Opinion
An AGOA With Even More Teeth
This past January, with the 15-year old African Growth and Opportunity Act (AGOA) program set to expire in September, the African Union dispatched a high-powered delegation of trade ministers of countries currently enjoying duty-free, quota-free market access to the United States for over 97 percent of their products. For all intents and purposes, the ministers’ week-long trip to Washington, DC was a success. After all, they met with very senior members of the Obama administration, with the Republican-led U.S. Congress and with the civil society, think tanks and various other private sector entities, and their message was heard loud and clear.
But for a slew of reasons, we cannot give anyone that calls for the simple renewal of AGOA a passing grade. In fact, while we understand that some countries would be up a creek sans paddle if AGOA and its third country fabric provision were not renewed on time, none of the other 30-plus countries has a really good enough excuse for allowing the status quo to continue. And that is why we are not surprised that heads of trade sages in Addis Ababa and Washington exploded in utter frustration.
When Rep. Paul Ryan (R,WI), the powerful Chair of the House Ways and Means Committee asked what else the delegation of Ministers wanted in AGOA before it expired, the response was culpably unsatisfactory – with nothing specific put on the table; like no one was ready for the most important question all sub Saharan-Africans should be able to answer on AGOA.
So, now we have to ask: How could the whole of sub-Saharan Africa not have any specific things to add to an enhanced AGOA? Watching the proceedings at the House Ways and Means Committee, it was obvious that the ministers were painfully unaware of AGOA’s facilities. Rumors swirled that someone in the delegation had only asked for tuna and tobacco to be included in AGOA. While this could have been a good thing for countries like Kenya, Mauritius (for tuna) – and Tanzania, Malawi, Mozambique and Malawi (for tobacco), just two commodities are not enough to satisfy an Africa that hungers for so much more.
The Problem?
The quandary that non-oil and non-textile producing AGOA beneficiaries find themselves in is twofold: Current textile volumes from Africa to the U.S. are the result of an incredibly innovative amendment to the AGOA rules of origin. The third country fabric provision completely changed the fortunes of investors in African countries, and in the process, they garnered support in the U.S. – after all, they supplied affordable garments to retail outlets like Gap and Banana Republic. And just like the oil producers, it is actually quite simple to make the case for a steady supply of fashion items and crude oil as these are on full display on catwalks and at the fuel pump.
And second, many African countries have neither fully appreciated the essence of lobbying the American government, nor grasped the American political system. Because it is much too easy to be overwhelmed with pessimism at how the now Republican-led Congress responds to the Obama Administration on immigration reform and Obamacare, one may definitely miss the fact that the Republicans are really keen on trade – with prognosticators suggesting that Obama and Congress will have an international trade legacy in mega trade deals like Trans-Pacific Partnership (TPP) with the Far East, and Transatlantic Trade and Investment Partnership (TTIP) with Europe.
We could point out that the Generalized System of Preferences (GSP), whose market access provisions are “financed” in much the same way as AGOA failed to pass Congress in July 2013. And yes: only one Senator, who has since left Congress, held up that piece of legislation. That GSP has, still, not been renewed should be a matter for concern for preference and market access programs. But again, people do not realize how invested the Americans are in Africa, and also that AGOA legislation is mostly non-controversial, attracting much greater bipartisan support.
In 2012, when Congress did not get to AGOA legislation till very late in the game, you can put the blame on the Africans themselves because they did not compel Congress to see this piece of legislation as a priority. In fact, like the Obama Administration, the African Union and the African Ambassadors in Washington, DC did this time around, AGOA has been front and center in the mind of Congress for over a year, and as we speak, the legislative language is currently being prepared. Projections are that because Africa and AGOA occupy a special place in Congress’ heart, it will receive a vote and pass before June 2015 – some say it’ll pass first quarter.
Nonetheless, like anyone who knows this bicameral body will tell you; Congress does not react unless there is a significant pressure. With 39 to 40 beneficiary countries currently being feted by China and the European Union to disadvantage American exporters, surely Africa was not short of strong supporters for whatever it is they want in a cornerstone program like AGOA.
For the record, each and every one of the stateside stakeholder groups wants what is best for Africa’s fast growing middle class just as much as it wants to give China and other countries a bloody nose in trade and investment competition. That said, because Africa brings in only about 2 percent of U.S. imports, who can blame Congress for not realizing that most of sub Saharan Africa does not really benefit much from AGOA?
Exploding Heads
But we must return to the exploding heads and why everyone should feel the way we do: The Obama Administration had taken the African Union’s ideas on a more
effective AGOA; combined these with studies sanctioned by U.S. Trade Representative Ambassador Michael Froman and even placed its outline for an enhanced AGOA on its official whitehouse.gov website. Foreign and trade policy observers felt that the U.S. now had a plan for Africa.
Key to making changes in AGOA lay in analyzing the true dynamic that existed between the world’s fastest growing middle class, and the United States. Here, Africa is a burgeoning economy that does not present a threat to internal producers in the United States. There’s also a focus on agriculture since sub-Saharan Africa is still between Rostow’s traditional agrarian economy and preconditions to take-off stage.
Like on the White House website, had the Africans not requested America for an enhanced AGOA? To this, Obama had specifically said he was keen on ensuring that
AGOA and its third country fabric provision were renewed for a long-enough period to encourage investment. Then, on top of updating AGOA origin rules and eligibility criteria, an appeal was sent to Congress to consider a total of 316 products in AGOA – some that were currently excluded due to out-of-date tariff rate quotas. So, in ministers not asking for specifics to be added to AGOA, Africans was both playing it safe and saying AGOA was good enough for now.
Lesotho’s Dilemma
Today, in February 2015, everyone, like they have been for the past two years, is in a state of panic – more so, countries like Lesotho, Kenya, Mauritius and South Africa.
Kenya’s garment manufacturers are looking to be reassured that AGOA will pass, but even Chairman Ryan’s proposal that Congress publish a legislative agenda may
not calm some nerves in Maseru. Lesotho, which in 2013, exported knit and woven apparel worth over US$321 million is dependent on textiles because it provides work for over 37,000 people.
In 2006, Lesotho textile accounted for 21 percent of Lesotho’s gross domestic product (GDP), and it dipped to 12 percent in 2012. This drastic drop was not due to Lesotho suddenly diversifying its economy to diamonds from the Letseng mine: It came from cancelled orders for Lesotho’s garments.
As Sourcing Journal Online suggests, timing is everything in the apparel and footwear industry: Industry Executives plan production and place orders months, and sometimes years, in advance so goods make it to stores in time for the next season. Panic on AGOA legislation is enough to send buyers to Bangladesh and Vietnam.
So, what is Lesotho to do? Of course, all AGOA beneficiaries must fight their for their specific privileges. And yes – if countries like Namibia or Ghana are not yet ready with their respective products, Lesotho and other countries must forge ahead. While 2012 was unfortunate, this time around, with Obama’s Democrats losing an already hyper polarized Congress in November 2014 to a Republican Party hostile to his agenda, the Africans are right to fear that the Specter of 2012 is back to haunt the garment industry with a vengeance.
We see the logic of everything; better keep what you have instead of demanding more in an environment that is very unstable. And with a Congress like we have, they may be right. But how can Africa forget that AGOA is for its own development? Should you not fight tooth and nail for something that could mean a better standard of living for your people? Why have an economic development program for all – and yet only a few are taking equitable advantage of it?
If AGOA is going to give the Africans the kind of teeth they need to bite a bigger chunk out of the world’s wealth, it will have to include things that the majority can garner equitable benefits from.
With writing by Emmanuel Musaazi and Djifa Kothor