[Senate Hearing 108-512]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-512

       AGOA III: THE UNITED STATES-AFRICA PARTNERSHIP ACT OF 2003

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

                                HEARING

                               BEFORE THE

                     COMMITTEE ON FOREIGN RELATIONS
                          UNITED STATES SENATE

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 25, 2004

                               __________

       Printed for the use of the Committee on Foreign Relations


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                     COMMITTEE ON FOREIGN RELATIONS

                  RICHARD G. LUGAR, Indiana, Chairman
CHUCK HAGEL, Nebraska                JOSEPH R. BIDEN, Jr., Delaware
LINCOLN CHAFEE, Rhode Island         PAUL S. SARBANES, Maryland
GEORGE ALLEN, Virginia               CHRISTOPHER J. DODD, Connecticut
SAM BROWNBACK, Kansas                JOHN F. KERRY, Massachusetts
MICHAEL B. ENZI, Wyoming             RUSSELL D. FEINGOLD, Wisconsin
GEORGE V. VOINOVICH, Ohio            BARBARA BOXER, California
LAMAR ALEXANDER, Tennessee           BILL NELSON, Florida
NORM COLEMAN, Minnesota              JOHN D. ROCKEFELLER IV, West 
JOHN E. SUNUNU, New Hampshire            Virginia
                                     JON S. CORZINE, New Jersey

                 Kenneth A. Myers, Jr., Staff Director
              Antony J. Blinken, Democratic Staff Director

                                  (ii)




                            C O N T E N T S

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                                                                   Page

DATA (Debt AIDS Trade Africa), statement submitted for the record    33
Larson, Hon. Alan P., Under Secretary of State for Economic, 
  Business, and Agricultural Affairs, U.S. Department of State, 
  Washington, DC.................................................     3
    Prepared statement...........................................     5
Liser, Ms. Florizelle B., Assistant United States Trade 
  Representative for Africa, Office of the United States Trade 
  Representative, Washington, DC.................................     9
    Prepared statement...........................................    11
    Responses to additional questions for the record from Senator 
      Feingold...................................................    32
Lugar, Hon. Richard G., U.S. Senator from Indiana, opening 
  statement......................................................     1
Newman, Hon. Constance B., Assistant Administrator, Bureau for 
  Africa, U.S. Agency for International Development, Washington, 
  DC.............................................................    14
    Prepared statement...........................................    16

                                 (iii)

  

 
       AGOA III: THE UNITED STATES-AFRICA PARTNERSHIP ACT OF 2003

                              ----------                              


                        THURSDAY, MARCH 25, 2004

                                       U.S. Senate,
                            Committee on Foreign Relations,
                                                    Washington, DC.
    The committee met at 9:35 a.m., in room SD-419, Dirksen 
Senate Office Building, Hon. Richard G. Lugar (chairman of the 
committee), presiding.
    Present: Senator Lugar.


        OPENING STATEMENT OF SENATOR RICHARD G. LUGAR, CHAIRMAN


    The Chairman. The Senate Foreign Relations Committee is 
called to order.
    It is my special pleasure to welcome our distinguished 
witnesses and guests to this hearing on trade between the 
United States and Africa.
    In November, I introduced the United States-Africa 
Partnership Act, Senate bill 1900. This bill would expand upon 
the bipartisan African Growth and Opportunity Act, AGOA, which 
became law in May of 2000. Subsequently AGOA II extended the 
benefits of the original bill until 2008. The United States-
Africa Partnership Act would extend AGOA benefits until 2015. 
This coincides with the goal of the World Trade Organization to 
have a tariff-free world by 2015.
    The AGOA laws have strengthened trade ties between the 
United States and African nations. The experience of AGOA has 
taught us valuable lessons about the path to enhanced 
investment and economic development and has confirmed some of 
the key principles that proponents of market-based developments 
have used to guide policy.
    AGOA has demonstrated that a commitment to good governance 
and a positive investment climate are important to economic 
growth. Countries such as Lesotho, which has made significant 
efforts in recent years to promote economic reform and stable 
democracy, have derived the most benefit from the AGOA 
provisions.
    The experience of AGOA also has demonstrated that regional 
integration is as essential to development as access to the 
U.S. and other foreign markets. Using the infrastructure and 
economic stability of South Africa as a base, neighboring 
southern African countries have worked together to take 
advantage of the benefits under AGOA.
    We need to continue to build upon this initial success. My 
bill, which has been cosponsored by Senators Hagel, DeWine, and 
Fitzgerald, offers trade benefits, more United States private 
sector investment incentives, and increased dialog with African 
governments. It envisions a continued economic partnership 
between the United States and African nations.
    To gain these benefits, African countries are expected to 
undertake sustained economic reform, abide by international 
human rights practices, and strengthen good governance. These 
standards have been used by the United States to stimulate 
reforms in Asia, Latin America, Eastern Europe, and elsewhere. 
A stable and prosperous Africa will be better equipped to 
cooperate on a range of shared problems, including weapons 
proliferation, terrorism, narcotics, and contagious diseases.
    Congress' attention to an AGOA extension is a time-
sensitive matter. The AGOA provision that allows least 
developed countries, LDCs, to export capped quantities of 
apparel made from third country fabric to the United States 
duty-free expires in September of this year. The proposed bill 
extends this provision until September 30, 2008. If this 
special rule for LDCs is not extended before its expiration, 
much of the economic progress that has been made under AGOA 
could be threatened.
    In an effort to stimulate business partnerships, the bill 
also addresses investment incentives and encourages the 
overseas Private Investment Corporation, the Export-Import 
Bank, and the Foreign Agricultural Service to facilitate 
investment in AGOA-eligible countries. It directs the Secretary 
of the Treasury to seek negotiations regarding tax treaties 
with eligible countries, which will provide further incentives 
for United States investors.
    The new bill also develops initiatives to provide technical 
support and capacity building. It encourages United States-
African links in the fields of agriculture, transportation, 
energy, and communications. It also grants funding for the 
continuation of the AGOA forums that have taken place in the 
United States and Africa. These forums are an essential aspect 
of monitoring the progress of AGOA and tailoring its 
implementation to ensure that the objectives are achieved.
    I believe it is critical to expand on the partnership 
between the United States and African nations by moving forward 
with Senate bill 1900. The bill recognizes the enormous 
potential for economic growth and development in sub-Saharan 
Africa. It embraces the vast diversity of people, cultures, 
economies, and potential among 48 countries and nearly 700 
million people. A stable and economically prosperous Africa can 
provide new partnerships that will contribute greatly to our 
commercial and security interests.
    This morning I welcome distinguished witnesses. Alan Larson 
is Under Secretary of State for Economic, Business, and 
Agricultural Affairs. Florizelle Liser is Assistant United 
States Trade Representative for Africa, and Constance Newman is 
Assistant Administrator for the Africa Bureau at the Agency for 
International Development. I look forward to each of your 
insights and to working with each of you on improving U.S.-
African trade relationships.
    I would ask that the witnesses testify in the order that I 
have introduced them, first of all, Secretary Larson, then Ms. 
Liser, Ms. Newman. Each of your statements that you have 
prepared will be made a part of the complete record, so you 
need not ask for permission. It is granted. Please summarize 
but, at the same time, fully state the things that we need to 
know. That is the purpose of the hearing, not to truncate your 
statements, but to fulfill our obligation to bring much greater 
focus on this entire subject, quite apart from the specific 
legislation that I have mentioned because of its time-sensitive 
character.
    Once again, Secretary Larson, it is a privilege to have you 
before the committee. Will you proceed with your testimony.

STATEMENT OF HON. ALAN P. LARSON, UNDER SECRETARY OF STATE FOR 
 ECONOMIC, BUSINESS, AND AGRICULTURAL AFFAIRS, U.S. DEPARTMENT 
                            OF STATE

    Mr. Larson. Thank you very much, Mr. Chairman, and thank 
you for inviting me to join my colleagues to testify on AGOA. 
Thank you for your leadership in supporting the first AGOA bill 
in 2000 and being such an active proponent of trade and 
investment relationships with Africa more generally.
    AGOA is a key part of our national policy of engagement 
with sub-Saharan Africa. We are working to make freedom, 
prosperity, and security the benchmarks of the U.S.-Africa 
partnership. As you mentioned, sir, fighting AIDS and breaking 
the cycle of famine and hunger in Africa are also top 
priorities for President Bush and Secretary Powell.
    Trade is an integral part of this overall Africa policy. 
Trade fosters greater prosperity. It supports our efforts to 
improve rule of law, to secure peace, to protect natural 
resources, and to increase human capacity. Trade helps Africans 
and their governments learn how to do business according to new 
rules, not only trade rules, but also rules and norms involving 
labor standards, environmental standards and investment codes.
    AGOA is the centerpiece of our trade policy toward Africa. 
Under it, duty-free and quota-free access for most eligible 
products is available, and that brings benefits not only to 
African businesses and African workers, but also to American 
businesses and American consumers. In many cases, new factories 
established in Africa have purchased American equipment. 
Overall, U.S. exports to Africa were up 15 percent in 2003 over 
the previous year's level, and overall at the end of 2002, U.S. 
investments in sub-Saharan Africa stood at just over $12 
billion, which was an 18 percent increase over the previous 
year.
    AGOA gives us credibility in our regular trade and 
investment dialog with the Africans through the AGOA forums. I 
have had the privilege, Mr. Chairman, of participating in each 
of the three that have been held to date, and I can tell you 
firsthand that when Ambassador Zoellick and I and other 
colleagues from the administration discuss with African leaders 
our concerns, whether it is over the agriculture provisions of 
the Doha development agenda or over issues like crop 
biotechnology, we have much greater credibility because we are 
not just lobbyists with them, we are partners with them. That 
partnership is forged by our partnership in AGOA.
    We believe very strongly, Mr. Chairman, that trade and aid 
can be mutually reinforcing. We appreciate your strong support 
for the Millennium Challenge Account. Both the MCA and AGOA are 
ways of expanding the circle of opportunity in developing 
countries that are serious about taking responsibility for 
their own economic growth.
    It is interesting that the countries that are taking 
advantage of AGOA best and those we expect to benefit most from 
the MCA share several traits. They are the countries that are 
doing the most to improve governance and the rule of law. They 
are the ones that are doing the most to invest in their own 
people and they are the ones that are doing the best job of 
giving economic opportunity to their own citizens. In short, 
AGOA helps most those countries that are doing the most to help 
themselves.
    AGOA is working. Last year African exports under AGOA and 
GSP increased by 32 percent to just under $3 billion when one 
excludes energy. When one includes energy, AGOA exports 
increased by 55 percent to something over $14 billion.
    The seven countries that keep track of AGOA job creation, 
Kenya, Lesotho, Malawi, Mauritius, Namibia, Swaziland, and 
South Africa, credit AGOA with providing employment to over 
150,000 workers.
    It is important to emphasize that AGOA is touching 
individual lives. For example, there are courageous Rwandans 
who are rebuilding their lives a decade after the horrors of 
the early 1990s. We know of the example of two women who are 
developing a cottage industry that now employs 225 women to 
produce colorful baskets that are woven from sisal and fabric, 
and they are getting help from American business partners in 
the marketing of these products under AGOA.
    Mr. Chairman, I started out my career as a teacher in 
Kenya. When I joined the Foreign Service, my first two posts 
were as a young diplomat in Freetown, Sierra Leone, and later 
in Kinshasa, Zaire. Those days were quite a while ago, but the 
thing that stands out in my memory are the individuals who were 
making important, courageous efforts to try to improve 
development in their own countries. The importance of AGOA in 
my mind is that it gives hope and opportunity to individuals 
today to really make a difference in their countries. This is 
the way, through small scale efforts like this, multiplied 
across the entire continent, that I think we are going to see 
the development that Africa so desperately needs.
    We welcome the fact the countries like South Africa, the 
largest and most diversified country, have benefited so much 
from AGOA. In Kenya, where I started my career, we have the 
very welcome experience of seeing AGOA exports increase by 
nearly 43 percent last year to something over $184 million.
    As you said, Mr. Chairman, we are now considering the 
future of AGOA. We want to keep in mind President Bush's 
commitment to see AGOA extended well beyond 2008, and we 
applaud, Mr. Chairman, your initiative to introduce legislation 
that accomplishes that and other important objectives.
    In sum, we are very pleased at the positive effects of AGOA 
in these past 3 years. It really is creating a new dynamic that 
is deepening the economic ties between eligible African 
countries and the United States, and in my view most 
importantly, it is giving Africans new hope and new 
opportunity.
    Thank you. .
    [The prepared statement of Mr. Larson follows:]

               Prepared Statement of Hon. Alan P. Larson

    Mr. Chairman, Senator Biden, and Members of the Committee, thank 
you for inviting me to testify today before the Committee on the 
African Growth and Opportunity Act (AGOA). It is a particular pleasure 
to testify on AGOA before this Committee that has been so active in 
promoting trade and investment between the United States and sub-
Saharan Africa. In particular, I want to recognize your role, Mr. 
Chairman, in supporting the first AGOA bill in 2000.

