in Lesotho started some time 
back now. It is an arrangement whereby government, employers 
and labor come together to thrash out labor issues inclusive of 
minimum wages, conditions within the factories, and all of the 
conditions and the compliance with International Labor 
Organization pacts.
    In fact, what we have done now, in my delegation I have a 
member of the trade unions, a representative of the trade 
unions, who has come along with us because we make sure that in 
all of our endeavors in terms of industrialization, labor is 
carried along. The trade unions are free to move into 
factories, and in my delegation we have the chairperson of the 
Lesotho Textile Exporters Association. There is a close working 
relationship between labor and employers and government in 
making sure that we respect the rights of our people who are 
working within those factories. One thing that has helped us a 
lot is the visa situation within AGOA where you are free to 
move in and check on these issues of labor and environment to 
make sure that we are complying and that we are doing the right 
things within our economies.
    Mr. RANGEL. Thank you. Minister Cuttaree.
    Mr. CUTTAREE. Thank you, sir. In Mauritius we have had a 
very long tradition of democracy and freedom of association. In 
fact, freedom of association is enshrined in our constitution. 
Therefore, trade unions have been a part of the political 
landscape of Mauritius for decades. Today, in fact, the trade 
union movement is considered as a partner with the government 
and also with the private sector. There are full tripartite 
meetings, for example, to decide on wages compensation. They 
are done regularly before any budget is presented.
    At the same time, we have a national Economic and Social 
Council which is a forum for tripartite dialog on matters of 
economic interest where government, private sector and the 
trade union movement meet regularly to discuss economic 
orientations for the country. We also have a Trade Union Trust 
Fund which gets grants from government, but which is run by the 
trade union movement for the training of trade unions, because 
we believe that the trade union movement should be a movement 
to fight for better conditions of workers, but it should also 
be a partner in the development of the country.
    Also we have remuneration orders, which is legislation 
which governs every economic sector of the country, for the 
private sector, not for the government, for the private sector, 
where the conditions of work, wages, minimum wages are laid 
down; overtime work is controlled; holidays, meal allowance and 
clothing allowance, everything is in the law, and we have a 
very strong labor department which ensures that the law is 
respected. We also have a labor court which deals expeditiously 
with matters concerning violations of labor laws. The irony of 
it all is that today we are being told that if you want to 
progress further on the part of economic development and to go 
more into the global system, we need to have more flexibility 
in our labor situation. Thank you.
    Mr. RANGEL. Thank you. Mr. Nzibo.
    Ambassador NZIBO. Honorable Mr. Rangel, let me first 
acknowledge your leadership as a champion for the common man, 
and your interest in the plight of the common person in Africa. 
As you know, Kenya has had a very strong tradition of trade 
unions. In fact, before we were allowed to form political 
parties, we were allowed to form trade unions. We have had 
several in the country. Changes that we have gone through have 
brought in a democratically elected government, a peacefully 
elected government.
    Kibaki was elected overwhelmingly on the hope for change, 
and part of it was to bring change for the thousands of 
employees in industry and the private sector. We had a problem 
with the export processing zones where workers were not 
allowed, but people worked very hard 2 years ago to allow that 
change, to allow workers to form trade unions, to join trade 
unions, and we have a very strong textile trade union which has 
worked in all of the sectors. So we do not have labor problems 
in Kenya. The non-governmental organizations community also has 
been a very strong watchdog in terms of the rights of the 
workers. The workers themselves are fighting very hard for 
their rights. We have a very skilled labor force, well-educated 
labor force, and they are free to form and join any union. 
Thank you.
    Mr. RANGEL. Last, do you know of mandatory 7-day-a-week 
work in your countries in certain factories, where the workers 
have to work 7 days, 9, 10, 11 hours a day? Do you know of any 
circumstances where employees are forced to work 7 days a week?
    Ambassador NZIBO. No, sir. The only thing I know is that 
the workers are free to accept overtime.
    Mr. RANGEL. Thank you, Mr. Chairman.
    Chairman CRANE. Ms. Dunn.
    Ms. DUNN. Thank you, Mr. Chairman; and thank you, 
gentlemen, for being with us today. It is a great honor to be 
an original cosponsor of AGOA III. Ambassador Nzibo, you 
articulated something to me I have heard in testimony on AGOA, 
and that is your comments that by empowering our women, you 
empowered our continent, and that is a very important 
perspective. I liked hearing that, and I like the fact that you 
are focused on that. I think that is very important.
    I have a couple of questions. I would like to focus on the 
fact that AGOA III does not make the third-nation fabric 
benefit retroactive. I would like to hear each of you state 
what the pros and cons of making this benefit retroactive are, 
particularly if we are not able to get this trade agreement 
passed before September 30 of this year. Could you go over some 
of the pluses and minus for us, please? Minister Malie, would 
you like to start?
    Mr. MALIE. Thanks. Thank you very much. I think our most 
important thing is to send out the right signals to the buyers. 
We already are experiencing a lot of problems because of the 
uncertainty of the extension of the third-country public 
sourcing arrangement. As I indicated, we have cancelations and 
orders that have been put in abeyance to the tune of $40 
million, which affects about 23 factories and about 37,000 jobs 
in those factories. What the major program is currently is the 
bias. There is that fear from the part that if we go ahead and 
there is no retroactive clause to this or the--there is no 
extension, what is going to happen to those orders that we are 
going to be placing and are going to be arriving in the United 
States after September 30?
    So, I think the major issue is sending out the right 
signals to the American buyers. The bill--they are hanging on 
the bill becoming law before September, in fact, before August, 
because, by then, some of these orders would have been shifted 
on to Asian manufacturers. So, really, for us, there is a great 
urgency to see that the bill comes into law by--circumstances 
allowing--by the end of June. That would assist in alleviating 
the problems that are there on the ground. The buyers are 
highly sensitive to the process.
    Mr. CUTTAREE. As you know, I am the Minister of Foreign 
Affairs and International Trade of Mauritius. We don't benefit 
from the third country--third-country fabric provision. 
Nevertheless, I think it is an important issue you raise 
because the whole question is the psychology of the buyer. When 
a buyer is trying to place an order, he wants to know, at the 
end of the day, what is the price he is going to pay. If he 
doesn't know that the third country fabric is going to be 
renewed and that he is going to be able to buy duty free, it 
will be difficult for him to decide to place an order.
    Theoretically, the proposal concerning the retroactive 
effect can help. I don't live in the United States, but I 
understand that the legislative process in the United States is 
very complicated. There is no certainty, although there can be 
lots of support for a measure, but there is no certainty until 
that measure is passed. If I were a buyer, I wouldn't bank on 
the retroactive effect actually being voted. In a situation 
like that, the orders might go elsewhere.
    Ambassador NZIBO. I would like to echo the sentiment of my 
honorable ministers here. As you are aware, one of the problems 
for AGOA has been capacity building--lack of funding 
particularly, Ambassador Zoellick and his able staff--for 
giving women the opportunity for training, the capacity. As you 
know, many of us depend on third-country fabrics. We don't have 
that capacity yet. If this acceleration bill is not passed by 
then, it will mean rolling back all the positive effects of 
what AGOA has done for many countries. My opinion, it should be 
in fact passed immediately to enable the good work that the 
United States has enabled Africa to do to continue, especially 
in empowering our people and opening up democratic change.
    Ms. DUNN. Thank you. Mr. Chairman, I certainly would urge 
that we put our shoulders to the wheel and together, with your 
strong sponsorship and the championship of Mr. Rangel and 
others on this Committee, that we get this important trade 
agreement passed as soon as possible.
    Chairman CRANE. I couldn't agree with you more. Mr. 
Jefferson.
    Mr. JEFFERSON. Thank you, Mr. Chairman. Honorable 
ministers, your Excellency, Mr. Ambassador, you have been 
wonderfully brilliant and articulate to advocate for the 
extension of AGOA and for the good work that AGOA has already 
accomplished in your countries. So, thank you very much for 
your testimony.
    I notice that under the experience we have had so far, a 
great deal of the AGOA exports have been in energy and energy-
related areas and the rest after that has been in the apparel 
industry. If you look at what is allowed in, footwear, luggage, 
watches, electronic products, very important products, my 
question is if this bill is extended--and I believe it will 
be--what do you see as what we need to do to get Africa engaged 
in bringing in some of these other highly favorable products in 
the marketplace? Mr. Malie or whomever?
    Mr. MALIE. Thank you very much, Congressman Jefferson. I 
think in the case of Lesotho, because of the lack of supplies 
on the ground and issues of supply chains, what we decided to 
focus on is deliberately and consciously on textiles, because 
of the nature of their being labor intensive, and creation. The 
volumes that we are able to create in terms of employment on 
the ground are fairly substantial.
    We have an unemployment rate of 45 percent within the 
country, and we had to target an area and put our efforts in an 
area where we think we would be able to reap benefits and get 
results out of. What we are also doing, we are trying to 
diversify on the ground. One area we think we should be--
through the extensions, both the third country fabric sourcing 
and also extension of AGOA--be on 2008 is to move into the area 
of agriculture and develop AGOA industries within the country. 
We had been exporting asparagus to Europe and canned peaches 
and beans within the region. We would like to go out and 
stabilize that area.
    Another area that we have been doing fairly well recently 
is in electronics. We have a factory that has opened up in 
television manufacturing, but we are selling those within the 
region, within South Africa. I think we would like to take full 
advantage of the extensions and try and make sure that in terms 
of agriculture and in terms of electronics, we explore the U.S. 
market as well and that capacity building within AGOA.
    Mr. CUTTAREE. I think there are two issues which are 
responsible for the situation we find ourselves in in Africa. 
First of all, direct foreign investment and the level of 
skills, and the two are interlinked. If you look at the 
stabilization of my own country, in the late seventies, when 
the tensions started to come within earshot--China, Hong Kong, 
Taiwan--and at the same time, when the Hong Kong companies 
couldn't get further market access in Europe and in the United 
States because of the General Agreement on Tariffs and Trade 
system, these people came to Mauritius because of the stability 
we had. There was also lots of labor available at cheap rates 
and labor which was educated.
    These people that came in, they brought in their market and 
their know-how, and they used people there. Gradually, the 
local Mauritians, the local people in the industry who had 
funds available, they invested in the textile sector and 
ultimately tourism sector. In Mauritius, we generated our own 
investment funds from the proceeds of the industry. Now today, 
if you want to go into some other area, it is very difficult 
for an entrepreneur from one of our countries to understand the 
markets like the United States. So, if it is a foreign investor 
who comes, he comes with the knowledge of markets, which is 
extremely important. He also knows about the technology. He 
comes with that and uses the people and the resources 
available.
    Unfortunately, the problem of that certification of 
production in Africa today is due to a large extent to the fact 
that there is no investment going into production of goods in 
Africa today. As you know, if you look at the figures, most of 
the investment going into Africa is going in constructive 
industries. This is why, under AGOA, we have been trying to get 
more investment coming from the United States into our 
continent.
    Ambassador NZIBO. Congressman Jefferson, let me first 
acknowledge your leadership in bringing investments to Africa. 
Last 4 years I have been here, we have interacted with you, and 
I know the good work you are doing. What Africa needs is 
American investments for us to diversify. The AGOA has given us 
that opportunity, but we see a lack of American investments. I 
know Colin Powell says, ``capital-shy.'' Where we are creating 
all the conducive conditions to attract American investments, 
the rate of returns on investments in Africa is very high. Many 
of our countries are very heavily dependent on agriculture, 
including Kenya.
    Unfortunately, our markets are European. We have not been 
able to penetrate this market because of lack of good 
communications, direct links between the United States and 
Africa. I know you are working in this area, but we need to do 
more of that. We have very good horticultural products covered 
by AGOA, flowers and all that. We would like to see whatever is 
provided in AGOA that Africa takes advantage. The biggest 
problem really has been the capacity, especially to meet the 
conditions, the high standards of the United States, I am happy 
that Africa is receiving that technical support and ask for 
more.
    Mr. CRANE. Well, let me express my appreciation to all of 
you for your presence here today and your testimony, and ask 
you if you will, to please consider, depending upon the time 
permitted to you, to communicate to other colleagues, Members 
of Congress, the importance of this legislation. We look 
forward to getting this bill passed as quickly as possible. I 
thank you for your presence here today. Mr. Rangel?
    Mr. RANGEL. Thank you. It would be helpful if you could ask 
your embassies to forward to us any literature you have as to 
the working conditions and the opportunity for people to have 
free association, because that is the biggest obstacle that we 
have to overcome, how you treat your workers, okay. Thank you.
    Mr. CRANE. Thank you so much. Now I would like to call our 
next panel Lucy Soares-Demelo, Jeff Streader, Jill Kiley, 
Stephen Hayes, Reverend David Beckmann, Robert Kirk and Mark 
Levinson. If our witnesses will please come forward and take 
their seats. If you will proceed in the order that you took 
your seats and in your prepared statements. If you will try and 
keep them to 5 minutes, we would appreciate that. Any more 
remarks you have in printed form will be made a part of the 
permanent record. With that, then, we start out with Ms. 
Soares-Demelo.

  STATEMENT OF LUCY SOARES-DEMELO, SENIOR MARKETING DIRECTOR, 
  MAST INDUSTRIES, INC., COLUMBUS, OHIO, ON BEHALF OF LIMITED 
             BRANDS AND NATIONAL RETAIL FEDERATION

    Ms. SOARES-DEMELO. Chairman Crane, Mr. Rangel, Mr. 
Jefferson, I am honored to be in the presence of you, the three 
Founding Fathers of AGOA. My name is Lucy Soares-Demelo, and I 
am Senior Marketing Director for Mast Industries. I am here to 
testify in strong support of H.R. 4103 on behalf of Limited 
Brands and our trade association, the National Retail 
Federation (NRF). As an African-born naturalized American 
citizen, I am proud that Limited Brands, Mast Industries and 
the NRF played a leading role in the effort to pass the first 
AGOA. We had the opportunity to host Chairman Thomas, Mr. 
McDermott and his delegation last year in South Africa, and we 
showed them a few of the hundreds of new factories built from 
the ground up, in some cases, where fiber is grown by local 
farmers went in one end and come out as high-quality finished 
garments for the U.S. market on the other end. So, literally, 
we went from ground to a garment. As we showed you, this 
particular factory would literally never have existed without 
AGOA, without the efforts of all of you. The AGOA opportunities 
in garment manufacturing have literally put food on the table 
for hundreds of thousands of poor Africans.
    As you know, with all of the success we have seen, AGOA is 
in big trouble. Many African producers will not survive without 
this bill. It is that simple. Many U.S. retailers are canceling 
orders right now because the incentives that drove U.S. 
customers to Africa may soon vanish. The AGOA has met billions 
of dollars in new orders, thousands of new jobs and far-
reaching investment and training. America has created what I 
would argue is the most effective, efficient assistance program 
ever extended by the United States to Africa. As a working 
mother, I see that one of the most compelling lessons learned 
from the AGOA experience is that the development of the garment 
industry in Africa has disproportionately benefited women and 
the children that depend on their wages for their very 
survival.
    I want to say something on what I think is the biggest 
disappointment related to AGOA. Unfortunately, unelected 
officials in U.S. Customs Service's Office of Regulations and 
Rulings (ORR) took away many of the benefits Congress intended 
to grant Africa. Here is one example. This man's jacket, made 
in South Africa in a factory in downtown Johannesburg where 
almost all the workers were hardworking Zulu women, we 
developed sophisticated African fabric to compete with Asian 
producers, in other words, moving business from a rich country, 
in this case Korea, to a black, South African neighborhood 
devastated by AIDS where the unemployment rates approached 50 
percent. This required a certain type of lining not available 
in Africa at the time, but we found an American supplier in 
Fall River, Massachusetts, called Duro. Africa wins and America 
wins, right? Wrong. Customs decided both should lose. Isn't a 
win-win what the Committee on Ways and Means wanted? Well, not 
according to ORR. They said no. This wasn't an AGOA qualifying 
garment because they read the bill to restrict the use of 
African and U.S. fabrics together in a garment. That order, 
this order went back to Asia. What a shame.
    Does this make sense to any Member here? Another reason why 
we need this bill now, my plea to this Committee, is that as 
you fine tune this legislation, you remove any ambiguity in the 
language of the bill that would allow the situation like this 
to happen again. In other words, specifying explicitly that all 
apparel products would be eligible for trade preferences except 
those products specifically excluded by the legislation. 
Finally, we think that it is vital that H.R. 4103 restore 
retroactively and refund any duty in cases where benefits were 
taken away by Customs' interpretations or a time lapse if this 
bill isn't passed soon. Companies that lost millions because 
they believed the Committee on Ways and Means interpretation of 
the bill when they placed orders in Africa shouldn't suffer 
because unelected officials decided to change Congress' intent. 
Now this Committee has the opportunity to continue that work, 
to do good by being good, to right a historic wrong, to make a 
difference in the poorest African countries. This is a rare 
chance to make an immediate and positive difference sitting 
here in Washington. Let's not let this moment pass. American 
retailers and our company pledge to work tirelessly with you to 
enact this bill as soon as possible.
    [The prepared statement of Ms. Soares-Demelo follows:]

   Statement of Lucy Soares-Demelo, Senior Marketing Director, Mast 
                    Industries, Inc., Columbus, Ohio

    Mr. Chairman, Members of the Committee, thank you for the 
opportunity to appear before the Trade Subcommittee to discuss the AGOA 
Acceleration Act of 2004.
    My name is Lucy Soares-DeMelo. I am Senior Marketing Director for 
MAST Industries, a global contract manufacturing division of Limited 
Brands. I am here to testify in strong support of H.R. 4103--the ``AGOA 
Acceleration Act of 2004''--on behalf of Limited Brands and our trade 
association, The National Retail Federation.
    First, let me congratulate you Mr. Chairman, Mr. Rangel, Mr. Levin 
and Chairman Thomas for your collective leadership in crafting this 
bipartisan legislation. We also pay special tribute to the original 
AGOA sponsor, Mr. McDermott--and also to Mr. Jefferson, who has always 
worked hard to advance the cause of African trade. I know that this 
AGOA 3 bill is a bipartisan effort, much like AGOA 1 and AGOA 2 that 
went before it. It is wonderful to see that when it comes to helping 
the poorest people in Africa through trade, there is no Democrat or 
Republican position; there is only an American position. 
Congratulations to the Ways and Means Committee.
    As an African-born naturalized American citizen, I am proud that 
Limited Brands, MAST Industries, and the National Retail Federation 
played a leading role in the effort to pass the first Africa Growth and 
Opportunity Act (AGOA). MAST Industries testified before this Committee 
on AGOA on February 3, 1999. Other American retailers such as our 
friends at GAP Inc., Liz Claiborne, and many other National Retail 
Federation members were strong and early supporters of AGOA.
    As many of you know, I moved to the region with my family to open 
MAST operations in Africa--in Cape Town, South Africa; Antananarivo, 
Madagascar; and Port Louis, Mauritius. Until recently, I had been 
working in Africa, helping African producers take advantage of the 
trade opportunities that Congress created. Hundreds of new factories 
were built, skills were learned and technology was shared, and indeed, 
thousands of lives were transformed. AGOA opportunities in garment 
manufacturing have literally put food on the table for hundreds of 
thousands of poor Africans.
    My only regret is that we couldn't have done AGOA much earlier. But 
now, one of the key AGOA benefits is expiring. Some U.S. retailers are 
canceling orders in African factories, because the incentives that 
drove U.S. customers to Africa may soon vanish. Africa needs more time, 
not because Africa didn't move fast enough, but because in most cases, 
the U.S. didn't deliver on its promises in time. Indeed, final AGOA 
regulations (which would help U.S. retail customers plan orders in AGOA 
countries) were held hostage by one Senator (since retired) for nearly 
one year beyond the original deadline. Customs changed rules several 
times, creating more uncertainty in the minds of AGOA customers. That 
uncertainty created hesitation and doubt about doing business in 
Africa--consequences that greatly undermined the promise of AGOA to the 
countries in the region. So I would ask the Members of the Committee to 
look at the extension of certain AGOA benefits not as a grant of new 
benefits--but as an effort to make good on previous promises to help 
the poorest countries in Africa.
    One thing is certain. Without leadership on Africa trade issues by 
members of this Committee, MAST Industries and many other retailers 
would not have a presence in Africa. MAST and Limited Brands didn't 
have a single order in South Africa, Swaziland, Kenya or Lesotho prior 
to AGOA's passage in the House. As we pointed out in our earlier 
testimonies, incentives matter. AGOA has meant billions of dollars in 
new orders, thousands of new jobs, and far-reaching investment and 
training. By suspending import taxes on clothing produced in the 
poorest African countries (treatment equivalent to countries like 
Mexico)--America has created what I would argue is the most effective 
and efficient assistance program ever extended by the United States to 
Africa.
    One of the most compelling lessons learned from the AGOA experience 
is that the development of the garment industry in Africa has 
disproportionately benefited women--and the children that depend on 
wages earned by those women for their survival.
    But let's remember the predictions of the opponents of AGOA. The 
emergence of an apparel industry in AGOA countries hasn't cost a single 
job in the United States. The textile lobby and other groups said that 
Africa would turn into a ``transshipment superhighway''. Not so. Or 
that factories would move from Charlotte, North Carolina to Cape Town, 
South Africa. Wrong. Other groups even said that ``bad countries'' 
would benefit most. Wrong again. The biggest winners have been 
countries that are democracies--with good labor standards for the 
developing world.
    AGOA is a success. And to quote Chairman Thomas, ``What the U.S. 
was doing before wasn't working. AGOA isn't perfect by any means, but 
in the short time it has been in effect, it has been working. The AGOA 
Acceleration Act will help it work even better.''
    And remember those who argued for a ``U.S. fabric only'' rule of 
origin? The amount of garments wholly made with U.S. materials in 
Africa is basically zero, because, as we know, this argument was merely 
a ploy to undermine the initiative. But one thing is for certain: as 
African economies grow, those countries purchase U.S.-made high 
technology and transportation equipment, software, machinery, services, 
high value agricultural products and many other inputs. Africa and 
America both win.
    As a working mother, like many of my colleagues at Limited Brands, 
I know that trade with Africa holds special meaning. We are 
particularly aware of the limited choices facing many women in the 
poorest countries in Africa. The alternative for them to training and 
working in a clean, safe factory, earning a decent wage, and receiving 
access to health care is often working in the fields (with their 
children) or the rice paddies.
    I can tell you from first hand experience that it breaks your heart 
to see children, with their young mothers, working in the rice paddies 
in a country like Madagascar. For these young women, a job in a garment 
factory holds the promise of breaking the cycle of illiteracy, of 
infant mortality, of malnutrition. A job in a garment factory means 
that young women have a chance to educate their daughters--the key 
determining factor in economic empowerment. Most of all, for women, a 
job really means having a choice--choices previously unavailable to 
women in that part of the world. The biggest choice is a chance for a 
better life. AGOA has meant a better life for millions of people--
especially women and girls. No wonder groups like OXFAM and Bread for 
the World support increased trade with the poorest African countries. 
You can't be pro-Africa without being pro-trade with Africa.
    Having worked with so many factories in Malawi, Swaziland, Lesotho 
and South Africa, where the plague of HIV/AIDS is devastating entire 
communities, I can share an interesting observation: I've seen first 
hand that women who can feed their families do not make dangerous 
choices that could end their lives. I find it fascinating how South 
African women working in garment factories--women whose neighbors 
suffer rates of infection of nearly 40 percent--seem relatively free 
from HIV. Could it be that an important key to preventing HIV/AIDS 
among young women in Africa is providing them with a source of income 
to buy food and pay modest tuition and book fees to gain an education? 
Could it be that factories allow us to reach women through health 
education that we could not reach before? I think that the answer to 
both questions is yes.
    Drugs won't solve the AIDS crisis in Africa. I am convinced that 
creating jobs and opportunity may be the best way to combat the spread 
of this horrible killer among women.
    I want to say something on what I think is the biggest 
disappointment related to AGOA. Our elected representatives in Congress 
and two Presidents--one a Republican and one a Democrat--supported 
expansive trade benefits for the poorest African countries. 
Unfortunately, unelected officials in the Office of Regulations and 
Rulings (now housed in the Bureau of Customs and Border Protection in 
the Department of Homeland Security) took away many of the benefits 
that Congress intended to grant to Africa.
    Allow me to review the record. Notwithstanding strongly-worded 
correspondence from this Committee, the Office of Regulations and 
Rulings interpreted AGOA rules in a way that rendered knit-to-shape 
garments ineligible in 2001 and then later decided that so-called 
``hybrid'' garments (those that were made of African fabric but had 
U.S.-made linings) also did not qualify for duty-free benefits. In 
another restrictive move, the Office of Regulations and Rulings ruled 
that fabric on rolls could not be used for collars and cuffs in polo 
shirts. In each of these cases, legal experts agreed that the Office of 
Regulations and Rulings could have gone either way on these 
interpretations.
    The Bureau of Customs and Border Protection Office of Regulations 
and Rulings had the discretion in all three instances to help Africa or 
to hurt Africa. In all three instances the Office of Regulations and 
Rulings chose the option that ended up hurting the people in the 
poorest countries in Africa. The only winners from these decisions were 
the factories in Asia which were able to win back or keep business that 
otherwise would have been placed in Africa. My estimate is that these 
and other actions by the Bureau of Customs and Border Protection cost 
one billion dollars in lost orders for African factories over the past 
several years. What a shame that Congress and the President agreed to 
help Africa only to have unelected officials defy the intent of 
Congress and take away benefits. It is shameful and must not be allowed 
to happen again.
    My plea to this Committee is that, as you fine-tune this 
legislation, you remove any ambiguity in the language of the bill that 
would allow this situation to continue. Indeed, we believe that the 
bill should clarify that the intent of the legislation is to provide 
AGOA benefits to ``all apparel''--or ``all apparel in Chapters 61 and 
62''. Just as the Committee avoided confusion in the Andean Trade 
Preference and Drug Eradication Act (ATPDEA) by outlining a so-called 
``negative list'' for product eligibility--we believe a similar 
approach might be well suited for AGOA. In other words, all apparel 
products would be eligible for trade preferences except those products 
specifically excluded by the legislation.
    Mark my words, if the language is left unchanged, OR&R will 
probably create new problems that will cost tens of millions in lost 
orders in the future. We don't want to be back here asking for Congress 
to pass an AGOA 4 to correct problems that can be avoided at the 
outset.
    Finally, we think that it is important that H.R. 4103 restore 
retroactively any benefits taken away by U.S. Customs for duties paid 
on knit-to-shape goods, polo shirts that were caught up in the collars 
and cuffs issue, and those products assessed duty because of 
eligibility issues over hybrid garments. The companies that lost 
millions because they believed the Ways and Means Committee's 
interpretation of the bill when they placed orders in Africa shouldn't 
suffer because unelected officials decided to rewrite the bill or 
change its intent.
    The AGOA apparel industry is in trouble. It desperately needs this 
legislation to survive. With the expiration of the third-country yarn 
and fabric provision later this year, followed shortly by the end of 
the global textile and apparel quotas, time is running out.
    Our experience in the first AGOA bill applies to this year--to 
Chairman Thomas and the Republican members, I make this plea: please 
work with the leadership to schedule this legislation on the floor. And 
to Mr. Rangel, and the Democratic members, I ask you to perform the 
same magic that you accomplished when you cleared the way for floor 
consideration of the first AGOA bill. We remember that House Leader Tom 
Delay was given a piece of paper by Mr. Rangel and others with a list 
of thirty to forty Democratic members who pledged to vote for the 
Republican rule on the bill. Mr. Delay knew that the votes would be 
there--and they were. Without that kind of an effort this time around, 
this bill doesn't have a chance.
    Once again I would like to commend this Committee for not only its 
current efforts but also its previous accomplishments. I recall the 
words of a former chair of the Ways and Means Committee--Bill Archer--
who set the stage for this remarkable success story when he declared, 
``We will have an AGOA bill with commercially viable apparel 
provisions, or we will have no bill at all.'' Clearly, the apparel 
provision are the locomotive driving the wonderful success of AGOA, and 
clearly the highlight of the success story is its impact on women and 
children. Now, this Committee has the opportunity to continue that 
work. To do good by being good. To right a historic wrong. To make a 
difference in the poorest African countries. This is a rare chance to 
make an immediate and positive difference sitting here in Washington. 
Let's not let this moment pass. American retailers and our company 
pledge to work tirelessly with you to enact this bill as soon as 
possible. The poorest countries in Africa are counting on us. Let's not 
disappoint them.
    Mr. Chairman, thank you again for the opportunity to appear, and 
for your efforts to advance growth and opportunity in Africa.

                                 

    Mr. CRANE. Thank you.
    Ms. SOARES-DEMELO. The poorest African countries in Africa 
are counting on us, and let us not disappoint them.
    Mr. CRANE. Thank you. Mr. Streader?

