Clothing and Textile Sector Workshop AGOA I to

Clothing and Textile Sector Workshop AGOA I to AGOA III: Trade Performance and Recent Legislative Amendments Eckart Naumann tralac / WESGRO Workshop Cape Town, South Africa 08 October 2004

Overview ►AGOA ►Trade overview performance under AGOA ►Legislative ►AGOA changes: AGOA I - AGOA III: earlier proposals absent in the final legislation ►Implications for South Africa and the region ►Implications for SACU-US free trade negotiations

Trade Performance: 2003 – 2004 ytd

Clothing sector trade – sample countries

Overview ►Exchange Rate

Trade Performance

AGOA I - AGOA II ►First changes to AGOA introduced at end 2002 ►Affected only clothing, and country designation (Botswana & Namibia) ►Clothing rule changes: ►Quotas doubled ►Knit-to-shape ►LDCs permitted (previously only cut to shape used in the wording) permitted to use foreign yarns (previous confusion as reference only to foreign fabric – customs interpreted narrowly as meaning ‘from AGOA yarn’)

AGOA II - AGOA III ►Signed into law mid 2004 ►Extends ►Where AGOA to 2015 migration to FTA, full cumulation ►Extends clothing provisions and Rules of Origin: ►Extends ►Quota LDC rule 3 years (3 rd with half quota, i. e. 1. 18%) % stays same 2008 – 2015 ►Expands folkloric provision (commercial production of ethnic fabrics, but conditions, e. g. from US or African yarn) ►Extends value tolerance rules: ►Allows foreign collars and cuffs, drawstrings, shoulder pads and elbow patches ►Foreign fibres and yarns 10% (prev. 7%)

What was left out of AGOA III ? Earlier versions HR & S Bill ►Extension ►LDC to 2015 / 2020 provision to 2008, optional 2 -yr extension – countries w/o fabric manuf. ►Increase quotas to 10% (and 3. 5% for LDCs) / even remove all quotas – subject to compliance with Ro. O ►AGOA eligibility continuous w/o annual review (unless non-compliance) ►Removes investment and trade finance restrictions on certain US institutions, (e. g. on textile and apparel projects)

What was left out of AGOA III ? Earlier versions HR & S Bill ►Includes some prev. excl products, e. g. canned peaches, other agric. goods ►Removes ►Budget import sensitivity rqmt. of US$ 85 mn for APHIS technical assistance

Implications for South Africa and region ►In the absence of FTA greater planning horizon for stakeholders ►Value tolerance rules benefit clothing sector in SA and region ►Extension ►loss of LDC rule: detrimental to SA ? in relative competitiveness ►Opportunities for local design (houses), contracting to LDCs? ►investment diversion from (and instead of) SA to region? ►Quotas: a likely problem in year 3? ►Incentive / disincentive for regional textile producers?

Implications for South Africa and region ►AGOA extension unlikely to fully mitigate end of MFA ►Provision of technical assistance by APHIS very important – e. g. case of Zambian sugar peas, SA oranges ►Besides extension, watered-down AGOA III of little new benefit except to clothing sector

What was left out of AGOA III ? Earlier versions HR & S Bill ►Extension ►LDC to 2015 / 2020 provision to 2008, optional 2 -yr extension – countries w/o fabric manuf. ►Increase quotas to 10% (and 3. 5% for LDCs) / even remove all quotas – subject to compliance with Ro. O ►AGOA eligibility continuous w/o annual review (unless non-compliance) ►Removes ►Includes some prev. excl products, e. g. canned peaches, other agric. goods ►Removes ►Budget investment and trade finance restrictions on certain US institutions import sensitivity rqmt. of US$ 85 mn for APHIS technical assistance

Implications for SACU-US FTA negotiations ►Extension of AGOA a disincentive to conclude FTA? ►Improved negotiation basis, although uncertainty remains ►Cumulation: non-FTA countries don’t suffer, FTA full cumulation ►Must build future FTA on aquis: expand coverage to non-AGOA goods (e. g. textiles, canned fruit, minerals and metals, etc. ) ►Challenge of clothing Ro. O: push for single CTH for all SACU? Principle has strong basis in AGOA ►AGOA built on VA – what about US-SACU? [NAFTA, US-Chile, USSingapore based largely on CTH, but US-Jordan and US-Israel largely VA)