[Senate Hearing 113-622]
[From the U.S. Government Publishing Office]
S. Hrg. 113-622
THE AFRICAN GROWTH AND OPPORTUNITY
ACT AT 14: THE ROAD AHEAD
=======================================================================
HEARING
before the
COMMITTEE ON FINANCE
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JULY 30, 2014
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Finance
______
U.S. GOVERNMENT PUBLISHING OFFICE
94-133 PDF WASHINGTON : 2015
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Publishing
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800;
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
Washington, DC 20402-0001
COMMITTEE ON FINANCE
RON WYDEN, Oregon, Chairman
JOHN D. ROCKEFELLER IV, West ORRIN G. HATCH, Utah
Virginia CHUCK GRASSLEY, Iowa
CHARLES E. SCHUMER, New York MIKE CRAPO, Idaho
DEBBIE STABENOW, Michigan PAT ROBERTS, Kansas
MARIA CANTWELL, Washington MICHAEL B. ENZI, Wyoming
BILL NELSON, Florida JOHN CORNYN, Texas
ROBERT MENENDEZ, New Jersey JOHN THUNE, South Dakota
THOMAS R. CARPER, Delaware RICHARD BURR, North Carolina
BENJAMIN L. CARDIN, Maryland JOHNNY ISAKSON, Georgia
SHERROD BROWN, Ohio ROB PORTMAN, Ohio
MICHAEL F. BENNET, Colorado PATRICK J. TOOMEY, Pennsylvania
ROBERT P. CASEY, Jr., Pennsylvania
MARK R. WARNER, Virginia
Joshua Sheinkman, Staff Director
Chris Campbell, Republican Staff Director
(ii)
C O N T E N T S
__________
OPENING STATEMENTS
Page
Wyden, Hon. Ron, a U.S. Senator from Oregon, chairman, Committee
on Finance..................................................... 1
Hatch, Hon. Orrin G., a U.S. Senator from Utah................... 3
ADMINISTRATION WITNESS
Froman, Hon. Michael, United States Trade Representative,
Executive Office of the President, Washington, DC.............. 5
ALPHABETICAL LISTING AND APPENDIX MATERIAL
Froman, Hon. Michael:
Testimony.................................................... 5
Prepared statement........................................... 21
Responses to questions from committee members................ 26
Hatch, Hon. Orrin G.:
Opening statement............................................ 3
Prepared statement........................................... 35
Wyden, Hon. Ron:
Opening statement............................................ 1
Prepared statement........................................... 38
Communications
African Coalition for Trade...................................... 41
African Cotton and Textile Industries Federation................. 47
American Sugar Alliance.......................................... 57
CBI Sugar Group.................................................. 67
The Esquel Group................................................. 73
Embassy of Malawi, et al......................................... 80
Embassy of the Republic of Mauritius............................. 83
National Pork Producers Council.................................. 91
PVH Corp......................................................... 95
(iii)
THE AFRICAN GROWTH AND OPPORTUNITY ACT AT 14: THE ROAD AHEAD
----------
WEDNESDAY, JULY 30, 2014
U.S. Senate,
Committee on Finance,
Washington, DC.
The hearing was convened, pursuant to notice, at 2:12 p.m.,
in room SD-215, Dirksen Senate Office Building, Hon. Ron Wyden
(chairman of the committee) presiding.
Present: Senators Stabenow, Cantwell, Cardin, Hatch, Crapo,
Thune, and Isakson.
Also present: Democratic Staff: David Eggleston,
Legislative Fellow; Jason Park, International Trade Counsel;
and Jayme White, Chief Advisor for International
Competitiveness and Innovation. Republican Staff: Richard
Chovanec, Detailee; Everett Eissenstat, Chief International
Trade Counsel; Rebecca Eubank, International Trade Analyst;
Kevin Rosenbaum, Detailee; and Shane Warren, International
Trade Counsel.
OPENING STATEMENT OF HON. RON WYDEN, A U.S. SENATOR FROM
OREGON, CHAIRMAN, COMMITTEE ON FINANCE
The Chairman. The committee will come to order.
I would like to start this afternoon by thanking Ambassador
Froman for joining us here today to discuss the African Growth
and Opportunity Act.
The President and the administration, in my view, have done
a significant amount of good work with respect to America's
economic relationship with sub-Saharan Africa, and the Finance
Committee is looking forward to continuing to work with you,
Ambassador Froman, as we pursue these issues in the days ahead.
More than 14 years ago, the Congress passed the African
Growth and Opportunity Act, which, of course, is known as AGOA.
For the first time, the United States established a trade
policy that was specific to sub-Saharan Africa. AGOA was
designed by a bipartisan group of lawmakers with the goal of
fostering opportunities for African entrepreneurship and
strengthening its job-creating trade ties with our country.
Today the law allows almost all products from eligible African
countries to be imported duty-free.
AGOA, in my view, has been a success, and it ought to be
renewed and strengthened in the same way that it was
established, colleagues, and that is through bipartisan work
and cooperation.
Our hearing is especially timely, because African leaders
arrive in the Nation's capital next week as part of the AGOA
forum. So now is a good time to begin to assess how AGOA and
other preference programs like the Generalized System of
Preferences fit into the larger trade puzzle.
Much, of course, in sub-Saharan Africa has changed in the
14 years in which AGOA has been implemented. In the wake of the
great recession, Africa is a bright spot in the global economy.
Over the past decade, economic growth in sub-Saharan Africa has
bested the world's average growth rate by 2 percent. In that
time span, six of the world's 10 fastest-growing economies were
in Africa.
There is also clear evidence that AGOA has been a success.
In 2000, trade between the United States and Africa stood at
less than $30 billion. It more than tripled over the following
decade as exports diversified and grew, supporting job growth
in both our country and in Africa. Some of the growth in trade
was the increase in West African oil production and exports
which would have occurred with or without AGOA. But even if you
choose to take oil out of the equation, AGOA is responsible for
significant growth and diversification among African exports.
While AGOA is going to remain a program that is primarily
intended to help Africa chart its own economic course, AGOA
benefits our country as well. As sub-Saharan African economies
have grown, in part because of this program, the region's
buying power has gotten stronger. That is good for American
exporters.
