going beyond agoa

8/12/2019 Going Beyond AGOA

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A Wilson Center | Manchester Trade Paper

Ideas for a Trans-Atlantic

South Partnership with Africa

S t e p h e n L A N D ED e n n i s M A T A N D AS t e v e M C D O N A L D

With Yetnayet Zewdie Demissie, LLM

J u n e 2 0 1 3



Like Te Economist o June 22 clearly indicates, President Obama’s second trip to Arica will ocus on the important

aspects o promoting American investment on the continent. Relatively, Obama’s strategic choices in Dr. Michael Froman

and Dr. Susan Rice or the respective positions o U.S. rade Representative and National Security Advisor means that the

Arica Growth and Opportunity Act (AGOA) has allies who are, ostensibly, keen on going beyond

the program’s current trade provisions.

Specifically, Te Wilson Center and Manchester rade recommend the following:

1. AGOA Enhancement must both perect market access and also go beyond

trade to promote U.S. investment and Arican regional integration.

2. Congressional consideration will involve a number o committees whose efforts

must be effectively coordinated to ensure that they reinorce each other.

3. Agricultural exports currently excluded by tariff rate quotas should be designated or AGOA duty-ree treatment.

4. Duty-ree access under AGOA should be made permanent with reciprocity being phased in afer a 10-year interim period.

5. In the 10-year period beore reciprocity begins its phase-in, the U.S. and Arican countries should address U.S.

concerns over market access and unavorable discrimination through an enhanced IFA structure.

6. A special Congressional Committee should review unilateral sanctions to ensure that

collateral damage is minimized on innocent parties including U.S. investors.

7. Ex-Im Bank and OPIC should develop innovative ways to increase resource proportions dedicated to Arican ventures.

8. Te U.S. should work with Arican countries to sign BIs and investor riendly Double axation reaties (Ds).

9. Te U.S., World Bank, ADB and financial entities should develop SPVs to guarantee

cross-border investments beyond sovereign guarantees.

10. In tandem with the U.S., the EU should agree, under -IP to provide duty-ree treatment or Arican

products while postponing requests or Arican countries to enter into EPAs or any other orm

o reciprocity or a 10-year interim period.

11. Te U.S. should designate RECs or AGOA eligibility i and when each o their member

states ulfils AGOA eligibility requirements.

12. As a concrete way to support regional integration, the U.S. should support an AU proposal or

WO rules to treat Arican non-LDCs in the same way as LDCs or trade preerences.

A ully operational and enhanced AGOA will not only benefit the U.S., but also presents

an unprecedented opportunity or Arica and or Europe to do brisk business. It also allows or an

alternative platorm to the Far East and Asia or Western investors - a classic win-win scenario.

Document Synopsis



Stephen LandeWith a 50-year career in trade policy at State

Department, at the USR and in the private sector,Stephen was pivotal to adding bilateral and pluri-

lateral elements to U.S. trade policy that had almostexclusively been multilateral and based on the

GA. He was key to initiatives such as AGOA, CBIand GSP as well as various US FAs. He is President

o Manchester rade and also serves as a trade policy adjunct proessor at the School o Advanced

International Studies, Johns Hopkins University.Contact him at [email protected]

Dennis Matanda An American politics and government post grad,Dennis currently serves as Head o Government

Relations at Manchester rade. He is, concurrently,editor & publisher o Te Habari Network , a tradeand investment policy paper and was one o three

pioneers o Gifed By Nature, Uganda’s internationalbranding campaign. He’s consulted with the Aricarade Insurance, an export credit agency; and is

currently finishing his second book, Master o the

Sagging Cheeks - a work o political fiction.Contact him at [email protected]

Tis is an ambitious but realistic & practical way to enhance AGOA

by not just ensuring prompt and seamless renewal o U.S. market access provisions or Arican

imports, but also promoting a level playing field or U.S. investment in Arica and encouragingAmerican participation in sub Saharan Arica’s regional inrastructural development.

