[Senate Hearing 114-297]
[From the U.S. Government Publishing Office]
S. Hrg. 114-297
THE AFRICAN GROWTH AND OPPORTUNITY ACT (AGOA)
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON AFRICA AND
GLOBAL HEALTH POLICY
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
APRIL 23, 2015
__________
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COMMITTEE ON FOREIGN RELATIONS
BOB CORKER, TENNESSEE, Chairman
JAMES E. RISCH, Idaho BENJAMIN L. CARDIN, Maryland
MARCO RUBIO, Florida BARBARA BOXER, California
RON JOHNSON, Wisconsin ROBERT MENENDEZ, New Jersey
JEFF FLAKE, Arizona JEANNE SHAHEEN, New Hampshire
CORY GARDNER, Colorado CHRISTOPHER A. COONS, Delaware
DAVID PERDUE, Georgia TOM UDALL, New Mexico
JOHNNY ISAKSON, Georgia CHRISTOPHER MURPHY, Connecticut
RAND PAUL, Kentucky TIM KAINE, Virginia
JOHN BARRASSO, Wyoming EDWARD J. MARKEY, Massachusetts
Lester Munson III, Staff Director
Jodi B. Herman, Democratic Staff Director
Jamil Jaffer, Majority Chief Counsel
Margaret Taylor, Minority Chief Counsel
John Dutton, Chief Clerk
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SUBCOMMITTEE ON AFRICA AND
GLOBAL HEALTH POLICY
JEFF FLAKE, Arizona, Chairman
JOHNNY ISAKSON, Georgia EDWARD J. MARKEY, Massachusetts
RAND PAUL, Kentucky CHRISTOPHER A. COONS, Delaware
JOHN BARRASSO, Wyoming TOM UDALL, New Mexico
MARCO RUBIO, Florida BENJAMIN L. CARDIN, Maryland
(ii)
C O N T E N T S
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Page
Hon. Jeff Flake, U.S. Senator From Arizona....................... 1
Hon. Edward J. Markey, U.S. Senator From Massachusetts........... 2
Tom Hart, U.S. Executive Director, One Campaign, Washington, DC.. 3
Prepared statement........................................... 5
Scott Eisner, Vice President for African Affairs and
International Operations, U.S. Chamber of Commerce, Washington,
DC............................................................. 9
Prepared statement........................................... 11
William McRaith, Chief Supply Chain Officer, Pvh Corp., New York,
NY............................................................. 16
Prepared statement........................................... 18
Walker Williams, President and Chief Executive Officer,
Leadership Africa USA, Washington, DC.......................... 22
Prepared statement........................................... 23
Catherine Feingold, Director of International Affairs, AFL-CIO,
Washington, DC................................................. 33
Prepared statement........................................... 34
Additional Material Submitted for the Record..................... 48
(iii)
THE AFRICAN GROWTH AND
OPPORTUNITY ACT (AGOA)
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THURSDAY, APRIL 23, 2015
U.S. Senate,
Subcommittee on Africa and Global Health Policy,
Committee on Foreign Relations,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:00 a.m., in
SD-419, Dirksen Senate Office Building, Hon. Jeff Flake,
chairman of the subcommittee, presiding.
Present: Senators Flake [presiding], Isakson, Markey, and
Coons.
OPENING STATEMENT OF HON. JEFF FLAKE,
U.S. SENATOR FROM ARIZONA
Senator Flake. This hearing of the Senate Foreign Relations
Subcommittee on African Affairs and Global Health Policy will
come to order. Earlier this year I chaired a hearing to explore
growth and investment in Africa following the 2014 U.S.
leaders--Africa Leaders summit. And today we are talking about
examining one of the key tools to help advance those aims, the
Africa Growth and Opportunity Act, or AGOA.
AGOA was created to provide incentives for African
countries to strengthen the business climate, grow economies,
and attract investment. And in doing so, AGOA aims to help
encourage stronger commercial ties with the United States and
integrate Africa into the global economy. As we all know, sub-
Saharan Africa's consumer base of nearly 1 billion people is
rapidly growing and has the potential to create increased
demand for U.S. goods, services, and technologies.
While ultimately African countries in the United States
would benefit from bilateral trade agreements like those in
place with other markets, the AGOA reauthorization is a step in
the right direction. And by the way, we hear that the Finance
Committee late last night did pass a reauthorization with a
broader package, so that is good news. AGOA will help build
capacity on the continent while sending a positive signal to
investors who are currently deciding whether to invest in
Africa or to look further afield.
Today we will hear from witnesses who will discuss how best
AGOA can advance growth and investment on the continent as well
as address the limitations of the act in the long term. Now,
each of our witnesses today brings a unique perspective to the
issue at hand, and I have no doubt they will contribute to the
debate. I thank all of you for your time, for showing up here
and sharing your experience, and I look forward to the
testimony here.
With that, I will recognize the distinguished ranking
member, Senator Markey, for any comments he might have.
OPENING STATEMENT OF HON. EDWARD J. MARKEY,
U.S. SENATOR FROM MASSACHUSETTS
Senator Markey. Thank you, Mr. Chairman, very much, and
thank all of those who have come here this morning. The African
Growth and Opportunity Act has been an important component of
the United States engagement in Africa for the last 15 years.
The esteemed Ambassadors from a number of African numbers,
including Cape Verde, Gabon, Zambia, Ghana, South Africa, Togo,
Burundi, Sierra Leone, Cameroon, and Madagascar, join us today
in a testament to the importance of AGOA.
AGOA enjoys bipartisan support because of its ability to
assist qualifying sub-Saharan African countries in gaining
greater access to United States markets, support economic
development, and advance good governance. The African economy
is expected to have a GDP growth of 4.5 percent in 2015,
outpacing even Asia in its growth.
As the Senate works on reauthorizing AGOA, we need to
consider how we can improve on its existing success. I look
forward to hearing from our witnesses how we can increase the
ability of AGOA partner countries to access its benefits, and
how AGOA can support decent work and fair labor standards. Mr.
Chairman, I would also like to supplement today's testimony by
including for the record a letter of support for the AGOA
extension from the Ethiopian Global Initiative.
Senator Flake. Without objection.
[Editor's note.--The letter mentioned above can be found in the
``Additional Material Submitted for the Record'' section at the
end of this hearing.]
Senator Markey. Thank you, Mr. Chairman, and I yield back
the balance of my time.
Senator Flake. Thank you, Senator Markey. We will go ahead.
I will introduce all of you together, and I believe Congressman
Isakson is on his way. I will let him talk about the action
last night when he gets here. But we will start with the
witnesses.
Tom Hart is the U.S. executive director for ONE, an
advocacy organization that aims to end extreme poverty and
preventable disease particularly in Africa. He and his team
have provided expertise on development assistance, particularly
in the areas of HIV/AIDS, malaria, and TB through PEPFAR, and
the Global Fund, and the Millennium Challenge Corporation.
Scott Eisner is the vice president for African Affairs at
the U.S. Chamber of Commerce where he represents the Chamber's
interest in sub-Saharan Africa through its Africa Business
initiative. Before joining the Chamber, Eisner spent time in
international politics working for the International Republican
Institute in Malawi, and he trained political parties there in
communications and campaign tactics.
Walter Williams is the president and chief executive
officer with Leadership Africa USA. Mr. Williams previously
served as president and founder of Education Africa USA,
focused on addressing educational challenges facing South
Africa's first democratically elected government. As a
consultant, Mr. Williams has worked with more than 100 NGOs
actively involved in development issues. He has also worked
extensively in international and U.S. government agencies.
Bill McRaith is chief supply chain officer for PVH Corp.,
at which he oversees the company's global supply chain
operations and is responsible for developing global production
systems to service the needs of PVH retail and wholesale
divisions. Before joining PVH, Bill served as senior vice
president of global sourcing at Walmart, and was previously
senior vice president of product development and supply chain
operations with Spiegel brands.
Catherine Feingold is the director of international affairs
at the AFL-CIO. Ms. Feingold previously served as director of
the Solidarity Center in Haiti and the Dominican Republic.
Feingold is a member of the Council on Foreign Relations, and
most recently worked in Haiti to promote good jobs and fair
wages as part of the post-earthquake redevelopment effort.
Again, thank you all for coming, and we will go ahead and
start as I introduced you. And please go ahead, Mr. Hart. Let
me just say your testimony will all be in the record, of
course. If you could, as close to 5 minutes as possible, limit
your remarks, we would be grateful.
STATEMENT OF TOM HART, U.S. EXECUTIVE DIRECTOR, ONE CAMPAIGN,
WASHINGTON, DC
Mr. Hart. Great, thank you so much. Chairman Flake, Ranking
Member Markey, and other members of the subcommittee, thank you
for the opportunity to testify on the important role trade
plays in alleviating poverty and on the reauthorization of
AGOA. The ONE Campaign represents a broad constituency of 6
million people globally, with a third in Africa and a third in
the United States.
We are probably best known by our cofounder, Bono, the lead
singer from U2. Bono actually has firsthand understanding of
the benefits and importance of AGOA. His wife, Ali Hewson,
founded a small clothing company called EDUN, which works with
companies in Kenya, Madagascar, and Uganda importing products
to the United States under AGOA. ONE fully supports the swift
reauthorization of AGOA and hopes it might be strengthened in
several ways that I will describe briefly.
Trade is an essential tool in driving economic growth and
creating jobs, which in turn reduces poverty. For example, the
small village of Masoro in Rwanda saw a boost in jobs and
income when the popular U.S. designer, Kate Spade, began
working there. A 158 local artisans honed their skills to
create quality products that are exported to global markets
through Kate Spade. Most employees are the sole family
breadwinner, with each supporting on average four other people.
And additional jobs have been created as new restaurants and
shops opened in the village to support the workers. This
demonstrates the powerful impact that one access point to the
global market can have on an entire community.
For the sake of time, I will skip what AGOA has achieved
over the last 15 years and discuss how we would like to see it
improved. When Congress created AGOA, the United States
eliminated tariffs and threw open the doors to U.S. markets
only to find over time that very few products trickled through.
Lack of trade and technical capacity, weak regional trade
linkages, and insufficient critical infrastructure also stood
in the way. Let me address each briefly.
African countries need technical support to strengthen
their economic policies, build well-functioning institutions,
improve regulatory policies, and improve private sector
operating practices in their own countries. And they need
support navigating the 21 U.S. Government agencies that spend
over $700 million trade capacity in 20 different categories.
While all of these agencies are doing good work, we need
greater coordination and streamlining among them. And we also
must listen to what African businesses, local leaders, and
government officials are asking for.
Looking quickly at regional integration, Africa's most
important trading partners live right next door, yet trade
barriers between African countries are among the highest in the
world. The Obama administration's Trade Africa initiative is
making a good start by aiming to double intraregional trade in
East Asia, which we support and believe should be expanded.
We also believe the Millennium Challenge Corporation should
have the authority to pursue regional compacts. MCC has already
provided over $3 billion trade-related assistance to 14 AGOA-
eligible countries since its creation. With regionally focused
compacts, MCC could promote cross-border engagement, create
larger and more harmonized markets, and improve trade among
countries in Africa.
Lastly, most African countries struggle with insufficient
infrastructure. Without adequate roads and ports, they cannot
get their goods to market. Transportation costs can add 77
percent to the value of exports making African products
uncompetitive.
Also nearly half of all African businesses cite the lack of
reliable energy access as their biggest obstacle to growth.
When electricity provided from the grid is not reliable,
businesses must run diesel generators, which are three to six
times more expensive as well as dirty and dangerous. Higher
energy prices increase production costs, making manufacturing
uncompetitive, slowing job growth, and slowing annual GDP
growth by an estimated 1 to 3 percent. We hope the Senate will
move swiftly to introduce and pass the Electrify Africa Act,
which along with AGOA would be a one-two punch to support
economic growth and poverty reduction in Africa.
So what is next for the U.S. Africa trade relationship? We
believe now is the time to look beyond preferences and
nonbinding TIFAs and begin pursuing reciprocal trade agreements
in order to deepen our economic relationship with the
continent. As the Senator said, sub-Saharan Africa's GDP is
expected to grow by four and a half times, outpacing even Asia.
This growth means that there are going to be more customers in
Africa, and we should make sure that we pursue agreements that
allow these new customers to buy American goods.
And to be clear, if we do not, others will. The European
Union and China are both actively pursuing reciprocal trade
agreements with sub-Saharan Africa. During the same period
United States exports to Africa grew by three times, China's
grew by thirteen. We would like to see a strong expansion of
bilateral and regional investment treaties and have USTR pursue
negotiations on free trade agreements with at least two sub-
Saharan African partners before the end of the administration.
To conclude, ONE continues to believe that U.S. foreign
assistance remains critical. The United States supports heroic
work to combat HIV/AIDS, malaria, hunger, and poverty around
the world, and this assistance will remain necessary for some
time. But that time will be shorter when trade, not aid,
defines our relationship with Africa. Now is the time to
redouble our efforts to support economic growth on the
continent.
Thank you.
[The prepared statement of Mr. Hart follows:]
Prepared Statement of Thomas H. Hart
Chairman Flake, Ranking Member Markey, and distinguished members of
the subcommittee, thank you for the opportunity to testify today on the
important role trade plays in alleviating poverty, specifically on the
reauthorization of the African Growth and Opportunity Act (AGOA).
The ONE Campaign represents a broad constituency of 6 million
members, one-third of whom are in Africa and one-third in the United
States, with the rest in Europe and elsewhere around the world. As a
policy advocacy organization committed to the fight against global
poverty and disease, we raise awareness about critical issues and work
with policymakers on bipartisan solutions. Our members are committed to
addressing the impacts of extreme poverty as well as the long-term
solutions. We believe trade is an essential tool in that fight.
You probably know ONE from our cofounder Bono, the lead singer of
the band U2. Bono actually has a firsthand understanding of the
importance of AGOA. His wife, Ali Hewson, founded a small clothing
company, called EDUN, which produces clothes in Kenya and Madagascar,
and works with the Conservation Cotton Initiative Uganda. This
initiative provides training and enterprise support to farmers in
northwest Uganda. EDUN and the cotton initiative are employing Africans
and creating clothes that are imported to the United States under AGOA.
ONE heartily supports the reauthorization of AGOA and applauds the
Finance Committee for clearing the legislation. We hoped to see a 15-
year extension, but believe a 10-year extension provides the assurance
businesses need to maintain operations, make new investments, and
continue to effectively utilize the AGOA preference program. We also
hope the legislation will be strengthened in several ways I will
describe later. But most importantly, we urge Congress to reauthorize
the program quickly.
The ability to trade is essential to driving economic growth and
creating jobs, which in turn reduces poverty. After the Korean war,
South Korea was one of the poorest countries in the world with a per
capita income of only $64, making it at that time poorer than the
Democratic Republic of Congo. Today, South Korea has a per capita
income of over $23,000, with its own foreign aid program, and is richer
than either Spain or New Zealand. South Korea has achieved an average
growth rate of 7 percent over the last 50 years, which has had a
profound impact on alleviating poverty. Trade and export-oriented
growth were two key elements of this incredible development and
poverty-reduction success.
We are seeing signs of this type of economic development and
investment in countries across Africa as well. For example, Kate Spade,
the popular U.S. apparel and accessory company has begun working with a
Rwandan-owned for-profit business that employs 158 workers. Local
artisans in the village of Masoro have honed their skills to create
quality products that are exported to global markets. Seventy-seven
percent of the employees are the primary or sole income earner in their
home and 80 percent report this is their first formal job. Each
employee is, on average, supporting four other people. This is not a
charity project for Kate Spade; it is a strategic investment in this
group of artisans that is helping them become a profitable supplier,
able to participate in the global market place.
The impact of this one supplier is not just limited to its
employees and their dependents; it is having an impact on the broader
community as well. Within the first 8 months of the business being an
official Kate Spade & Company supplier, a new restaurant opened to
serve the employees, and new salons and seamstresses opened as well.
This small-scale example demonstrates the powerful impact one access
point to the global market place can have for an entire community.
My testimony today will focus on three areas. First, what AGOA has
accomplished, particularly in regards to the fight against extreme
poverty; second, what we see as some of AGOA's shortfalls and ways it
can be improved; and third, what is next for the U.S.-Africa trade
relationship.
what has agoa accomplished?
Since AGOA's adoption in 2000, U.S. imports from sub-Saharan Africa
have increased more than three times, and reached $26.7 billion in
2014. The vast majority is from oil and minerals. Nonmineral and nonoil
exports to the United States have increased fourfold in the last 14
years, leading to strong job creation. Since 2001, AGOA has generated
approximately 350,000 direct jobs and over 1 million indirect jobs
across sub-Saharan Africa, supporting up to 10 million people.
Increased trade under AGOA has also created around 100,000 jobs in the
United States, because as African economies grow they open up new
markets for U.S. goods and services.\1\
The textile industry has experienced particularly strong growth
under AGOA, and is responsible for a good number of the jobs created.
Many of these jobs are held by women, which is important given that
women are more likely to invest their income in the health and welfare
of their families and communities. The State Department is working
through its African Women's Entrepreneurship Program to target African
women entrepreneurs to promote business growth, create better business
environments, and increase trade both regionally and to U.S. markets
through AGOA.
how can agoa be improved?
One often-voiced criticism of AGOA is only a small number of
countries use it. In 2013, over half of the AGOA eligible countries
exported less than $1 million of product to the United States. South
Africa and Nigeria alone represent 73 percent of all U.S. noncrude
petroleum imports under AGOA in 2013. The top textile and apparel
producers are Kenya, Lesotho, and Mauritius, followed by Cote d'Ivoire
which exports primarily cocoa products.\2\
When Congress created AGOA 15 years ago, many believed tariffs and
the lack of market access were the biggest inhibiters of economic
growth in Africa. However, when AGOA removed those barriers we saw
there were other structural problems keeping many African countries
from taking advantage of AGOA preferences, including weak trade and
technical capacity, a lack of regional trade linkages, and insufficient
critical infrastructure. In other words, Congress threw open the doors
on tariffs and access, only to find very few products trickle through.
These additional barriers must be addressed in order for more sub-
Saharan African countries to fully take advantage of the benefits
provided under AGOA and grow their economies.
The Agriculture sector is one that demonstrates the needs across
all three of these issues. Sub-Saharan Africa is home to 50 percent of
the world's uncultivated arable land and could be a major export area
for the continent. Yet, it is only expected to produce 15 percent of
its own projected food demand by 2030. Barriers to agricultural growth
are similar to the barriers in other economic sectors on the continent:
lack of regional integration and technical capacity. Before Africa can
better utilize the trade preferences AGOA provides, there must be
better intra-African value chains throughout the region. This means
transportation infrastructure with shorter waiting times at border
crossings and ports. It means harmonized regulations and standards
throughout the region, to facilitate linkages in the value chain and
cross-border collaboration between companies. And it means greater
technical assistance from the U.S. Government on sanitary and phyto-
sanitary standards, so that African produce can be shipped globally.