There are more than 100,000 red, white, and blue American
jobs tied to AGOA. American exports to sub-Saharan Africa grew
about 250 percent since the program's inception, particularly
benefitting aerospace, auto, and agricultural jobs here at
home.
The expiration of AGOA in September 2015 gives this
Congress, the administration, and other stakeholders a chance
to see where the program stands, to look at what works, and to
develop plans to help AGOA adapt to Africa's fast-changing
economic landscape.
The evaluation process has to start early. That is why the
Finance Committee is choosing to hold this hearing more than a
year before AGOA's expiration date. African apparel
manufacturers who benefit from the program often receive orders
up to 9 months in advance, but they are not going to get these
orders if there is uncertainty about when AGOA expires. Failing
to renew and perhaps reshape AGOA in a timely manner could
reverse important economic gains made over the last decade and
a half, and no member of this committee, Democrat or
Republican, wants that to happen.
The Congress needs to explore ways to improve AGOA to
further drive growth in a broader range of African exports. One
method to consider is expanding the array of products that AGOA
covers. Another option is making it easier for producers to
draw from a bigger variety of sources in the manufacturing
process.
Our goal should be for AGOA to help increase the value of
Africa's exports and promote growth and diversity in even more
African countries. That way they can better compete with the
economic hotbeds in the Asia-Pacific region and around the
world.
It is also important to recognize that, even with
enhancements, AGOA is not a silver bullet for development. It
has to be part of an overall strategy to increase trade ties,
boost investment, and particularly cut burdensome red tape. The
administration has recognized this as a priority as well,
launching programs such as Power Africa and Trade Africa.
The Overseas Private Investment Corporation, the Millennium
Challenge Corporation, and the Export-Import Bank, in my view,
all play significant roles in a comprehensive American approach
to African development. The committee will do its part by
looking for ways to enhance AGOA's impact in the months ahead.
The fact remains that it is Africa and Africa alone that
holds the power to continue to increase its people's living
standards. The best way to accomplish that is to improve
governance on the continent. Improving governance,
strengthening the rule of law, cutting needless and burdensome
regulation--all of these will help Africa attract investment.
I want to conclude by simply saying that any AGOA 2.0 ought
to be crafted in a way that complements efforts by African
governments to improve the lives of their people. Fortunately,
there are promising ideas to be heard. This committee is
looking for ways to put them into practice. Senator Hatch and I
have already had discussions about how we can work together in
a bipartisan way.
[The prepared statement of Chairman Wyden appears in the
appendix.]
The Chairman. Senator Hatch, we look forward to your
statement.
OPENING STATEMENT OF HON. ORRIN G. HATCH,
A U.S. SENATOR FROM UTAH
Senator Hatch. Thank you, Mr. Chairman.
Welcome, Ambassador Froman. We appreciate you and the hard
work you are doing. This is an important hearing, and I
appreciate you coming and agreeing to participate.
Before addressing today's topic, I really want to discuss
our efforts to renew Trade Promotion Authority, or TPA. I have
been raising this with you and the administration now for
years, and, frankly, I cannot quite understand why the
administration does not get behind you and get this done.
I joined with my colleagues in the House and the Senate on
a bipartisan basis to come up with the Trade Priorities Act.
That bill renews and modernizes TPA. It is a bipartisan bill.
It is something that makes a lot of sense. But shortly after
introduction, the Finance Committee held a hearing on the bill,
and, at that time, they wrote to you, Ambassador Froman, and
formally requested that you appear at the hearing.
Despite the President's call for TPA renewal, no one from
the administration attended. At the time, I noted how important
it was for the administration to publicly and forcefully
advocate for congressional renewal of TPA, and, over the next
several months, I urged you and others in the administration to
be more active in advocating for TPA--for TPA renewal, that
is--making it clear that the legislative window was rapidly
closing. Despite my various calls for action and the calls of
other Senators on this committee, the administration's efforts
have been anemic in this regard. As a result, we are, 6 months
later, no closer to considering TPA legislation than we were in
January.
Now, I do not have to tell you, Mr. Ambassador, that
without TPA, the administration lacks congressional authority
to negotiate and conclude trade agreements, and, if the
administration chooses to negotiate and conclude a trade
agreement, such as the Trans-Pacific Partnership, even in
principal, without having TPA, they are going to be doing it
without Congress's authorization, and I would like to see
Congress involved.
And if this happens, I doubt Congress would grant such an
agreement the fast-track procedural benefits associated with
TPA. At that point, Congress may simply consider the agreement
on its merits under its regular rules and procedures, and that
might not be very good, at least considering some of the past
things that have happened.
I think the President's trade agenda is at risk if we do
not do this. Now, I am disappointed in the efforts I have seen
thus far, and I hope they will improve in the future. I support
AGOA.
Mr. Chairman, I ask that my full remarks be placed in the
record.
The Chairman. Without objection, so ordered.
Senator Hatch. But I am for AGOA. It is something that we
ought to do, something we must do. We do that because it is a
great thing for African countries that are involved, and it is
the right thing for us as well. So I am going to support that
as strongly as I can and support you in your efforts to get
that done. But I really want to bring home once again how
important TPA really is, and we should not keep putting it off.
I presume the President, if he wants to do it at all, will
probably try to do it in the lame duck session. It is called
lame duck for a variety of reasons, one of which is, hardly
anything ever gets done there. That has not always been the
case. There have been some things done there.
But I am really concerned about it, because I think that it
puts you and your work way behind, as far as I am concerned, at
least as far as getting congressional approval, which is
essential in these matters.
But in any event, Mr. Chairman, I intend to support you and
Ambassador Froman on AGOA and get that done as soon as we can.
The Chairman. Thank you, Senator Hatch. I just want you to
know of my very strong interest in working closely with you on
trade policy.
[The prepared statement of Senator Hatch appears in the
appendix.]
The Chairman. What we are doing now is talking to all of
those who have had a great interest in trade policy, and this
is business and labor and environmental people and people who
are concerned about health causes and digital goods. The list--
Senator Isakson, because he has been very involved in this
area--goes on and on.