.A.S.P. is specifically meant to highlight the act that Arica and the U.S.

are separated by the South Atlantic, while countries participating in the rans-Atlantic and

Investment Partnership (-IP) and the rans-Pacific Partnership (PP) are in the

North Atlantic and in the Pacific, respectively.

Te rans-Atlantic South Partnership

ADB: Arican Development Bank AGOA: Arica Growth and Opportunity ActAU: Arican UnionBI: Bilateral Investment reaty CCA: Corporate Council on AricaCOMESA: Common Market or Eastern and Southern AricaDF/QF: Duty Free | Quota FreeD-NY: Democrat o New York (or instance)D: Double axation reaty ECOWAS: Economic Community o West Arican StatesEPA: Economic Partnership AgreementEU: European UnionEx-Im Bank: Export Import Bank FA: Free rade AgreementGSP: Generalized System o PreerencesLDC: Least Developed Country LIC: Low Income Country

MCC: Millennium Challenge CorporationMFN: Most Favored Nation (status)MNC: Multinational CorporationOPIC: Overseas Private Investment CorporationR-U: Republican o Utah (or instance)SADC: Southern Arica Development CorporationSPV: Special Purpose VehiclesSSA: Sub Saharan AricaASP: rans-Atlantic South PartnershipIFA: rade and Investment Framework -IP: rans-Atlantic rade and Investment PartnershipPP: rans-Pacific PartnershipRQ: ariff Rate QuotaUNECA: United Nations Economic Commission or AricaUSAID: United States Agency or International DevelopmentUSIC: United States International rade CommissionUSR: United States rade Representat ive

Abbreviations

Steve McDonaldSteve is Director o the Arica Program at the WilsoCenter in Washington, DC. Responsible or Aricaexperts and a whole host o international events,he is a ormer Foreign Service Officer in Ugandaand South Arica - and as Desk Officer or Angola,

Mozambique, Cape Verde, Guinea Bissau, and Saoome & Principe. He has traveled extensively to theregion and the world, is widely published, has taugat various universities and has lived in parts o WeCentral and Southern Arica.Contact him at [email protected]

Ms. Demissie is a legal analyst in international trade, commercial law, corporate law and arbitration

Authors



Te Perect Storm or AGOA Enhancement?

Pres. Obama announcing Michael Froman as his nominee or USR

At his June 6, 2013 confirmation hearing, Michael Fro-man, once again, brandished his support to Congressor a strategic partnership with Sub Saharan Arica.Te new US rade Representative - who also retains apresidential advisor position and joins Pres. Obama’s

3-Arican nation trip entourage this June 2013 - hasalready called or a ‘seamless’ renewal o the AricaGrowth and Opportunity Act (AGOA) trade preer-ences program. Importantly, in hoping to ‘ ... find in-novative ways to acilitate trade and regional integra-tion across the developing world ...’ like he testifiedto Congress, Froman seems to be keen on AGOA en-hancement over the straight renewal o a program thathas, thus ar, had modest success.

According to the June 7, 2013 World rade Daily, Dr.Froman wants to use the annual AGOA Forum thisAugust to begin the renewal effort, effectively invitingArican countries and stakeholders to submit enhance-ment proposals. Coincidentally, the Arican Union andthe United National Economic Commission or Arica(UNECA), who jointly hosted the May 2013 AGOAMidterm Review exercise, want to expand trade andinvestment flows between the U.S. & Arica, to diver-siy Arica’s economies, promote sustained growth, al-leviate poverty and also promote regional integration.

Tereore, with Froman as a hypothetical tipping

point , the conditions are, indeed, ripe or what can bethe perfect storm or AGOA enhancement. With slightadjustments such as those described in this paper, theprogram has the potential to, first, provide sub Saha-ran Arica with the kind o new deal program appro-priate or the region’s current potential. Secondly, anenhanced AGOA with an American export and invest-ment component could allow the U.S. to successullyconront commercial challenges rom China, the EUand smaller third countries intent on profiting romlucrative ventures on the continent.