                       U.S. POLICY TOWARD AFRICA

    AGOA is one part of a much broader policy of engagement with sub-
Saharan Africa. U.S. policy in Africa aims to foster development and 
democracy and create an environment in which freedom, prosperity and 
security become benchmarks of the U.S.-Africa partnership of the 
twenty-first century. We are committed to helping African countries 
develop the democratic institutions that encourage good governance and 
rule of law. Development of independent media, effective parliaments, 
and independent judiciaries are vital to that effort. We also have 
programs in place on anti-corruption and improved respect for 
internationally recognized human rights. These efforts help to deepen 
the fragile roots of new democracies in Africa.
    Fighting the HIV/AIDS pandemic ravaging the continent continues to 
be a priority of U.S. foreign policy. The President's Emergency Plan 
for AIDS Relief will focus on bringing life-extending HIV/AIDS 
prevention and treatment to some of the most afflicted and under-
resourced countries in the world.
    In the firm belief that Africa cannot successfully address 
conflict, poverty or health challenges without also addressing natural 
resource and environmental management, we are also working to protect 
Africa's natural environment. Africa is home to remarkable biological 
diversity and extensive natural resources that are important not only 
to Africa, but to us all. Ensuring that Africans are able to manage and 
protect this bounty is a policy priority.
    We are also concerned about human resources in Africa and are 
working with G8 and other partners to prevent famine and hunger from 
further draining Africa's fragile human resources. We are the largest 
provider of humanitarian famine relief, while at the same time we work 
with African partners to better tap the potential of agriculture as a 
driver of growth and progress, and a source of increased food security.
    Trade is an integral part of our strategy for fostering greater 
economic prosperity in sub-Saharan Africa and supports our efforts to 
improve governance, secure sustainable peace, encourage effective 
natural resource management, and protect and nurture the region's human 
capital. For Africa, trade is not only an exchange of goods and 
services, but also and exchange of ideas. As the continent becomes more 
integrated through trade in the global economy, Africans and their 
governments are learning to do business according to new rules--not 
only trade regulations, as codified in the WTO, but also labor law, 
environmental standards, and investment codes. These rules bring with 
them stability and predictability that is critical to economic growth.
    But it is not only trade with the United States that is important 
to bringing economic prosperity and sustainable peace to Africa. Trade 
among Africans can bring prosperity by allowing them to use their 
comparative advantages more effectively. Trade among Africans is also 
important to sustainable peace. One day, the economic bonds that trade 
creates may become stronger than the ethnic divisiveness that has so 
often torn the continent apart.

                            THE ROLE OF AGOA

    AGOA remains a centerpiece of our policy toward Africa. In the past 
three years, AGOA has had the very positive effect of increasing our 
two-way trade with Africa and in diversifying the range of products 
that are being traded.
    AGOA's purpose is to help spur prosperity and development in 
African countries and bring them more fully into the global economy by 
giving them greater access to the U.S. market. And AGOA is working. 
AGOA is also about integrating Africa into the world's trading and 
finance networks. AGOA makes African countries more attractive, cost-
effective sources for purchasing raw materials and finished products. 
By easing access to U.S. markets, the African Growth and Opportunity 
Act has had a major impact in Africa. AGOA has facilitated new 
investment, created jobs, and helped form commercial linkages that will 
foster new investment opportunities and increase prosperity in sub-
Saharan Africa over the long term.
    The very existence of AGOA has changed the attitude of many African 
firms and governments about doing business with the United States and, 
in fact, with each other. They see the commitment of the United States 
to deepening economic relations with Africa, and begin to realize that 
the United States can be a partner for them--they don't have to rely 
solely on their traditional, usually former colonial, trading partners 
such as France and Portugal.
    But this isn't just altruism on the part of the United States. AGOA 
offers African countries one concrete benefit: duty- and quota-free 
access for most products from eligible countries. There are benefits 
available for American businesses and consumers as well. In many 
instances, new apparel factories have bought American equipment. U.S. 
businesses are also investing directly in sub-Saharan Africa. Our firms 
have made direct investments in textile and apparel production as well 
as manufacturing automobiles and parts. At year-end 2002, the U.S. 
investment position in sub-Saharan Africa stood at $12.1 billion, an 18 
percent increase over the previous year. Investment in South Africa 
increased to $3.4 billion in 2002 from $3.1 in 2001. Our approach to 
AGOA, which includes dialogue on critical political and economic policy 
issues as well as AGOA's job and growth benefits, can help in our 
overall effort to make Africa more stable and prosperous--which will of 
course make Africa a stronger partner with the United States and a 
growing market for American goods and services.
    AGOA also continues to facilitate regular trade and investment 
policy discussions through the United States-Sub-Saharan Africa Trade 
and Economic Cooperation Forums, our premier platform to articulate and 
advance trade and economic policy toward Africa. I have been fortunate 
to participate in all three held to date: in October 2001 in 
Washington, January 2003 in Mauritius, and December 2003 here again in 
Washington. In Mauritius, Ambassador Zoellick, other senior officials, 
and I were able to engage the Africans in open and productive 
conversations on biotech, Doha development agenda, transparency and 
anti-corruption principles. During the most recent forum, we spoke to 
the Africans about the importance of infrastructure development to 
trade, highlighted the role of trade in boosting economic growth and 
development, agreed on the importance of fighting corruption and 
increasing transparency, addressed the imperative of increased access 
to credit for the private sector, and encouraged African countries to 
explore ways to diversify their exports under AGOA, especially in the 
agriculture sector. African officials hailed the positive impact of 
AGOA on trade and economic growth and described supply-side constraints 
to increased trade. Parallel private sector and NGO forums have focused 
on the challenges that African countries face in their attempts to take 
full advantage of opportunities AGOA provides for their economy to 
grow.

                         TRADE AND DEVELOPMENT

    AGOA is an important part of our efforts to use trade as well as 
aid as a means of development. Our common challenge is to launch 
together a new era of sustained growth and lasting development progress 
that benefits all people. Bringing all of the world's poor into an 
expanding circle of opportunity is vital to raising hope, improving 
peoples' lives, and creating a more secure, democratic, and prosperous 
world.
    The Millennium Challenge Account (MCA), like AGOA, seeks to expand 
the circle of opportunity in developing nations that are committed to 
taking responsibility for their own economic growth, including nations 
in sub-Saharan Africa. Counties already taking advantage of AGOA and 
those that will benefit from the MCA share several traits. They are 
working to improve governance and rule of law. They are developing 
economic and social policies that support poverty alleviation. And they 
are allowing the private sector--not the government--to allocate scarce 
resources and serve as the engine of economic growth.
    The MCA program is focused like a laser on promoting lasting 
development progress, starting with its focus on selecting partners 
with a proven track record in governing justly, investing in people, 
and promoting economic freedom. And already countries are reacting 
positively to the incentives that the MCA creates to accelerate and 
deepen efforts on reform, growth, and inclusion.
    According to the World Bank and International Monetary Fund, trade 
is the single most important channel affecting growth for developing 
countries. The World Bank estimated that increasing poor countries' 
access to world export markets could generate an additional $1.5 
trillion in income over 10 years, raise their annual gross domestic 
product growth rates by 0.5 percent, and lower the number of persons 
living in poverty by 300 million.

                  TRADE AND EMPLOYMENT EFFECTS OF AGOA

    Let me provide a few examples that demonstrate how trade with sub-
Saharan Africa has flourished under AGOA. Excluding energy products, 
African exports in 2003 under AGOA, including products covered by 
Generalized System of Preferences (GSP) provisions, increased by 32 
percent to just under $3 billion. Total AGOA exports increased 55 
percent in 2003, to $14 billion, well over half of sub-Saharan Africa's 
overall exports to the United States. Behind oil, the biggest AGOA 
export has been apparel. Sub-Saharan Africa exported over $1.2 billion 
in apparel under AGOA in 2003, almost 50 percent more than in 2002. 
While this trade is only 2.1% of the U.S. imported apparel market, it 
has great importance to Africa. We have also seen exports of 
transportation equipment, minerals and metals, agricultural products, 
and chemicals all increase under AGOA. In addition to these direct 
exports to the United States, we are well aware too that AGOA helps to 
stimulate business within Africa to produce the goods that come to us 
via AGOA. In that sense, AGOA helps Africans recognize the tremendous 
benefits of opening up their markets to each other, as well as to the 
rest of the world.
    These figures may seem small compared to our overall imports of 
$1.3 trillion in 2003, but this isn't trivial for Africa. The United 
States is sub-Saharan Africa's largest single-country market, the 
recipient of about one-quarter of sub-Saharan Africa's exports.
    AGOA has also been successful in creating tens of thousands of jobs 
across the continent. Seven countries that keep track of AGOA job 
creation--Kenya, Lesotho, Malawi, Mauritius, Namibia, Swaziland, and 
South Africa--credit AGOA with providing employment to a total of more 
than 150,000 workers.

                     STIMULATING THE PRIVATE SECTOR

    Trade and employment numbers are the most obvious way of measuring 
the impact of AGOA on Africa, but we shouldn't forget the non-
quantifiable impacts, the most important being the sea change in 
relationships between African governments and the private sector. For 
example, most AGOA-eligible countries have established local AGOA 
committees, usually involving governments and businesses, and 
frequently our Embassies. The creation of U.S.-market oriented 
organizations such as these, and the sheer volume of news and 
commentary in African countries about AGOA, demonstrate a shift in 
thinking. Several countries have credited AGOA's textile visa system 
for helping them to upgrade and improve the operations of their customs 
service--a nice side benefit. Governments increasingly see their roles 
as facilitating rather than regulating trade. As we look at various 
AGOA success stories, with a few exceptions, the biggest beneficiaries 
have been countries of southern and eastern Africa. I suggest a couple 
of reasons for this.
    Major winners from AGOA like Lesotho, Namibia, Mauritius, and South 
Africa have a combination of factors in their favor. They have 
reasonable commercial frameworks that allow businesses to set up and 
operate relatively freely, and governments that have encouraged 
investment and trade. A company won't invest if the obstacles are too 
great, or if it fears effective expropriation by unreasonable 
regulation or excessive corruption.
    These countries are also for the most part relatively large 
markets--or are tied to larger markets such as the Southern Africa 
Customs Union, in the case of Lesotho, Swaziland, and Namibia. They 
have benefited from a relatively robust and sophisticated 
infrastructure and shipping connections in southern Africa. They have 
also been stable politically.

               THE IMPORTANCE OF THE ELIGIBILITY CRITERIA

    The countries that are benefiting from AGOA are making continual 
progress toward 1) promoting a market-based economy that protects 
private property rights, 2) enforcing the rule of law and fighting 
corruption, 3) eliminating barriers to trade and investment including 
the resolution of investment disputes, 4) implementing economic 
policies that will reduce poverty, and 5) protecting workers' rights 
and human rights. These are the AGOA eligibility criteria.
    Countries such as Zimbabwe, which fail to meet these criteria, 
simply are not in a position to benefit. This year, President Bush 
found that two countries, the Central African Republic (CAR) and 
Eritrea, no longer met AGOA eligibility criteria. The March 2003 
military coup d'etat in CAR and a general deterioration in the human 
rights situation in Eritrea were critical factors in this 
determination.
    Quite simply, AGOA benefits have largely accrued to those countries 
that have done the most to help themselves, encouraging investment and 
trade, maintaining political stability, and observing the rule of law. 
We have worked with other countries to try to improve the results of 
AGOA through our trade capacity building programs and will continue to 
do so. But ultimately, whether a country can tap all possible benefits 
from AGOA is largely in its own hands.
    Our focus today, however, should not be on those countries that 
have failed to meet AGOA eligibility, but on those that have met the 
criteria and have experienced first-hand the importance of trade to 
economic development. The real success of AGOA is in how it helps 
Africans to help themselves.

                          EXAMPLES OF SUCCESS

    AGOA is touching individual lives, including those courageous souls 
who are rebuilding their lives a decade after the horrific events in 
Rwanda of the early 1990s. In Rwanda, two women are developing a 
cottage industry that now employs 225 women to produce colorful baskets 
woven from sisal and fabric--called ``peace baskets''--for export to 
the United States under AGOA. The U.S. business partners in this 
venture are successfully marketing these high-quality handicrafts.
    I believe this effort exemplifies the kinds of activities you hoped 
would result when the Congress passed AGOA legislation in 2000 and AGOA 
II in 2002. The private sectors--in both the United States and Africa--
have seized on this trading opportunity. The economic impact of this 
effort will be significant. These women will earn nearly twice Rwanda's 
average per capita income of $210 per year. It is small-scale efforts 
like this--multiplied across the continent of Africa--that will bring 
the large-scale economic development Africa so desperately needs.
    Another example is Lesotho, a small, land-locked country of only 2 
million. Lesotho's AGOA exports totaled nearly $373 million, a 17 
percent increase over 2002. According to Lesotho's trade minister, AGOA 
has created over 25,000 new jobs so far, and over 20 plants have opened 
or expanded since 2000. New investment means those exports and job 
numbers are likely to increase. A $100 million denim-rolling mill will 
begin operation in April 2004, creating 2,000 new jobs when fully 
operational. Investors are also constructing a $40 million yarn-
spinning mill that should be completed by the end of 2004. Four new 
apparel factories opened in Lesotho in 2003. One of them will employ 
5,000 in a poor rural district.
    South Africa, the largest and most diversified economy in Africa, 
has greatly benefited from AGOA. It exported over $1.7 billion under 
AGOA in 2003, a nearly 25 percent increase over 2002. In 2003, a U.S. 
jeans manufacturer began to export its South African product to the 
United States. With the added AGOA production, it increased payrolls in 
South Africa from 220 to 300. AGOA also kept jobs in the United States. 
This apparel production is providing a market for U.S. exports in the 
form of denim--all of the denim in these jeans comes from North 
Carolina. The thread used is also from North Carolina. These U.S. 
exports of cotton fabric to South Africa--which increased from $1 to $4 
million from 2002 to 2003--are a vivid example of how AGOA can benefit 
not only African economies, but the U.S. economy as well.
    Kenya saw its AGOA exports to the United States increase by nearly 
43 percent in 2003, reaching $184 million. Kenya has estimated that 
30,000 people hold jobs directly related to AGOA, and over 150,000 
others have jobs indirectly linked to AGOA, in industries that support 
companies manufacturing for export under AGOA. Even manufacturers that 
aren't selling their products directly to the United States are 
benefiting--for example, half of Kenya's sisal production is used in 
dartboards that we import under AGOA. Kenya's export promotion agency 
estimates it has seen over $45 million in such ``backward linkages'' 
into Kenya's economy. Kenya is also taking small steps in value added 
products, exporting a small amount of processed coffee--$58,000 worth--
under AGOA in 2003. Granted, this is a small amount, but the point is 
that AGOA can support agricultural processing in Africa and reduce the 
impact commodity price fluctuations have on the continent's economic 
health.
    Uganda is another major coffee producer. Under AGOA, a new firm is 
processing coffee before exporting it to the United States--the first 
time Uganda has ever added value to its coffee exports. Thanks to this 
and other AGOA-inspired innovations, total AGOA exports were valued at 
$1.5 million in 2003, up from $32,000 in 2002.
    And in Uganda's neighbor to the south, Tanzania, a new apparel 
factory employs over 650 local workers. A small handicraft company in 
Tanzania has boomed since AGOA. Before AGOA, it employed 25 people and 
exported $20,000 a year worth of arts and crafts to the United States. 
Now, it has increased its exports to the United States ten-fold and has 
created new jobs and provided income for 125 poor Tanzanians, mostly 
women.
    Foreign companies have invested over $200 million in spinning 
operations in Namibia, creating some 20,000 jobs by 2005. AGOA is 
diversifying Namibia's economy beyond diamonds, minerals, and 
subsistence farming.
    In Mali--last year Africa's largest cotton producer--a $12.5 
million cotton-thread factory opened in February of this year. The 
modern facility is one of the few outside South Africa capable of 
producing quality thread for use in manufacturing apparel for export to 
the United States under AGOA. In fact, Mauritian investors who operate 
apparel factories at home and plan to use the thread there were among 
the investors. The factory--the first of its kind in Mali--created 200 
new jobs. It is a noteworthy example of AGOA promoting investment 
within the continent.