    STATEMENT OF JEFFREY STREADER, VICE PRESIDENT OF GLOBAL 
    SOURCING, VANITY FAIR CORPORATION, NASHVILLE, TENNESSEE

    Mr. STREADER. Mr. Chairman, Mr. Rangel, Mr. Jefferson, my 
name is Jeffrey Streader. I am the Vice President of Global 
Sourcing with VF Imagewear, a subsidiary of VF Corporation. I 
am pleased to be here today to discuss the AGOA Acceleration 
Act representing VF Corporation. We are the world's largest 
apparel company. We are a Fortune 300 company. We were founded 
in 1899 in Reading, Pennsylvania, and today, our headquarters 
are in Greensboro, North Carolina. We have 52,000 employees 
worldwide and 17,500 associates here in the United States. Our 
U.S. locations are 39 administrative and sales offices, 23 
distribution centers, 18 factories and 214 retail outlets. Our 
brand portfolio includes Nautica, the North Face, Lee, 
Wrangler, VF, Lily of France, Jansport and many others and 
every channel in distribution.
    Our goal is to be the world's most responsive apparel 
company. Our ambition is to produce apparel with a blended 
strategy using factories in both the Western Hemisphere and the 
Eastern Hemisphere. We produce 46 percent of our apparel today 
in our own factories and 54 percent we source. Production in 
the VF factories uses predominantly American fabric and will 
continue to do so. For sourcing, we have developed a 
comprehensive analytical framework which we use to assess the 
competitive landscape for the apparel and textile industry. Our 
strategies, although they are structured, are certain to change 
after the elimination of quota in 2005, which is less than 5 
years after AGOA. Prior to the passage of AGOA, in 2000, we did 
not source any product in Africa.
    Our decision to enter the sub-Saharan market was made after 
thoroughly assessing the cost benefit for the corporation but 
also after truly understanding the risk-reward of entering this 
market. We emerged the very principles of AGOA including the 
establishment of a market economy while focusing on stable 
transparent governments that demonstrated efforts to combat 
corruption with overall stability. Our continuous due diligence 
has identified over 20 viable companies to engage. Currently, 
we import branded product for the U.S. market from Mauritius, 
Madagascar, Kenya, Lethoso, Swaziland, Mozambique and South 
Africa. The factories have met our international compliance 
standards, which are the most rigorous standards in the 
industry. The overseas factories must meet the same standards 
of our internal factories. In our opinion, since AGOA's initial 
passage, seven to eight of the AGOA nations have progressed 
quickly from the embryonic stage to the early export stage. 
This is when low-wage labor is used for labor-intensive 
operations with acceptable but unrefined execution.
    Uncertainty in the region's long-term viability has led to 
underinvestment and an undeveloped textile industry to augment 
the region's growth. The development of a large and 
sophisticated textile industry will only begin if the rules of 
origin under the AGOA legislation are extended. Otherwise, a 
vast majority of sub-Saharan companies that depend on low-cost, 
high-quality yarns and fabrics in Asia will quickly be forced 
to go out of business. As the largest apparel company in the 
world, we embrace free trade. We are capable of providing 
significant steady production opportunities. We prefer to 
establish and maintain long-term partnerships. This in turn 
translates to consistent employment opportunities and regional 
stability.
    The VF Corporation is committed to sustaining and even 
growing our activities in sub-Saharan Africa provided the 
supply chain model continues to make economic sense for us. 
Unless H.R. 4103 is passed before the expiration of the current 
program, we will have no choice but to move out of our African 
locations. It would be extremely difficult to return if this 
would occur. Succinctly, sub-Saharan Africa unconditionally 
needs the extension of AGOA and the LDC's access to third-party 
fabric to even begin to compete in an environment that will 
change dramatically in 7 months. Furthermore, we believe this 
gives the region additional time to attract investment for the 
textile industry.
    [The prepared statement of Mr. Streader follows:]

   Statement of Jeff Streader, Vice President of Global Sourcing, VF 
                   Corporation, Nashville, Tennessee

    Mr. Chairman and distinguished members of the committee,
    My name is Jeffery Streader, the Vice President of Global Sourcing 
with VF Imagewear, a subsidiary of VF Corporation. I am pleased to be 
here today to discuss the AGOA Acceleration Act of 2004, H.R.4103, 
representing VF Corporation.
    VF Corporation is the world's largest apparel company. VF is a 
Fortune 300 corporation. Our company was founded in 1899 in Reading, 
Pennsylvania and our corporate headquarters are currently in 
Greensboro, North Carolina. We employ over 52,000 associates worldwide 
with 17,500 employees in the United States. Our U.S. locations include 
39 administrative and sales offices, 23 distribution centers, 18 
factories and 214 retail outlets.
    The VF brand portfolio includes Nautica, The North Face, Lee, 
Wrangler, Vanity Fair, Lily of France, Jansport and many other brands 
in virtually every channel of distribution. Our goal is to be the 
world's most responsive apparel company.
    VF's ambition has been to produce our apparel with a blended 
strategy using factories in both the Western Hemisphere and also the 
Eastern Hemisphere. VF Corporation produces 46% of our apparel in our 
owned factories and 54% is outsourced. Production in the VF factories 
predominantly uses American fabric.
    For outsourcing, we have developed a comprehensive analytical 
framework to assess the competitive landscape of the apparel and 
textile industry worldwide. Our corporate sourcing strategies are 
structured, but are certain to change after the elimination of quota in 
2005. This is less than five years after the passage of AGOA.
    One tenth of the world's population lives in sub-Saharan Africa and 
this region has the highest population growth rate in the world. With a 
GNI of under $500 U.S. annually, this is a region full of challenges. 
Prior to the passage of AGOA in 2000, VF Corporation did not source any 
apparel in Africa. VF's decision to enter the sub-Saharan market was 
made after thoroughly assessing the cost/benefit for the corporation, 
but only after truly understanding the risk and reward of entering this 
market. We embraced the very principles of AGOA, including 
establishment of a market economy, while focusing on stable, 
transparent governments, ones that demonstrated efforts to combat 
corruption and with overall stability.
    Our continuous due diligence has identified over twenty viable 
companies to engage. Currently, VF Corporation imports branded apparel 
for the U.S. market from Mauritius, Madagascar, Kenya, Lethoso, 
Swaziland, Mozambique and South Africa. These factories have met our 
International compliance standards. In spite of this, the aggregated 
volume is less than 1% of VF's overall production.
    In our opinion, since AGOA's initial passage, seven to eight of the 
AGOA nations have progressed quickly from the embryonic stage to the 
early export stage. This is when low wage labor is used for labor 
intensive operations with acceptable but unrefined execution. 
Uncertainty in the region's long term viability has lead to under 
investment and an undeveloped textile industry to augment the region's 
growth.
    The development of large and sophisticated textile and apparel 
producers will only begin if the ``rules of origin'' AGOA legislation 
are extended. Otherwise, a vast majority of sub-Saharan companies that 
depend on low cost, high quality yarns and fabric from Asia will 
quickly be forced to go out of business.
    As the largest apparel company in the world, VF Corporation 
embraces free trade. We are capable of providing significant, steady 
production opportunities. We prefer to establish and maintain long term 
partnerships. This, in turn, translates to consistent employment 
opportunities and regional stability. VF Corporation is committed to 
sustaining and even growing our activities in sub-Saharan Africa, 
providing the supply chain model continues to make economic sense for 
our American company.
    Unless H.R. 4103 is passed before the expiration of the current 
program, we will have no choice but to move out of our African 
locations. Additionally, it will be extremely difficult to return if 
this would occur. Succinctly, Sub-Saharan Africa unconditionally needs 
the extension of AGOA and the LDC's access to 3rd party fabric to even 
begin to compete in an environment that will change dramatically in 
seven months. Furthermore, this gives the region additional time to 
attract investment in the local yarn and textile industry to sustain 
long term competitiveness.

                                 

    Mr. CRANE. Thank you, Mr. Streader. Ms. Kiley?

  STATEMENT OF JILL KILEY, IMPORT COMPLIANCE MANAGER FOR DUTY 
   PREFERENCE PROGRAMS, GAP, INC., SAN FRANCISCO, CALIFORNIA

    Ms. KILEY. Good afternoon, Chairman Crane, Ranking Member 
Rangel and other Members of the Committee on Ways and Means. My 
name is Jill Kiley. I am the Import Compliance Manager for Duty 
Preference Programs for Gap, Inc. Gap is a leading 
international specialty retailer offering clothing accessories 
and personal care for men, women, children and infants under 
the Gap, Banana Republic and Old Navy brand name. Fiscal 2003 
sales were $15.9 billion. As of April 3, 2004, we operated 
3,022 stores in the United States, United Kingdom, Canada, 
France, Japan and Germany.
    I appreciate the opportunity to testify before you on this 
very important matter. Gap has been pleased to support the AGOA 
and contribute to the economic development in sub-Saharan 
Africa. This is an incredibly important region for us, and we 
are thrilled to have been one of the first retailers in this 
region. We have been there since 1996, prior to AGOA's 
inception in October of 2000. Unfortunately, restrictive 
interpretation of AGOA rules and potential expiration of 
benefits has hampered our and our other retailers' ability to 
fully source from sub-Saharan Africa. Further business growth 
will also continue to be threatened in this fragile region if 
action is not taken.
    First and foremost, the third-country fabric benefit for 
LDCs must be extended immediately. Without that, further 
investment in the region will be extremely difficult. Gap has 
already begun forecasting for our holiday and back-to-school 
seasons. These are the bread-and-butter seasons for the 
industry. Uncertainty regarding duty and profit margins due to 
the delay in action on AGOA III extension coupled with long 
transit times from the region will force orders to Asia or 
other non-African sourcing regions. In the time since AGOA 
became effective, the raw materials infrastructure in the 
region has not developed sufficiently enough to support maximum 
AGOA eligible garment production. We would gladly leverage more 
duty-free opportunities if the capacity and quality of local 
textiles warranted it. While we understand the argument for 
phasing out third-country fabric benefits to more fully 
encourage investment in the fabric and yarn industries, we need 
much more time at this point. The regional textile capacity has 
not proven to be adequate yet. It would be a shame for all the 
investment that has gone into the region thus far be for 
nothing if the textile industry does not have enough time to 
get off the ground.
    Secondly, interpretation of the flat knit collars and cuffs 
components or other flat knit components has been incredibly 
burdensome and rather unfortunate. It was never envisioned by 
apparel manufacturers, retailers and even the origin 
governments that these types of materials would be considered 
as components by U.S. Customs and not as materials for 
eligibility purposes. Production in the LDC for garments made 
with these components, these flat knit materials, was done in 
good faith as AGOA eligible garments. We would ask that you 
also make this provision retroactive to the effective date, 
again based on our original understanding in the spirit of the 
agreement that--in terms of trade liberalizing production.
    Thirdly, the application of the foreign findings and 
trimmings limit to LDC garments, which are permitted to use 
foreign fabrics, has been another issue for Gap. With the 
current limit of 25 percent of the total cost of components, a 
number of items are being excluded from AGOA eligibility. 
Unfortunately, Customs has interpreted certain language in the 
original AGOA to restrict benefits by applying this trim limit 
to apparel that otherwise is permitted to use foreign fabrics. 
It has cost us duty-free benefits on numerous styles, 
particularly on certain toddler styles that have a 
disproportionate cost of foreign heat transfers and screen 
prints to body fabric. We would suggest that the bill move to a 
provision that is a term that is known as major parts as 
opposed to even going through the suggestion of short supply 
findings and trimmings. We would rather see the concept of 
major parts adopted, which would be much more trade 
liberalizing.
    Fourth and the latest issue has been composite goods. This 
would be garments that are otherwise AGOA eligible but have a 
foreign textile component such as a belt. These are very 
complex situations, and it is almost enough to just move those 
styles out of the region rather than go through the time and 
trouble to determine case-by-case eligibility. Last, I would 
like to say, we are also in the Greater Developed Countries. 
The extension of overall benefits to 2015 is also important to 
sustain economic development throughout the continent. We do 
not just rely on production in the lesser-developed countries, 
and we do encourage extension of benefits for the entire SSA. 
Finally, I would just like to say again that I appreciate the 
opportunity to testify before you, and I am happy to take any 
questions.
    [The prepared statement of Ms. Kiley follows:]

  Statement of Jill Kiley, Import Compliance Manager, GAP, Inc., San 
                         Francisco, California

    Good afternoon Chairman Thomas, Ranking Member Rangel and the other 
members of the Ways & Means Committee. My name is Jill Kiley and I am 
the Import Compliance Manager for duty preference programs for Gap Inc.
    Gap Inc. is a leading international specialty retailer offering 
clothing, accessories and personal care products for men, women, 
children and babies under the Gap, Banana Republic and Old Navy brand 
names. Fiscal 2003 sales were $15.9 billion. As of April 3, 2004, Gap 
Inc. operated 3,022 stores in the United States, the United Kingdom, 
Canada, France, Japan and Germany.
    I appreciate the opportunity to testify before you on this very 
important matter. Gap Inc has been pleased to support the African 
Growth and Opportunity Act (AGOA) and contribute to the economic 
development in Sub-Saharan Africa (SSA). This is an incredibly 
important region for us in our sourcing efforts and we are thrilled to 
have been one of the first retailers in this region prior to the 
inception of AGOA in October 2000.
    As you are well aware, there have been some hurdles with the 
interpretation of AGOA. Gap Inc. takes every precaution in complying 
with trade agreements across the globe. We have five positions 
dedicated to this very specific task and Customs and Border Protection 
has given Gap Inc. a low-risk importer approval rating--the highest 
achievable by an importer. This is a standard we remain committed to 
maintaining.
    Unfortunately, however, restrictive interpretation of AGOA rules 
and potential expiration of benefits has hampered our and other 
retailers' ability to fully source from Sub-Saharan Africa. Further 
business growth will also continue to be threatened in this fragile 
region if action is not taken.
    I will focus my comments today on five specific problem areas in 
AGOA and some suggested clarifications. Gap Inc. remains committed to 
sourcing from this region but resolution of these problems will greatly 
enhance our ability to continue to do so. I am happy to provide further 
examples and information to you upon request.
    Under current law, the Least Developed Countries (LDCs) duty-free 
provision, allowing for garments to be cut and sewn in African LDCs 
from third country or foreign origin fabrics and yarns, will expire on 
September 30, 2004.
    This third country fabric benefit for Least Developed Countries 
must be extended immediately--without that further investment in the 
region will be extremely difficult. Gap Inc. has already begun 
forecasting our orders for the back to school and holiday shopping 
seasons--the bread and butter seasons for our industry. Uncertainty 
regarding duty and profit margins due to the delay in action on the 
AGOA III extension coupled with long transit times from Africa will 
force orders to Asia or other non-African sourcing regions. The longer 
the clock ticks on AGOA III action, the more the region will suffer a 
lack of orders. Time is of the essence.
    In the time since AGOA became effective, the raw materials 
infrastructure in the region has not developed sufficiently enough to 
support maximum AGOA-eligible garment production. In other words, we 
would gladly leverage more duty-free opportunities for basic styles and 
perhaps eventually higher-valued tailored garments if the capacity and 
quality of local textiles warrants it. While we understand the argument 
for phasing out third country fabric benefits to more fully encourage 
investment in the fabric and yarn industries in the region, additional 
time is needed for the regional textile capacity to be proven adequate. 
It would be a shame for all the investment that has gone into the 
region to be for naught because the industry there did not have enough 
time to get off the ground.
    Secondly, the interpretation of flat knit collars/cuffs components 
has been incredibly burdensome. It was never envisioned by apparel 
retailers, manufacturers, or even the origin governments that flat knit 
materials would be considered as components by U.S. Customs rather than 
fabric for AGOA eligibility purposes. Production of Least Developed 
Country garments made with foreign flat-knit materials was done in good 
faith as AGOA-qualifying and it hurts all concerned to pay for a 
restrictive interpretation applied retroactively by Customs.
    As a result of this interpretation, Gap Inc. was forced to remove 
production of one of our staple items--the pique polo shirt--out of the 
region. Not because we were unhappy with the region's cut-and-sew 
quality, but because Customs took a much more conservative than 
intended approach to their treatment of the garment. We are pleased to 
see language to remedy this problem is included in the AGOA 
legislation. Extending this provision retroactively to the effective 
date of the original AGOA would also be appropriate.
    Thirdly, the application of the foreign findings and trimmings 
limits to Least Developed Country garments using foreign fabrics has 
been another issue for us. With the current limit of 25% of the total 
cost of components, a number of items are being excluded from AGOA 
eligibility. Unfortunately, Customs has interpreted certain confusing 
language in the original AGOA to restrict benefits by applying the 
foreign trim limit to apparel that otherwise is permitted to use all 
foreign fabric. It has cost Gap the AGOA duty-free benefits on numerous 
styles, particularly infant and toddler garments that have a 
disproportionate cost of foreign heat transfers and screen prints to 
the body fabric.
    The fourth--and most recent issue--is composite goods. 
Specifically, Customs has ruled that AGOA garments such as pants that 
include a foreign textile belt are not eligible for duty-free benefits. 
Each situation must be looked at case by case, which is complex enough 
to simply move the entire garment production out of the region, rather 
than risk an unfavorable eligibility determination or further impede 
speed to market. The retail reality is that fashion and our drive for 
competitive distinction may dictate certain accessories be sold with 
apparel. These trends which incorporate otherwise low-value items, such 
as foreign belts, should not affect the duty free eligibility of the 
garment itself, otherwise again orders will be forced out of the SSA 
region.
    Lastly the overall extension of duty-free benefits to 2015 for 
qualifying apparel cut and sewn in the SSA is necessary to sustain 
economic development throughout the region including the Greater 
Developed Countries. Gap has mindfully placed production programs in 
GDCs such as Mauritius and South Africa when feasible based on regional 
fabric availability. We have not relied solely on the relatively 
simpler rules and benefits of LDC third-country fabric production. 
Especially in light of quota elimination for WTO countries in 2005, a 
duty-free competitive advantage for the SSA is necessary well beyond 
the original AGOA benefits expiration of 2008.
    Even with the expiration of the quota system in 2005, Gap Inc. 
remains committed to our diversified sourcing strategy that includes 
Sub-Saharan Africa. However, the U.S. Congress needs to address the 
issues outlined in my testimony to ensure the long-term economic 
success of the region and its garment industry. Already, 50,000 jobs in 
Lesotho alone (according to in-country sources) have been created and 
there is the potential for more--provided the region is given the tools 
to succeed.
    On behalf of Gap Inc, I greatly appreciate the opportunity to 
testify before you on this very important matter and I look forward to 
answering any questions you may have. Thank you.

                                 

    Mr. CRANE. Thank you Ms. Kiley. Mr. Hayes?

  STATEMENT OF STEPHEN HAYES, PRESIDENT, CORPORATE COUNCIL ON 
                             AFRICA

    Mr. HAYES. Thank you, Chairman Crane, Congressman Rangel 
and Congressman Jefferson. It is an honor to represent the 
Corporate Council on Africa. We represent 205 corporations 
which collectively represent about 85 percent of all U.S. 
private, direct investment in Africa. The AGOA presently serves 
as the cornerstone of U.S.-Africa trade policy and is a major 
part of our overall policy toward Africa. For us, AGOA is not 
simply about trade or even export-led growth in Africa. Its 
goals are more profound, which affect most of our investors. 
The AGOA is an investment in the future of Africa's markets 
and, by extension, the U.S. economy.
    Today, the population of sub-Saharan Africa is 635 million, 
twice that of the United States, yet any economic activity is 
equal to the State of Michigan in any given year. Africans 
cannot buy if they cannot sell. The AGOA also encourages 
countries to uphold the rule of law, govern properly and 
thereby create the necessity and necessary conditions for 
economic growth. For us, AGOA serves as a prime incentive to 
countries by offering trade privileges to those who exhibit 
improving governance, transparency, rule of law and respect for 
rights. These conditions help all of our companies. In that 
respect, participation in AGOA encourages countries to 
establish the conditions for real economic growth, and as they 
do, provide an avenue for the economic growth to access the 
U.S. marketplace.
    Cohesive policy is essential, and I applaud Congress and 
the Administration for the work it has done in tandem with AGOA 
to expand some of our aid budgets and demonstrate its faith in 
private-sector-led development. The birth of the Millennium 
Challenge Corporations is especially welcome with a pro-growth 
mandate and further incentives to countries to govern 
prudently. Encouraging African countries to implement sound 
macroeconomic policies, including good governance and the rule 
of law, significantly benefits the United States. As African 
income grows, the purchase of U.S. goods and services will lead 
to jobs in our market as well. Despite the success and the 
promise, 3 years is not enough, however, to judge AGOA's full 
worth and the benefit to countries of Africa. I do not believe 
it is prudent to judge any trade policy that involves more than 
three dozen countries that are home to hundreds of millions of 
people, speaking thousands of languages and possessing such 
diverse levels of economic development. The AGOA still has 
impacted too few sectors, and it needs more time.
    Steps must be taken to ensure that AGOA's promise is 
realized by reaching into those sectors that already employ so 
many Africans. Here, I call your attention specifically to 
agriculture. We continue to keep our markets shut to 
agricultural goods or undercut African farmers with our own 
large subsidies. Africa's comparative advantage is in 
agriculture, a sector that employs 70 percent of Africa's 
entire population. Africans already buy large quantities of our 
best goods, software, entertainment, services and, yes, our 
agriculture, to name a few. It is time that we start buying 
their best. We need to allow Africans to trade with what they 
already produce in abundance. Full economic benefits must reach 
all the population and not simply the elites. Opening our 
markets to agriculture reinforces stability. Most discourse 
about AGOA focuses on textiles, and the results are 
encouraging. However, the global consumer is increasingly ready 
to experience Africa's harvest of flowers, unique fruits and 
vegetables, seafood, exotic spices and much more. If AGOA fails 
to make a real difference by ignoring the full sectors, such as 
agriculture, then our stated goal to help extricate Africans 
from poverty through this legislation will not be met. As long 
as Africans remain mired in poverty, they cannot afford 
American goods and services. If this happens, not only will 
AGOA have failed Africa, it will have failed the United States.
    We all recognize that building an economic foundation takes 
time. United States policy must be enacted with long-term 
vision, wisdom and hope. Short-term economic policies do not 
reflect confidence in our vision nor do they give hope to 
Africa. We should therefore continue this program and couple it 
with other incentives and viable opportunities for Africa. We 
support the expansion of the LDC Apparel Benefit. Second, we 
recognize that AGOA is underutilized, at least partially 
because exporting to the United States is an arduous process. 
We advocate greater technical assistance. To sum up, AGOA helps 
us sow the seeds of a new market for American goods. It 
benefits Africans by creating jobs and stability and encourages 
governments to move from opacity to transparency, from 
lackluster legal systems to states that uphold the rule of law. 
Thank you, Mr. Chairman.
    [The prepared statement of Mr. Hayes follows:]

   Statement of Stephen Hayes, President, Corporate Council on Africa

    When President Clinton signed the African Growth and Opportunity 
Act in 2000, it was a hopeful beginning for resurgence in U.S.-Africa 
commercial relations. President Bush supports the continuation of AGOA 
and hails its success. In January 2003 the President said ``From 
Mauritius to Mali, AGOA is helping to reform old economies, creating 
new incentives for good governance, and offering new hope for millions 
of Africans.'' Indeed, AGOA creates hope but its full potential has not 
been realized, and work remains. For that to happen, Congress must pass 
an extension to AGOA this session.
    Trade and investment, coupled with sound economic policies, are 
proven engines of development and growth. South Korea, for example, 
made the right choices internally, and had support from the outside 
world. Today South Korea is a world leader in cutting edge sectors 
including internet technology. Many of Africa's countries may have been 
slow to make the correct choices, and they also have had relatively 
little external support. Today, AGOA is a sensible U.S. policy for 
Africa, and one that encourages Africans to make the appropriate 
domestic decisions.
    AGOA has been in place for only three full years and in several 
cases, we have cause to celebrate. Over a dozen AGOA-driven factories 
have opened in Lesotho--a country slightly smaller than Maryland. In 
Kenya, direct AGOA related jobs number nearly 30,000. Because of AGOA, 
South Africa is now the single largest supplier of oranges to the U.S. 
And because the South Africa harvest occurs during the opposite time to 
U.S. producers, this does not affect the U.S. orange growers. Beyond 
the oranges, the South African government estimates that 90,000 jobs 
have been created as a result of AGOA. In Malawi, democracy and good 
governance are taking root: there are new political parties, ongoing 
privatization programs, and a new bill to halt child labor. This is 
largely the result of AGOA. But these successes are not enough to make 
a real difference for most Africans.
    AGOA is not simply about trade or even export-lead growth in 
Africa. It is an investment in the future of Africa's markets, and by 
extension, the U.S. economy. Today the population of sub-Saharan Africa 
is 635 million--over twice that of the U.S. Yet economic activity 
remains small. In 2002 the Gross Domestic Product of sub Saharan Africa 
was $319 billion, smaller than that of the State of Michigan the year 
before. Africa's underserved population has enormous market potential. 
There are 635 million consumers, hoping to enjoy American goods and 
services.
    However, Africans cannot buy American goods and services if they 
cannot afford them. AGOA has begun to spur the needed income generation 
in Africa, but as history has shown, sustained growth takes time.
    U.S. investors should support and act on this opportunity as well. 
Foreign firms are already profiting with AGOA-driven investments in 
Africa. It is time that U.S. investors reap the same benefits. Africa 
is no longer a vacuumfor investment: FDI and Africa's stock markets 
produce among the highest returns in the world, with declining risk 
with each passing quarter.
    With strong incentives for positive change, AGOA recognizes what 
recent studies are proving: real economic growth cannot occur without 
good governance, including the rule of law. Daniel Kaufman and others 
at the World Bank have proven this correlation. However, they have also 
found that this is not a virtuous cycle: growth does not necessarily 
lead to good governance. Thus we cannot simply invest in and trade with 
Africa and assume that governance will naturally improve as economies 
grow.
    The carrot of AGOA is policy in line with the research: it induces 
countries to take steps toward needed reform. And as they do, countries 
are awarded with preferential access to the U.S. market, a proven means 
for growth. That growth benefits everyone, and not just economically.
    Economic growth and the expansion of the rule of law in Africa 
bolster U.S. security. In today's interconnected world, marginalized 
individuals can have influence beyond their borders. Stagnant economies 
and failed states are potential breeding grounds of terror. They are 
also terrorist havens: it is no coincidence that Al Qaeda has been 
based in Somalia and Afghanistan, both failed states.
    Commerce and further incentives for the rule of law must now build 
on the base of forward-looking leadership, and reinforce the emerging 
stability.
    Beyond extending the overall program, there are aspects of the 
proposed legislation that the Corporate Council on Africa believes 
deserve specific recognition.
    First, the least developed country third country apparel benefit 
must be extended. This provision was initially included in AGOA to help 
jumpstart the African apparel industry. Most African countries simply 
did not have fabric making capacity, and that remains the case in many 
places. However, the industry recognizes that vertical integration is 
and will be necessary for continued trade with the U.S., and firms are 
investing to become vertically integrated. For example, in Lesotho, 
construction has begun on a state-of-the-art denim fabric mill and 
plans are in place for a yarn spinning plant and knitted fabric mill. 
But, three years has not proven long enough for most businesses to 
invest in full integration. Many were hesitant because the AGOA 
benefits--regardless of where the fabric is from--expire in 2008.
    An extension of AGOA should therefore include the correct 
incentives for firms to further invest in the African textile industry. 
A sunset date is necessary for the third country fabric benefits to 
ensure that the industry does not become dependent upon imported 
inputs, but September of this year is too soon to halt third country 
fabric use. The proposed extension of the benefit through 2007, coupled 
with the overall program's extension through 2015 should give 
businesses ample faith in AGOA and ample time to invest in vertical 
integration. This is a young industry and therefore we must not act 
with too heavy a hand.
    Second, increased on-the-ground technical assistance is essential 
to the long-term success of AGOA and the growth of African economies. 
AGOA is underutilized, at least partially because exporting to the U.S. 
is an arduous process. Different agencies have jurisdiction in dealing 
with imports and with increased security needs come increased security 
regulations and restrictions. For any new trader--especially the 
smaller businesses--the U.S. market is therefore enticing and 
intimidating. Traders may or may not have internet access to read the 
lengthy documentation. Traders may or may not have the funds to pay a 
customs broker. Traders may or may not speak English. Technical 
assistance is therefore welcomed and needed. Without it, the web of 
U.S. rules and regulations will continue to function as a non-tariff 
barrier to entry for African traders.
    But technical assistance goes beyond assistance with customs. The 
U.S. government has mechanisms in place to help investors. The Export-
Import Bank of the United States and the Overseas Private Investment 
Corporation are the most notable examples. For AGOA's success to grow, 
these agencies need to put more weight behind AGOA. Restrictions on 
OPIC must be lifted as well, allowing the corporation to work in all 
viable industries in Africa. These agencies are very effective 
elsewhere in the world and in many industries; it is time for them to 
apply more of their talents to Africa.
    AGOA benefits Africans by creating jobs and stability. It 
encourages governments to move from opacity to transparency, from 
lackluster legal systems to states that uphold the rule of law. It 
provides hope and real opportunity to Africans.
    It also benefits Americans. AGOA helps to sow the seeds of a new 
market for American goods in Africa. Africans cannot buy what we are 
selling if they cannot earn a living themselves.Improved African 
economic viability and trade promotes better international relations, 
safety and stability.
    But AGOA cannot stand as the lone policy aimed at creating growth 
and opportunity in Africa. I applaud this administration for the work 
it has done expanding our aid budgets and its faith in private-sector 
lead development. The birth of the Millennium Challenge Corporation is 
especially welcome, with a pro-growth mandate, and further incentives 
for countries to govern prudently. But such progress is overshadowed 
because we continue to keep our markets shut to agricultural goods or 
undercut African farmers with large subsidies. Africa's comparative 
advantage is in agriculture where 70% of Africans earn their living. 
Africans already import large quantities of our best goods: software, 
entertainment, and services to name a few. It is time we start 
importing their best.
    AGOA is crucial initiative for Africa and the United States, and 
one that is beginning to produce. It is also a testament of 
Congressional hope and belief in Africa. We must reaffirm this message. 
To do so, we must extend and enhance the legislation and couple it with 
parallel programs offering incentives and real opportunity for 
Africans.