AGOA Enhancement Ideasaking the lead on this, the House Ways & Means +Foreign Affairs committees have announced their in-tention to address AGOA issues. Rep. Devin Nunes(R, CA) and Rep. Charlie Rangel (D-NY), Chairman +Ranking Member respectively o the rade Subcommit-tee; Rep. Ed Royce (R-CA), Chairman o House Foreign

Affairs Committee and Rep. Chris Smith (R, NJ) andRep. Karen Bass (D-CA), Chairman + Ranking Mem-ber respectively o the House Subcommittee on Africa,Global Health, Global Human Rights, and InternationalOrganizations, all head initiatives on AGOA.

In the Senate, efforts are led by Majority Whip, Sen.Durbin, (D-IL), Sen. Coons, (D-DE), Chair o the A-rica Sub committee plus Senators Baucus, (D-M) andHatch, (R-U), Chairman and Ranking Member othe Senate Finance Committee. For the private sector,the Corporate Council on Arica, the U.S. Chamber oCommerce, Wilson Center and Brookings Institutionhave already or are in the process o drafing white pa-pers and recommendations on AGOA improvement.

Te rans-Atlantic South Partnership - .A.S.P..A.S.P. is a collation o ideas rom the Wilson Center & Manchester rade premised on the ollowing:

a. Te act that U.S. commercial and political interestshave as much to gain - at least in the medium term -rom deeper relations with Arica as with the Pacificand with the European Community.

b. Reinvigorating AGOA into a much more compre-hensive program requires a strategically coordinatedstakeholder effort. Tis could commence at the 2013Addis AGOA Forum where stakeholders can holdAGOA improvement discussions with Froman.

c. Addis could then orm a oundation or tangible leg-islative and administration action beore the close o2013; essentially allowing or the enactment o a com-prehensive and improved AGOA bill beore the 113thCongress adjourns.

actics - ‘Whole-o-Government’ ApproachLike he enunciated at 2012’s AGOA Forum, Froman’swhole-of-government approach can be deployed or anAGOA enhancement plan. Stakeholders like Housecongressional committees or subcommittees could,or instance, maintain jurisdiction and coordinate toensure that measures & ideas reinorce each other.Ten, a special committee created by House Majorityand Minority leaders comprising various committeesand subcommittees could be responsible or disparateaspects o the U.S.-Arican relationship.

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Congressional mandates under which individual entities all, ofentimes, encumber, closer coordination among

ederal agencies. For policy efficacy, this must be reviewed.

In conjunction, the National Security Council andUSR increasingly coordinate with agencies, and thiscurtails their tendency to stovepipe. Tis trend oughtto intensiy with ormidable AGOA allies like Susan

Rice, as National Security Advisor and Froman atUSR. Teir support will be key or .A.S.P. whichis broken down into 3 sections and based on Mar-ket Access Provisions, Investment Promotion and Regional Integration.

1. Reconsidering Market Access Provisionsa. Currently Excluded Agricultural Exports

Opportunities in Arica’s Agricultural Sector (Reuters Image)

Te U.S. provides low duty-entry to traditional com-modity exporters under a system o tariff quotas whilesubjecting new suppliers to double or triple digit dutylevels. Tis has two direct consequences: First, manyArican countries are yet to approach their ull poten-tial under AGOA, and secondly, the ailure to desig-nate RQ products subject to prohibitive duties con-tradicts AGOA which is designed to allow Aricansuppliers to exploit new markets or their products.Agricultural products like groundnuts, tobacco, cocoaor sugar - which are widely grown in Arica - are as-sessed highly prohibitive tariff rate quotas (RQs).

o perect market access and also make a huge impactin sub Saharan Arica, the U.S. must designate key ag-

ricultural commodities such as those above, or duty-ree treatment. Like history shows, doing this will besignificant: For example, AGOA apparel exports withduty rates o about 20% grew by double digits aferthey received avorable designation. Also, i theseproducts received duty-ree status, many rural areas,would benefit, simultaneously ulfilling a key tenet oU.S. policy in Arica.

