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Remarks by Ambassador Michael Froman at the African Growth and Opportunity Act (AGOA) Ministerial

AGOA

Ambassador Michael Froman, United States Trade Representative
Remarks at 2014 U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum Ministerial

Washington D.C.
August 4, 2014

*As Delivered*

Good morning, Honorable Deputy Chairperson Mwencha, esteemed Ministers from our AGOA Partner Countries and Secretaries-General of the Regional Economic Communities, Honorable Members of Congress, U.S. Government colleagues, and other public and private sector supporters of the African Growth and Opportunity Act (AGOA).

Welcome, and as I learned in Africa, let me say, “All protocol observed.”

For the past 14 years, we and our predecessors have gathered representing more than 1.1 billion people, traveling thousands of miles, bearing as many as 41 flags, and speaking 21 official languages, all for one reason: the promise of trade.

AGOA is a powerful reminder of that promise.  Since it was enacted in 2000, AGOA has been the cornerstone of U.S. trade policy with sub-Saharan Africa, and in broad strokes, it has been a success.

From the first full year of AGOA to the last, U.S. imports from AGOA countries have grown threefold to more than $26 billion a year.  Non-oil imports have increased fourfold, as has the stock of U.S. foreign direct investment.

AGOA has contributed to the diversification and competiveness of sub-Saharan Africa’s economies and has supported hundreds of thousands of jobs across the continent. And what these broad strokes cannot capture is the importance of these opportunities for countless communities, families, and individuals.

The United States has benefitted from AGOA as well, not just from the stability that comes with increased global prosperity, but also from the market opportunities that accompany Africa’s rise. Since 2000, U.S. exports to sub-Saharan Africa have increased fourfold, from $6 billion to $24 billion. Last year, these exports helped support nearly 120,000 American jobs, and as Africa continues to grow, our economic futures will become even more intertwined.

Indeed, Africa’s trajectory means that the theme of this week’s historic summit, “Investing in the Next Generation,” applies as much to the United States as it does to Africa. 

Our shared future will be made brighter by an AGOA that is not only renewed but also improved. Seamless renewal will send an important signal to purchasers of AGOA products and investors in AGOA industries who are already making decisions about next year, and in some cases, many years in the future. The sooner we renew our commitment, the more likely they will  do the same.

Improving AGOA is critical because despite the concrete benefits that AGOA has brought to both of our continents, it is clear that more can and must be done. Although non-oil exports under AGOA have increased by fourfold since 2001, last year’s total of $5 billion remains small both in absolute terms and as a share of U.S. imports.  And while we are seeing countries starting to branch out and use AGOA for more products, there is still much room to grow in non-oil, manufactured and value-added products from AGOA-eligible countries.

Improving AGOA requires adapting to the changes that have occurred since the year 2000, applying the lessons we have learned, and anticipating where current trends will take us.  To begin with, it’s clear that the Africa of 2014 is not the Africa of 2000.  Many of you are moving away from unilateral preferences and entering into agreements with trading partners such as the European Union which provide for reciprocal access.  Going forward, we cannot think about AGOA in isolation. 

That’s why, for the past year, we have conducted a review of AGOA that asked not only how AGOA was working but also how it fits into the broader arc of our trade and development policy.  Our efforts relied on the input of U.S. and African stakeholders in government, the private sector, and civil society.

Among our findings, one observation is clearer than the rest: to unlock AGOA’s true potential, we need to do more than focus on tariff preferences. 

In our view, AGOA must be linked to a broader, comprehensive coordinated trade and development strategy. What we are calling for is an “AGOA Compact” – a whole-of-government trade and investment strategy supported by the public and private sectors on both continents and backed by our international partners.  With the outline of this compact in mind, today’s Forum provides an extraordinary opportunity to begin filling in the details and charting a common course toward trade-led growth and development.

Consider the challenges that many countries face at borders and ports. A combination of red tape, corruption, and gaps in infrastructure can make the cost and time associated with shipping a product twice that of similar products coming out of competitor countries in Asia or Latin America, and that impinges upon the competitiveness of African producers and undermining the capacity of trade to contribute to development. 

I should mention briefly here that there is a unique opportunity to multiply the benefits of AGOA through our multilateral work together in the WTO, though that opportunity has recently been cast into significant doubt.

The historic Trade Facilitation Agreement or ‘TFA’, concluded just last December in Bali, allows multilaterally agreed standards to guide every country's efforts to eliminate red tape at the border. The TFA includes path-breaking flexibilities for developing countries to adapt implementation to their unique national circumstances. And it allows for the mobilization of international resources in support of these domestic efforts, including through the recently announced TFA Facility at the WTO.

I applaud those African countries, including the Republic of Congo, Cote d'Ivoire, Morocco and Mauritius, who are among the 40 or so developing countries leading the way in implementing the TFA by announcing their so-called "Category A" notifications. They are sending a powerful message to investors and to the donor community.

Unfortunately, the actions of a small number of WTO Members have placed this enormous opportunity in jeopardy. I hope that Africans will help lead the effort to ensure that our hard work at Bali does not go to waste, that the potential of both TFA and the new Trade Facilitation Agreement Facility are not squandered.