                         LOOKING TO THE FUTURE

    Now we are considering the future of AGOA, keeping in mind 
President Bush's commitment to see AGOA extended beyond 2008. Mr. 
Chairman, I applaud your initiative in introducing legislation to 
extend AGOA through 2015. Clearly, with the current global system of 
quotas on textile and apparel expiring on January 1, 2005, African 
producers will have to compete more effectively. But with the benefits 
of AGOA that I've described here, they can rise to this challenge, and 
I am hopeful that they will thrive beyond 2005.
    I am very pleased at the positive effects of AGOA these past three 
years. It is helping to create a new dynamic in Africa, to deepen the 
economic ties between those eligible countries and the United States. 
And it has given Africans new hope. Thank you.

    The Chairman. Thank you very much, Secretary Larson.
    I would like to call now upon Ms. Liser for her testimony.

STATEMENT OF FLORIZELLE B. LISER, ASSISTANT UNITED STATES TRADE 
 REPRESENTATIVE FOR AFRICA, OFFICE OF THE UNITED STATES TRADE 
                         REPRESENTATIVE

    Ms. Liser. Thank you very much, Mr. Chairman. I am pleased 
that you have invited me to testify on this very important 
issue of AGOA and I just want to thank you and on behalf of 
Ambassador Zoellick and Deputy USTR Shiner also thank you for 
the leadership that you have shown over the years in terms of 
improving the trade and economic relationship between the 
United States and the countries of sub-Saharan Africa. We have 
noted it and we appreciate it as it continues from AGOA I to II 
to III.
    I would like to touch briefly on developments since the 
committee's last hearing on AGOA in June 2003 and describe some 
elements that the administration hopes to see addressed in the 
legislation now being considered to amend AGOA, including S. 
1900, the United States-Africa Partnership Act of 2003.
    Mr. Chairman, AGOA's achievements continue to mount. In 
2003, two-way U.S. trade with sub-Saharan Africa increased 36 
percent over 2002 to just under $33 billion. Particularly 
impressive is the 32 percent growth in non-oil AGOA imports, 
which included value-added products such as apparel, 
manufactured products, and processed agricultural products. 
This is important because many people often focus on the 
overall numbers, but it is the growth in the non-oil imports 
that we should keep our eyes on. This is improving rapidly.
    Africa's share of the U.S. market in each of the sectors 
mentioned, such as apparel, is still very, very small. For 
example, in apparel, it is just 2.1 percent of the U.S. apparel 
import market, but these relatively small gains in African 
access to the huge U.S. market translate into substantial 
benefits in economic development in Africa, a region where over 
half the population subsists on less than $1 a day.
    AGOA is also, though, benefiting U.S. exporters, both by 
creating a business environment more conducive to U.S. exports 
and by generating new exports related to AGOA production. U.S. 
exports to sub-Saharan Africa increased by 15 percent in 2003.
    There are currently 37 sub-Saharan African countries 
eligible for AGOA, and on December 31, 2003, we added one new 
country, Angola, to AGOA and discontinued the AGOA beneficiary 
status of two others, the Central African Republic and Eritrea. 
This was the first year that previously eligible countries have 
been removed from AGOA beneficiary status. The President's 
action underscored the seriousness with which this 
administration views the eligibility criteria.
    Last June, the United States began free trade agreement 
negotiations with the five countries of the Southern African 
Customs Union. This FTA, the first ever with any country in 
sub-Saharan Africa and the first time we will be doing an FTA 
with a least-developed country, Lesotho, builds on the success 
that these five countries have achieved under AGOA and marks a 
maturation of our trade relationship with these countries, 
moving from one-way preferences to a full two-way partnership.
    I know that my colleague, Connie Newman, will describe in 
greater detail the fact that the Regional Competitiveness Hubs, 
which were established in Africa at the direction of President 
Bush, have now completed more than a year of work, assisting 
governments and businesses and many small businesses and 
individuals in the region to address trade-related challenges.
    So the issue now is sustaining and building on AGOA's 
success. AGOA has been an undeniable success. However, much 
remains to be done if we hope to sustain these achievements 
over the long term and help African countries to reach their 
full potential under AGOA.
    Mr. Chairman, your introduction last November of S. 1900, 
the United States-Africa Partnership Act of 2003, has helped to 
focus attention on measures needed to preserve and build on 
AGOA's successes, and we thank you. Similar legislation, as you 
know, is also being considered in the House of Representatives. 
The administration has identified several elements that it 
hopes to see reflected in this legislation.
    First, extending AGOA's authorization. President Bush is 
committed to working with Congress to extend AGOA beyond 2008. 
Extension of AGOA would increase investor confidence and 
demonstrate the U.S. Government's long-term commitment to 
increasing African growth and development through trade.
    Second, extension of AGOA's Special Third Country Fabric 
Provision. In the eyes of many AGOA stakeholders, the extension 
of this provision, which expires at the end of September, is 
the most urgent item for congressional action on AGOA. Under 
this provision, less-developed country AGOA beneficiaries are 
permitted to use fabric from any source in qualifying AGOA 
apparel. In fiscal year 2003, 84 percent of AGOA apparel 
imports fell under this provision, and the uncertainty, 
unfortunately, about the future of the provision is already 
having a negative impact on AGOA.
    As Ambassador Zoellick said in testimony a few weeks ago, 
we recognize that this issue of third country fabric and the 
provisions and its extension are an important issue to AGOA's 
continued success. We want to work with Congress to find the 
right balance between the short-term interests of preserving 
Africa's AGOA apparel industry and the longer-term objective of 
developing an African textile industry, while at the same time 
being mindful of continuing incentives for African sourcing of 
U.S. textile components.
    The third thing that we would like to see or element we 
would like to see addressed in AGOA legislation is to provide 
greater certainty about rules governing AGOA-eligible apparel. 
Congress has periodically considered technical corrections to 
the regulations governing the rules of origin for AGOA apparel. 
As the committee considers action on S. 1900, it may be useful 
to consider some additional adjustments to AGOA to address 
other technical corrections.
    Fourth, we would like to see support for the President's 
request for AGOA-related trade capacity building assistance. 
Many African countries that are eligible for AGOA remain unable 
to take advantage of AGOA both because of supply side 
constraints, such as inadequate infrastructure, and other 
factors that can be addressed via technical assistance. We hope 
that Congress will support the administration's fiscal year 
2005 budget request for trade capacity building programs in 
Africa, especially those aimed at helping African countries to 
make use of AGOA.
    Finally, we would like to see that there is a promotion of 
greater African cooperation in multilateral trade negotiations. 
Some African countries have opposed tariff reduction efforts in 
the WTO because of their concerns about erosion of preferences 
and potential revenue losses. Congress should consider 
including language in AGOA legislation calling on sub-Saharan 
African countries to support the larger objective of reducing 
trade barriers worldwide, even as they continue to benefit from 
preference programs such as AGOA. And that is the point of AGOA 
III.
    Mr. Chairman, these are some of the elements that we 
believe deserve congressional consideration in legislation 
amending AGOA. We are ready and willing to work with the 
Congress to develop that legislation which is practical, 
passable, and that will, above all, permit us to build on 
AGOA's many achievements.
    I welcome the opportunity to respond to any questions that 
you might have. Thank you.
    [The prepared statement of Ms. Liser follows:]

               Prepared Statement of Florizelle B. Liser

    Mr. Chairman, Senator Biden, and Members of the Committee, thank 
you for inviting me to appear again before your Committee to discuss 
the African Growth and Opportunity Act (AGOA). It was my pleasure to 
participate in the Committee's last hearing on AGOA, in June 2003. Mr. 
Chairman, the Administration appreciates your longstanding leadership 
on AGOA and the special attention that this Committee has given to our 
efforts to strengthen the U.S. trade and economic relationship with 
sub-Saharan African countries.
    In my testimony today, I would like to update you on developments 
related to AGOA since the Committee's June 2003 hearing and also 
describe some elements that the Administration hopes to see addressed 
in legislation now being considered to amend AGOA, including S. 1900, 
the United States-Africa Partnership Act of 2003. We look forward to 
working with you and others on this Committee, along with Finance 
Committee Chairman Grassley, on such legislation this year.

                  AGOA ACHIEVEMENTS CONTINUE TO MOUNT

    In my previous testimony before this Committee, I described how 
AGOA, since its enactment in May 2000, has already made progress toward 
many of the objectives set for it by Congress. It has boosted U.S.-
Africa trade, supported African economic and political reforms, and 
strengthened our dialogue with African countries on trade and economic 
development issues. I am pleased to report, nine months later, that we 
continue to witness progress in each of those areas. Here are a few 
highlights:
    Two-way trade is up, with benefits on both sides of the Atlantic. 
In 2003, two-way trade between the United States and sub-Saharan Africa 
increased 36 percent over 2002, to just under $33 billion. The 
increased market access provided by AGOA helped to boost U.S. imports 
from Africa by 43 percent to $25.6 billion, with over half of this 
trade covered under AGOA and its GSP provisions. Particularly 
impressive is the 32 percent growth in non-oil AGOA imports, which 
include value-added products such as apparel, manufactured goods, and 
processed agricultural products. Production and export of these goods 
has a much greater impact on jobs-creation and sustainable economic 
growth than does export of basic commodities. In 2003, apparel imports 
from sub-Saharan Africa were up 50 percent; transportation equipment 
imports (mostly automobiles from South Africa) were up 34 percent; and 
AGOA agricultural imports were up 13 percent. Africa's share of the 
U.S. market in each of these areas remains small--for example, 
constituting just 2.1 percent of the U.S. apparel import market. But 
these relatively small gains in African access to the U.S. market 
translate on the African side into substantial benefits and economic 
development in a region that has been on the margins of the global 
economy and where over half the population subsists on less than a 
dollar a day.
    AGOA is also benefiting U.S. exporters, both by creating a business 
environment more conducive to U.S. exports and by generating new 
exports related to AGOA production. U.S. exports to sub-Saharan Africa 
increased by 15 percent in 2003, led by increased sales of aircraft, 
vehicles, and computer and telecommunications equipment. We are also 
aware of several U.S. businesses that are providing inputs to AGOA 
apparel producers in Mauritius, South Africa, and Ghana. So AGOA is 
also having a positive impact here in the United States.
    AGOA Forum Enhances U.S.-African Dialogue. In December 2003, trade 
ministers and senior-level officials from over 30 AGOA-eligible 
countries met with President Bush and top Administration officials in 
Washington, DC during the Third Annual U.S.-Sub-Saharan African Trade 
and Economic Cooperation Forum. This event, also known as ``the AGOA 
Forum,'' provides an opportunity for senior African and American 
officials to discuss ways to strengthen U.S.-African trade and economic 
relations. The President took the opportunity to reiterate his 
commitment to AGOA and to encourage African support for open markets 
and multilateral trade liberalization. Ambassador Zoellick participated 
in both the government-to-government and the private sector meetings. 
All three of us on this panel participated in the Forum, as did 
National Security Adviser Rice, Secretary Powell, Secretary Evans, 
Secretary Snow, Secretary Veneman, USAID Administrator Natsios, U.S. 
Global AIDS Coordinator Tobias, and U.S. Trade and Development Agency 
Administrator Askey. There was also an opportunity for the African 
ministers to meet with some Members of Congress to discuss challenges 
related to AGOA implementation and prospects for legislation to amend 
AGOA.
    President Changes List of Beneficiary Countries. On December 31, 
2003, President Bush added one new country--Angola--to the list of AGOA 
beneficiary countries and discontinued the AGOA beneficiary status of 
two others--the Central African Republic and Eritrea. The President's 
action followed the annual interagency AGOA eligibility review, led by 
USTR. The review of Eritrea cited a serious deterioration in the human 
rights situation and a lack of progress toward rule of law and 
political pluralism. The March 2003 overthrow of the elected government 
of the Central African Republic was a major factor in the decision to 
terminate that country's AGOA beneficiary status. This was the first 
year that previously eligible countries have been removed from AGOA 
beneficiary status. The President's action underscored the seriousness 
with which the Administration views the eligibility criteria.
    Free Trade Agreement Launched with SACU. In June 2003, the United 
States began free trade agreement negotiations with the five countries 
of the Southern African Customs Union (SACU): Botswana, Lesotho, 
Namibia, Swaziland, and South Africa. In pursuing this FTA, the 
Administration is responding to Congress' direction, as expressed in 
AGOA, to pursue free trade negotiations with interested sub-Saharan 
African countries as a catalyst for increasing trade and investment 
between the United States and Africa. This FTA--the first ever with any 
country in sub-Saharan Africa--builds on the success that these five 
countries have already achieved under AGOA and marks a maturation of 
our trade relationship with these countries, moving from one-way 
preferences to two-way partnership. We have held four rounds of 
negotiations so far and expect to intensify the negotiations over the 
coming months in an effort to conclude the agreement by the end of 
2004. Trade capacity building is a fundamental element of bilateral 
cooperation in support of this FTA. U.S. and SACU officials have 
established a Cooperative Group on Trade Capacity Building that meets 
on the side of the negotiations to identify trade capacity building 
needs arising out of the FTA discussions and to find ways to address 
these needs.
    Trade Hubs Hitting Their Stride. As my USAID colleague, Connie 
Newman, describes in greater detail, the three Regional Competitiveness 
Hubs established in Africa at the direction of President Bush have now 
completed a year or more of work assisting governments and businesses 
in the region to address trade-related challenges and to develop and 
diversify their AGOA trade. In response to African requests, the hubs 
are also devoting greater attention to helping African countries meet 
sanitary and phytosanitary measures to facilitate greater African 
agricultural exports under AGOA. Many other U.S. agencies are also 
involved in AGOA-related technical assistance, which is critical if 
Africans are to take full advantage of AGOA.

