A Tipping Point for U.S.-Africa Commercial Relations

This week, senior government officials from sub-Saharan African countries have been meeting in Washington to deliberate on trade relations between Africa and the United States. The forum, organized by the African Union Mission in United States, was supposed to focus on the future of the African Growth and Opportunity Act (AGOA). The emerging consensus from this forum is that future of U.S.-African relations are dependent on Congress extending the third country fabric provision of the African Growth and Opportunity Act (AGOA) within the next several weeks.

President Clinton signed AGOA into law in 2000 with the support of a strong bipartisan consensus in Congress. The legislation anticipated a relationship between the U.S. and the countries of Sub-Saharan Africa that, one day, would be based on trade, investment and mutual benefits as opposed to the inherently problematic donor-recipient relations.

Under AGOA, nearly 6,400 products are eligible to enter the U.S. duty free from those African countries making progress on political and economic reforms. Today, there are 40 countries in the region eligible for AGOA’s benefits. Twelve years after AGOA’s passage, the implementation of the legislation is still a work in progress but the trend is definitely positive.

Since 2001, the first year that the legislation was in place, imports into the U.S. under AGOA have increased 500 percent, from a value of $8.15 billion to $53.8 billion. Oil accounts for more than 90 percent of these imports, which underscores Africa’s growing strategic importance to the U.S. At the heart of AGOA, however, are apparel and textile products. An estimated 300,000 jobs have been created in those African countries that manufacture shirts, blouses and pants for the U.S. market.

And this is where the third country fabric provision comes in. Through quirks in the legislation, it is set to expire on September 30, 2012, which in legislative terms is the functional equivalent of this afternoon.

If the provision expires, virtually all of the apparel products currently coming into the U.S. from Africa will no longer be cost competitive. Many jobs, along with related development and diplomatic benefits, will be lost. Already, African manufacturers have lost more than 35 percent of their orders from U.S. customers due to the uncertainty surrounding the extension of the provision, according to the Washington-based African Coalition on Trade which represents exporters in nine AGOA countries. If the provision expires, AGOA would be reduced to an oil bill, which certainly is not the intention of Congress or the Obama administration.

Reportedly there is no opposition in the Senate or House to extending the provision. Apparently, it is just the political paralysis that is affecting all aspects of U.S. lawmaking these days. On this one, however, it is vital that President Obama speaks out in favor of extending the legislation. The leadership in Congress also has to act. Not only would the provision’s passage be welcome by the 40 trade ministers from Africa who will be in Washington in mid-June for the annual U.S.-Africa AGOA forum but it will be a clear indicator of U.S. support for AGOA and Africa’s potential.

Indeed, the recent trade mission that the Assistant Secretary of State for African Affairs Johnnie Carson led to Ghana, Nigeria, Tanzania and Mozambique, in association with the Corporate Council on Africa, was a welcome reflection of the American interest in the considerable upside of investing in Africa.

As well, bipartisan leadership in the Senate and House has introduced the Increasing American Jobs through Greater Exports to Africa Act that among various objectives would triple U.S. exports to Africa over the next 10 years, which would support over 300,000 jobs in the U.S. Last year alone, U.S. exports to the region increased 20 percent to $21.3 billion which supports more than 100,000 American jobs.

The immediate extension of AGOA’s third country fabric provision is as much in the interests of the U.S. as it is the AGOA-eligible countries in Africa.

As Florizelle Lizer, the U.S. assistant trade representative for Africa, said in recent Congressional testimony, “AGOA is the cornerstone of U.S.-African relations.” The U.S. cannot afford to undermine this critical stepping stone to African markets, many of whom are emerging as quickly as any in the global economy.