1. Clothing and Textile Sector Workshop AGOA I to AGOA III : Trade Performance and Recent Legislative Amendments Eckart Naumann tralac / WESGRO Workshop Cape Town, South Africa 08 October 2004

2. ► AGOA overview ► Trade performance under AGOA ► Legislative changes: AGOA I - AGOA III ► AGOA III: earlier proposals absent in the final legislation ► Implications for South Africa and the region ► Implications for SACU-US free trade negotiations Overview

3. Trade Performance: 2003 – 2004 ytd

4. Clothing sector trade – sample countries

5. ► Exchange Rate Overview

6. Trade Performance

7. ► First changes to AGOA introduced at end 2002 ► Affected only clothing, and country designation (Botswana & Namibia) ► Clothing rule changes: ► Quotas doubled ► Knit-to-shape permitted (previously only cut to shape used in the wording) ► LDCs permitted to use foreign yarns (previous confusion as reference only to foreign fabric – customs interpreted narrowly as meaning ‘from AGOA yarn’) AGOA I - AGOA II

8. ► Signed into law mid 2004 ► Extends AGOA to 2015 ► Where migration to FTA, full cumulation ► Extends clothing provisions and Rules of Origin: ► Extends LDC rule 3 years (3 rd with half quota, i.e. 1.18%) ► Quota % stays same 2008 – 2015 ► Expands folkloric provision (commercial production of ethnic fabrics, but conditions, e.g. from US or African yarn) ► Extends value tolerance rules: ► Allows foreign collars and cuffs, drawstrings, shoulder pads and elbow patches ► Foreign fibres and yarns 10% (prev. 7%) AGOA II - AGOA III

9. ► Extension to 2015 / 2020 ► LDC provision to 2008, optional 2-yr extension – countries w/o fabric manuf. ► Increase quotas to 10% (and 3.5% for LDCs) / even remove all quotas – subject to compliance with RoO ► AGOA eligibility continuous w/o annual review (unless non-compliance) ► Removes investment and trade finance restrictions on certain US institutions, (e.g. on textile and apparel projects) What was left out of AGOA III ? Earlier versions HR & S Bill

10. ► Includes some prev. excl products, e.g. canned peaches, other agric. goods ► Removes import sensitivity rqmt. ► Budget of US$ 85mn for APHIS technical assistance What was left out of AGOA III ? Earlier versions HR & S Bill

11. ► In the absence of FTA greater planning horizon for stakeholders ► Value tolerance rules benefit clothing sector in SA and region ► Extension of LDC rule: detrimental to SA ? ► loss in relative competitiveness ► Opportunities for local design (houses), contracting to LDCs? ► investment diversion from (and instead of) SA to region? ► Quotas: a likely problem in year 3? ► Incentive / disincentive for regional textile producers? Implications for South Africa and region

12. ► AGOA extension unlikely to fully mitigate end of MFA ► Provision of technical assistance by APHIS very important – e.g. case of Zambian sugar peas, SA oranges ► Besides extension, watered-down AGOA III of little new benefit except to clothing sector Implications for South Africa and region

13. ► Extension to 2015 / 2020 ► LDC provision to 2008, optional 2-yr extension – countries w/o fabric manuf. ► Increase quotas to 10% (and 3.5% for LDCs) / even remove all quotas – subject to compliance with RoO ► AGOA eligibility continuous w/o annual review (unless non-compliance) ► Removes investment and trade finance restrictions on certain US institutions ► Includes some prev. excl products, e.g. canned peaches, other agric. goods ► Removes import sensitivity rqmt. ► Budget of US$ 85mn for APHIS technical assistance What was left out of AGOA III ? Earlier versions HR & S Bill

14. ► Extension of AGOA a disincentive to conclude FTA? ► Improved negotiation basis, although uncertainty remains ► Cumulation: non-FTA countries don’t suffer, FTA full cumulation ► Must build future FTA on aquis: expand coverage to non-AGOA goods (e.g. textiles, canned fruit, minerals and metals, etc.) ► Challenge of clothing RoO: push for single CTH for all SACU? Principle has strong basis in AGOA ► AGOA built on VA – what about US-SACU? [NAFTA, US-Chile, US- Singapore based largely on CTH, but US-Jordan and US-Israel largely VA) Implications for SACU-US FTA negotiations