               SUSTAINING AND BUILDING ON AGOA'S SUCCESS

    AGOA has been an undeniable success. Two-way trade is up. New 
investment is flowing into Africa. And new economic opportunities have 
opened for many AGOA-eligible countries. But much remains to be done if 
we hope to sustain these achievements over the long-term and help 
African countries to reach their full potential under AGOA.
    For example, we need to do more to broaden participation in AGOA 
and to help beneficiary countries to expand and diversify their exports 
under AGOA. Many AGOA-eligible countries have yet to export any 
significant amount of goods under AGOA. Others are doing well on 
apparel but have not been able to diversify into any of the hundreds of 
other products for which duty-free market access is provided under 
AGOA.
    Mr. Chairman, we appreciate the leadership that you have brought to 
addressing the challenges related to AGOA's full implementation. Your 
introduction last November of S. 1900--The United States-Africa 
Partnership Act of 2003--has helped to focus attention on measures 
needed to preserve and build on AGOA's successes. We are grateful for 
the opportunity to provide our views on this topic. As you know, 
similar legislation is being considered in the House of 
Representatives.
    The Administration has identified several elements that it hopes to 
see reflected in this legislation. I would note that many of these 
elements are addressed in some way in S. 1900.
    Extend AGOA's Authorization. When President Bush met with senior 
African officials during the AGOA Forum in December 2003, he reiterated 
his commitment to work with Congress to extend AGOA beyond its current 
expiration in 2008. Extension of the AGOA program would increase 
investor confidence and demonstrate the United States Government's 
long-term commitment to increasing African growth and development 
through trade. In order to have the intended effect, the extension 
should be for a sufficient number of years to provide predictability 
and spur needed investment.
    Extension of AGOA's Special Third-Country Fabric Provision. In the 
eyes of many AGOA stakeholders, the extension of the third-party fabric 
provision, which is set to expire on September 30, 2004, is the most 
urgent item for Congressional action on AGOA. Under this provision, 
less developed country AGOA beneficiaries are permitted to use fabric 
from any source in qualifying AGOA apparel. In FY2003, 84 percent of 
the $1.2 billion in AGOA apparel imports fell under this provision. 
Although sub-Saharan Africa's share of the U.S. apparel market is just 
2.1 percent, this rule has contributed to AGOA's early success by 
allowing sub-Saharan African countries to develop their apparel 
industries.
    The original rationale for the 2004 expiration of the third-country 
fabric provision was to give African apparel producers a boost while at 
the same time providing an incentive for development of an African 
textile industry. Absent a regional textile industry, African apparel 
production is unlikely to be competitive in the long-term. While AGOA 
has indeed sparked investment in the fledgling African textile 
industry, more time is needed for this industry to develop its capacity 
and for the African apparel industry to become more competitive with 
Asian and other producers. This is particularly important with the 
fast-approaching January 2005 end of the WTO Agreement on Textiles and 
Clothing. Many analysts have predicted that Africa will lose jobs and 
market share in a post-quota world.
    The uncertainty about the future of the provision is already having 
a negative impact on AGOA as the Administration's primary initiative to 
boost African economic growth and development. We understand that 
several major U.S. buyers have already shifted orders to Asia in 
anticipation of the September 30 expiration date.
    As Ambassador Zoellick said in testimony a few weeks ago, we 
recognize that this is an important issue to AGOA's continued success. 
As Congress seeks to address the third-party fabric provision in AGOA 
legislation, we want to work with you to balance the short-term 
interest of preserving Africa's AGOA apparel industry and the longer-
term objective of developing an African textile industry, while at the 
same time being mindful of continuing incentives for African sourcing 
of U.S. textile components.
    Provide greater certainty about rules governing AGOA-eligible 
apparel. Since the enactment of AGOA in 2000, Congress has periodically 
considered technical corrections to the regulations governing the rules 
of origin for AGOA apparel. For example, the ``AGOA 2'' legislation 
that was passed as part of the Trade Act of 2002 made some technical 
corrections. As the Committee considers action on S. 1900, it may be 
useful to consider some additional adjustments to AGOA to address other 
technical corrections.
    Support the President's request for AGOA-related trade capacity 
building assistance. Many African countries remain unable to take 
advantage of the broad market access provided by AGOA, both because of 
supply-side constraints, such as inadequate infrastructure, and because 
they do not currently produce many exportable, value-added products. As 
Connie Newman describes in her testimony, USAID and other agencies are 
addressing these and other AGOA-related challenges through the Regional 
Competitiveness Hubs and other initiatives. This type of assistance is 
of great value to beneficiary countries. We hope, therefore, that 
Congress will support the Administration's FY2005 budget request for 
trade capacity building programs in Africa, especially those aimed at 
helping African countries to expand and diversify their exports under 
AGOA.
    Promote greater African cooperation in multilateral trade 
negotiations. In that AGOA was developed, debated and enacted prior to 
the launch of the WTO's Doha Development Agenda in 2001, there is no 
reference in the Act to the importance for sub-Saharan African and 
other developing countries of multilateral trade liberalization. In 
fact, some African countries have opposed tariff reduction efforts in 
the WTO because of concerns about ``erosion of preferences'' and 
potential revenue losses. (The World Bank and the IMF are working with 
African and other developing countries to address these concerns.) 
Congress should consider including language in AGOA legislation calling 
on sub-Saharan African countries to support the larger objective of 
reducing trade barriers worldwide, even as they continue to benefit 
from preference programs such as AGOA.
    Mr. Chairman, these are some of the elements that we believe 
deserve Congressional consideration in legislation amending AGOA. We 
are ready and willing to work with the Congress to develop legislation 
that is practical, passable, and that will permit us to build on AGOA's 
many achievements. Thank you.

    The Chairman. Thank you very much, Ms. Liser, for that 
testimony. It is great to have you before the committee again.
    I welcome now Ms. Newman, who is an old friend of the 
committee and a person who has given distinguished public 
service to our country in many capacities. Good to have you, 
and please proceed.

      STATEMENT OF HON. CONSTANCE BERRY NEWMAN, ASSISTANT 
    ADMINISTRATOR FOR AFRICA, U.S. AGENCY FOR INTERNATIONAL 
                          DEVELOPMENT

    Ms. Newman. Thank you very much, Mr. Chairman. I am pleased 
to appear before you to discuss how USAID supports the 
implementation of AGOA, and I want to make four points.
    First of all, trade enhances economic growth and economic 
growth reduces poverty.
    Second, AGOA serves as the focal point of USAID's strategy 
to build trade capacity in Africa.
    The third, USAID is providing technical assistance to a 
number of programs, most notably the Presidential trade 
initiative that I will talk about in just a few moments.
    And fourth, USAID needs to continue to provide technical 
assistance because we are not there yet.
    Just a background. The pace of economic growth and 
development in Africa is of paramount concern to the United 
States. What I think we all have to do when we talk about AGOA 
is to recognize the context within which it will or will not be 
successful. So it is important for us to remember the various 
challenges that exist and take those into consideration in 
providing technical assistance.
    For example, we do need to ensure that there is 
transparency and accountability of the various governments with 
which we work. There is a need to build on the human capacity, 
and there is a need for better infrastructure. I have in the 
testimony a list of the challenges, my point being, though, 
that we cannot think about AGOA separate and apart from the 
other development needs because AGOA will not be successful.
    In addition to those challenges that I have mentioned 
earlier, there are a number of obstacles that are directly 
related to AGOA. There is inadequate international market 
access. There is a limited capacity to participate in 
multilateral negotiations. At the industry and firm level, 
there is poor information on trade prospects.
    So for me it is not enough just to outline the problems. 
Your question probably is, so what are you doing about it?
    With the various resources, USAID has been very much 
involved in providing technical assistance. As was mentioned 
earlier, in the AGOA forum in 2001, President Bush announced a 
trade initiative and that initiative called for the structuring 
of three trade hubs, one in each of the major regions, that 
would provide technical assistance. It does more than provide 
assistance in AGOA.
    These trade hubs--which by the way, deserve the praise of 
our staff because they got them set up. They were pushed, but 
they got them set up and running in a year. There is technical 
assistance there for individuals, for individual business 
people. There is technical assistance for governments. There is 
technical assistance for trade associations because there is a 
recognition that there is a need at every level for assistance 
in order for AGOA to be successful.
    If one were to go onto the Internet sites for each of the 
hubs, one would be able to see the variety of activities that 
are available, the tools that are there for individuals and for 
governments. It is very rewarding to us that in each of the 
regions there have been a series of seminars for government 
representatives and for businesses on how to meet the AGOA 
requirements.
    And we have successes. My colleagues have talked about many 
of them. I think we all like to talk about Lesotho because 
Lesotho has, I think, taken AGOA to the heights. But there are 
successes in many of the other countries. I have mentioned them 
in the testimony. I am sure that you are anxious to get to 
questions, so I will not go through that long list of successes 
that we are all very proud of.
    But what I will say is that AGOA provides a special 
opportunity to achieve one of the administration's key 
development objectives of building a strong trading partnership 
between the United States and sub-Saharan Africa. Under AGOA 
and through President Bush's trade initiative, the 
opportunities for trade will expand, bringing an increase in 
prosperity and a vibrant economic climate to Africa and greater 
opportunities for American exporters and investors. USAID is at 
the forefront of the United States Government's commitment to 
better the economic landscape in reducing poverty, and we look 
forward to the continuing interest and advice from you and the 
Congress in general on our efforts to achieve the objectives of 
AGOA.
    Thank you.
    [The prepared statement of Ms. Newman follows:]

           Prepared Statement of Hon. Constance Berry Newman

    Mr. Chairman, Senator Biden, and Members of the Committee, I am 
pleased to appear before you to discuss how USAID supports the 
implementation of the bipartisan direction of Congress to support 
economic development in sub-Saharan Africa through the African Growth 
and Opportunity Act (AGOA).
    In my testimony, I would like to emphasize four key points:

   Trade enhances economic growth, and economic growth reduces 
        poverty.

   AGOA serves as the focal point of USAID's strategy to build 
        trade capacity in Africa.

   USAID is providing technical assistance through a number of 
        programs, most notably the Presidential Trade for African 
        Development and Enterprise (TRADE) Initiative, to implement 
        AGOA and to help make it a success.

   USAID needs to continue to provide technical assistance to 
        help expand the pool of AGOA-eligible countries.
                 background: the development challenge
    The pace of economic growth and development in Africa is of 
paramount concern to the United States. Sub-Saharan Africa (SSA) 
continues to face enormous development challenges. It remains the 
world's poorest region, with half of its population of 690 million 
living on less that $1 per day. Of the 32 countries around the world 
with the lowest levels of human development, 24 are in sub-Saharan 
Africa. While economic growth trends in many countries are positive, 
with an overall regional population growth of 2.1% a year, achieving 
the Millennium Internationally Agreed Development Goal of reducing 
poverty levels by 50% by 2015 will require almost a doubling of current 
rates to over 6% a year.
    Increasing economic growth will require major commitments on the 
part of African governments, civil society and the international 
community across a broad spectrum. Numerous challenges must be 
addressed: improving the transparency and accountability of government; 
increasing agricultural productivity; preserving the richness and 
diversity of Africa's natural resources; broadening the economic base; 
improving the competitiveness of African products; building human 
capacity at all levels; expanding information and communication 
technology networks; improving the enabling environment for increased 
trade and investment, including building basic infrastructure; curbing 
the spread of HIV/AIDS, malaria, tuberculosis and other infectious 
diseases; and increasing African capacity to deal effectively with 
natural disasters.

                DEVELOPMENT AND TRADE ARE COMPLEMENTARY

    There is a growing appreciation of the key role trade can play in 
increasing economic growth and reducing poverty in SSA. Rapidly growing 
global markets will continue to create opportunities for the people of 
Africa to trade, provided they have the capacity.
    Integrating SSA into the world economy has become a principal 
objective of the U.S. Government. In addition, the G-8 with strong 
support from the U.S., now places a high priority on the trade-
development linkage. With the links between trade-generated economic 
growth and sustainable development becoming clearer, many SSA countries 
now actively seek to enhance their participation in the global economy. 
They face, however, a common set of obstacles:

   Inadequate international market access, limited capacity to 
        participate in multilateral negotiations, and limited abilities 
        to comply with international trade agreements adversely affect 
        their ability to compete in global markets;

   At the national level, infrastructure, institutional, and 
        policy constraints prevent many from taking advantage of trade 
        and investment opportunities; and

   At the industry and firm level, poor information on trade 
        prospects, inability to meet international standards, 
        cumbersome regulations, capital and technology constraints, 
        limited access to credit, and the lack of insurance and trade 
        finance limit production and trade opportunities.

    U.S. trade policy, with increasing USAID engagement and support, 
seeks to mainstream trade into the economic development agenda for SSA. 
This means that trade and development policies are complementary and 
reinforcing. Together, these policies and programs assist SSA countries 
in expanding their capacity to implement trade agreements and to use 
trade as a tool for economic growth and poverty reduction.
    The African Growth and Opportunity Act focuses on this specific 
challenge--encouraging trade as a way to further promote economic 
growth in sub-Saharan Africa. AGOA provides trade preferences to 
countries that are making progress in economic, legal, and human rights 
reforms. However, AGOA also provides a framework for technical 
assistance to help countries take advantage of the trade preferences. 
In my travels, I have met with government officials throughout Africa 
who ask for our help in using AGOA's preferences to build their 
countries' economic and physical infrastructures for trade. USAID's 
activities directly address these technical assistance needs.
    Sub-Saharan Africa has enormous potential to become a more 
important strong player in the international economy, yet the region 
accounts for just 2% of world trade. Although a number of countries in 
the region have begun to take measures to increase their ability to 
trade, trade is still hampered by systemic constraints such as high 
transaction costs, capacity limitations, and poor infrastructure. If 
Africa is to fulfill its potential, these constraints must be lifted, 
and AGOA is one of the principal means to do it.
    Transforming the varied economies in Africa into strong 
participants in the global economy will take time. Through our 
Missions, we are working with countries to look at promising 
opportunities for significant increases in regional and international 
trade. Ultimately, national wealth must be built enterprise by 
enterprise, sector by sector.

