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Statement of Florizelle B. Liser, Assistant U.S. Trade Representative for Africa
Office of the U.S. Trade Representative
Before the House Committee on Foreign Affairs
Subcommittee on Africa and Global Health
"Beyond Oil & Gas: African Growth and Opportunity Act's Benefits to Africa"
July 12, 2007

Chairman Payne and Members of the Subcommittee:

Thank you very much for this opportunity to testify before the Subcommittee on the effectiveness of the African Growth and Opportunity Act in promoting African economic growth and development.

I am pleased to report that seven years after its implementation, the African Growth and Opportunity Act (AGOA) continues to have a significant positive impact on U.S.-Africa trade.

Introduction

The impetus for AGOA grew out of recognition-both in the United States and in Africa-that trade can be an important tool for increasing U.S.-African engagement and can serve as an engine for African economic growth and development. The passage of AGOA in 2000 was a major bi-partisan achievement supported by African countries as well as by the private sector and faith-based, civil rights and non-governmental organizations. Congress and the Bush Administration have demonstrated a continuing commitment to AGOA, amending it three times to enhance and extend its benefits-via the Trade Act of 2002, the AGOA Acceleration Act of 2004, and the Africa Investment Incentive Act of 2006.

When we look at AGOA's impact over the past seven years, I believe we can say that the Act's major policy objectives have been achieved:

• AGOA has ignited an expansion of U.S.-African trade;
• by offering substantial trade benefits to those countries undertaking sometimes difficult economic and political reforms, AGOA has provided a powerful incentive and reinforcement for African efforts to improve governance, open markets, and reduce poverty;
• and trade capacity building assistance to help Africans take advantage of AGOA's provisions and to support regional integration and development has grown.

AGOA has also provided a platform-through the annual U.S.-Sub-Saharan Africa Trade and Economic Cooperation Forum (also known as "the AGOA Forum")-for a high-level dialogue on ways to improve U.S.-African trade and economic cooperation.

U.S. Trade with Sub-Saharan Africa Continues to Grow

AGOA has been a measurable success in achieving increased trade between the United States and sub-Saharan Africa. In 2006, AGOA imports totaled $44.2 billion. That is more than five times the level of AGOA imports in 2001, the first full year of AGOA. Much of this increase was related to oil, but non-oil imports-including value-added products such as apparel, footwear, automobiles, and processed agricultural goods more than doubled from $1.4 billion in 2001 to $3.2 billion in 2006. Our imports of African-made apparel have almost doubled since AGOA came into effect-increasing from $748 million in 2000 to over $1.3 billion in 2006. Last year, 19 AGOA eligible countries exported apparel to the United States; prior to AGOA only a few countries sent apparel of any significant quantity to the U.S. market.

There are many AGOA success stories: tiny Lesotho has become the leading sub-Saharan African exporter of apparel to the United States; Kenya's exports under AGOA now include fresh cut roses, preserved pineapples, sport fishing supplies, nuts, and essential oils, as well as apparel; Ghana is exporting more value-added products under AGOA including chocolates, jewelry, baskets, and preserved pineapples; and many African businesses that had never previously considered the U.S. market are attending trade shows and getting orders-everything from Ugandan organic cotton T-shirts to Senegalese peanut oil to Mauritian seafood and Rwandan baskets. This increased trade has translated into thousands of new jobs in some of the poorest countries in Africa and hundreds of millions of dollars of new investment in the region.

AGOA has also created opportunities for U.S. businesses. Because of AGOA, Africans are increasingly seeking U.S. inputs, expertise, and joint venture partnerships. U.S. exports to sub-Saharan Africa more than doubled from $5.9 billion in 2000 to $12.1 billion in 2006, driven in large part by growth in manufactured products exports such as machinery, oil field equipment, motor vehicle parts, and telecommunications equipment.

Admittedly, AGOA's impact has not been shared equally by all eligible sub-Saharan African countries. While more countries are taking advantage of AGOA today than in 2001, much of the AGOA-related trade gains have been in a dozen or so countries and some eligible countries have yet to export any products under AGOA. We also know that most of AGOA's non-oil success has been concentrated in the apparel sector. These facts reinforce the need for continued trade capacity building for AGOA countries, which I will address later in this statement. The theme of the 2007 AGOA Forum, "As Trade Grows: Africa Prospers," was selected in order to highlight the wide range of products eligible for AGOA and to stress the importance of, and opportunities for, diversification.

AGOA has spurred African economic and political reforms

AGOA has had a positive impact on African economic, political, and social reforms.