Trade and Technical Capacity
Trade capacity-building is essential for ensuring the utility of
AGOA for eligible partners and addressing nontariff trade barriers.
Trade capacity-building covers a variety of activities, including
efforts to strengthen economic policies; remove trade barriers; build
well-functioning economic, political, and legal institutions; improve
regulatory policies that affect the way firms compete; and improve
private sector operating practices and strategies.
According to the USAID database on trade capacity-building there
are 21 U.S. Government agencies that spent over $711 million in trade
capacity-building assistance in 2013.\3\ This assistance is given in 20
different categories. While all of these agencies are doing good and
necessary work, we need greater coordination and streamlining among
these agencies to ensure maximum efficiency and return on our
investment.
We must also recognize that our African partners know best what
they need, and ensure that we are listening to what business owners,
local leaders, and government officials in African countries are asking
for. The U.S. Government must do a better job of properly targeting
resources for capacity-building projects that are based on locally
identified capacity gaps.
Also, we recognize our partners in Africa often lack the technical
assistance and knowledge to be able to navigate the complex web of
agencies that participate in setting standards for trade.
Regional Integration
As the United States main Africa trade promotion vehicle, AGOA
should encourage and facilitate more intra-Africa trade. Trade
barriers, including nontariff barriers, between African countries are
among the highest in the world. USAID and USTR are working through the
Obama administration's Trade Africa initiative to address the need for
further regional integration and intra-African trade. In its initial
phase, Trade Africa is focused on a partnership with the East African
Community.\4\ It aims to double intraregional trade among EAC member
states, increase exports from EAC member states to the United States by
40 percent, and reduce the average time it takes to import or export a
container from a land-locked country by 15 percent, and to decrease by
30 percent the average time a truck takes to transit selected borders.
From 2013-2014 there was a 24-percent increase in exports of goods
from the EAC to the United States. Container transit times from Mombasa
to Kigali have decreased from 21 days to just 6 days, and associated
costs are down by over $1,700 per container.\5\ This is excellent
progress and we need more targeted assistance like this, having a real
impact on the cost of production that increases the competitiveness of
goods from African countries.
We also believe Millennium Challenge Corporation can be a key
player in improving regional integration, and believe this legislation
should give MCC the authority to pursue regional compacts. MCC has
already provided over $3 billion in trade-related assistance to 14 AGOA
eligible countries since its creation in 2004. With regionally focused
compacts, MCC could significantly improve trade and investment between
and among countries in Africa. By promoting cross-border engagement,
MCC regional compacts would help create larger and more harmonized
markets for trade and development and, at the same time, open new
opportunities for American companies.
Infrastructure and Energy
Lastly, sub-Saharan African countries are struggling with
insufficient critical infrastructure. Without adequate roads and ports,
they cannot get their goods to market. Transportation costs can equal
up to 77 percent of the value of exports, making African products
uncompetitive in the global market place. In addition, electricity
costs are enormous because a scarcity of grids means that producers are
forced to pay for expensive generators and diesel fuel to power their
activities.
Among the massive infrastructure deficit on the continent, we
believe electricity is a critical challenge we should meet immediately.
This is why ONE strongly supports the introduction and passage of the
Electrify Africa Act as soon as possible. This legislation would
support expanding access to catalyze investment in the energy sector in
Africa, generating 20 new gigawatts of power, providing first-time
access to 50 million people by 2020. The bill uses already existing
government resources, allowing us to reach these goals with no
additional appropriations needed.
Nearly half of all African businesses cite the lack of reliable
energy access as their biggest obstacle to growth. When electricity
provided from the grid is not reliable, businesses must run diesel
generators to keep their operations functioning. Pulling energy from a
generator costs somewhere between three and six times what electricity
from the grid costs worldwide.\6\ Higher energy prices increase
production costs, making manufacturing in Africa uncompetitive, slowing
job growth, and slowing annual GDP growth by an estimated 1 to 3
percentage points.\7\ In Kenya 57 percent of businesses own generators;
in Tanzania it is 42 percent; and in Ethiopia, 41 percent.\8\ In South
Africa, growth fell from 2.2 percent in 2013 to 1.5 percent in 2014,
due in part to electricity supply constraints.\9\
Access to safe and reliable electricity at competitive costs is
essential to economic development. In order for African businesses to
be competitive in the global market place, we must address these very
real and serious infrastructure challenges that are currently serving
as nontariff barriers to trade, both within Africa and between Africa
and the rest of the world.
One year ago, I sat at this very table at a hearing on energy
poverty, and bipartisan legislation very nearly passed in December. We
hope the Senate will move expeditiously to pass the Electrify Africa
Act, which, along with speedy passage of AGOA, would be a one-two punch
to support economic growth and poverty reduction in Africa.
what is next for the u.s.-africa trade relationship?
While we strongly support AGOA, we believe there is much more the
United States Government can and should be doing to enhance trade with
sub-Saharan African countries. The statement of policy in the original
AGOA legislation expressed support for negotiating reciprocal and
mutually beneficial trade agreements. As Congress moves to reauthorize
and improve AGOA, now is the time to look beyond preferences, and
recognize the need for reciprocal trade agreements in this rapidly
maturing relationship between the United States and the continent.
In 2015, sub-Saharan Africa's GDP is expected to grow at 4.5
percent, making it the fastest-growing economic zone in the world,
outpacing Asia's regional average of 4.3 percent annual growth.\10\
This economic growth means there is a rising middle class in Africa,
who are new consumers. The United States should be aggressively
pursuing agreements that would allow these new consumers to buy
American goods.
The European Union and China are both actively pursuing reciprocal
trade relationships with sub-Saharan Africa. During the same period
that U.S. exports to Africa grew by a multiple of 3, China's grew by a
multiple of 13, from $4.4 billion to $56.3 billion. In fact, in 2011,
U.S. and Chinese exports of machinery and transport equipment to sub-
Saharan Africa represented 41 percent and 40 percent, respectively, of
the value of the two countries' total exports to sub-Saharan Africa.
But China's exports of machinery and transport equipment was almost
triple the value of the United States. If the United States continues
to be satisfied with the nonreciprocal AGOA as the primary feature of
our trade relationship with Africa, we risk missing out on huge
opportunities.
We would like to see the administration pursue an aggressive trade
agenda in Africa over the next 18 months that moves beyond nonbinding
Trade and Investment Framework Agreements. We would like to see the
United States pursue Bilateral Investment Treaties that provide foreign
investors with core protections against political risk and uncertain
business environments. Currently the United States has only six BIT
agreements in place, which collectively only cover 7 percent of
regional GDP.\11\ USTR should move to conclude the BIT's currently
under consideration with Mauritius and the East African Community.
Additionally and importantly, we also would like to see USTR begin
pursuing negotiations on FTAs with at least two sub-Saharan African
partners before the end of this administration.
We were pleased to see that the introduced AGOA legislation
includes a requirement that USTR submit a report to Congress
identifying African countries that have expressed an interest in
entering into a FTA and evaluating the viability of pursing a FTA, and
plans for negotiating and concluding a FTA. This reporting requirement
is a great start, but should be strengthened.
USTR should be required to report to Congress within 6 months of
passage, and provide updates annually thereafter. The report should
include a list of no less than five countries USTR identifies as
potential targets for FTA negotiations. USTR should also be required to
provide a roadmap of reforms necessary for African countries to be able
to enter into a negotiation for an FTA. I hope that Congress will push
USTR on this worthy goal, and strengthen reporting language to ensure
USTR is proactive in this regard.
conclusion
ONE supports AGOA and the U.S.-Africa trade relationship because we
believe trade is an important tool to reduce poverty, promote job
creation and the dignity that all people strive for, no matter where
they live. I urge you to reauthorize AGOA as quickly as possible and
strive to strengthen it; introduce and pass the Electrify Africa Act;
and push the administration to pursue more reciprocal trade agreements
with our partners in sub-Saharan Africa.
Of course, at ONE, we continue to believe our foreign assistance
programs remain critical. The United States supports heroic work to
combat HIV-AIDS, malaria, hunger, and poverty around the world, and
this assistance will remain necessary for some time. But that time will
be shorter when trade, not aid, defines our relationship with Africa.
Now is the time for us to strengthen our resolve and redouble our
efforts to boost economic growth in Africa.
Thank you for your time.
----------------
Notes
\1\ http://www.brookings.edu//media/research/files/reports/2012/6/
agoa/agoa_full_report.pdf.
\2\ Kenya at $342 million, Lesotho at $321 million, and Mauritius
at $199 million.
\3\ African Development Foundation, Department of Agriculture,
Department of Commerce, Department of Defense, Department of Health and
Human Services, Department of Homeland Security, Department of Justice,
Department of Labor, Department of State, Department of the Interior,
Department of Treasury, Environmental Protection Agency, Export-Import
Bank, Federal Trade Commission, Inter-American Foundation, Millennium
Challenge Corporation, Overseas Private Investment Corporation, Peace
Corps, Small Business Administration, Trade and Development Agency,
USAID.
\4\ Burundi, Kenya, Rwanda, Tanzania, and Uganda.
\5\ https://ustr.gov/about-us/policy-offices/press-office/
speechestranscripts/2015/february/remarks-ambassador-michael-1.
\6\ McKinsey & Company. ``Brighter Africa: The growth potential of
the sub-Saharan Electricity Sector'' pg. 1.
\7\ Ibid.
\8\ World Bank Enterprise Survey, World Bank Group, 2013.
\9\ World Economic Outlook, International Monetary Fund, April
2015. Pg. 65.
\10\ The Economist, ``Africa is the Horizon: 2015 African Business
Outlook Survey'' March 2015.
\11\ Cameroon (1989), the Democratic Republic of Congo (1989),
Republic of Congo (1994), Mozambique (2005), Rwanda (2012), and Senegal
(1990).
Senator Flake. Thank you, Mr. Hart.
Mr. Eisner.
STATEMENT OF SCOTT EISNER, VICE PRESIDENT FOR AFRICAN AFFAIRS
AND INTERNATIONAL OPERATIONS, U.S. CHAMBER OF COMMERCE,
WASHINGTON, DC
Mr. Eisner. Mr. Chairman, Ranking Member Markey, members of
the committee, Scott Eisner, vice president for African Affairs
at the U.S. Chamber of Commerce. Thank you for the opportunity
to testify today.
I sit before you representing the American business
community. This is a community that is as energized as I have
ever seen it before, eager to partner with African businesses
and governments alike to bring a new level of prosperity to our
mutual citizens. We fully endorse the reauthorization of AGOA,
one that includes all current and future beneficiaries,
including South Africa. AGOA has not just created jobs in
Africa, but it has also created jobs in the United States. For
instance, jobs in the automotive industry have been supported
back here in the United States thanks to Ford's investments in
South Africa.
Since AGOA began, we have seen trade between sub-Saharan
Africa and the United States triple, and we have seen rates of
growth for many of these countries reach new heights that we
never thought possible. Clearly we would not be where we are in
our trading relationship with the continent had it not been for
AGOA. For example, according to a report by the African
Diplomatic Corps, AGOA has created over 300,000 jobs in sub-
Saharan Africa and as many as 100,000 jobs in the United
States. AGOA has indirectly created as many as 1.3 million jobs
in sub-Saharan Africa as well. Exports from AGOA eligible
countries to the United States were $25.6 billion, more than
four times the amount in 2001 they were last year. And U.S.
exports--or U.S. imports from sub-Saharan Africa, including--
excluding energy products, were $4.4 billion, representing
nearly a threefold increase.
As we approach the 15-year anniversary of AGOA, we look
forward to a speedy reauthorization. However, I want to use my
time before you today not to reflect on the successes of the
past, but what the future has to hold and what will need to be
done to build upon the success of AGOA.
Trade facilitation is critical for Africa's
competitiveness, and it will reduce the cost for international
and domestic merchants. While we have seen a number of tariff
lines decline since the inception of AGOA, there remains a
challenge to intra-Africa trade in the form of nontariff
barriers that show the movement of goods, services, and people
across borders.
The elimination of such NTBs will go a long way toward
creating new opportunities for job creation across the
multitude of sectors both in the United States and in Africa.
It will also help with addressing many of the challenges that
African traders face when trying to export goods to the United
States under AGOA. Simply put, full implementation of the TFA
is a win-win for Africa and the United States.
As we look at increasing capacity-building, many countries
fail to take advantage of the duty-free benefits of the
Preference Program. Major focus on improving AGOA is
stabilization rate, specifically within nonenergy exports to
the United States. Despite a significant increase of these
exports to the United States, less than a million dollars is
attributed to over half of the 39 AGOA beneficiary countries in
2014.
In order to get these figures out, the United States will
need to double down its efforts in trade capacity-building.
Greater reviews will need to be put in place and streamlining
as well for funds allocated toward trade capacity-building
toward the continent. We feel strongly that AGOA eligible
countries should have to come up with AGOA action plan as well
that would clearly lay out how they intend to utilize the
Preference Program and what sectors they plan on emphasizing.
Such action plans would aid the U.S. private sector a great
deal by helping us to focus on key growth opportunities
identified by the countries.
The Chamber applauds the U.S. Government for the work they
are doing to address regional integration throughout the
continent. Efforts to establish regional investment treaties
with regional trading blocks, such as the East African
community, help to strengthen the interests of U.S. firms who
are looking to invest in the continent by expanding the total
market size. Regional integration is also a key factor in
bringing down the cost of cross-border trade that I referenced
earlier in my testimony. Regional integration is key to helping
Africa compete globally.
As we move beyond AGOA, we can all agree that it is an
important part of our economic policy with the continent, but
it cannot be only viewed as the only trade platform for us to
engage with the diverse economies cross the continent. There is
far too much at stake if we, as a country, simply stay the
course. We need to find more effective ways to increase the
two-way trading relationship between the U.S. and African
markets, whether they be bilateral, or regional, or FTAs along
the way.
The Chinese continue to eat our lunch in many sectors
across the continent, Europeans are signing bilateral and
regional trade agreements left and right with African partners,
and beyond competition from outside Africa we are seeing an
increase of policies across the continent in such areas as
local content, property rights, and the erosion of intellectual
property that are impacting the ability for U.S. companies to
invest. There has to be a better way for all stakeholders to
engage on policy matters across the continent, whether it is
the review of AGOA eligibility that needs to be implemented by
our government to include a more robust private sector input or
through the annual report to Congress that has not been
published ???2008.??? We need to find a way to encourage our
partners in Africa to have a more robust conversation with the
American business community.
The day after AGOA has been reauthorized is the day that we
need to reshape our trade agenda with the continent. I fear
that if we do not, our competitors from abroad will have made
it very difficult for us to compete effectively in the future.
Mr. Chairman, on behalf of the U.S. Chamber, I would like
to thank this committee for affording me the opportunity to
testify. As this Congress works to strengthen public policies
and support private enterprise, the U.S. Chamber stands ready
to help you in any way.
Thank you.
[The prepared statement of Mr. Eisner follows:]
Prepared Statement of Scott Eisner
On the occasion of this hearing of the Senate Committee on Foreign
Relations on the African Growth and Opportunity Act, I am pleased to
testify on behalf of the U.S. Chamber of Commerce and our members. The
Chamber is the world's largest business federation, representing the
interests of more than 3 million businesses of all sizes, sectors, and
regions, as well as state and local chambers and industry associations,
and is dedicated to promoting, protecting, and defending America's free
enterprise system.
Across Africa, U.S. companies of all sizes and sectors see vast,
often untapped possibilities for trade. The African Growth and
Opportunity Act (AGOA) was enacted in 2000 and remains the cornerstone
of U.S. trade and investment policy toward sub-Saharan Africa. The AGOA
era has witnessed a significant improvement in economic conditions
across the continent. Annual real gross domestic product (GDP) growth
in sub-Saharan Africa was a half percentage point lower than global GDP
growth in the decade prior to AGOA. Since its 2000 passage, sub-Saharan
Africa's growth averaged 6.3 percent, more than 2 percent higher than
the 3.9 percent world average.\1\ AGOA is a small but real contributor
to this positive trend. This growth is linked not just to U.S.-Africa
trading relations but to engagement with the entire global economy.
The decade following AGOA's enactment has seen the continent's
trade with the United States almost quadruple since 2001 with AGOA
imports totaling $25.6 billion in 2014.\2\ It has led to the creation
of thousands of American and African jobs and has helped expand
Africa's middle class to nearly 350 million consumers.\3\
However, economic policies in many African nations have for too
long served as a drag on intraregional trade and investment. The region
remains home to many of the world's poorest countries with major
economic challenges linked to inadequate infrastructure, access to
skilled labor, and insufficient power generation. Furthermore, trade
with the United States has consisted largely of oil, gas, and minerals.
In this context, AGOA's expiration on September 30, 2015, provides
the opportunity to review AGOA's integral role within U.S.-Africa
relations and to readjust the legislation to Africa's changing economic
and political environment. The Africa of today is not the same
commercial partner it was in 2000, and these changes call for an
evolution of U.S. trade policy with an emphasis on increased private
sector investment and two-way trade.
As stated by U.S. Trade Representative Michael Froman, ``If we are
able to achieve sustainable development, it is our view that investment
must be the driver.'' \4\ In reviewing AGOA, we must recalibrate our
trading preferences to account for recent changes and maximize the full
potential of this preference program for all countries involved.
agoa's performance
As the cornerstone of U.S.-Africa trade policy, AGOA is central to
U.S. strategic interests. The Act represents a shift from our
traditional aid-based approach to the continent to one favoring trade
and commercial investment.
The first priority of AGOA, as written in the legislation, is to
``promote stable and sustainable economic growth and development in
sub-Saharan Africa.'' Since AGOA's enactment in 2000, trading relations
between the United States and Africa have greatly expanded and are
expected to increase in the near future:
AGOA has directly created over 300,000 jobs in sub-Saharan
Africa and as many as 100,000 jobs in the United States.\5\
AGOA has indirectly created as many as 1.3 million jobs in
sub-Saharan Africa.
U.S. goods exports to sub-Sahara were $24 billion in 2014,
up 250 percent from 2003.\6\
Exports from AGOA eligible countries to the United States
were $25.6 billion, more than four times the amount in 2001.
U.S. imports from sub-Saharan Africa, excluding energy
products, were $4.4 billion representing a nearly threefold
increase since 2001.\7\
While AGOA has provided the framework for enhanced U.S.-Africa
trade, it would be unwise to merely extend the legislation without
accounting for the changed economic landscape. AGOA can be enhanced so
that the potential benefits are maximized for American and African
businesses.
AGOA has played a leading role in helping sub-Saharan African
countries diversify their exports to the United States. However, many
countries fail to take advantage of the duty-free benefits of the
preference program. A major focus of improving AGOA is in its
utilization rate, specifically within nonenergy exports to the United
States, which have increased by more than 275 percent since 2000--
rising from $1.2 billion to $4.4 billion in 2014. Apparel products
remain the largest nonenergy category, followed by automobiles and
other manufactured goods.