                                 

    Mr. CRANE. Thank you, Mr. Hayes. Now, Reverend Beckmann.

STATEMENT OF REVEREND DAVID BECKMANN, PRESIDENT, BREAD FOR THE 
 WORLD, ON BEHALF OF PARTNERSHIP TO CUT HUNGER AND POVERTY IN 
                             AFRICA

    Reverend BECKMANN. Thank you, Mr. Chairman, Ranking Member 
Rangel, Mr. Jefferson. I am David Beckmann. I am President of 
Bread for the World. This is a national Christian citizens 
movement against hunger. We organize mainly in churches. We 
mobilize about a quarter of a million letters to Congress a 
year on issues that affect poor and hungry people in the United 
States and around the world. I am also testifying on behalf of 
the Partnership to Cut Hunger and Poverty in Africa, which is a 
broad association of organizations in the United States and 
Africa that care about agriculture and rural development.
    I want to say three things. First, Bread for the World and 
the Partnership to Cut Hunger and Poverty in Africa support the 
passage of AGOA III. We do so because we think it is important 
to reducing poverty and hunger in Africa. I think the testimony 
that you are going to hear from the Union of Needletrades, 
Textiles and Industrial Employees (UNITE!) is important. I 
appreciate the field work that they have done, and I appreciate 
the Committee's oversight and attention to the issue of 
workers' rights. This could be a more significant part of the 
annual meetings between U.S. and African officials about AGOA. 
That said, it is our judgment that AGOA has helped to reduce 
poverty and hunger in Africa without any significant adverse 
effect on poor people in this country, and that it ought to be 
extended. Second point is approving AGOA III is urgent. I just 
came back from Uganda, Mr. Chairman, and I was struck that 
Uganda is an example of exactly what this Committee tried to do 
when you started AGOA. There has been a big surge in Ugandan 
exports to the United States. There are several factories in 
Uganda that have come into existence specifically to create 
textiles to respond to the opportunity of AGOA. I visited one 
rural area about an hour to the east of Kampala. There are many 
jobs except for agriculture in the whole district, and there 
are 1,200 people working in a textile factory that is run by an 
Indian family that has come from outside to take advantage of 
AGOA.
    The President of Uganda, President Museveni, is fanatical 
about AGOA. He says it is the best thing that the United States 
has done for Africa in the whole history of relationships 
between the United States and Africa. He is talking a lot to 
other African leaders and to the people of Uganda about doing 
business with the rest of the world as the only way that Uganda 
and other African countries can really transform their 
economies and dramatically reduce poverty over the long-term. 
From my perspective, it is important that Uganda see trade not 
as an end in itself, but as a means to the end of poverty 
reduction. This is a country that has problems, but they have 
reduced poverty and HIV infection. They have dramatically 
increased enrollment in primary school. If AGOA III doesn't 
pass before AGOA II runs out, those textile factories will 
close. President Museveni's pro-trade policies will be 
embarrassed, and Uganda's development prospects will be 
adversely affected. So, passing AGOA III is urgent. I 
appreciate the fact that you are planning to move it through 
Congress just as fast as you can.
    The third point I want to make about capacity building. The 
AGOA III could have a lot more impact than AGOA has had so far 
if there were some money available for capacity building. The 
AGOA is benefiting a small number of African countries. It 
could have much broader, much deeper impact in Africa if there 
were funding available to help countries, help individuals, 
help businesses take advantage of the opportunities of AGOA. 
Thank you.
    [The prepared statement of Reverend Beckmann follows:]

  Statement of Reverend David Beckmann, President, Bread for the World

    Mr. Chairman and Members of the House Ways and Means Trade 
Subcommittee, I thank you for this opportunity to testify before your 
committee and also for all the support that you, and this Committee, 
have given to Africa through the years. I represent two institutions, 
Bread for the World and the Partnership to Cut Hunger and Poverty in 
Africa, which strongly believe that current trends of hunger and 
poverty in Africa can be reversed, and progress made towards achieving 
sustainable development in Africa.\1\
---------------------------------------------------------------------------
    \1\ Bread for the World is a U.S. Christian citizens' movement 
against hunger. Its nationwide grassroots membership of concerned 
individuals and churches mobilize a quarter of a million letters to the 
U.S. Congress each year on issues that are important to hungry people. 
The Partnership to Cut Hunger and Poverty in Africa is an independent, 
non-partisan effort to increase the level and effectiveness of U.S. 
development assistance to Africa's agriculture and rural development.
---------------------------------------------------------------------------
    The challenge of improving the lives of nearly 700 million people, 
half of whom live on less than $1 a day and one-third considered 
chronically undernourished, is daunting. Africa is the only region in 
the world where hunger, poverty and disease are pervasive and 
increasing.
    Yet we live at a time when incredible opportunities exist to 
reverse these trends and greatly improve the lives of poor people in 
Africa. Many African governments are now embracing democracy, 
experiencing peaceful power transitions and investing more in uplifting 
the lives of their people. New democratic ideals and Africa-led 
initiatives that hold governments accountable, such as the Africa-wide 
NEPAD initiative, are being put in place and becoming acceptable by 
countries emerging from years of colonialism and dictatorship. The 
United States must support these positive efforts and give change a 
chance.
    We see AGOA as profoundly important to Africa. AGOA has laid a good 
foundation for partnership between the United States and Africa, and 
helped to transform hundreds of thousands of lives in Africa through 
creation of gainful employment, stable incomes and better livelihoods.
AGOA Can Help Reduce Hunger and Poverty in Africa
    AGOA's enactment in 2000 marked a turning point in U.S.-Africa 
trade policy. AGOA has become, according to many African leaders, a 
valuable symbol of partnership for development between the United 
States and Africa. President Yoweri Museveni of Uganda has been quoted 
many times saying that what Africa needs is ``trade and not just aid'' 
to support its sustainable economic development.
    The primary objective of AGOA is to encourage increased trade and 
investment between the United States and sub-Saharan Africa by reducing 
trade barriers, expanding U.S. development assistance, negotiating 
trade agreements, promoting private sector engagement and strengthening 
democracy. As part of a long-term U.S. strategic engagement, AGOA aims 
to build capacity and infrastructure in sub-Saharan Africa and expand 
its participation in the global economy.
    Thirty-seven African countries have met the eligibility 
requirements to export to the United States under AGOA. To become 
eligible under AGOA, sub-Saharan African countries must show progress 
in establishing:

    1.  Good governance, including a mechanism to combat corruption;
    2.  Market-based economies, including the elimination of barriers 
to U.S. trade and investment
    3.  The rule of law and respect for internationally recognized 
human rights, including workers' rights.

    Trade has the potential to help lift African people out of the 
cycle of hunger and poverty. That potential, however, can only be 
realized with the establishment of institutions and policies that raise 
economic productivity and achieve equitable distribution of benefits. 
We urge the U.S. government to adopt a comprehensive Africa policy, 
including a strengthened AGOA, increased development assistance 
(including the promised Millennium Challenge Account), increased 
emphasis on agriculture and rural development, and a vigorous response 
to famine and civil conflicts. U.S. policy, including AGOA, should be 
responsive to the New Partnership for African Development (NePAD), 
which is Africa's own comprehensive development policy. The highest 
priority for U.S. and African development policy should be to reduce 
hunger and poverty.
    We regard AGOA as an important part of a comprehensive policy 
framework within which we can focus our advocacy to insist that the 
United States support capacity building, technology transfer, market 
access for African producers and infrastructure investments that will 
promote measurable reductions in hunger and poverty. The emergence of 
African nations that are self-reliant, prosperous, peaceful and 
democratic is not only a matter of the U.S. national interest but also 
a moral imperative.
    Opponents of the legislation say AGOA is fundamentally flawed 
because it is based on questionable ``trickle-down'' economic theory 
and lacks an institutionalized role for civil society. Some opponents 
still argue that AGOA imposes stringent eligibility requirements in 
spite of the fact that nearly 80 percent of sub-Saharan African 
countries have already been granted AGOA eligibility status. Others say 
that AGOA offers African countries inherently unequal trading 
relationships with the United States, and parallels the World Trade 
Organization's (WTO) efforts to secure unlimited access in developing 
countries for lucrative banking and insurance interests in exchange for 
limited market access.
    Another argument against AGOA is that it provides multinational 
corporations with unhindered access to African markets, whereas 
fledgling African companies are not well equipped to take advantage of 
new opportunities offered by AGOA.
    Others note that U.S. non-governmental organizations and the U.S. 
Congress have been ineffective in implementing mechanisms to monitor 
AGOA. They also assert that Africa's textile and apparel sector will 
never survive the onslaught from China, India and other Asian countries 
after the expiration of the WTO Agreement on Clothing and Textiles 
(ACT) eliminating worldwide apparel quotas in 2005. Finally, opponents 
of AGOA argue that without the parallel removal of domestic U.S. 
agriculture subsidies and other trade distorting practices, AGOA will 
never be able to unleash the economic potential of the African 
agriculture sector.
    There is some truth in each of these arguments. Nonetheless, on 
balance, we support AGOA and what it represents for U.S.-Africa 
relations. We are fully supportive of an AGOA III that will:

    1.  Increase agricultural productivity and rural development in the 
region, including increased technical assistance and capacity building.
    2.  Encourage investments in infrastructure--roads, railways and 
ports--to facilitate the movement of goods within countries and across 
borders.
    3.  Promote increased U.S. investment that is mutually beneficial.
    4.  Extend the ``third country fabric'' provision thereby saving 
tens of thousands of jobs.
    5.  Facilitate ongoing dialogue between the United States and 
African governments.
    6.  Encourage expansion of information and communication 
technologies.

    AGOA has had a positive impact in Africa in a relatively short 
time, stimulating economic growth and job creation at a time of 
economic recession in most African countries, and encouraged many 
countries to adopt policies aimed at ending hunger and poverty. Five 
countries (Lesotho, Kenya, Namibia, Swaziland and Uganda) have credited 
AGOA with creating nearly 200,000 jobs. Examples abound, in Uganda, of 
young women who have become employed for the first time and left 
endless cycles of hunger and poverty. In Southern Africa, families have 
been re-united as men find jobs near their spouses and do not have to 
migrate far looking for jobs, only to come home infected with HIV/AIDS.
    AGOA has become a household name in many African countries, 
touching the lives of many poor people. Many Africans--especially the 
more than 200,000 employed in AGOA-related industries--see it as a 
lifeline and opportunity for gainful employment and sustainable 
incomes. Families that are currently benefiting from AGOA as farmers 
growing cotton for these industries or as workers spinning yarn can now 
send their children to school and afford basic health services.
    During the first half of 2003, U.S. imports (including both AGOA 
and the Generalized System of Preferences) increased by 65 percent to 
$6.6 billion. This was primarily due to increases in energy-related 
imports from Nigeria, which totaled $5.4 billion of total imports 
compared to $3.0 billion in the first half of 2002. AGOA-related 
imports of African textiles and apparel increased by $148.4 million 
(40.7 percent) over 2002.
    At the moment, Africa accounts for less than 2 percent of global 
trade and its exports to the United States barely reach 2 percent of 
the U.S. total imports in value terms. The United States represents the 
single largest country market for Africa, importing 26 percent of 
Africa's exports compared to United Kingdom's 10 percent and France's 7 
percent. Trade between the United States and Africa totaled $33 billion 
in 2003, up from $24 billion in 2002, with total African exports to the 
United States accounting for $26 billion, with $14 billion of them 
AGOA-related.
    After the energy, mining and transport sectors, AGOA's emphasis has 
been on the textile and apparel sector. Currently 19 countries have 
sufficient infrastructure to directly benefit from the textiles and 
apparel provisions of AGOA. For example:

      In Lesotho, thirteen new garment factories opened in 2001 
and 6 in 2002, increasing total employment from 29,000 to 45,000.
      In Madagascar, new companies in 2002 brought in $10.6 
million in international investment, creating 5,100 jobs.
      In Kenya, AGOA-related textile and apparel businesses now 
employ about 200,000 people.

Challenges faced by AGOA
    AGOA represents a potential that is yet to be fully exploited. Out 
of the current 37 AGOA-eligible African countries, only about 7 of them 
have fully benefited from AGOA. The rest of the countries face serious 
constraints that hinder their effective participation in AGOA. Severe 
food insecurity caused by low farm productivity and frequent adverse 
weather, a massive debt totaling over 250 billion and a burden of 70 
percent of the world's HIV/AIDS-infected people are straining Africa's 
limited resources.
    The Need to Address Agriculture. So far, most of AGOA benefits have 
accrued to the energy, mining and transport equipment sectors. But, the 
most effective way of ending hunger and poverty in the continent is by 
investing in agriculture and rural development. More than 70 percent of 
Africa's population lives in rural areas and depend largely on farming.
    In Africa, agriculture is a key sector for promoting economic 
development and reducing hunger and poverty. Most poor people in Africa 
live in rural areas and depend largely on agriculture, which accounts 
for 35 percent of sub-Saharan Africa's Gross Domestic Product, 40 
percent of its exports and 70 percent of its employment.
    Expanding AGOA to include agriculture would have a significant 
impact on reducing hunger and poverty. The International Food Policy 
Research Institute (IFPRI) estimates that a 1 percent increase in 
agricultural productivity would raise the incomes of 6 million African 
people above $1 per day. A $1 increase in agricultural production 
generates about $2.32 in economic growth. AGOA must make it easier to 
export agricultural products to the United States.
    Improving agriculture and rural development in Africa has the 
potential to increase incomes and transform more lives, allowing 
families to get better nutrition, health and education, and creating 
more dynamic economies and markets for U.S. exports. Such investments 
will strengthen local and regional markets, address important food 
standards and safety concerns, and allow African farmers and traders 
gain the capacity and skills they need to move food in local and 
regional markets more efficiently, reducing hunger, famine and poverty.
    The Need to Diversify. Most African countries remain dependent on 
one or two products to carry their entire economy. Unless African 
countries diversify their economies, they will remain highly vulnerable 
to severe economic downturns and will be the first countries to suffer 
in a depressed international economy.
    The Need for Further Infrastructure Development. Many African 
nations lack the basic infrastructure to efficiently move their 
products to regional or global markets. Roads, water for irrigation, 
storage facilities and reliable transportation are all needed to 
strengthen the ability of African farmers and small businesses to 
market their products.
    The Need for Access to Capital. International lending agencies 
should streamline requirements for access to capital for African 
countries. Financing is important for infrastructure development, 
business expansion and operational costs. The U.S. government should 
provide tax incentives for U.S. companies to make local capacity 
building, trade, agriculture and infrastructure investments in Africa.
    The Need for Technical Assistance. AGOA should target technical 
assistance to ease constraints such as poor infrastructure, roads and 
communication networks, lack of sanitary and phyto-sanitary standards, 
credit and market information so vital in international trade, and 
providing incentives for public and private sector investments in 
agriculture and rural industries. African and U.S. businesses need 
training to meet the challenges of producing ``export-ready'' goods.
    The Need for Market Expansion and Regional Integration. Efficient 
large-scale production lowers costs and enhances competitiveness. 
Regional market integration is necessary to allow a larger market 
demand for domestic production. Expanding market access and lowering 
trade barriers for African agricultural products through AGOA will 
improve not only national economies but also the lives of the poorest 
people in sub-Saharan Africa.

AGOA Must Be Extended Now
    The ``third country fabric'' provision is due to expire on 
September 30, 2004. Uncertainty over its extension is already causing 
cancellation of orders and job losses in many countries in Africa. In 
Kenya alone, this may result in the loss of 30,000 jobs and $30 to $40 
million in lost revenue this year. Congress should act now to extend 
the ``third country fabric'' provision by at least 3 years--a minimum 
period needed to allow Africa to build adequate capacity for fabric and 
apparel manufacturing.
    The President has already signaled approval to extend AGOA beyond 
2008, and the Congress should extend the legislation to 2015 as 
stipulated in the current bills. The approaching deadlines are 
dampening new investments and placement of new orders. Such extensions 
are needed in order to provide certainty and encourage businesses to 
commit their resources for the long-term, enhancing the prospects for 
new investments.
    The longer Congress waits to make this important decision on third-
country fabrics, the greater the losses in jobs and investments, which 
African countries can ill-afford. Moreover, in January 2005, the WTO 
will lift its textile and apparel quota, exposing Africa's fledgling 
textile and apparel industry to stiff competition from Asian economies. 
Extending AGOA would give Africa more time and increase its capacity to 
strengthen its industry to compete more effectively in the global 
market.

Recommendations
    To strengthen AGOA's impact on hunger and poverty, Bread for the 
World recommends that AGOA be revised in these ways:

1.

Many economic development goals can be achieved within the existing 
framework of AGOA by increasing appropriations targeted to strengthen the 
capacity building provisions of the Act. In order to encourage the 
production, processing and transportation of more and better quality 
exports, the United States should support AGOA eligible countries in the 
areas itemized below.

a.

Technical training and capacity building in agricultural production, trade, 
processing, research and markets especially for institutions serving 
smallholder farmers, small-scale rural businesses, co-operatives, marketing 
and transport organizations.

b.

Specialized technical training to increase African capacity to negotiate in 
the WTO.

c.

Market product and price information gathering, delivery and access to 
farmers, traders, processors and policy makers.

d.

Creating a comprehensive information database on U.S. and African 
agribusinesses to serve as a clearinghouse for specific inquiries regarding 
international trade, laws, contacts and such.

2.

Obtaining necessary capital is a major constraint on development. The U.S. 
government should press the Overseas Private Investment Corporation (OPIC) 
and the Export-Import Bank to respond to the AGOA policy dialogue and bring 
significant new resources to help African countries attract more investment 
capital. In addition, the U.S. government should reduce the risks for 
commercial bank lending to agribusiness, provide training in market and 
loan facilities, establish loan guarantee funds, defray supervisory costs 
and promote an increase in the number of U.S. financial firms doing 
business in Africa.

3.

AGOA should encourage and support African countries in the establishment 
and enforcement of effective laws, rules and regulations governing 
international trade and marketing.

4.

The U.S. government should establish an AGOA agricultural trade advisory 
team to facilitate communication between African and American stakeholders. 
The advisory team would include designees of U.S. and African governments, 
educational institutions, the private sector, including smallholder 
producer organizations, and NGO representatives.

5.

Consumer preferences in the United States have increased demand for high-
quality niche products and value-added products, such as year-round fresh 
fruits and vegetables, higher value horticulture and floriculture products, 
organic tea, raw cotton, cottonseed, spices, nuts, processed seafood and 
folk craft items. The United States should provide technical assistance for 
eligible countries to identify and access these niche agricultural markets, 
especially for products from smallholder farmers.

6.

The U.S. government should provide tax incentives for U.S. companies to 
make trade, agriculture and infrastructure investments in Africa.

    Most of these changes will take additional financial resources. 
Moreover, an educated, healthy workforce is integral to successful 
African economic development. This underscores why increases in 
development assistance (including the promised Millennium Challenge 
Account) are necessary for strengthening mutually beneficial trade and 
investment that will help reduce hunger and poverty in sub-Saharan 
Africa.
Conclusion
    Mr. Chairman, I hope you will move swiftly and resolutely to pass a 
bipartisan, comprehensive AGOA III.

                                 

    Mr. CRANE. Thank you. Our next witness is Mr. Kirk.

 STATEMENT OF ROBERT KIRK, VICE PRESIDENT, THE SERVICES GROUP, 
                      ARLINGTON, VIRGINIA

    Mr. KIRK. Thank you, Chairman Crane, Ranking Member Rangel 
and Congressman Jefferson. My name is Robert Kirk. I am Vice 
President with the Services Group, which is an economic 
consulting company. I specialize in international trade work, 
and I am speaking in a personal capacity. My focus for the 
intervention is on the special rules of origin for the LDCs. 
The liberal rule of origin which allows for the use of third-
party cloth is in many ways what made AGOA unique. When AGOA 
was implemented in 2000, this was a breakthrough, not only to 
include apparel but to allow third-party cloth in contrast to 
other preferential schemes which have been on the books for 
many other Organisation for Economic Co-operation and 
Development countries.
    When we look at the achievements over the past 4 years, we 
look at the trend in trade--and we remove the oil and related 
products, we look at the textiles and apparel--we see major 
expansion. The LDCs which have access to the special rule 
increased their exports of apparel by over 176 percent in the 
period 1999, just before AGOA, to 2002. That increase has 
continued. When we look at what has happened with those 
countries' trade under the Cotonou agreement with Europe or we 
look at the other qualifying AGOA countries that do not qualify 
for the special rule, we find that there has been very little 
difference in trade, very little increase in apparel trade. 
That to me points out the importance of the liberal rule of 
origin in expanding exports and promoting investment.
    Now we often hear arguments that this is a very narrow and 
shallow investment that is taking place. These are low-paid 
jobs. It is true they are low-paid jobs. In the history of 
economic development, many of the countries that are today more 
developed started out with these low-paying jobs: Mauritius 30 
years ago; many of the Far East Asian countries. It is a foot 
hold.
    It also allows countries to engage in the international 
economy, and that is what is so positive. The investment that 
is taking place is sourcing from the most sufficient suppliers 
in the world. It is allowing the countries to fit into the 
increasing international division of labor. It is not trying to 
super impose with special incentives a certain sort of 
industrial development to take place. So, I would argue that a 
caution against moving toward adopting stricter rules of origin 
since this would initially lead to undoubtedly a loss of jobs 
in the labor intensive manufacturing.
    The upstream industry, the textile industry is much more 
capsule intensive, creates very few jobs. It is true that much 
remains to be done in African economies to enable them to take 
a fuller role in the world economy. By bringing in investment, 
this is creating incentives for positive policy change and 
difficult regulatory reforms, through actually creating an 
incentive, through seeing benefits flow through. So, to--I 
would urge that the success that AGOA has had comes from 
largely the more liberal rules of origin and would urge that it 
is very important that the special rule is extended. Thank you, 
Mr. Chairman.
    [The prepared statement of Mr. Kirk follows:]

     Statement of Robert Kirk, Vice President, The Services Group, 
                          Arlington, Virginia

    1.  In four years AGOA has emerged as an extremely important and 
successful Special and Differential Treatment program. AGOA \1\ was 
unique in granting preferences for apparel and allowing for a Special 
Rule for Lesser Developed Countries that allows the use of third party 
cloth. AGOA has stimulated an expansion of non traditional exports from 
Sub Saharan Africa. Excluding oil and related products, which accounted 
for more than 80 per cent of exports in 2002, the major increases 
occurred in apparel from five Lesser Developed Countries (Kenya, 
Lesotho, Madagascar, Malawi and Swaziland), motor vehicles from South 
Africa and Tobacco from Malawi. The exports of apparel for the Lesser 
Developed Countries qualified under the Special Rule increased by 176 
per cent between 1999 and 2002, while exports of apparel from AGOA 
beneficiaries without apparel benefits experienced a 30 per cent 
decline in their exports to the U.S. over the same period. The 
countries that qualified for the Special Rule have seen their apparel 
exports grow much faster than countries that cannot source third party 
cloth.
---------------------------------------------------------------------------
    \1\ Subsequently Canada implemented an enhanced GSP in 2002 which 
has a simple minimum local content rule of origin of 40 per cent of ex-
factory price for Least Developed Countries for all GSP products.
---------------------------------------------------------------------------
    2.  The increase in apparel exports has dominated the `new' trade 
under AGOA. The Lesser Developed Countries have used the derogation on 
the rules of origin to source third party cloth for their apparel 
products. The same African countries qualify for duty free exports to 
the EU under the Cotonou Agreement, providing they meet the more 
stringent rules of origin and source cloth from either the EU or an 
African, Caribbean or Pacific country. Exports of apparel to the EU 
have not increased significantly.
    3.  Rules of Origin specify that certain activities must be sourced 
in an eligible country in order to qualify for a specific incentive. 
Where the rule requires an input that is not produced locally it is 
frequently argued that this will act as an incentive to establish 
domestic or regional production. This approach is similar to the local 
content argument for import substituting activities. It is based on an 
implicit industrial structure that assumes an integrated set of 
industrial activities. Recent reductions in trade transactions costs 
have created opportunities for significantly increased specialization 
of production. The increased fragmentation of trade evidenced by the 
increased trade in intermediate inputs provides evidence of the 
economic gains from specialization.
    4.  In the Lesser Developed Economies there is currently 
insufficient supply of the diverse intermediate inputs required by the 
existing apparel producers to satisfy their demands. It is sometimes 
argued that a stricter rule of origin would stimulate additional 
investment to produce the inputs. Others argue that there is already 
unused capacity which could be reactivated if apparel producers had to 
source their cloth within either Africa or the U.S. The idea of using 
rules of origin to create incentives to develop clusters of linked 
industries appears plausible. However, upon examination it is clear 
that using rules of origin in this way represents a form of 
protectionism that will inhibit global competitiveness. The evidence 
from East Asia and from successful developing economies such as 
Mauritius indicate that as firms expand substantial external economies 
of scale will create positive incentives for linkages and increased 
regional sourcing of inputs. There is already some evidence that this 
is beginning to develop in some of the Lesser Developed Countries. The 
capital intensive textile industry will create fewer employment 
opportunities relative to the more labor intensive apparel sector.
    5.  Realizing internationally competitive linkages, industrial 
deepening and labor skill upgrading is achieved best by creating a 
sound enabling environment and trade policies that permits investors to 
source their inputs from the most competitive supplier. The shallow 
production base and the need to improve the business environment would 
caution against imposing additional market access requirements on 
Lesser Developed African Economies. Further, the phase out of quotas 
(under the WTO Agreement on Textiles and Clothing) is expected to 
result in increased competition in the U.S. market from Asian apparel 
suppliers. Moving towards more restrictive rules of origin at this 
juncture would risk imposing higher costs at the same time as African 
exporters experience increased competition.
    6.  More restrictive rules of origin will also increase compliance 
costs as firms have to keep more detailed records to establish the 
origin of all their major inputs. The administrative costs of complying 
with a more restrictive rule of origin can be high for small and medium 
sized firms.
    7.  For many African economies, with a small industrial base and a 
relatively recent history of macroeconomic stability, the ability to 
source intermediate inputs from the most efficient suppliers in the 
world provides an opportunity for economic growth. Policies which 
impose additional conditions on the investment will, ceteris paribus, 
lead to a reduction in investment.
    8.  AGOA is simply one vehicle for augmenting economic growth and 
reducing poverty in Africa, in order to sustain and enhance growth it 
is necessary for the beneficiary countries to address the domestic 
constraints to investment and trade and to harness sound economic 
policies to exporting under AGOA.
    9.  The success of AGOA in stimulating an increase in non 
traditional exports has augmented economic growth and contributed to 
reducing poverty. The economies eligible for the flexible rule of 
origin have realized much higher rates of apparel exports than those 
subject to the more restrictive rules of origin. By encouraging 
linkages to global supply chains AGOA is assisting African economies to 
participate more fully in the global economy. Requiring restrictive 
rules of origin will interfere with this process and is a form of 
protectionism that threatens to raise the costs of participating in the 
global economy. This risks making African economies less attractive to 
investment.