Also, a precedent has been set by the EU: Afer yearso resistance, Europe succumbed to calls or the need

to improve its preerential programs or agriculturalproducts. Sugar and bananas have, among other prod-ucts, been designated or unlimited duty-ree entryunder their Everything but Arms (EBA) Program. TeU.S. should do as much.

Like the Corporate Council on Arica, .A.S.P.

recommends that AGOA coverage be expanded to

include additional market access or tariff rate quota(RQs) products. Furthermore CCA calls a comprehensive

International rade Commission (IC) study to determine

which products - currently excluded rom AGOA - hold the

most potential or Arica’s development and U.S. invest-

ment, with a goal o completing the study no later than

the end o 2013 or results to be incorporated

into new AGOA legislation.

b. Market Access Provisionso avoid the so-called ‘approaching the cliff’ phenome-non, we recommend that market access provisions un-der AGOA be made permanent. Sales should not dryup because o buyer concern that imports will be subject to ull MFN duties on the expiry o a preerenceprogram – beore products can reach the U.S. Tis oc-curred 2 years ago when buyers slowed purchases romsub Saharan Arica because AGOA’s Tird CountryFabric provisions might not have been renewed beoreChristmas orders arrived in the U.S.

Instead, .A.S.P. recommends that the U.S. not requestAGOA beneficiaries or reciprocal duty-ree access

into their markets or a 10-year period; allowing timeor Arican negotiations to orm a continental FAand possible customs union; to bargain as a group.

Here, we don’t call or permanence o non-recipro-cal aspects market access provisions as internationaltrade practice doesn’t justiy perpetuating temporarypreerences. Tese are only meant to promote growthand an environment so beneficiaries no longer needpreerential entry to be competitive in in key markets.

Nonetheless, the suggestion or a 10-yearnon-reciprocity period comes with a proviso that

the EU must be willing to postpone reciprocityrequests or a similar period.

(See Full Discussion in Regional integration Below)

2. Promotion o U.S. Investments in Aricaa. Review of Unilateral U.S. ActionsTere’s probably no greater impediment to U.S. invest-ment in Arica and elsewhere than the ad hoc, unpre-dictable and unilateral nature o American sanctionsand conditionalities. Ideally applied to improve gov-ernance issues in Arica or to protect U.S. economic

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interests, they, ofentimes, end up causing collateraldamage to U.S. investors and innocent parties on thecontinent - with measures negatively outweighing anypositive impact on the attainment o U.S objectives

Malagasy seamstresses at work beore AGOA benefits were withdrawn

o remedy this, we recommend that a special Congres-sional committee be established to review the overalleffectiveness o unilateral actions, and amend thesewhere necessary. A review must encompass actions

taken to protect the global common in Arica, goodgovernance conditionality to be eligible or MCC, US-AID + USR required programs, as well as those de-signed to limit oreign corrupt practices, carbon emis-sions, and trade in conflict minerals, among others.

Care should be taken to minimize, to the extent possi-ble, the unintended consequences to innocent partiesor those that negatively affect a country’s economy. E-ort should also be expended on avoiding what hap-pened in Madagascar. In withdrawing AGOA benefitsollowing a coup, we find that 5 years later, perpetra-

tors are still in power while Malagasy seamstresses andU.S. investors lost the U.S. market as apparel clients.

Our suggestions do not seek to undermine U.S. goals.

In act, any review should ocus on how to make sanctionsmore effective through developing mechanisms to ensure

joint actions with other governments. Where collective ac-tion is not possible, ocus should be on targeted sanctions

against perpetrators o unacceptable behavior.

