[Congressional Record Volume 149, Number 103 (Monday, July 14, 2003)]
[Extensions of Remarks]
[Pages E1464-E1465]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




THE STATE OF AFRICA: THE BENEFITS OF THE AFRICAN GROWTH AND OPPORTUNITY 
                            ACT--NEXT STEPS

                                 ______
                                 

                         HON. CHARLES B. RANGEL

                              of new york

                    in the house of representatives

                         Monday, July 14, 2003

  Mr. RANGEL. Mr. Speaker, the African Growth and Opportunity Act 
(AGOA) has been in effect for over 2\1/2\ years. It was implemented on 
October 2, 2000.
  At present, 38 sub-Saharan African countries are designated as 
eligible under the African Growth and Opportunity Act (AGOA); however, 
implementation of trade benefits for two of these countries, Democratic 
Republic of Congo and the Gambia, is not final. Two other countries 
achieved eligibility on January 1, 2003, Cote d'Ivoire and Sierra 
Leone. (The attachment lists the eligible 38 countries.)
  To date, small countries near South Africa have been the most 
successful users of the program so far--Lesotho and Swaziland have 
tripled exports to the United States since 1999. Lesotho's exports to 
the United States, for example, are up from $110 million to $321 
million in 2002. In practical terms, these sales have created 15,000 
jobs. Farther north, export growth has been strong in Kenya--whose 
government believes AGOA has created 150,000 local jobs. South Africa 
is now an auto exporter, shipping 17,000 cars to the United States in 
the first 10 months of 2002.
  Additionally, 19 AGOA countries have met the additional requirements 
to receive duty-free and quota-free treatment for exports of their 
apparel and textiles products. Seventeen of the 19 countries have 
qualified for the provisions for less-developed countries, which allows 
the use of non-U.S. and non-AGOA fabric through September 30, 2004 
(only Mauritius and South Africa are not eligible).
  AGOA's sectoral effects to date have been most evident in the 
textiles and apparel sector. In 3 years, AGOA textile and apparel 
exports to the United States have doubled, rising from $570 million in 
1999 to $1.1 billion for 2002. This total comprises 9 percent of all 
AGOA exports. AGOA exports now comprise approximately 2 percent of all 
U.S. textile and apparel imports--a 100 percent increase from 2000, 
when AGOA took effect. Africa's 92 percent export growth rate in 
textile and apparel products is 10 times that for China, Latin America, 
Europe and other major textile and apparel exporters.