                                 

    Mr. CRANE. Thank you, Mr. Kirk. I would like to yield to 
our Ranking Member Mr. Rangel to introduce our last guest.
    Mr. RANGEL. Thank you, Mr. Chairman. I asked permission of 
Mr. Levinson to introduce you because my only question to the 
panel is to ask them to respond to your testimony. Like Africa, 
so many newcomers to America and certainly minorities and low-
income people have gained entry into the marketplace through 
our textile and apparel industry. The UNITE! is the parent 
organization of the International Labor Garments Union Workers 
that I was once a member. My mother retired after 25 years. Of 
course, the initiation of trade agreements with developing 
countries have had a severe economic impact on their membership 
and their jobs.
    More importantly, his concern is one that is felt 
throughout the Congress, and that is that there be some 
international standard for labor, that there be some laws that 
the countries have that are not only on the books, but they are 
enforced. Just as most industrialized nations started this way, 
most countries that enjoy having a middle class started this 
way as well. It has been the labor unions and not the 
entrepreneurs of America that have set the standards. No one 
dreams or hopes that we start off with U.S. standards, but we 
do intend to make certain that there are some standards. So, I 
hope you listen carefully to Mr. Levinson's testimony because I 
will be asking you just one question and that is to respond to 
it. Mr. Levinson, thank you for being here.

      STATEMENT OF MARK LEVINSON, CHIEF ECONOMIST, UNITE!

    Mr. LEVINSON. Chairman Crane, Mr. Rangel, Mr. Jefferson, I 
appreciate the opportunity to appear before the Committee 
today, and I appreciate that special introduction. Four years 
after AGOA was signed into law, it does not appear to us to 
have lived up to its name. While exports from Africa have grown 
sharply under AGOA, this increased trade has failed to 
translate into robust growth and sustainable development for 
the region. We believe that is the standard by which it should 
be measured. While exports under AGOA have grown more than 45 
percent from 2001 to 2003, real annual gross domestic product 
growth in sub-Saharan Africa actually fell from 3.7 percent to 
3.5 percent. Even in some of the countries that have seen their 
AGOA exports rise the fastest, annual growth last year was 
lower than it was in 2001. I have attached some charts to my 
testimony with more figures along these lines.
    In addition, widespread unemployment, high poverty rates, 
low wages and violations of worker rights continue to plague 
the region. Why hasn't AGOA delivered on its promise? I believe 
there are three basic reasons. First, AGOA failed to address 
the underlying impediments to development in the region, 
particularly countries' unsustainable debt burdens. Two, AGOA's 
conditionality creates strong new investor rights but only 
provides minimal protections for worker rights, exacerbating 
unequal bargaining power and speeding up the race to the 
bottom. Three, AGOA cannot compensate for the threat posed to 
African producers by the phase out of global textile and 
apparel quotas next year. When quotas are eliminated, AGOA 
countries stand to lose major market shares and many exports to 
China.
    I want to concentrate my remarks on worker rights and the 
phase out of apparel and textile quotas. While AGOA contains 
conditions on workers' rights, these have not been strong 
enough to ensure that workers' fundamental human rights are 
actually respected in the region. Lesotho, for example, is the 
third-largest AGOA exporter, and its shipments under AGOA have 
shot up more than 188 percent since 2001. According to an 
investigation by UNITE! researchers, workers in Lesotho make 
only $0.30 an hour, less than half the basic wage needed to 
support a family of four. Many workers who we interviewed were 
so desperate to make ends meet, they were forced to borrow 
money at usurious rates, sometimes from their own supervisors. 
Management refuses to recognize legitimate union 
representation, and the government does little to hold 
employers accountable. In addition, the U.S. Department of 
State reports that blacklists are commonly used by employers in 
the textile and apparel sector.
    Violations of workers' rights are not isolated to Lesotho. 
In Nigeria, all unions must affiliate with the one legally 
mandated labor federation sanctioned by the government. In 
Kenya, free trade zone employers are specifically exempted from 
health and safety laws. In Cameroon, there were reports of 
trade union leader harassment and failure by the government to 
enforce existing laws. In my submitted testimony, I have a 
longer example about Namibia, a huge factory in Namibia, where 
a Namibian-based research institute has done extensive research 
of violations at that factory, which I don't have time to go 
into here.
    Perhaps the most striking example of AGOA's failure to 
protect workers' rights is in Swaziland. The American 
Federation of Labor-Congress of Industrial Organizations 
submitted workers' rights petitions on Swaziland in 1999 and 
2002. Though the Administration accepted the 2002 petition in 
September, 2003, there has still not been any effective action 
taken to address the violations detailed in the petition. The 
government of Swaziland is a monarchy that systematically 
suppresses trade union rights. Union leaders that helped 
organize a peaceful demonstration in 2001 were charged with 
contempt of court, had their passports withdrawn and were 
barred from addressing public audiences. Trade unionists that 
seek to enforce their rights confront the judiciary whose 
autonomy and authority has been undermined by the king of 
Swaziland and which is incapable of establishing rule of law. 
Decrees from the king have banned free speech and political 
dissent, further curtailing trade union activities.
    According to the State Department, the government continues 
to turn a blind eye to abuses of workers' rights by 
multinational employers. Despite these flagrant violations of 
workers' rights, Swaziland still enjoys its full AGOA benefits 
and has seen its exports to the United States under AGOA jump 
143 percent since 2001. The current GSP petition on Swaziland 
has been under review for more than 7 months with no effective 
action to ensure that AGOA conditions are being met.
    Let me say a few words about the expiration of apparel and 
textile quotas. In 246 days from today--246 days--apparel and 
textile quotas expire. The AGOA cannot save the textile and 
apparel industry in sub-Saharan Africa if quotas are allowed to 
expire. If quotas expire--it is not just Africa--almost all 
apparel and textile producing countries around the world will 
be devastated. Workers in Latin America, the Caribbean and Asia 
and Africa will be thrown into direct, unregulated competition 
with China, and millions will lose their jobs as a result. It 
will further decimate the industry in the United States, which 
has already suffered huge job losses. More than 337,000 
American apparel and textile workers have lost their jobs just 
since this Administration took office in January of 2001. A 
third of the industry has been decimated.
    According to industry analysts, if quotas expire within 2 
to 3 years, up to 600,000 workers in the United States, we 
expect to lose their jobs. Categories where import quotas have 
already been phased out offer a small window into the future. 
So, for example, in the last 2 years for the products that were 
removed from quota in 2002--and there were products that were 
removed in 2002--China increased its exports to the United 
States by $4.1 billion while the rest of the world declined by 
$1.3 billion.
    In the apparel categories where quotas disappeared in 2002, 
China's share of U.S. imports went from 9 percent before the 
quotas expired to 60 percent last year. They are expected to go 
to 70 percent this year. At the same time, sub-Saharan Africa's 
share of imports in those categories dropped. Some AGOA 
countries saw large declines in those categories. Mauritius saw 
exports drop by nearly 50 percent. Kenya's exports suffered a 
loss of nearly 75 percent. Madagascar's declined almost 40 
percent in those categories. This is entirely expected.
    The U.S. International Trade Commission in its recent study 
said that production would shift from Africa to China once 
quotas were eliminated. If China captures 70 percent of the 
entire U.S. apparel and textile market when quotas expire, 
which is entirely possible and which they have done in the 
goods that have already expired from quota, $42 billion of 
trade will go from other exporting countries to China, the 
largest shift in production in world history. The projected 
export losses for countries are--and this is just assuming that 
they--what they would lose in the U.S. market is proportionate 
to what they have now. The Caribbean Basin Initiative region 
would lose over $6 billion. Mexico, $5.4 billion. Bangladesh, 
$1 billion. Lesotho, almost $300 million. Mauritius, almost 
$200 million.
    Producers from 31 countries, including the United States, 
Africa, Turkey, Mexico, have recently joined together to call 
for an extension of the quota system to 2008. UNITE! along with 
other apparel and textile worker unions from around the world 
are demanding that textile and apparel quotas be extended and 
the phase out not occur until there are enforceable protections 
for workers' rights in the global trading system. If we don't 
extend quotas, in my view, even if we pass this extension of 
AGOA, we are not going to save the apparel and textile industry 
in Africa. Thank you very much.
    [The prepared statement of Mr. Levinson follows:]

          Statement of Mark Levinson, Chief Economist, UNITE!

         From countries all across the continent of Africa, AGOA is 
        helping to reform old economies, creating new jobs, is 
        attracting new investment, most importantly, is offering hope 
        to millions of Africans.

                                                        George Bush
                                                          6/26/2003

         We dislike the wages and working on Saturdays and Sundays. We 
        work very hard for this company filling those containers all 
        the time within a few days. They benefit from us but we don't 
        get anything in return.

                               Worker at Ramatex factory in Namibia
                  Quoted in Ramatex: On the Other Side of the Fence
               Labour Resource and Research Institute, October 2003

    Despite President Bush's glowing assessment of the African Growth 
and Opportunity Act, it is apparent now, four years after the program 
was signed into law, that it has not lived up to its name. While 
exports from Africa have grown sharply under AGOA, this increased trade 
has failed to translate into robust growth and sustainable development 
for the region.
    While exports under the AGOA program grew by more than 45 percent 
from 2001 to 2003, real annual GDP growth in sub-Saharan Africa 
actually fell from 3.7 percent to 3.5 percent. Even in some of the 
countries that have seen their AGOA exports rise the fastest, annual 
growth last year was lower than it was in 2001 (See Chart A and Chart 
B). In addition, widespread unemployment, high poverty rates, low wages 
and violations of workers' rights continue to plague the region.
    Why hasn't AGOA delivered on its promise? There are three basic 
reasons:

    1.  AGOA failed to address the underlying impediments to 
development in the region, particularly countries' unsustainable debt 
burdens.
    2.  AGOA's conditionality creates strong new investor rights but 
only provides minimal protections for workers' rights, exacerbating 
unequal bargaining power and speeding up the race to the bottom.
    3.  AGOA cannot compensate for the threat posed to African 
producers by the phase-out of global textile and apparel quotas next 
year. When quotas are eliminated, AGOA countries stand to lose major 
market share and many export jobs to China.

1) Debt in Africa
    With mounting unsustainable debt burdens and low revenue, many 
African countries are unable to invest in infrastructure and basic 
human services like healthcare and education that are vital for 
development. External debt burdens stand at 53 percent of GDP in sub-
Saharan Africa. In Africa as a whole, fourteen cents of every dollar 
earned on exports goes to debt service payments. Even with growing 
exports and enhanced international debt relief, Africa's debt burden 
has continued to grow since AGOA's implementation, and it hit $275.5 
billion in 2001. Unfortunately, the current AGOA extension bill would 
do nothing to help find solutions to Africa's debt crisis. As long as 
governments in the region are forced to send billions of dollars to 
international creditors each year instead of investing those resources 
in health care, education, and infrastructure, lasting development in 
the region will be extremely difficult to achieve.

2) A Failed Development Model
Worker Rights Need to Be Strengthened

    AGOA contains conditions protecting investor rights and 
intellectual property rights that are very similar to conditions that 
developing countries have refused to add to the agenda of the World 
Trade Organization and balked at in bilateral trade negotiations. These 
conditions further strengthen the hand of transnational corporations 
investing in Africa, and reduce the scope for public policies designed 
to help capture some of the benefits of those investments for local 
economic development. As a result, investors in the region enjoy 
extremely favorable access--tax holidays, subsidized provision of 
services like electricity and water, and lax government regulation--
while contributing very little to the domestic economy in terms of 
decent employment, linkages to local small and medium enterprises, and 
investments in the community.
    Thus, while exports are booming, profits are being captured by the 
very few, and often by transnational companies with few domestic 
linkages. This perverse model of development perhaps explains some of 
the disjuncture between the soaring exports under AGOA and 
disappointing growth in the region overall. Workers are unable to 
capture their fair share of the wealth they create through rising 
wages; African businesses are denied contracts in favor of third-
country suppliers (a provision that would be extended under the current 
bill); and local governments forego tax revenue in order to attract 
scarce investment. By eroding governments' bargaining power with 
foreign investors, and failing to build the bargaining power of 
workers, AGOA has exacerbated an imbalance that allows investors to pit 
governments against governments, and workers against workers, in a race 
to the bottom in regulatory standards and working conditions.
    While AGOA also contains conditions on workers' rights, these have 
not been strong enough to ensure that workers' fundamental human rights 
are actually respected in the region. Lesotho is the third largest AGOA 
exporter, and its shipments under AGOA have shot up more than 188 
percent since 2001. But, according to an investigation by UNITE! 
researchers, workers in Lesotho making apparel for The Gap make only 
about 30 cents an hour, less than half of the basic wage needed to 
support a family of four. Many workers are so desperate to make ends 
meet that they are forced to borrow money at usurious rates, sometimes 
from their own supervisors. Workers are subjected to verbal and 
physical abuse and forced to work unpaid overtime. Though many workers 
are fighting to unionize their factories, and unions have majority 
support at some facilities, management refuses to recognize legitimate 
union representation, and the government does little to hold employers 
accountable. In addition, the U.S. State Department reports that 
blacklists are commonly used by employers in the textile and apparel 
sector. Violations of workers' rights are not isolated to Lesotho. In 
Nigeria, all unions must affiliate with the one legally mandated labor 
federation sanctioned by the government. In Kenya, free trade zone 
employers are specifically exempted from health and safety laws. In 
Cameroon, there were reports of trade union leader harassment and 
failure by the government to enforce existing labor laws.

Ramatex in Namibia

    Many of the problems of AGOA are illustrated by the experience of 
workers at Ramatex in Namibia. Ramatex, which employees 7,500 workers, 
is the most important foreign investment in Namibia since independence. 
The government provided a $120 million $N subsidy to Ramatex, a company 
based in Malaysia, to locate in Namibia. According to a comprehensive 
report on Ramatex by the Namibian based Labour Resource and Research 
Institute (LRRI):

         The financial support that Ramatex received from the Namibian 
        government is equivalent to the salaries of all workers for 34 
        months--almost 3 years. A huge investment by any standard which 
        can only be justified if Ramatex' operations in Namibia will 
        lead to long-term sustainable jobs of decent quality.

    According to the LRRI report, female workers are forced to take 
pregnancy tests (at their own expense), there have been several strikes 
because of low pay (approximately $50 per month) and workers have 
serious health and safety concerns.
Listen to workers at Ramatex:

         We work the same hours everyday. If you are tired you are told 
        to go home and never to come back again. If you miss work on 
        Saturday and Sunday, you are just told to go home or you get 
        fired depending on the number of warnings. If you just miss 
        work on Saturday and Sunday, the moment the Chinese supervisor 
        see you he or she will only talk to the Filipino in the office, 
        they will then tell you, `go office, sign warning'.

         I start at seven in the morning. We iron over a hundred items 
        in an hour, and we stand the whole day. The standing is very 
        painful, but there is nothing I can do because it is my work. I 
        leave at 19h30 in the evening, whether it is a weekend or 
        normal weekday. Sunday-to-Sunday. When I started I used to 
        attend night classes but I don't get time anymore and I stopped 
        going to classes, because I have no time

         We dislike the wages and working on Saturdays and Sundays. We 
        work very hard for this company filling those containers all 
        the time within a few days. They benefit from us but we don't 
        get anything in return.

The LRRI report concludes:

         Ramatex workers experience the daily frustrations of not being 
        able to make ends meet despite working 9-11 hours every day! 
        Unless this situation is redressed in the near future, Ramatex 
        will essentially be contributing to the establishment of a 
        large number of `working poor'--people in full-time employment, 
        unable to even meet their basic needs. This stands in sharp 
        contrast to the Namibian government's stated objective of 
        promoting decent work in line with ILO standards.

Swaziland

    Perhaps the most striking example of AGOA's failure to protect 
workers' rights is in Swaziland. The AFL-CIO submitted workers' rights 
petitions on Swaziland in 1999 and 2002. Though the Administration 
accepted the 2002 petition on September 2003, there has still not been 
any effective action taken to redress the violations detailed in the 
petition. The government of Swaziland is a monarchy that systematically 
represses trade union rights. Union leaders that helped organize a 
peaceful demonstration in 2001 were charged with contempt of court, had 
their passports withdrawn, and were barred from addressing public 
audiences. Trade unionists that seek to enforce their rights confront a 
judiciary whose autonomy and authority have been undermined by the King 
of Swaziland, and which is incapable of establishing rule of law. 
Decrees from the King have banned free speech and political dissent, 
further curtailing trade union activities. According to the U.S. State 
Department, the government continues to turn a bind eye to abuses of 
workers rights by multinational employers. Despite these flagrant 
violations of workers' rights, Swaziland still enjoys its full AGOA 
benefits and has seen its exports to the U.S. under AGOA jump 143 
percent since 2001. The current GSP petition on Swaziland has been 
under review for more than seven months, with no effective action to 
ensure that AGOA conditions are being met.
    Unfortunately, the current AGOA extension would do nothing to 
strengthen the workers' rights provisions of the program, nor to ensure 
that the current provisions are administered more consistently and 
aggressively. Instead, extension of AGOA under the current 
circumstances will likely only encourage the current pattern to 
persist. Footloose multinational investors will remain free to take 
advantage of desperate governments and struggling workers, profit from 
additional access to the U.S. market, and contribute very little to 
long-term economic development in the region.

3) The Elimination of Apparel and Textile Quotas
    Even if these important flaws in AGOA were fixed, there is a more 
serious problem that must be addressed. At the end of this year, 246 
days from today, apparel and textile quotas expire. AGOA cannot save 
the textile and apparel industry in Sub-Saharan Africa if quotas are 
allowed expire. Simply granting more tariff preferences to countries 
whose exports will soon be swamped by Chinese production is like 
rearranging the furniture when your house is on fire.
    If quotas expire almost all apparel and textile producing countries 
around the world will be devastated. Workers in Latin America, the 
Caribbean, Asia and sub-Saharan Africa will be thrown into direct, 
unregulated, competition with China, and millions will lose their jobs 
as a result. It will also further decimate the industry in the U.S., 
which has already suffered large job losses. More than 32 percent--
337,000--U.S. textile and apparel jobs have been lost since January 
2001. Hundreds of plants have closed devastating communities. But this 
pales in comparison to what will happen when quotas expire. Industry 
representatives predict that 600,000 U.S. workers will lose their jobs 
within several years of the expiration of quotas.
    Categories where import quotas have already been phased out offer a 
glimpse of what is to come. In the last two years, for the products 
removed from quota in 2002, China increased its exports by $4.1 billion 
while the rest of the world's declined by $1.3 billion. In the apparel 
categories where quotas disappeared in 2002, China's share of U.S. 
imports (in square meters) jumped from 9 percent in 2001 to 60 percent 
in 2003. It is expected to go to 70 percent by the end of this year. At 
the same time, sub-Saharan Africa's share of imports in the same 
categories dropped. Some AGOA countries saw large declines in these 
categories: Mauritius saw its exports drop by nearly 51 percent, 
Kenya's exports suffered a loss of nearly 75 percent, Madagascar's 
exports declined by 39 percent. In a recent study, the U.S. 
International Trade Commission found that production would undoubtedly 
shift from Africa to China once quotas were eliminated, regardless of 
AGOA. One manufacturer from Zambia told Women's Wear Daily, ``Even if 
we didn't pay our workers, we still would be unable to cut our prices 
to match China's.''
    If China captures 70 percent of the entire U.S apparel and textile 
market that would result in a net shift of approximately $42 billion in 
trade from other exporting countries to China. The projected export 
losses (assuming losses proportionate to existing market share) for 
countries are: CBI region $6.3 billion, Mexico $5.4 billion, Indonesia 
$1.6 billion, Bangladesh $1 billion, Lesotho $289 million, Mauritius 
$187 million.
    Producers from 31 countries including the U.S., Africa, Turkey and 
Mexico have recently joined together to call for an extension of the 
quota system until 2008. UNITE!, along with other apparel and textile 
worker unions from around the world, under the auspices of the 
International Textile Garment Leather Workers Federation (ITGLWF), is 
demanding that the textile and apparel quotas be extended, and that 
phase-out not occur until there are enforceable protections for 
workers' rights in the global trading system. Only with such guarantees 
in place will workers in the U.S. and around the world be able to 
compete on a fair playing field.

Other Concerns With the Bill
    The bill extends the third-country fabric provision that allows for 
export of apparel products to the U.S. to receive duty free treatment 
without having to use U.S. or regional yarns or fabrics. Under this 
provision, Chinese yarns and fabrics are shipped to Africa, cut and 
sewn into garments and then exported to the U.s. duty free. This will 
result in the loss of U.S. jobs because the U.S. industry will lose 
yarn and fabric orders to China and other suppliers. It makes little 
sense why China, which is not a party to this agreement, should receive 
such a large benefit from it.

Conclusion
    There is nothing wrong with African countries having access to U.S. 
markets. But this should not be done at the expense of workers in 
America or in Africa. Market access should be linked to adherence to 
internationally recognized labor rights. U.S. policy toward Africa 
should be judged by its effect on the lives of ordinary people. Broad 
based development requires that workers have internationally recognized 
human rights, improvements in physical infrastructure, production of 
basic commodities for national, regional and international markets; 
promotion of locally owned enterprises; and sufficient government 
control to balance private capital needs with broader societal needs. 
AGOA fall short in all these areas.



Sources: U.S. Department of Commerce and IMF World Economic Outlook, 
April 2004


Sources: U.S. Department of Commerce and IMF World Economic Outlook, 
April 2004

                                 