Despite a significant increase of nonenergy related exports to the
United States, less than $1 million is attributed to over half of the
40 AGOA beneficiary countries in 2014. The few countries that account
for the bulk of nonenergy exports include:
U.S. imports from South Africa totaled $3.1 billion (2014);
U.S. imports from Kenya totaled $423 million (2014);
U.S. imports from Lesotho totaled $289 million (2014);
U.S. imports from Mauritius totaled $227 million (2014).\8\
AGOA's renewal allows us the opportunity to examine options to
improve its utilization by African countries and AGOA's long-term
contribution to the transformation of their economies. Inclusion of new
agricultural products would be of great value to many agro-based
African economies. Enhancing and extending the duration of the AGOA
third country fabric provision is another step the Chamber supports.
We must also review the U.S. Government's aid expenditures in
Africa. Some of these funds should be directed to build Africa's
technical capacity under the AGOA program in a more substantial way
than currently used.
the cost of inaction on renewal
Unfortunately, AGOA's pending expiration is already undermining
business and investor certainty. Companies operate with long planning
horizons, and sourcing decisions are made many months or even years in
advance. For this reason, the expiration of AGOA in a little more than
5 months has begun to affect business decisions, and this dampening
effect on trade will accelerate in the months ahead.
If the program were to expire, many of the significant gains made
by African economies would be undermined. By contrast, immediate action
by Congress for AGOA's renewal would send a strong signal of confidence
to the U.S. business community and to our potential business partners
in African countries. It would also confirm our commitment to growing
the U.S.-Africa economic partnership for the long-term and building on
its historic economic growth.
AGOA is central to the dialogue between the United States and
African countries on two-way trade and investment. Opportunities such
as the annual AGOA Forum and our bilateral strategic dialogues present
an opportunity to continually review the trade-preference program as
well as review the health of our trading relationship. In this vein, we
must put greater emphasis on the functionality of these events on an
annual basis and in consultation with the end user; i.e., the business
community, to determine if they are being used in the most efficient
manner.
AGOA gives the U.S. administration the opportunity to conduct an
annual review to consider whether countries are meeting the Act's
eligibility criteria, a process that allows the United States to
positively influence political and economic reforms among AGOA
beneficiaries. In light of this opportunity, Congress should consider
whether to enhance AGOA's eligibility criteria in ways that foster
greater two-way trade. These may include intellectual property
protections, customs regimes, regulatory and legal standards, and
measures taken to implement the World Trade Organization (WTO) Trade
Facilitation Agreement (see below).
Many other major trading nations have been active in securing
preferential trade agreements with Africa, including the Economic
Partnership Agreements of the European Union, as well as agreements
with Brazil and China. While AGOA is a one-way trade preference
program, it also represents our primary vehicle for pursuing a broader
trade agreement securing market access for both the United States and
Africa. As long as the European Union is the sole recipient of
reciprocal tariff elimination with several African countries, U.S.
firms will remain at a competitive disadvantage in these markets.
Looking ahead, the most significant role of AGOA's reauthorization will
be in providing a foundation in which our government and business
leaders can forge a more dynamic trade and investment relationship with
African countries beyond a one-way preference program.
the world trade organization and africa
The Chamber is firmly committed to the global rules-based trading
system embodied by the WTO. In the view of Chamber members, the
multilateral trading system embodied by the WTO has benefited the
entire world, including Africa. Eight successful multilateral
negotiating rounds have helped increase world trade from $58 billion in
1948 to $22 trillion today. This is a fortyfold increase in real terms,
and it has helped boost incomes in country after country.
While this rising tide of commerce has brought gains for developed
countries, its most dramatic benefits have accrued to developing
nations, including Africa. As recently as 1993, 1.9 billion people--
nearly half the world's men, women, and children--lived on $1.25 a day
or less, in constant 2005 dollars. Since then poverty totals have been
falling fast. By 2000 the number of people in absolute poverty had
fallen to 1.7 billion, and the share of world population to 28 percent.
The most recent estimates issued by the World Bank find the totals down
to 1.2 billion people and 17.5 percent of population.
While no single factor explains these income gains, the rise in
international commerce has by all accounts played a major role. The
economic growth that trade helps fuel contributes to educating the
young, building essential infrastructure, strengthening institutions of
governance, and combating measles, malaria, and other preventable
illnesses.
the wto trade facilitation agreement
At the Bali Ministerial, trade ministers unanimously endorsed the
first multilateral trade agreement since the organization's creation in
1995. The Chamber warmly welcomed the Trade Facilitation Agreement
(TFA), the principal deliverable in the Bali Package, as a cost-
cutting, competition-enhancing, anticorruption agreement of the first
order. It promises to streamline the passage of goods across borders by
cutting redtape and bureaucracy and promoting border modernization for
customs clearance around the globe.
The final agreement has surprised observers with its quality as
countries accepted stronger commitments than had been anticipated.
Unlike free-trade agreements (FTAs) negotiated by two or several
parties, the dynamic at the 159-member WTO often leads to the lowest
common denominator; however the final version of the TFA is still
impressive. To illustrate, the agreement includes more than 120
``shalls'' (indicating obligations binding on all parties) and only a
few dozen instances where governments made weaker ``best endeavor''
commitments.
In a major change for dozens of developing countries--especially in
Africa--the TFA will require countries to transition fully to modern
border practices under which goods are cleared through customs
independently of the final determination of duties and taxes. Countries
will migrate to electronic processing of required information to allow
clearance through customs before goods arrive in the country. Countries
will also look to modernize risk-based targeting.
The true value of a trade agreement lies in its effective
implementation. In this process, WTO members will list all the
provisions they commit to fully implement by the time the Agreement
enters into force, with the goal of securing the necessary
ratifications by two-thirds of WTO members by December 2015, when the
WTO will hold its 10th Ministerial Conference in Nairobi, Kenya--the
first time this biannual event will be held in Africa. Particularly in
the case of developing countries, this represents an opportunity to
highlight a strong commitment to efficient customs and port procedures
before the global business community and private investors, and bold
reformers are likely to see economic benefits in the form of increased
trade, investment, and growth.
The Chamber is making concerted outreach to governments in Africa
and elsewhere to encourage them to take on their commitments in a
fulsome manner and to underscore the international business community's
keen interest in seeing these reforms advance. We strongly support the
administration's efforts to ensure the TFA enters into force in a
timely manner and on the most commercially meaningful terms, and we
encourage Congress to continue to support these efforts as well.
electrify/energize africa
Another U.S. Chamber legislative priority is the Electrify Africa
bill, which the House approved in the previous Congress last May.
Similar legislation in the Senate has been named Energize Africa.
Insufficient power generation is a leading factor in AGOA's low
utilization rate which inhibits the growth of businesses and disrupts
supply-chain networks. This bill would assist countries in developing a
wide range of power solutions, promote economic growth, and remove a
major obstacle in the development of many African economies.
With no additional expenditure by the U.S. Government, the
Electrify Africa Act would encourage the development of new
infrastructure to provide access to electricity in sub-Saharan Africa.
More than 70 percent of the people in the region have no access to
electricity, with grave consequences. Indoor air pollution from wood
and dung burning stoves kills more than 3 million people per year--more
than AIDS and malaria combined. By promoting reliable access to energy,
this bill would help remove one of the continent's most significant
barriers to development.
Given that Africa is home to a number of the fastest growing
economies in the world, this bill has the potential to generate
significant new economic opportunities for U.S. companies and the
workers they employ. Broader access to electricity would allow a larger
middle class to emerge, providing opportunities for U.S. companies.
Appropriately, the bill places an emphasis on the role of the private
sector as it promotes access to electricity. The Congressional Budget
Office (CBO) estimates that implementation of the Electrify Africa Act
would save the United States $86 million from 2014-2019.
trade promotion authority
In order to build upon AGOA toward bilateral and regional
reciprocal trade agreements, Congress must pass Trade Promotion
Authority (TPA). TPA is a vital tool for the negotiation of new trade
agreements; without it, the United States has never passed a major
trade pact. TPA allows Congress to facilitate a revitalized trade
agenda through three ways: (1) It allows Congress to set negotiating
objectives for new trade pacts; (2) it requires the executive branch to
consult extensively with Congress during negotiations; and (3) it gives
Congress the final say on any trade agreement in the form of an up-or-
down vote. The result is a true partnership stretching the length of
Pennsylvania Avenue.
A simple form of TPA was first approved in 1934, but the latest
version lapsed in 2007. TPA will not only be critical for the success
of AGOA's legacy but also for the opportunity to move beyond this
program to a more robust trade agenda with the continent.
export-import bank
The U.S. Chamber of Commerce strongly supports the reauthorization
of the U.S. Export-Import Bank (Ex-Im), which is a vital part of the
American economy, especially to the small- and medium-size businesses.
Ex-Im supports over 150,000 American jobs at 3,000 companies that
depend on the Bank's services in order to compete in global markets.
Failure to reauthorize Ex-Im would put at risk hundreds of thousands of
American jobs and would hurt many small- and medium-size businesses.
Without the Bank's services, American companies would lose crucial
support overseas and fall behind foreign competitors.
Sub-Saharan Africa is a priority region for Ex-Im Bank, with over
$2.05 billion in transactions in over 20 countries being supported by
Ex-Im Bank in 2014. Since 2009, Ex-Im Bank has supported over $6.6
billion in transactions throughout sub-Saharan Africa.\9\ In addition,
section 124 of AGOA directs Ex-Im Bank to expand its financial
commitments of its loan guarantee and insurance programs to African
countries and supports Ex-Im's Africa Advisory Committee in fostering
economic cooperation between the United States and sub-Saharan Africa.
However, the Advisory Committee was not authorized in the most recent
reauthorization of Ex-Im Bank and remains nonoperational.
The impending expiration of Ex-Im Bank as well as the current
nonoperational status of the Africa Advisory Committee threatens the
competitiveness of American firms in doing business in Africa.
Countries such as Brazil, China, France, Germany, India, and Korea have
their own equivalents of Ex-Im, and in recent years they have provided
two to ten times the level of support for their exporters that
Ex-Im has provided to American firms. If Ex-Im Bank including its
Africa Advisory Committee are not reauthorized, U.S. companies would be
at a sharp disadvantage in many African markets.
recommendations
Given the rising importance of Africa to the United States, the
Chamber urges that Congress and the administration consider these
recommendations:
Extend AGOA beyond 2015: An extension of AGOA would benefit both
the United States and all AGOA-eligible countries by providing greater
predictability and stability for U.S.-Africa trade. In order to
maximize AGOA's potential and to take into account the dynamic economic
environment on the continent, the legislation should receive multi-year
renewal.
Expansion of Product Coverage: The AGOA program excludes many
products that could be of great value for trade with sub-Saharan
Africa, and Congress should consider what products can usefully be
added. The Chamber also supports the extension of AGOA's third country
fabric provisions.
Review AGOA's Eligibility Criteria: AGOA should take into account
the deliberate trade and investment actions of African governments.
With the goal of enhancing economic growth and development, AGOA should
encourage efforts to promote trade facilitation, expand market access,
protect intellectual property, extend fair treatment to foreign
investors, and enhance the business climate in other ways.
Move Toward Regional Trade Agreements: To maximize the potential
benefits of U.S.-Africa trade relations, U.S. officials should consider
how to use AGOA as a vehicle to move beyond a one-way preference
program and toward bilateral and regional reciprocal trade agreements.
Pass Trade Promotion Authority: Trade Promotion Authority would
drive economic growth and job creation in the United States through the
negotiation of critical trade agreements. TPA will be a necessary tool
for enhancing trade relations with African nations as we pursue
bilateral and regional reciprocal trade and investment agreements on
the continent.
Press for Swift Implementation of the WTO Trade Facilitation
Agreement: The U.S. Government and business community should continue
to press African nations to embrace a fulsome list of their commitments
under the TFA to highlight their commitment to efficient customs and
port procedures. Governments doing so would signal to the global
business community their clear intent of real economic reform.
Approve the Electrify/Energize Africa Act: The Electrify Africa Act
would encourage the development of new infrastructure to provide access
to electricity in sub-Saharan Africa. By promoting reliable access to
energy, this bill would help remove one of the continent's most
significant barriers to development and would allow a larger middle
class to emerge, providing a wide range of opportunities for U.S.
companies in years to come.
Reauthorize the Export-Import Bank: The Export-Import Bank remains
a vital part of the American economy and enables American firms to
successfully compete in African markets. Reauthorizing Ex-Im and its
Africa Advisory Committee would ensure assistance to American companies
exporting to Africa.
conclusion
The Chamber thanks the leadership of the Senate Subcommittee on
Africa and Global Health Policy for convening this hearing on the
African Growth and Opportunity Act. We look forward to working with
Congress and the administration to advance the next reiteration of AGOA
in order to further the trade and investment relations between the
United States and the countries of sub-Saharan Africa.
----------------
Notes
\1\ Data from International Monetary Fund, ``World Economic
Outlook,'' October 2014.
\2\ Data from http://dataweb.usitc.gov/africa/trade_data.asp.
\3\ African Development Bank, ``The Middle of the Pyramid: Dynamics
of the Middle Class in Africa,'' 2011.
\4\ USTR, ``Remarks by United States Trade Representative Michael
Froman to the U.S. Global Leadership Coalition,'' press release, June
25, 2013.
\5\ Office of Congressman Chris Smith, ``African Diplomats Present
AGOA Recommendations to Foreign Affairs Committee.''
\6\ Data from http://dataweb.usitc.gov/africa/trade_data.asp.
\7\ CRS, ``African Growth and Opportunity Act (AGOA): Background
and Reauthorization,'' 2015.
\8\ Ibid.
\9\ Export-Import Bank, Africa (Sub-Saharan):http://www.exim.gov/
about/whatwedo/markets/
africa/.
Senator Flake. Thank you, Mr. Eisner.
Mr. McRaith.
STATEMENT OF WILLIAM McRAITH, CHIEF SUPPLY CHAIN OFFICER, PVH
CORP., NEW YORK, NY
Mr. McRaith. Good morning. Chairman Flake, Ranking Member
Markey, and distinguished members of the Senate Foreign
Relations Africa Subcommittee, on behalf of PVH, I would like
to begin by thanking you for your work on the recent
introduction of the AGOA Extension Enhancement Act of 2015.
There are several portions of the bill that are of great
interest to PVH and the overall business community, not the
least of which is the decision to extend the United States
partnership with Africa for the 10-year period. Large
investments by U.S. companies in Africa that can have the most
significance in job and economic generation on both continents
depend in a large part on this lengthy AGOA renewal.
To start, allow me to introduce myself and the company that
I represent. My name is William McRaith. I am the chief supply
chain officer for PVH. The story of PVH starts with Moses
Phillips and his wife, Ida, mending and selling shirts for
local coal miners in a small town in Pennsylvania, and has
grown to become one of the largest apparel companies in the
world with over $8 billion in revenues in 2014, employing
approximately 16,000 people in the USA and 14,000 people
globally.
PVH is now headquartered in New York with distribution
sales in other corporate locations in California, Georgia,
North Carolina, New Jersey, New York, Nevada, Pennsylvania, and
Tennessee. Among other PVH brands include Calvin Klein, Tommy
Hilfiger, Van Heusen, ARROW, IZOD, Warner's, Olga, and Speedo.
We are a dedicated global corporate citizen. Today there
are over 4,000 retail locations that we have outside of the USA
where our brands are sold. As we expand throughout the world,
we have made an unwavering commitment to corporate social
responsibility, which we believe can be a key competitive
advantage as well as just the right thing to do.
My message today is simple and straightforward: Africa
today is prime to receive the type of large private sector
investment that will generate the economic growth we all
envisage for Africa. The present infrastructure of global
supply chains is changing fast and changing before our eyes,
and soon large portions of the world's supply chains, mostly
that which is currently based in Asia, will shift and soon be
based in regions of Africa. Ensuring the presence of U.S.
investment in Africa is crucial as this will not only generate
economic growth for the United States, but it also creates jobs
and exports U.S. values and business practices that are much
needed in Africa.
U.S. businesses have been mostly absent from Africa to
date. China is in Africa in a very large way mainly extractive
in nature, but in turn is building the infrastructure of many
of these countries. The European Union has also been involved.
The U.S. presence is mainly in the form of assistance through
legislation that seeks to build the trade capacity and
facilitation mechanism in sub-Saharan Africa, combined with a
10-year AGOA extension, the United States is now shifting from
merely an aid to a trade position.
Greater U.S. presence in Africa will also help develop an
economic partnership and association needed to press for
deepening of trade relations beyond the current policy of
unilateral trade preference. We have seen this happen in
countries in the Caribbean and the Latin America region who in
the past enjoyed unilateral trade preferential relations
through programs like the Caribbean-Based Initiative and the
Andean Trade Preference Act. And with time, these relations
blossomed and provided the political impetus needed to move
towards a more lasting, deeper, and bilateral trade
relationship with free trade agreements.
A little bit of our story in Africa. So approximately a
year ago, we went to Africa. We actually took a trade
commission to Africa with a number of our partners. On that
trip, the companies that we took were persuaded, and the best
description I would give of them is they were highly skeptical.
In fact, the vast majority of them were just downright cynical
on any opportunity that might exist in Africa mainly as a
result of bad trips in the past. What we saw this time around
really changed everyone's mind. We have always known of
Africa's great, but raw, potential, form of resources. But
aspects related to good government have in general always
been--has had much to desire.
This time was very different. The countries we visited
demonstrated that we had laid the foundations necessary to
track significant foreign and direct investment, and we were
prepared to undertake--and they were prepared to undertake the
commitments necessary to ensure social responsible companies
like ourselves can enter. The level of professionalism,
commitment, and maturity that we are seeing from some
governments in Africa reassure of our interest not only to
source from Africa, but also to produce in Africa.
As a result of our trip, we identified a great opportunity
for the industry to invest nearly a billion dollars to create a
vertically integrated apparel supply chain in some regions of
Africa, in other words, to create jobs in Africa, not just in
apparel, but also in textiles and even the agricultural
industry through better cotton production techniques.
Moving forward, as we plan to invest in countries in
Africa, we plan to do it through a more inclusive model of
investment and growth in which we will be able to put in place
right from the very beginning facilities, norms, and values
that will guide the work of the factories, the relationships
between workers, managers, associations, civil rights
societies, governments, and other stakeholders. In all
communications with African leaders and officials we have
stressed that PVH is not interested in making a quick buck, but
in establishing a lasting presence in the country. In order to
do so, they must equally be committed to upholding the
sustainable social standards we require across all sectors and
all investors who participate. As I mentioned previously, some
indicated that they actually want partners like PVH to help
them to implement these practices.
We think the 10-year extension is a great start for PVH,
and we are very pleased with the bill as introduced. However,
we submit that while we have the chance to make changes to the
bill we should consider a couple of additional simple
modifications. We applaud the provision introduced with the
proposed language that allow for a 60-day notification to
Congress, and we assume the business community knows of a
proposed termination to terminate a country's eligibility.
However, in practice a 6-month timeline may be more effective.
