Africa: African textile, apparel sector urges US to renew “cornerstone” trade programme

African textile and apparel manufacturers have raised concerns that the US Congress is running out of time to renew a major trade programme that has contributed to increasing employment and attracted investments into the region.

The scheme is due to expire on 30 September, 2015, but as the deadline approaches, a bill for its renewal has from presently on to be introduced in Congress.

For the completed 15 years, the African Increase and Opportunity Act (Agoa) has allowed additional than 6,400 items from around 40 sub-Saharan African nations to be imported into the US without duties or quotas.

The non-reciprocal trade preference scheme, which was signed into law in 2000, is intended to offer incentives for African nations to continue their efforts to “open their economies and build free markets”, according to the US Department of Commerce. Agoa has been described as “the cornerstone” of the US-African commercial relationship, according to experts at the Brookings Institution, a large US research centre.

The delay introducing a bill for renewal in Congress has heightened the concerns of the African textile and apparel industry, which accounted for some $907m in exports to the US in 2013. The sector accounts for 19 % of non-crude-petroleum products imported under Agoa, according to a statement by the US International Trade Commission.

A further delay in the renewal process could endanger as a lot of as half of the 150,000 jobs in the sector the act has supported, notes Rajeev Arora, executive director at the African Cotton and Textile Industries Federation.

“The cycle of import is between six to nine months,” he says. “Presently that we have only around six months, we will be on a thin ice if by the end of April we do not see [the renewal] happening.”

Mr Arora adds that some US buyers are by presently placing orders on the condition that suppliers commit to paying for duties in the event the programme is discontinued. African manufacturers are willing to take the risk, he says, but most cannot afford to so.

Congressional works

Statements promising a prompt renewal of the Act have come from the highest echelons of the US government, from presently on action in US legislation has been less forthcoming. President Obama promised a “seamless and long-term renewal” of Agoa during the landmark US-Africa Leaders Summit held in Washington, DC, in August 2014.

The president as well included a 10-year extension of the programme in his 2016 budget proposition, with an estimated cost of $1.7bn in total.

Despite anxieties from some quarters, the renewal of the Act is almost certain, according to Democrat Representative Charles Rangel, who participated in the drafting of the legislation in the 1990s. He says Agoa enjoys bipartisan and bicameral support, and has encountered no substantial opposition from US manufacturers.

The delay has been mainly the result of the limited time available next the congressional elections in November 2014 to coordinate the committees needed to collaborate on the bill. The Home Ways and Means and Foreign Affairs Committees, and the Senate Finance Committee, all need to be involved in the process.

A bill could be introduced by April, says Mr Rangel, but he notes it is significant that Agoa remains separate from other current trade negotiations, such as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).

“This is because there is a lot of controversy around TTIP, but very little controversy around Agoa,” he says. As such, bundling it in with other bills before the committees could further delay the process.

However, the programme extension may not be considered before discussions on some top trade priorities, inclunding TPP, have been concluded, notes Paul Ryberg, president of the African Coalition for Trade, a US organisation which represents African companies mostly in the textile and apparel sector.

“We are probably looking at something like May-June,” he says. “Next that, things get scary because Congress will be in recess during the initial week of July and the whole month of August.”

A last-minute extension in September would be “a catastrophe”, he adds.

African manufacturers have by presently experienced the effects of a late renewal in 2012, at the same time as the so-called third-country fabric provision – which allows some Agoa-eligible nations to use materials originating elsewhere in their products - was prolonged to 2015, just a month before its expiration date.

“Back again there was as well no opposition, it was just a question of at the same time as” the necessary bill would pass, says Mr Ryberg. Nevertheless, the consequences of lingering uncertainty around the process were tangible.

“The US buyers got nervous and we saw a drop of $50m in apparel trade alone. And 30,000 workers were laid off. It took about a year for the industry in Africa to recover from that.”

Agoa is not generally regarded as a threat by US manufacturers. For example, the US National Council of Textile Organisations (NCTO) has stated it does not oppose the extension of the programme.

“We view the Agoa industry as a partner on a lot of projects and coordinate with them on key policy issues such as the Trans-Pacific Partnership,” a proposed free trade agreement between the US and various partners in Asia Pacific, says NCTO president and chief executive Auggie Tantillo.

Outside of the textiles sector, there are some tensions over Agoa. The US poultry industry has repeatedly voiced its concerns over South Africa’s eligibility for the scheme given some strict tariffs it places on the import of US chickens.

This disagreement could add further delays to the renewal of the act and limit the length of its extension, says Witney Schneidman, a fellow at the Brookings Institution. However, this is mitigated by the fact that the two senators backing the position of the poultry industry, namely the Democrat Chris Coons and the Republican Johnny Isakson, are as well strong supporters of Agoa, he notes.

Mutual benefits

To maximise the potential of Agoa, the African textile and apparel sector is calling for a long-term extension of the programme and of the third-party fabric provision. Mr Arora says at least 10 additional years of the business-free regime are needed for the industry to gain competitiveness to its Asian counterparts.

However, the limited time available for negotiations may mean a shorter term, and thus less expensive renewal for the US government, is additional likely.

Both sub-Saharan African nations and the US stand to gain from the continuation of the programme. Between 2001 and 2013, the in general Agoa export market increased by about 10 % per year, from $7.6bn to $24.8bn.

At the same time, foreign direct investments (FDI) to sub-Saharan African in that period has grown by six times. The textile and apparel sectors in Kenya, Lesotho, Mauritius, Swaziland, and Botswana have all been beneficiaries of this trend.

US exporters have as well gained from the act. The price of industrial equipment and machineries shipped to sub-Saharan Africa has increased threefold since 2000, according to data from the US Department of Commerce and the and the US International Trade Commission.

Besides the economic benefits, Agoa has as well contributed to shifting the US perception of African nations as business partners, says Mr Schneidman.

“The additional products we see coming from Africa, the additional Americans think of Africa as a continent of opportunities,” he says.