                  USAID'S ROLE IN AGOA IMPLEMENTATION

    USAID is responding to the challenge of increasing trade and 
investment in Africa and supporting AGOA through several programs, 
especially the Trade for African Development and Enterprise (TRADE) 
Initiative. President Bush announced this Presidential Initiative in 
October 2001 at the first annual AGOA Forum. He stated, ``The trade 
program will establish regional Hubs for global competitiveness that 
will help African businesses take advantage of AGOA, to sell more of 
their products on the global markets.''
    TRADE is a five-year initiative that promotes U.S.-African business 
linkages and business development, expands the role of trade in poverty 
reduction strategies, and builds African capacities for more 
sophisticated trade analysis. It also leads to improvements in the 
provision of public services supporting trade (such as customs 
procedures), strengthens the enabling environment for African business, 
and enables African business to take even better advantage of 
opportunities under AGOA.
    TRADE operates primarily through three Hubs located in Ghana, 
Botswana, and Kenya. USAID works collaboratively with other USG 
agencies such as the Department of Commerce, the Office of the U.S. 
Trade Representative, the Department of Agriculture, and the Trade and 
Development Agency in designing and implementing the programs funded by 
the Hubs.
    A wide range of activities is underway in each of the Hubs to 
support AGOA, including--promoting exports of agricultural commodities 
to the U.S., establishing business contacts and generating business 
opportunities for hand- and machine-loomed textiles and apparel, and 
removing infrastructure constraints that hamper trade.
    Some of the major TRADE activities are as follows:
    USAID is helping to make products more marketable in the global 
economy by eliminating physical and policy barriers to trade.

          USAID's regional mission in East Africa is supporting efforts 
        to harmonize customs and trade facilitation policies such as 
        establishing a ``one-stop'' border post at the Malaba/Torero 
        border between Kenya and Uganda;

          Our regional mission in Southern Africa is working to 
        identify and remove barriers to trade in the Trans-Kalahari 
        Highway and Dar es Salaam transportation corridor; our East 
        Africa office is doing the same in the Northern Corridor in 
        Kenya and Uganda. Our West Africa mission is working with two 
        regional intergovernmental organizations to set up 
        observatories that track and report on corrupt practices on key 
        interstate trucking routes.

          Our West Africa office is also assisting in developing a 
        ``Road Tracker'' system to trace the movement of goods between 
        countries in the Tema-Ouagdougou-Bamako/Niamey corridor.

          Each Hub is working with counterpart organizations such as 
        the Central African Power Pool Secretariat, the Southern 
        African Power Pool, and the West African Power Pool to improve 
        the availability of and lower the cost of power supplies.

    USAID is helping identify agricultural commodities with the highest 
export potential to the United States for AGOA participants to build 
markets in their region and the world.

          In Zambia, Pest Risk Assessments (PRAs) have been conducted 
        for baby corn, baby carrots, courgettes, and baby squash. 
        Discussions between the USG and the private sector are centered 
        on identifying U.S. market outlets for these products.

          In South Africa, PRAs for apricots, cherries, plumcots, and 
        litchis have been drafted and are under review by USDA's Animal 
        and Plant Health Inspection Service (APHIS).

          In Namibia, a PRA for grapes has been completed and is under 
        review by APHIS.

          In East Africa, we are working with private and public sector 
        officials to improve AGOA implementation and business linkages. 
        Programs have been conducted in Kenya, Madagascar, Mauritius, 
        Rwanda, Seychelles, Tanzania, and Uganda.

          In Lesotho, 41 factories produce apparel, and two entities 
        specialize in embroidery. Two of the largest producers have 
        made investments that will enable them to source fabric 
        regionally.

    USAID is providing funding for the USDA to place APHIS advisors at 
the Hubs to coordinate PRAs and to facilitate the export development of 
markets for of agricultural commodities. USAID and USDA are working to 
place an advisor in each Hub in the spring of 2004.
    USAID is establishing AGOA resource centers to provide technical 
assistance on AGOA legislation and to build relationships with U.S. 
businesses. These activities focus on marketing apparel, textiles, and 
crafts.

          In West Africa, we have expanded our AGOA Resource Center 
        Network from nine to eleven centers, and we will add two more 
        this year. In response to the poor level of Internet coverage 
        in the region, we have also developed a comprehensive 
        compendium of AGOA information on a CD-Rom and distributed 
        widely.

          In Southern Africa, we are sponsoring Awareness Seminars on 
        the benefits of AGOA and on export opportunities in Southern 
        Africa. Seminars have been conducted in Malawi, Zambia, 
        Namibia, Swaziland, Botswana, and Tanzania.

          With recent accession of Angola as an AGOA-eligible country, 
        the Southern Africa Hub provided an extensive AGOA awareness 
        seminar for 60 public and private sector representatives in 
        Luanda, Angola.

          The Southern Africa Hub has provided Grouping Nine marketing 
        seminars for over 300 small handicraft enterprises in Botswana, 
        Lesotho, Swaziland, Namibia, Malawi and Zambia.

    In East Africa, we are working with private and public sector 
officials to improve AGOA implementation and business linkages. 
Programs have been conducted in Kenya, Madagascar, Mauritius, Rwanda, 
Seychelles, Tanzania, and Uganda.

          USAID is improving opportunities for exports of textiles and 
        apparel. In Malawi, AGOA exports (excluding Generalized System 
        of [C4]Preferences) continued to grow in 2003, and now exceed 
        $58 million. The number of jobs linked to AGOA grew slightly in 
        2003 to 7,500 workers. In a promising development, Malawi's 
        primary textile producer was privatized. Revitalization of the 
        producer under new ownership will link garment-makers to 
        Malawi's cotton-growing and ginning sectors, thus deepening 
        Malawi's AGOA supply chain.

          In Lesotho, 41 factories produce apparel, and two entities 
        specialize in embroidery. Two of the largest producers have 
        made investments that will enable them to source fabric 
        regionally. The first denim mill in Lesotho is due to start 
        next month and will employ 1,500 people at the outset. All 
        products made in Lesotho are destined for the mid-range to low-
        end chain stores in the Unites States.

          In Mauritius, 49 companies are registered for the export of 
        apparel to the United States under AGOA. These companies employ 
        about 50,000 people and export a wide variety of apparel goods 
        to the U.S. There are currently five active spinning mill 
        projects at various stages of realization in Mauritius.

          In Botswana, six of the eight apparel producers have exported 
        to the U.S. under AGOA. The production force of the eight 
        companies is 5,463 workers. Trade figures indicate that 
        Botswana significantly increased its exports to the U.S., from 
        $4.58 million in 2002 to $6.32 million in 2003.

          In South Africa, AGOA exports increased 26% to $998 million 
        in 2003 from $789 million in 2002. Levi Strauss SA began 
        exporting jeans to the U.S. in August 2003 from its new 
        production facility and increased its payroll from 220 to 300 
        over the past year.

    Again, in South Africa, the South Africa International Business 
Linkage (SAIBL) program worked with 32 small- and medium-scale 
enterprises this past year to assist them with AGOA exports to the 
U.S.; the value of these transactions is estimated at $8.3 million.

          In Tanzania, a new factory opened recently as a direct result 
        of AGOA and the Tanzania government's export processing zone 
        policies. It is hiring 700 workers and expects to be exporting 
        over $1 million by the end of 2004.

          Zambia exported $510,000 in duty free goods to the U.S. under 
        AGOA in 2003. AGOA induced regional exports of yarn, however, 
        are estimated to exceed $8 million.

          In Namibia, there are thousands of new jobs and unprecedented 
        levels of new apparel exports. Ramatex Namibia is the highest-
        profile AGOA-related activity in the country with nearly $200 
        million invested in its vertically integrated textile and 
        garment manufacturing plant. Between Ramatex and Rhino 
        Garments, an estimated 10,000 new jobs have been created.

          In Mozambique, two apparel companies exported to the U.S. 
        under AGOA in 2003, though one company has since closed 
        operations.

    AGOA encourages the establishment of private sector linkages 
between U.S. and African businesses.

          USAID has provided funding to the Corporate Council on Africa 
        (CCA) to promote international business linkages. The linkage 
        programs assist African companies to prepare business plans, to 
        achieve International Standards Organization certification, to 
        participate in U.S.-led trade delegations, to attend trade 
        shows in the United States, and to identify public and private 
        sector trade financing. The linkage programs also assist U.S. 
        firms by identifying trade and investment opportunities in 
        Africa, by steering U.S. firms to appropriate government and 
        private sector contacts, and by identifying sources of 
        financing.

          The Southern African International Business Linkage program 
        has recently increased its scope with a two-year pilot program 
        to Botswana, Tanzania, and Zambia.

          USAID's sponsorship of the CCA's investment in the West 
        African International Business Linkage program resulted in the 
        completion of more than 200 transactions and two joint ventures 
        with a total value of approximately $52 million.

          The International Executive Service Corps (IESC) launched a 
        program called AGOA Linkages in the Common Market for Eastern 
        and Southern Africa. This program is designed to increase 
        awareness of AGOA among key stakeholders within AGOA-eligible 
        states and to stimulate exports of products to the U.S.

                               CONCLUSION

    AGOA provides a special opportunity to achieve one of the 
Administration's key development objectives of building a strong 
trading partnership between the United States and the countries in sub-
Saharan Africa. Under AGOA and through President Bush's TRADE 
Initiative, the opportunities for trade will expand, bringing an 
increase in prosperity and a vibrant economic climate to Africa and 
greater opportunities for American exporters and investors. USAID is at 
the forefront of the USG's commitment to better the economic landscape 
in helping to reduce poverty. We look forward to the continuing 
interest and advice from Congress on our efforts to achieve the 
objectives of AGOA.
    Mr. Chairman, Senator Biden, and Members of the Committee, thank 
you for providing me with the opportunity to speak before you today. I 
look forward to answering any questions you may have.