    Mr. CRANE. Thank you, Mr. Levinson. Let me just read a 
section of the bill to you, Ms. Soares-Demelo, and it is the 
sense of Congress on interpretation of textile and apparel 
provisions of AGOA. It says, ``It is the sense of the Congress 
that the executive branch, particularly the Committee for the 
Implementation of Textile Agreements, the U.S. Customs and 
Border Protection of the U.S. Department of Homeland Security 
and the U.S. Department of Commerce should interpret, implement 
and enforce provisions relating to preferential treatment of 
textile and apparel articles broadly in order to expand trade 
by maximizing opportunities for imports of such articles from 
eligible sub-Saharan countries.'' I hope that that addresses 
the concern that you registered earlier.
    I would like to put a question up to the entire panel for 
any panelist to respond to and that is, why are some countries 
not yet benefiting more fully from U.S. investment flows? Is it 
because they lack petroleum and gas sectors or because of more 
fundamental issues with the structure of their economies and 
governments? What provisions or incentives would help increase 
U.S. direct-investment in sub-Saharan Africa in sectors other 
than petroleum and gas? Anyone wish to respond?
    Mr. HAYES. The fact is that U.S. investment flows beyond 
the energy sector. There has not been a significant upgrade on 
U.S. investment in Africa. The incentives to invest simply 
aren't there. Financing is very, very difficult to get. The 
restrictions on the Export-Import Bank of the United States and 
the Organization of the Petroleum Exporting Countries are 
limited to certain industries.
    Private banking in the United States does not feel secure 
in supporting investment in Africa, and that is one of the 
areas we have to work on. The African banking sector does not 
have a history of supporting private-sector investment, U.S. or 
their own private-sector investment. Again, until there is 
greater transparency and rule of law, companies are frankly 
very reluctant to invest. Yet, I do think there are great 
investment opportunities in many countries. Why it is not 
uniform is very simple, too. I think the rule of law, the 
issues of transparency the various disparities on resources and 
so forth, all contribute to very uneven development.
    I think this country really needs to look at financing 
issues especially and look at how we increase the capital flows 
to Africa from our own investment portfolio. The two strongest 
investors right now are China and South Africa. There are 
reasons for that. The United States is not, beyond the energy 
sector, yet--a significant investor.
    Mr. CRANE. Anyone else have a comment? Yes, Mr. Streader?
    Mr. STREADER. For VF, continuity of product and integrity 
of our brands, it takes a while for us to move from one 
production location to another. When AGOA was enacted, we 
immediately began to look at economic benefits that came with 
AGOA and Africa, but it takes awhile for due diligence, us 
first to identify not only the governments that we felt were 
stable, but also looking at the infrastructure, the development 
of roads, the ports, the ability to leave--to get our raw 
materials in and to leave quickly and then subsequently looking 
at what existed from a production standpoint. The move to 
Africa for us over the 3-year period is basically a start from 
zero. We believe there are greater opportunities here as the 
infrastructure and the abilities mature, but it is going to 
take time.
    Mr. CRANE. We have someone with us now who was one of the 
original workers in the vineyards to create our first AGOA 
bill, and that is Congressman McDermott. He will be recognized 
after we go through the chain of command here. Let me first 
yield to Mr. Rangel.
    Mr. RANGEL. Thank you. I will be brief. I would hope that 
all of you would send to me any information that you have as it 
relates to laborers' rights and issues at the workplace. It 
would help me. Also, Reverend Beckmann, if you could send me 
some information on the organization that you represent, and do 
they have involvement with things besides hunger and poverty, 
your organization?
    Reverend BECKMANN. People are hungry and poor because of a 
lot of other things, so----
    Mr. RANGEL. Have they taken position on the war?
    Reverend BECKMANN. Sure. To the extent that it affects 
hungry people.
    Mr. RANGEL. What position is that?
    Reverend BECKMANN. You mean on the Iraq war?
    Mr. RANGEL. Yes.
    Reverend BECKMANN. We argued before the war that the United 
States should slow down. We are a religious organization, and 
partly we reflected the judgment of the Catholic bishops and 
other religious authorities, that moving when we did, it was 
not a just war. The doctrine of just war says you have to wait 
until you have exhausted all other remedies. Our focus is on 
what is good for poor people. So, the emphasis in our thinking 
was on the tremendous diversion of attention and resources that 
the war would entail away from the things that make for better 
livelihoods for people at the bottom.
    Mr. RANGEL. Economic class that fights the war.
    Reverend BECKMANN. Absolutely, sir.
    Mr. RANGEL. Well, I hope some of you will briefly take care 
of my concerns about labor conditions by writing and sending me 
information, but I do hope to take advantage of this 
opportunity and comment on some of Mr. Levinson's remarks, not 
dealing with quotas--but I think we all agree that we have to 
do something there--but as it relates to wages and working 
conditions, it would help me with my thinking.
    Reverend BECKMANN. I would like to speak to it, if I may, 
Mr. Rangel. I found the written testimony really helpful, 
especially the middle part about the field work that they have 
done. I thought their first argument is a bogus argument. Just 
because some of the same countries that have had rapid exports 
have also had declining gross national product during this 
period of global recession doesn't mean that the exports didn't 
make things better than they would have been otherwise. So, I 
didn't find convincing at all. The AGOA is a significant thing, 
but it is a small thing. There are lots of other reasons why 
Africans are still poor and a lot of other things that they 
need to do and that America and the other industrialized 
countries can do to help reduce poverty, promote healthy 
development in Africa. However, that is not a reason not to do 
AGOA. It is just that this is only one piece.
    I thought the most convincing part of the written testimony 
was the field work that they have done, especially the concern 
about Swaziland. In Bread for the World's view, what may be 
most important is that worker rights really be part of trade 
policy and trade agreements. We do have international agreement 
on basic worker rights. I think the most important of those is 
the right to associate. The funding that people in Lesotho are 
getting 30 cents an hour is not commensurate in itself. That is 
$2.50 a day. The average per capita income in Lesotho is 
probably a dollar day. So, if they are getting an income of 
$2.50 a day, in that market they may be happy. What is 
fundamentally important is the right to associate, so that the 
workers in Lesotho or wherever can make their own judgments 
about whether they are getting a fair deal or not; and if they 
are not, that they can organize unions and push to defend their 
own rights.
    So, I thought that part of the analysis was really, really 
important and helpful. I have been to two or three of the 
annual AGOA conferences. One of the best features of AGOA has 
been that it brings together African leaders together with top 
leaders of U.S. Government, and then we have helped to develop 
parallel fora so that African businesspeople are getting 
together with U.S. businesspeople, African civil society is 
getting together with U.S. civil society. These have been very 
productive fora. I was struck that, for example, in 2001 it was 
delayed a couple of months because of September 11, but in 
November 2001, you had the President and four secretaries all 
meeting at length with Africans. The Secretary of Commerce 
never meets with Africans. These annual meetings have been 
helpful. Within all those discussions, this kind of analytical 
work, criticism, and concern had seldom been expressed. So, I 
appreciate the testimony. I appreciate the Committee's 
attention to this, and it seems to me that part of the ongoing 
dialog about AGOA ought to be about labor rights. There is 
labor rights language in the law, so the Administration needs 
to make that part of the discussion with African governments 
about the implementation of AGOA.
    Mr. RANGEL. Thank you, Reverend. Thank you. People like you 
are going to send me back to the church. Thank you for your 
testimony.
    Chairman CRANE. Mr. Jefferson.
    Mr. JEFFERSON. Thank you, Mr. Chairman. One of the reasons 
for extending the third-country fabric provisions, apart from 
the reason that it is fundamental to making AGOA work now for 
African nations, is the hope that there will be time to permit 
investments in the country sufficient to create a level of 
reasonable fabric production that can sustain the apparel 
industry.
    As AGOA III was originally introduced by Mr. Rangel and Mr. 
McDermott and me, before the Chairman substituted his provision 
we had a 4-year window of opportunity for this to happen. Now 
it is down to 2.5 years. The question is whether you think that 
that is sufficient time to generate the required investment in 
reasonable fabric production, which of course is the premise 
upon which this extension is based, and if so, what evidences 
do you see of investment moving in this area in those 
countries, in the African countries that we are hoping to see 
fabric produced in? Whoever might want to approach it.
    Mr. STREADER. Mr. Jefferson, what we have observed is that 
the initial setups were in garment factories which were easier 
to do in a smaller capital investment. We believe that the 
third-party fabric extension needs to take place because along 
the way to foster growth in the area in Africa, you are going 
to need the Asian fabrics, but it would--I believe it would 
bring on the investment that is needed for the community in the 
textile--in the textile sector, which is an 18--to 36-month 
period to put up a textile mill to really get it going with any 
efficiency, and the cost is much larger. I believe you will see 
partnerships between American and African companies if, in 
fact, this is extended.
    Ms. KILEY. I would just like to add that while the original 
AGOA was effective October of 2000, each country had approvals 
that they had to go through; so in effect, not every country 
has been eligible for benefits including, if the fabric was 
produced there, that it would qualify as regional until they 
met their approval--their eligibility measures. So, those were 
phased in, throughout 2001 and even, as we speak, additional 
countries docking in.
    Mr. JEFFERSON. So, the two of you think this 2-and-a-half 
year extension is going to be time sufficient to permit the 
kind of investment that is needed to produce fabric there on 
the Continent?
    Mr. HAYES. If I might, also, Congressman Rangel asked a 
question to us. I would like to take that part on also. I am 
concerned frankly, Congressman Jefferson, that 2-and-a-half 
years is enough time. I think, given infrastructure, given the 
realities of change, the slowness of getting the visas for 
AGOA--most countries still don't have their visas as for AGOA--
I think 2-and-a-half years is not enough time. From my 
perspective 2-and-a-half years though is better than closure. I 
think that we are going to need a lot more time.
    In terms of your points with the question of Mr. Levinson, 
I think there is quite a bit in his statement that I agree 
with. I don't think, though, that AGOA was meant to address all 
the impediments. The criticism of AGOA that I have had from the 
very beginning is that it doesn't go far enough. I think much 
more needs to be done with Africa for the sake of our own 
economy. More partnerships need to be built, more technical 
assistance. If we address labor laws, at the same time we are 
going to address education for young people; otherwise you have 
a vast unemployed and disaffected youth. We have seen evidence 
of where that goes in terms of discontent, rebellion, and 
terrorism.
    So, I think there are a number of issues that have to be 
addressed comprehensively that haven't been done so far yet 
for--for and with Africa, because I think they are an enormous 
potential trading partner. Unfortunately, one of the weaker 
sectors of the Corporate Council is that we have no textile 
companies within our area. So, I think other companies will 
have to answer the textile-specific questions. I think issues 
such as Swaziland--was with President Masari last night in 
Boston, who is doing the negotiations on behalf of the African 
Union behind the scenes. I think we have got to work for change 
there, and I think that is happening.
    There are other issues on China. For 3 years I have been 
saying that one of the major benefactors of AGOA has been 
China. At least they have been using it to create jobs, which, 
again, I don't think is entirely a negative, but I do think we 
have to address the issues of United States-China. What we have 
been advocating at the Corporate Council is a dialog with China 
on Africa, frankly, to begin to look at are there areas of 
cooperation, are there areas of change. I think that Mr. 
Levinson hit on some key critical points.
    Chairman CRANE. Thank you. Ms. Soares-Demelo.
    Ms. SOARES-DEMELO. Just to go back a few points, first to 
Mr. Levinson. I just wanted to point out, being someone who has 
spent a lot of time in factories and working with different 
factory owners on different products, certainly I can tell him 
that this particular jacket was made in a unionized South 
African factory and the workers were making at least $220 a 
month. I think that is a pretty good start, and I am not so 
sure what more he would want. My second point was back to Mr. 
Crane. Unless the word ``shall'' is changed to ``must,'' ORTL 
will create problems, we can pretty much count on that. As I do 
a lot of work on different products, there are so many small 
issues that come up that continue to be a stumbling block to 
doing good business in Africa.
    As far as the extension of time to develop an industry in 
Africa, I think we have to look at the capacity on sewing, 
which is the ground state, and grow from there. Certainly mill 
investment is huge, as my other colleagues have pointed out, 
and the variety of--especially for the customers that I have--
of the fabrics they need is great. From the ground state we can 
start with certain basic products. Long term, of course, we 
want Africa to be able to do from the ground to the garment and 
to be able to do it all, because that is what is really 
sustainable in the global world today. Right now the capacity 
in sewing is still very small, and they need to grow that as 
step one before they can really get the investment of the mills 
behind that.
    Chairman CRANE. Thank you. Mr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. I appreciate your 
having this hearing. I am sorry I wasn't able to be here for 
the bulk of it. Mr. Kirk, I read an article recently from a 
World Bank economist who suggested that third-country fabric--
there was no reason to put any limitation on it. It really 
didn't make much sense. I have been looking for any evidence to 
suggest that by putting these kinds of tightened rules of 
origin, we somehow force investment in the more basics, so that 
we start making fabric inside the countries that are using 
third-party fabric. Is there any evidence that that has ever 
worked?
    Mr. KIRK. Thank you, Congressman McDermott. I am familiar 
with that article. When viewed that way, a rule of origin is a 
form of local content requirement, which is a form of 
protectionist policy. Now, when one is looking at extremely 
large markets like the U.S. market or even the European market, 
it can create incentives. So, certain industrial development 
can take place as a result of the incentives to supply that 
market under a preference. Has it been successful? Well, if we 
look at the European record where there has been the Lomay 
Convention and the Cotonou agreement since 1990, we go back 30 
years, we see very limited success.
    Mr. MCDERMOTT. Because they did not open up to third-party 
fabric?
    Mr. KIRK. I think that is one of the reasons. The other 
reason would have to look at domestic policies within the 
African-Caribbean-Pacific countries in that agreement. 
Certainly the restrictions on local content would be a 
constraining factor, and increasingly this appears to be 
recognized. In a sense, the success of AGOA in expanding 
exports of apparel has been contrasted to the lack of increase 
in exports to Europe under their preferential scheme.
    Mr. MCDERMOTT. So, actually ours was more liberal, or at 
least more progressive, in terms of allowing them to get an 
industry up and running; is what you are suggesting?
    Mr. KIRK. Yes.
    Mr. MCDERMOTT. Is there any example of where the tightening 
of the rules discourages investment?
    Mr. KIRK. I think a tightening of the rules in this 
particular case--we are talking about the special rule--would 
lead to a loss of jobs in the apparel sector immediately, 
because it is almost certainly the case that the imports could 
not be sourced competitively at present.
    Mr. MCDERMOTT. Let me switch to Mr. Streader. You are 
sourcing a lot out of Africa, and if they close down--if we 
give another 2-and-a-half years, what are you going to do in 
2007? Are you going to stay until 2007 and go along inch-by-
inch with us, always wondering if we are going to extend it for 
another couple of years?
    Mr. STREADER. Honestly, it is on the back of our mind, and 
we are measuring and looking at all of the--the quizzes and 
free trade agreements that are in progress all the time, as we 
put together the best supply chain model that makes sense for 
our publicly traded American company. There is an economic 
value that we put to this, but along the way, truly, it is a 
blended strategy. We will not be 70 percent in China. We will 
not, not even close. We will always have a presence here. The 
blended strategy, it really warrants us to look hard at Africa 
to continue to build what we are doing there, which is still--
it is a large number, sir, but it is small in terms of the 
overall VF quantity because of the magnitude of the 
corporation, but we will continue to look at it.
    Mr. MCDERMOTT. Give me your reasons for why you wouldn't 
just put it all in China. Why not? You have got it all in one 
place. Do it all out of there. The containers are there, the 
ships are there; why fiddle around with 20 percent out of 
Africa or somewhere else?
    Mr. STREADER. Well, honestly speaking, we are not convinced 
that China is the only answer. There are many other viable 
options in the Western Hemisphere and Central America where 
there are still some great cost benefits coming outside of 
Central America, that the speed to market and the opportunity 
to bring product here is--there is a true benefit to that. 
Along the way we are looking at, for instance, India and South 
Asia and there are many other places. So, it is truly a 
benefited blended strategy. We will not be heavy in China. It 
will be important to us, but we would like to have the 
variables which include Africa for us. We would like that.
    Mr. MCDERMOTT. So, even the distance makes a difference, 
even though you are ordering now for, what, let's see, this is 
April--so you are ordering for spring next year? Is that what 
you are planning right now?
    Mr. STREADER. Spring and for September and October. So, 
this decision is something that affects us every day. The next 
order, do we keep it in the present location or in Mombassa or 
Nairobi, or do we think about moving it because of the 
ramifications of a 19- or 30-some percent duty? We are 
measuring that right now. We are concerned.
    Mr. MCDERMOTT. How long can you wait before you pull the 
plug on it? The Congress sits here and fiddles around. You must 
have a drop-dead date. You don't want to tell us, huh?
    Mr. STREADER. My chairman asks me that question frequently 
and it--it is not--it is not in September, I will tell you 
that. It is much before that.
    Mr. MCDERMOTT. I can imagine you might give yourself a 
little slack.
    Mr. STREADER. I am hoping we can move this along in 30 days 
or 45 days. We really are--we are very anxious for this to 
progress.
    Mr. MCDERMOTT. Can you give a response to the idea that if 
there was ending access to third-party fabric, how would that 
change your investment pattern? More likely to put more in, or 
are there other factors that make the decision?
    Mr. STREADER. There are many factors, sir. It is 
efficiencies, it is speed, it is the ability to sell a full 
package, and not just by labor. There are a lot of variables 
that we look at we have, but it is truly, we have a 
comprehensive framework that we use.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. I appreciate your 
taking the time to work with us here. For all your work over 
the last 5 or 6 years on this issue you are a real hero. Thank 
you.
    Chairman CRANE. Thank you. We want to express appreciation 
to all of you folks for your willingness to give of your time 
and to communicate with us on this important piece of 
legislation that we have under consideration. I would ask you, 
if you do have the time, to please communicate with our other 
colleagues. To any extent you can, please try and convey 
messages to them, because we need to continue the broad 
bipartisan support that we have had, but a big part of that is 
education. I thank you all for your participation. With that, 
the hearing stands adjourned.
    [Whereupon, at 3:55 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

                                 

                    [BY PERMISSION OF THE CHAIRMAN:]

                                  African Coalition for Trade, Inc.
                                               Washington, DC 20007
                                                     April 29, 2004
Chairman Philip Crane
Trade Subcommittee
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

Dear Chairman Crane:

    We are writing in connection with the Ways and Means Trade 
Subcommittee's April 29, 2004 hearing on H.R. 4103, the AGOA 
Acceleration Act of 2004, to express our support for this important 
legislation.
    The African Coalition for Trade (ACT) is a trade association of 
African private sector companies and groups that support expanded 
opportunities for mutually beneficial trade and investment ties between 
Africa and the United States. ACT's members come from across Africa, 
including Botswana, Cote d'Ivoire, Kenya, Lesotho, Madagascar, Malawi, 
Mauritius, Mozambique, Senegal, South Africa, Swaziland, Tanzania and 
Zambia. ACT fully supports H.R. 4103.
    AGOA has been a tremendous success in its first four years, but 
that success is also fragile. To date, more than 80% of the apparel 
that has entered the United States under AGOA has been from the less 
developed countries (LDCs) and has been made with third-country fabric. 
But the LDCs' access to third-country fabric is scheduled to expire on 
September 30, 2004. The situation is made all the more threatening by 
the fact that a mere three months later on January 1, 2005, the Multi-
Fiber Arrangement (MFA) system of quotas on textile and apparel imports 
from the China and the other largest producers in the world is 
scheduled to terminate pursuant to the Uruguay Round Agreement on 
Textiles and Clothing.
    There can be little doubt that the LDCs' infant apparel industries, 
suddenly stripped of access to their primary source of inputs and 
almost simultaneously facing unfettered competition from China, are 
staring into the face of disaster. Literally hundreds of thousands of 
jobs are in jeopardy. If these jobs disappear, there are no realistic 
prospects for alternative employment.
    H.R. 4103 would avert this impending crisis by extending the LDCs' 
access to third-country fabric for three more years to give the LDCs 
time to adjust to the new rules of origin and the new competition from 
China and, simultaneously, to allow more time for investment to be made 
in the African yarn and fabric industry so that it can better meet the 
input requirements of the garment manufacturers.
    H.R. 4103 would also make technical corrections to AGOA's apparel 
provisions to: (1) permit use of imported collars and cuffs, (2) 
authorize commingling of U.S. and African-origin fabric in the same 
garment, (3) allow short supply fabrics to be woven/knit in Africa, (4) 
authorize retroactive duty refunds for goods imported since AGOA took 
effect in 2000 that meet the AGOA eligibility standards as amended by 
the preceding provisions, and (5) instruct the Bureau of Customs and 
Border Protection (CBP) to interpret AGOA liberally in order to expand 
trade opportunities as Congress has intended.
    These technical corrections are absolutely essential to correct 
CBP's past unnecessarily restrictive interpretations of AGOA and to 
prevent CBP from continuing to undermine the intent of Congress in the 
future. Moreover, it is only equitable to authorize retroactive duty 
refunds for products that were imported since AGOA was enacted and that 
would have qualified for duty-free eligibility but for CBP's past 
rulings that have been inconsistent with the intent of Congress.
    ACT and our members in the African private sector appreciate the 
opportunity to present our views to the Trade Subcommittee on these 
important issues. Please let us know if you require additional 
information or if we may otherwise be of assistance.
            Respectfully submitted,
                                                        Paul Ryberg
                                                          President

                                 

                    [BY PERMISSION OF THE CHAIRMAN:]

                Statement of AGOA Civil Society Network

    Mr. Chairman, Congressman Levin and Members of the Subcommittee, 
The AGOA Civil Society Network is pleased to provide this written 
testimony to stress the significance of the AGOA Acceleration Act to 
our organization and the people of Africa and the United States.
    The Africa Growth and Opportunity Act (AGOA) Civil Society 
Network--a consortium of civil society groups and private sector 
representatives from the U.S. and Africa--are happy to see the AGOA 
Acceleration Act's introduction into the House and look forward to it's 
speedy progress within Congress. The AGOA Acceleration Act contains a 
number of provisions that members of the AGOA Civil Society Network 
believe are important to the advancement and continued success of AGOA.
    We hope that under the provisions of the AGOA Acceleration Act, the 
following will be possible and encouraged during implementation:

      The three major sectors--civil society, government and 
private sector--will fully participate in the AGOA process with an eye 
towards enabling African businesses to meet international standards and 
become more competitive in the global market.
      Good corporate governance and an investment in human 
resources development will be promoted to ensure that trade benefits 
are properly diffused throughout African societies.
      In order to ensure equitable trading opportunities for 
Africa, the United States, European Union and Japan will collectively 
eliminate subsidies and quotas and all forms of trade protection and 
allow the laws of comparative advantage in a free market system to 
create a level playing field that can allow for African participation.
      Under the established interagency trade advisory 
committee, participating US institutions will collaborate with and 
support African-led civic organizations that promote AGOA's goals and 
objectives. In turn, civil society groups will support the trade 
advisory committees efforts and AGOA implementation through advocacy, 
capacity building and technical assistance for Africans in need on the 
ground.
      The development of infrastructure projects that increase 
trade capacity through ecotourism will enable African countries to look 
beyond petroleum in their quest for development. As a result of this 
expansion, more direct flights and direct sea routes between Africa and 
the US will be established to facilitate and ease the process of 
bilateral trade activity. Efforts at the local level including the one 
led by Miami-Dade county through the International Sister Seaport and 
International Sister Airport programs will be engaged in the AGOA 
process and called upon in executing programs and disseminating 
information about national and international trade efforts.
      Civil society will be engaged by United State government 
agencies in monitoring AGOA eligibility and compliance, as well as 
tracking the impact of trade on the masses of people of Africa and the 
US. This should be done in collaboration with centers of excellence in 
Africa to increase African participation and develop an objective, 
African point of view regarding US-African trade, intra-African trade 
and it's link to poverty reduction. Collaboration with US institutions, 
particularly civil society organizations, in this effort will ensure 
that redundancies are avoided for the greatest amount of impact.

                                 

                    [BY PERMISSION OF THE CHAIRMAN:]

                                       American Chamber of Commerce
                                              Port Louis, Mauritius
                                                     April 29, 2004
Chairman William Thomas
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C.20515

Dear Chairman Thomas:

    We are writing in connection with the Ways and Means Committee's 
April 29, 2004 hearing on H.R. 4103, the AGOA Acceleration Act of 2004, 
to express our support for this important legislation. The American 
Chamber of Commerce in Mauritius consists of Mauritian companies that 
import from or export to the United States and American companies that 
do business in Mauritius.
    We fully support H.R. 4103, including in particular the extension 
of the lesser developed countries' (LDCs') access to third-country 
fabric and the technical corrections to AGOA's apparel provisions that 
permit: (1) use of imported collars and cuffs, (2) commingling of U.S. 
and African-origin fabric in the same garment, and (3) short supply 
fabrics to be woven/knit in Africa.
    AGOA has been a tremendous success in its first four years, but 
that success is also fragile. To date, more than 80% of the apparel 
that has entered the United States under AGOA has been from the LDCs 
and has been made with third-country fabric. With the expiration of 
AGOA's third-country fabric provision now less than six months away, 
the LDCs are confronting the very real prospect of an almost complete 
collapse of their infant apparel industries that have been created in 
response to AGOA.
    That situation is made all the more threatening by the fact that on 
January 1, 2005--a mere three months after the scheduled expiration of 
the LDCs' access to third-country fabric--the Multi-Fiber Arrangement 
(MFA) system of quotas on textile and apparel imports from the China 
and the other largest producers in the world is scheduled to terminate 
pursuant to the Uruguay Round Agreement on Textiles and Clothing.
    There can be little doubt that the LDCs' infant apparel industries, 
suddenly stripped of access to their primary source of inputs and 
almost simultaneously facing unfettered competition from China, are 
staring into the face of disaster. Literally hundreds of thousands of 
jobs are in jeopardy. If these jobs disappear, there are no realistic 
prospects for alternative employment.
    H.R. 4103 would avert this impending crisis by extending the LDCs' 
access to third-country fabric for three more years to give the LDCs 
time to adjust to the new rules of origin and the new competition from 
China and, simultaneously, to allow more time for investment to be made 
in the African yarn and fabric industry so that it can better meet the 
input requirements of the garment manufacturers. We fully support H.R. 
4103 in order to protect the LDCs from disaster.
    But H.R. 4103 does not go far enough in ensuring that the promise 
of AGOA is realized for all AGOA beneficiaries. Rather, we respectfully 
suggest that H.R. 4103 should be revised to add special dispensation to 
permit Mauritius to utilize third-country fabric in order to prevent a 
crisis in our apparel industry. Similar relief was granted to Botswana 
and Namibia in the so-called AGOA II legislation enacted in August 
2002, when it had become apparent that these non-LDCs were not 
benefiting from AGOA. The same relief is now needed for Mauritius.
    Since AGOA was enacted, apparel imports from the LDCs have 
increased by more than 250%, leading to the creation of more than 
200,000 new apparel jobs. By contrast, during the last 15 months in 
Mauritius more than 30 apparel factories have closed, costing 12,000 
jobs, representing fully 15% of EPZ jobs in Mauritius at the time AGOA 
was enacted. During March 2003-February 2004, U.S. apparel imports from 
Mauritius have declined by 15%. Mauritius is the only AGOA beneficiary 
whose apparel exports have declined to such an extent during this time.
    This drop in apparel employment, production and exports is 
attributable to two factors: (1) increased competition from neighboring 
LDCs, who have enjoyed the competitive advantage of being able to 
utilize more plentiful and less expensive third-country fabrics, while 
we are limited to using only more expensive, less available African or 
U.S.-origin fabrics; and (2) the prospect of unfettered competition 
from China, effective January 1, 2005.
    Because of the shortage of inputs eligible for duty-free treatment 
that are available to Mauritius, U.S. importers who used to source 
apparel in Mauritius have in the past year or two begun placing their 
orders in LDCs to capture the duty-free benefits of AGOA. By all 
indications, the situation will only worsen when the MFA quotas on 
China are lifted at the end of the year. Ironically, if the current 
trend continues, the new industries in the LDCs may survive the lifting 
of quotas on China, while our more established apparel sector in 
Mauritius, deprived of access to essential inputs, is in jeopardy. AGOA 
is now creating the prospect of the poor having to pay the price of 
economic development for the poorest. This is not what we had 
understood AGOA was intended to do.
    To prevent further job losses in Mauritius, we respectfully request 
that H.R. 4103 should be revised to include special temporary relief to 
allow Mauritius to use third-country fabric during whatever period the 
LDCs' access to third-country fabric is extended. We appreciate the 
Committee's consideration of our position on this issue, which is 
critical to the survival of the Mauritius apparel industry.
            Respectfully submitted,
                                                       Aleda Koenig
                                                      Vice-Chairman

                                 

                    [BY PERMISSION OF THE CHAIRMAN:]

                                           Quatre Bornes, Mauritius
                                                     April 29, 2004
Chairman Phil Crane
Ways and Means Trade Subcommittee
U.S House of Representatives
1102 Longworth House Office Building
Washington, D.C.20515

Dear Mr. Chairman,

    We are writing on behalf of the following shirt manufacturers and 
weaving mills of Mauritius regarding the AGOA Acceleration Act of 2004, 
HR 4103 and to express our strong support for enacting the AGOA 
Acceleration Act of 2004, HR 4103, including in particular the 
technical corrections to the apparel provisions:

      Aquarelle Clothing Ltd--Shirt manufacturer with factories 
located both in Mauritius and Madagascar
      New Island Clothing Ltd--Shirt manufacturer with factory 
located in Mauritius
      Consolidated Fabrics Ltd--Weaving mill located in 
Mauritius
      Socota Textile Mills Ltd--Weaving mill located in 
Mauritius

    Our current customers in the USA are Abercrombie and Fitch / J. 
Crew / Nordstrom / Nautica / Eddie Bauer / Express / Banana Republic / 
JOS A Bank etc.
    Since enactment of AGOA I we have been unable to benefit from the 
short supply provision under AGOA i.e. exporting duty free with the use 
of African fabric and African garment making under the short supply 
provision.
    During the same period of time, it is to be noted that our Asian 
competition has been able to benefit from the short supply provision 
using Asian fabric with garment making in sub-Saharan Africa.
    This situation has caused us serious prejudices in terms of 
competitiveness and duty savings. We firmly believe that it is totally 
unfair and against the spirit of AGOA which at the origin was in favor 
of promoting the African Textile Industry.
    Therefore we hereby reiterate our strong support for enacting the 
AGOA Acceleration Act of 2004, HR 4103, including in particular the 
technical corrections to the apparel provisions. We also support the 
need for this to be made retroactive in order to address the inequity 
of the current situation.
    We are at your entire disposal for any further information you may 
need.
            Yours truly,
                                                        Eric Eynaud
                                                Marketing Executive
                                           Aquarelle Clothing, Ltd.

                                                      Elvis Cateaux
                                                    General Manager
                                          New Island Clothing, Ltd.

                                                        Eric Thorel
                                                    General Manager
                                         Consolidated Fabrics, Ltd.

                                                 Olivier Stekelorom
                                                    General Manager
                                         Socota Textile Mills, Ltd.

                                 

                    [BY PERMISSION OF THE CHAIRMAN:]

                                                 BMD Textiles, Ltd.
                                Cape Town, Republic of South Africa
                                                        May 3, 2004
Chairman Philip Crane
Trade Subcommittee
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C.20515

Dear Chairman Crane

    BMD Textiles (Pty) Ltd, is a textile company, involved in fabric 
knitting, operating in Cape Town, South Africa, specializing in 
synthetic fabrics for the baseball, football and basketball markets. 
This written submission is in support of H.R. 4103, AGOA Acceleration 
Act of 2004.
    May we state from the outset that our Company, our Industry and in 
fact sub Saharan Africa (SSA) is extremely grateful for the initiatives 
taken in implementing the AGOA legislation that has brought substantial 
benefits to so many of our people. We are constantly being made aware 
of the positive effects that the additional job creation that AGOA has 
resulted in, has had on the people of Africa.
    Poverty reduction through the creation of formal employment impacts 
on so many aspects of life in Africa. Women especially benefit from 
this income and are now able to feed, clothe and most importantly, 
educate their children. Investment, poverty reduction and stability in 
Africa will also impact positively on reducing HIV/AIDS and/or assist 
families who have lost breadwinners to this disease.
    Since it's enactment, BMD has experienced the benefits of AGOA 
first hand with increased levels of business being conducted with 
clothing manufacturers for the USA market. We have developed very 
limited business relations with other African countries such as Lesotho 
and Swaziland where some of our products are sold to clothing 
manufacturers in those countries. The reason for this limited success 
in LDC countries is due to the third country exemption provision of 
AGOA..
    With regard to H.R. 4103, AGOA Acceleration Act of 2004, we would 
like to make the following submissions:

    1.  The extension of AGOA through to 2015 is fully supported as 
this will provide long term benefits, stability and certainty for 
existing and potential investors.
    2.  We are aware that the intention of AGOA is to create 
sustainable development and trade in and with Africa. This can only be 
achieved by ensuring that the Textile and Clothing supply chain remains 
integrated and that a climate of certainty and stability is created 
with regard to the third country exemption extension.
    3.  Whilst not ideal, we accept that a two year extension followed 
by a one year phased down approach is a reasonable compromise proposal 
under the circumstances. This should provide ample time to build 
sufficient textile capacities. However, unless this date is 
implemented, there is a very real chance that the long term success of 
AGOA will be undermined and that sustainable development will be 
severely compromised. We would therefore urge that the termination of 
the third county exemption input at the end of the third year be final 
and unambiguous so that investor confidence can be created.
    4.  In order to further encourage investment confidence, mechanisms 
currently available to the United States Government to assist investors 
in Africa would be welcome. This would for example require current 
restrictions on the Overseas Private Investment Corporation to be 
lifted.
    5.  We would support any efforts to correct the technical 
difficulties with regard to interpretation that seem to have occurred. 
In addition to correcting these unintended errors of interpretation, we 
would like to see the new legislation provide for more flexible 
interpretation, based on the spirit and intent of the Legislature.

    Finally, whilst the above submission is made in the interests of 
the Textile and Apparel Industry, we are aware that proposed changes to 
AGOA would have significant benefits in the Agricultural sector as 
well. Acknowledging that we are not competent to comment on 
agricultural matters, we are aware that this sector employs between 70% 
and 80% of the labour force in SSA and any benefits of sustainable 
development in this area of the African economy would be vigorously 
supported.
            Respectfully submitted
                                                      Dr. H. Prader
                                                 Executive Chairman

                                 
   Statement of Dollar General Corporation, Goodlettsville, Tennessee

    This is the statement of Dollar General Corporation (``Dollar 
General'') urging the prompt passage of the AGOA Acceleration Act of 
2004 (hereinafter ``H.R. 4103'' or the ``Bill'').
    Dollar General is a customer-driven distributor of consumable 
basics. Our niche is profitable small stores delivering convenience and 
value. We deliver this value by offering our customers good quality at 
an everyday low price on both national brands and private label goods. 
Included in our private label program is a large portion of our 
imported apparel. The apparel is manufactured in a variety of countries 
including Bangladesh, Indonesia, India, Cambodia, Philippines, 
Thailand, Vietnam, and sub-Saharan Africa.
    Dollar General applauds the Subcommittee on Trade for taking up 
this important issue. The continued development of the economies of 
sub-Saharan Africa is crucial to the advancement of democracy in the 
region. While these economies have made significant strides in the 
textile and apparel sector since the enactment of the African Growth 
and Opportunity Act in 2000 (``AGOA''), the reality is that much of 
these gains will be forfeited unless the third-country fabric 
provisions are extended. In addition, Dollar General requests a change 
in the Bill as introduced to redress a significant problem experienced 
by Dollar General and others.
    Section 7(c) of the Bill would amend Section 112(d), 19 U.S.C. 
3721(d), to make it clear that the use of imported collars or cuffs 
would not disqualify a garment otherwise eligible for the third-country 
fabric preference. This is a very welcome clarification.
    This clarification would not have been necessary had the agency 
responsible for implementing AGOA, United States Customs and Border 
Protection (``CBP''), interpreted AGOA to effectuate the clear purpose 
of the legislation. However, CBP adopted an unnecessarily narrow 
interpretation of AGOA with the result that a variety of the types of 
garments an emerging apparel industry can be expected to produce have 
been denied the AGOA preference. The merchandise most directly affected 
by the narrow interpretation is polo shirts. CBP ruled that because the 
collar and cuff components were not fabric, polo shirts cut and sewn in 
AGOA countries with third-country fabric were not eligible for the 
preference. The collars and cuffs typically were imported in rolls, but 
separated by various types of dividing lines. CBP ruled that these 
rolls were not considered fabric. This decision eliminated the ability 
of the lesser-developed AGOA countries to manufacture polo shirts 
because the collar and cuff must be produced from the same yarn dye lot 
and at the same time as the body fabric to ensure accurate color 
matches.
    This decision caused many importers to pull out of sub-Saharan 
Africa. This was a very unfortunate development and has retarded the 
development of the apparel industry in sub-Saharan Africa. Apparel 
industries do not begin by making complicated tailored garments. They 
begin with basic garments like polo shirts and move to more 
complicated, higher value added production. The Bill will eliminate 
this impediment to growth and development.
    The proposed change will would eliminate future problems with 
respect to collars and cuffs. However, the manner in which the change 
is effected could have an adverse impact on the argument that polo 
shirts made with imported collars and cuffs qualify under subsection 
112(b)(3)B as originally enacted. We strongly believe that the 
interpretation of the provision by CBP was overly narrow and 
inconsistent with the desire of Congress to encourage trade with the 
lesser-developed sub-Saharan African countries. Dollar General and 
others should have the opportunity to make that argument. Accordingly, 
we ask that section 7(c) of the Bill be revised to read as follows:

         (3) COLLARS AND CUFFS. An article otherwise eligible for 
        preferential treatment under this section will not be 
        ineligible for such treatment because the article incorporates 
        collars and cuffs (cut or knit-to-shape) that were not produced 
        in an eligible beneficiary sub-Saharan African country.