Secondly, an important change would be to remove the visa
requirement. Current apparel shipments require a visa to
accompany each shipment. This requirement of quota system is
outdated and unnecessary.
Congress must work hard and in hand with the business
community by passing a long-term AGOA extension. We look
forward to working with the members of the subcommittee, other
Members of Congress, with the administration to share our
business perspective and ensure that we do not lose the
momentum and this tremendous opportunity that awaits Africa.
As someone who has been involved in global operations for
over two decades, I always have to ponder the question, where
is the next region of growth? I believe we have the answer. It
is Africa.
I thank you again for this opportunity, and I look forward
to discussing it further and answering any questions you may
have. Thank you, Mr. Chairman.
[The prepared statement of Mr. McRaith follows:]
Prepared Statement of William McRaith
agoa extension will boost investment in africa
My comments today represent the views of PVH, although I'm certain
that they reflect the thoughts of many other companies. In short, my
message is simple and straightforward: Africa today, is primed to
receive the type of large private sector investments that will generate
the economic growth we all envision for Africa. The present
infrastructure of global supply chains is changing before our eyes and
soon large portions of the world's supply chain, mostly what is
currently based in Asia will shift and be based in regions of Africa.
The proposed 10-year extension of AGOA sends a message to U.S.
companies that their investment in sub-Saharan Africa will be given
sufficient time to turn a profit. Ensuring the presence of U.S.
investment in Africa is crucial as this will not only generate economic
growth for the U.S., but it also helps create jobs and export U.S.
values and business practices that are much needed in Africa.
Quite frankly, heretofore, the U.S. has been mostly absent from
Africa. China is in Africa in a very large way, mainly extractive in
nature but in turn is building the infrastructure of many countries.
The EU has been involved at a ``commercial'' level which enabled them
to recently reach agreements with many sub-Saharan countries for an
eventual reciprocal free trade agreement. The U.S. has mainly shown
only an ``assistance'' presence in Africa. It is time now to move from
``aid'' to ``trade.'' The electrify Africa initiative and other
legislation that seeks to build the trade capacity and facilitation
mechanisms in sub-Sahara Africa combined with the 10-year AGOA
extension will embolden U.S. investors to enter those markets.
With U.S. investment comes the export of good business practices.
We export good business standards, worker rights policies and do not
allow corruption. These basic standards are why the queue to work at a
U.S. brands or U.S. company abroad are many times longer than that of
other foreign investors. Workers know that they will be treated fairly
by U.S. companies.
It is important to note as well that over time, greater U.S.
presence in Africa will also help develop the economic partnerships and
associations needed to press for deepening our trade relations beyond
the current policy of unilateral preferences. This extension will allow
us time to create incentives to link the business communities of the
two continents through AGOA. The U.S. has already seen this happen for
example with countries in the Caribbean and Latin America, where after
decades of unilateral trade preferences relationships through programs
like the Caribbean Basin Initiative or the Andean Trade Preferences
Act, the business relationships blossomed and provided the political
impetus needed to move toward more lasting, deeper and bilateral trade
relations.
I fully realize that Africa is a vast region, with many countries
still struggling mightily to achieve a modicum of the stability and
investment potential that I just described. That is why despite the low
costs of labor in Africa, many companies, including PVH, have been
hesitant in the past to invest or move production there. However, I
strongly believe that as more and more countries in Africa start seeing
the growth and success of their neighbors, they will move toward making
the changes necessary to take part in the success that can be achieved
through strong governance and foreign direct investment. The changes in
Africa are likely to take place first in specific regions and clusters
and then spread out to others areas of the continent.
our recent business adventure to africa
PVH has been monitoring Africa for several years as a potential
location for production, as we sought to identify opportunities to
improve our supply chain. The company has been a pioneer in driving
investment and development, and we like to be the first into an area to
help establish the workplace rules to be followed by future investors
and market participants.
Let me share with you a story about a trip we made to Africa 2
years ago. PVH organized the trip and invited several other companies
in the apparel and textile sector to conduct an exploratory business
mission to countries in East Africa. Many of the companies we invited
were hesitant to make the trip, being either skeptics or downright
cynics, given that similar missions in the past had not yielded much
success. Leveraging our long-term relationships, we convinced them to
come with us and give it another chance.
What we saw this time around changed everyone's mind. We have
always known that Africa has great but raw potential in the form of
resources. But aspects related to good governance have in general
always left much to be desired. This time it was different. The
countries we visited demonstrated that they had laid the foundations
necessary to attract significant foreign direct investment and were
prepared to undertake the commitments necessary to secure socially
responsible companies. The Ministers and key government officials with
whom we met were passionate in sharing their vision of growth for their
countries. They spoke of adherence to the rule of law, free markets,
government stability, and transparency. They highlighted major and well
thought out modern infrastructure projects that were recently completed
or about to be finalized. They understood and showcased the economic
advantages that their countries have compared to others in the sub-
Saharan region. Most importantly, they spoke about their commitment to
their people by bringing investment and education to the country that
will truly touch--for good--the lives of their citizens.
The level of professionalism, commitment, and maturity that we are
seeing from some governments in Africa reassures our interest to not
only source from Africa, but to produce in Africa. Every one of the
other companies we had initially cajoled to join us on the trip agreed
that Africa is ready for significant investment. They, and I, saw the
opportunities that reminded us of some apparel production powerhouses
today--and where they were 20 years ago. As a result of our trip, we
identified a great opportunity for the industry to invest nearly a
billion dollars to create a vertically integrated apparel supply chain
in some regions of Africa. In other words, create jobs in Africa not
just in apparel, but also in the textile and even agricultural industry
through better cotton production techniques.
While much work remains to be done, the initial foundations are
there. As a result, Congress must send an unequivocal signal to the
investor and business community that it truly is interested in seeing
Africa develop and stand on its own two feet by promptly approving the
bill that will extend AGOA. AGOA preferences are the thread that will
keep together Africa's enormous potential.
pvh is interested in building values and a new production model in
africa
Apparel production has generally been one of the first industries
to invest in low-income countries. It is undeniable that there are
significant cost advantages that come to companies sourcing from
Africa, but this is not the only motivator or factor that PVH considers
in making strategic decisions about the countries where we place
production. Over the last 30 years, we have seen the great good that
can come to these countries from the jobs created and the economic
boost that our industry gives these countries. On the other hand, it is
undeniable that there have been instances in which costly and even
tragic mistakes have been made.
The apparel industry's mistakes of the past have often been the
result of near-sighted investment in lawless environments. That model
must and will change rapidly. For PVH, the value of our company is in
the public's perception of our brands, thus we cannot risk our
reputation being tarnished by pursuing short-term growth strategies
when it comes to our sourcing decisions. PVH is interested in being a
partner in a long-term strategy for growth in the countries where we
operate and with the people who work with us. We want to be in places
where we can install not just good factories, but codes of conduct,
values, environmental sustainability, positive worker relations, and
the highest business and ethical principles to ensure the long-term
success of our commitments.
As a result of this commitment by PVH, countries in Africa where we
invest will be the beneficiaries of a new and more inclusive model of
investment and growth in which we will be able to put in place, right
from the beginning, facilities, norms, and values that will guide the
work at the factories and the relationships between workers, managers,
associations, civil society groups, governments and any other
stakeholders. That is why when we look at Africa we do not just look
for a place to quickly set up a sewing operation. We know that to be
successful you need to have a clear line of sight throughout your
entire supply chain structure. To that end, we are identifying our best
global supplier partner companies to join us on this journey. These are
entities with which we have developed long and trusting relationships.
We know that they meet PVH corporate social responsibility standards
and are companies that we can trust to work with us in our mission.
Further, in all our communications with African leaders and
officials, we have stressed that PVH is not interested in making a
quick buck, but in establishing a lasting presence in their country. In
order to do so, they must be equally committed to upholding the
sustainable social standards we require across all sectors and with all
investors and participants. We have asked those governments to review
their Corporate Social Responsibility code at all levels and develop
both educational and enforcement programs to ensure compliance. We
asked each of them how they wanted the Brand name of their country to
be thought of 10 years from now as the decision they made would
ultimately determine the answer. As I mentioned previously, some
indicated they want partners like PVH to help them implement these
practices as the baseline standards in their country.
africa can be vertically integrated
The possibilities for investment in Africa are there and we need to
encourage U.S. companies to lead the way to investment because after 20
years of learning, we are positioned today to bring good business
practices, standards, and ethics to the region. I mentioned earlier
that based on our recent trips to Africa, coupled with our experience
with supply chains around the world, has lead us to explore an
investment path in Africa where the countries where we have presence
will be more than just seamstresses. Instead we envision becoming the
world's first example of how to proactively build a fully vertical,
ground to finished product, socially responsible supply chain.
The old model of only cutting and sewing operations that can be
installed and removed with relative ease does not fit with our vision
of Africa. Africa can attract investment in other added value processes
in apparel production such as cotton growing, yarn-spinning, weaving,
and logistical operations. Cotton growing is a main staple in several
African countries. Further, for man-made fibers they have the petroleum
and natural fiber basics such as bamboo that can be converted to
apparel yarns. In many countries, English is the primary or one of the
top three primary languages, which makes it easier to train workers and
future managers. When political and policy stability is added to this
mix, we see no reason why some regions in Africa cannot developed into
fully vertically integrated value chains.
other areas in which the u.s. can help
In addition to a long-term renewal of AGOA, there are other ways by
which the U.S. can partner with Africa to achieve a fully vertically
integrated model of production. For instance, there is cotton
production in Africa today, but is very inefficient and of poor quality
compared to the high yields and high quality cotton produced in other
areas. Many countries in Africa have been forced to source from Asia in
recent years despite their fertile grounds and historic tradition as
cotton growers. This can be changed by creating partnerships between
developed and developing countries in Africa that would help transfer
know-how to African farmers and facilitate the move from artisan to
technologically advanced methods of growing and harvesting. Helping
them to implement farming practices that use less water, less
pesticides, and have higher yields per acre will leapfrog them into the
21st century. Implementing harvesting practices that use machines
rather than people will help minimize labor risk potentials.
Instituting cotton grading practices that mimic our own system will
help ensure quality product and reliability for purchasers.
Training workers and management is also essential and this is
another area where developed countries' know-how can prove crucial.
Allowing employees access to visas to travel to the U.S. for training
in our practices and systems will enable us to ensure that best
practices are exported and put in place globally. Trade infrastructure
projects are critical, and in this regard we salute current
congressional efforts to promote energy investments in Africa. We also
support the Trade Facilitation Agreement signed in Bali last year and
look forward to its implementation. Creating support to the sub-Saharan
nations to build an intraregional connectivity that will allow goods
necessary for apparel production to transit the continent seamlessly
will enhance the attractiveness of the continent and prevent each
nation having to be completely vertically integrated on its own.
conclusion--it all starts with agoa renewal
Congress can be a great catalyst for growth as well by matching the
long-term commitment expected from the private sector by approving a
lengthy extension of the AGOA program. Companies cannot commit to
individual investments ranging in the hundreds of millions of dollars
unless they have more certainty about the rules in place. We are
embarking on these types of investment. However, it will take 12-24
months to set up very expensive yarn spinning, fabric weaving/knitting
and apparelmaking facilities. We then need to train workers on the use
of complicated machinery, build production capacity and be able to have
benefits long enough to cover the full depreciation of our investments
which takes in the ideal world 8 years . . . if we have any delays
along the way, we will need the full 10-year period to recoup costs.
The proposed 1-year AGOA extension is a strong signal showing that
Congress is working with the private sector in helping Africa develop
and diversify into economic independence.
We think the 10-year extension is a great start. There are some
other changes that could be added which will make the program easier
and more predictable. We applaud the provision in the proposed language
that will allow for a 60-day notification to Congress and we assume the
business community of a proposed determination to terminate a country's
eligibility. However, in practice, the time needed to clear the
production channel is 6 months. We would like to see this provision
amended to allow 6 months notice. We can use that time to both unwind
our production and to pressure the host government to take remedial
action prior to the end of the 6 month period.
Secondly, an important change would be to remove the visa
requirement. Currently, apparel shipments require a visa accompany each
shipment. This can be electronically transmitted but it is a
``barrier'' to entry. It is a ``sink'' for possible government
corruption. It requires financial investment of the foreign
governments. It is a remnant of the quota system that was eliminated in
2005 . . . it is outdated and unnecessary.
PVH believes not only that Africa has great potential, but we
believe that there are countries in the region that are ready to
welcome the types of partnerships and investments that will yield
significant economic gains in the next two decades. These economic
gains will be accompanied by positive social changes in those
countries, as they adopt the business and ethical values and practices
that are the basis for attracting PVH and companies like us. With the
right set of policies in place, Africa can also change the model of
apparel sourcing by having a fully integrated supply chain that
includes man-made fibers, cotton, yarn, textile, and apparel
production. Congress must work hand in hand with the business community
by passing a long-term AGOA extension. We look forward to working with
the members of this subcommittee, other Members of Congress and with
the administration to share our business perspective and ensure that we
do not lose momentum in the tremendous opportunities that await Africa.
As someone who has been involved in global operations, I always ponder
the question of where is the next region of growth. I believe we have
the answer: It is Africa.
I thank you again for this opportunity and look forward to
discussing it further and answering any questions you may have. Thank
you Mr. Chairman.
Senator Flake. Thank you, Mr. McRaith. Mr. Williams?
STATEMENT OF WALKER WILLIAMS, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, LEADERSHIP AFRICA USA, WASHINGTON, DC
Mr. Williams. Yes. Thank you, Chairman Flake. The
opportunity to testify is very important to me because 15 years
ago I had the privilege of working on the first AGOA program,
and I am happy to say, and I will not go over what has been
said by my fellow witnesses, that AGOA is and has been a
success. In my view, it is the most comprehensive of all U.S.
trade preference programs, providing preferential access to the
U.S. market for a wide range of products. I sincerely believe
AGOA has become the foundation of the United States-Africa
relationship, and has accomplished its goal to shift our focus
to include trade and investment.
The mission of AGOA and the private entities when it was
launched 15 years ago still rings true today. It was to
increase trade and investment, to strengthen the private
sector, to reduce trade barriers, to support the rule of law,
to reduce poverty, to provide economic reform, and to encourage
regional integration.
Now, Mr. Chairman, I have been asked to address briefly
three issues, AGOA's impact. I do not think I need to dwell on
that too much because it has been covered by other witnesses,
the challenges, and the approach to possibly changes that might
enhance the U.S. position in the region.
Now, before I begin my remarks I would like to put on the
record that Leadership Africa USA has been working since 2013
with African Ambassadors Group to renew AGOA. And we have
recently launched the AGOA Action Committee and a Call to
Action with Watts Partners, Bechtel, Chevron, the Corporate
Council in Africa, the U.S. Chamber of Commerce, and key civil
society organizations and several corporations, all supporting
the reorganization of AGOA and beyond.
The three issues: AGOA has successfully increased two-way
trade with Africa. Under AGOA, total exports from sub-Saharan
Africa have tripled, and the amount of U.S. direct foreign
investment has almost quadrupled. The good news and indeed more
on the way--when Congress finally passes the AGOA Extension
Enhancement Act of 2015. I support the actions of congressional
leaders who put forward a bipartisan bill composed by the
Senate Finance Committee and the House Ways and Means
Committee. It references key AGOA issues, like extension,
regional integration, eligibility, reporting, capacity-
development, along with several other key trade issues.
Yesterday I had the privilege of listening to and
witnessing the U.S. Senate Committee on Finance complete a
markup of AGOA, GPS, and extend preferential duty program for
Haiti. These actions to me signal that a legislative movement
is underway for getting AGOA authorized sooner rather than
later, and one that I applaud with this congressional action.
Extension. I just want to make a comment on extension: 15
years versus 10 years. Leadership Africa USA, continues to
support a longer renewal of 15 years, which has been suggested
and is attractive to the business community because it provides
predictability and certainty for investors, businesses, and
most especially local businesses and women-owned businesses in
Africa who would like to get into export and do business with
the United States.
It also allows for supply chain development, and to do that
several industries, particularly textiles and agriculture, need
a longer timeline. I believe a longer timeline for AGOA's
renewal to provide maximum investment in trade, and create
jobs, and provide ownership opportunities for SMEs in America.
Eligibility, we are addressing that, and we recently had
conversations about South Africa, and that points to the
direction that we need to clarify eligibility and how we
determine eligibility and annual reviews. It is a very
important subject, and it lends clarity to the business
community because they know what and how eligibility is going
to be addressed, and it precludes surprises. So I am suggesting
that I like what I heard from Senator Isakson yesterday, and I
support the direction that he is moving in, and I think that it
is a good solution because if you want regional integration, we
need to keep South Africa in the mix with AGOA.
Capacity-building is very important as is infrastructure.
We cannot have an Africa and an AGOA without infrastructure,
and infrastructure should include energy, health, education,
and, most importantly, power. I mean, there are 600 million
people in Africa without electricity, and that is critical to
AGOA's success.
I will close by saying I thank you for this opportunity,
and I look forward to your questions.
[The prepared statement of Mr. Williams follows:]
Prepared Statement of Walker A. Williams
Mr. Chairman and members of the Subcommittee on Africa and Global
Health Policy, I thank you for this opportunity to testify before your
committee and also for all of the support this committee has provided
to Africa.
As President and CEO of Leadership Africa USA (LA USA) with a
professional background of over three decades of experience addressing
major African development issues which include advocacy activities
directly related to the formal launching of AGOA on May 18, 2000. In my
opinion, AGOA is still the most comprehensive of all U.S. trade
preference programs benefiting 40 countries in sub-Saharan Africa (as
of January 2015) eligibility for preferential access to the U.S. market
in a wide range of products. It has become a flagstone of the U.S.-
Africa relationship and has successfully shifted the U.S. focus to
trade and economic issues. The policy priorities of AGOA when launched
in 2000 still ring true today--to increase trade and investment;
strengthening the private sector; reducing trade barriers; supporting
the rule of law; poverty reduction; economic reform; and encouraging
regional integration in Africa.
Mr. Chairman, I have been asked to address three issues:
AGOA's role in promoting economic growth and investment in
Africa;
Challenges to expanding African exports; and
AGOA's impact and the U.S. approach to the region in a
changing global trade environment.