A review o U.S. conditionality should include mea-sures designed to protect America rom competition.Such targets include:

i). Requirements that government-unded agricultural

commodities are shipped on U.S. bottoms

ii). Assurance that U.S. financial support or exports

and investors doesn’t boost production that directlycompetes with U.S. production

iii). Prohibiting assistance or competitive agriculture

products also grown in the U.S.

iv). Local content requirements or Ex-Im programs

designed to ensure that financed exports contain signifi-

cant amounts o U.S. materials. Also, the value added byintellectual property rights (IPRs) and services is ofen not

included in calculating U.S. content.

Tese are ofen logical but are mandated or admin-istered in such a restrictive way that they go beyondtheir original intent to become onerous barriers to

U.S. exports and investments. Further limiting U.S.competitiveness are concerns over money launderingand ailing financial institutions. Tis is embodied inrequirements or large reserves, control over destina-tion and use o U.S. unding plus extraneous reportingrequirements. Te problem may not be the require-ments par se since money laundering and poorly man-aged are, indeed, deleterious to U.S. economic and na-tional security interests.

However, again, the problem is the act that mandateswere put together with little concern or their impact

on U.S. - Arica relations.

For instance, Arican institutions may not have adequate

capacity to meet U.S. regulation requirements. However, procedures could be developed to reflect the region’s capac-

ity with assurances that American concerns are addressed.

b. Off-Budget ActivitiesFollowing what some policy makers considered abruising fight in the 112th Congress to reauthorizeEx-Im Bank’s mandate, and coupled with the evolvingconcern over tax payers providing corporate welare

and money to cover bad debts, legislators could be re-luctant to adjust lending mandates o entities such asthe Overseas Private Investment Corporation (OPIC)and Ex-Im itsel. Both entities are, as a result, morerisk averse, making business or Arocentric U.S. ex-porters and investors even more difficult.

Ex-Im and OPIC currently ocus on low ailure rates oless than 1% - meaning that U.S. investors are, some-times, denied assistance on lucrative projects i thesehave higher incidences o risk. However, U.S. agenciesmust, especially in doing business with Arica or other

rontier areas, be willing to review their aversion sim-ply because those who venture into Arica - as recentErnst & Young reports show - also reap huge rewards.

Additionally, these bodies demand an inordinateamount o paper-work which turns-off investors whosimply lack the capacity or depth to respond to intri-cate U.S. regulations or may need to move quickly. othis, there are legislative efforts to urther increase Ex-Im outlays to the region by setting goals or lending toAmerica businesses operating in Arica.

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I the US is not to cede important economic activity tothe competition, and also given the above limitationson increasing Ex-Im resources or modiying its lend-ing criteria, creative ways to significantly increase theportion it lends to Arica must be developed. Tus, westrongly support a bipartisan bill introduced by influ-ential Senators and Congressmen in the 112th Con-gress requiring that Ex-Im provide at least 25% o its

recent increase in lending ability - about $10 bn o theadditional $ 40 bn - to be used in Arica. Also, Sen.Coons, recommends that a report go to Congress ilending to Arica is below 10% o annual totals com-mitted. Tese are initiatives needing support.

In no way should this reflect negatively on officials who

develop innovative approaches especially to assist smalland medium-sized enterprises but are short-staffed and

weighed down by Congressional requirements. OPIC andEx-Im have tripled US assistance since the start o the

Obama Administration. However, the magnitude o their

assistance is only a raction o that provided by China.

c. Special Purpose VehiclesTe U.S. must, in tandem with World Bank, AricanDevelopment Bank (ADB), financial institutions, eq-uity unds, MNCs and other governments, developspecial purpose vehicles (SPVs) to deal with risks be-yond sovereign guarantees. In addition, the Millen-nium Challenge Corporation (MCC) must undertaketo develop programs with the objective that 20% ounding available or uture MCC compacts to apply

to regional inrastructure.

d. Non-Reciprocal Benefits for U.S. InvestorsUltimately, any decision to extend AGOA’s non-recip-rocal concessions must be taken under a joint U.S. -Arican strategy where both parties work to achieveeconomic integration goals. Although targets may bemissed, the collective must complete a continentalFA and i possible a customs union, by early in thenext decade. Te continental FA must encompass thethree RECs in Eastern and Southern Arica (ormingthe ripartite Group), + an ECOWAS Customs Union.