The whole point of these discussions, apropos of Senator
Hatch's important concern here, is the better the TPA, the
better future trade agreements are going to be, and that is
enormously important to my State, where about one out of six
jobs depends on international commerce. And the trade jobs pay
better than do the non-trade jobs.
I just want Senator Hatch and all our colleagues on both
sides of the aisle to know that we are going to pursue very
vigorously these discussions with all of those who have had an
interest in trade policy so we can get the best, best possible
TPA, because we know that is going to pay big dividends as we
go forward with a whole host of these trade issues.
So thank you, Senator Hatch.
The sole witness at our hearing today will be the United
States Trade Representative, Michael Froman. It is his second
appearance in front of the committee in recent months. We thank
you for that.
Ambassador Froman, it is our usual practice, as you know,
to make your prepared statement a part of the record, and we
would like to ask you to use 5 minutes or so to summarize your
concerns, because I know colleagues have a number of questions.
So, welcome.
STATEMENT OF HON. MICHAEL FROMAN, UNITED STATES TRADE
REPRESENTATIVE, EXECUTIVE OFFICE OF THE PRESIDENT, WASHINGTON,
DC
Ambassador Froman. Thank you very much, Chairman Wyden,
Ranking Member Hatch, members of the committee, and thank you
for inviting me here today to testify about AGOA.
AGOA, as you have noted, has been the cornerstone of
America's economic engagement with sub-Saharan Africa for the
past 14 years, and it has had some very important successes.
U.S. imports from AGOA countries have grown from $8.2 billion
in 2001 to $26.8 billion in 2013, a threefold increase.
Non-oil AGOA trade has increased almost fourfold during the
same period, from $1.4 billion to almost $5 billion. U.S.
direct foreign investment stock in sub-Saharan Africa has also
increased from approximately $9 billion to $35 billion. And,
according to the African Coalition on Trade, AGOA-related
investment has resulted in the creation of some 300,000 jobs in
sub-Saharan Africa and almost 120,000 jobs here in the United
States.
But there clearly is more work to be done. Utilization of
AGOA is low and uneven. The bulk of U.S. imports under AGOA
come from a handful of countries, and, although we are
beginning to see diversification, exports under the program are
still concentrated in a relatively few sectors.
Finally, while the growth in exports has been impressive
over the life of AGOA, in absolute terms, the level of exports
is quite low. We can and must do better. And, to that end, last
August I launched a comprehensive review of AGOA to examine
both its successes over the last 14 years, as well as areas
where it might be improved. And, as we undertook this exercise,
we were mindful too that the Africa of 2000 is not the Africa
of 2014.
Six of the 10 fastest-growing economies in the world are in
Africa, and African countries are increasingly moving away from
unilateral preference programs and entering into reciprocal
trading relationships, including with the European Union. As we
think about AGOA's future, we need to consider how the U.S.-
Africa trade relationship should evolve over time as well.
We draw three main conclusions from our review. First,
while tariff preferences are important, they are not
sufficient. African countries face constraints to trade that
include inadequate and high-cost infrastructure, particularly
in the energy and transportation sectors; burdensome customs
procedures and other border barriers impacting Africa's
regional and global trade; difficulties complying with
agriculture safety and marketing standards, including sanitary
and phytosanitary standards; limited skilled labor; and low
productivity and competitiveness in non-oil value-added
products. And, despite growing business interest in Africa,
AGOA countries also continue to face difficulties finding
partners in the United States.
For AGOA to reach its full potential, it must be situated
at the core of a comprehensive trade and investment strategy,
an AGOA compact that targets the full range of supply-side
constraints to trade in Africa, that creates new markets for
African products, harnesses growing private-sector interest in
trade and investment, and promotes regional integration and
value-added production.
Now, this also includes moving forward with implementation
of the WTO Trade Facilitation Agreement concluded in Bali last
year, which, by OECD estimates, could lower costs for
developing countries in trade by up to 15 percent if fully
implemented.
Second, there are some areas in which the AGOA program
itself can be updated and improved. This, of course, is the
province of Congress, but the findings of our review may be
helpful as you consider these issues.
For example, the length of extension. Our research suggests
that it is important to extend the program for a sufficient
period of time to encourage investment in critical industries
in Africa.
Product coverage. As you said, Mr. Chairman, most AGOA
beneficiaries enjoy duty-free treatment for virtually all of
their products: 97.5 percent of the tariff lines are covered.
However, there are still 316 tariff lines that continue to lie
outside the program, and we believe that Congress should
consider whether any new products can now be added to the
program, keeping in mind domestic sensitivities.
Rules of origin. AGOA has some of the most flexible rules
of origin of any preference program. There are, however, areas
of the program where flexibility has been constrained. For
example, there are limits on accumulation of labor costs across
AGOA countries and a cap on the use of U.S. inputs in meeting
the requisite regional value content rules. Elimination of
these limits could also encourage greater integration into
regional and U.S.-Africa value chains.
Eligibility criteria. AGOA's eligibility criteria have
played an important role in raising standards and improving the
rule of law throughout the continent. However, they have not
been updated since AGOA was first established. Updating these
criteria, for example, to include provisions relating to
eliminating unwarranted SPS barriers and employment
discrimination, could be an important way to modernize the
program.
Eligibility review processes. AGOA's mechanism for ensuring
that countries meet eligibility criteria currently is all or
nothing. An approach that allows for partial and more immediate
withdrawal may allow the administration to take a more tailored
and nimble approach to drive positive changes in beneficiary
countries.
We look forward to working with you to explore these and
other issues in the process of moving forward with renewal.
Third and finally, while the administration remains firmly
committed to securing AGOA renewal, we need to begin working
with our African partners to develop a vision of a trade
relationship that goes beyond one-way preferences in the mid-
to long-term. As I said, today's world is different from the
one when AGOA was first enacted, both in Africa and in its
relations with major trading partners.
Against this backdrop, we need to consider the way ahead
and how different tools, from unilateral preference programs to
reciprocal trade agreements, might evolve to be used with
different partners to help us achieve our goals of broad-based
economic growth and prosperity.