Before I begin my testimony I want to reference for the record
Leadership Africa USA's AGOA efforts working with the African
Ambassadors Group's AGOA renewal efforts and more recently our
launching of the AGOA Action Committee and the ``Call to Action''
campaign with Watts Partners, Bechtel, Chevron, the Corporate Council
on Africa, the U.S. Chamber of Commerce and major civil society
organizations supporting Africa.
economic growth and investment
AGOA has successfully increased two-way trade with Africa in many
sectors such as horticulture, apparel, automobiles, ferroalloys, cocoa,
chocolate and confectionary products. Under AGOA, total exports from
sub-Saharan Africa have tripled and as AGOA countries improve their
business and investment climate, the amount of all U.S. FDI has almost
quadrupled. AGOA has also supported the diversification of sub-Saharan
African economies; since 2001, nonoil, nonmineral exports under AGOA to
the United States have increased almost fourfold, but at only $5
billion, there is much room for growth. AGOA has also created
approximately 350,000 direct jobs and 1,000,000 indirect jobs in Africa
and 100,000 jobs in the United States.\1\
Earlier this year, U.S. Trade Representative (USTR) Michael Froman
succinctly summed up AGOA's success as follows: ``Under AGOA, total
exports from sub-Saharan Africa to the United States have tripled and,
as AGOA countries improved their business and investment climates, the
stock of U.S. FDI has almost quadrupled. AGOA has also supported the
diversification of sub-Saharan African economies; since 2001, nonoil,
nonmineral exports under AGOA to the United States have increased
almost four-fold, but at only $5 billion, there is much room for
growth.\2\
Despite many AGOA success stories, we believe more needs to be done
to bolster Africa's participation in the global economy.
agoa: issues and opportunities to expand african exports
The reauthorization of AGOA presents the 114th U.S. Congress a
historic opportunity to assess key issues and AGOA's policy objectives
going forward along with several program challenges that should be
addressed as part of a enhanced AGOA. Many of the changes and key
issues being contemplated by this Congress in the AGOA Extension and
Enhancement Act of 2015 are raised in my testimony to address several
key AGOA issues under discussion. The key AGOA issues I have included
are; Program Duration, Program Coverage, Eligibility, Export
Diversification, Trade, Increasing Investment, Capacity-Building,
Regionalization and Communications.
Issue: Program Duration
We support the actions of key congressional leaders on April 16,
2015, who put forward a bipartisan bill cosponsored by the Senate
Finance Committee and the House Ways & Means Committee--``AGOA
Extension and Enhancement Act of 2015'' which referenced issues like
AGOA's extension, regional integration, eligibility criteria, AGOA
certainty, AGOA beneficiaries utilization strategy, expanding trade and
investments, etc. Also included as part of the AGOA Extension and
Enhancement Act of 2015 was renewal of the Generalized System of
Preferences (GSP) program and extension of the Preferential Duty
Treatment Program for Haiti.
AGOA Extension
While AGOA has contributed to market growth, missed opportunities
occur as a result of short or unpredictable project duration. One of
the most critical considerations is the amount of time it takes for
investment to take root or supply chains to expand. All supply chains
need time to develop and companies will not invest in cross-border
supply chains if they are not assured that their investments have a
chance at success. AGOA can help defray this risk if it remains in
place long enough. Ten years has been cited as the absolute minimum for
even the most straightforward supply chain, but sectors like
agriculture take even longer to develop. In the textiles and apparel
sector, for example, investments typically are planned over 10-year
periods, and returns on investment take 2 or more years.
We support a longer renewal of 15 years which has been suggested
and is attractive to the business community because it provides
predictability and certainty for investors and businesses and helps
reduce commercial risk. For many small- and medium-sized entrepreneurs
(SMEs) the cost of exporting to the U.S. may be prohibitive absent
trade preferences. Sufficiently long renewal periods reduce risk for
SMEs and other businesses because they know costs won't change
unpredictably. In sectors such as apparel and others, orders have a
relatively long lead-time, which requires longer, more predictable
project duration. As others such as the Brookings Institution have
noted, a long renewal period would also allow time to consolidate the
gains of the past; make opportunities more predictable, and the
relationship more participatory and less unilateral; ensure mutual
benefits; be responsive to the transformative priorities of sub-Saharan
African countries; and remain supportive of the regional integration
agenda.
Also related to the debate on AGOA's duration is a larger question
around whether trade preference programs should be replaced with two-
way free trade agreements (Free Trade Agreements, or ``FTAs''). This
discussion will continue to increase as preference margins erode (due
to FTAs and WTO trade liberalization) and as Africa's preferential
trade agreements with the U.S. and other trading partners, particularly
Europe are signed.
The United States already has Trade Investment Framework Agreements
(TIFAs) with several AGOA eligible countries and Regional Economic
Communities that are designed to spur private sector investment,
increase trade, and facilitate dialogue on areas of mutual interest.
According to the Brookings Institution, the AGOA countries with
existing TIFAs enjoy a proportionally large share of the total exports
under AGOA.\3\ I also support increased use of TIFAs and greater
integration of the business community in the TIFA process. Moreover,
the African Union has suggested that U.S. policy rely more on TIFAs to
gain better market access in countries like South Africa instead of
resorting to AGOA graduation policies which could reverse regional
integration efforts and potentially undo the progress made under AGOA.
Third Country Fabric Provision
The Third Country Fabric (TCF) Provision is a flexible rule of
origin that allows AGOA beneficiary countries to receive preferential
treatment for goods manufactured with fabric or yarn from non-AGOA
countries and is also set to expire in 2015. The TCF provision has
proven to be critical to supporting the growth in the textile and
apparel sector, which has been accelerated by AGOA and is an important
industry for a growing number of AGOA beneficiaries. The fastest-
growing African exporters of apparel under AGOA from 2005-11 were Cape
Verde, Ethiopia, Kenya, Lesotho, Madagascar, and Togo. In 2004, Kenya,
Lesotho, Madagascar, and Swaziland relied upon the TCF provision to
export 90 percent of textile and apparel goods under AGOA. Without the
TCF provision, countries that rely on imported fabric to produce
apparel would no longer be able to access U.S. market. USTR has urged
Congress to renew AGOA and third country fabric provisions long enough
``to encourage meaningful investment and sourcing'' \4\ and the AGOA
Ambassadors Working Group recommends reauthorization ``for a
significant enough period of time (15-20 years) to inspire investor
confidence and allow opportunities to take root and grow.'' The same
applies to the Third Country Fabric Provision. The Ambassadors also
note ``if the prevailing economic growth rate in SSA is used as a base
rate, it could take African LDCs a minimum of 20-25 years to reach the
lower income level and develop the capacity to trade globally.''
The African Union recommends that the TCF provision be extended
concurrently with AGOA because the continued success of the textiles
and apparel industry in sub-Saharan Africa is dependent on the
provision's flexibility.
The Textiles and Apparel and Retail Industries have advocated for a
long renewal because ``[s]hort-term renewals don't provide enough
certainty to enable industry to make capital-intensive investment
decisions necessary to attract textile and footwear investments or
affect long-term sourcing partnership decisions.'' \5\ For the apparel
industry, orders alone must be placed approximately 9 months in
advance. The textiles and apparel industry has also argued that AGOA's
third country fabric rule be concurrent with AGOA's duration and
renewed for an extended period of time. Included in this group are:
American Apparel and Footwear Association (AAFA);
National Retail Federation (NRF);
African Cotton and Textile Industries Federation (ACTIF);
United States Fashion Industry Association;
Retail Industry Leaders Association (RILA); and
Outdoor Industry Association.
Business groups like the Corporate Council on Africa (CCA) and U.S.
Chamber of Commerce do not offer a specific time period for renewal,
but CCA has urged Congress to establish the program for a period ``long
enough to establish meaningful investment opportunities.'' The U.S.
Chamber of Commerce simply suggests a multiyear renewal.
African Coalition for Trade (ACT), a nonprofit organization made up
of private sector actors engaged in trade under AGOA, advocates for a
15-year renewal period to encourage large investments, which take 10-15
years to amortize. A long renewal period would not preclude
negotiations of Free Trade Agreements (FTAs), similar to the Caribbean
Basin Initiative (CBI) a permanent preference program that led to a
number of reciprocal agreements.
A longer 15-year renewal of AGOA, we believe is necessary to
attract investment and trade, create jobs and ownership opportunities
for SMEs in Africa.
Issue: Program Coverage
Program coverage in terms of both countries and products continues
to be an AGOA reauthorization issue. AGOA grants preferential market
access to the United States for over 6,000 products (building upon the
base of GSP), but certain products such as sensitive agricultural
products subject to tariff-rate quotas remain excluded. As a result,
the trade and development community has long advocated for 100 percent
duty-free quota-free (DFQF) treatment for all products from sub-Saharan
Africa.
For instance:
The African Union advocates for 100 percent QF treatment for
all products, including agricultural products.
A 2014 Brookings Institution study found that extending 100
percent DFQF treatment to AGOA beneficiaries would generate
$105 million for African producers at a loss of only $9.6
million of U.S. producers. This benefit is derived almost
entirely from the increased preferential treatment for the 1
percent of goods considered politically sensitive in the United
States, and African exporters gained no significant advantage
when DFQF was calculated at 99 percent.\6\
The National Foreign Trade Council (NFTC) has proposed
amending AGOA to include Regional Economic Communities (RECs)
as eligible for AGOA benefits.
Issue: Country Eligibility
The debate around country eligibility is a significant area of
focus, with two main issues emerging: whether to add additional
eligibility criteria and how to improve the annual eligibility review
process. The AGOA eligibility criteria and reviews act as both a carrot
and a stick. The eligibility requirements create incentives for
beneficiary countries to strive for higher standards, but they can also
penalize countries that miss the mark by withholding or withdrawing
benefits. Currently, AGOA eligible countries must have established or
make continual progress toward establishing a market-based economy, the
rule of law, elimination of barriers to U.S. trade and investment,
poverty reduction policies, antibribery rules, and protection of
workers' rights. Also, countries must not engage in activities that
undermine U.S. national security, violate human rights, or support
terrorist activities. These eligibility criteria are in addition to the
political and economic criteria in the now-expired GSP, which AGOA
eligible countries must also continue to meet. Adding to eligibility
criteria or strengthening enforcement of eligibility criteria could
actually deter investment because it could create greater uncertainty
over whether benefits would remain in place.
In advance of AGOA's reauthorization to improve the annual
eligibility review process we should clarify the eligibility criteria
around the following issues:
Food Security;
Additional Labor Standards; and
Business Environment.
For instance, a discussion continues around whether to continue
eligibility for South Africa under AGOA, due both to South Africa's
relatively advanced economy and political issues. Removing South Africa
from the program, I believe, could disrupt critical regional market
development. Further, taking preferential benefits away from more
advanced economies does not ensure that less developed economies will
benefit. Instead, market share tends to drift to other more advanced
economies, like China, when preferences are removed.
The Obama administration through the USTR has encouraged Congress
to reexamine and update the eligibility criteria, for example by
``[elimination of] unwarranted SPS barriers and employment
discrimination.'' \7\ It also supports a more flexible eligibility
review process, by, for example, adding intermediate steps before
complete withdrawal is announced, such as partial withdrawal of
benefits we believe is fairer and support.
AFL-CIO and Solidarity Center have suggested that an AGOA renewal
include continued improvement toward all core labor rights in ILO
Conventions, and adding intermediate steps before revocation of
eligibility to support workers and prevent retaliation against them.
Issue: Diversification of Exports Under AGOA
Growth in exports is a central goal of AGOA and key to sustained
economic growth and development, yet many sub-Saharan African countries
have struggled to diversify their export base even with AGOA's
benefits. A concentrated export base can be vulnerable to market
disruptions on both the supply and demand sides, which makes countries
more susceptible to economic and political volatility. A diverse export
base, on the other hand, spreads commercial risk across many products
and industries, which can help countries' better absorb market
disruptions and maintain economic growth.
Despite AGOA's broad product coverage, petroleum is by far the most
heavily exported AGOA product, comprising 82 percent of total imports
under AGOA in 2013.\8\ AGOA has already facilitated exports in
nontraditional products, but petroleum exports continue to dominate
AGOA trade, hovering at between 80 to 90 percent of total AGOA exports.
Continued support for export diversification under AGOA would better
distribute the benefits of AGOA and support sustained economic growth.
Technical assistance and capacity development
The USAID Trade Hubs (now renamed Trade and Investment Centers)
have helped some AGOA beneficiary countries develop National Investment
and Export Strategies, designed to help boost exports under AGOA. The
strategies identify potentially competitive products and industries and
market gaps that could prevent growth at scale. For example, Mauritius
has identified light manufacturing of cutlery and hardware as
potentially competitive, but assistance is needed with branding. In
Mozambique, there is great competitive potential for agriculture
products, including cashews and coconut, but this potential is hampered
by poor infrastructure and requires technical assistance to comply with
foreign SPS requirements.
Capacity-building initiatives can also support diversification of
exports under AGOA, especially those targeted at regional integration
and supply chain development. For example, trainings on design and
marketing would help improve the competitiveness of the textile and
apparel industry, and sanitary and phytosanitary (SPS) training would
help farmers access larger regional and international markets. In the
textile and apparel sector, support for vertical integration is key to
strengthen the development of the apparel industry and would also help
support the development of related sectors like cotton.
We suggest the United States formally assist AGOA countries with
their national investment and export strategies and need policies to
support them.
We need a more comprehensive AGOA trade and investment strategy
that will link trade and investment opportunities, build value chains,
and strengthen participation in African regional markets--a ``Support
Programme Imports (EIAO),'' to support export diversification for sub-
Saharan African countries and encourage U.S. businesses to increase
imports from Africa \9\ in part through capacity-building that will
support, grow, and diversify AGOA markets.
Issue: Enhancing Agricultural Trade
A strong area of focus for AGOA's renewal is agriculture.
Agricultural exports under AGOA have been sluggish, despite the
agriculture sector's importance to sub-Saharan Africa. Enhancing market
access for agricultural products and addressing supply and demand side
constraints could help boost agricultural exports and greatly
contribute to the region's economic growth.
Despite challenges around agricultural trade, exports of
agricultural products under AGOA have increased 8 percent. Those
benefits are ``widespread; nearly two-thirds of AGOA beneficiaries
experienced significant positive increases in their agricultural
exports as a result of AGOA.'' \10\ AGOA has positively impacted the
agriculture sector in sub-Saharan Africa, however, significant untapped
potential for growth remains.
Agriculture employs over half of the population, roughly 65
percent, and approximately half of those employed in the sector are
women. Agriculture growth is two to four times more effective at
directly reducing poverty than growth originating in other sub-Saharan
Africa sectors, and ``for every 10 percent increase in farm yields,
there has been a 7-percent reduction in poverty in Africa.'' \11\
TABLE 2: AFRICAN AGRICULTURAL EXPORTS
(Value and share by destination, 2012)
------------------------------------------------------------------------
Destination Value (billion $) Share (percent)
------------------------------------------------------------------------
World........................... 57 100.0
Europe.......................... 20 35.4
Africa.......................... 13 23.5
Asia............................ 12 21.7
Middle East..................... 5 8.1
North America (United States)... 3(2) 5.4 (3.5)
South and Central America....... 2 2.7
------------------------------------------------------------------------
Source: Center for Global Development \12\
The Obama administration has recognized the need to reexamine the
agricultural tariff lines excluded from AGOA and determine whether any
additional products could be added due to possible shifts in political
sensitivity.\13\ We fully support this review.
Tariff Rate Quota (TRQ) Administration: Despite the importance of
the agriculture sector, many products like meat, dairy, sugar, tobacco,
cotton, and value-added products containing dairy and sugar (e.g.,
chocolate) are subject to tariff rate quotas (TRQs) that predate AGOA,
which limit their trade to U.S. markets. Although these products are
politically sensitive in the United States, they hold great export
potential for Africa.
The WTO G20 group of developing countries has pushed for changes to
the TRQ rules during the Doha Round of trade negotiations. At the 2013
Bali Ministerial, part of the Doha Round, WTO Members reached a
compromise agreement that stipulates that if tariff rate quotas for
agricultural products remained underfilled, then the importing country
will either accept goods at the lower tariff rate on a first-come,
first-served basis until the quota limit is reached or issue an
automatic import license upon request until the quota is filled. The
compromise will be in place for 6 years unless WTO Members agree to
renew or modify it. After the 6-year period, countries can opt out of
the compromise agreement, which the United States has said it would do.
Assistance Meeting SPS Standards: We know firsthand that simply
eliminating tariffs is insufficient to boost agricultural exports under
AGOA. Addressing nontariff challenges will also be critical, some of
which are the focus of capacity-building initiatives linked to AGOA. A
particular challenge for agribusiness, particularly SMEs, has been
compliance with complicated U.S. sanitary and phytosanitary (SPS)
requirements.
The United States Government should move forward and could provide
additional support to AGOA countries for SPS, for example assisting
those seeking import approval for horticultural products from the U.S.
Animal and Plant Health Inspection Service (APHIS) be implemented as
recommended in a 2010 report published by the International Food and
Agricultural Trade Policy Council (IPC).
It is also important to note that many countries lack the capacity
to implement their own SPS standards, which, on paper, are aligned
largely with international norms. Increased U.S. support to help
implement SPS standards would also help AGOA countries take better
advantage of export opportunities.
Issue: Simplified Rules of Origin
Rules of origin (ROO) are used to determine where a product
originates, which is an important factor in determining whether a
product is eligible to receive benefits under a preference program like
AGOA. While rules of origin will help ensure that trade preferences are
not bestowed on nonbeneficiary countries, complicated rules of origin
can place undue burdens on companies and customs officials alike and
may ultimately discourage use of preference programs. Simplifying and
unifying rules of origin for preference programs could lead to higher
usage rates by more AGOA beneficiary countries. For example, the more
flexible third country fabric provision (mentioned above) has
facilitated growth in the apparel sector. Also, allowing cumulation
from other African countries will help to support regional integration
efforts.
In addition to the rules of origin under AGOA itself, rules of
origin across preference programs are an issue. Many developing and
least developed countries are eligible to receive preferential
treatment under programs from a number of countries, all with different
rules of origin, which can quickly become trade restrictive for
developing countries that lack capacity to navigate these complex and
conflicting sets of rules. Most AGOA beneficiary countries are also
eligible to receive preferential treatment from the European Union
(Everything but Arms), Canada (Least Developed Country Tariff Program),
Japan (GSP), and Australia (Australian System of Tariff Preference),
among others.
During the Hong Kong Ministerial Conference in 2005, WTO Members
acknowledged the difficulty that developing countries have in
navigating diverse rules of origin under multiple preference programs.
In a step toward harmonizing rules of origin, WTO Members agreed upon
draft guidelines on rules of origin for preference programs for least
developed countries during the 2013 Bali Ministerial Conference. The
draft guidelines encourage rules of origin to be simple and
transparent. Since then, the WTO has created a Database on Preferential
Trade Agreements that contains information on the various rules of
origin for preference programs of WTO Members.
We propose simplifying AGOA rules of origin by:
Conforming to the WTO draft guidelines on rules of origin
for preference programs;
Extending uniform rules of origin to all African countries
to support regional harmonization;
Review the apparel industry uniform rules of origin and
the third country fabric provision;
Reducing the value-add requirement to a percentage that is
more in line with Africa's economy; e.g., ``10-15 [percent]
African content;'' \14\
Issue: Increasing Investment
AGOA as a trade preference program aimed at increasing African
exports to the United States, its goals also include increasing
investment on the subcontinent. Due to the central nature the program
has played in discussions on U.S. trade and investment policy, along
with growing interest from the U.S. business community, AGOA does have
the potential to link more closely to investment promotion. In addition
to the business community, African institutions and development
programs, such as the USAID Trade Hubs (now renamed the Trade and
Investment Centers) have encouraged increasing investments by African
governments using AGOA as one tool alongside other U.S. programs and
policies.
