TRALAC - Trade Law Centre

Rep. Baucus, Sen. Hatch introduce bill to support jobs, strengthen trade ties with Sub-Saharan Africa and Central America

Thursday, 21 June 2012

Source: Senate Finance Committee

Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Member Orrin Hatch (R-Utah) introduced legislation today [ AGOA.info note: track progress of this legislation at this link] to continue expanding U.S. trade with sub-Saharan Africa and Central America. The bill will extend a key provision of the African Growth and Opportunity Act (AGOA) and make non-controversial technical changes to the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) textiles and apparel provisions. In addition to the AGOA and CAFTA-DR provisions, the bill would reauthorize import sanctions against Burma for three years, while preserving the Administration’s right to waive or terminate those sanctions.

“We can strengthen our economy and create jobs in the U.S. by developing trade relationships with countries around the world. This program helps us advance our trade agenda, support jobs and boost our economy here at home,” Baucus said. “Burma has made real progress advancing democracy, but we need to maintain pressure to guarantee it continues.”

“This is win-win legislation that builds upon our nation’s goal of strengthening economic relations with Africa, while ensuring that our regional trade agreement with Central America and the Dominican Republic continues to succeed,” Hatch said. “Swift passage of this legislation will help provide opportunities for job creation and economic growth both in the United States and abroad. Burma is making important progress undertaking much-needed political and economic reforms, but it’s critical that we continue to have the necessary tools to address the situation if it deteriorates. As such, this bill reauthorizes the import ban on Burmese products, while providing the flexibility needed to address current conditions in Burma. This legislation makes sense, is good for our nation, and should see swift passage through the Congress.”

The bill would extend until September 2015 the AGOA provision allowing duty-free access to the U.S. market for apparel produced in sub-Saharan African countries made from third-country fabric, or fabric originally produced anywhere in the world, rather than from only within those countries themselves or from the United States. The provision is currently set to expire this fall. Because such a large proportion of apparel imported from AGOA nations is made with third-country fabric, allowing the provision to expire would seriously undermine AGOA’s development goals. The senators’ bill would also add the Republic of South Sudan to the list of 48 sub-Saharan nations eligible to qualify for duty-free access to the U.S. market for certain products, including apparel, footwear and textiles. That duty-free market access stimulates economic growth, boosts positive business activities and encourages integration among sub-Saharan economies. Over the last decade, six of the world’s ten fastest-growing economies were in sub-Saharan Africa.

The bill would make technical corrections and modifications to the rules of origin for certain textile and apparel products under CAFTA-DR which will expand trade and create jobs in the United States and the CAFTA-DR countries. These changes were agreed to by Trade Ministers during the February 2011 CAFTA-DR Free Trade Commission meetings. All CAFTA-DR countries except the United States have already approved the changes this legislation codifies, and passage of this bill will ensure that all the CAFTA-DR countries can benefit from these changes.

The bill would also reauthorize import sanctions against Burma for three years. While there have been encouraging developments in Burma, additional political and economic reforms are required to meet the goals set forth in existing Burma sanctions legislation. The bill does leave intact the Administration’s authority to waive or terminate the import sanctions.

Summary of bipartisan legislation to address Africa Preferences, CAFTA-DR technical textile changes, and Burma sanctions

Identical bipartisan legislation was introduced in the House (H.R. 5986) and Senate (S. 3326) to:

(1) Extend the African Growth Opportunity Act (AGOA) third-country fabric provisions through 2015 and add South Sudan as an eligible beneficiary country under AGOA;

(2) Implement non-controversial technical corrections and modifications to the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR) textile and apparel rules of origin provisions; and

(3) Renew Presidential authority to apply import sanctions against Burma.

African Growth and Opportunity Act

Since its enactment in 2000, AGOA has helped countries develop and diversify their exports, and most importantly, it supports jobs in Africa and the United States.

Third-Country Fabric. Under a special provision of AGOA, eligible textile and apparel products can be made using third-country fabric as an input. This provision will expire in September 2012, and already orders have begun to slow and factories have begun to lay off workers. The legislation extends the AGOA third-country fabric provisions through the current authorization of the AGOA program (September 2015).

South Sudan Eligibility. The legislation adds the Republic of South Sudan to the list of eligible beneficiaries under AGOA, ensuring that the Administration is able to extend the important benefits of this program to the new state of South Sudan if it meets the AGOA eligibility criteria.

Dominican Republic-Central America-United States Free Trade Agreement

The United States signed CAFTA-DR in 2004, and it entered into force for the United States in 2006. As part of the agreement, certain textile and apparel products were granted duty-free access to the U.S. market provided they met certain rules of origin. In February 2011, the CAFTA-DR trade ministers agreed to make several non-controversial technical corrections and modifications to the rules of origin for these products under CAFTA-DR. All CAFTA-DR countries except the United States have already approved the changes this legislation implements.

Burma Sanctions

In 2003, Congress passed the Burmese Freedom and Democracy Act, which among other things imposed an import ban on products of Burma. While other provisions of the Act apply indefinitely, the import ban required annual renewal for a maximum of three years. Since then, the import ban has been reauthorized twice (in 2006 and 2009), and renewed annually. While there have been encouraging developments in Burma, additional and significant political and economic reforms in Burma are required to meet all of the benchmarks and goals set out in the 2003 Act. As a result, the legislation extends the 2003 Act’s import ban for an additional three years, and continues the annual renewal of the sanctions.