    The Chairman. Thank you very much, Ms. Newman.
    Let me just start with a couple of questions that are 
stimulated by your testimony. How would you describe the 
activity at the hubs? You mentioned that in a fairly short 
period of time this initiative has been achieved. In your 
testimony, you enumerate a number of workshops and other 
meetings in which various countries or, more particularly, 
companies or individuals have taken part. Please describe what 
a hub looks like, how the word gets out that you are there and 
that people are inclined to find your Web site, to find your 
communications, to find you in those hubs.
    Ms. Newman. Well, some of the hub is physical, so there is 
an office. It is not a grand office, but there is an office. 
Some of the hub is the Internet site, and those are getting 
better by the day. There is general information country by 
country. There is information on activities. There is detailed 
information on AGOA and links. So you have the office. You have 
the Internet site. And then what you have are consultants 
traveling around the countries in the regions. You can go on 
the site and find out where they are and what the subject 
matter might be. The subject matter might be customs 
harmonization, and then there would be special information 
going out to governments and to regional organizations that 
would have an interest in customs harmonization.
    What does a hub look like? It looks like an office, an 
Internet site, a series of meetings, seminars, and tool kits 
because there is a recognition that governments and individuals 
and associations all need information. My colleagues have made 
it sound simple, but there is some pretty complicated 
information about AGOA and how to meet the standards. These 
kits are helping people understand that.
    The final thing I will say is that the Animal and Pest 
Control Inspection requirements have been a barrier to many of 
the African countries bringing horticulture into the United 
States. The Department of Agriculture, funded by USAID, is now 
placing inspectors in each of the sites to help explain what 
many people in this country do not understand, how to get 
through that process because that is very important to be 
successful.
    The Chairman. I appreciate that response. It occurs to me 
that a good number of citizens of African countries may at some 
point hear of AGOA or the idea in some form, but all of the 
trade situations that we have, whether it is the customs, or 
the inspections that you just mentioned, are rather daunting if 
you are in the process of setting up from scratch a new 
business, hiring a few people, trying to figure out how you 
might find your place in the world outside of your neighborhood 
or even your country. The need for hands-on work is imperative.
    It occurs to me we have from to time to time, just as we 
have hearings on AGOA, hearings on public diplomacy, and we are 
trying to think how the message of idealism and outreach in our 
country reaches others so that, as a matter of fact, they want 
to work with us, and they find some vitality in that 
relationship. This is why I am curious about the hubs. They are 
a part of our overall diplomacy.
    I want to follow with Secretary Larson on the question of 
the ties with our embassies, our Ambassadors, and others who 
are offering technical services there. I do so because each 
time we have a confirmation hearing for a candidate to be 
United States Ambassador to an African country, I or others 
ask, ``What do you know about AGOA? Have you done your 
homework, in essence? What kind of activity is going on, and 
what kind of activity do you believe that you as Ambassador, 
with your talented staff, might be able to stimulate? You 
understand the ethos of the program and the general foreign 
policy aspects that have preceded your being nominated to be 
Ambassador to the country.'' Most of the candidates respond 
fairly comprehensively. They understand how important and how 
serious this mission is. They work, of course, with USAID, with 
our Trade Representative, with other Americans. We are 
hopefully not engaged in a stovepipe mentality with regard to 
this. There are not enough hands to go around to do that.
    Could you describe, from the embassy standpoint, how the 
AGOA situation is organized and augmented?
    Mr. Larson. Certainly. One starting point is that even 
before our Ambassadors go to the field, I meet with every 
single one of them.
    The Chairman. You are the briefer assigned to bring them up 
to speed.
    Mr. Larson. I bring them up to speed. I underscore the 
general importance of economics and business promotion to our 
foreign policy goals. I tell them about the experience that the 
Secretary of State has virtually every day. Foreign ministers 
will come in and you might expect that they want to talk about 
the next U.N. vote or some regional crisis, but they inevitably 
also bring up their trade agendas and their trade issues. This 
is a central part of the foreign policy dialog at this stage.
    The second point I would make is that our Ambassadors have 
been very, very activist on AGOA in working with USAID and with 
USTR and with our public diplomacy people in making sure that 
there is information available to the host government about the 
benefits of AGOA, about the opportunities for learning more 
about how to seize those benefits, and about how to make this 
an ongoing partnership.
    We have with us here today Ambassador Price, our Ambassador 
in Mauritius, who has been a very good example of exactly this 
type of activist role. He has hosted Ambassador Zoellick and 
many others of us when we went to that second forum in 
Mauritius.
    I think the third point that I would make, Mr. Chairman, is 
that for all the challenges that Connie Newman mentioned 
explicitly and I think the rest of us have alluded to, I get 
good feedback from African ministers on our trade capacity 
efforts and our efforts to promote AGOA. I get it from the 
Africans, but I also get it in an interesting way, sometimes 
from Europeans who are also active in the area of trade 
capacity building and, of course, at least sometimes they think 
they have special relationships with the Africa countries. But 
I have had Europeans come and say, we do not know what you are 
doing on trade capacity building in Africa, but you must be 
doing a good job because the Africans talk to us about how much 
they appreciate the work that you are doing in helping them 
benefit from AGOA. So that strikes me as good testimony to what 
we have been doing and an encouragement to just work harder at 
it.
    The Chairman. Well, that is very helpful and I appreciate 
your personal attention to this, as well as your help with our 
Ambassadors to ensure that they really do maximize the 
opportunities of the program.
    Now, Ms. Liser, you have identified in your testimony four 
items that the administration has suggested should be elements 
of the legislation we are discussing. You say that you would 
like to see many of these elements. You have noted that some 
are addressed in some way in S. 1900. Without knowing in a 
technical way what sort of interaction you may have had even 
with our Foreign Relations Committee staff to this point, 
certainly our intent is to reflect all of these things. I want 
to make certain that they are reflected, but even beyond that 
to ask you or Secretary Larson or Ms. Newman how we anticipate 
we are going to progress with this situation.
    If this were a trade hearing dealing with almost any other 
country in the world, we would have very diverse opinions, 
because I would not say that there is a degree of protectionism 
or isolationism coming over the country. Very clearly, an 
objective observer from outside the whole forum would think 
that that is the case, namely, that we are being advised by 
many people in American business, American labor, or other 
Americans who are just simply worried about all the cross-
currents of trade, job loss, manufacturing loss, outsourcing, 
and competition that seems to them to be unfair. Sometimes they 
would just rather not have it at all. So these are all reasons 
why most people of common sense say, go slow this year in the 
trade area. This is not a happy year.
    I take a look, for example, at something that, to use the 
vernacular, would be a no-brainer, a bilateral treaty with 
Australia. Even here there is a lot of foot-dragging. The 
Central American free trade is another example. Here are these 
Latin American Presidents, some of whom have had conflicts for 
years. They come arm in arm to see us and say, ``We would 
really like to get together to have an elimination of trade 
barriers within our hemisphere, but likewise to work with you 
and with Mexicans.'' We read press accounts: interesting, but 
maybe not this year, and so forth.
    So suddenly we come to this very vital point, which all of 
us have made. This is the reason that I introduced the 
legislation last November. There is plenty of running room for 
everybody to get set and have the chance to work the language. 
I am hoping at this point--now, this is March--that we have 
worked it out. When I read in your testimony the four things 
that you are suggesting, I hope it has been very direct to this 
staff. In fact we have got the language because we do not have 
time to temporize back and forward as to whether we are on the 
same page at this stage.
    Can you comment generally about this?
    Ms. Liser. Thank you, Mr. Chairman. I do believe I can. 
First of all, let me just say that your staff has been 
excellent. I have been in touch with them, had meetings with 
them on your behalf. They were meeting with us on your behalf, 
that is. We have had the same types of opportunities with a 
number of the congressional staff on both the Senate and the 
House side, who have an interest in seeing AGOA III legislation 
go forward and go forward as soon as possible. That has been a 
major advantage for us in informing us of where you are up 
here.
    But I think what is even more important is that it is a 
unique position in terms of AGOA because it is one area in 
terms of trade where we have seen consistently, since AGOA I 
was introduced, a number of stakeholders across a wide range 
including on the Hill bipartisan support for AGOA. And then in 
terms of major stakeholders, the African countries have worked 
very closely with us in letting us know what is critical. That 
was partly because of them and their loud voice on the Hill 
that I think AGOA I and AGOA II were passed, and their voice is 
also very strong at this point. They too have been meeting with 
folks on this side of the house as well as on the other side.
    We have the faith-based community which has had a very 
vocal part in passage of AGOA in the past and continue to do 
that. We have the AGOA Coalition which are businesses and NGOs 
and others who also support AGOA.
    So I think that right now what we have again is a 
partnership amongst all of those stakeholders who are very 
interested in seeing this legislation pass and see it passed as 
soon as possible. I know in the administration, we are very 
willing, able, ready to work with Congress in trying to move 
this legislation forward. So we stand open and ready, 
appreciate what you have already done, appreciate the 
cosponsors of this bill, and have been working closely on the 
House side with various members on that side and their staffs 
as well.
    The Chairman. Well, this is good news.
    Yes, Secretary Larson.
    Mr. Larson. If I could, Mr. Chairman, just add a couple of 
comments to Flori's excellent statement.
    You said in your opening remarks quite correctly, sir, that 
there is a real action-forcing event here in terms of the 
expiration----
    The Chairman. September 30, for example.
    Mr. Larson [continuing]. Of the fabric provision. It is a 
short legislative year. It is an election year and that always 
makes things complicated.
    But it is very important to remember that for the United 
States and our economy, the impact of AGOA frankly is minimal. 
It is positive, but the impact overall is minimal. And yet, for 
these African economies that have rested some of these new 
developments on the provisions of AGOA, including the third 
fabric provision, it is huge. They would not understand that 
somehow we were not able to address this legislative challenge 
this year. For them it really is imperative that this get done.
    Flori in her opening remarks said something that is very 
important and I think worth underscoring. We need to work for a 
resolution of this that is practical and passable. We cannot 
let perfect be the enemy of good. We are going to have to work 
something out, but we simply just have to get it done. I think 
from the standpoint of the State Department, that is the 
message I really wanted to leave. We have to get this done. We 
have to work it out. We have to be practicable and come up with 
something that is passable.
    The Chairman. I agree, and that is the purpose of this 
dialog now, because it would appear to me that the four points 
that you mentioned, Ms. Liser, are in Senate bill 1900.
    I want to make certain that the language that is in the 
bill is agreeable and compatible with your aims, because we are 
in a timeframe situation, quite apart from the politics of it. 
It is critical to achieve results before September 30. That is 
just 6 months away from now.
    I mention this because we have been engaged, in the first 3 
days of this week, on the Senate floor, attempting to work 
through a European treaty situation. I will not characterize 
all of the sides of this, but in essence, the Europeans have 
gone to the WTO and said that America is out of step, so out of 
step, that after many, many months and intervening conferences, 
they are levying tariffs on $4 billion of our exports. We are 
into the 25th day of this new regime. The Senate is unable to 
move forward or backward on this. It is not simply because we 
are disagreeing with the need to do something about it, but the 
procedures in the Senate are those that permit amendments on 
all sorts of other issues to come under this.
    The public, looking at this as a whole, might say, well, 
this is no way to run a business. Americans studying this from 
a constitutional perspective would say, this is the way that we 
have always been running business in the Senate. This is a free 
country. Anybody who wants to discuss any subject on an 
authorization bill or some such vehicle as this can bring it 
up. Many people have said that they have 15 items, as a matter 
of fact, that they would like to discuss. In a short 
legislative year, we are not sure that any of these are going 
to be discussed unless it is done on a so-called must-pass 
basis.
    Meanwhile, American business and American jobs and what 
have you lie out there, vulnerable, as these tariffs increase 
our costs, and our exports decline, and so forth.
    This is well known to all of you because you have to deal 
in your part of government with this every day. All I am saying 
is that I would like to move, along with the distinguished 
ranking member, Senator Biden, to a markup fairly rapidly on 
this bill, just so that we get it underway. We have a hope of 
getting this on the Senate agenda in some form. Now, it ought 
to be in a form in which it is recognized up front as a 
critical and important part of our relationship with African 
nations.
    Hopefully the President and the Secretary of State will 
discuss a gamut of relationships. You have touched in your 
testimony upon the budget support. Let me just say quite 
frankly that the State Department came forward with a fine 
budget that seemed to me to cover a great number of items, 
including HIV/AIDS, the Millennium Challenge. I mention those 
two situations because they also impact greatly upon our 
relations in a humanitarian and economic way with Africa.
    The Budget Committee, in its own wisdom, sliced $1.4 
billion from the State Department's request. Conceivably these 
very items that we have just discussed might have been 
casualties. I worked with the Budget Committee chairman, 
Senator Nickles. Secretary Powell called Senator Nickles. Many 
of you may have called members of the budget staff. Our staff 
worked with the budget staffs on both sides of the aisle 
constructively, and at the end of the day, the $1.4 billion was 
restored, plus an additional $300 million that was a specific 
request of Senator Durbin to the HIV/AIDS request.
    Now, that is the authorization, and that is the budget. We 
still have the spending side to go, the appropriations. Without 
this initial parameter, and not having the possibility of 
lodging budget points of order, we would already be in very 
deep difficulty even before we had this conversation today. 
Fortunately, due to activism by the State Department, by us, by 
others in a bipartisan way, we have the game still alive.
    We really have to understand the urgency of this. We have 
testimony from Jim Morris of the World Food Program. He points 
out, as you would, that--and these are not exclusively African 
figures--24,000 people die in the world every day from 
malnutrition and starvation. A fairly high percentage of those 
are in African nations. About 8,000 more people, as we heard 
from Randy Tobias, the HIV/AIDS Administrator, are dying from 
AIDS and tuberculosis or some medical difficulty that is often 
induced by malnutrition, or for which it is very difficult to 
decide how the interactions occurred for those human bodies. So 
that yields a total of 32,000 people. If that occurred in 
battle any day in this world, this would be a very significant 
concern. Yet it actually does occur, every day in this world, 
almost off the charts. This is the enormity of what we are 
looking at.
    The President has taken the initiative on HIV/AIDS, as well 
as the Millennium Challenge, trying to think through the 
governance issues and how to provide more quality assistance. 
What we are talking about today is an initiative by African 
citizens in African nations. This a significant movement into 
the mainstream of world trade. It is going well, as you have 
all pointed out. It is tremendously important that it be 
supported, and that we work with other nations. You have 
mentioned the Europeans and their surprise and delight. At the 
same time, we are not in competition. We are, as a group of 
nations, hopefully thinking together. Perhaps we can enhance 
our relationship with the Europeans by working with them 
through our diplomacy in Africa.
    Please, if you can, help us through public statements. If 
there is a technical language change, let us get at it quickly, 
as opposed to waffling with more general feelings about this 
sort of thing. We are serious about it, and so are you. We will 
all need a good bit of luck to see this come across the finish 
line.
    Ms. Newman.
    Ms. Newman. Mr. Chairman, I find often in our discussions 
of Africa we do not talk often about the benefit to the United 
States of having a strong Africa. We are not just doing a favor 
to Africa by having AGOA. We are attempting to build another 
partnership with a continent that is extremely important for so 
many reasons. So I find it is often hard in having discussions 
with people about why we should have AGOA, why should we even 
address HIV/AIDS. We are wonderful people, but that is not the 
only reason we are doing it. I think we need to use that 
argument also in trying to get this to move forward.
    The Chairman. A very good point. As we discuss, as you say, 
the diseases, the fact is that these diseases could afflict 
this continent, as well as all of our people. We are a very 
small world, as we have discussed already. During the SARS 