Trade and investment are highly interconnected. The increase in
trade between sub-Saharan Africa and the United States has been
accompanied by increased foreign direct investment (FDI) in sub-Saharan
Africa. At the time when AGOA was enacted, U.S. companies were leaving
sub-Saharan Africa at an alarming rate. The trend has, however,
radically reversed with U.S. FDI to SSA countries having increased by
over 50 percent between 2001 and 2007. Unfortunately the United States
has been slow to invest in Africa, while other countries, including
Brazil, India, and China, have raced to participate in Africa's growing
economy.
Sub-Saharan Africa's economies grew by an average of 5 percent in
2013, and growth is projected to increase going forward. Foreign
investment is expected to be approximately $80 billion in 2014.
President Obama last year announced a commitment of $33 billion
investment in Africa by the U.S. Government, the private sector, and
the World Bank. The President's Power Africa initiative also received
funding of $12 billion in August 2014 and will be an important
counterpart program to AGOA, as energy is one of the major supply-side
constraints facing increased trade. A renewed AGOA has the potential to
encourage more American firms to invest in a diverse range of sectors
throughout sub-Saharan Africa and help to keep the United States
competitive in the region.
An approach advocated by the AGOA Ambassadors Working Group among
others, is an AGOA targeted tax incentives for U.S. companies that
invest in nonextractive, priority sectors in AGOA beneficiary
countries. These incentives could come in the form of tax credits or
grant a zero tax rate on repatriated income or ``development
exception.'' \15\ It would also help decrease the level of commercial
risk and facilitate more U.S. private sector investment in nonpetroleum
products in the region, which is already forecasted to increase by
approximately 20 percent.\16\
For instance, during the U.S.-Africa Leaders summit last year the
United States announced a number of new trade and investment pledges
for Africa. These new commitments include $300 million annually to
expand the Power Africa initiative, $7 billion to the Doing Business
Africa initiative, and additional funding for the New Alliance for Food
Security and Nutrition. In addition, large commitments were made by the
private sector and civil society at concurrent side events during the
summit. These investments support increased exports under AGOA by
enhancing infrastructure development, linking U.S. and African private
sectors, reducing trade barriers in Africa, and supporting agricultural
production in AGOA beneficiary countries.
The AGOA Ambassadors Working Group recommends creating a diaspora
fund to share knowledge about doing business in U.S. markets and
provide capital using financing facilities to incentivize diaspora
investment compatible with AGOA's mandate should be explored.
Issue: Targeted Trade Capacity-Building
Preferential market access under AGOA has long been linked to trade
capacity-building through initiatives like the USAID Trade and
Investment Centers and other programs. A long-standing question is how
trade capacity-building could be better linked to AGOA so that it could
more sufficiently address both supply and demand side constraints that
prevent businesses, particularly SMEs and women entrepreneurs, from
taking advantage of the program and reaping its benefits.\17\ A
particular focus has also been placed on how capacity-building could
better support regional integration. I believe there is widespread
support throughout sub-Saharan Africa, across industries and sectors
regarding the importance of capacity-building to sustainable
development.
John Kufuor, former President of Ghana from 2000 to 2008, applauded
AGOA as a ``stimulus'' for African manufacturers and as ``a welcome
challenge'' for African companies, which must meet its rigorous
criteria for accessing the U.S. market.'' \18\ However, he also noted
that African entrepreneurs lack experience competing in the global
economy and therefore need extra assistance and training to overcome
knowledge and skills gaps.\19\ Africa's high trade barriers prevent
trade and investment from taking root and thwart regional integration
efforts that would better connect Africa to the global economy.
The USAID Trade Capacity Building database estimates the United
States provided over $3.3 billion in trade capacity-building assistance
to sub-Saharan Africa between 2001 and 2009. In 2012, the United States
spent approximately $94.6 million in trade capacity-building assistance
in AGOA countries.\20\ However, current capacity-building initiatives
need to be better coordinated to increase effectiveness. Better
coordination and linkage with AGOA would help facilitate the program's
objectives and leverage dollar expenditures.
Capacity-building efforts could focus on reducing regional trade
barriers and building capacity for higher value activities,
particularly in areas that show promise and fall under AGOA like
agriculture, textiles and apparel, and the leather industry. A possible
agriculture investment example could leverage activities under the New
Alliance for Food Security and Nutrition (which is also linked to the
African Union's Comprehensive Africa Agriculture Development Programme
(CAADP)) could be linked to AGOA eligible agricultural products in
beneficiary countries and amplify the benefits generated under both
programs. The Obama administration has also suggested improving the
link between AGOA and infrastructure investment initiatives like the
U.S.-Africa Clean Energy Finance and USAID funded development projects
at the ports of Mombasa and Dar es Salaam and along the Northern and
Central Corridors.\21\
In theory, the United States Agency for International Development
(USAID) is the coordinator of trade capacity-building, but a 2014 GAO
study found challenges with its structure. For example, the official
agency strategy predates the creation of the Millennium Challenge
Corporation (MCC), which means MCC's critical trade capacity-building
activities are unaccounted for in USAID's coordination plan.\22\ One
widely supported proposal is the establishment of a more formal
coordination process between the more than 12 implementing agencies of
U.S. capacity-building assistance.
I would be remiss if I did not include in my testimony the
importance of infrastructure to promote sociodevelopment and poverty
reduction in Africa. Intentionally implicit in AGOA's mission is
support for an infrastructure development strategic framework in
support of regional and continental infrastructure development in
energy, transport, water, health, ICT and power and electricity.
Without a sustainable infrastructure base in Africa AGOA's true
development impact will not be fully achieved.
According to the World Bank, just 16 percent of sub-Saharan African
roads were paved in 2011, compared with 26 percent in Latin America, 65
percent in East Asia and 79 percent in OECD countries. Only 1 in 3
Africans had access to electricity, against 9 in 10 people elsewhere in
the developing world. Poor infrastructure is a major impediment to even
faster economic development; the continent loses 2 percentage points of
GDP growth annually as a result of its infrastructure deficit.
The American business community continues to fight for initiatives
such as the African Growth Opportunity Act (AGOA) because they believe
more must be done to help our private sector compete in African
markets. While others forge ahead the United States may be falling
behind. Companies operate with long planning horizons and sourcing
decisions made many months or even decades in advance.
AGOA's pending expiration provides an opportunity to review U.S.-
Africa economic relations and broaden the relationship to include a
focus on supporting the critical infrastructure needed to achieve the
impactful outcomes envisioned in AGOA. Investment in infrastructure
needs to be more than doubled to about $93 billion a year within a
decade and AGOA can be a catalyst to help spur U.S. investment
opportunities in this sector.
Issue: Expanding Regional Trade and Integrating Africa Into Global
Supply Chains
We believe there is broad consensus on the need to support deeper
regional integration. Regional market development holds particular
promise for African economic development and increased investment
alike. Regional trade can produce economies of scale, and AGOA could
better link to and support regional harmonization efforts already
underway, including the Trade Africa initiative. Although AGOA is a
trade preference program that opens the U.S. market and not a bilateral
trade agreement, greater focus on regional markets could strengthen the
program's reach.
Building stronger regional markets will also encourage value chain
development within sub-Saharan Africa and between African countries and
global supply chains. This is critical because, as the U.N.
stresses,``[i]n developing countries . . . value added trade
contributes some 28 [percent] to countries' GDP on average . . . [and
furthermore,] [e]conomies with the fastest growing [global value chain]
participation have GDP per capita growth rates some 2 percentage points
above the average.'' \23\
Trade Facilitation is also a topic of focus and, notably, efforts
to improve trade facilitation will both encourage regional market
development and integrate Africa into global supply chains. At the Bali
Ministerial Conference in 2013, WTO Members reached consensus on the
Agreement on Trade Facilitation which includes a number of measures
designed to enhance transparency, accelerate customs clearance times,
and simplify customs formalities and procedures, all of which are
expected to increase sub-Saharan Africa imports by about 55 percent and
increase exports by 63 percent. Measures addressing supply side trade
constraints allow businesses to be more competitive by reducing the
amount of time it takes them to get their goods into the hands of end
consumers. Facilitating trade at the borders increases predictability
of delivery times and costs. Trade facilitation activities will have
positive spillover effects. For example, previous trade facilitation
activities in Burundi to streamline tax collection increased government
revenues, which in turn fund health and education projects.
Improved trade facilitation will improve AGOA usage rates by making
it easier for more businesses to engage in cross-border trade through
faster clearance times, increased transparency, and lower overall trade
costs. Targeted, coordinated trade facilitation will play an important
role and could improve hard and soft infrastructure and trade
logistics, create enabling environments that increase market access for
SMEs, local businesses and regional integration.
Additional trade facilitation measures linking AGOA to service
sector investments will be critical to value chain development. A
diverse range of services are needed to make value chains develop and
function, including transport, storage, and distribution services,
along with financial, legal, and advisory services, and others. The
payoff of improving services can be quite significant. Agricultural
exports, for example, are highly responsive to quality of transport
services and trade-related infrastructure. The potential for growth in
services is significant, and AGOA should reap this benefit.
The Corporate Council on Africa and East African Business Council
developed joint recommendations on trade facilitation that were
presented at the August 2014 U.S.-Africa Leaders summit in the context
of the U.S.-East African Community Trade and Investment Partnership and
Commercial Dialogue, led by USTR and the Department of Commerce,
respectively. Through The Corporate Council on Africa's Trade Working
Group in partnership with USTR and Commerce are involved in actions
that could be implemented to strengthen the agricultural and apparel
value chains, improve digital trade, build the cold chain, and improve
customs procedures and technology, including electronic payment
systems. The U.S. Chamber of Commerce is leading a global effort on
trade facilitation that is complementary of these efforts related to
sub-Saharan Africa.
Issue: Sustained High-Level Political Dialogue
Although AGOA is an economic program, continued support for
building the trade and investment relationship between the United
States and African nations requires high-level political commitment. We
recommend enhanced political dialogue that demonstrates a mutual
dedication to strengthen and multiply commercial linkages would help
strengthen the relationship between the United States and Africa and
improve confidence among investors and businesses.
Events like the historic U.S.-Africa Leaders summit which brought
together President Obama and more than 40 heads of state from sub-
Saharan Africa to discuss ways in which to increase trade and
investment, enhance security, and strengthen democracy must be
continued. Notably, China and the European Union, both of which have
aggressive commercial policies on Africa, hold regular summits with
African heads of state. For example, through the forum on China-Africa
Cooperation, Chinese and African Ministers meet annually, and a heads
of state summit is held every 3 years.
Key outcomes from the 2014 U.S.-Africa Leaders summit and
additional ways in which AGOA could help foster political dialogue
between the United States and sub-Saharan Africa include:
Among the specific commitments achieved were: (i) increase
investment in the New Alliance for Food Security and Nutrition,
(ii) escalate Power Africa efforts through the Programme for
Infrastructure Development in Africa (PIDA) framework and by
providing $300 million per year to achieve 30,000 MW power,
(iii) expand U.S. trade and investment platforms, (iv) renew
AGOA, and (v) provide $7 billion in financing over the next 2
years under the Doing Business in Africa Campaign.\24\
A recommendation from The AGOA Ambassadors Working Group
supports more frequent congressional delegation visits to AGOA
countries to enable legislators to witness the effects of AGOA
and better understand the region's commercial opportunities and
challenges, and help to inform future legislative decisions.
We recommend a summit-level meeting held every 2 years would build
on the success of the 2014 summit and continue to enhance political
dialogue among the heads of state of AGOA beneficiary countries and the
United States. These summits would provide a regular opportunity to
discuss common interests, and could also enhance the utility of the
annual AGOA forums.
Mr. Chairman and members of the subcommittee, thank you for
providing me with the opportunity to speak before you today. I hope you
will move forward and resolutely to pass AGOA's reauthorization.
----------------
Notes
\1\ AGOA Ambassadors Working Group Recommendations for the
Reauthorization of the African Growth and Opportunity Act (AGOA).
\2\ Froman, Michael. Growing the Development Dividend: U.S. Trade
Policy and Global Development in the 21st Century. Office of the United
States Trade Representative, 29 Jul. 2014. Web. 8 Dec. 2014.
\3\ Schneidman, Witney & Lewis, Zenia A. The African Growth and
Opportunity Act: Looking Back, Looking Forward. Brookings Institution,
June 2012. Web. 9 Dec. 2014.
\4\ Froman, Michael. Growing the Development Dividend: U.S. Trade
Policy and Global Development in the 21st Century. Office of the United
States Trade Representative, 29 Jul. 2014. Web. 8 Dec. 2014.
\5\ U.S. and African Companies Call for Immediate Renewal of AGOA.
American Footwear and Apparel Association, 13 Aug. 2014. Web. 10 Dec
2014.
\6\ The African Growth and Opportunity Act: An Empirical Analysis
of the Possibilities Post-2015. Brookings Institution, 2014. Web. 12
Dec. 2014.
\7\ Testimony of United States Trade Representative Michael Froman
Before the Senate Finance Committee on the African Growth and
Opportunity Act (AGOA). Office of the United States Trade
Representative, 30 Jul 2014. Web. 13 Dec. 2014.
\8\ Loucif, S.J. U.S. Trade with sub-Saharan Africa, January-
December 2013. International Trade Administration, n.d. Web. 9 Dec
2014.
\9\ AGOA: Trade and Investment Performance Overview. United States
International Trade Commission, 24 Apr 2014. Web. 11 Dec. 2014.
\10\ AGOA: Trade and Investment Performance Overview. United States
International Trade Commission, 24 Apr 2014. Web. 11 Dec. 2014.
\11\ Carletto, Calogero, Jolliffe, Dean, and Banerjee, Raka. The
Emperor has no Data! Agricultural Statistics in sub-Saharan Africa.
2013. Web. 15 Nov. 2014.
\12\ Elliott, Kimberly. AGOA's Final Frontier: Removing US Farm
Trade Barriers. Center for Global Development, 28 Jul. 2014. Web. 12
Dec. 2014.
\13\ Fact Sheet: Investing in African Trade for our Common Future.
The White House, 4 Aug. 2014. Web. 11 Dec. 2014.
\14\ How AGOA 2.0 Could Be Different: Outlining Africa's Position
on the AGOA Review process. African Union and United Nations Economic
Commission for Africa, Apr. 2014. Web. 12 Dec. 2014.
\15\ AGOA Ambassadors Working Group Recommendations for the
Reauthorization of the African Growth and Opportunity Act (AGOA).
\16\ Schneidman, Witney & Lewis, Zenia A. The African Growth and
Opportunity Act: Looking Back, Looking Forward. Brookings Institution,
June 2012. Web. 9 Dec. 2014.
\17\ Note, the House Committee on Foreign Affairs and Senate
Committee on Foreign Relations have jurisdiction over legislation
concerning capacity-building for Africa.
\18\ Schneidman, Witney & Lewis, Zenia A. The African Growth and
Opportunity Act: Looking Back, Looking Forward. Brookings Institution,
June 2012. Web. 9 Dec. 2014.
\19\ Interview with John A. Kufuor, former President of Ghana
(2001-9), Washington, April 17, 2012. Cited from Witney Schneidman,
African Perspectives on AGOA. The African Growth and Opportunity Act:
Looking Back, Looking Forward, (2012): 23. Brookings Institution.
Africa Growth Initiative, June 2012. Web. 9 Dec. 2014.
\20\ Williams, Brock R. African Growth and Opportunity Act (AGOA):
Background and Reauthorization. Congressional Research Service, 24 Jul.
2014. Web. 9 Dec. 2014.
\21\ Fact Sheet: Investing in African Trade for our Common Future.
The White House, 4 Aug. 2014. Web. 11 Dec. 2014.
\22\ USAID Should Update its Trade Capacity Building Strategy.
United States Government Accountability Office, Aug. 2014. Web. 14 Dec.
2014.
\23\ Global Value Chains and Development: Investment and Value
Added Trade in the Global Economy. United Nations, 2013. Web. 10 Dec
2014.
\24\ Statement by the Chair of the U.S.-Africa Leaders Summit. The
White House, 6 Aug. 2014. Web. 14 Dec. 2014.
Senator Flake. Thank you, Mr. Williams. Ms. Feingold?
STATEMENT OF CATHERINE FEINGOLD, DIRECTOR OF INTERNATIONAL
AFFAIRS, AFL-CIO, WASHINGTON, DC
Ms. Feingold. Thank you. Good morning. Chairman Flake,
Ranking Member Markey, and members of the Senate Foreign
Relations Subcommittee on Africa and Global Health Policy,
thank you for this opportunity. The AFL-CIO strongly supports
reauthorization of AGOA. We support AGOA's objective of
building sustainable economic growth in Africa.
However, we are concerned that to date oil and gas
constitute 80 to 90 percent of all exports under AGOA with only
a few countries effectively using the program for nonenergy
products. This has meant that many of the ambitious goals
identified by AGOA have not been fully met.
In the proposed reauthorization bill, we welcome some
important changes, especially those that make the eligibility
processes more transparent and accountable, including a formal
process for third party petitions, public hearings, a biennial
report on country compliance that includes civil society
submissions, and the out of cycle reviews. We believe that
these changes will create a more effective mechanism for unions
and civil society organizations to raise concerns regarding
compliance with AGOA eligibility criteria and hold their
governments accountable.
Despite these improvements, the bill unfortunately omits
several important measures regarding eligibility that the AFL-
CIO believes would make AGOA more effective. These include:
first, updating the labor criteria to include the abolition of
the worst forms of child labor and guaranteeing freedom from
discrimination, which would be consistent with the core
conventions of the International Labor Organization. AGOA
beneficiaries should also commit to making progress toward
creating decent work, including good wages, respect for worker
rights, and access to social protections.
Second, requiring governments to develop and implement
resource transparency standards. Too often commodity-driven
growth supports corrupt regimes with little direct benefit to
citizens. Transparency provisions would empower citizens with
information needed to engage with governments and target
corruption.
Third, ensuring countries uphold their fundamental
responsibility to protect against and remedy violations of
human rights in the context of business activities as defined
in the U.N. Guiding Principles on Business and Human Rights.
Fourth, introducing a democracy clause. Lastly, in addition
to strengthening the eligibility criteria, we strongly support
increasing funding for capacity-building. This would include
education and skills training for formal and informal workers,
women and young workers, as well as for entrepreneurs, trade
union and civil society organizations.
Let me give you an example of why exactly we need a strong,
effective AGOA and increased capacity-building programs. In
June 2014, the U.S. Government took the rare step of suspending
trade benefits for Swaziland, citing that government's
systematic violations of fundamental worker rights, including
repression of union and human rights leaders, the issuing of
death threats, and imprisonment of activists, and the refusal
to legally recognize the union federation TOCOSWA.