    This minor change will accomplish the same clarification as the 
current version of the Bill.
    Section 8 of the Bill makes certain provisions retroactive to the 
2000 enactment of AGOA. This treatment is extended to apparel articles 
that meet the requirements of ``Section 112(b) of the African Growth 
and Opportunity Act (as amended by section 3108 of the Trade Act of 
2002 and this Act).''
    Polo shirts made with imported collars and cuffs will meet the 
requirements of Section 112(b). However, the change that makes this 
possible is not an amendment to section 112(b). It is an amendment to 
section 112(d) which applies only to section 112(b).
    The cuff and collar provision should be placed on the same footing 
as other clarifications of section 112(b) eligibility requirements. In 
order to ensure that the effective date provision is implemented 
correctly, we ask that section 8(d) of the Bill be revised by adding at 
the end the following:

         and apparel articles that meet the requirements of section 
        112(b) after applying section 112(d)(3) as added by this Act.

    We believe that this revision will redress the disadvantage to 
which Dollar General and others were placed because of the erroneously 
narrow interpretation of the third-country fabric provision of AGOA by 
CBP.
    Dollar General appreciates the opportunity to express its views on 
the Bill and urges that they be considered favorably by the Congress.

                                 

                                                    Duro Industries
                                    Fall River, Massachusetts 02724
                                                        May 4, 2004
Chairman Philip Crane
Trade Subcommittee
Committee on Ways & Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

Dear Chairman Crane:

    We are writing in connection with the Ways and Means Trade 
Subcommittee's April 29,2004 hearing on H.R. 4103, the AGOA 
Acceleration Act of 2004, to express our support for this important 
legislation.
    Duro Industries is a major U.S. manufacturer of fabrics used as 
linings for jackets & coats. Encouraged by the new opportunities for 
trade created by the African Growth & Opportunity Act (AGOA), Duro has 
sold significant volumes of lining fabric to jacket/coat manufacturers 
in AGOA countries. U.S. Customs and Border Protection (CBP) has managed 
single-handedly to virtually destroy this export opportunity and, in 
the process is on the verge of causing the loss of thousands of jobs 
here in the United States and tens of thousands of jobs in Africa, by 
its unbelievable interpretation of AGOA that prohibits commingling U.S. 
and African fabric in the same garment. According to CBP, a garment 
made of 100% African fabric is eligible under AGOA, and a garment made 
of 100% U.S. fabrics is likewise eligible. But a garment made of both 
U.S. and African fabric is ineligible. This bizarre interpretation 
turns the intent of Congress on its head.
    H.R. 4103 would make technical corrections to AGOA's apparel 
provisions, inter alias, to confirm that Congress intended to allow 
commingling of U.S. and African-origin fabric in the same garment. 
Equally important, the bill authorize retroactive duty refunds for 
goods imported since AGOA took effect in 2000 that meet the AGOA 
eligibility standards as amended by the bill.
    These technical corrections are absolutely essential to prevent the 
loss of literally thousands of jobs in both the United States and 
Africa. Moreover, it is only equitable to authorize retroactive duty 
refunds for products that were imported since AGOA was enacted and that 
would have qualified for duty-free eligibility but for CBP's past 
rulings that have been inconsistent with the intent of Congress.
    We appreciate the opportunity to present our views to the Trade 
Subcommittee on these important issues. Please let us know if you 
require additional information or if we may be of assistance.
            Respectfully submitted
                                                William J. Milowitz
                                                     Vice President

                                 

                        Eastman Chemical Company, Voridian Division
                                         Kingsport, Tennessee 37662
                                                        May 4, 2004
Chairman Philip Crane
Trade Subcommittee
Committee on Ways and Means
U. S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

Dear Chairman Crane:

    Thank you for the opportunity to express our opinions regarding 
H.R. 4103, ``AGOA Acceleration Act of 2004,'' and issues raised during 
the Trade Subcommittee's Hearing on this important Bill on April 29.
    Eastman Chemical Company's Voridian Division, located in Kingsport, 
Tennessee manufacturers acetate filament yarn that is used by our 
customers in a variety of textile applications. One of the largest 
applications of acetate filament yarn is in the production of woven 
lining fabrics that are used in tailored apparel such as suits and 
sport coats. In fact, our largest U.S. customers for acetate filament 
yarn weave such lining fabrics.
    As you know, the textile industry in the U.S. has been under 
tremendous competitive pressure from lower-cost imports from a number 
of countries including China. As a result, many of our domestic textile 
mills and apparel producers have been forced to close their doors, and 
employment in the U.S. textile industry is in a downward spiral.
    When the Trade and Development Act of 2000 (PL 106-200) extended 
certain trade benefits to the countries of Sub-Saharan Africa, we 
supported the initiative because we saw benefits not only for the 
developing countries of Africa, but also for the textile industry of 
the U.S. The yarn-forward and fabric-forward rules of origin included 
in PL 106-200 meant that U.S. textile mills would also share in the 
growth that was expected to occur in the embryonic textile industries 
of the Sub-Saharan African nations. This meant that our U.S. customers 
who weave acetate lining fabrics could export their product to AGOA-
qualified countries to be made into apparel that would qualify for 
duty-free status when imported into the U.S.
    We further supported the concept of ``co-mingling'' fabrics from 
the U.S. and qualifying African countries to produce apparel that would 
qualify for duty-free status when imported into the U.S. We support the 
concept of retroactively qualifying such co-mingled apparel that was 
denied duty-free status by Customs.
    We continue to believe that AGOA should provide benefits to the 
U.S. textile industry, along with benefits to countries in Sub-Saharan 
Africa, and could not, and cannot, support provisions that allow Sub-
Saharan African countries to use ``third-country'' fabrics in the 
production of apparel to be granted duty-free status when imported into 
the U.S., if such fabrics are produced in sufficient quantity and are 
commercially available in the U.S. or one, or more, of the qualifying 
African countries. Specifically, tailored apparel items assembled in 
qualifying Sub-Saharan African countries should contain lining fabrics 
made in the U.S. or one of the qualifying Sub-Saharan countries to 
qualify for duty-free treatment since these fabrics are produced in the 
U.S. and in one, or more, of the Sub-Saharan countries in sufficient 
quantities.
    Eastman Chemical Company supports the extension of the AGOA 
proposed in H.R. 4103, but cannot support provisions of the Bill that 
would allow the use of ``third-country'' fabrics, if such fabrics are 
produced in sufficient quantity in the U.S. or one of the qualifying 
Sub-Saharan African countries. It is our belief that to allow the use 
of such fabrics will be detrimental to the textile industry of the 
U.S., to our customers who produce acetate lining fabrics and to 
Eastman Chemical Company, as a producer of acetate filament yarn.
    Thank you for the opportunity to express our opinions on H.R. 4103.
            Sincerely yours,
                                                 Richard L. Johnson
                                       Group Vice President, Fibers

                                 

                                              House of Dreams, Inc.
                                          New York, New York, 10023
                                                        May 3, 2004
Chairman Philip Crane
Trade Subcommittee
Committee on Ways & Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

Dear Committee Members,

    I wish to thank you for considering the comments I express below.
    House Of Dreams, Inc. (hereafter referred to as HOD), designs and 
markets apparel to American retailers. It manufactures garments in 
Europe and Sub Saharan Africa. Being an immigrant from Africa, I was 
delighted when the AGOA act was promulgated in 2000, not because it 
would be beneficial to my corporation, but because it would be 
beneficial to Africa as a whole as well as the American consumer. It 
made sense. At the first opportunity I shifted production from Europe 
to facilities in Africa. Africa was my place of birth, and I was proud 
to participate in developing its economy, albeit indirectly. I did not 
want to take advantage of the so called cheap labor markets, but rather 
really wanted to assist in fostering trade between Africa and the USA 
by improving infrastructure and providing my knowledge of the USA 
markets to companies in Sub Saharan Africa. However, soon after AGOA 
was introduced I became disillusioned by the realities of AGOA--here is 
my opinions as to what the problems with AGOA are, as presently 
implemented.

    1.  US Customs Department does not support AGOA. Rather, they 
attempt to interpret AGOA to facilitate the imposition of duties on 
product that, I believe, was contemplated to be duty free by the 
writers of AGOA. This is problematic because the adopted version of 
AGOA was unclear in many areas, when viewed in hindsight, and US 
Customs in such situations and in the absence of clarity, interpreted 
AGOA from a strict legal interpretation of the text without due 
consideration to the spirit of the agreement.

    To illustrate my point, I present the following case history of an 
actual event that I encountered. Among the many apparel categories that 
my company designs and markets, Mens dress shirts are one category that 
we imported from Sub Saharan Africa. The dress shirts we market are 
made from an exceptionally fine count cotton (170/2 me). Prior to 
shifting production of these shirts from Europe to Sub Saharan Africa, 
I investigated whether such product would qualify for duty free entry 
into the US, in terms of AGOA. AGOA was not clear on this point. The 
short supply provisions seemed to suggest that provided the yarn used 
was in short supply (as contemplated by S12(t)), the yarn could be 
imported and woven into fabric in Sub Saharan Africa, and the resultant 
garment would then enter duty free. The act was clear that such would 
be the case if it was a womens blouse, but did not provide the same 
clarity if it was a mans shirt (sexual discrimination at the very 
least). Having followed AGOA from the earliest discussions to it's 
eventual passing, I was aware that the intent of AGOA was to provide 
relief in the form of duties such that it could facilitate increased 
trade between the two continents, whilst simultaneously preserving and 
protecting the textile and apparel industry in the USA. To this end, I 
contacted nearly every spinner of cotton fiber in the USA and asked if 
they could spin yarn of the fine cotton count required. Every spinner 
responded in writing that they could not. Despite the mill in Africa 
being able to weave such fine cotton, no mill in Africa was able to 
spin cotton of that count either. As AGOA requires either the yarn to 
be of African or US origin, or a short supply fabric for the resultant 
garment to qualify for duty free entry, I sought clarity from US 
Customs. All the information was given to US customs in writing and an 
opinion from them was sought. Soon after submission, US customs 
verbally communicated that they believed that the yarn was in fact in 
short supply, and accordingly agreed with my interpretation that it 
would be possible to import the yarn from Europe, weave the fabric in 
Africa and manufacture the garment in Africa and this would qualify for 
duty free entry into the US under S12(t). However, they did suggest 
that I request a formal written binding ruling, which I immediately 
submitted (March 19th 2001). As my company was the first to attempt 
this, the US customs in the US, communicated this to their officers in 
Mauritius (the country in which the fabric and garments were to be 
made), such that the officers there would authorize and issue the 
necessary certificates, which need accompany the shipments at time of 
export. The Mauritian Minister of Trade also investigated this matter 
prior to issuing any visas, and he too was convinced that such garments 
were duty free in terms of AGOA. Further, I spent considerable time and 
money assisting the mill in Mauritius develop the necessary expertise 
to manufacture such high quality fabric. You see the point of my 
shifting production from Europe to Africa was not for cheap labor--the 
garments I manufacture are high end product that is not particularly 
sensitive to price--but rather because I spent 30 years of my life in 
Africa, I know what Africa's economic obstacles are. Africa has 
abundant raw material and mineral resources, which they have exported 
for years, but unfortunately never, had the expertise to add value to 
such product. My desire was to uplift the mills and garment 
manufacturers level of expertise such that they can compete not on 
``price'' but rather on quality. The mill in Mauritius was overjoyed, 
and soon the type of cloth I encouraged them to develop became one of 
their major product lines. Profits improved, as did their ability to 
share such profits with their workforce by improving wages and work 
conditions. I was treated like a hero. After importing such shirts for 
almost one year, a binding ruling was eventually received from US 
Customs (February 28, 2002). To my horror, not only did they reverse 
course, but they also sought duty on past shipments as well as 
shipments that had just been presented to Customs for clearance. To add 
insult to the injury, their written ruling concluded ``Subheading 
9819.11.21, HTSUS, specifies that, in regard to articles cut and 
assembled in a beneficiary sub-Saharan African country from fabric (as 
in this case), the fabric must be formed other than in ``the United 
States or a beneficiary sub-Saharan African country''. The irony of the 
US customs interpretation is best illustrated by the fact that it would 
extend duty free status to shirts made from Chinese origin fabric, 
while disqualifying shirts made from African or US origin fabric. This 
clearly could not have been congress' goal.
    One can only imagine the cash flow and profitability problems this 
created. We formally objected to their interpretation of AGOA and 
continued importing the items, paying the duty under ``objection'' 
until the matter was resolved. In January 2004, US Customs advised that 
our complaint was overruled and that they are sticking to their 
interpretation of AGOA, despite CITA agreeing with our interpretation 
by clarifying that such garments do qualify as duty free, as published 
in the federal register in October 2003.
    How can AGOA work if Congress, US Customs And CITA are not ad idem? 
Further, I suggest that a year is an unacceptable period of time to 
wait for a response for clarification. In order for business on both 
continents to flourish and consequently the objectives of AGOA to be 
achieved, business requires clarity if not certainty in a timelier 
manner. No businessperson will invest in maximizing and developing 
trade between the continents when such ambiguity exists. In the 
interim, my business has suffered, and the Mauritian mill was left 
devastated.
    I further entered into a major technology agreement with the 
premier worsted wool supplier in the world--Dormeuil Ltd., whereby at 
my expense, they shared technology and know how with mills in South 
Africa. This technology and know how enabled the mills (who have 
suffered a lack of expertise as a result of the years of isolation from 
international trade), produce world-class quality fabrics, suitable for 
the better end mens tailored clothing market in the USA. I subsequently 
terminated this contract (much to the dismay of the mills in South 
Africa), because of the attitude of US Customs and the lack of clarity 
that AGOA provides. This was a great shame, but I cannot fight the US 
Customs single-handed. As South Africa has progressed democratically 
and economically, the wage rates have risen and they can no longer 
compete on price. Unfortunately, due to both the lack of mills in the 
USA or Sub Saharan Africa producing fabric desired by the US markets, 
they cannot now even compete on quality. This was my initial concern 
with AGOA and was the reason why I believed that it was important to 
invest in providing the technology to the sub Saharan mills. My opinion 
is the lack of consensus between congress and US Customs is to blame, 
and certainly to blame for me ceasing to pay and provide the required 
technology. If the intention of AGOA is to assist Africa in it's 
economic development in the long term, AGOA and the various US 
government bodies responsible for it's implementation must not obstruct 
the development of the ``added value'' processing in Africa. This is 
made clear by the comparative export volume differences between the 
LDC's and NON LDC AGOA beneficiary countries.

    2.  I fully support the retroactivity provision being discussed as 
part of AGOA 111. This will at least provide a basic level of comfort 
to businesses that require clarity on an AGOA issue, but are 
uncomfortable with the time it takes to get clarification. In the case 
study illustrated above, I concluded that a year is an unreasonable 
period for a business to wait for clarity. However, I am a realist and 
if this time frame cannot be improved upon, at least a businessperson 
such as myself who made every good faith effort to obtain clarity 
before importation can at least be refunded should clarity be 
forthcoming down the line.
    3.  I further support the proposal to allow the use of third 
country trims, commingling of US And African fabrics and partial 
assembly of garments in both the US and Africa.

    In Conclusion, I strongly urge congress to modify AGOA such that 
obstacles to trade that do not impact US manufacturers be removed for 
example, many components of a garment such as trims and fusible's are 
not readily available in the US or Africa, and such a restriction that 
the source of such items must be principally from US or African origin, 
merely impedes trade and simultaneously does not protect US business 
because they are not available from US manufacturers. Until such 
obstacles are removed, and unless it allows for regional weaving of 
fabrics in Africa from imported yarn, I firmly believe that the 
objectives of AGOA will not be achieved.
    Thank you for your consideration of the above points.
            Yours Sincerely,
                                                     Stanley Lerman
                                                    CEO & President

                                 

                                                   Jaysix USA, Inc.
                                     Fredericksburg, Virginia 22401
                                                       May 03, 2004
Chairman Phil Crane
Ways and Means Trade Subcommittee
US House of Representatives
1102 Longworth House Office Building
Washington DC 20515

Dear Sir,

    We would like to express our strong support for enacting the AGOA 
Acceleration Act of 2004, HR 4103, including in particular the 
technical corrections to the apparel provisions.
    Our company was established in 2001 in the USA, to import apparel 
(mainly men's shirts) from AGOA countries. After proving that we had 
good technical expertise and a price advantage over competing 
countries, we have obtained orders from well known US retailers such as 
Jos A Banks, Federated Stores and Brooks Bros.
    However, when US Customs required that short supply fabrics not be 
woven in Africa, our pricing became uncompetitive with shirts made from 
short supply fabrics originating from China which can also be imported 
without duty. As a result, orders from our customers have almost 
completely dried up. It has been particularly difficult to substantiate 
our position, when our customers discovered that ladies shirts from 
AGOA countries can be imported without duty. Especially as the only 
difference between men's and ladies shirts is the side on which buttons 
are placed.
    In addition, as we had accepted long term seasonal orders before 
the abovementioned Customs rulings came into effect, we have had to 
bear the cost of import duty on these orders, which we had contracted 
to deliver to our customers. As a young Company this unplanned 
financial burden has been particularly difficult to bear.
    In light of the above, we express our strong support to the Ways 
and Means Committee to enact the AGOA Acceleration Act of 2004, HR 
4103, so that the disadvantage which men's shirts made from short 
supply fabrics of AGOA origin are currently subjected to, can be 
rectified. We also express our strong support that this be made 
retroactive in order to address the inequity of the current situation.
            Yours truly,
                                                      Guy Prudhomme
                                                          President

                                 

 Statement of Rodney Birkins, Jr., J.C. Penney Purchasing Corporation, 
                              Plano, Texas

    These written comments will address the critical importance of 
extending the current AGOA benefits and are being submitted on behalf 
of J.C. Penney Corporation Inc. and J. C. Penney Purchasing 
Corporation. I am the President of the J. C. Penney Purchasing 
Corporation (``JCPPC''), the global procurement arm for merchandise for 
sale in JCPenney's retail, catalog and internet operations. Eighty 
percent of JCPenney sales are textile and apparel related. My comments 
regarding the extension of current AGOA benefits will be directed at 
the textile and apparel industry, and specifically at the future 
ability of AGOA apparel manufacturers to use third country fabric.
    Within my capacity as President of JCPPC, I am responsible for the 
development of our strategic sourcing plans and managing the assets to 
support our global merchandise procurement. We currently purchase and 
import merchandise from 55 countries world wide and from all areas of 
the globe ranging from nearby Mexico to China and Southeast Asia to the 
countries of the Sub-Saharan Africa. Last year alone, JCPPC's 
international purchases of goods were valued at $7 billion retail. Our 
extensive global sourcing experience places JCPenney in a unique 
position to understand and comment on the proposed AGOA trade 
legislation and its potential impact on the sourcing decisions of U.S. 
purchasers.
    The positive impact of AGOA is quite evident. The AGOA benefits 
that allow duty free treatment for goods meeting specific criteria have 
provided the impetus for foreign and local investment and fueled the 
creation of much needed jobs within the region. One area where jobs 
have been created is the apparel manufacturing industry. U.S. 
purchasers have responded favorably to the AGOA countries as a source 
for product. U.S. imports of apparel under AGOA have risen from 
approximately 75 million SMEs in 2001 to over 300 million SMEs in 2003. 
As the attached chart indicates, the vast majority of AGOA apparel is 
made with third country fabric. AGOA, with the provisions allowing the 
use of third country fabric, has provided a glimmer of hope to a region 
of unparalleled poverty.
    However, now there is a dark cloud on the horizon and unless 
changes are made to the proposed AGOA Acceleration Act of 2004, the 
prior economic gains achieved under the Trade Act of 2002 could be 
lost. I do not make this pronouncement lightly. This is a critical 
moment in the history for the Sub-Saharan economies and the fledging 
apparel manufacturers in those countries. Already, the removal of 
quotas on textiles and apparel in 2005 has created global changes in 
apparel manufacturing patterns. These changes coupled with the 
uncertainty of AOGA manufacturers' future ability to utilize third 
country fabric are starting to take its toll on the apparel 
manufacturers in the region. As we speak, AGOA apparel factories are 
being emptied. Orders are being shifted out of the region. The 
uncertainty concerning the future use of third country fabric, beyond 
AGOA's current expiration date, is the driving factor. The ability of 
U.S. importers to obtain duty free treatment for apparel produced with 
third country fabric is vital to the survival of the AGOA region as a 
producer of apparel.
    Let me take a few moments to explain the necessity for AGOA apparel 
manufacturers to have the flexibility to use third country fabric in 
AGOA apparel products. Today, decisions where to source merchandise are 
driven by quota availability. 2005, with the elimination of quotas on 
textiles and apparel, will see a period of great change to sourcing 
patterns. Instead of being driven by the artificial constraints of 
quotas, sourcing decisions will become more rationalized and will be 
based upon sound business reasons. Post 2005, common themes among 
businesses sourcing world wide are:

      The reduction in the number of countries where 
merchandise is sourced. This will allow businesses to take advance of 
volume discounts that were previously unavailable under the quota 
system.
      The reduction in the number of companies or suppliers 
that a business deals with. This will allow businesses to develop long 
terms relationships with a few reliable key suppliers.
      Global deflation of 8%-18% in the prices of textiles and 
apparel resulting from:
      Elimination of quota charges
      Use of the most efficient supply chains
      Over capacity within the apparel manufacturing industry

    Many wrongly assume that retailers are look for the lowest price 
when making sourcing decisions. I will not deny that price is 
important, but actually, the most important criteria is the speed of 
the sourcing timeline. The merchandise JCPenney purchases runs the 
gamut from core commodities to high fashion items. Each of these has a 
different sourcing timeline. High fashion has a short shelf life and by 
necessity a short production timeline. Core commodities have more 
flexibility in sourcing and have a longer sourcing timeline. Countries 
must meet the relevant timeline requirement to be considered as a 
potential source country.
    Once a decision is made on the relevant timeline, price enters into 
the sourcing decision matrix. The speed and price components are not 
static in the decision making process, but are like counterweights on a 
scale. The shorter the sourcing timeline, the greater the price of the 
product. Conversely, the longer the production lead time the less we 
will pay for a product. This relationship of speed and price relates 
directly to the risk assumed by JCPenney. The greater the sourcing 
timeline, the greater the risk that the product will not meet the needs 
and fashion tastes of JCPenney customers. The shorter the sourcing 
timeline, the less risk JCPenney assumes regarding its ability to sell 
a particular product. So, with longer lead time production areas, 
importers and retailers expect lower pricing to offset the elevated 
risk.
    The AGOA region has one of the longest sourcing timelines in the 
world due in part to the lengthy transit time between Africa and the 
U.S. Under AGOA and the resulting duty free treatment of complying 
products, this region gained a competitive advantage and became more 
attractive as a sourcing region. Not being restricted by quota 
availability has added to the attractiveness of the region over the 
last few years. However, this particular competitive advantage will go 
away in January of 2005. The elimination of quotas in 2005 heightens 
the need for AGOA apparel manufacturers to be cost competitive.
    To determine the cost competitiveness of AGOA apparel, we need to 
break it down to the cost components:

      Transportation costs per container out of the AGOA region 
are approximately double the transportation cost per container from 
East Asia. Additionally, transit times from AGOA countries average 
approximately 40 days while transit time from East Asia averages 14 
days.
      While wage rates in the AGOA are lower than many other 
apparel manufacturing countries, the productivity of the AGOA labor 
force averages about 60% of industry standard. The low productivity 
means that even with a lower wage rate, the labor cost in a garment is 
relatively high.
      Plant and equipment expense are higher in the garment 
cost. Since fewer garments are produced in the facility due to the low 
sewing productivity, a greater fixed asset cost is charged to each 
garment.
      Fabric costs--The hope, when AGOA was originally crafted, 
was that a textile industry would develop within the region to support 
the Sub-Saharan apparel industry. With limited exceptions, that hope 
has not been realized. The high cost, approximately $80-$100 million, 
of establishing a textile plant has proved too expensive for a region 
with limited economic resources. The uncertainty of the global apparel 
manufacturing industry as a result of the end of quota in 2005 is 
another deterrent to the establishment of regional textile factories. 
As a result, although there is some regional fabric production, the 
amount of regional fabric currently produced falls substantially short 
of the demand by AGOA apparel manufacturers. Additionally, regional 
fabric runs 15%-20% higher than fabric purchased in the global markets. 
Today, regional fabric is used in only about 14% of total AGOA apparel 
production.
      Duty costs--a typical cost component for textile products 
is the amount of duty an importer is required to pay on the product. 
The duty free treatment accorded AGOA products helps to partially 
offset the higher costs for AGOA products

    However, duty elimination alone is not enough. When all of the cost 
components are factored in, the costs of sourcing apparel in AGOA 
countries is high and non-competitive. High costs with long lead times 
are a combination which will spell disaster for the apparel 
manufacturers in the AGOA region and will send business to other 
competing economies.
    The only hope for the AGOA region to remain competitive is the 
extension of the ability to use third country fabric. Third country 
fabric is vital to the very survival of the apparel manufacturing in 
the AGOA region. Without access to textiles from the most competitive 
markets, the AGOA countries will have difficulty competing in the 
marketplace of the future.
    The current AGOA legislation planted a seed of hope of economic 
growth for this region. This growth is now being slowly realized. 
Failure to all continued use of third country fabric will crush the 
fledgling apparel manufacturing industry and with it the economic 
benefits already gained. With the passage of the AOGA Acceleration Act 
of 2004, Congress has an opportunity to provide for real economic gains 
for the AGOA region not just illusory benefits.
    The proposed legislation provides only for a 2 year extension of 
third country fabric at the current levels with a phase out in the 
third year. 2005 will radically change the global manufacturing playing 
field and be a period of hyper-competitiveness. This will create a time 
of great uncertainty. It is unrealistic to expect major investment in 
textile production within the AGOA region during this period of 
transition and market adjustment.
    To provide U.S. importers and AGOA manufacturers stability, the 
AGOA Acceleration Act of 2004, with the extension of third country 
fabric, must be passed and passed quickly. JCPenney strongly urges that 
the third country fabric allowance be extended permanently, or at a 
minimum that this allowance is extended for a period of 7 years. This 
period of time will allow AGOA countries to continue realizing the 
benefits of AGOA through apparel production while providing an adequate 
transition time for the potential establishment of a viable regional 
textile manufacturing industry.