epidemic and other situations, transportation induced a lot of 
change quickly. This is a case of our mutual benefit.
    A couple of weeks ago I had a very good meeting with six 
African Ambassadors. We talked about AGOA. We were not meeting 
from the standpoint of a charitable relationship. Rather we 
were talking about the interests of each of our countries, that 
is, the six countries represented and the United States, and 
what we have at stake in this. I mention this because the 
active diplomacy of Ambassadors to the United States from 
African states has been a major factor in keeping this issue to 
the forefront. They care about this. They are articulate about 
the legislation. They also understand September 30.
    Now, on that September 30 situation, we clearly have a 
short deadline. You would know this from the Trade 
Representative standpoint. Textiles are a very sensitive, 
neuralgic issue with regard to world trade. Add agriculture to 
textiles, and you already are into very considerable arguments. 
You can make the point that essentially, after all, there are 
not many textiles. When you take a look at the whole universe 
of this trade, why is there such commotion? I am here to tell 
you, if you did not already know, that there is commotion, even 
with the very mention of the subject.
    When we went through the AGOA I business, quite apart from 
AGOA II, the legislation did not move all that rapidly. I 
remember going over to my House colleagues. I pay tribute to 
them because they carried the legislative load there for a long 
time. There were as many as 15 or 20 active Members in the 
House of Representatives on both sides of the aisle who 
continually held press conferences or rallies or various other 
things. We try to support each other. Frequently it revolved 
around how we are going to have a breakthrough in this textile 
area. This third country situation, which is complex to explain 
to the normal person in Africa or the United States, was a 
result of the compromises that brought this to the fore before 
and will do so, I presume, again.
    All of us are going to have to go to school again, starting 
with the four of us, to make certain that we understand what 
that provision is, why it is important that it be extended, why 
it comes due this 30th, and therefore why, out of order, out of 
sequence, the Senate or the House ought to take up this 
legislation, at a time when many Members would say, my 
goodness, we have a priority list that deals with health and 
education in the United States, our roads, our taxes, our 
Medicare. It is a wonderful idea, but why now? Why by September 
30?
    Once again, just for the sake of the record, please 
explain, any one of the three of you, your interpretation of 
what it is that we are attempting to achieve by September 30. 
This is most time-sensitive, although the extension to 2008 is 
very important for the reason Secretary Larson and you, Ms. 
Liser, pointed out, just so there will be a continuity of 
investment. People have an investment horizon there that is 
more intermediate. Please deal for the moment with September 30 
and its importance.
    Ms. Liser. Thank you, Mr. Chairman. Indeed, the issue of 
the third party fabric is one which has been sensitive in the 
past but which is also crucial, in fact, urgent at this moment.
    I think what we are facing--I have had the privilege of 
visiting a number of the apparel factories in various countries 
now that are AGOA-eligible. What you see there is really 
impressive. Places where there was nothing before, there are 
factories which are employing many, many people, particularly 
women who have never been in the formal economy before who now 
have been trained and have the opportunity to enhance their own 
lives and the lives of their families. It is extremely 
impressive.
    What is happening, though, is that as an apparel business 
develops in sub-Saharan Africa, while they are doing that, they 
have not had the ability to also develop as rapidly as possible 
the textile industry. So as you can imagine, that is an 
industry on which many of us that are industrialized now have 
actually built and developed our own economies over time. And 
there is a reason for that. At the same time, though, the 
textiles industry, which is more complex, requires a higher 
level of investment, has been a little bit slower to invest in 
Africa in making the actual fabrics and textiles there.
    So as a result, as I said earlier, 84 percent of the 
apparel that is being manufactured by these eligible countries 
under AGOA uses third country fabric. They simply do not have 
enough regional or indigenous fabric that they make or enough 
indigenous fabric that meets the qualifications for the apparel 
that is being sent to WalMart and Target and The Limited and so 
forth.
    The Chairman. For instance, somebody from a third country 
sends some fabric of some sort from the United States to an 
African country.
    Ms. Liser. That is right.
    The Chairman. And then in this shop men and women do 
something to this fabric.
    Ms. Liser. Right. They cut that fabric and they sew fabric 
together into apparel which then is sent back to the U.S. 
market. We are probably one of the largest importers of apparel 
in the world.
    You mentioned the sensitivities of the textiles industry, 
and I think all of us here are quite aware of that. I just 
wanted to take a moment, though, to put things in perspective. 
I know we talked about the Africans cumulatively constituting 
about 2.1 percent. They had actually about 1 percent of the 
U.S. import apparel market before AGOA started, and what AGOA 
has done is allowed them to move up from what was a very 
minuscule amount of exports to now be 2.1 percent. What you 
have to think about, though, is that cumulatively, all of them 
together, rank 18th in the U.S. import lineup of apparel so 
that there are 17 other countries that individually send more 
apparel to the United States than all of the African countries 
combined.
    When you look at Lesotho--we have talked about Lesotho a 
bit--Lesotho's $392 million of apparel exports to the United 
States, by itself Lesotho ranks 36th among all of the suppliers 
of apparel to the United States. So even their best performer 
under AGOA ranks 36th in terms of exports here. That $392 
million, just so you know, would compare to the largest 
exporter, which is China, of $11.6 billion. So you can imagine 
why then Lesotho is number 36 in the lineup. There are many, 
many countries.
    Again, I think that it is our responsibility to also 
educate people about what is going on here.
    Another factor, though, that I would mention is that 
because of AGOA and because these countries can continue, even 
after third party fabric expires, to import U.S. fabric, there 
are some partnerships that are developing there which we would 
like to continue to encourage.
    But I think for now the urgency is that we need to be able 
to pass legislation that will extend the third party fabric 
provision beyond September 30. Some of the retailers have told 
us that they are already shifting their orders to Asian 
countries for the most part. This is something that we would 
like to see stemmed before that reversal for the Africans 
starts to take hold. It has not yet taken hold, and this is why 
it is urgent to act.
    I would just say that I think that the President, I know my 
boss, Ambassador Zoellick, we are strongly supportive of 
extending AGOA, addressing this third party fabric issue. We 
recognize that this is a tight calendar for the Congress this 
year, and that is why we have been on many levels and in many 
places working to try to make sure that we work with you and 
your staffs. We would like to work with you specifically and 
Chairman Grassley and his staff on the legislation in the 
coming months so that we can, in fact, have this happen. Thank 
you.
    The Chairman. Secretary Larson.
    Mr. Larson. If I could just add an exclamation point to 
what Flori just said. Unless Congress acts, a vast majority of 
the apparel trade benefits under AGOA will be swept away. The 
investment that made that trade possible will be lost. The good 
will that we have gained as a result of AGOA will be washed 
away. And there will not be any really effective way of 
regaining that later. Those investments will have moved on. By 
the time the Congress comes back into session, it will be 2005, 
and the quotas under the international textile and apparel 
trade arrangement will be history.
    There is an overriding urgency. AGOA is not just about the 
textile and apparel trade, but as our testimonies have made 
clear, this is one of the areas where there has been a 
tremendous opportunity that has been seized. It has been very 
large for Africa, very, very small and, I would argue, 
complementary in terms of our own economic interests. It is not 
just a case where, well, we can come back to this next year and 
we will fix it and in the meantime things will go on as they 
have been going on. It will be a hiccup but it will not be a 
problem. This will devastate AGOA unless Congress acts before 
the expiration of the third country fabric provision on 
September 30.
    The Chairman. Well, you are absolutely right. One purpose 
of the hearing is, once again, to have that statement made and 
understood as broadly as possible.
    I appreciate your mentioning, Ms. Liser, my colleague, 
Senator Grassley. The Senator from Iowa and his committee are 
critical for all this.
    We are often in a situation in the Foreign Relations 
Committee in which we quite rightly are seized with the overall 
relations of our country with other countries. This is 
certainly a very, very important reason why we have enhanced 
relations with African countries, and why we want to augment 
that.
    As with the hearing that we held this past Tuesday on 
immigration and on Mexico and other issues of this sort, 
clearly jurisdiction on the immigration parts of those issues 
lie with the Judiciary Committee. We have tried to visit with 
those members of that committee who have held at least one 
subcommittee hearing on that subject.
    This is part of our own diplomacy internally in the Senate. 
I lay this out so that there will not be any doubt. I 
understand that action must be taken by the Finance Committee, 
and I hope that it will be. Hopefully, this hearing will 
strengthen the resolve of that committee, and offer good 
reasons why it should act.
    At the same time, all of us will have to pull together--and 
by that I mean the administration and the Secretary and each of 
the agencies that are here today--to make certain that wherever 
you are, whichever committee in the Senate, that this is time-
sensitive and critically important for our country in multiple 
ways, whether it be finance or trade or diplomacy or security 
or health and humanitarian purposes. I think that most Senators 
understand that, and that is why they tolerate our getting into 
all sorts of subjects that are sometimes beyond our specific 
jurisdiction.
    Let me just ask whether any of you have any further comment 
that you might want to make on areas that you feel might not 
have been adequately covered, just so that our record is as 
complete as possible, as we send it out to others who are not 
party to this conversation today. Yes.
    Ms. Newman. I probably ought to add one other point. First 
of all, I am very optimistic about the future of the African 
Continent. If we look at what has happened in terms of 
governance and growth and the ability to even think about 
African countries being Millennium Challenge Account countries 
says they are doing so much. But they are not going to do it 
without us as partners. And AGOA is not just what AGOA presents 
itself, but it is the message that we send that we are serious 
about Africa being a part of a global economy. The additional 
contribution that we need to make is helping them build 
capacity to operate in the global economy, not just with AGOA 
but beyond that. We contribute about $90 million to that a 
year, but we all need to do more and we need to leverage the 
private sector support for trade capacity building because it 
is only through those relationships that really they are going 
to become a full partner in the economy.
    The Chairman. Secretary Larson, do you have a final 
comment?
    Mr. Larson. Well, yes, just one, and it just builds out 
slightly on a point I had made briefly earlier in the hearing. 
One of the things that AGOA does for us in our relationship 
with the African nations is to give us credibility and a sense 
of genuine partnership. I mentioned in passing that Ambassador 
Zoellick and the rest of us, when we were in Mauritius, really 
had credibility when we talked to the Africans about some of 
our interests in pushing the Doha development agenda and 
discussing with them our approach to things like agricultural 
biotechnology. It was credibility because we were present and a 
part of what is important to them, which is developing their 
own economies and providing jobs and opportunities.
    This is a broader point. We need to cooperate with African 
countries on a range of things. We have not talked much about 
counter-terrorism, but the African countries have been and in 
the future will be extraordinarily important partners for us in 
stemming international terrorism. On a week when there is a lot 
of attention here on Capitol Hill to the importance of this war 
on terror and the importance for us to never let down our guard 
or lose our focus or do anything that prevents us from gaining 
allies all around the world in this fight, it is important to 
remember that this is part of what helps us be understood in 
Africa as countries that have an interest in a broad 
relationship with them. It makes it for them a two-way street 
and it makes it a lot easier for us, frankly, when we go and 
raise our other issues, whether it is other trade issues or 
issues like counter-terrorism, that we are seen as true 
partners. If we want them to be with us on those issues that 
are most critical to us--and that includes counter-terrorism, 
then we need to be present and working with them on the issues 
that are most important to them and that is jobs and economic 
opportunity.
    The Chairman. Ms. Liser.
    Ms. Liser. I just wanted to add one point that really is in 
the bailiwick of Connie Newman. As I have traveled around the 
continent and talked to many, many people and many ministers of 
trade in Africa about AGOA, one of the things that they will 
say is we have not been able to actually do much with AGOA yet. 
We see the potential. We are at the very beginning stages of 
being able to take advantage of AGOA. The countries that have 
been able to actually fully--and I would not even say that 
there are any that have fully taken advantage of AGOA yet--are 
really still at the beginning stages of that. So the overall 
extension of AGOA is important.
    But the point that I have really seen with my own eyes is 
that the market access alone will not actually, at the end of 
the day, make the difference for many of these countries. 
Without the technical assistance and the trade capacity 
building, without a sense of partnership with U.S. businesses, 
their small businesses with African small businesses and U.S. 
small businesses working together in joint ventures, we are not 
going to actually see as much benefit out of AGOA for these 
countries as we would like.
    So, again, we are hoping that the overall provisions, in 
terms of extension, extension of third party--these are 
critical. But another critical aspect that is addressed in S. 
1900, as well as in provisions that we think will be considered 
on the House side, really has to do with this point of access 
alone is not enough. You have to do something to help these 
countries to take advantage of AGOA, and that is where the 
technical assistance and the trade capacity building really 
become important.
    The Chairman. Well, I appreciate that statement. At a 
breakfast meeting this morning, the head of one of our leading 
foundations, for whom I have a lot of respect, paid tribute to 
Ambassador Zoellick. He felt that his relationship with Mr. 
Lamy and the European Union was an extraordinary case of good 
personal chemistry advancing agendas well beyond what might 
have occurred if two other individuals without that personal 
chemistry were interacting at a very difficult time. Secretary 
Larson has mentioned the Doha conference of WTO, as well as the 
extension of trade generally. Americans are deeply concerned 
about job creation, about extension of our own economy. We have 
to understand that that has occurred, by and large, through the 
extension of our markets and through very vigorous trade 
initiatives, and that our ability to produce and to export 
makes those jobs possible. They do not occur in a vacuum, in a 
zero sum game, in our country if we hunker down and pull the 
protectionist walls around us. But at the same time, if you are 
going to export, somebody has to have the wherewithal to buy. 
There literally have to be stronger economies out there.
    It gets to another point that Secretary Larson was pointing 
out. We have a phobia in this country, and rightly so, of so-
called failed states. This term describes a situation in which 
the governments are not really effective in providing security 
for their own citizens or for their neighbors or, worse still, 
a situation in which the governments may be incubators, if not 
of al-Qaeda cells, of somebody's cells, that is, of sub-
governmental groups and others that prey upon the rest of the 
world. Therefore, from our standpoint of security, failure of 
African states is unacceptable not only to the citizens that 
are malserved there, but to us and to the world community.
    Sometimes, we shift all of our focus, and we talk in this 
committee about terrorism and about security, and rightly so. 
Yet one of the things that we get back to again and again is 
whatever happened to Afghanistan in 10 years after we left. 
Why, indeed, were al-Qaeda cells breeding in training camps? 
The 9/11 Commission has been interrogating people from past 
administrations, as well as this one.
    We are talking today about African states. Very severe 
security problems occurred at two of our embassies in African 
states. They were directly attributable to al-Qaeda cells and 
the organization. As you now read a 10- or 12-year history of 
the organization, you learn that it did not all occur in 
Afghanistan.
    These are serious matters. Even if you wanted to get into 
an argument over textiles, you would need to extend the 
argument to American security and to our overall desire to make 
sure that everybody in this world is healthy, and that in fact 
we not only have healthy customers, but also healthy 
governments who are able to provide the normal provisions that 
enable nation-states to deal with each other.
    This is all to point out why the deadline of September 30 
matters. This is a critical juncture, as all of you have 
pointed out. This is not a situation in which somehow we can 
sort of pick up the pieces easily next year when we finally get 
around to it, with a whole new Congress, and maybe new 
legislative agendas. This is our agenda presently.
    We appreciate your contribution to that understanding this 
morning. Please continue to work with us closely. We will try 
to champion the cause and to take on other champions who want 
to be with us in the Senate, as well as in the House, 
hopefully.
    Having said all this, why, the hearing is adjourned. Thank 
you for coming.
    [Whereupon, at 10:50 a.m., the committee adjourned, to 
reconvene subject to the call of the Chair.]