The annual review of countries to determine eligibility status under AGOA examines specific congressionally-mandated criteria, including the establishment of a market-based economy, political pluralism, the elimination of barriers to U.S. trade and investment, efforts to reduce poverty, and the protection of internationally recognized worker and human rights. We in the Administration take these criteria very seriously, as shown by the countries that have been removed as AGOA beneficiaries for failing to meet the eligibility standards: the Central African Republic lost its eligibility in 2004 following a coup d'etat; Eritrea lost its eligibility in 2004 for its shortcomings on economic reform and human rights; and Cote d'Ivoire was terminated in 2005 for lack of progress on political and economic reforms. Our hope and expectation is that these and other countries currently not found eligible will strive to create conditions so that they may be positively reconsidered. A number of formerly ineligible countries did exactly that: Liberia and Mauritania addressed the problems we raised during the eligibility review process, made significant economic and political reforms in response to our concerns, and are now AGOA beneficiary countries.

The majority of sub-Saharan African countries are undertaking real reforms-and not only because of AGOA, but because they also perceive it's in their best interests to do so. AGOA countries have liberalized trade, strengthened market-based economic systems, privatized state-owned companies, and deregulated their economies. These changes have improved market access for U.S. companies and benefited African economies. Additionally, many countries reformed their customs regimes in order to meet AGOA's apparel eligibility requirements, as AGOA requires countries to establish an effective apparel visa system before they receive apparel benefits.

Trade Capacity Building Assistance Remains Critical

We appreciate that many eligible countries need assistance in order to take full advantage of AGOA's benefits. The challenges they face include inadequate infrastructure, lack of technical capacity to meet international product standards (such as sanitary and phytosanitary standards) and technical regulations, lack of access to finance, and little experience in producing and marketing value-added products for the U.S. market.

That's why we are investing in assistance to help African countries to address these challenges. Last year, the U.S. Government dedicated $394 million to trade capacity building in sub-Saharan Africa, up 95 percent over FY2005. This aid goes toward activities such as helping African businesses and farmers to meet quality and standards issues, to get more timely market information, and to establish linkages with prospective American partners. Under the auspices of the U.S Agency for International Development, four regional trade competitiveness hubs have been established throughout the region, each with AGOA advisors and trade specialists.

In FY2006, USAID launched implementation of the five-year, $200 million African Global Competitiveness Initiative (AGCI). The goals of AGCI are to expand sub-Saharan Africa's trade under AGOA and to improve the region's external competitiveness. The AGCI provides assistance to overcome constraints by strengthening businesses and forming business linkages, improving the business climate, increasing access to financing, and leveraging investments in infrastructure.

As part of our implementation efforts, we requested the U.S. International Trade Commission to do a new series of reports examining factors that affect African trade in key non-oil industries.

The first of these new reports-released in April-reviewed a wide range of industries: 12 in all-from cashews to cocoa butter, cut flowers to preserved fish, textiles and apparel to financial services and tourism. The report identifies underlying factors-policies, investments, and economic conditions-contributing to the growth and development of specific industries in Africa. African Trade Ministers have informed us that this study will be an integral part of their strategic planning on how to better take advantage of AGOA.

In May 2007, President Bush launched a complementary program, the African Financial Sector Initiative, to help African countries improve business environments and mobilize significant domestic and international investment. The Overseas Private Investment Corporation (OPIC) will support the creation of several new private equity funds that will mobilize up to $1 billion of additional investment in Africa. This investment will address critical gaps in the sources of financing available to African businesses, including small- and medium-sized enterprises. By September 2007, OPIC will select the first group of funds to support based on its assessment of developmental impact and potential for success. Moreover, U.S. government agencies will provide targeted technical assistance to strengthen country and regional debt markets; improve remittance systems in Nigeria and West Africa; provide banking regulation training; and develop payment systems and credit bureaus. These efforts will help to improve business competitiveness and foster greater trade ties.

Conclusion

Thanks to AGOA, our trade and investment relationship with sub-Saharan Africa has matured considerably over the past seven years. Two-way trade is increasing, African countries are diversifying their exports to the United States, and we are consulting with each other more, both on bilateral and multilateral issues. But while we have achieved much under AGOA, significant challenges remain. More needs to be done to diversify Africa's exports, and to expand the number of countries exporting under AGOA. AGOA has created significant opportunities for trade, investment, and partnership and we will continue to work with our African partners, the U.S. Congress, African and U.S. private sectors, civil society and other stakeholders to address the challenges and to ensure those opportunities are realized.