                                 

                    [BY PERMISSION OF THE CHAIRMAN:]

                       Mauritius Export Processing Zone Association
                                              Port Louis, Mauritius
                                                     April 29, 2004
Chairman William Thomas
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

Dear Chairman Thomas:

    We are writing in connection with the Ways and Means Committee's 
April 29, 2004 Hearing on H.R. 4103, the AGOA Acceleration Act of 2004, 
to express our support for this important legislation. The Mauritius 
Export Processing Zone Association (MEPZA) is the trade association of 
the apparel and other manufacturers that operate in the Export 
Processing Zone in Mauritius.
    We fully support H.R. 4103, including in particular the extension 
of the lesser devloped countries' (LDCs') access to third-country 
fabric and the technical corrections to AGOA's apparel provisions that 
permit: (1) use of imported collars and cuffs, (2) commingling of U.S. 
and African-origin fabric in the same garment, and (3) short supply 
fabrics to be woven'knit in Africa.
    AGOA has been a tremendous success in its first four years, but 
that success is also fragile. To date, more than 80% of the apparel 
that has entered the United States under AGOA has been from the LDCs 
and has been made with third-country fabric. With the expiration of 
AGOA's third-country fabric provision now less than six months away, 
the LDCs are confronting the very real prospect of an almost complete 
collapse of their infant apparel industries that have been created in 
response to AGOA.
    That situation is made all the more threatening by the fact that on 
January 1, 2005--a mere three months after the scheduled expiration of 
the LDCs' access to third-country fabric--the Multi-Fiber Arrangement 
(MFA) system of quotas on textile and apparel imports from the China 
and the other largest producers in the world is scheduled to terminate 
pursuant to the Uruguay Round Agreement on Textiles and Clothing.
    There can be little doubt that the LDC's infant apparel industries, 
suddenly stripped of access to their primary source of inputs and 
almost simultaneously facing unfettered copmetition from China, are 
staring into the face of disaster. Litterally hundreds of thousands of 
jobs are in jeopardy. If these jobs disappear, there are no realistic 
prospects for alternate employment.
    H.R. 4103 would avert this impending crisis by extending LDCs' 
access to third-country fabric for three more years to give the LDCs 
time to adjust to the new rules of origin and the new competition from 
China and, simultaneously, too allow more time for investment to be 
made in the African yarn and fabric industry so that it can better meet 
the input requirements of the garment manufacturers. We fully support 
H.R. 4103 in order to protect LDCs from disaster.
    But H.R. 4103 does not go far enough in ensuring that the promise 
of AGOA is realized for all AGOA beneficiaries. Rather, we respectfully 
suggest that H.R. 4103 should be revised to add special dispensation to 
permit Mauritius to utilize third-country fabric in order to prevent a 
crisis in our apparel industry. Similar relief was granted to Botswana 
and Namibia in the so-called AGOA II legislation enacted in August 
2002, when it had become apparent that these non-LDCs were not 
benefiting from AGOA. The same relief is now needed for Mauritius.
    Since AGOA was enacted, apparel imports from the lDCs have 
increased by more than 250%, leading to the creation of more than 
200,000 new apparel jobs. By contrast, during the last 15 months in 
Mauritius more than 30 apparel factories have closed, costing 12,000 
jobs, representing fully 15% of EPZ jobs in Mauritius at the time AGOA 
was enacted. During March 2003-February 2004, U.S. apparel imports from 
Mauritius have declined by 15%. Mauritius is the only AGOA beneficiary 
whose apparel exports have declined to such and extent during this 
time.
    This drop in apparel employment, production and exports is 
attributable to two factors: (1) increased competition from neighboring 
LDCs, who have enjoyed the competitive advantage of being able to 
utilize more plentiful and less expensive third-country fabrics, while 
we are limited to using only more expensive, less available African or 
U.S. origin fabrics; and (2) the prospect of unfettered competition 
from China, effective January 1. 2005.
    Because of the shortage of imputs elligible for duty-free treatment 
that are available to Mauritius, U.S. importers who used to source 
apparel in Mauritius have in the past year or two begun placing their 
orders in LDCs to capture the duty-free benefits of AGOA. By all 
indications, the situation will only worsen when the MFA quotas on 
China are lifted at the end of the year. Ironically, if the current 
trend continues, the new industries in the LDCs may survive the lifting 
quotas, while our more established apparel sector in Mauritius, 
deprived of access to essential inputs. Agoa is now creating the 
prospect of the poor having to pay the price of economic development 
for the poorest. This is now what we had understood AGOA was intended 
to do.
    To prevent further job losses in Mauritius, we respectfully request 
that H.R. 4103 should be revised to include special temporary relief to 
allow Mauritius to use third-country fabric during whatever period the 
LDCs' access to third-country fabric is extended. We appreciate the 
Committee's consideration of our position on this issue, which id 
critical to the survival of the Mauritius apparel Industry.
            Respectfully submitted,
                                                      Danielle Wong
                                                           Director

                                 
    Statement of Maurice Vigier de Latour, Chairman, Mauritius-U.S. 
                       Business Association, Inc.
    The Mauritius-U.S. Business Association Inc. (MUSBA) commends the 
Committee on Ways and Means for holding hearings on the AGOA 
Acceleration Act of 2004, H.R. 4103. MUSBA is a bilateral trade 
association whose members are private sector companies, business 
organizations, and individuals in Mauritius and the United States who 
are engaged in mutually beneficial trade and investment between the two 
countries.
    The African Growth and Opportunity Act (AGOA) has been a huge 
success in its first four years by creating literally hundreds of 
thousands of new jobs in Africa, establishing opportunities for 
sustainable economic development in the world's poorest region, and 
building a new foundation based on hope, mutual benefit and friendship 
for the long term economic relationship between Africa and the United 
States. These economic successes in turn have reinforced the strong 
movement in Africa toward democracy, political stability, peace and 
respect for human rights.
    But while AGOA's success has been noteworthy, it is also fragile. 
The cornerstone of AGOA is its system of trade preferences (quota-free/
duty-free access to the U.S. market) for apparel made in Africa that 
meets the AGOA rules of origin. For AGOA's first four years (October 
2000-September 2004), these rules of origin have permitted the less 
developed AGOA beneficiaries (LDCs) to utilize yarns and fabrics 
imported from outside Africa or the United States, so-called ``third-
country fabric.'' Thereafter, AGOA as originally enacted would require 
that only yarns/fabrics made in Africa or the United States be used.
    To date, more than 80% of the apparel that has entered the United 
States under AGOA has been from the LDCs and has been made with third-
country fabric. With the expiration of AGOA's third-country fabric 
provision now less than six months away, Africa is confronting the very 
real prospect of an almost complete collapse of the infant apparel 
industry that has been created in response to AGOA.
    The situation is made all the more tenuous by the fact that on 
January 1, 2005--a mere three months after the scheduled expiration of 
the LDCs' access to third-country fabric--the Multi-Fiber Arrangement 
(MFA) system of quotas on textile and apparel imports from the largest 
and most competitive producers in the world is scheduled to terminate 
pursuant to the Uruguay Round Agreement on Textiles and Clothing.
    There can be little doubt that the infant apparel industries of 
Africa, suddenly stripped of access to their primary source of inputs 
and almost simultaneously facing unfettered competition from China, are 
staring into the face of disaster. Literally hundreds of thousands of 
jobs are in jeopardy in countries where the unemployment rates average 
nearly 50%. If these jobs disappear, there are no realistic prospects 
for alternative employment. The hopes and aspirations of literally 
millions of Africans hang in the balance.
    The AGOA Acceleration Act would address this impending crisis by 
extending the LDCs' access to third-country fabric for three more years 
to give the LDCs time to adjust to the new rules of origin and the new 
competition from China and, simultaneously, to allow more time for 
investment to be made in the African yarn and fabric industry so that 
it can better meet the input requirements of the garment manufacturers.
    When AGOA was enacted in 2000, it was thought that four years 
should be a long enough period of access to third-country fabric to 
``jump start'' the apparel sector in the LDCs. It must be remembered, 
however, that at that time China was not a member of the WTO and, 
therefore, the MFA quotas on China were not scheduled to be phased out. 
In the meantime, China has joined the WTO. As a consequence, the 
fundamental assumptions on which the September 30, 2004 expiration date 
for third-country fabric was based have been completely changed. It is 
no longer reasonable to assume that the infant apparel industries 
created from scratch in the African LDCs during the past four years 
should be mature enough to go toe-to-toe with the world's largest and 
lowest cost producer of textiles and apparel. These changed 
circumstances cry out for an extension of AGOA's third-country fabric 
provision.
    Time is already running out for the LDCs. Orders are being 
cancelled today, as U.S. importers conclude they cannot tolerate the 
uncertainty of whether their cargoes will be duty free after September 
30, 2004. African workers are already being laid off as their factories 
are losing business. H.R. 4103 must be enacted as quickly as possible, 
and well before September 30, 2004, in order to prevent the destruction 
of what AGOA has accomplished so far.
    Although enactment of H.R. 4103 is of critical importance, the AGOA 
Acceleration Act does not go far enough in protecting the promise of 
AGOA. Rather, we respectfully suggest that H.R. 4103 should be revised 
to add special dispensation to permit Mauritius to utilize third-
country fabric in order to prevent a crisis in its apparel industry. 
Similar relief was granted to Botswana and Namibia in the so-called 
AGOA II legislation enacted in August 2002, when it had become apparent 
that these non-LDCs were not benefiting from AGOA.
    While more than 200,000 new apparel jobs have been created in LDCs 
across Africa in response to AGOA, more than 30 apparel factories have 
closed in Mauritius, costing 12,000 jobs, all in the last 15 months. It 
is ironic that Mauritius, which was deemed too competitive to warrant 
access to third-country fabric when AGOA was enacted, has now lost 15% 
of the apparel industry jobs it had at that time.
    This contraction of the Mauritian apparel industry is reflected in 
the official import statistics maintained by the U.S. Department of 
Commerce, which report that apparel imports from Mauritius have dropped 
15% during the 12-month period March 2003-February 2004. While apparel 
imports from the AGOA LDCs have grown by 228% since AGOA was enacted in 
2000, apparel imports from Mauritius have not kept pace. Rather, 
apparel imports from Mauritius have grown by just 13% since 2000, which 
is less than the 19% increase in U.S. apparel imports from all origins. 
Thus, while Africa's share of the U.S. apparel import market has more 
than doubled since AGOA was enacted, Mauritius is losing market share. 
In other words, Mauritius received little or no benefit from AGOA 
during 2000-02; even more troubling, beginning in 2003 and continuing 
to date, Mauritius is actually being harmed by AGOA as its exports to 
the United States are falling.
    It is ironic that Mauritius should be suffering declining apparel 
exports to the United States because Mauritius has probably done more 
than any other country of Africa to contribute to the success of AGOA. 
Mauritius has invested its own capital in the development of both the 
apparel sector in neighboring LDCs (including Madagascar and 
Mozambique) and the textile sector both in Mauritius and in LDCs 
(Mali). In addition, Mauritius has made its technical expertise in the 
textile and apparel sector available to the LDCs. But the Mauritian 
textile and apparel sector will not be able to continue to invest in 
the development of its neighbors if its export revenues from sales to 
the United States continue to decline.
    Since AGOA was enacted, Mauritius has gone from being the largest 
African supplier of apparel to the United States to the number six 
slot, behind Lesotho, Kenya, South Africa, Swaziland, and Madagascar. 
This is reflected in the fact that Mauritius has had the lowest growth 
rate of all the countries that have exported apparel duty-free under 
AGOA. Indeed, Mauritius' rate of growth is lower than even Botswana. 
Recognizing that Botswana was not benefiting from AGOA, Congress 
changed Botswana from a non-LDC to an LDC in AGOA II to enable it to 
compete on equal terms with the LDCs.

         Comparison of U.S. Apparel Imports from AGOA Countries
------------------------------------------------------------------------
                           2000 Imports    2003 Imports   % Growth 2003/
         Country              (msme)          (msme)           2000
------------------------------------------------------------------------
Swaziland                       7.166          49.164         586.1
Kenya                          12.556          52.228         315.9
Lesotho                        34.365         103.865         202.2
Madagascar                     20.495          45.639         122.7
Malawi                          3.311           7.049         112.9
Namibia                         0              10.543        >100
Ghana                           0               6.176        >100
Cape Verde                      0               1.271        >100
Ethiopia                        0               1.172        >100
Uganda                          0               0.841         100
Mozambique                      0               0.423        >100
Tanzania                        0               0.345        >100
South Africa                   37.925          70.251          85.2%
Botswana                        2.167           3.051          40.8%
Mauritius                      39.771          45.124          13.5
Africa Totals                 157.756         397.142         151.7
U.S. Imports from the      16,035.35       18,863.52           17.6
 World
------------------------------------------------------------------------

    Even South Africa, the only other non-LDC that exports apparel to 
the United States, has far outstripped Mauritius. South Africa's 
apparel exports to the United States have increased by 32.326 million 
square meter equivalents (msme) or 85%, six times the growth by 
Mauritius of 5.353 msme or 13.5%. The reason is that South Africa's 
yarn and fabric industry is many multiples larger than the Mauritian 
textile industry, so South Africa has been better able to supply its 
own yarn and fabric to its apparel manufacturers, while Mauritius alone 
in Africa has been left without an adequate source for yarn/fabric 
inputs for duty-free apparel production. In addition, the Mauritian 
yarn/fabric industry is limited to cotton and to a lesser extent wool 
production, while the South African industry produces the full range of 
yarns/fabrics, including man-made fibers.
    While Mauritius is investing in adding new yarn/fabric capacity, 
this takes time, as is illustrated by the fact that the first new yarn 
spinning plant to be built in Mauritius since AGOA was enacted opened 
for business only in October 2003, a full three years after AGOA was 
enacted. Even with the new plant, Mauritius produces only about one-
third of the yarn requirements of its apparel sector. Consequently, 
Mauritius ranks near the bottom of all AGOA countries in the percentage 
of its apparel exports to the United States that qualify for duty-free 
entry under AGOA.

                2003 Duty-Free Apparel Imports under AGOA
------------------------------------------------------------------------
                           Total Imports     Duty-Free
         Country              (msme)      Imports (msme)   %  Duty-Free
------------------------------------------------------------------------
Mozambique                      0.423           0.418          98.8
Ghana                           6.205           6.108          98.4
Malawi                          7.049           6.873          97.5
Lesotho                       103.865          98.574          94.9
Madagascar                     45.643          42.856          93.9
Kenya                          52.642          48.850          92.8
Swaziland                      49.166          45.288          92.1
Ethiopia                        1.172           1.078          91.9
Uganda                          0.841           0.739          88.9
Botswana                        3.051           2.643          86.6
Mauritius                      45.146          19.983          44.3
South Africa                   85.899          28.064          32.7
Tanzania                        1.289           0.326          25.2
Total                         402.391         301.8            75.0
------------------------------------------------------------------------

    Because of the shortage of inputs eligible for duty-free treatment 
that are available to Mauritius, U.S. importers who used to source 
apparel in Mauritius have in the past year or two begun placing their 
orders in LDCs to capture the duty-free benefits of AGOA. Ironically, 
AGOA is now creating the prospect of the poor having to pay the price 
of economic development for the poorest. This is obviously not what 
AGOA was intended to do.
    To prevent further job losses in Mauritius, we respectfully request 
that H.R. 4103 should be revised to include special temporary relief to 
allow Mauritius to use third-country fabric during whatever period the 
LDCs' access to third-country fabric is extended. We appreciate the 
Committee's consideration of our position on this critical issue, and 
we would be happy to respond to any requests for additional 
information.

                                 

                                         New River Industries, Inc.
                                            Radford, Virginia 24141
Chairman Philip Crane
Trade Subcommittee
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

Dear Chairman Crane:

    We are writing in connection with the Ways and Means Trade 
Subcommittee's April 29, 2004 hearing on H.R. 4103, the AGOA 
Acceleration Act of 2004, to express our support for this important 
legislation.
    New River Industries, Inc. is a major U.S. manufacturer of fabrics 
used as linings for jackets and coats. Encouraged by the new 
opportunities for trade created by the African Growth and Opportunity 
Act (AGOA), New River has sold significant volumes of lining fabric 
going to jacket/coat manufacturers in AGOA countries. U.S. Customs and 
Border Protection (CBP) has managed single-handedly to virtually 
destroy this export opportunity and, in the process is on the verge of 
causing the loss of thousands of jobs here in the U.S. and tens of 
thousands of jobs in Africa, by it's unbelievable interpretation of 
AGOA that prohibits commingling U.S. and African fabric in the same 
garment. According to CBP, a garment made of 100% African fabric is 
eligible under AGOA, and a garment made of 100% U.S. fabric is likewise 
eligible. But a garment made of both U.S. and African fabric is 
ineligible. This bizarre interpretation turns the intent of Congress on 
its head.
    H.R. 4103 would make technical corrections to AGOA's apparel 
provisions, inter alia, to confirm that Congress intended to allow 
commingling of U.S. and African-origin fabric in the same garment. 
Equally important, the bill authorizes retroactive duty refunds for 
goods imported since AGOA took effect in 2000 that meet the AGOA 
eligibility standards as amended by the bill.
    These technical corrections are absolutely essential to prevent the 
loss of literally thousands of jobs in both the U.S. and Africa. 
Moreover, it is only equitable to authorize retroactive duty refunds 
for products that were imported since AGOA was enacted and that would 
have qualified for duty-free eligibility but for CBP's past rulings 
that have been inconsistent with the intent of Congress.
    We appreciate the opportunity to present our views to the Trade 
Subcommittee on these important issues. Please let us know if you 
require additional information or if we may otherwise be of assistance.
            Sincerely,
                                                        Paul Poandl
                                           Executive Vice President

                                 

                    [BY PERMISSION OF THE CHAIRMAN:]

     Statement of Nien Hsing Textile Company, Ltd., Taipei, Taiwan

    Nien Hsing Textile Co., Ltd. is a vertically integrated 
manufacturer specializing in denim fabric and jeans from cotton fiber 
to ready made garment. Our main customers are VF, Gap Inc, Wal-mart, 
Target, Jordache, Calvin Klein, and DKNY. Over 90% of our markets are 
in the USA. In the Nien Hsing fabric division, presently we have denim 
mills in Taiwan, Mexico and Lesotho, as well as a dyeing plant in 
Nicaragua. We are ranked fifth in the world denim fabric production. 
Furthermore, in the garment division, we currently have jeans factories 
in Mexico, Nicaragua and Lesotho with an annual production of over 
three million dozens of jeans. At present we are ranked first in the 
non-brand jeans manufacturer in the world. Due to these investments, we 
have created over 27 000 jobs in the lesser-developed countries over 
world.
    When AGOA I officially came into effect on October 1st 2000, Nien 
Hsing began planning an investment in Lesotho of two garment factories 
that would employ 6700 workers, a ring spinning yarn mill and a 
vertical yarn and denim mill. These new facilities are now operational 
at a cost of over $100 million USD, creating about 10,000 jobs in 
Lesotho. Nien Hsing now ranks as one of the main garment producers and 
the largest denim fabric and yarn manufacturer within the AGOA LDCs 
(See Annex I for details of Nien Hsing facilities in Lesotho).
    We believe that for the continuous growth, development and 
prosperity of the African textile and garment industry, the AGOA III 
must adopt the following three principles:

    1.  The extension of third country fabric sourcing for LDCs must 
not be more than three years.
    2.  The extension of third country fabric sourcing for LDCs must 
not include denim fabric (U.S. HTS 5209.42)
    3.  The Rule of Origin should only apply to fabric that provides 
the essential character of the garment.

     The extension of third country fabric sourcing for LDCs must not 
be more than three years.

    There must be textile industry development amongst Sub-Saharan 
African (SSA) AGOA beneficiary countries to form a stable vertical 
supply chain of fabric with existing garment factories. Through the 
means of high capital investment of textile industry, SSA can raise the 
need of local raw materials and supplies, to raise the industrial skill 
level, and to increase the diversity, depth and stability of local 
textile and garment industry.
    By calculating Nien Hsing's denim mill and ring spinning yarn mill 
projected full production, in future, we will purchase from African 
countries and from the USA an estimate 61 million pounds of cotton 
annually, other spare parts for the machinery repairs and maintenance 
will also be creating more business opportunities for SSA regions.
    Nien Hsing Textile was attracted to invest over $100 million USD in 
Lesotho to establish a vertically integrated denim mill (covering 
spinning, weaving and dyeing, and one ring spinning yarn mill) because 
the special rule allowing LDCs to utilize third-country fabric would 
expire September 30, 2004. Nien Hsing probably would not have made this 
investment if we had known that deadline might be extended. It is our 
understanding that other companies that had planned to invest in 
textile plants in SSA have either cancelled or suspended their 
investment plans because of AGOA III's possible extension of third-
country fabric.
    It takes two years to bring a textile mill from the evaluation 
process to full production. Therefore, the extension for third country 
fabric sourcing for the LDCs should not be more than three years. 
Anything more than three years will bring serious harm to existing 
textile industries and prevent potential new investments in the SSA 
countries.
    The extension of third country fabric sourcing for LDCs must not 
include denim fabric (U.S. HTS 5209.42).
    One of AGOA's goals is the development of a vertically integrated 
textile-apparel industry in SSA to anchor these jobs in the region and 
to make these new industries more competitive. The main justification 
for extending the LDCs' access to third-country fabric is the relative 
shortage of Africa-origin yarns and fabrics.
    But no shortage exists in the denim sector. By July 2004, Nien 
Hsing's denim mill, with original design capacity of 40 million square 
meters per year, will be producing 1.7 million square meters per month 
(20 million square meters anually). In 2003, U.S. denim apparel imports 
from SSA totaled 39.5 million square meters (See Annex II).
    In other words, Nien Hsing by itself has the capacity to produce--
and shortly will be producing--enough denim to supply the total imports 
of denim garments under AGOA. This capacity can easily be increased to 
accommodate increasing demand. Moreover, there are already several 
other denim mills in SSA. Therefore, there is no shortage of denim 
fabric in SSA and no justification for extending the importation of 
third-country denim. Nien Hsing should not be penalized for having 
adopted the policies of AGOA by building an integrated denim plant by 
September 30, 2004.
    Rule of Origin only applies to fabric that provides the essential 
character of the garment.
    In contrast to denim fabric, which is not in short supply in 
Africa, various other components and inputs are not readily available. 
The problem is compounded because fashion designers insist upon an 
almost endless variety of constantly changing minor components and 
inputs. It is unrealistic, therefore, to require minor components and 
inputs to be sourced in Africa. Nien Hsing recommends the basic AGOA 
rule of origin be limited to fabric that provides the essential 
character of the garment and that manufacturers be allowed to source 
other minor components and inputs outside of the region.
Nien Hsing's investment planning for AGOA III.
    If AGOA III can be passed with our suggestions, Nien Hsing will 
plan:

    1.  To increase monthly denim production from July production of 
1.7 million square meters to up to 3.4 million square meters as 
necessary to supply the requirements for denim. At full production, our 
denim fabric output will be more than enough to supply AGOA 
consumption, and it can also be exported to the South Africa market as 
well as to EU market. This will represent a milestone in LDCs textile 
industry.
    2.  The ring spinning yarn production will be increased from 0.7 
million KGs per month of July 2004 to 1.4 million KGs per month. Nien 
Hsing will also play an active role to encourage other textile 
industries to join us in a strategic alliance, and utilize our mills' 
production to establish a knitted fabric mill and dyeing plant. If our 
ring spinning yarn can be totally made into knitted fabric, this is 
enough knit fabric to produce 5 million dozen knitted garments 
annually.

Future development for textile and garment industry in the AGOA 
        beneficiary countries
    As demonstrated by our investment of over $100 million USD, Nien 
Hsing believes the future of Africa is one that has a competitive 
textile-garment industry with its own cotton fields, its own yarn 
mills, its own weaving and knitting plants, its own dyeing mills and 
its own garment factories.
    Finally, I would like to thank the Chairman and members of the 
House Committee on Ways and Means for giving us this opportunity to 
present our suggestions. We would welcome the Chairman and all the 
Committee Members to come and visit our factories in Lesotho to witness 
the growth of least developed countries in Africa and to witness the 
spirit of AGOA that is working in Africa.

                                                     ANNEX I
                        Investment of Nien Hsing Textile Co., Ltd. in Kingdom of Lesotho
----------------------------------------------------------------------------------------------------------------
                                      Investment
                            Year of     Amount     Capacity  (Thousands of   Number of
                          Investment   (Million        Unit per year)        Employees           Remarks
                                         USD)
----------------------------------------------------------------------------------------------------------------
                                                Textile Division
----------------------------------------------------------------------------------------------------------------
O.E. Yarn & Denim Mill        2002        65      20,000 SMEs                     800   Half of designed
                                                                                         capacity
----------------------------------------------------------------------------------------------------------------
Ring Spining Yarn Mill        2002        25      10,000 KGs                      400   Half of designed
                                                                                         capacity
----------------------------------------------------------------------------------------------------------------
                                                Garment Division
----------------------------------------------------------------------------------------------------------------
C & Y Garment                 1991         5      400 Dozs                       2100   ........................
----------------------------------------------------------------------------------------------------------------
Nien Hsing Garment            2000         6      500 Dozs                       3700   ........................
----------------------------------------------------------------------------------------------------------------
Global Garment                2002         6      500 Dozs                       3000   ........................
----------------------------------------------------------------------------------------------------------------
Total                                    107                                   10,000   ........................
----------------------------------------------------------------------------------------------------------------


                                                    ANNEX II
                                       2003 Blue Denim Imports from Africa
                               (all figures in thousand square meter equivalents)
----------------------------------------------------------------------------------------------------------------
                                                         M/B                      B/G        W/G
                                                       Trousers   W/G  Slacks  Playsuits    Skirts      Totals
----------------------------------------------------------------------------------------------------------------
Botswana                                                  134          194          0          0          328
----------------------------------------------------------------------------------------------------------------
Kenya                                                   1,222        3,904         19        104        5,249
----------------------------------------------------------------------------------------------------------------
Lesotho                                                 5,960        8,165         96         60       14,281
----------------------------------------------------------------------------------------------------------------
Madagascar                                              1,297        2,771          0         15        4,083
----------------------------------------------------------------------------------------------------------------
Malawi                                                    283          238          0          0          521
----------------------------------------------------------------------------------------------------------------
Swaziland                                               1,445          656         19         15        2,135
----------------------------------------------------------------------------------------------------------------
LDC Subtotal                                           10,341       15,928        134        194       25,497
----------------------------------------------------------------------------------------------------------------
Mauritius                                               1,937        2,354          0        164        4,455
----------------------------------------------------------------------------------------------------------------
South Africa                                            5,200        3,412         19        268        8,899
----------------------------------------------------------------------------------------------------------------
Non-LDC Subtotal                                        7,137        5,766         19        432       13,324
----------------------------------------------------------------------------------------------------------------
Totals                                                 17,478       21,695        153        626       39,952
----------------------------------------------------------------------------------------------------------------
(Source: U.S. Department of Commerce.)
M/B Trousers = HTS 6203.42.40.10, 6203.42.40.35
W/G Slacks = HTS 6204.62.40.10, 6204.62.40.40
B/G Playsuits = HTS 6203.42.40.30, 6204.62.40.35
W/G Skirts = HTS 6204.52.20.30, 6204.52.20.40


                                 

                              Nigerian-American Chamber of Commerce
                                                 Imo State, Nigeria
                                                        May 3, 2004
Congressman Philip M. Crane
Chairman Subcommittee on Trade,
Committee on Ways & Means,
(U. S. House of Representatives),
1104 Long worth House Office Building,
Washington, DC, USA.

Dear Congressman Crane and Distinguished Hon. Members, Subcommittee on 
Trade, Committee on Ways & Means,

    I am moved by your sincere commitment and a distinct sense of 
appreciation towards the wonderful and noble work you all are doing in 
the U.S. Congress to address the trade and development needs of sub-
Saharan Africa (SSA), aimed at expediting development and sustainable 
growth in African trade with the United States and by implication the 
world trade organization (WT0) in the new millennium, to send you this 
my Statement For Printed Record of Hearing.
    Based on the experience I gained from my just concluded case-study 
research in the United States, published under the title: ``NIGERIA 
INITIATIVE FOR AGOA'', a documentation of the factors LIMITING 
Nigeria's performances on the AGOA to Petroleum and the STRATEGIES 
necessary to expand Nigeria's participation/opportunities in the AGOA 
to a wide range of Agricultural and Manufactured Products, I have come 
to the conclusion that for the ``AGOA Acceleration Act of 2004'' to 
achieve expected results, it will be necessary that congress consider 
the following: That;

    1.  Technical Assistance must be defined and structured in the 
``AGOA Acceleration Act 2004'' to address the specific and peculiar 
Limitations and localized circumstances, obstructing the active 
participation of each designated sub Saharam African Country in the 
AGOA, particularly on an individual/case by case consideration, as 
against a general standard, because the situation in each country is 
different. This point is very crucial, considering that outside South 
Africa and Mauritius, the private sector is either weak or non-existent 
and in most cases participation is concentrated in TEXTILE/APAREL 
SECTORS, of the economies of most sub Saharan African Countries.
    2.  The active implementation of the AGOA may succeed better if 
Technical Assistance (public-private) and deliberately encouraged 
private-private partnerships for production under AGOA in sub Saharan 
African Countries (SSAs), including U.S. Export Credit and Project 
Finance Structuring Assistance Programs are restructured in the ``AGOA 
Acceleration Act 2004'' to offer the United States, the opportunity to 
actualize billions of dollars (currently lost due to poor performance) 
in export of equipment, materials, parts/supplies and expertise, which 
local producers seriously need to produce and export under AGOA from 
SSA, while SSAs will in return, gain from `Accelerated Manufacturing 
and Agricultural Production Capacity Development, globally competitive 
International Trade Capacity and Export Production Experience', 
necessary to remain competitive under AGOA and in the WTO, after AGOA. 
This way, SSAs will have the opportunity to build high-growth and high-
wage paying economies, minimize unemployment, effectively reduce 
poverty through PRODUCTIVITY and create prosperity for their citizens, 
necessary to sustain Presidential Democracy and Good Governance.
    3.  Majority of AGOA-Designated sub Saharam African Countries lack 
the basic infrastructure, national conducive environment for 
investment/business development and experienced labor for competitive 
export production and international trade management, though they have 
the great potential capable of building a competitive export-oriented 
economy and the creation of large and varied export market for U.S. 
exports under the AGOA.