Given the slower program in the Economic Commu-nity o Central Arican States (ECCAS/CEMAC), it isunclear how these ormer French colonies will be in-

corporated into continental arrangements.

While these measures are necessary, they, by

themselves are insufficient to ensure a seamless flow o trade within the region: An effective customs

union and eventual common market requires that more effort and resource base be applied to not just trade negotiations but also to ensuring the ree flow

o all actors o production, removal o non-tariff

barriers, consensus on community-wide SPSand industrial standards as well as other norms

o behavior – perhaps most important,deepening o regional inrastructure.

Troughout this process, and in recognition o U.S.orbearance in not demanding immediate or prema-ture reciprocity rom Arican countries – or even rom

countries as economically advanced as South Arica -Arican RECs and individual countries must considertrade liberalization. Firms seeking to invest in the re-gion consider this a priority - including the acceptanceo multilateral disciplines in the WO.

Here, we recommend that consultation procedures toremove impediments and leveling the playing field beundertaken. Secondly, the U.S. should sign onto investment protection agreements like bilateral invest-ment treaties (BIs) and civil aviation conventions.

Invariably, the U.S. should expend effort towards ne-gotiating BIs not only with just those already compli-ant countries but also the non-compliant ones offeringraw material or market opportunities or Americans.

Importantly, U.S. must ollow the EU example o an ex-pansive approach to investor riendly Double axationreaties (Ds). I implemented, Ds would protectU.S. companies rom double taxation and ensure thattax incentives offered by Arican countries to attractinvestors are not taxed by U.S. fiscal authorities.

Additionally, we suggest on-going consultation underthe existing but improved rade + Investment Frame-work Agreement (IFA) structures. Tese would ad-dress U.S. concerns about impediments to ree flowo American exports and investment into the regionwhere more advantages are provided to 3rd countries.

We also recommend the following:

i. Tat IFAs be organized hierarchically - with

an Arican Union - U.S. group at the apex or general

issues; while RECs and countries address specific ones.

ii. Tat current staffing levels be significantly enhanced

iii. Tat the USR serve as US chairman o the IFA

and receive the support o senior government agencies

such as the reasury and State Departments.

iv. Tat meetings have a regular schedule preceeded

by published agenda and ollowed by published reports

on meeting results.

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3. Regional IntegrationRegional integration is a challenge especially sincegovernments must cede some authority to supra-na-tional bodies - never an easy decision. Tere’s also al-ways local resistance to opening markets and borders.Fortunately, Arican countries have, thus ar, dis-played steady progress on achieving deeper economicintegration. But this process is at crossroads given e-orts by the EU to gain a competitive advantage in A-rican markets over other country imports, somethingor which the U.S. should not stand. Our strategy or aseamless AGOA renewal and enhancement has a com-ponent to protect U.S. exporters rom competitive dis-advantage. We also suggest that the Administration beauthorized to designate REC themselves or duty-reetreatment in certain situations.

a. Te WO | European UnionTe World rade Organization (WO) has placed

great emphasis on delineating Least Developed Coun-tries (LDCs) rom non-LDCs. However, these twokinds o countries must, ideally, be treated as a singleunit especially or FA and customs union purposes.

Using this distinction, the EU has piled on Arica by de-

manding that preerential trade preerences be negotiatedwell beore countries are economically integrated enough

to orm a common external tariff. Te EU specificallydemands that non-LDC country agree to liberalize 80%o imports rom the EU or else lose preerential access.