  Energy-related exports from AGOA countries continue to predominate; 
however, their overall share is declining, e.g., down to 76 percent of 
AGOA imports in 2002, from 83 percent in 2001. Additionally, the reason 
for the decline is not because energy exports from AGOA countries have 
dropped, but rather other imports have increased. For example, AGOA 
imports of transportation equipment were 4 percent of all AGOA imports 
in 2001, but those imports grew by 81 percent and are now 6 percent of 
all imports under AGOA.
  Not all African countries have participated fully and equally in 
AGOA's remarkable early record of success. Progress has been less 
evident for Tanzania, Ethiopia and much of West Africa. Moreover, 
despite the success in textiles and apparel, overall U.S. imports from 
Africa dropped by $3.4 billion, or about 25 percent, last year. This is 
because most African countries still rely on natural resources 
(especially oil, diamonds and precious metals) whose prices are 
volatile. Higher light-manufactured exports were thus offset by lower 
prices for oil and natural gas early in 2002, which cut Africa's energy 
export revenue by about $4 billion, while South Africa saw a $400 
million decline in exports of platinum, palladium and rhodium.
  More serious in the long term is that AGOA benefits are limited in 
agriculture. Here, largely due to lower coffee and cocoa prices, 
Africa's exports are down by 4.5 percent (or $25 million) since 1999. 
EU and American subsidies also probably hamper African farmers trying 
to diversify out of tropical commodities. However, AGOA does seem to be 
helping Africa export value-added agricultural products; while 
preserved fruits, vegetables and juices are still a small percentage of 
Africa's total farm exports, they are up from $22 million to $39 
million since 1999, with South Africa the leading supplier.
  To ensure that AGOA's early successes continue, it needs to be 
updated, extended and expanded to meet the current and future 
challenges in the U.S.-Africa trading relationship. Key issues that 
need to be addressed include the following:
  The more liberal apparel benefits for least-developed AGOA countries 
are set to expire in 2004, just as worldwide quotas will be eliminated. 
(Currently, least-developed AGOA beneficiaries can use third country 
fabric in qualifying apparel. This flexibility was necessary because 
few of these countries have fabric-making capacity.)
  I propose to extend LDC benefits for a short period of time, while 
creating incentives for LDC countries to develop fabric-making 
capacity. All AGOA benefits (apparel and otherwise) expire in 2008. The 
President has already indicated he will support an extension of the 
overall program beyond 2008. I propose to make AGOA benefits permanent. 
Sub-Saharan Africa has a tremendous amount of opportunity to export 
agricultural products. Unfortunately, many of the products do not meet 
U.S. sanitary/phytosanitary requirements. Currently, there are only 
about three USDA personnel (APHIS workers) providing technical 
assistance to the Africans to meet U.S. standards. Include a provision 
providing substantially more technical assistance for development of 
the agricultural sector.
  The AGOA apparel rules of origin (yarn forward requirements, very 
specific rules on findings, trimmings, etc.) are fairly onerous, and in 
many cases, make little commercial sense. Streamline the rules of 
origin.
  The United States is currently a party to dozens of international tax 
treaties with other countries. These treaties prevent double taxation 
for U.S. firms operating abroad, and include transparency requirements 
for other countries' systems of taxation.
  Include a provision encouraging the Secretary of the Treasury to 
negotiate tax treaties with appropriate AGOA countries.
  HIV/AIDS, malaria and tuberculosis epidemics continue to plague the 
continent. Include a provision to provide tax credits to U.S. firms 
with operations in AGOA countries when they make cash contributions to 
the global fund to fight HIV/AIDS, malaria and tuberculosis.
  The main deterrent to African investment is the lack of 
infrastructure in AGOA countries. Find a way to increase development in 
this area--perhaps through OPIC or the World Bank/IMF. There are 
several areas where Congress can clarify its intent. An AGOA III bill 
would be a natural venue to address these issues.
  Imports under AGOA have been a significant share of all U.S. imports 
from sub-Saharan Africa. In 2001, AGOA imports were $8.2 billion, or 39 
percent of the total U.S. imports from sub-Saharan Africa of $21 
billion. In 2002, AGOA imports rose to $9 billion, or 49 percent of the 
total U.S. imports of $18.2 billion from the region.
  Since petroleum imports are by far the major imports under AGOA, 
Nigeria, a leading oil producer, is the major import supplier under 
AGOA. Nigeria supplied 60 percent of AGOA imports in 2002, and together 
with South Africa (15 percent) and Gabon (13 percent), accounted for 88 
percent of all AGOA imports last year. In comparison, 14 AGOA-eligible 
countries accounted for less than 1 percent of AGOA imports, and of 
those, 5 did not ship anything.
  In 2002, the 107th Congress approved several amendments to the AGOA 
in the Trade Act of 2002. These amendments are commonly called AGOA II. 
They include doubling the cap for apparel assembled in an AGOA country 
from fabric made in an AGOA country to 7 percent of overall imports 
over an 8-year period (by 2008). However, the cap under the special 
rule for lesser-developed countries was left unchanged. They allowed 
Namibia and Botswana to qualify for the special rule for less-developed 
countries, even though their per capita incomes exceed the limit set 
under AGOA. They clarified that AGOA benefits be given to ``knit-to-
shape'' articles, garments cut in both the United States and an AGOA 
beneficiary country (``hybrid cutting''), and merino wool sweaters knit 
in AGOA beneficiary countries. They authorized $9.5 million to the 
Customs Service for textile transhipment enforcement, and broadened 
trade adjustment assistance to cover production shifts to an AGOA 
beneficiary country.
  The United States and five southern African countries (Botswana, 
Lesotho, Namibia, South Africa and Swaziland) are scheduled to begin 
free trade agreement (FTA) negotiations in late May. Preliminary 
discussions have focused on the negotiation's timetable and framework. 
Once begun, FTA negotiating rounds are expected to occur every 7 weeks 
with the target completion date set for the end of 2004. USTR notified 
Congress of its intent

