U.S. Trade Representative Ron Kirk was among the first to cheer when the U.S. House of Representatives and the U.S. Senate voted in August to make critical changes to the African Growth and Opportunity Act (AGOA) and to the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR).
Kirk, the country’s point man on global trade, spoke about the impact of the vote on factories such as Lucky 1888 Textile Mills, located in the free trade zone at Tema, just outside of Accra, the capital of Ghana, as a true U.S.-Ghana trade success story. About 500 Ghanaian women work at the factory, making medical scrubs that are exported to the United States for sale at Wal-Mart Stores Inc., he noted after his visit to the factory in July. “Lucky Mills wouldn’t exist if it weren’t for the AGOA,” he said.
Capitol Hill’s action on CAFTA-DR also drew praise from Kirk and from U.S. textile exporters and their supporters. “This move to correct technical errors in the agreement is a job-preserving measure that will allow U.S. producers to recapture market share in the important CAFTA-DR market,” the U.S. Chamber of Commerce said in a statement. “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.”
According to official U.S. figures, U.S. exports of textiles and apparel to the CAFTA-DR region — Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua — were $3.8 billion in the 12-month period ending February 2012, and increased 15 percent over the previous 12-month period. United States imports of textiles and apparel from the 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.
The AGOA and CAFTA-DR are the cornerstones of U.S. trade policy for sub-Saharan Africa and Central America, respectively, offering duty-free treatment to their products, promoting regional integration, creating trade and investment opportunities that contribute to their sustainable growth and development. Washington and private-sector supporters of both measures argue that if those countries can grow their economies through trade and investment, they would provide “some of the best markets” for U.S. businesses, including small businesses, to sell their goods and services.
Prior to Aug. 2, technical corrections and modifications to product-specific rules of origin were needed, including clarifications on duty-free eligibility for certain types of thread, fabric and apparel, to enhance the Central America-Dominican Republic agreement. Among other changes, the corrections and modifications provide certainty of duty-free treatment for women’s and girls’ woven pajama bottoms, clarity as to how certain items will be treated on the textiles “short supply” list of the agreement, and encourages greater use of U.S. inputs.
At issue in AGOA was the legislation’s so-called Third-Country Fabric Provision, or TCF, which would have expired on Sept. 30 if Congress had not acted to renew it. Its extension through September 2015, when AGOA itself is set to expire, means that AGOA-eligible countries can continue to source yarns and fabrics from countries anywhere in the world, such as China and India, albeit subject to a limit. Failure to extend it would have had a negative impact on the cotton and textiles inputs, significantly weakening prospects for the development of “a viable and more vertically integrated African cotton-to-apparel value chain,” the U.S. Trade Representative’s office says.
African officials applauded the extension. “We are extremely happy with the extension because this is what we have been pushing for in AGOA,” Susan Muhwezi, Uganda’s senior presidential adviser on AGOA and trade-related issues, was quoted as saying in her country’s local press. “The extension of TCF will save about 300,000 jobs in the sub-Saharan Africa that could have been lost if the extension didn’t take place. We are now looking forward to the extension of AGOA beyond 2015.”
The third-country fabric benefit accounts for more than 95 percent of apparel trade under AGOA. According to the United States Association of Importers of Textiles and Apparel, this apparel trade not only creates critical jobs in Africa, but also allows U.S. apparel brands and retailers to create critical jobs at home in areas such as design, logistics, sourcing, merchandising, marketing and retail.
Some insist, however, that African countries should invest more in local fabric production to ensure the long-term sustainability of the continent’s apparel industry. “A gap exists between cotton production and cloth manufacturing because very few African countries currently undertake spinning, weaving, knitting and finishing of textiles at the standard necessary to supply the clothing industry,” Dorothy McCormick Ph.D., professor at the University of Nairobi (Kenya)’s Institute for Development Studies, said at a seminar in Tanzania earlier this year on “China and Africa: Win-Win Strategies of the Clothing Trade.”
Atim Annette Oton, owner of Calabar Imports, a specialty store for African, Asian and South American home furnishings, jewelry, fashion, aromatherapy and gifts with two locations in Brooklyn, N.Y., imports a line of clothing from singer/dancer/ fashion designer Wunmi in Nigeria. The clothing is made from locally designed and manufactured batik fabric. While she supports AGOA “because until the government becomes more protective about the textile and apparel industry, AGOA gives access,” she favors.
“Craft is an art that is peculiar to a particular country. For instance, batiks from Nigeria — if we don’t grow that industry, we destroy it and to grow it you need to invest in it. If you combine batik with other fabrics, as much as batik is an art form, it loses its value, it loses the essence of what it is in terms of particularity,” Oton says. “I understand that some countries don’t have enough textiles, so they want to pull in third-country fabrics. But in countries that have textile industries that are being destroyed, we need to build back those industries. In the north of Nigeria, the Chinese have attempted to sell African fabrics made in China and the marketers protested. If we don’t respect [local fabric], what you end up with is the power of the third fabric and the devaluation of the original fabric. If batik will sell for one hundred dollars, why put a two dollar item with it so you can sell more?”
U.S. small businesses — importers, exporters, inves-tors, service providers — stand to gain from the AGOA and CAFTA-DR legislation, supporters of both measures say. “The AGOA is not only good for the thousands of jobs across the continent, but has also proven beneficial to U.S. businesses as they reduce their costs, diversify their supply chains and provide greater low-cost apparel options for American consumers,” the U.S. Chamber of Commerce said in its statement.
Acting U.S. Commerce Secretary Rebecca Blank added, “The approval of these provisions supports the U.S. textile industry and will save … the jobs of thousands of workers and small-business owners in the United States, Africa and Latin America.”
In particular, U.S. small businesses can bring inputs and other forms of investment needed to boost the capacity of Africa’s Central America’s textile industries. Uganda, for example, has yet to significantly benefit from AGOA, according to an Aug. 7 article titled “AGOA Dream in Tatters as US Renews Export Pledge,” in The Observer, a major Ugandan newspaper. “A number of bottlenecks continue to hamper the country’s progress, with poor funding, lack of a National Textile Policy and raw materials ranking high. Lack of raw material, especially leather for tanning, lack of a training institution and improvement of [the tannery in Jinja] continue to hamper Uganda’s competitiveness,” the article said.