With that, let me thank you again for the invitation to
testify, and I am happy to take your questions.
The Chairman. Thank you very much, Ambassador Froman.
[The prepared statement of Ambassador Froman appears in the
appendix.]
The Chairman. Let us talk about China's growing influence
in Africa, first of all. While AGOA has resulted in an increase
of U.S.-Africa trade since 2000, it appears that China's
engagement with this fast-growing region has far surpassed our
country. From 2000 to 2011, there was a 14-fold increase in
Africa's trade with China compared to just a threefold increase
during the same period for the United States and China.
What are the consequences, in your view, to sub-Saharan
Africa and the U.S. interests if China is significantly
enhancing its economic footprint in Africa and we are lagging
behind?
Ambassador Froman. Well, we firmly believe that Africa
ought to have good trade and investment relationships with
everybody, whether it is China or India or Turkey or any number
of other countries, the European Union, who are active in the
continent, and it is up to the Africans to determine what kind
of relationships they want to have and how to define those
relationships to ensure that they work in their interests.
Our experience has been that the more that other countries
like China are active in Africa, the more Africans want the
U.S. involved as well, because they know that we are not
interested in just taking resources out of the continent. We
are also interested in investing in human resources in the
continent.
The Chairman. If you might, give a couple of specifics.
What are the administration's key proposals to enhance the
value of AGOA and strengthen trade and economic ties between
our country and sub-Saharan Africa?
What would be the top two priorities, say?
Ambassador Froman. Well, with regard to AGOA, as I
mentioned, I think we need to look at both changes to the
program itself with regard to eligibility criteria, product
coverage, duration, and rules of origin, but then I think, very
importantly, we need to situate it in the context of other
policies that help address the
supply-side constraints.
For example, with regard to infrastructure, we are very
active in helping to promote Power Africa to enhance
electricity, access to affordable and reliable electricity,
which is a key factor in the competitiveness of African firms
being able to engage in the global economy.
The Chairman. Let me see if I can get a couple of others
in.
One, with respect to how to improve reciprocity with
developing countries, you talk about the need to move toward
more reciprocal arrangements with emerging market countries
rather than remaining satisfied just handing out these tariff
preferences, and I strongly agree with that. And certainly
there are legitimate questions about whether South Africa is
ready to graduate from the program given the size of its
economy.
Is it time for Congress and the administration to consider
whether countries like India, Thailand, Brazil, and Turkey are
also ready to graduate from the Generalized System of
Preferences program?
Ambassador Froman. Well, I think the application of the GSP
program is something that we need to think through and work on
with Congress, stakeholders, and our trading partners.
I note that both the European Union and Canada have
recently reformed their GSP programs and have graduated a
number of emerging economies. We have not done so. But I think
we need to look at how do we move toward a better set of
relationships with some of our key partners.
We had some experience in trying to negotiate reciprocal
arrangements in Africa with the South African Customs Union in
early 2000. And one of the lessons we learned out of that
experience is that, if the countries really are not ready for
our kind of FTA, then it is not going to be a productive
exercise.
So I think we need to think through this. We need to work
with you and our trading partners and our stakeholders to
determine how best to move forward, taking into account
different countries at different levels of development. In the
meantime, we need to work with our trading partners to address
bilateral trade issues so that we are not put at a competitive
disadvantage vis-aa-vis our competitors who may already have
those relationships.
The Chairman. Ambassador Froman, let me close this round by
asking you a question about human rights. It is my view that
Senator Cardin, a very valued member of this committee, has
done a great service by constantly coming back to this matter
of human rights and trade. I would be interested in your
thoughts about how the administration can use AGOA eligibility
criteria to better battle human rights infringements.
As you know, Uganda recently took a step that was not only
in the wrong direction, but I think a global affront. It passed
anti-gay legislation that I think contradicts globally
understood human rights.
How is the administration leveraging the eligibility
criteria found in AGOA to address policies like the one I have
mentioned in Uganda and elsewhere that are inconsistent with
human rights and AGOA's criteria?
Ambassador Froman. Well, first of all, the administration
has spoken out and will continue to speak out around the world
about the importance of implementing internationally recognized
human rights, including with regard to LGBT individuals. We
take this very seriously. We have taken a number of steps vis-
aa-vis Uganda, in particular, as you mentioned, in terms of
pulling back in certain areas of cooperation.
I wrote to my counterpart in February about this issue, and
we are engaged with Uganda, along with the other agencies of
the U.S. Government, on this issue to try to make progress. And
we have made it clear that, in regards to respect for human
rights, the criteria is that countries should not engage in
gross violations of internationally recognized human rights,
and we intend to take that seriously as part of our annual AGOA
review process.
The Chairman. My time has expired.
Senator Hatch?
Senator Hatch. Thank you, Mr. Chairman.
Ambassador Froman, as you know, I introduced the renewal of
Trade Promotion Authority, which specifically authorized
ongoing trade negotiations. But TPA authority is not limited to
those negotiations; it also opens up opportunities to negotiate
new trade agreements with any nation willing and able to meet
Congress's standards, including sub-Saharan Africa.
Now, if you ever receive TPA, would you consider initiating
trade negotiations with nations in sub-Saharan Africa, and, if
so, which nations do you think you would consider?
Ambassador Froman. Well, as I said, I think we need to very
much look at this issue and figure out whether it makes sense
to try to move toward more reciprocal trading arrangements with
various countries. We had this experience in the 2000s which
proved to be unproductive trying to do an FTA with the Southern
African Customs Union.
At the same time, much has changed since then. Many
countries have signed Free Trade Agreements or Economic
Partnership Agreements with the European Union. The EPAs with
the European Union tend to be of a different standard than our
FTAs. They tend not to include services necessarily or
intellectual property rights or labor and environmental issues.
And we would have to determine whether there is a model for
reciprocal trade relationships with the countries that you
mention, that you allude to, that make sense given our
standards.
Senator Hatch. You testified, I think, about the importance
of full implementation of the WTO Trade Facilitation Agreement
to economic growth for Africa and in Africa. For that reason, I
have to say I am extremely disappointed that India appears to
be going back on the deal it agreed to in Bali.