[[Page E1465]]

to enter into these negotiations in November 2002. Since this will be 
the United States' first FTA in sub-Saharan Africa, other AGOA 
countries will be watching the process closely to determine how they 
might take advantage of such an opportunity in the future.
  USTR appears to understand that a more ``developmental'' approach 
needs to be taken with the SACU FTA. Specifically, USTR has told 
Congressional staff that they: (1) recognize the need for asymmetrical 
treatment, i.e., treating Botswana, Swaziland, Nambia and, 
particularly, Lesotho (an LLDC country) differently than South Africa; 
and (2) will strive to provide sufficient technical assistance to help 
these countries eventually become full FTA trading partners. An initial 
$2 million in U.S. funds has already been set aside for new trade 
capacity building initiatives related to the FTA. USTR believes they 
can attain these goals even while addressing U.S. industries' 
interests.
  SACU is the largest U.S. export market in sub-Saharan Africa. U.S. 
exports to SACU totaled more than $3.1 billion in 2001--most to South 
Africa ($3 billion). Leading U.S. sales to the region include 
machinery, vehicles, aircraft, medical instruments, plastics, 
chemicals, cereals, pharmaceuticals and wood and paper products. U.S. 
foreign direct investment in the SACU countries totaled $2.8 billion in 
2000, largely in manufacturing, wholesaling and services.
  The five SACU countries are leading beneficiaries of the African 
Growth and Opportunity Act (AGOA). The SACU countries were the top U.S. 
supplier of non-fuel goods under AGOA in 2001, accounting for more than 
a quarter of U.S. non-fuel imports from eligible sub-Saharan African 
countries. (Since oil exports boost the export numbers for many African 
countries, one needs to look at non-fuel exports to assess the benefit 
of AGOA.) Between 2000 and 2001, total U.S. non-fuel AGOA goods from 
South Africa grew by more than 30 percent, from Lesotho by 53 percent, 
and from Swaziland by 50 percent. Increases were seen in the textile 
and apparel, transportation equipment and agriculture sectors. As a 
result of AGOA, Namibia received a multimillion investment in an 
integrated textile and clothing production complex, and negotiations 
are under way for two additional factories.


                        ELIGIBLE AGOA COUNTRIES

  (1) Benin, (2) Botswana*, (3) Cameroon*, (4) Cape Verde*, (5) Central 
African Republic, (6) Chad, (7) Congo, (8) Cote d'Ivoire, (9) 
Democratic Republic of Congo, (10) Djibouti, (11) Eritrea, (12) 
Ethiopia*, (13) Gabonese Republic, (14) The Gambia, (15) Ghana*, (16) 
Guinea, (17) Guinea-Bissau, (18) Kenya*, (19) Lesotho*, (20) 
Madagascar*, (21) Malawi*, (22) Mali, (23) Mauritania, (24) Mauritius*, 
(25) Mozambique*, (26) Namibia*, (27) Niger, (28) Nigeria, (29) 
Rwanda*, (30) Sao Tome and Principe, (31) Senegal*, (32) Seychelles, 
(33) Sierra Leone, (34) South Africa*, (35) Swaziland*, (36) Tanzania*, 
(37) Uganda*, (38) Zambia*. (*Countries eligible for apparel 
provision.)

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