Europe cannot ask the same o LDCs since these are guar-anteed duty-ree treatment on 97% o their EU imports

under the WO DF/QF initiative.

Tese EU actions preclude non-LDCs and LDCs rom en-tering into a customs union since the ormer are obligated

to maintain duty-ree entry or EU products while thelatter can continue to impose MFN duties. In act, this also

limits ree movement o goods within FAs since LDCswill have to inspect all imports rom EPA signatories to

levy offsetting duties on any trans-shipped product or non-

originating product containing EU inputs which did not pay duties when entering the FA.

Particularly intense pressure is being exerted on the

other 12 Arican non-LDCs since South Arica alreadyhas an FA with the EU. Countries like Kenya, Ghana,Nigeria and Namibia are being threatened with thewithdrawal o preerential treatment and access toEU markets i they do not enter into their respectiveEPAs by October 2014. LDCs are also subject to likepressure as the EU intends to withhold liberal ruleso origin or their products i EPAs are not signed.Tere’s also an additional perception that EU aid pro-grams will be determined by whether a country entersinto these pacts or not. Finally, since ree movement

o goods and a customs union requires member statesto maintain the same duties on third country imports,particularly rom a major supplier like the EU, someLDCs may assume that they have no choice but to jointhe EPA as the only way to maintain their aspirationsor a customs union.

By setting an October 2014 deadline or EPAs, the EU

demonstrates how atally flawed these bilateral pactsreally are, specifically as pertaining to economic inte-gration. For instance, a hypothetical EPA with Ghanawould affect progress being made on the ECOWASintegration just like a sealed EPA with either Kenyaor Namibia would deal sizeable blows to the nascenthopes or an East Arican Community (EAC), orCOMESA and SADC as well as plans to combine thesethree RECs into a single ripartite Group.

Te U.S. must, orceully, point out that an integratedArica is important not just to the U.S. but to the EU

as well. Tus, the two parties should work together toensure that the July 2013 rans-Atlantic rade and In- vestment Partnership (-IP) negotiations not onlyliberalize trade across the North Atlantic but also withthe South Atlantic as well.

I this argument does not work, the U.S. should explain that there will be strong opposition

to -IP in the U.S. i it is seen to be legitimizingthe EU o 28 or 29 countries, while the EU

concurrently hinders economic integration othe 48 countries in sub-Saharan Arica.

Opposition in the U.S. will only heighten when

it’s realized that the EU is using its overwhelming economic strength to gain preerential treatment or

its exports over American ones in Arica.

Importantly, selectively signed EPAs would also un-dermine U.S. strategy in the region. I the U.S. sim-ply renews AGOA in its current non-reciprocal ormwithout effectively addressing the adverse EPA effects,Americans will find that their exports are at a disad- vantage in juxtaposition to EU products. Conversely,i the U.S. ollows the EU example and negotiates reci-procity with non-LDCs, this would disrupt economic

integration in the same way the EU is doing.

Te situation in South Arica best illustrates the

conundrum within which American exports have to grapple. Te EU and South Arica rade, Development

and Cooperation pact contained an FA liberalizing 90%o their trade. A number o duties were to be phased in

gradually, and with these in place, U.S. companies,continually, losing market share. I and when EPAs

lower EU duties significantly on their Arica-

bound exports outside South Arica, the U.S. willsuffer the same diversion throughout the region.

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Although the EU and the U.S. have both indicatedthat they would address implications o incorporat-ing duty-ree treatment o Arican goods and inputsthe same as those produced in -IP countries, theyhave also suggested that these issues would only beaddressed afer -IP has been negotiated. Accordingto Te Economist, this process could last up to 2 yearsand thus, this would not work or Arica since the EU

is insisting on ending preerential treatment or Ari-can imports in the immediate uture.

