Third Party Fabric in AGOA May Face Changes; GSP Still Languishing
House Ways and Means Committee member Rep. Darin LaHood, R-Ill., said that there will be a renewed bipartisan effort to extend the African Growth and Opportunity Act next year. He called AGOA "something that is very beneficial to our U.S. trade policy." But LaHood left the door open to phasing out or changing the third-party fabric provision of AGOA in the 2025 reauthorization.
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Companies that contract with African apparel manufacturers say that allowing clothing that uses Asian fabric to qualify for duty-free benefits under AGOA is necessary to make African production cost-competitive (see 240612005 and 2310300051). That third-party fabric rule is allowed for 21 of the 35 beneficiary countries, and nearly all the garments imported from AGOA countries are covered by the rule.
When asked if House Republicans want to phase out third-party fabric rules, LaHood said, "I think there's a mechanism that we can get to a resolution on that." LaHood declined to say what he would like that resolution to be.
Ways and Means ranking member Rep. Richard Neal, D-Mass., said that moving AGOA in the House in the lame duck would be "a heavy lift." But Neal said if Congress turns to the legislation in 2025, "I'm all in, I think it should be done."
Advocates for AGOA are anxious that the program be extended well ahead of the September 30, 2025, expiration date, given the fate of the Generalized System of Preferences benefits program. That program had waived about $1 billion a year in duties for importers that took advantage of it, but the volume of goods that qualify for GSP is likely lower now, given that some importers who had moved manufacturing away from China to GSP countries have since moved production back, according to the Coalition for GSP.
When Congress returns in January, GSP will not have existed for four years.
When asked by International Trade Today if he wants to bring back GSP, House Speaker Mike Johnson didn't respond directly on the merit of the policy, or on whether action would have to wait for the Republicans to clear what he called the "very aggressive first 100 days agenda in Congress."
"We haven't even had a chance to really address that in any detail, so stay tuned on that," he said during a morning press conference at the Capitol.
LaHood said he doesn't know if action on GSP will have to wait for Republicans to tackle immigration policy and tax cut extensions. In the past, GSP has sometimes passed the House on the suspension calendar, which allows bills to move without dedicating time for debate, if they can get two-thirds of the votes. (The last time it did so, it passed 400-2). However, the last time it passed the House, it couldn't pass the Senate through unanimous consent; instead, it hitched a ride on a government spending bill in March 2018.
When asked if the pro-tariff posture of the administration could mean GSP is out-of-step with political sentiment, and will not come back, LaHood responded, "Well, my hope is that GSP is passed by the Congress. We passed it in the committee, so Ways and Means Republicans, and some Democrats, are fully supportive of it. I think we're going to continue to push to have that done in the new Congress. I think it's imperative that our trade policy be predicated on things like GSP."
Ways and Means member Rep. Beth Van Duyne, R-Texas, who voted for GSP restoration earlier this year, was less sure GSP would return. "I would say it's a discussion to have, absolutely," she said.
Ways and Means member Rep. Blake Moore, R-Utah, who also is a supporting player on the House Republicans' leadership team, said he believes Republicans are still motivated to act on GSP in 2025, "because the whole trade world is going to be a big, constant debate." The program's support is "incredibly bipartisan," he said. The top Democrat on the committee, Neal, said he hopes GSP is not gone forever.
When asked if GSP's removal of tariffs is contrary to the incoming administration's trade philosophy, Moore responded, "I think there's a needle to thread there, honestly. I think it's important, because ... of the results we've seen from GSP, being able to move manufacturing away from China." He said China is afraid U.S. companies will move production out of China to Vietnam, the Philippines and Mexico. The Philippines is a GSP beneficiary; Vietnam is not.
"There's still plenty of motivation for it; it's going to be a unique world of trade in Q1, for probably all of 2025," Moore said. "There's opportunities to work on all of this together."