With respect to AGOA legislation, what changes could we
make that would best incentivize beneficiary countries to fully
embrace the necessary trade facilitation reforms?
Ambassador Froman. Well, we are quite concerned about the
current situation at the WTO around the implementation of the
Bali agreement and the Trade Facilitation Agreement. We have
been engaged with other countries, including in sub-Saharan
Africa, about the Trade Facilitation Agreement, and I am
gratified that the African countries are quite interested in
the Trade Facilitation Agreement and what it means for
improving their competitiveness.
There is a limited time left before the deadline comes,
midnight tomorrow night, for the implementation of the Trade
Facilitation Agreement, and I certainly encourage the other
countries that are currently holding up that agreement--it is a
very small number of countries that have expressed their
willingness to break that consensus--I encourage them to come
back to the table and support the consensus that would bring so
many development benefits to countries, including in sub-
Saharan Africa, and the failure of which will have serious
ramifications for the multilateral trading system itself.
So we are encouraged on that.
Senator Hatch. Last week the European Union completed an
Economic Partnership Agreement with the Southern African
Development Community, which is a group of countries in
southern Africa, including South Africa. As a part of that
agreement, the southern African countries agreed to protect 251
geographical indications, or GIs, from the E.U.
Now, this raises serious concerns. The E.U. has
aggressively been using trade agreements to inappropriately
protect generic terms around the world. Essentially, the E.U.
is using its trade agreements to undercut market access for
U.S. producers of products that use common names such as
cheddar, parmesan, and mozzarella.
While the TPA bill I introduced has provisions to address
these practices, I would like to know what you are doing to
combat this threat and to ensure U.S. producers do not lose
market access opportunities overseas due to the E.U.'s
inappropriate use of GI protection.
Ambassador Froman. We completely are in agreement with you
about the importance of addressing this issue. We are doing so
in TTIP directly with the E.U., but also in TPP and in our
other bilateral discussions.
The point that we make to all of our trading partners is
that the trademark system and the common name system that we
have in the United States works very well, including for
European producers of these products, but their GI system does
not work for our producers of these products. So we are pushing
very hard to make clear that we would find that unacceptable in
a trade agreement.
Senator Hatch. According to the International Trade
Commission's AGOA report released in April of this year, 24 out
of 39 countries eligible for AGOA benefits report utilization
rates of 10 percent or less, and 21 countries had utilization
rates of less than 1 percent. South Africa, the beneficiary
with the highest program utilization, was only at 31 percent.
So what are the most significant constraints to AGOA
beneficiary country utilization of the AGOA program?
Ambassador Froman. I think that underscores the importance
of addressing the supply-side constraints that are preventing
full usage of AGOA, for example, hard infrastructure, the lack
of roads, supports, and reliable, affordable electricity--and
Power Africa is very much directed at that effort.
Soft infrastructure. Right now, you get to a border. You
may wait for days to cross the customs plaza. It does not have
a computer system that can talk to the next customs plaza. You
wait another few days to get through there, and, by the time
you get through the two customs plazas, you have added a great
deal of cost to your shipment, and maybe your shipment is
spoiled.
So coming together, having single IT systems that can speak
to each other, that can link customs organizations, that can
get to a single customs crossing, we are addressing that
through Trade Africa and some of the work that we are doing on
that.
Issues around capacity building, having the USDA help
strengthen laboratories in sub-Saharan Africa, and inspectors
to help farmers meet our SPS standards and our other
standards--those are all things that we can do to help increase
the utilization of AGOA. Again, the review that we have done
over the last year shows that these tariff preferences, while
important, are simply not enough, that we have to address the
other issues.
The last thing I would say is, on the demand side, many of
these are small countries and small markets, and it is
important that they succeed in their efforts to integrate
regionally with their neighbors, and we are promoting regional
integration in Africa, including by working with the East
African community, for example, on a regional investment
arrangement.
Then they have a larger market for their products, it is
more efficient for them, and they can produce more competitive
products.
Senator Hatch. Thank you, sir.
The Chairman. Thank you, Senator Hatch.
Senator Isakson?
Senator Isakson. Mr. Chairman, if I can, on a point of
personal privilege, I would like to acknowledge the presence of
Congresswoman Karen Bass from California, who is in the
audience today. She is a steadfast worker on behalf of the
African continent and U.S.-Africa relations and traveled with
Ambassador Froman and myself to Ethiopia last year to the
African summits.
The Chairman. And to keep our tradition of bipartisanship,
let me second your comment, Senator Isakson, because I am very
much aware of the Congresswoman's good work, and we are glad to
have her here today as well.
Please go ahead with your questions.
Senator Isakson. Thank you, Mr. Chairman.
Three great things have happened on the continent of Africa
in the last 25 years. One, under the Clinton administration,
AGOA was negotiated and implemented.
Number two, under President Bush's initiative, PEPFAR (the
U.S. President's Emergency Plan for AIDS Relief) was
established, which is the greatest single humanitarian
accomplishment, I think, in terms of health, in the history of
mankind.
Then, third and most importantly, the Millennium Challenge
Corporation has allowed many African countries to be able to
develop the infrastructure necessary to be good trading
partners.
I think former Chairman, now Ranking Member Hatch's point
on TPA should be noted to this extent. AGOA is a nonreciprocal
trade agreement. So it is not affected by TPA. But the stated
goals of AGOA are to establish, hopefully, trade relationships
and free trade agreements with African countries by building
and developing, which would be subject to Trade Promotion
Authority.
So I think, every time we look the other way and put off
the inevitable--that is, giving the President the authority
under TPA that he needs, as well as the clear signal that trade
is important to the Congress of the United States--we run the
risk that we are not going to ever be able to cash in on the
tax dollars of the American people that are invested in PEPFAR,
the Millennium Challenge Corporation, or in AGOA.
So I think Senator Hatch makes an outstanding point. We
always talk about how we are going to get around to TPA, but I
think, when you talk about things like AGOA, which was
predicated on building relationships toward a future free trade
agreement, it shows you that time is of the essence in terms of
doing that.
That is a speech. That was not a question. You can comment
or not comment. I will give you your choice on that.