    Thus, the need for strategies that include, ``Build Operate & 
Transfer (BOT)'', ``Build Operate & Own-Contracts (BOO)'' and other 
types of ``Infrastructure Finance Structuring Concepts'', including the 
development of Export Manufacturing Incubator System, in form of 
``Export Free Zone Manufacturing Villages'' and ``Agricultural Export 
Production Villages'', with exclusive conducive environment amongst 
others, designed and managed by Independent Foreign/Local Managers to 
guarantee successful repayment of Foreign Financing involved. The 
encouragement of the foregoing by the ``AGOA Acceleration Act 2004'', 
may be necessary to achieve the long term mutual trade and economic 
interests of the U.S. and SSAs in the AGOA.
    Finally, I am pleased to recommend that since most private sector 
leaders with local knowledge of STRATEGIES and SOLUTIONS on the 
foregoing are based in Africa and may not easily attend and present 
oral testimonies in future, the Congress may encourage the U.S. 
Department of State and the Department of Commerce to assist some of us 
to visit and contribute, as well as present some case studies that will 
assist Congress better understand and appreciate the peculiar obstacles 
and limitations to be considered in the new AGOA legislation. In 
addition, the ``AGOA Acceleration Act 2004'' may consider providing 
for:

     National Initiative/Strategies Arrangement, by each AGOA-
Country, for accelerated and successful implementation of the AGOA, as 
a condition to benefit from U.S. Technical Assistance, from 2005, 
onwards. This will serve as an implementation plan, which each country 
will follow, accordingly.
     USAID AGOA-Countries' National Initiative/Strategies 
Articulation, Development and Assessment Committee, for the 
Articulation/Review of National Initiative/Strategies, to ensure 
accelerated and successful implementation of the AGOA. African private 
sector leaders, whose current studies and publications on the AGOA are 
assessed relevant and strategic to the successful implementation of the 
AGOA, may be appointed into the USAID AGOA-Countries' National 
Initiative/strategies Assessment Committee.
     Encourage more capacity building training programs for the 
private sector, as against public sector/civil servants, particularly 
as AGOA can only be actualized if the private sector is able to produce 
and export competitively by advancing the program from ``Talking-To-
Doing''.

            Warm regards,
                                                 Mazi Felix Fon Oji
                                                          President

                                 

                    [BY PERMISSION OF THE CHAIRMAN:]

             Office of the Special Advisor to the President on AGOA
                                                     Abuja, Nigeria
                                                     April 30, 2004
Congressman Thomas, Chairman,
Committee on Ways & Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515.

    On behalf of the Nigerian government and other Sub-Saharan African 
countries, I congratulate you and members of the Committee for a 
successful hearing on the above bill yesterday 29th April 2004.
    In view of the call from some quarters that the 3rd Country Fabric 
Provision of the AGOA is extended beyond three years, I reiterate the 
stand of the Nigerian Textile Manufacturers and Government that an 
extension of this provision for a definite period of three years is 
enough as a longer extension WILL harm our textile sector greatly.
    The Nigerian textile industry is the largest in Sub Saharan Africa, 
in terms of production capacity. Its installed capacity stands at over 
1.2 billion square metre equivalent.
    Out of the existing 50 major mills, 50% are fully integrated, from 
fibre to fabric while some more are currently investing in integrated 
production facilities to take advantage of AGOA. The production 
capacity utilisation stands at 35-40% and at that, Nigeria is the 
largest exporter of cotton yarn to the European Union and a major 
supplier to the West African countries.
    The textile sector is the largest employer of labour after the 
Government. It currently employs about 50,000 workers directly in 
textile factories and about 750,000 in the cotton farming sector.
    Since the enactment of AGOA, there has been increased investment in 
the textile and apparel sector in Nigeria like other Sub-Saharan 
countries. For instance, a textile mill in Lagos recently invested in a 
new plant for the production of denim and similar fabrics.
    The product range currently exported from Nigeria which we intend 
to supply to other Sub-Saharan African countries once Nigeria's Textile 
Visa is granted include the following:

a.

Cotton Yarn for weaving and knitting

i.

Ring spun--combed and carded    (NE 16-30)

ii.

 Open End                         (NE 6-24)

b.

Polyester Filament Yarn

i.

75/150/300Denier

ii.

Grey, Bleached White and Dyed

iii.

Texturized

c.

Woven Grey Cloth

i.

63-102 inches

ii.

Plain and twill weaves

d.

Knitted Fabric (circular)

i.

Grey

ii.

Bleached white and Dyed

e.

Dyed Fabrics for Suiting and Shirting

i.

Fibre dyed

ii.

Yarn dyed

iii.

Piece dyed

iv.

Spun/Filament Polyester

v.

Blended (PV/PC)

vi.

Cotton--drill, (shirting, denim, bottom weights--from new mill in mid 2004)

f.

Printed Fabrics

i.

Real wax prints

ii.

African Prints (Fancy)

     Up to 8 colour designs
     Special effects available--embossing, dew drops

    We believe that an extension of the 3rd Country Fabric Provision 
would further impair our concerted efforts to rejuvenate this extremely 
important sector to our economy which has suffered over 57% loss in 
employment (in seven years) and a 69% reduction in number of factories. 
A prolonged or permanent extension would put at risk the new investment 
of over $100 million in the past three to four years AGOA has been in 
existence and the livelihood of cotton growers in the West African 
region who supply the Nigerian Textile Industry. This threat to 
livelihood of cotton growers can perpetuate rural poverty.

NIGERIA WILL BE IN A POSITION TO SUPPLY YARN AND FABRIC AS PRODUCTION 
        INPUTS TO APPAREL PRODUCERS OF ELIGIBLE SUB-SAHARAN AFRICAN 
        COUNTRIES THAT HAVE BEEN GRANTED TEXTILE VISA.

    Congressman Thomas, may I use this medium to earnestly plead that 
the Committee on Ways & Means members to:

i.

extend for a definite and final duration of three years, the 3rd Country 
Fabric Provision;

ii.

assist to ensue that the Act is passed quickly in both the House and the 
Senate to prevent further underutilisation of installed production capacity 
and flight of investment capital from Sub-Saharan Africa due to uncertainty 
and

iii.

request the Office of the United States Trade Representative to approve 
Nigeria's Visa application which they have informed us has satisfied every 
technical and eligibility condition.

    I thank you and your colleagues for your diligence and concerted 
efforts to assist the Sub-Saharan African countries develop and better 
their economies through a companied programme of trade partnership and 
technical assistance.
            Please accept my personal warm regards,
                                                        G.M. Sasore
                                               Presidential Adviser

                                 

 Statement of Retail Industry Leaders Association, Arlington, Virginia
    This statement is submitted on behalf of the Retail Industry 
Leaders Association (RILA) in strong support of H.R. 4103, the Africa 
Growth and Opportunity Act (AGOA) Acceleration Act of 2004.
    RILA is an alliance of the world's most successful and innovative 
retailer and supplier companies--the leaders of the retail industry. 
RILA members represent more than $1 trillion in sales annually and 
operate more than 100,000 stores, manufacturing facilities and 
distribution centers nationwide. Its member retailers and suppliers 
have facilities in all 50 states, as well as internationally, and 
employ millions of workers domestically and worldwide.
    RILA actively supported the original African Growth and Opportunity 
Act (AGOA), which received overwhelming bipartisan support when 
Congress passed the legislation in 2000. RILA continues to believe that 
the AGOA program is critical to helping the nations of sub-Saharan 
Africa (SSA) compete in the worldeconomy.
    RILA strongly supports the ``AGOA Acceleration Act of 2004'' (H.R. 
4103, and urges Congress to pass the legislation as quickly as 
possible. Specifically, RILA supports the three-year extension of the 
third country fabric provision, a clarification of what products and 
processes qualify for duty-free benefits under AGOA and increased 
efforts to support infrastructure and trade capacity.
Textile and Apparel Benefits
Third Country Fabric Provision
    Extending the third country fabric provision before it is set to 
expire this fall is key to maintaining AGOA as a viable sourcing option 
for textiles and apparel. Exports from sub-Saharan African nations have 
increased dramatically since the enactment of the original AGOA 
legislation, particularly in the textile and apparel sector. According 
to Department of Commerce statistics, AGOA textile and apparel imports 
increased by almost 50 percent to $1.2 billion in 2003. As pointed out 
in the bill's findings, this increase has led to substantial increases 
in foreign investment and the creation of tens of thousands of jobs. 
African women have benefited the most from these new jobs. It is also 
important to note that the increase in exports from AGOA nations has 
not resulted in a large net-increase in textile and apparel imports. 
Rather, companies have redirected and diversified their sourcing to 
include AGOA countries.
    In the few short years that AGOA has been in existence, it has led 
to some real benefits for some of the poorest countries in Africa. We 
can look to Uganda as an example. As a landlocked nation faced with 
continuous border problems and internal strife, Uganda faces constant 
challenges. However, the Ugandan government has recognized the 
potential of AGOA to bring benefits to the country. In 1999, there were 
no apparel exports from Uganda, only coffee and some natural resources. 
However, in the first two months of 2004, Uganda shipped about 240,000 
articles of clothing to the U.S. This increase is a direct result of 
Uganda being able to produce apparel using the third-country yarn and 
fabric provision.
    However, now Uganda and the rest of the eligible lesser-developed 
countries (LDCs) face a dual challenge. Not only is the third-country 
fabric provision set to expire at the end of September, but global 
quotas on textiles and apparel will be removed at the end of the year. 
If AGOA nations are to remain a viable sourcing option, the third-
country fabric provision needs to be extended until the necessary 
infrastructure can be develop in the region to allow for full vertical 
integration.
    Retailers are already placing orders for the busy Back-to-School 
and Christmas shopping seasons as well as looking at sourcing options 
for the first quarter of 2005 and beyond. Without the extension of the 
third-country fabric provision, AGOA will immediately become a less 
attractive sourcing option and it is unlikely that nations will be able 
to sustain, let alone build upon the early successes of AGOA. Extending 
the third-party fabric provisions, even after the removal of quotas, 
will maintain AGOA nations advantage over other nations such as China 
because of the duty-free benefits that AGOA qualifying products 
receive. We strongly support the extension of the AGOA textile and 
apparel provisions beyond 2004 and believe it is key to maintaining Sub 
Saharan Africa's viability as a post-quota sourcing option.
Clarification of Eligible Products and Procedures
    When Congress passed AGOA in 1999, the vision and intent was to 
help a region of the world that had very little trade with the United 
States. Those who were looking to invest and source products from the 
region welcomed the ambitious and liberal textile and apparel rule of 
origin. While trade has significantly increased, retailers and apparel 
manufacturers have continuously struggled as U.S. Customs and Border 
Protection (CBP) and the Committee for the Implementation of Textile 
Agreements (CITA) have taken a very narrow interpretation of the law, 
denying duty-free access to garments that Congress intended to cover.
    Too many times, CBP and CITA have made decisions that have forced 
retailers to cancel orders and place them elsewhere because the garment 
would not receive benefits. We applaud the sponsors of the bill for 
including a sense of the Congress statement calling for broad 
interpretation of AGOA by CBP and CITA.
Infrastructure and Trade Capacity
    While granting duty-free benefits for eligible products has 
established AGOA nations as a viable sourcing option, the nations of 
SSA continue to face numerous challenges. The lack of a modern 
infrastructure is a continuing problem. If you have a factory that can 
manufacture the product, but there is no infrastructure in place to 
facilitate the movement of the merchandise from the factory to the port 
for export, the order most likely won't be placed. We fully support the 
language in the bill calling for the development of infrastructure 
projects to help trade capacity and transboundary cooperation to help 
facilitate trade. This is critical to the region continuing to expand.
    SSA nations need help with infrastructure relating to roads, but 
also dealing with the rail system, the ports and information systems. 
RILA encourages Congress to support efforts to bring technical 
assistance to the nations of SSA. Not only will this help with the 
facilitation of trade, but improving the infrastructure, especially the 
ports, will also help in the war on terrorism. RILA believes that 
technical assistance should not be limited to facilitating the movement 
of goods, but also ensuring the security of those goods through the 
ports.
Conclusion
    RILA believes that the African Growth and Opportunity Act has had a 
positive impact on the nations of sub-Saharan Africa. It would be a 
shame for Congress to allow benefits under AGOA lapse as the nations of 
SSA face a critical juncture with global quotas set to expire at year's 
end. For this reason, and for the continued viability of the region, we 
strongly urge Congress to pass the AGOA Acceleration Act of 2004 as 
soon as possible. This will send a strong signal of commitment by the 
U.S. to SSA and will encourage those currently doing business in the 
region to maintain their relationships and investment in the region.

                                 
         Statement of ShopKo Stores, Inc., Green Bay, Wisconsin

    ShopKo Stores, Inc. (``ShopKo'') urges the prompt passage of H.R. 
4103, the AGOA Acceleration Act of 2004 (hereinafter ``H.R. 4103'').
    ShopKo is a customer-driven retailer of quality goods, including 
apparel, and services in two very distinct market environments; mid-
sized to larger cities like Omaha, Neb., and Salt Lake City, Utah and 
smaller rural communities like Clintonville, Wis. Our retail operations 
included 359 stores in 23 states as of January 31, 2004. One hundred 
forty-one locations are operated as ShopKo stores and 218 as Pamida 
stores in cities and towns throughout the Midwest, WesternMountain and 
Pacific Northwest regions. ShopKo apparel is manufactured in a variety 
of countries including sub-Saharan Africa.
    ShopKo appreciates the efforts of the Subcommittee on Trade to 
address the difficulties faced by the poorest countries in Africa. The 
development of the economies of sub-Saharan Africa is crucial to the 
advancement of democracy in the region. While these economies have made 
significant strides in the textile and apparel sector since the 
enactment of the African Growth and Opportunity Act in 2000 (``AGOA''), 
the unfortunate reality is that these advances are in jeopardy unless 
the third-country fabric provisions are extended for at least three 
years.
    ShopKo began to source apparel in sub-Saharan Africa before the 
enactment of AGOA. AGOA resulted in increased purchases. However, if we 
are to continue sourcing in sub-Saharan Africa it is imperative that 
the third-country fabric provisions be extended for at least three 
years. Even with the duty advantage, producers in sub-Saharan Africa 
will find it difficult to compete against producers in the countries 
where quota restrictions will disappear on January 1, 2005. Without the 
duty advantage and the ability to use third-country inputs, they will 
have no chance at all.
    ShopKo requests that the Subcommittee consider two minor changes in 
the language of H.R. 4103.
    Section 7(c) would amend AGOA Section 112(d) 19 U.S.C. 3721(d), to 
make it clear that the use of imported collars or cuffs would not 
disqualify a garment otherwise eligible for the third-country fabric 
preference. This is a very welcome clarification.
    This clarification would not have been necessary had the agency 
responsible for implementing AGOA, United States Customs and Border 
Protection (``CBP''), interpreted AGOA in keeping with the clear 
purpose of the legislation. However, CBP adopted an unnecessarily 
narrow interpretation of AGOA with the result that a variety of the 
types of garments an emerging apparel industry can be expected to 
produce have been denied the AGOA preference. The merchandise most 
directly affected by the narrow interpretation is polo shirts. CBP 
ruled that because the collar and cuff components were not fabric, polo 
shirts cut and sewn in AGOA with third-country fabric were not eligible 
for the preference. The collars and cuffs typically were imported in 
rolls, but separated by various types of dividing lines. CBP ruled that 
these rolls were not considered fabric. This decision eliminated the 
ability of the lesser-developed AGOA countries to manufacture polo 
shirts because the collar and cuff must be produced from the same yarn 
dye lot and at the same time as the body fabric to ensure accurate 
color matches.
    This decision caused many importers to pull out of sub-Saharan 
Africa. This was a very unfortunate development and has retarded the 
development of the apparel industry in sub-Saharan Africa. Apparel 
industries do not begin by making complicated tailored garments. They 
begin with basic garments like polo shirts and move to more 
complicated, higher value added production. H.R. 4103 will eliminate 
this impediment to growth and development.
    The proposed change would eliminate future problems with respect to 
collars and cuffs. However, the manner in which the change is effected 
could have an adverse impact on the argument that polo shirts made with 
imported collars and cuffs qualify under subsection 112(b)(3)(B) as 
originally enacted. We strongly believe that the interpretation of the 
provision by CBP was overly narrow and inconsistent with the desire of 
Congress to encourage trade with the lesser-developed sub-Saharan 
African countries. ShopKo and others should not be denied the 
opportunity to make that argument. Accordingly, we ask that section 
7(c) be revised to read as follows:

     (3) COLLARS AND CUFFS. An article otherwise eligible for 
preferential treatment under this section will not be ineligible for 
such treatment because the article incorporates collars and cuffs (cut 
or knit-to-shape) that were not produced in an eligible beneficiary 
sub-Saharan African country.

    This minor change will accomplish the same clarification as the 
current version of H.R. 4103.
    Section 8 makes certain provisions retroactive to the 2000 
enactment of AGOA. This treatment is extended to apparel articles that 
meet the requirements of ``Section 112(b) of the African Growth and 
Opportunity Act (as amended by section 3108 of the Trade Act of 2002 
and this Act).''
    Polo shirts made with imported collars and cuffs will meet the 
requirements of Section 112(b). However, the change that makes this 
possible is not an amendment to section 112(b). It is an amendment to 
section 112(d) which applies only to section 112(b).
    The cuff and collar provision should be placed on the same footing 
as other clarifications of section 112(b) eligibility requirements. In 
order to ensure that the effective date provision is implemented 
correctly, we ask that section 8(d) be revised by adding at the end the 
following:

     and apparel articles that meet the requirements of section 112(b) 
after applying section 112(d)(3) as added by this Act.

    We believe that this revision will redress the disadvantage to 
which ShopKo and others were placed because of the erroneously narrow 
interpretation of the third-country fabric provision of AGOA by CBP.
    ShopKo appreciates the opportunity to express its views on H.R. 
4103 and urges prompt passage of this legislation.

                                 

                    [BY PERMISSION OF THE CHAIRMAN:]

                                   South African Textile Federation
                                                Bruma, South Africa
                                                     April 27, 2004
The Chief of Staff
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
WASHINGTON, D.C. 20515

Dear Ms Giles,

    In response to the Committee's Advisory of April 20, 2004, the 
South African Textile Federation would like to make the following 
written submission on various amendments to the AGOA as contained in 
H.R. 4103, the ``African Growth and Opportunity Acceleration Act of 
2004. We cover the following aspects i.e.

      The overall extension of AGOA until 2015;
      Fixing interpretation issues encountered with the U.S. 
Dept. of Commerce;
      The three year extension of 3rd country inputs for LDC's; 
and
      The extension of AGOA preferences to Sub Saharan African 
fabrics and made up textiles.

    If you require any clarification please do not hesitate reverting 
to us.
            Kind regards,
            Yours sincerely
                                                           B. Brink
                                                 Executive Director
                               __________

             SUBMISSION ON PROPOSED AMENDMENTS TO THE AGOA

         AS CONTAINED IN THE ``AGOA ACCELERATION ACT OF 2004''

        1.  AGOA Beyond 2008

    The continuation of AGOA beyond 2008 and specifically to 2015 is 
fully supported as this will create more certainty and a more secure 
investment climate in sub Saharan Africa.

        2.  Interpretation Issues on the Rules of Origin

    It is our contention that any moves to amend the existing rules of 
origin on qualifying apparel will be seriously detrimental to the 
textile sector both in the U.S. and in sub Saharan Africa. To amend the 
rule so that it is made applicable only to the essential component of a 
garment will largely benefit the big exporting countries in the Far 
East.
    An amendment that should be made to the rules of origin is that 
permitting a mixture of USA and SSA yarn and fabric origin in 
qualifying apparel. This should not however be extended to third 
country inputs.

        3.  Three Year Extension of 3rd Country Inputs for LDC's

    We had previously proposed in our submission of January 30, 2004 
that if it was found necessary to conditionally extend the termination 
date of the special rule, that this should be on a phased down basis 
over a period of two years, with two thirds of LDC exporter's fabric 
usage to be permitted in year one, one third to be permitted in year 
two and with no allowance thereafter.
    However in a spirit of compromise, we have revised our position and 
now lend our support to the proposal that the special rule for LDC 
countries be extended for a last and final three years with only one 
half of 3rd country inputs being allowed in year three.
    This will enable apparel exporters and yarn and fabric suppliers to 
establish and strike input supply alliances.
    Any extension to this period of validity would hold serious 
consequences for the development of the textile industry in sub Saharan 
Africa (SSA). The reason for the initial four year exemption window on 
the general rules of origin was to convey a very strong message to all 
concerned that it is the aim of the Trade & Development Act (TDA) for a 
textile industry embracing fibre manufacture, yarn spinning and fabric 
weaving and knitting and finishing to be invested in, developed and 
expanded within SSA. Clearly these investments have been slow to 
develop given the uncertainty of whether the special rule would be 
extended or not. It must be made crystal clear this time that the 
proposed extension of three years is the final extension.
    Unless there is considerable investment in the textile industry 
within SSA, AGOA will have missed its most important long-term goal, 
the industrial development of Africa.
    As a further suggestion, more reliance should be placed on short 
supply provisions for yarn and fabric not produced in the USA or sub 
Saharan Africa. We believe that under the Act, the President is 
authorized to proclaim duty-free and quota-free benefits for apparel 
that is both cut (or knit-to-shape) and sewn or otherwise assembled in 
beneficiary countries from fabric or yarn not formed in the United 
States or a beneficiary country, if the President has determined that 
such yarns or fabrics cannot be supplied by the domestic industry in 
commercial quantities in a timely manner.
    An alternative or additional solution would be a system of selected 
availability whereby fabric sourcing flexibility would be introduced. 
This would encourage the use of U.S. and regional products by 
facilitating timely amendments to the list of items that are not 
available in those markets which would be eligible as qualifying inputs

        4.  Extension of Preferential Entry under AGOA to Yarn, Fabrics 
        and Made Up Textiles

    In order to maximize the benefit to sub Saharan Africa's (SSA) 
fledgling textile and apparel industries it is strongly suggested that 
preferential duty free entry be extended to yarn fabrics and to made up 
textiles (chapter 63 of the Harmonised tariff).
    It is crucial to provide as much assistance as possible to the 
yarn, fabric and made up textile sector of SSA ahead of the termination 
of the Agreement on Textiles and Clothing at the end of 2004. For 
without this small advantage given to SSA, China will effectively put 
paid to any industrial growth and development in SSA.
    We have sounded out the American Textile Manufacturers' Institute 
on this extension of preferential entry to yarn, fabrics and made up 
textiles and they ``would not have too much of a problem''. 
Additionally we would point out that South Africa as the major yarn and 
fabric producer in SSA would scarcely be able to export $50 million of 
yarn or fabric, or about 0,1% of U.S. textile mill shipments.

                                 

      Statement of Jeff Posner, USI Sportswear, New York, New York

    Good afternoon. My name is Jeff Posner and I am the President of 
USI Sportswear, a New York based company that supplies sweaters to such 
companies as Pendleton Woolen Mills, Woolrich, Incorporated, Eddie 
Bauer, J.C. Penny, Syms and others. I am accompanied by Arthur Bodek of 
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt, Customs Counsel to 
USI Sportswear. I am here today to raise my voice in support of the 
passage of HR 4103, particularly Section 8 which would make retroactive 
certain enhancements in the AGOA program.
    USI Sportswear has always been a very strong proponent of the AGOA 
program. In fact, for approximately 17 years, my company has been 
manufacturing sweaters in Africa, specifically, in Mauritius, 
Madagascar and South Africa, for the American market. Typically, the 
manufacture of our sweaters utilizes African yarn, African knitting and 
African assembly. If there ever was a type of company that the AGOA 
legislation was intended to encourage, it is USI Sportswear.
    Notwithstanding the above, a misinterpretation of the AGOA 
legislation by the U.S. Customs Service has served to deny AGOA 
benefits for our merchandise. This misinterpretation has frustrated the 
intent of the Congress in passing the AGOA and has resulted in enormous 
economic harm to our company.
    I specifically refer to AGOA Preference Group D, codified at 
subheading 9819.11.09 of the tariff schedule. As initially drafted, the 
provision extended AGOA treatment to garments ``wholly assembled in one 
or more [AGOA] countries from fabric wholly formed in one or more 
[AGOA] countries from yarn originating in either the United States or 
one or more [AGOA] countries. . . .'' As our sweaters were typically 
wholly manufactured in Mauritius all the way back to the spinning of 
the yarn, the products were certified by the Mauritius government, and 
entered under the AGOA program, consistent with the requirements of the 
program.
    Much to our surprise, U.S. Customs denied AGOA treatment for these 
sweaters claiming that they were knit to shape and therefore not made 
from ``fabric''. As interpreted by Customs, if two otherwise identical 
sweaters were wholly manufactured in Africa from African yarn, AGOA 
eligibility would be denied to garments that were knit to shape (on the 
theory that there was no fabric) and granted to sweaters that were not 
knit to shape. The determination of whether a sweater is knit to shape 
largely turns on extremely esoteric factors such as the degree to which 
one can discern the shape of a component based on lines formed during 
the knitting.
    In addition to being inconsistent with prior precedent, this 
Customs interpretation is completely at odds with the intent of 
Congress in passing the AGOA.
    Indeed, on March 6, 2001, a letter on this point was sent to the 
Secretary of the Treasury by Representatives Bill Thomas, Philip Crane, 
Charles Rangel, Robert Matsui, Jim McDermott, Dave Camp, Jim Ramstad, 
Philip English and Jennifer Dunn. In this letter, the aforementioned 
representatives pointed out that:

      The Customs interpretation is wrong;
      It violates legislative intent; and
      ``threatens to seriously undermine the viability of 
AGOA.''

    The Congressional views expressed in the March 6th letter were 
ignored.
    In part for this reason, Congress passed the AGOA II legislation 
specifically referring to knit to shape sweaters. In its report, the 
House Ways and Means Committee observed that it was forced to take its 
action because of the Customs misinterpretation, even though, as 
reflected in the report, ``the Committee believes that the AGOA . . . 
language stated clearly that knit to shape apparel articles are to 
receive benefits. . . .''.
    While the AGOA II legislation should have been the last chapter 
that had to be written on this subject, unfortunately it was not as 
Customs would only apply AGOA benefits to knit to shape sweaters on a 
prospective basis. This, despite the fact that the legislative history 
indicated that the so-called AGOA II legislative fix was merely a 
clarification of what the law had already provided.
    Thus, the passage of HR 4103, particularly Section 8 that would 
make the AGOA II knit to shape benefits retroactive to the beginning of 
the AGOA program, would finally give full effect to the Congressional 
intent on this point.
    Accordingly, USI Sportswear wholeheartedly supports the passage of 
HR 4103.
    Thank you for your time.

                                 

                                          YKK Southern Africa, Ltd.
                                            Bryanston, Johannesburg
                                                     April 30, 2004
Chairman Philip Crane
Trade Subcommittee
Committee on Ways and Means
U.S. House of Representatives
1102 Longworth House Office Building
Washington, D.C. 20515

H.R. 4130

PLEASE ANNOUNCE AGOA III ENACTMENT (Every Day Counts!)

    The performance of AGOA indicates that the Bill has had an 
excellent influence on the economies of participating countries. AGOA 
created a platform for our people to up skill themselves and earn a 
living on a continent that is rife with unemployment. Thank you USA!
    However, the reticence of AGOA LDC extension has already resulted 
in order cancellations.
    As a result of this, and exacerbated by the unfair strength of the 
East, we have seen many well established clothing manufacturers close 
their doors.
    We are therefore very grateful for the introduction of the AGOA 
Acceleration Committee to expedite the earliest official statement that 
AGOA III will be enacted. What a difference even a day would make!
            Many thanks and kind regards,
                                                        Ian Rheeder
                                                  Marketing Manager

                                  
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