Washington, D.C. – United States Trade Representative Ron Kirk today welcomed news of an agreement in Congress to advance legislation making critical updates and improvements to the African Growth and Opportunity Act (AGOA), America’s trade preference program for sub-Saharan Africa, and the Central America – Dominican Republic – United States Free Trade Agreement (CAFTA-DR).
“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 Ambassador Kirk. “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.”
The extension of AGOA’s third-country fabric provision was a critical issue raised by trade ministers during the recent AGOA Forum in Washington, DC. U.S. orders for shipment of African exports after the slated expiration date of September 2012 are down 35 percent; African textile exports have already dropped by 27 percent in the last year.
Benefits of Extending AGOA’s Third-Country Fabric Provision
Critical to AGOA’s performance: AGOA is the cornerstone of America’s trade and investment policy with sub-Saharan Africa. AGOA’s performance and effectiveness are closely tied to its Third-Country Fabric (TCF) provision, which is set to expire in September 2012. The TCF provision is crucial to the continued survival of Africa’s textile and apparel industry – it has generated hundreds of thousands of jobs in sub-Saharan Africa, including in least developed countries, and has helped American retailers reduce their costs, diversify their supply chains, and provide greater low-cost apparel options for U.S. consumers. Swift passage of legislation extending AGOA’s TCF provision is necessary to ensure AGOA’s continued success – and the stability, development, and economic growth of sub-Saharan African countries. Congress has extended the TCF provision twice with bipartisan support.
The key to the African apparel industry’s development: Apparel trade under AGOA depends on the TCF provision. Global sourcing decisions for apparel are typically made up to nine months in advance, so failing to extend the TCF provision now means that apparel buyers are preparing to move production out of AGOA beneficiary countries, which will likely result in significant job losses and factory closures in Africa. The potential collapse of AGOA apparel exports – if third country fabric is not extended – will also have a negative impact on the cotton and textiles inputs, and would significantly weaken the prospects for the development of a viable and more vertically integrated African cotton-to-apparel value chain.
Helps American Retailers, Businesses, and Consumers: Imports under AGOA, particularly apparel imports made possible through the TCF provision help American retailers lower costs on apparel products. The TCF provision also provides retailers with an incentive to diversify their supply chains away from other sources, and provides low-cost sourcing options for American apparel retailers and consumers. AGOA also creates goodwill towards American companies that are undertaking a range of business partnerships with African companies, including sourcing apparel and other products from AGOA beneficiaries, and investing in rapidly growing African markets.
Benefits of Modifying CAFTA-DR Textiles Provisions
Critical to maximizing the FTA’s benefits: Legislation is also needed to implement technical corrections and modifications to the product-specific rules of origin for textile products covered under the CAFTA-DR—our agreement with Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua. The modifications that, among other things, provide certainty of duty-free treatment for women’s and girls’ woven pajama bottoms and clarity as to how certain items will be treated on the textiles “short supply” list of the FTA, which will promote use of the free trade agreement.
Supports the American textiles industry and other U.S. businesses: The CAFTA-DR provisions will promote U.S. exports to the region and help support jobs and production in America. The correction on sewing thread alone will help support an estimated 1,000 jobs in the United States, Central America, and the Dominican Republic, with U.S. production located in North Carolina, Florida, South Carolina, and Alabama. These changes to CAFTA-DR FTA have the strong support of the domestic textile industry as well as U.S. importers and retailers who source from the region.
Will mutually benefit the textile and apparel sectors of the United States and its CAFTA-DR partners: The United States, Central America, and the Dominican Republic have a long history of co-production arrangements. U.S. exports of textiles and apparel to the CAFTA-DR region were $3.8 billion in the 12-month period ending February 2012, and increased 15 percent over the prior 12-month period. U.S. imports of textiles and apparel from the CAFTA-DR region were $8.0 billion in March 2011 through February 2012, 10 percent higher than the previous 12-month period. Approximately 73 percent of those imports were made from either U.S. or regional yarns and fabrics.