African Growth and Opportunity Act (AGOA)

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1 African Growth and Opportunity Act (AGOA) Gail W. Strickler Assistant United States Trade Representative for Textiles and Apparel

2 AGOA Overview - The legislation provides duty-free access to all clothing (as well as certain textile) exports from countries that qualify under the Act s wearing apparel provisions, subject to the Rules of Origin. - Provides duty-free market access to the U.S. for qualifying Sub-Saharan African countries by extending preferences on more than 4,600 products eligible under the U.S. Generalized System of Preferences + 1,800 tariff lines added by the AGOA legislation.

3 AGOA Overview Business Opportunities 43% of all tariffs collected by CBP comes from textiles and apparel 71% of $100 billion market subject to an average duty of 16% Over $11 billion in tariffs currently paid by importers of textiles and apparel U.S. imports of textiles and apparel from SSA totaled $986.3 million in 2014, up 5.8% from 2013

4 AGOA Overview Job Creation in Developing Countries High labor contribution to cost Can employ large numbers of low-skilled workers Can employ large numbers of women Value chain advancement as workers become more skilled Supply chain development

5 AGOA Renewal Recently introduced legislation extends AGOA for 10 years (through 2025) 3rd country fabric provision extended in renewal through September 30, 2025 Proposal also adds travel goods to GSP President Obama and Congress are committed to working towards a seamless AGOA renewal

6 Importance of AGOA Africa s economic pulse has quickened, infusing the continent with a new commercial vibrancy McKinsey Global Institute Return on foreign investments is higher in Africa than any other developing region

7 AGOA Rules of Origin Certain apparel allowed to enter the U.S. duty-free provided one of the following rules is met: Apparel made of U.S. yarns and fabrics Apparel made of U.S. fabrics and/or knit-toshape components, from U.S. yarns and sewing thread Apparel made of regional sub-saharan Africa (SSA) yarns and fabrics (subject to a cap) Apparel made in a designated SSA lesserdeveloped beneficiary country (LDBC) of thirdcountry (China, Pakistan India, etc.) yarns and fabrics (subject to a cap) Items containing less than 10% 3rd party fabrics that are otherwise eligible (de minimis rule)

8 Short Supply List 1) Yarns and fabrics designated as not available in commercial quantities in the U.S. 2) Yarns and fabrics considered in short supply in NAFTA Short supply items can be sourced from anywhere and qualify as duty-free Not subject to a cap or de minimis rule

9 AGOA Eligibility Out of all AGOA-eligible countries, 26 are currently qualified for textile and apparel benefits Eligibility determined based on progress in the following areas: market-based economies; the rule of law; barriers to U.S. trade and investment; IPR; corruption; poverty; health care; education; human rights; worker rights; child labor Eligibility reviewed yearly by the President Apparel Provision Qualifying Countries Benin Botswana Burkina Faso Cameroon Cape Verde Chad Cote d'ivoire Ethiopia Ghana Kenya Lesotho Liberia Madagascar Malawi Mauritius Mozambique Namibia Niger Nigeria Rwanda Senegal Sierra Leone South Africa* Tanzania Uganda Zambia *South Africa does not qualify as an LDBC and is ineligible for 3 rd party fabric provision

10 US Imports through AGOA (2014) Men s/boys woven cotton trousers ($166,081,359) Lesotho, Kenya, Mauritius Men s/boys woven cotton shirts ($148,078,693) Kenya, Mauritius, Ethiopia Manmade fiber sweaters ($97,870,263) Lesotho, Kenya, Malawi Women s/girls woven cotton trousers ($94,570,113) Kenya, Lesotho, Mauritius Women s/girls knit synthetic fiber trousers ($83,335,904) Lesotho, Kenya, Mauritius

11 US Imports through AGOA (2014) 1) Men s/boys woven cotton trousers ($166,081,359) v Duty rate savings: $27,569,506 2) Men s/boys woven cotton shirts ($148,078,693) v Duty rate savings: $29,171,503 3) Manmade fiber sweaters ($97,870,263) v Duty rate savings: $31,318,484 All other AGOA Textile/Apparel Imports $396,360,728 4) Women s/girls woven cotton trousers ($94,570,113) v Duty rate savings: $15,698,639 5) Women s/girls knit synthetic fiber trousers ($83,335,904) v Duty rate savings: $9,416,957 Millions Top US Tex:le Imports through AGOA 1,

12 AGOA in 2015 Swaziland failed to meet AGOA standards and has been declared ineligible as of 2015 Madagascar declared fully re-eligible as of 2015 At its peak in 2008, textile and apparel production in Madagascar was 2x that of Swaziland Madagascar: $315,000,000 Swaziland: $175,000,000 Loss of Swaziland production offset by opportunities in Madagascar

13 The Future of AGOA One decade to develop robust and permanent industries and supply chains Only scratched the surface of what is possible GOALS Quadruple non-resource production $4 billion in textile and apparel exports by 2025

14 The Future of AGOA Problem: AGOA has been underutilized Non-energy AGOA share of per capita income was less than 0.01% for 27 out of 37 countries Only 4 countries achieved a per capita value >$10 for non-energy AGOA exports Mauritius, Lesotho, Swaziland, South Africa The countries that focused on textile and apparel production have benefitted the most

15 Duty Free Access 16 countries are both AGOA eligible and possess an Everything But Arms (EBA) agreement with the EU Retailers can serve both markets duty free from a single location Sourcing to 50% of the global apparel market from a single location Average apparel duty saving of 16% in the US and 12% in the EU Quadrupling production would result in an additional $480,000,000 in duty savings to the US and $14,400,000 in duty savings to the EU

16 AGOA & EBA Countries 16 Countries Eligible for Both Botswana Cameroon Cape Verde Cote d'ivoire Ghana Kenya Mauritius Namibia Niger South Africa* *South Africa does not qualify as an LDBC and is ineligible for 3 rd party fabric provision

17 High Duty Products AGOA currently represents an underwhelming share of high tariff production 16% that of non-tariff preference countries Knitted manmade tops 32% duty Woven manmade tops 27% duty Knitted/woven manmade outerwear 28% duty Knitted synthetic bottoms 28% duty Woven synthetic bottoms 28% duty

18 Manufacturing & Material Overlap Manmade knitted sweaters ($84,913,584) Manmade knitted outerwear (28.2%) Knitted babies garments (16-32%) Synthetic knitted trousers ($107,221,801) Synthetic knitted shorts (27.9%) Synthetic knitted swimwear (24.9%) Cotton woven shirts ($156,203,072) Synthetic woven dresses (16%) Cotton woven pajamas/nightdresses (8.9%) Cotton woven trousers ($249,065,357) Synthetic woven trousers (28.6%)

19 AGOA Opportunity 10 year renewal Longest in AGOA history Chance to build robust supply chains and attract long-term investment Better utilization of AGOA 3 rd party sourcing and duty free advantages Phenomenal growth on the horizon for suppliers and buyers alike

20 Assistant U.S. Trade Representative for Textiles and Apparel Gail W. Strickler Assistant United States Trade Representative for Textiles and Apparel (202)