                              ----------                              


             Additional Questions Submitted for the Record


 Responses of Florizelle B. Liser, Assistant U.S. Trade Representative 
for Africa, to Additional Questions for the Record Submitted by Senator 
                          Russell D. Feingold

    Question 1. What justified certifying Angola as an AGOA-eligible 
country at the end of 2003? What steps did the Government of Angola 
take that constituted ``continual progress'' toward improved protection 
of human rights and worker rights, and toward combating corruption? Was 
there any disagreement among the agencies involved in reviewing 
Angola's eligibility status?

    Answer. Angola is about two years removed from war, at peace for 
the first time in its history, and faces enormous challenges in 
establishing policies and institutions necessary to manage urgent 
reconstruction and development programs, as well as inevitable 
political, economic, and social change. Our review noted that since the 
end of the civil war in 2002, over three million internally dislocated 
people--ex-combatants, their families, and refugees--have returned 
without violence. We also noted that the Government made progress 
toward the development of an interim poverty reduction strategy 
program, and increased spending on health and education has been 
allocated in Angola's 2004 budget. The Government generally respects 
worker rights as provided for under the Constitution, including the 
right to form and join trade unions, engage in union activities, and 
strike. In addition, under the newly approved budget, parastatal 
companies such as SONANGOL will no longer be able to provide funds 
directly to government ministries ``off budget''--potentially closing 
the single largest loophole permitting misuse of oil revenues. The 
Government also indicated that it would soon publish the long-awaited 
oil diagnostic, a commitment that will lead to greater transparency in 
management of oil revenues.
    Because of steps taken by the Government of Angola in these and 
other areas, the interagency committee concluded that on balance, 
Angola had made generally positive progress toward meeting the AGOA 
eligibility requirements. We agreed that the Government of Angola still 
faces significant challenges, particularly in the areas of human and 
labor rights protections and economic governance, and warned the 
government via a strongly worded letter from Secretary of State Powell 
to President dos Santos, that in order for Angola to retain its AGOA 
benefits, it must continue to make progress on reforms in these areas.
    While there were varying views among agencies as to the degree of 
progress made by Angola in meeting AGOA eligibility criteria, the 
interagency committee ultimately reached consensus that Angola should 
be made eligible for AGOA benefits.

    Question 2. Can you assure me that USTR defers decisions regarding 
whether or not a given country meets human rights-related eligibility 
criteria to the State Department, rather than allowing other agencies 
that do not have responsibility for promoting human rights abroad to 
overrule the decision of the primary agency?

    Answer. USTR chairs the interagency committee that considers the 
eligibility criteria for each country, including those related to 
internationally-recognized worker rights, human rights, and elimination 
of the worst forms of child labor. Participating agencies include 
State, Commerce, Treasury, Labor, Agriculture, USAID, CEA, and the NSC. 
Agencies draw on their own sources, as well as reporting from U.S. 
Embassies and public comments solicited through a Federal Register 
notice, to assess the economic, social, and political climates of 
different African countries, including human and labor rights. Each 
agency makes its own assessment of which countries are making continued 
progress in meeting AGOA's human rights and labor criteria, although 
some agencies will defer to the Labor and State Departments as having 
greater expertise in these areas.
    Decision-makers within the State Department reached their own 
internal decision to favorably consider Angola's eligibility before the 
Department supported that decision within the interagency committee. 
The interagency process is based on consensus--all agencies must agree 
on changes to a country's eligibility status before that recommendation 
can go forward. No agency--including the State Department--is overruled 
in this process.
                              ----------                              


                   Statement Submitted for the Record


          Prepared Statement of DATA (Debt AIDS Trade Africa)

    DATA (Debt AIDS Trade Africa) thanks Chairman Lugar, Senator Biden, 
and the Senate Foreign Relations Committee for the opportunity to 
testify on S. 1900, the United States-Africa Partnership Act of 2003. 
As introduced, this legislation would extend the benefits of the 
African Growth and Opportunity Act (AGOA) and amend provisions to 
encourage increased trade between the U.S. and Africa as well as 
enhance the trade capacity of sub-Saharan Africa.
    DATA is a non-profit organization dedicated to alleviating poverty 
in sub-Saharan Africa by working to ensure that Africa receives or is 
able to earn the resources necessary to overcome the AIDS emergency and 
achieve rapid progress toward the internationally agreed upon 
Millennium Development Goals. Although probably best known for its 
efforts to combat AIDS in Africa and increase development assistance to 
poor countries, DATA is also committed to highlighting trade as an 
important means of reducing poverty and improving the lives of poor 
people.
    Economic growth is a necessary component for poverty reduction--and 
poverty reduction is critical to broad, sustainable growth. In sub-
Saharan Africa these goals require a potent combination of ingredients 
that includes debt relief, increased development assistance, combating 
the scourge of AIDS, and a fairer and expanded international trade 
system. Without all of these Africa will not only fail to achieve the 
Millennium Development Goals but will also fail to become a true 
competitor in the global economy and attain self sufficiency.
    Africa's limited trade capacity and the trade policies of the 
developed world that hamper opportunities to increase capacity make it 
impossible for countries to compete with the most developed nations. 
These burdens act as a disincentive for investment; undermine food 
security; unfairly stifle efforts to expand export oriented 
agricultural products; and weaken Africa's ability to expand and 
diversify its economies as well as the ability of governments to raise 
revenues. Trade is crucial for African development, and unfair trade 
policies undermine development.

                             TRADE BARRIERS

    The importance of AGOA as a tool for increasing trade opportunities 
as well as trade capacity for sub-Saharan Africa must be viewed within 
the overall context of the international trading system and its impact 
on Africa. The negative effect of Western trade policies on Africa is 
most pronounced in three areas:

          1. Liberalization Policies. Inappropriate market 
        liberalization policies pressed on African countries by 
        International Financial Institutions retard development. 
        Countries are encouraged to remove measures that protect their 
        developing industries even as developed countries maintain 
        substantial subsidies and limit access their markets. During 
        their trip to Africa, Bono and U.S. Treasury Secretary Paul 
        O'Neill both noted that in Ghana the premature removal of 
        domestic agricultural subsidies combined with the opening of 
        Ghanaian markets to more imports and the prevalence of highly 
        subsidized agricultural exports from the EU and U.S. created a 
        perfect storm of unfair trade practice. The nascent character 
        of African economies requires special and differential 
        treatment in order to grow and mature, driven by country-owned 
        development strategies enjoying the support of domestic 
        constituencies.

          2. Subsidies. Industrialized nations spend more than $300 
        billion on agricultural subsidies. U.S farm subsidies alone 
        totaled more than $12 billion in 2002. While these subsidies 
        assist U.S. farmers, their structure results in overproduction 
        of goods which are then ``dumped'' on the global market at a 
        fraction of their worth. These inexpensive products flood the 
        international market not only making it not only nearly 
        impossible for African farmers to export wheat, corn, sugar and 
        other commodities, but often difficult for them to compete in 
        their home markets.
          The extraordinary subsidies and other trade barriers that 
        developed countries maintain make it clear that reform of poor 
        country economies and trade regimes alone will not produce the 
        result we are pursuing. The U.S. must reform its subsidy 
        structure as well as provide increased trade opportunities for 
        more of the goods that Africa produces, particularly in the 
        agricultural sector. With approximately three-quarters of the 
        world's poor living in rural areas, reducing subsidies and 
        opening markets to the products generated by small farmers and 
        small enterprise is a key to unlocking development through 
        trade.

          3. Market Access. The imposition of tariffs, duties and 
        quotas on African exports and the imposition of escalated 
        tariffs on value added exports prevent countries from expanding 
        trade, their options and their capacity. It is the production 
        and export of value-add products that will have the greatest 
        impact on economic growth in Africa.

    AGOA addresses the third of these systemic ways in which trade 
impacts African growth and poverty reduction. While limited, it has 
increased trade between the United States and sub-Saharan Africa, 
creating jobs and investment. As a first attempt by the U.S. to tackle 
trade issues and improve trade conditions for Africa, AGOA, though 
small, is a significant step toward the goal of providing a level 
playing field and improved export conditions for Africa. It has also 
proven that specifically tailored trade laws can act as, and reinforce, 
development programs for poor countries. If a properly balanced and 
applied trade scheme is developed increased investment--foreign, 
regional and domestic--productivity, and income and wages for workers 
in Africa can be the result.

                          THE BENEFITS OF AGOA

    The impact of AGOA on African imports has been impressive. Imports 
range from oil and petroleum products to textile and apparel, jewelry, 
cocoa, automobiles, agricultural products, and even electronics.
    African economies and employment have also been positively impacted 
since the law's enactment in 2000. Today, 38 of the 48 sub-Saharan 
African countries are eligible for AGOA benefits. Fully three-fourths 
of imports from AGOA beneficiaries enter the U.S. duty-free. Sub-
Saharan African countries have increased their regional fabric 
production and textile capacity; 19 countries are eligible to receive 
textile and apparel benefits; and six countries qualify for AGOA's 
special handloomed, handmade and folklore textile and apparel 
provisions. In the two years following enactment, Africa's clothing 
exports to the U.S. grew 46%, reaching $1.1 billion in 2002.
    The United States is now sub-Saharan Africa's largest single 
country market, purchasing more than one-quarter of the region's 
exports in 2002. Total trade between the United States and the region 
was nearly $24 billion in 2002, with U.S. exports to African of $6 
billion and U.S. imports reaching $18 billion. In 2003, the export of 
apparel from Africa to the United States grew by 50%; agricultural 
exports increased by 13% and transportation related imports (mostly 
passenger cars from South Africa) increased by 34% over 2002 levels.
    The benefits of AGOA are perhaps best evidenced in Lesotho--a small 
country in southern Africa that was facing a declining extractive 
industries and diminishing remittances from expatriates. AGOA offered 
an opportunity to reorient the economy and the changes have been 
striking. In 2002, Lesotho exported $318 million in goods to the United 
States under AGOA and more than $370 million in 2003. Investment has 
increased, including the construction of a denim rolling mill, 17 
garment factories and the construction of a cotton mill scheduled for 
completion this year. Some 25,000 jobs have been generated as a result 
of its AGOA status. Today, for the first time, more workers in Lesotho 
are employed in the private sector manufacturing jobs than by 
government.

                           AGOA IMPROVEMENTS

    Despite making a significant contribution to improving market 
access, AGOA is not perfect. Currently, only a fraction of the duty-
free cap available to AGOA eligible countries is used--in 2000 duty 
free apparel exports only reached half of the volume available under 
AGOA. Often the U.S. Customs Service strict interpretation of the law 
results in the denial of duty-free status for some apparel productions. 
The complicated nature of U.S. sanitary and phyto-sanitary requirements 
acts as a barrier to African agricultural exports. Issues of 
implementation and capacity still prevent countries from fully 
benefiting from expanded trade with the United States.
    There are a number of deficiencies in the current law, including:

   the relative short lifespan of the law and special 
        provisions to assist poor countries;

   inability of AGOA beneficiary countries to take full 
        advantage of duty free access to the U.S. market;

   the lack of clarity in rules of origin which prevent the 
        denial of duty free status for many products;

   the lack of technical assistance and training for countries 
        seeking to meet importation requirements for agricultural 
        goods; and

   the need to improve and create conditions and incentives for 
        investment.

    The bill introduced by Senator Lugar not only reinforces the 
existing foundation by extending the life of AGOA, but also addresses 
many of the deficiencies mentioned above. DATA specifically supports 
provisions of the legislation that would:

   extend the life of AGOA;

   extend the term of the third country fabric provision until 
        2008;

   clarify the law to improve implementation so that African 
        countries may take full advantage of AGOA;

   enhance trade capacity of African countries; and

   enhance incentives for U.S. corporate investment in Africa.

    Special trade regimes such as AGOA work best when they stimulate 
investment in productive capacity. Extending AGOA until 2015 would 
provide additional time to secure growth industries where they 
currently exist and create markets and stimulate production in areas 
where capacity is currently lacking in Africa.
    Because apparel and textiles exports have increased in volume and 
importance to many sub-Saharan Africa countries, the third country 
fabric provision--which permits certain countries to use textiles from 
sources other than Africa or the United States in the production of 
garments for export to the U.S.--must be extended. Without the 
extension the upward trade trends as well as the opportunities for 
country that are on the verge of reaching capacity to produce apparel 
will be severely hobbled.
    Clarifying the AGOA rules of origin will increase apparel orders 
and increase duty-free imports. The lack of clarity has often resulted 
in the U.S. Customs Service denying duty free status to garments 
produced under the AGOA because some components of the garments are 
neither African nor American in origin. The ongoing uncertainty over 
what constitutes an AGOA-eligible garment must be resolved in a way 
that will give Africa the greatest possible latitude.
    S. 1900 would significantly improve the current law by addressing 
these issues as well as providing increased technical assistance to 
enhance agricultural trade; capacity building for meeting U.S. sanitary 
and phyto-sanitary requirements; access to and training on U.S. 
agricultural technologies; infrastructure enhancement incentives and 
assistance; and, business skills training for U.S. and Africa 
producers.
    Africa's exports to the U.S. are only a tiny fraction of U.S. 
consumption, but are of great significance to sub-Saharan African 
economies. These improvements coupled with the extension of the AGOA 
will allow more time for more countries to truly take advantage of the 
law benefits and sustain the positive effects thus far experienced.
    In addition to AGOA efforts that enhance market access, the 
legislation would address Overseas Private Investment Corporation 
(OPIC) restrictions that fail to provide sufficient incentive for U.S. 
companies to invest in African capacity and/or to sell the sort of 
capital goods that would enable Africa to build its own capacity. The 
legislation would also require of the Export-Import Bank to implement 
regulations that would ensure extension of credit, loans, guarantees 
and insurance to help spur direct investment in the region.

                               CONCLUSION

    More than 700 million people live on a continent abundant with 
natural resources and yet many countries must rely on exports from the 
United States and Europe to feed their people. This is due in great 
part to the fact that the international trade system is weighted 
against them. American and European markets remain largely closed to 
African goods. Tariffs and quotas make it difficult, if not impossible, 
for Africa to export processed good and commodities. Liberalization 
schemes that wealthy nations (and their surrogates at the IMF and World 
Bank) press on Africa often work against countries that lack advanced 
trade capacity necessary to take advantage of the benefits that 
liberalization is assumed to provide, and often the process negatively 
impacts the most vulnerable poor communities whom we wish in fact to 
assist.
    Clearly, real growth and development in African will always be 
limited unless we address matters of trade. Without improved trade with 
Africa and trade capacity within Africa along with increased 
development assistance and deeper debt relief, Africa's escape from the 
cycle of poverty and its participation in the global economy will be 
hindered. However, trade cannot merely be an instrument to open African 
markets to U.S. consumer goods. Trade must be fair--structured in a way 
that permits fragile economies to participate without inflicting 
excessive harm on their people--and it must be two-way. Opening the 
U.S. market to raw commodities and, more importantly, value added 
products can directly benefit U.S. consumers by reducing prices, 
creating a win-win means of reducing global poverty.
    A prosperous Africa will be stable and secure. It will have the 
means to educate and feed its people, resolve conflict and fight 
disease and poverty. This would not only be a benefit to Africans, but 
to the people of the world.
    Clearly AGOA is not a panacea. Extending its life and expanding 
some provisions alone will not achieve the goals that we, including 
Africans, have for the continent. However, it will improve economic 
conditions in Africa and increase U.S. investment in the continent and 
can act has a foundation for all else that must be done.

                                 
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