On the human rights question asked by the chairman, I want
to brag about Ambassador Froman for a minute. Last year, in
Addis Ababa, Ethiopia, he had to leave early, and he came up to
me and said, ``Would you go meet with Swaziland for a minute
and explain to them if they don't get their act together in
terms of worker rights, there could be consequences?''
Do you remember that?
Ambassador Froman. I do indeed.
Senator Isakson. So I went and met with Swaziland to
explain to them that beating up on workers and denying them the
right to organization and physically abusing them would be a
violation of principles the United States felt they need to
meet.
To the Ambassador's credit, last month, I believe they were
dropped from compliance with AGOA. Is that correct?
Ambassador Froman. That is correct.
Senator Isakson. Which leads me to the question I will
require you to answer. As we go into this current period
between now and next September and the next iteration of AGOA,
should we not have a tiered way for somebody to come back, like
Swaziland, to get back into the AGOA agreement? Because right
now, as I understand it, it is cold turkey and there is no
really tiered structure where compliance can bring them back
into AGOA. Is that correct?
Ambassador Froman. That is correct, in that it is an all or
nothing kind of switch. And that is one of the ideas that we
are proposing as Congress considers the renewal of AGOA, that
it would be worth looking at ways to have other more flexible
ways of limiting access and doing things in different time
periods than currently exist, and we have had success.
We have turned off AGOA for political issues, such as
coups, for a number of countries over its history--Mauritania,
Cote d'Ivoire, Guinea, Niger, Madagascar, and Mali--and those
countries all were re-entered into AGOA. They were allowed to
rejoin AGOA and become eligible again as they moved toward
democratic elections and democratic transitions.
So we certainly want to have the ability to both
incentivize them, to engage them in better policies, and, when
they do so, to reward them by giving them access again to the
AGOA program.
Senator Isakson. I know that the length of the extension of
the next AGOA agreement is certainly an issue that was
discussed at Addis Ababa, from 15 and 17 years out to shorter
periods of time, like 3 or 4. But it seems like, to me, if we
are ever going to get to the goal, which is a foundation for
free trade agreements with African countries that are
compliant, we ought to have some tiered levels of
accomplishment or participation so that we can go from an AGOA
agreement which is nonreciprocal to a true free trade agreement
with those countries.
Would you agree with that?
Ambassador Froman. Well, I think that bears a lot of
looking at. Yes. I think we need to work with you to think
through exactly how to do that, on both what the duration
should be and how we think about different tiers of countries
who may be more or less ready to engage in reciprocal trade
arrangements.
At the same time, we want to take into account regional
supply chains or regional value chains. If we do an FTA with
one country, do we not want to make sure we are not disrupting
important integration that is going on in the region as well?
So these are complicated issues that we very much look
forward to working with you on.
Senator Isakson. My last point, Mr. Chairman.
From my experience in Africa, getting the African countries
to recognize intellectual property protection, worker rights,
standards like we do in the United States, pay attention to
corruption and have a more stable environment in which to
trade, is the biggest single asset for the African countries to
grow and prosper under the next future AGOA agreement.
I commend the Ambassador for the work that he has done and
pledge to work with him in any way possible to facilitate an
extension of that agreement.
Thank you, Mr. Chairman.
The Chairman. I do not want to make this a bouquet-tossing
contest, but let me throw the commendations back to you,
Senator Isakson, because I know you have put a lot of years
into this effort at fostering trade relations with Africa, and
I very much appreciate your leadership.
Senator Thune?
Senator Thune. Ditto, Mr. Chairman. I also compliment my
colleague from Georgia. He has worked really hard on a lot of
these issues.
I appreciate you and Ranking Member Hatch holding the
hearing today, and I thank Ambassador Froman for being here.
The last time that we did this was in 2012, and let me just
say that AGOA is a great, important program that is helping the
nations of sub-Saharan Africa raise their standards of living
and adopt the rule of law. Since we did this the last time, we
added South Sudan as an eligible country so that the citizens
of that country can benefit from the greater market access for
their products in the United States. So I hope this hearing
will be the beginning of a process for considering reforms to
AGOA before the program expires next September.
I would also say--and I am sure you have heard it before,
but it is a point we cannot emphasize enough--we need TPA. You
can negotiate the best agreements possible, TTIP and TPP, but
we are not going to get them through Congress without Trade
Promotion Authority, and I just hope that you and the
administration will become fully engaged with Congress on that
issue. For some reason, we have not been able to get that
moving forward.
I wanted to ask a question, and it is not really AGOA-
specific, but one of the challenges that we are facing in
agriculture is making sure that our American ag technologies
are available to help nations of the world feed their
populations.
I do not think there is anywhere in the world where
American technology, such as agricultural biotechnology, could
be more useful than on the African continent. Yet we know that,
in the past, cultivation of biotech crops has been hampered by
the unwillingness of the E.U., which is a major African export
market, to approve these products.
In the context of the ongoing TTIP negotiations, how can we
ensure that the higher yields and other benefits of
agricultural biotechnology will be available to the nations
that need them the most and that these products, when exported
again, will not be discriminated against?
Ambassador Froman. Well, this is a very important issue in
our TTIP dialogue. We have made clear that we want to see SPS
standards and other standards based on science.
The E.U. actually has its own law and its own procedure for
approving biotech products. We prevailed in a WTO case against
them for them not implementing that law sufficiently well. They
have lost a European Court of Justice case, and our first step
with them in TTIP is to encourage them to apply their own law
and their own procedures to ensure that biotech products are
evaluated on science and are processed accordingly.
Recently, as you may know, the E.U. took a decision that
would allow countries in the E.U. to make their own individual
decisions about the importation and cultivation of genetically
engineered products, and we are hopeful that, as countries
decide whether they want to allow that cultivation to occur, we
will begin to see some progress in educating people about the
safety of those products and that they will make progress in
terms of market access in that regard.
Senator Thune. I just think it is a huge issue. Europe is a
huge export market for Africa, and, if you want to see the
African people, countries on that continent, be able to better
feed themselves, as well as to export and grow an economy, that
issue is critically important.
