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Haiti Trade Benefits Could Go on Spending Bill; Need for AGOA Third-Country Fabric Questioned

Congress will pass a spending bill before leaving next week, and while everyone wants to attach their legislation to it, the prospect for Haitian trade preferences to get a ride seems relatively strong.

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Rep. Gregory Meeks of New York, the top Democrat on the House Foreign Affairs Committee, said he is "working like heck" to get the Haiti trade benefits program onto the continuing resolution, the formal name for the bill that would continue funding the government. "It is my No. 1 priority."

"I'm feeling there's movement, we're moving in the right direction, so I'm hopeful that it will happen."

Massachusetts Rep. Richard Neal, the top Democrat on the House Ways and Means Committee, said "we're pushing" to get HOPE/HELP on the CR, and he thinks it can be done.

Beth Hughes, vice president of trade and customs policy at the American Apparel and Footwear Association, when told about these comments, said, "I think that would be wonderful. We all would love to see that program renewed now rather than wait until it comes up for expiration." The Haiti trade preferences expire at the end of September next year. She said brands with factories in Haiti need the certainty -- and so do the workers.

Meeks said he's also working to get the African Growth and Opportunity Act attached, and he'd like another 10-year renewal -- AGOA also expires at the end of September 2025.

When asked about whether the third-country fabric provision is an obstacle to renewing AGOA, Meeks said, "It is important for the continent that we have ... a bill that we can pass." He added that he would be willing to make AGOA's terms less generous for apparel exporters if "that's the only way to get it done."

Neal was less optimistic about AGOA making it onto the CR than he was about the Haiti program, but said it could happen. He didn't endorse the idea of phasing out the third-country fabric provision for the next 10-year AGOA renewal. Rather, he said, "We would prefer a short-term" renewal. When asked if he meant a short-term renewal with the current rules of origin, he said, "Well, we'll see, we're talking about it. But it's doable."

Ways and Means Trade Subcommmittee Chairman Rep. Adrian Smith, R-Neb., when asked about whether the third-country fabric provision in AGOA will be altered in the next renewal, said: "There're discussions underway, and I think there are discussions to be had, and that's good."

When asked about whether Haiti-HELP would be added to the continuing resolution, Smith said, "I'm pushing to see what all can be put in.... I think we want to be productive with this."

He said he's also hoping the Generalized System of Preferences could go on the CR.

Ways and Means Chairman Jason Smith, R-Mo., when asked about his position on the third-country fabric provision, didn't answer.

The top Democrat on the Trade Subcommittee, Rep. Earl Blumenauer of Oregon, said that the approach to AGOA is "very much in flux" among the committee's leaders. When asked if Jason Smith would insist that third-country fabric rules be removed to renew AGOA, he said it's "hard to read his mood."

But, he said, he's been talking to the leaders in both parties on the committee, as well as members of Congress outside the committee, about the importance of moving some of the trade preference bills. He said he just talked with Sen. Chris Coons, D-Del., a leading advocate for AGOA in that chamber. He described his advice as: "Release some of the hostages, move it forward."

Hughes said apparel imports from AGOA countries have been declining as expiration approaches. "With GSP being expired for four years, no one is certain that Congress is going to renew AGOA or Haiti on time," she said.

However, she said, if the third-country fabric provision was no longer available for the least-developed countries in AGOA, apparel brands would reduce their activity in sub-Saharan Africa. "I think if that goes away, or is changed in any way, the duty-free access that AGOA gives folks isn’t going to be enough. That’s what we’ve been telling the Hill and the administration and trying to give them real examples of that" that member companies have shared.

According to agoa.info, 85% of textiles and apparel exported from AGOA countries to the U.S. from January to June 2024 took advantage of the third-country fabric rule of origin. Cut and sew operators in Kenya, Tanzania and Ethiopia import yarn or fabric from China, South Korea, Pakistan, India, Taiwan, other Southeast Asian countries, or even the U.S. (Ethiopia was expelled from AGOA, but is still a major apparel manufacturer).

Even though AGOA has the most generous textile rule of origin for any trade program, still, the 1.8% apparel import share sub-Saharan Africa had in 2023 is far smaller than for countries that face high tariffs -- 21% of apparel imports that year were from China,18% from Vietnam and 9% from Bangladesh, according to an analysis by University of Delaware Professor Sheng Lu.

"There’s very little regional production [in Africa] of all the inputs that you need," Hughes said. "We’d love to see a more vertical industry, especially in cotton," she added, since that would reduce the chances of cotton-containing apparel getting detained under the Uyghur Forced Labor Prevention Act. But setting up the infrastructure to process West African cotton and make it into yarn is expensive, and investments are stalled with the renewal uncertainty.

"If we want to decrease what’s coming from China, any changes to that third-country fabric provision isn’t going to meet that goal, it’s going to do the reverse," Hughes said.

Hughes said a short-term renewal, even if it maintains the third-country fabric provision, is not helpful for companies that place orders a year out.

She said apparel companies love Coons' proposal of a 16-year renewal, and said that a new bill introduced Dec. 11 by Rep. John James, R-Mich., that would renew AGOA for 12 years "is pretty great, too."

James' bill would extend AGOA to a Sept.30, 2037, expiration date, and would preserve the third-country fabric provision for that entire period. In past remarks (see 2310300051), James said "the well-intentioned pursuit of AGOA-plus could have unintended consequences."

He issued a statement with the bill that said, "The value of AGOA to the United States is clear. Fostering a robust business environment between the African continent and American business will lead to economic growth and prosperity for African countries and lower costs for consumers here in the United States."

He said AGOA has helped supply chains move from China to Africa. “U.S. strategy towards Africa is too often stick without the carrot -- and fails to recognize the vast economic potential of the continent," he added. "If we do not engage proactively, we are ceding the space to our adversaries."