.A.S.P believes that a way around this quandary restsin immediately using the Tird Bucket (global issues)o the -IP talks to find a solution. Tis vehicle canallow or both parties to agree on an interim 10-yearregime under which Arican products exported to -IP countries are treated the same or duty-ree entryinto both the EU and the U.S. as well as in determiningwhether a product gains -IP origin qualities when

incorporated into a more advanced product. In ouropinion, there’s no better way to effectively insert Ari-

ca into global supply chains & distribution networks.

a. Implementationi. U.S. Position to Convince the EU to Delay EPAsLike mentioned earlier - and in a bid to ensure an eco-nomically integrated Arica - the U.S. must work withthe EU under the auspices o the -IP to delay nego-tiating EPAs until a common approach to reciprocityhas been developed.

ii. imely Passage of AGOATe 113th Congress should, like we suggested earli-er, permanently extend AGOA’s duty-ree provisionswith the proviso that some orm o reciprocity be in-corporated at the end o a 10-year period. Secondly,the market access provisions should be enhanced toinclude the same universal product coverage as the EUto acilitate incorporation o duty-ree treatment orArican products under the -IP.

iii. Duty-Free reatment As stated above, the U.S. should request that the EUextend the Marketing Access Regulation (MAR)1528/2007 under which duty-ree treatment is provid-ed to Arica, coinciding with a projected extension oAGOA non-reciprocal provisions.

Additionally the MAR should be modified to allow

the same duty-ree treatment or Nigeria, the Republic o Congo and Gabon who were suspended in 2008 due

to their reusal to negotiate interim EPAs.Te duty-ree benefits under AGOA would morph

into proposed -IP provisions once they areagreed upon, and as with the above AGOA proposal,

Arican countries would be expected to negotiatereciprocity with the U.S. and with the EU or

else lose the benefits under these provisions.

b. WO RulesA second challenge emanating rom third countries

to timely regional integration is the WO rules thatexclude non-LDCs rom those Duty Free/Quota Freeprograms that provide LDCs with market access to developed country markets. In response, the AU devel-

oped a proposal called the Enhanced and Improvedrade Preference System for the Promotion ofRegional Integration in LICs and LDCs. I adopt-ed, it’d provide DF/QF access to all sub Saharan Ari-can countries provided that the non-LDCs belong to aREC whose LDC majority is progressing towards inte-gration. All Arican non-LDCs all into this category.

c. Designation o RECs An enhanced AGOA should include provisions toallow the designation or AGOA eligibility any RECwhere all its members are eligible or duty-ree treat-ment. Tis would acilitate a regional approach andenhance peer pressure on recalcitrant REC membersas aberrant behavior would imperil REC designation.

ConclusionTere are significantly greater benefits to sub SaharanArican countries and the U.S. itsel rom a seamless

and timely renewal and enhancement o AGOA. o-day, AGOA does not avorably compare with simi-lar programs rom China or the EU. By overhaulingAGOA market access provisions and going beyondthem to incorporate U.S. investment and regional in-tegration components, the U.S. could surpass othercountries in one stroke, effectively deepening U.S. -Arica economic interests through a coordinated andmore aggressive program. Continuing the status quois unsustainable and guarantees urther marginaliza-tion o U.S. interests in Arica vis-a-vis third countries.

Perhaps more important, the Obama Administrationand Congress can create a lasting legacy by incorporat-ing enhanced AGOA provisions that acilitate an Ari-can-led economic integration - emulating the U.S. o19th Century and the EU o the 20th. Te 21st centurycould be epoch in which Arica attains similar goals.Te beneficiaries o this development will not only bethe U.S., Europe and the Arican countries themselvesbut U.S. firms who would have an alternative to Asia inwhich to operate their supply chains and distributionnetworks - a classic win-win scenario.

6~ SL . DM . SM . YZD ~ | Washington, DC | June 21, 2013

going beyond agoa

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