Congress reached an agreement in late June to advance legislation that would make changes to two trade agreements seen as critical for the apparel industry.
The legislation amends the African Growth and Opportunity Act (AGOA) and the U.S.-Central America — Dominican Republic Free Trade Agreement (CAFTA-DR). It would extend the third-country fabric provision of AGOA–an issue identified during a recent AGOA forum in Washington D.C. as crucial to the agreement’s success–through 2015. It was set to expire on Sept. 30 of this year. The AGOA amendment would also add South Sudan to the list of eligible sub-Saharan African countries encompassed by the agreement.
Additionally, the agreement would make technical corrections to CAFTA-DR and would renew presidential authority to impose import sanctions on Burma.
“If our trade partnerships with Africa and Central America are going to provide the economic boost they’re meant to provide to these developing regions, and benefit American businesses and consumers as well, these critical fixes to AGOA and CAFTA-DR need to pass. So the agreement to move this legislation now is a very welcome step,” said U.S. Trade Representative Ron Kirk of the agreement. “We look forward to working with Congress in any way we can to ensure the renewal of AGOA’s third-country fabric provision and the implementation of technical changes to CAFTA-DR’s textiles and apparel provisions as soon as possible.”
According to USTR, orders of exports from AGOA countries for dates after the current third-country provision expires are down 35 percent. Textile imports from Africa dropped 27 percent overall in the last year, the agency said.
In a joint letter to the House Ways and Means Committee earlier this year a coalition of industry groups said the delay of the AGOA third county fabric benefit renewal, “forced many U.S. companies to shift their 3rd and 4th quarter 2012 orders to other countries to avoid uncertainties.”
The letter–signed by groups including the African Cotton & Textiles Industries Foundation, American Apparel & Footwear Association, American Manufacturing Trade Action Coalition, National Council of Textile Organizations, National Retail Federation, Outdoor Industry Association, Retail Industry Leaders Association, U.S. Association of Importers of Textiles and Apparel and the U.S. Chamber of Commerce–went on to say that many of the coalition’s member companies, both inside and outside the apparel industry, had “repeatedly expressed grave concern over the fallout of further delay.”
The coalition expressed concern that African governments had the perception that the delay indicated Congress was “abandoning Africa,” and that was “worrisome to many U.S. investors who must rely on the good will of these governments as American companies seeking market access in Africa and competing against companies from other regions.”
Similarly the coalition called Congress to task for failing to move ahead with technical corrections to CAFTA-DR that were approved by the free trade member countries. The fixes will be beneficial to the Western Hemisphere textile and apparel supply chain, the coalition said.
AGOA is considered a cornerstone of the U.S.-Africa trade relationship. Speaking in advance of the AGOA Forum in Washington D.C. just prior to the introduction of the legislation on the Hill, Johnnie Carson, Assistant Secretary of State for African Affairs, said, “The AGOA is our most important trade legislation in respect to opening up our markets for African goods and services.”
USTR said the long lead times for orders at most apparel companies mean that uncertainty about the availability of third country fabric benefits is more likely to negatively impact trade in the region. Third country fabric benefits allow a proscribed amount of apparel to be made with fabric produced outside the AGOA regions or the U.S. and still receive duty free treatment. It is seen as a tool to encourage use of the agreement.
The CAFTA-DR changes would also provide duty-free certainty for women and girls’ woven pajama bottoms, among other things, and would also provide some clarity about items on the textiles “short supply” list. By mutual agreement certain fabrics that are found to be in “short supply” in the free trade agreement region may be sourced elsewhere without impacting duty free status of items.
In announcing the House version of the legislation, Ways and Means Committee Chairman Dave Camp, R-Mich., said it has strong bipartisan support and strong industry buy in. Real action on AGOA has languished on the Hill for some time, despite historically broad bipartisan support for the trade agreement. There is little controversy over the CAFTA-DR fixes.
The renewal of the ability to level sanctions against Burma would extend U.S. government authority to use import restrictions to encourage continued democratization there, sources said. Restrictions have been gradually eased as Burma has taken steps towards democracy, but the certainty required for a significant investment in the region by the textile and apparel industries is a long way off. At one time Burma was an emerging textile source for the U.S.
Congressman Charles Rangel, D-N.Y., said the sanctions on Burma “have helped promote change and progress, which I am hopeful will continue.” Both Rangel and Camp were among the co-sponsors of the House version of the legislation.
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