This case underscores the need for rights-based training
programs to help workers monitor and push back against many of
the problems that occur in light industrial production in the
region. Without that training, the workers of Swaziland would
not be able to continue to advocate for improved working
conditions in their country.
With the reauthorization of AGOA, success will rely not
only on improved trade flows, but also on the creation of
coherent policy toward Africa that links AGOA to other programs
that promote meaningful investment in Africa's workers as well
as in its manufacturing and infrastructure capacity.
One of the underlying assumptions behind the original AGOA
legislation was that low skill exports would lead to the
creation and growth of complex and higher skill sectors.
However, trade preferences alone have proved insufficient to
achieve that goal. Currently, trade and investment capacity
building hubs in the region focus mostly on transport and power
infrastructure issues to the detriment of worker rights,
protections, and benefits.
Through these trade hubs, we believe that programs need to
be created to support initiatives that provide youth, women,
and migrant workers in both formal and informal employment with
education and skills training. Investment in strong labor
protections as part of the trade capacity programs would make
those hubs a foundation for creating decent work, a strong
skilled workforce, and strengthen the system.
Let me close by thanking you again for the opportunity to
present the views of the AFL-CIO on AGOA reauthorization and
implementation. I would be happy to answer any questions. Thank
you.
[The prepared statement of Ms. Feingold follows:]
Prepared Statement of Catherine Feingold
Chairman Flake and members of the Senate Foreign Relations
Committee, thank you for the opportunity to present testimony on the
Africa Growth and Opportunity Act (AGOA) and the role of the
legislation in creating jobs and decent work in sub-Saharan Africa. We
appreciate the committee's effort to encourage dialogue and move AGOA
toward reauthorization. The AFL-CIO supports a 10-year AGOA
reauthorization. While we have concerns about whether AGOA has
succeeded in promoting shared economic growth, we believe a revised
AGOA could contribute to job creation and development in Africa.
Much of my testimony today is drawn from a previous policy brief
published by the AFL-CIO and the Solidarity Center titled, ``Building a
Strategy for Workers' Rights and Inclusive Growth--A New Vision for the
Africa Growth and Opportunity Act (AGOA).'' \1\ That brief was based on
intensive consultations with the AFL-CIO's African trade union partners
and the regional organization that represents their interests.
Many Africa trade unions are barely aware of AGOA because it has
had very limited impact on the development of their economies, except
in the extractive and textile and garment sectors, and only in a few
countries. This is largely due to the historical, and unfortunate, fact
that trade capacity-building has long focused on transport and power
infrastructure, to the detriment of worker rights, protections or
benefits.
The AGOA legislation does, however, establish worker rights
criteria. The AFL-CIO supports this recognition of the fundamental role
these rights play in ensuring a sustainable, inclusive trade and
development strategy, and strongly urges the inclusion of African
workers, as stakeholders, in efforts to strengthen the impact and more
equitably spread the benefits of AGOA. This means the development of
well-grounded country strategies, and the trade and investment capacity
building hubs that support them, that arise via a fully consultative
process that embraces all stakeholders, including workers, their
representatives and other civil society actors. These trade and
investment capacity-building hubs could be greatly enhanced by
addressing worker rights issues throughout their programs.
Economic growth and expanding consumer markets in Africa are
positive signs, especially for U.S. companies and manufacturers doing
business in Africa. But they mask persistent income inequality: almost
half of sub-Saharan Africans live in poverty. Key tests for AGOA will
be how well it addresses growing income inequality in Africa and how
well it promotes the creation of good paying and sustainable employment
on the continent. The program should aspire not to push African
countries into the global race to the bottom--in terms of wages,
respect for rights and implementation of the law, a contest so many
other countries have joined--but to fully embrace its stated goals or
reducing poverty and strengthening democracy, along with increasing
trade and integration.
A new AGOA must take into account what lies behind poverty,
including the changing face of the workforce. A high percentage of
Africans toil in the informal economy, with subcontracting and
irregular labor contracts put downward pressure on wages and working
conditions. Women workers dominate in many informal sectors and
predominate in AGOA-promoted industries such as floriculture and
garments. And many workers migrate for jobs, where they may be
vulnerable to exploitation or left uncovered by labor laws.
The AFL-CIO's support for AGOA is based on feedback received from
engagement with partner trade unions in Africa, through bilateral
discussions and the work of the Solidarity Center, an AFL-CIO-allied
organization with programs in 13 countries in sub-Saharan Africa.
During the recent U.S.-Africa Leaders summit, the AFL-CIO hosted a
delegation of 38 union leaders and worker rights advocates from sub-
Saharan Africa. Speaking at the summit's Civil Society Forum and in
other venues, those leaders argued not just for the reauthorization of
AGOA, but also for a better AGOA. A joint partnership statement between
the AFL-CIO and the International Trade Union Confederation's Africa
Regional Office articulated the key points of a shared economic vision
for Africa.\2\ This vision focuses on inclusive economic growth, with
workers benefiting from job creation and access to financial stability,
education, health care, and social protection. Key parts of this vision
include investing in young workers, gender equality, migrant rights and
policies on trade, investment, and industrialization that generate job
growth but with strong respect for worker rights and the rule of law.
AGOA is very much a part of this vision but requires changes that
better integrate trade promotion into the legislation's broader goals
of promoting democratic governance and respect for human rights,
including worker rights. In the original act, it was clear that the law
was created not only to support increased trade and investment but also
to encourage rule of law development, address corruption, eradicate
poverty, and support civil society organizations. The AFL-CIO
enthusiastically embraces that vision and is pleased that it remains a
goal in the new authorization.
i. improving eligibility criteria
AGOA's eligibility criteria contain a range of U.S. policy goals
including the establishment of a market economy, the rule of law,
political pluralism, the elimination of barriers to U.S. trade and
investment, economic policies to reduce poverty, efforts to combat
corruption, increased access to education and health care, and the
protection of internationally recognized worker rights.
In the current law, section 104 (F) explicitly enumerates
``internationally recognized worker rights'' as: ``protection of
internationally recognized worker rights, including the right of
association, the right to organize and bargain collectively, a
prohibition on the use of any form of forced or compulsory labor, a
minimum age for the employment of children, and acceptable conditions
of work with respect to minimum wages, hours of work, and occupational
safety and health.''
AGOA's labor rights language needs to be consistent with the
highest standards embodied in other trade legislation and state that
countries must meet all core rights laid out in the corresponding ILO
Conventions, which are reflected in the ILO Declaration of Fundamental
Principles and Rights at Work. There also should be an explicit
reference to elimination of the worst forms of child labor and freedom
from discrimination, including the rights to equal remuneration and
freedom from discrimination in employment and occupation enshrined in
ILO Conventions 100 and 111. It should be clarified that the right to
acceptable conditions of work with respect to minimum wages includes,
among other things, any legally or contractually required pay (such as
overtime, bonus, and holiday pay) and any legally or contractually
required contributions to pensions, health care, disability insurance
or other benefits.
The particular focus on equal remuneration and freedom from
discrimination in employment and occupation is particularly critical
given the changing role of women in the African workforce. Extending
trade preferences to a country can increase employment and better
connections to markets for women, but it also has the potential to
increase existing inequalities and/or worsen economic opportunities.
Light industry, particularly the garment and textile sector, is
heavily staffed by women--and often young women. The Solidarity Center
has noted in exchanges with union partners that, in its programs in
Kenya, Uganda, Malawi, Lesotho, and Swaziland, women garment and
textile workers have struggled with major workplace problems including
low wages, sexual harassment, discrimination, unsafe workplace
conditions and a lack of nonwage benefits, such as paid maternity
leave. Where unions were formed to represent workers in these
countries, we saw improvements in their working conditions and wages
that generated gains for their families and communities.
Additional improvements to eligibility criteria should also
include: requirements for countries to make continual improvement
regarding labor protections over time, elevating standards and living
conditions in tandem with economic growth; provisions for protecting
human right in the context of business; explicit mention of democracy
as a benchmark and a standard for resource transparency and activities.
This last point is critical as commodity-driven growth too often
supports corrupt regimes and results in little direct benefit to the
majority of citizens. AGOA should contain measures that require
countries to develop and implement transparency standards, and AGOA
benefits should be limited, suspended or withdrawn for beneficiaries
that fail to develop or implement such standards.
ii. creating more robust mechanisms for eligibility oversight
The AFL-CIO is pleased that the process of sanctioning countries
that do not comply with AGOA's eligibility criteria has been changed in
the draft legislation, as we see removal from the program as a last
step. We also believe that the new petitioning process empowers
stakeholders and can send strong signals to governments to change their
behavior. The AFL-CIO also welcomes the proposed flexibility of
applying a selective loss of benefits. Ultimately, however, the U.S.
Government must be prepared to withdraw eligibility as it did with
Swaziland when governments simply refuse to comply with the act's
requirements.
iii. capacity-building
As part of an overall effort to strengthen AGOA, trade capacity-
building, including in the areas of worker rights and the environment,
is fundamental and requires financial resources as well as a commitment
to ensuring that gains from trade result in inclusive economic growth.
Capacity-building is crucial to sparking better use of AGOA and
broader economic development, but must be accompanied by a robust
development strategy. Current capacity-building efforts, such as the
Trade Africa and Power Africa initiatives, focus primarily on
bolstering transport and power infrastructure. While these are
necessary to meet emerging development needs and close gaps that keep
African countries from taking advantage of AGOA benefits, the United
States must also invest in building stronger democratic institutions,
enhancing social protections and developing needed human and resource
capital if AGOA is to live up to its ambitious goals. Trade capacity-
building must address the ability of stakeholders to hold their
governments accountable to the standards included in the AGOA
eligibility criteria. Strong citizen engagement will support
sustainability of projects and investments.
Congress should explicitly authorize funding for initiatives that
provide youth, women, and migrant workers--in formal and informal
employment--with education and skills training; support informal
economy unions and worker-driven organizations; and strengthen these
organizations' ability to participate in democratic decisionmaking and
demand legal rights and access to social protections, particularly in
the areas where violations of labor and environmental rights are
prevalent.
Attention to core labor standards enumerated in the AGOA section
104 should be part of a larger development strategy focused on
workforce development, skills building, and health and safety
awareness. As agencies such as USAID promote intraregional trade as
congruent to the goals of AGOA, a deliberate effort should be made to
bring unions and worker rights organizations into the process.
Unions are best prepared for, and already responding to,
intraregional trends and issues. In East Africa, where the East African
Community (EAC) is integrating economies (supported by programs like
Trade Africa), the East Africa Trade Union Confederation (EATUC) is
working to promote harmonized labor standards and social security
portability across the economic zone. The Congress of South African
Trade Unions (COSATU) has recently released a statement noting that the
impact of U.S. poultry exports could severely impact jobs in South
Africa.\3\ COSATU argues, however, that this debate is not germane to
renewal of trade preferences under AGOA, and should be argued in a
different venue, such as the World Trade Organization.
Finally, the Swaziland example again shows the need for rights-
based training programs to help workers monitor and push back against
many of the noted problems that plague light industrial production
worldwide. In sectors such as garments and textiles, these programs are
necessary as well as work to help workers share in the gains from
trade.
Conclusion
A better AGOA has the potential to change not only the nature of
Africa's contributions to the U.S. economy, but also to transform the
lives of African workers whose work contributes to the wealth and trade
that arises from duty-free access to the United States. The AFL-CIO
supports the draft legislation, though it would like to see some
strengthening in the eligibility criteria including labor rights
provisions as well as monitoring and accountability mechanisms. The
AFL-CIO believes that Congress needs to authorize capacity-building
funding in separate legislation so as to allow gains from trade to be
broadly shared.
----------------
Notes
\1\ Building a Strategy for Workers' Rights and Inclusive Growth--A
New Vision for the Africa Growth and Opportunity Act (AGOA). AFL-CIO
and Solidarity Center, July 2014.
\2\ Statement of Partnership at the Conclusion of the U.S.-Africa
Leaders' Summit, AFL-CIO/Africa Regional Organization of the
International Trade Union Confederation (ITUC-Africa), August 8, 2014.
\3\ COSATU, Press Statement, AGOA should remain nonconditional and
preference based, April 22, 2015.
Senator Flake. Thank you, Ms. Feingold, and thank you all.
I will start with some questions, and when Senator Isakson gets
back, we will have him report on the markup last night.
But, Mr. Eisner, first you mentioned that China is eating
our lunch here, and I believe, Mr. Hart, you mentioned that we
have improved or we have increased imports, or, I am sorry,
trade by 3 percent. China has done 13 percent during that same
time. What can we do--I mean, what is the one thing that China
is doing that we are not, the most important thing, put it that
way. I know that other countries--you mentioned European
countries are signing bilateral investment agreements right and
left. And after the question about what China is doing that we
are not, I would like to go into whether this is forestalling
or making it easier or harder for bilateral trade agreements to
be signed.
So, Mr. Eisner.
Mr. Eisner. Thanks for the question. You know, I think the
one thing that China is able to do that the U.S. Government is
not just in the position or the U.S. business community is this
kind of command and control approach when it comes to
investments in Africa that we have seen over a long period of
time where they offer lower rates. They offer a different
incentive package for African governments. They come in with a
different set of standards we will say when engaging both on
worker issues, but also their investment strategies.
So I think the fact that they are--where the United States
can come into play is much more in the alignment of our foreign
assistance packages that may be taken into account of
remodeling some of the systems we have out there, whether it is
the USAID system or MCC, or other U.S. Government agencies that
can look at the lifeline approach of projects and take into
account what the American business community is able to offer
to some of these countries to make it a little bit more
competitive to compete with China, Europe, and others.
I think a lot of times it is not taken into account that
what Americans are putting into that system is a very long
approach to investment. It is not a take-and-grab approach, and
I think that is one of the defining factors that we should
start looking at when we look at aiding. Obviously we need
reauthorization of Ex-Im and other agencies to help support
that investment abroad.
But I think it is just generally the approach of
competitiveness versus what China's approach is, which is much
more hands on, I would say, from the top tier of government
down.
Senator Flake. Mr. Hart, do you have any thoughts here?
Mr. Hart. If I could--before I answer your direct question,
much has been written in the last couple of days about
bipartisanship blooming all over Washington. And I just would
like to say I think your committee has reached new heights with
the AFL and the Chamber heartily endorsing reauthorization. So
it is really fantastic to be part of the Hallelujah Chorus
here. [Laughter.]
I think Scott has answered better than I can. Let me just
say China is taking investment in Africa seriously. They look
at Africa as a key trading partner, and the United States so
far is not. We are pivoting East, but the East is pivoting to
Africa. I think we need to take much more seriously the
potential growth and the potential economic opportunity.
I think we continue to look at Africa, first of all, as one
country. It is not. And we also look at it with a 20-year-old
predisposition that it is all corrupt and we cannot do business
there, and that is also untrue. The barriers to doing business
are there. I have discussed a number of them, energy being a
key one. But I think we can take much more--take a much more
vigorous approach to our economic relationship with the
continent.
Senator Flake. Mr. McRaith, you mentioned that you would
prefer to do some vertical integration there. Can that be done
in a 10-year timeframe? I know a 15-year is preferable, but can
it be done with 10 years?
Mr. McRaith. Yes. So actually I like the comments of Mr.
Williams. Certainly 15 years was something that we initially
came forward with. Again, I would just reconfirm that we are
pleased to get 10 years, but 15 years would have absolutely
been the preferred. A number of people that we met with
actually asked us to verify and submit facts as to what is it
you really need--why do you need 15 years. Why do you need 10
years? Why does the three-year renewal not work?
So we actually submitted a set of documents, historically,
that showed the investment and the ROI on major investments,
you know, $400 million investments in spinning, weaving, dying,
and full mill capacity in the ROI. And that really--that ROI
really kind of balanced out around the 8th and the 9th years.
So the 10-year really just kind of meets the absolute minimum
threshold required to get us that investment into place. The
belief is that by then FTAs will be in place and we will
continue forward. But 10 years was the absolute minimum, but
people we were really looking for was that 15-year mark to go
with those big investments. It can be done, but barely.
Senator Flake. All right. Well, thank you. Mr. Eisner, what
incentives are there for any of the African countries to enter
into a bilateral agreement with us while they are getting
preferential treatment here? We do have examples. I think
Colombia is one. There is a preferential agreement there. They
entered into a bilateral free trade agreement with us, or an
FTA at least, and suspended the preferences they were getting.
What are some examples in Africa that--where that might happen?
Is South Africa the best candidate for that, and do you foresee
that during the next 10 years if we do reauthorize it and us
entering into bilateral agreements with any of these countries?
Mr. Eisner. Colombia is a great example of how we were able
to transition from what was a one-way trading system to a peer
trading system, I might say. I think, you know, there are
opportunities here. I think that the renewal of AGOA helps that
platform, but we really have to reenergize and relook at the
way we do trade agreement across the continent I think.
The diversity of the markets, let us not forget, is pretty
high. So the South Africa example, while they have pretty high
GDP also have a population that is about 40 percent employment
all told, both accounted for and unaccounted for, which
obviously I believe AGOA's mission there is to help raise that
40 percent up into the stratosphere.
But you look at what we are doing on the regional
investment treaty front or the regional FTA front, and I think
that is where we will see greater successes. And when we point
to the EAC and the great work done by USTR and the Commerce
Department to truly try to align the EAC into a system that can
be compatible with U.S. trade FTA styles.
I think there are examples of how we get there. I do not
have an answer for you today of what it is going to look like.
I think we need to rethink how we are doing trade with the
continent and what does the approach look like when you have to
take into account that you have a Kenya in the same regional
trading block as a Burundi. They are not on scale, and so how
do you adapt to a new style of trade with the continent. And I
am looking forward to working with folks across this table to
come to that conclusion the day after you guys reauthorize
AGOA.
Senator Flake. Thank you. Senator Markey has kindly agreed
to let Senator Isakson go first since he has a time constraint.
Senator Isakson. And I appreciate the Senator from
Massachusetts for doing so. I want to--as you all know, last
night in the Finance Committee we marked up the Extension and
Authorization of AGOA for a 10-year extension, which I was very
proud to be a part of. I think Africa is the continent of the
21st century for the United States of America.
The Chinese are extracting a lot of wealth. They are
building a lot of buildings, but they are using their own labor
to do so. America is saving lives with PEPFAR. Millennium
Challenge is building infrastructure and capacity. And if we
continue to bolster our trade and jobs with Africa, we are
going to do a great job expanding our relationship, and it will
be the principal continent of this century for America in terms
of trade, profitability, and partnership. So I am excited to
work on it, and I am excited for AGOA to be moving forward.
I want to make one public statement, though, and I hope the
South Africans are listening all the way across the globe. I
just talked to our Ambassador, by the way, in South Africa. We
have had some market access problems with the South Africans.
They are the single largest beneficiary of AGOA. They are a
very developed country in comparison to most of the other
African countries. They have market--we have market access
problems for agricultural products from United States of
America, and Senator Coons and I have worked extensively to try
and get the South African Federation on Poultry and others to
come to the table and negotiate forthrightly.
