AGOA Support Strong in Committee; Many Support Changes to Eligibility Reviews

There was no disagreement at a June 12 hearing on the need to renew the African Growth and Opportunity Act before it expires about 15 months from now, and Democrats and Republicans on the House Ways and Means Subcommittee on Trade also talked about changing the terms of "graduation" from AGOA. Democrats on the committee were more vocal than members of the Republican majority about the need to change AGOA before renewing it.

Rep. Terri Sewell, D-Ala., has been a leader in the House on both AGOA and Haitian trade preference programs -- also on the hearing agenda. She said when she traveled with Committee Chairman Rep. Jason Smith, R-Mo., to Benin, Madagascar and Mauritius, officials in those countries were very nervous AGOA would expire, and asked Congress to pass a renewal in 2024.

"Reauthorization without trying to reform would be a missed opportunity," Sewell said, and named graduation terms, strengthening environmental and labor standard enforcement, and making country eligibility reviews less frequent than the current annual schedule. Sewell noted that Mauritius is afraid it will be pushed out of AGOA because it is on the verge of leaving the "low income" category.

Turkey lost its Generalized System of Preferences benefits program eligibility due to its median income during the last administration.

Witness Daniel Runde, director of the Center for Strategic and International Studies' Project on Prosperity and Development, agreed that Mauritius is afraid, with good reason. "It graduates to nothing," he said. When AGOA was written, he said, Congress envisioned that countries that developed into more prosperity would then become comprehensive free-trade agreement trading partners. Unfortunately, he said, the U.S. has lost its political will to negotiate tariff-liberalizing agreements. Runde argued that no country should graduate from AGOA unless the U.S. has tried first to negotiate an FTA with it.

Many committee members, from both parties, decried the unwillingness of the administration to negotiate market access for Kenyan exports and U.S. exports to Kenya. The Trump administration opened FTA negotiations with Kenya, but the Biden administration scaled back the ambition to a trade and investment partnership, which would not lower tariffs on either side. Even Rep. Dan Kildee, a Democrat from Flint, Mich., who has often criticized globalization as a job destroyer in his hometown, said he thought the administration should be negotiating a true FTA with Kenya.

After the hearing, Subcommittee Chairman Adrian Smith, R-Neb., told International Trade Today that if the administration changed course on its refusal to negotiate a tariff liberalizing agreement with Kenya, it might open up political space to renew Trade Adjustment Assistance. Democrats' insistence that GSP travel with TAA -- and Republicans' insistence that TAA not be renewed unless trade promotion authority moved -- was what prevented a GSP renewal at the end of 2022 (see 2211160068). No Democrats supported Adrian Smith's bill renewing GSP, also because of TAA's expiration.

Although no one in the House committee said their support for AGOA renewal is conditioned on TAA returning, several Democrats on the Senate Finance Committee said they would not vote for any trade bill unless TAA was part of it, and Senate Finance Committee Chairman Ron Wyden, D-Ore., said he was committed to making sure workers who lost jobs due to import competition or offshoring are supported.

Adrian Smith acknowledged that disagreement over renewing TAA kept Democrats from supporting GSP renewal, but suggested that because renewing AGOA is so broadly popular, GSP and Haitian preference programs could be bundled with it "to get it done. You know, if the Democrats don't want to play ball, that's unfortunate. But I think we need to listen to folks like we heard from today."

Witness Skip Richmond, co-owner of DTRT Apparel Group, explained that he first learned about sourcing from Africa when the Hong Kong company he worked for needed to find a new place to make basketball uniforms, because at that time, there was a global apparel quota system, and China had hit its quota. He and a colleague later set out on their own, establishing factories in Ghana, rather than Madagascar, where his employer had contracted, because Madagascar had lost AGOA eligibility due to a coup, and because the shipping times from East Africa were triple the time from West Africa.

Ghana, the continent's oldest democracy, has been a good place to do business, but the training workers there need, compared with Asian apparel powerhouses, means AGOA tariff benefits are a necessity, he said. He said maintaining the third-country fabric provision is also crucial. Richmond said he's interested in investing more than $15 million to establish a textile mill in Ghana that would make synthetic fabrics from recycled clothing, but will not move until he knows AGOA is in effect until at least 2035.

The desire to restore eligibility to Ethiopia was mentioned by both Rep. Ron Estes, R-Kan., and Rep. Don Beyer, D-Va. Estes said he visited Ethiopia and heard how they want to return to the program; Beyer, whose northern Virginia district has many Ethiopian immigrants, said he's repeatedly talked to U.S. Trade Representative Katherine Tai about the path for Ethiopia to return.

Beyer asked Runde to elaborate on his endorsement of flexibility on eligibility reviews in the new Senate AGOA proposal (see 2404120007). That bipartisan bill, which also proposes a 16-year renewal, rather than 10, says the administration could give a warning, termination for only some products, full termination or even take no action if it believes that's better for U.S. interests.

Runde replied, "We need a menu of options, whether it’s formal warnings, probation periods, partial terminations," he said.

He also praised the changes to graduation in the Senate bill, which would not graduate middle-income countries until they spent five consecutive years above the income threshold.

Cintas Corporation's vice president of sourcing, Af Nasser, said Cintas buys goods from 23 countries, including Haiti, Kenya, Ethiopia and Madagascar. In his written testimony, Nasser said: "We urge Congress and the Administration to continue working with Ethiopia to facilitate the restoration of benefits for Ethiopia under the AGOA trade preference program."

As he discussed preference programs with the committee, he said he hopes the rules of origin for AGOA will be enhanced "so that Kenya’s apparel industry can not only remain competitive but expand," but did not say what changes would be beneficial.

Cintas is still operating in Haiti, but said unrest there has "significantly hindered our ability to ship to the United States."

Witness Marggie Peters Muhika, deputy regional program director for Africa Solidarity Center, a labor rights organization, wrote that 26,000 garment sector jobs have been lost in Haiti due to the chaos and general weakness in garment nearshoring. She said there have been 50,000 garment jobs lost in Central America.

Rep. Carol Miller, R-W.Va., noted that the Haitian preference programs and AGOA are so valuable as development tools because they cover apparel. Textile and apparel exports from AGOA countries have doubled since 2000, and were more than $1.4 billion in 2021.

Richmond told Miller that the apparel industry is a powerful way to help former farmers or street vendors to move up the economic ladder. Of the more than 5,500 Ghanaians working in DTRT's two knitwear factories, most had never had a formal job before. "They're part of the social security program now, they pay taxes," he said.

Runde said about 1.3 million Africans have jobs due to AGOA exports, and there are 450,000 U.S. jobs dependent on African trade.

Rep. Suzan Del Bene, D-Wash., a long-time trade advocate among House Democrats, asked Runde if he thought critical minerals from AGOA beneficiaries should count for mineral content requirements for electric vehicle tax credits in the Inflation Reduction Act. Several Republicans argued that AGOA should be leveraged to increase connections between African critical minerals mines and North American firms that need those minerals.

However, Muhika, in her written testimony, said labor abuses are rampant in African mines, particularly where mines are not run by large companies but are instead sites where children and adults mine by hand and sell what they find, rather than working for a wage. "As the mining sector grows to meet global demand, we can expect labor rights violations to balloon as well, unless strict labor standards are built into trade agreements and then enforced," she wrote.