So I hope that you will continue to impress upon your
colleagues, in the trade negotiations with the Europeans at
least, that opening up to these products which are proven to be
safe is something that they should figure out a way to
expedite.
I know that they have their own process, as you described,
but sometimes those processes are very bureaucratic and, in
many cases, used, I think, to protect agriculture on the
European continent.
Just briefly, in your testimony, you talk about updating
AGOA eligibility standards. You mentioned the unjustified
sanitary and phytosanitary measures that have been adopted by
some African nations. I am wondering if you could elaborate on
some of those measures and how an updated AGOA might help to
address them.
Ambassador Froman. Currently, among the eligibility
criteria, AGOA partners are required to elimiate or to be
making continual progress toward eliminating barriers to U.S.
trade and investment. So they already have an obligation to
eliminate barriers to U.S. trade and investment.
What we have seen over the last few years are increasing
barriers being erected around sanitary and phytosanitary
standards. So one of the recommendations that we will make to
Congress as you consider the renewal of AGOA is to explicitly
mention the SPS standards as one of those barriers that we will
take into account as we do the annual review of AGOA
eligibility.
Senator Thune. Mr. Chairman, my time has expired. Thank
you.
The Chairman. Thank you.
Senator Cardin is next.
Senator Cardin. Thank you, Mr. Chairman.
Ambassador Froman, thank you. I think the timing of this
hearing is great, well in advance of the expiration of the AGOA
law. I am pleased that we are working on this early.
I think it is important that a message be included in the
meetings next week with African leaders that the Congress is
very much engaged on strengthening the ties between Africa and
the United States, and one of those is to look at tools that
have worked, such as AGOA, look at strengthening it and making
sure that those tools continue to be available. So I applaud
you for that.
I know Chairman Wyden has already mentioned a subject that
you and I have talked about, and I thank him for that, and that
is that good governance and human rights need to be and are
already part of the AGOA process, as you just pointed out in
response to Senator Thune.
I would urge you that, as we look at improving and
strengthening AGOA, part of that should be higher expectations
on the good governance issues and ways to monitor the progress
that is being made in these countries in a more effective way.
I want to ask a question on a second issue that we have
talked about, and that deals with capacity building. We do
invest today development assistance in African countries, some
of which are exporting to us under AGOA.
How do you coordinate our development assistance--how do
you deal with private-public partnerships as part of AGOA--so
that countries can really take advantage of the AGOA laws?
It is one thing to have trade agreements. It is another
thing to have the capacity to use those trade agreements in the
best interests of your country, and in many of the African
countries, they really do not have the capacity to deal with
that.
So the question is, how do you use AGOA to further the
capacity opportunities of these countries so that we really do
develop growing economies, stable markets, a growing middle
class to buy U.S. products--all of the above. How do we do
that?
Ambassador Froman. Thank you for that question. And I think
you will probably be hearing more about this this week around
the AGOA forum and the leaders' summit.
But to preview that, let me just say we have a whole-of-
government approach to what we are doing now on trade and
investment in AGOA, and it recognizes the role of the State
Department, the Commerce Department, USAID, MCC, USDA, the
Trade and Development Agency, all working to address those
supply-side constraints that I mentioned that will determine,
in our view, whether AGOA is more successful going forward--
even more successful than it has been in the past.
For example, on capacity building, one of the areas we have
identified as a need is to train inspectors and to upgrade
laboratories in sub-Saharan Africa so that they can work with
farmers there to more successfully meet our sanitary and
phytosanitary standards. And we are working with USAID and USDA
on a capacity building program, to expand their capacity
building program to achieve that objective.
We are also working to develop young entrepreneurs and to
give them the access, the networks, the training that they need
to be able to take advantage of that.
I had the honor this morning of meeting with 500 Mandela
Washington fellows under our Young African Leaders Initiative.
They are here in Washington this week. They have been in the
country for a month or so, having internships around the
country in various companies. They will be going back to
Africa, networking among themselves.
There were 50,000 applications for this program. Five
hundred people were selected from all over Africa, and this is
a program that we are going to continue to build upon that
helps create the entrepreneur class in these countries who have
ties to the United States and who want to see their products
make their way through AGOA to the U.S. market.
So we are using all of our interagency partners, MCC,
through their compacts, building roads, working on constraints
on growth, USAID, USDA, the Trade and Development Agency, OPIC,
and the like, to address all the issues that go into Africa
being able to take advantage of AGOA.
Senator Cardin. Let me mention one of the major pluses of
AGOA, and that is that it has helped women. Many of the people
who have benefitted from these opportunities have been women. A
lot of these fields are dominated by women.
So I would hope that part of our capacity building would be
geared toward gender sensitivity on how women are treated in
the economies of these countries.
Ambassador Froman. Absolutely. It is a key part of our
human rights and our labor rights. In fact, one of the
proposals we are making on the workers' rights piece of this is
to include nondiscrimination, to upgrade the definition of
internationally recognized workers' rights, as the ILO does, to
include nondiscrimination as well.
There is also the African Women's Entrepreneurship program
which the U.S. supports. It has been very effective in bringing
together women entrepreneurs in Africa and markets here in the
United States, including through the trade hubs, and we are
looking at ways to build on that as well.
Senator Cardin. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Cardin.
Senator Stabenow?
Senator Stabenow. Thank you very much, Mr. Chairman and
distinguished Ranking Member. This is a really important
hearing.
I think that it is clear that we want to get AGOA
reauthorized.
Thank you, Ambassador Froman.
I wanted to follow up on the capacity issues and, first,
underscore what Senator Cardin said in terms of leadership from
women. As I have been focusing more on Africa as the chair of
the Agriculture Committee, it is very clear that, first of all,
agriculture is a huge economic driver in Africa and, secondly,
that women are providing so much of the leadership, going from
micro-loans to be able to support their families, to gardens
for villages, to communities, to looking at how they now move
out to export or to expand.
So I want to underscore, I think, the importance of
capacity building as it relates to women in leadership. Also, I
wonder if you might just talk a little bit more--because I
think capacity challenges are so important in terms of what
happens to hold countries back.