As part of the AGOA Compact, we also need to address problems with infrastructure – hard and soft.  From the roads that MCC builds to the development of airports our Trade and Development Agency support to, very importantly, our whole-of-government, public-private  Power Africa initiative to double access to affordable, reliable electricity, we here are focused on helping Africa address its deficit in hard infrastructure.

And as USAID and the State Department support trade facilitation efforts to consolidate border crossings, eliminate roadblocks – both literally and figuratively -- we are helping to improve Africa’s soft infrastructure.

We recognize the need for capacity building, including by USDA and USAID strengthening laboratories and training inspectors so that African farmers and manufacturers can better meet the agricultural and technical standards necessary to export their products to global markets. 

And as the Secretary said, there is also the need to build human capacity. Africa is on a path to become the largest contributor to the world’s workforce by 2050, and translating that potential into broad-based growth requires equipping the next generation of African exporters with the skills they need to succeed.  I was honored to participate in a panel on entrepreneurship at a meeting of the Young Africa Leaders Initiative last week here in Washington – and I am delighted that some of the incredibly impressive participants in that program will be here with us today.  YALI and the African Women’s Entrepreneurship Program are just two examples of our interest in not just taking resources out of Africa, but investing in human capital in Africa.

And there is a need to increase demand for AGOA products, including by supporting larger, regional markets and by working with the private sector to better integrate African producers into regional and global value chains.

As I’ve said, this is a whole-of-government effort on our side, and I know it will be bewildering at times to deal with all of the different agencies.  So we will be looking to build upon our Trade Hubs to create “one-stop shop” Trade and Investment Platforms which will work to bring advice, financing and trade promotion to AGOA entrepreneurs.

Of course, AGOA lies at the core of this strategy. And our review has identified four areas in which this core might be strengthened so that beneficiary countries can better utilize and diversify their exports. Now, as all of you know, it falls to Congress to decide what changes ultimately will be made.  But we believe that our review, and your efforts to examine the same questions, and our discussions today can greatly inform the work of Congress.

First, AGOA would be strengthened by a reauthorization period – both for the third country fabric rule and for the preference program itself – which is sufficiently long to ensure predictability for producers, consumers and investors. 

Second, there may be value in revisiting the list of covered products under the program to see if we can add any new products.  In 2006, for example, AGOA was expanded to include over 700 additional tariff lines, mostly in the textile and apparel areas, which brought significant new market access opportunities to Africa. 

But we also have to keep this issue in perspective. The existing range of products eligible for duty-free treatment under AGOA is already more extensive than under any other U.S. preference program.  Almost all AGOA beneficiaries have duty-free access for 97.5 percent of all tariff lines, and there are only 316 dutiable tariff lines at present out of a total of over 10,700.  The majority of these remaining lines cover agricultural and textile products, many of which historically have been the most import sensitive, which is why we will be consulting closely with domestic stakeholders in the coming months.

Third, there may be ways to streamline AGOA’s rule of origin requirements and make them more flexible. These requirements are already very generous – including the broad third-country fabric exception for apparel, but some limitations remain.  Removing limitations like those on the “cumulation” of labor costs or the percentage of U.S. content could provide beneficiary countries greater flexibility and help integrate them into regional and U.S. supply chains.

Finally, it is important to update AGOA’s eligibility criteria and processes. Both have promoted critical political and economic reforms throughout sub-Saharan Africa, but neither has ever been substantially updated. We believe the criteria can be strengthened to better promote open trade and broad-based economic growth – for example, by resolving SPS barriers to trade and promoting fundamental worker rights.  The review processes can also be updated to allow more effective enforcement – for example, by allowing partial and more timely withdrawal rather than all-or-nothing withdrawal that goes into effect the year following the decision.

Even as we discuss these programmatic changes and AGOA’s renewal, we must also use today’s meeting to begin a new discussion about the future of U.S.-Africa trade and investment relations.  As Africa’s trade relations with other trading partners evolve and as other trading partners revise their preference programs to take into account the rise of emerging economies, we need to assess the impact on our relations with Africa and chart out a path for its further development. 

Today, we launch the official campaign for AGOA’s renewal.  AGOA enjoys broad-based, bipartisan and bicameral support in Congress.  We will be hearing from many of its Congressional champions later this morning.  We look forward to working with all of you to highlight the impact and promise of AGOA – for Africa and the United States. 

Let me now turn to my friend and the Honorable Erastus Mwencha - Deputy Chairperson of the African Union. Both in that position and as Secretary General of COMESA, Mr. Mwencha has been a longstanding supporter of AGOA. He has testified before Congress many times and shares his ideas about how AGOA can be improved, and I look forward to hearing his opening remarks on behalf of the African Union and AGOA beneficiary countries.

 

*A full video of the African Growth and Opportunity Act (AGOA) Ministerial opening remarks can be seen here.*

To learn more about the African Growth and Opportunity Act, please visit the USTR AGOA page.