THE AMCHAM POST - JULY 07 2022 

The American Apparel and Footwear Association (AAFA) urged the office of the United States Trade Representative (USTR) to renew the African Growth and Opportunity Act (AGOA), as U.S. brands and retailers look to diversify sourcing.

While the trade agreement’s expiration is still three years away, the Washington, D.C.-based trade group believes that establishing long-term, forward-looking policy will help brands commit to new sourcing strategies with the 36 AGOA-eligible sub-Saharan African nations.

“U.S. investment in the region already faces mounting uncertainty” in the absence of a decision on AGOA’s renewal, AAFA vice president of trade and customs policy Beth Hughes wrote to Trade Policy Staff Committee chair William Shpiece last week.

“Companies are poised to diversify out of China, and Africa is a logical place for many of them,” she added. Brands are looking to work with Free Trade Agreement (FTA) countries to counteract ongoing supply chain challenges and tensions with China.

The AGOA region’s growing textile and garment sector has gained business from American brands in recent years, but the legislation’s “on-again, off-again nature” has eroded U.S. importers’ interest in utilizing its benefits, according to Hughes. While its 10-year renewal in 2015 was an “important first step,” she said officials should extend the agreement’s active period to “sustain the kind of long-term trade and investment that is needed to alter centuries of underdevelopment.” Should AGOA be renewed for a decade or longer, “companies would have the necessary certainty and timeframe they need to grow a vertical, responsible, and competitive industry in Africa up to and past 2025,” Hughes said.

The trade agreement’s duty-free access and flexible rules of origin already represent a “success story” for the industry, Hughes added. That’s why several AAFA members sourcing with AGOA nations want to expand. According to the AAFA, members’ post-pandemic apparel imports from AGOA countries rebounded in 2021, with more than 97 percent entering the U.S. under the program.

What’s more, Hughes said that more brands appreciate AGOA’s third-country fabric provision lending flexible duty-free status to goods made using yarns and fabrics produced by countries such as India or China. According to the Brookings Institution, the third-country rule accounts for 95 percent of U.S. apparel imports under AGOA. If the trade act is renewed, more American importers are likely to source from the region, Hughes said. AAFA recommended raising the annual quota limit for apparel imports under AGOA from 3.5 percent of total U.S. apparel imports to 4.5 percent.

“As we forge to further develop a responsible industry, we have an opportunity to ensure that this development benefits a traditionally underserved population—women, who make up a large portion of our African workforce,” Hughes added.

Since Ethiopia lost its AGOA status on Jan. 1 as a result of a civil war in Tigray, Indian denim manufacturer Arvind announced a 90 percent production reduction in its Ethiopian factories. H&M, PVH, Hanes, JCPenney, and The Children’s Place also sourced from Ethiopian suppliers.

By Kate Nishimura (Sourcing Journal – June 2022