You mentioned transportation. We know that if you cannot
move materials, you cannot move goods, you are not going to be
able to take advantage of AGOA. We know that simple things like
cold storage become an issue around meeting SPS standards.
By the way, I would also underscore what Senator Thune said
in his comments on technology and, also, your efforts around
barriers, using SPS standards as barriers, which I think is a
really important issue to deal with as part of this agreement,
because I do think that that is something that needs to be
addressed.
But when you look more broadly at capacity building and our
role in that or other organizations' roles and so on, how do
you see the U.S. Government being involved in that? What are
the tools, the other tools that we can be using to deal with
the capacity issues so countries can fully utilize AGOA?
Ambassador Froman. I think we have a number of tools, and
we are not starting from scratch. We have been involved in what
we call Aid for Trade for quite some time. We were quite a
generous donor on Aid for Trade. We are a leader globally in
that area, and we also play a convening role in bringing other
donors and multilateral development banks and other
institutions to the table on that.
That is the approach we have taken here as well. Through
this consultation process over the last year, we have heard
from people about the importance of addressing the capacity
building issues, as you mention, on women, on young
entrepreneurs, on meeting SPS standards, meeting technical
barriers of trade, technical standards as well, and we have
something called the Standards Alliance which works with
countries to help provide technical assistance to them, to
train them on how to meet technical standards to address the
U.S. market, and we are going to work with all of our
interagency partners to do that.
But it is not something we have to do alone either. We are
part of a larger donor community, part of a larger
international community.
So, for example, on trade facilitation, which is a key part
of this, we can bring together customs organizations so that
they have the same procedures and have the same policies,
actually have common information technology platforms. If you
clear a shipment in Mombasa, you do not have to re-clear it
every time it crosses a border in the East African community.
That is something we are doing through the WTO, with the
African Development Bank, with the World Bank, as well as with
the other donors. And we have played an active role in helping
to identify those resources to make sure they are coordinated,
and we work with the African countries on their needs
assessments to be able to address those.
Senator Stabenow. Just quickly--my time is running out--I
know that we have had a lot of U.S. agriculture companies that
have been involved for a long time in Africa, and more and more
all the time, and they are focusing on issues like drought
resistance and water conservation and other issues.
We also have land grant colleges, like Michigan State
University, my alma mater, that are very involved in research.
How are USTR and our partner agencies facilitating the
exchange of knowledge and technical resources between U.S.
agriculture and AGOA nations? Are there things we could be
doing better there?
Ambassador Froman. Thank you. We are working with the rest
of the interagency community. And Raj Shah, the head of USAID,
in particular, has played a leading role, for example, on the
new Alliance for Food Security and Nutrition, bringing to the
table both U.S. research institutions and the U.S. private
sector to invest in Africa, bring in technology, bring in
technical training, to make sure that they can meet SPS
standards, increase agricultural productivity, and develop
those markets that ultimately will be both to the benefit of
Africa in terms of development, but also will help them get
access to global markets as well.
So we are working with all of our interagency partners to
try to make sure we have a whole-of-government approach, a one-
stop-shop approach. So, as we sit down with our African
partners, we can look at all of their needs and what capacity
constraints they face and bring the appropriate resources to
bear.
Senator Stabenow. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Stabenow.
I also want to note that you and Senator Isakson had a very
good hearing, I think it was yesterday, on the 2-year
anniversary of the U.S.-Korea free trade agreement, and we know
that you, as chair, and Senator Isakson are going to do an
excellent job there. I am anxious to hear more about the
lessons learned.
I have only one other question--and this will not surprise
you, Ambassador Froman--and it is on the digital infrastructure
of Africa, because I think Senator Stabenow is absolutely right
about what we have always thought of with respect to the
physical infrastructure. We talk about roads and rail and
water, but we need to think about, for example, how an African
farmer is going to get information about markets, for example,
if they do not have any access to broadband.
So tell me, if you would, what is the administration doing
in terms of working with Africa on infrastructure challenges,
particularly as they relate to Internet-based infrastructure?
Ambassador Froman. As you know, Africa has been an area of
great growth in this area. Over 50 percent of urban residents
in Africa are now online. There are more than 50 million
Facebook users in Africa, and mobile phone penetration, perhaps
most importantly, has gone from 1 percent to 50 percent of the
African population.
That is absolutely critical to the issue you mention about
farmers, for example, and folks in rural Africa who are now
getting information on their mobile phones about weather, about
market prices, which can help them make decisions about what to
plant and when to harvest and where to sell their product and
at what prices, because of that connectivity.
There is certainly more to be done there, and it is one
area we have been focused in particular on in our food security
program, Feed the Future: technology and how to use Internet
connectivity and mobile technology to help farmers achieve
greater productivity.
Of course, it is one of the underlying issues behind Power
Africa. We want to make sure that there is affordable, reliable
electricity throughout the continent so that when people are
charging their phones or getting online, they can stay
connected to the rest of the world.
The Chairman. I am only going to make one point in wrapping
up--and I think Senator Hatch and I do not have any further
questions.
Generally, Mr. Ambassador, I think there has been a sense
that AGOA was seen as the program that Congress created; this
was essentially Congress's effort. And my view is, this
administration has focused on AGOA in ways that no other has,
in part by your interest, Mr. Ambassador, and certainly the
President's.
So I think my judgment, as we leave now, given that history
where people said, ``Hey, I think this program, AGOA, is a good
program, it is Congress's,'' is that it is clear now that the
Obama administration owns AGOA too. I think that is very
valuable.
The policy options you shared with the committee today are
going to be taken seriously as we continue our work.
I always like to see if Senator Hatch wants to offer the
last word, but we appreciate your cooperation.
Senator Hatch?
Senator Hatch. I appreciate the work you do. You are
certainly an intelligent man, and I have no doubt that you will
be able to accomplish whatever you decide to do.
I just want to make sure you have the tools to be able to
do it, and that we have the tools up here to be able to help
you.
So I have every confidence in you and wish you the very
best.
The Chairman. With that, the Finance Committee is
adjourned.
[Whereupon, at 3:10 p.m., the hearing was concluded.]
A P P E N D I X
Additional Material Submitted for the Record
----------
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Communications
----------
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
[all]