Debate on Third Country Yarn and Fabric US GSP to Africa

African and US government officials renewed calls last week for the US Congress to quickly extend a provision that allows several African countries certain benefits involving textile trade. However, observers note, the prospects for extending the measure ahead of a 30 September expiration date are becoming increasingly slim as the US presidential election draws nearer.

The African Growth and Opportunity Act (AGOA), which was first passed by the US in 2000, provides roughly 6,400 African products with preferential quota and duty-free access to the US market. The bill expands upon the US Generalised System of Preferences, a set of formal exceptions from the WTO’s most favoured nation (MFN) principle that allows developed countries to offer developing countries preferential treatment on specific goods.

A key element of AGOA’s apparel programme is the Third-Country Fabric (TCF) provision, a 2002 addition to the Africa-focused trade law that allows eligible countries to utilise yarn and fabric from any country, including India and China, in producing their textile exports and still qualify for such preferential access.

Politics slowing down the process, Kirk says

While the textile provision enjoys broad bipartisan support in Congress, trade observers and officials alike note that the long legislative process and political dynamic involved could prevent the measure’s renewal before the end-September deadline, especially with the US presidential election kicking into high gear.

At a separate meeting in May of this year, Kirk mentioned that the swift passage of legislation extending the TCF provision was necessary to ensure AGOA’s continued success, as well as the economic growth of sub-Saharan African countries. AGOA’s non-petroleum exports virtually tripled from about US$1.2 billion to US$4.5 billion between 2001 and 2011, with textile and apparel counting for more than US$850 million in 2011 alone.

African officials have similarly made a public call for the TCF clause to be renewed. “Mauritius and other African apparel-producing countries are concerned the US Congress has so far failed to take action to extend it,” Somduth Soborun, Mauritius’ ambassador to the United States, told Voice of America last week.

Soburun further suggested that the resulting uncertainty over the renewal is already hurting trade, with many sub-Saharan African countries experiencing a loss of demand from US retailers.

A recent report by the Washington-based Brookings Institution finds that, should the TCF clause expire this September, the viability of more than US$800 million in apparel exports from Africa to the US could be at risk, as could overall exports under AGOA.