I offered two amendments last night, one which I withdrew
and one which passed unanimously. The one that passed
unanimously was an instruction to the President to immediately
after the passage of AGOA to instigate an investigation and
inquiry into South Africa's practices as far as agricultural
access to their market, which I intend to do. And with the new
parameters, as was mentioned by Ms. Feingold, in the bill, we
have the ability to take action against a country that is not
participating or playing fairly with the rules, which we intend
to do.
The amendment that I withdrew was one that would terminate
South Africa at the end of 3 years' period in terms of
participation in AGOA. I withdrew that because that is a
sledgehammer. I do not like to use sledgehammers, but I also do
not think the South Africans should take the withdrawal of that
amendment as any easing of our pressure to see to it we have
fair and equitable access to the markets in South Africa.
Trade is a two-way street. The South Africans are
benefiting richly from it. We need to make sure that AGOA works
not only for the South Africans, but for the United States of
America as well. So I just want to make that point, and I think
Senator Coons might want to, if you would let me refer to him
just a second, may echo my statement.
Chris.
Senator Coons. Thank you, Senator Isakson. With the
concurrence of the Chair, I just wanted to add that Senator
Isakson has been a tireless leader on the issue of AGOA
renewal. He and I have visited South Africa. We raised this
issue of open market access years ago. In fact, Scott, I think
we were together at the U.S.-South Africa Chamber launch that
same trip, and we have had a number of, I think, focused, and
relevant, and valuable conversations.
The breadth of concern in the Senate about ensuring that
South Africa is a good and fair trade partner is a reflection
of the bipartisanship Mr. Hart referenced. And Senator
Isakson's amendment that was adopted last night had more than a
dozen cosponsors, and the one that was narrowly withdrawn and
will be reconsidered also enjoys broad support.
It is my real hope that we can resolve this in a positive
way, but it is difficult for me to go home and say that I am
giving duty-free, quota-free access to the markets of the
United States when there is not a comparable fair attitude on
the part of the most developed economy on the market, one that
we hope to work together to strengthen and to broaden. So I
just want to commend you for your leadership and your continued
and strong engagement on this.
Senator Isakson. And I thank Chairman Flake for giving us
time, and Senator Coons for his work and cooperation, and
Senator Markey for his patience. Thank you. [Laughter.]
Senator Flake. Thank you.
Senator Markey.
Senator Markey. I thank you, and I thank you, Senator
Isakson and Senator Coons, for your incredible interest in this
issue. It is very impressive. Ms. Feingold, can you talk about
the state of child labor in Africa? And could you comment on
what the United States could do more to ensure that we deal
with that problem?
Ms. Feingold. Absolutely. Thank you so much for your
question. I think that this has been an issue that we have
focused on a lot, and with the leadership of Senator Harkin and
Engel, we have one model of a protocol that has been used
within the cocoa supply chain. But it is an issue throughout
sub-Saharan Africa, and I think the first step to dealing with
child labor is working with the business community, and we do
have lots of multistakeholders initiatives where we work
together to identify where child labor is in the supply chains,
and then work to get technical assistance there to make sure
that children are not working in hazardous situations, and that
we link it to access to education, and make sure that their
parents have good wages that keep the kids out of the----
Senator Markey. So can we talk about that a little more
specifically then? So our goal is to keep them in school, not
have them at work. And there are eligibility requirements in
AGOA for the ability to be able to get a job and not be still
in school. Can you talk about that a little bit and how the
United States can help to make sure that it is not exploited?
Ms. Feingold. Absolutely. Well, we think that there is a
direct link between making sure that their parents actually
have decent work so that when we talk about AGOA we talk about
building strong jobs in the region, that means their parents
have good wages and that their kids are not seen as being
needed to work to have income for the family. And so, we
strongly support that children first get a good education so
that that contributes to the development of Africa, and that
their parents have their fundamental worker rights, the ability
to bargain with their employer to raise wages, and have good
jobs, and keep their kids out of the workplace.
Senator Markey. All right, thank you. Mr. Williams, you
referenced Power Africa in your testimony. We heard from the
President of Liberia that they have a grand total of 42
megawatts for a country of 4.2 million people. Just to contrast
that, Massachusetts has about 6 million people and we probably
have about 16 thousand megawatts. So 42 megawatts for an entire
country of 4 million people, and Power Africa can play a role
there.
So could you help us to understand what it is that you see
that Congress can do, America can do, to help expand that
access to electricity, especially renewable electricity? Solar
could be a big game changer in Africa.
Mr. Williams. Well, Senator, I had the privilege last year
of coordinating the African Energy Ministerial in Ethiopia, and
one of the featured agencies was the USAID's Power Africa and
the Power Africa Program. And it was very successful because,
as has been mentioned by the other witnesses here, Africa has
$600 million people without electricity. And I can say to you
right now in southern Africa there are blackouts and rolling
blackouts in even South Africa.
So power and energy are critical. If AGOA is going to be
successful, it is something we need to address. Power Africa
brings an opportunity to the U.S. Congress because Power Africa
has created a working task force of all the Federal agencies
who get together monthly and talk about a coordinated approach
and strategy to producing more power and electricity in Africa.
Two weeks ago I was in St. Thomas and I attended a DOE
meeting there just prior to the President's trip to Jamaica as
he was on his way to Panama. In St. Thomas, we talked about
renewables and the importance of renewables. Renewables are
going to be a big factor, but it is still going to be really
petroleum and gas for a while as we transition, but we need to
promote renewables as one of the options.
We are also looking at doing a very big regional power
ministerial to follow up the African Energy Ministerial
possibly in Angola this year with all of the Africa Energy
Ministers from the SADC region and talk about how they can work
together--reach an agreement on how they can work together to
produce more electricity and power for the region. So it is a
regional strategy.
Senator Markey. Okay, beautiful. Mr. Hart, in 2013, the
United States imported $26 billion worth of petroleum products
under AGOA. But just on average, 240,000 barrels of oil are
spilled in Nigeria per year, and that is despoiling drinking
water, agricultural lands. So what is and can AGOA do to ensure
that there are better environmental standards that do protect
the long-term natural resources of each of these countries?
Mr. Hart. That is a great question, Senator, and I want to
admit quickly that I am not an expert in the particulars of how
AGOA can be strengthened in this way. I do think that our
ongoing engagement with Nigeria in this regard is really
important, and why I testified that I hope that we will be able
to move and strengthen AGOA quickly, as well as move beyond
AGOA so that we can have an even more robust engagement and
ensure that there are the kind of safety standards that are
needed to protect the environment and to ensure the safety of
the citizens of the countries from whom this oil is being
extracted.
Senator Markey. Okay. Mr. Williams, do you have a view on
that, how we can ensure that or help to apply pressure so that
better environmental standards are used while the oil, which is
being extracted to be sent to America, despoils the environment
in some of these countries.
Mr. Williams. Well, let me say that, really a two-way
street like trade is a two-way street, environmental practices,
best practice, is a two-way street. I am of the opinion that a
lot of the things that we need to have implemented need to be
put into formal agreements and understandings. So there are
ways that we can mitigate some of the environmental risk, but
we need to look at best practices, which gets back to capacity
development. We need to send and we need to train people to do
better.
Now, one of the things that is happening is gas is going to
be a transitional fuel, but Africa is sitting on oil and gas.
They are going to be developing those resources, so let us not
have them reinvent the wheel. Let us go there and bring best
practices and develop models that can be emulated. So, I mean,
no one wants to be a polluter.
Senator Markey. Thank you all so much for all of your work
in this area. Thank you, Mr. Chairman.
Senator Flake. Thank you, Senator Markey.
Senator Coons.?
Senator Coons. Thank you, Chairman Flake and Ranking Member
Markey. Thank you for convening this and for this terrific
panel that represents the whole range of NGOs, and the private
sector, and advocacy organizations, and those who represent
from labor to the Chamber. It is, as Mr. Hart said, a great
opportunity for us to continue to build on what I think is some
steadily growing bipartisanship here in the Senate.
AGOA, as we all know, offers the opportunity for much of
sub-Saharan Africa duty-free and quota-free access to the U.S.
market. And through AGOA, we seek to increase trade and
investment in the region, promote sustainable economic growth,
and encourage the rule of law and market-oriented reforms. I
support the long-term reauthorization of AGOA, and I am pleased
to see that the Finance Committee has made real progress on an
at least 10-year authorization.
But it is important that we also consider ways that greater
two-way trade with the region, particularly with developed
countries, establish reciprocal agreements with key markets
such as South Africa. If Congress is able to pass a 10-year
AGOA reauthorization, one concern I have is that a country like
South Africa would have duty-free access to our markets until
2025. And it is my hope that our Government will work toward a
free trade agreement with South Africa before that.
And so, I am wondering whether a shorter reauthorization
for South Africa would make sense, and if we offered instead 3
years of AGOA benefits which would give us time to negotiate an
FTA that would provide benefits for U.S. companies eager to
continue accessing the South African market. As we know,
Senator Isakson has filed such an amendment. I expect that we
will take it up, and reconsider it, debate it, and move it on
the floor once the Finance bill comes out.
What I would like to ask this panel to turn to is whether
there are other things in the AGOA reauthorization that we
should be taking up. Some outside experts from Brookings to the
Center for Global Development have suggested that we should do
more to increase intraregional trade, trade capacity-building,
and investment. The Finance Committee bill makes a great start,
but there are some things missing, in my view. For example, the
Millennium Challenge Corporation, which I view as an innovative
foreign assistance and development agency started under
President Bush, does great work on a bilateral basis, but does
not have the legal authority to do regional compacts.
So I, yesterday, along with Senator Isakson, met with Dana
Hyde, and when I was recently in Kenya I was talking with
Aeolus Kenya, Limited about a regional infrastructure project,
the conversation Senator Markey had just had with a number of
you about power and Power Africa. If Liberia really is to take
advantage of Power Africa, it will be on a regional basis. The
Mount Coffee Dam would provide hydropower to a whole region.
If, as Mr. William discussed, we are going to have a successful
energy ministerial in Angola, much of that is going to be about
regional development.
So I think we should authorize the MCC to enter into
regional compacts. I also think that we should be specifically
adding some trade capacity building and trade facilitation
provisions. So I would welcome any member of the panel who
wants to comment for a moment on whether the MCC should have
regional development authority, the ability to enter into
regional compacts, and whether you think we could
constructively add more capacity within AGOA to particularly
advance the role and interests of women, to particularly
advance trade capacity building and trade facilitation. I will
take a comment from any panel member. If you would, Mr. Hart
and Mr. Eisner.
Mr. Hart. I am glad I get to go first because we all
earlier vigorously agreed on all the points you just made. So
we absolutely agree more and better trade facilitation
assistance is necessary. It needs to be streamlined. There are
21 agencies in the U.S. Government that do this, and they are
doing great work, but it needs to be streamlined and
strengthened. I think many of us agree that the MCC should be
given the authority to do regional compacts. ONE heartily
endorses that idea. Regional integration is critical. Their
best trading partners are their neighbors.
And lastly, as you mentioned and as I testified, we believe
the passage of the Electrify Africa legislation is a critical
complement to AGOA. Business leaders across Africa cite lack of
electricity as a major, major constraint to production. High
energy costs or no energy make African producers less
productive and less competitive. So we heartily endorse the
Electrify Africa Act and believe that is a terrific complement
to AGOA.
Senator Coons. Thank you, Tom.
Mr. Eisner.
Mr. Eisner. Yes, this love fest continues. So, you know, I
echo the Electrify Africa Act or the Energize Africa Act or
whatever it becomes in a combined bill. I think it is necessary
for us as we look at the continent and the power generation.
You will never get to industrialization on the continent, which
all the countries really are striving for, unless you have a
base load of power that is able to supply investment.
On MCC, could not agree more than regional compacts are the
way that we should be going. If the Government of the United
States, whether it is USTR or the Commerce Department, are
focusing on NEAC, you know, regional trade investment
framework, whatever it might be called at the end of the day,
then I think you have to do that with some support dollars
behind it, and those dollars supplied by MCC make a lot of
sense.
I do think, as I mentioned earlier to Senator Flake, we
need to look at the MCC model and how do we incentivize more
American companies to invest in the process. I am open to think
through with you all how that may be looked at. I think they do
amazing work, and I think there are a lot of opportunities for
greater opportunities for the U.S. inputs into that considering
the lifeline of the projects. And how we invest in the
communities, and what those companies are doing in those
communities to build up the living wages of everyone around it
I think need to be considered in the MCC process.
On the 3-year--I tend to disagree that the 3 years makes
sense in South Africa due to the destructive nature it could
have on neighboring countries, like Lesotho where you have
$275,000 a year that are put in a very low economy, and the
fact that the textile industry there really is the backbone of
the economy. And if you take South Africa out of that equation
and you look at Namibia, you look at Botswana, all reliant in
some way or another on the South African economy. And if you
extract the U.S. portion of that, which is, I think, how it
might be looked at, as a political angle into South Africa, I
agree wholeheartedly that some of the market impediments that
we are facing really need to be addressed and addressed
yesterday, not today. But I think there is a way we need to get
to there, and I am not sure 3 years in and out and the
sledgehammer approach that Senator Isakson mentioned was the
right way. I think the cautious approach that was adopted by
Finance yesterday I think is a much more palatable one, and one
that needs to be looked at for other economies where there are
impediments to U.S. investments, like in the area of local
content, forced localization where it really is becoming a real
challenge for American companies who invest around parameters
that just do not make a lot of sense for us.
Senator Coons. I think if we look at how far the South
African economy has come, there has to be a question whether at
some point they need to graduate to an FTA, and at some point
whether the terms under which they have been benefiting need to
be modernized to reflect what would be a really balanced trade
relationship. I think that was the point Senator Isakson was
making and which I concur.
Mr. Eisner. And I would fully agree with you that we have
to evolve that relationship beyond where it is today, but
considering the elements around that and the high unemployment
in the market, I am not distorted that gets along the way. But
I fully endorse what you are saying.
Senator Coons. Mr. Chair, will you tolerate the other
members of the panel answering this question, and then we are
going to have to wrap up. Mr. McRaith, Mr. Williams, Ms.
Feingold?
Mr. Williams. Senator Coons, I echo maybe it slightly
different than how Scott's interpretation is, but I think that
we need clarity. Business people need clarity if they are going
to invest not their money, their stockholders' money. And if
they do not think it is going to beyond 3 years, and 3 years is
not enough of a timeline to make a business decision. Ten
years, okay, it is a compromise. We really need a longer time
period.
Getting to your other question, I support what MCC is
doing, and I would suggest that we look at their metrics, how
they evaluate what is successful and what is not successful,
and see if we can apply that to some other programs that need
to be better measured, and to look for better outcomes.
I would like to comment briefly on the China comment that
came up earlier. China is doing a lot in the continent, and we
do need to play some catch up in some places. But I can tell
you that the African Ambassadors and the Africans would prefer
to work with U.S. companies, which gets to a suggestion I am
going to make is that we need to empower our Ambassadors, our
embassies, our commercial embassy officials, to be more
supportive of U.S. businesses. I have personal experiences
where they do not always see as part of the role as a diplomat.
But we need to--if we do not have a lot of hubs in Africa, we
need to try to see if we cannot create some one-stop-shops in
these embassies, that can be more supportive of U.S. businesses
as they run into these opportunities.
Senator Coons. Mr. Williams, as you are well aware, a
number of us in the last Congress fought for and ultimately
successfully got an increase in the number of foreign
commercial service officers on the continent. I just came back
from a trip to Kenya, to Chad, to Senegal, and I could not
agree more. When I meet with ambassadors and their commercial
staff, whether State Department or FCS, they are increasingly
getting the message that this is of great value to us
politically, strategically, economically. And I hope to work
tirelessly with the chairman on this issue as well.
And I remain very interested, Mr. McRaith, Ms. Feingold, in
how we advance the labor and economic development potential
that the apparel industry really offers with longer term
clarity and authorization, and how to make sure that the child
labor issues that plagued the cocoa industry have really been
resolved. I have had a number of very encouraging meetings
about significant progress that has been made, but would love
to continue that conversation with you.
Thank you to the panel, and thank you for your engagement
in this issue, and thank you for what you recognize on a broad
basis is the significant potential for addressing the
challenges of poverty and of underdevelopment, that real trade
and real investment make possible. And I look forward to
working with the chairman on moving AGOA forward. Thank you.
Senator Flake. Thank you, Senator Coons, and thank you all.
And before we close, one thing that we have not addressed, and,
Mr. McRaith, you may want to talk about what you are doing to
be a good corporate citizen in the countries in which you
operate, your company and others, just to end on that.
Mr. McRaith. Yes, it is interesting. You know, as we look
at Africa and we see an incredible opportunity, but it is not
just that we see an incredible opportunity in Africa. What we
look at is that we have 30 years of learning of how not to do
business around the world as we enter countries. And, you know,
you can count any number of countries where the apparel
industry, which is a first mover of large quantities of jobs,
are not necessarily proud as you look back at what has
happened.
So as we enter Africa, the key for us is to learn from all
of those things that we could have done differently and apply
them. And, you know, the simplest way I would describe it to
you is we have corporate values, and in some cases we have met
with governments in Africa where they have not had the same
values that we have had. And we have drawn bright lines in the
sand and said we will not cross this line until you correct
things that need to be corrected in some cases, which were
actual laws and had been put into place.
The good news is that those laws were changed. We forced
those to be changed, and that is the value of private
enterprise entering these countries. You can make those things
change. When many Presidents or Prime Ministers of different
countries had made phone calls to have those laws changed, it
did not mean the same as someone who was now faced with an
industrial revolution being told that their people would not be
part of it because people could not come and engage with them.
So the key is to make sure that the people who go in have
the values, and we are actively working with the governments to
say it is not only about ensuring that you have the right code,
but that you actually have the enforcement capability to ensure
the code is applied, and you have the right training ability to
make sure that people understand that.
And, again, just the one thing I always recognize about
Africa, someone said it earlier, is we talk about a continent
very often as most people talk about a country. And this is a
continent inside of which you could fit all of the United
States, all of India, all of China, all of Japan, and most of
Europe physically would fit inside that continent. And so, you
really have to think of it regionally, and you have to focus on
those countries that you are engaging with.
And, again, I can only tell you we have been pleased with
the engagement we have had to deliver on those values, ensure
the investments are made to secure them. But we go in with our
eyes wide open and are always verifying that what is being said
is, in fact, what is happening.
Senator Flake. Well, again, thank you all for your
testimony. For the interest of members and their staff, the
record will be open until the close of business on Friday.
And we look forward to incorporating many of the
recommendations that you have made here today as we consider
these policies and this legislation. So thank you again.
With the thanks of the committee, the hearing is now
adjourned.
[Whereupon, the hearing was adjourned.]
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Additional Material Submitted for the Record
Letter from Ethiopian Global Initiative submitted
by Senator Edward J. Markey
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