Economic growth and prosperity in much of Africa and the Caribbean have not kept pace with the rest of the world. Recognizing this fact, the United States recently passed legislation that could improve the situation — and benefit your business.

Economic Growth Is Encouraged

In May, President Clinton signed the Trade and Development Act of 2000 (H.R. 434) into law. It is designed to improve African and Caribbean economies by encouraging them to diversify their export portfolio to include labor-intensive manufactured goods.

Stated by House Africa Subcommittee Chairman Ed Royce (R-Calif.), the historic legislation provides the commercial framework on which to build. The agreement becomes effective October 1, 2000.

Apparel Duties Removed

Currently, under the U.S. General System of Preferences (GSP) tariff code, most Caribbean and African exports to the United States — with the exception of apparel and sugar — are duty-free.

In an attempt to boost local textile and apparel industries, the new legislation eliminates U.S. import duties on apparel made with U.S. fabric from 48 sub-Saharan African and 23 Caribbean and Central American countries. Additionally, imports from Caribbean Basin countries may receive the same trade benefits for a quota of up to 250 million square meters of apparel made from regionally-knitted fabric.

Sector Diversity Is Promoted

The majority of African exports to the United States includes three commodities: oil, platinum, and diamonds. The new legislation, in part, promotes a diversification of African exports from raw materials to higher-value added products, creating more jobs. Opening up opportunities in apparel is a start. For example, in 1999, U.S. apparel imports from Africa supplied only 1.1% of total U.S. apparel imports of $50.8 billion.

For the Caribbean, the bill partly grants NAFTA parity for textiles and apparel, giving that region a similar tariff treatment that Mexico currently enjoys, up to the quota level cited earlier.

For both African and Caribbean countries, larger textile and apparel industries are expected to emerge, increasing employment and economic growth. According to House Ways and Means Chairman Bill Archer (R-Texas), the agreement will give them the tools they need to do that.

Trade and Investment

In the past, U.S. exports to Africa and the Caribbean have not been robust. In 1999, U.S. exports to the African continent totaled only $10 billion; U.S. exports to the entire Caribbean totaled only $10.3 billion.

The U.S. foreign direct investment (FDI) in Africa, on a historical-cost basis, reached almost $13.5 billion in 1998. This represented an increase of 134% over 1994, while U.S. FDI worldwide increased 60%. Meanwhile, in the Caribbean Basin, U.S. FDI is approaching $100 billion.

U.S. Beneficiaries to Increase

In the short-term, primary U.S. beneficiaries of this agreement are projected to be U.S.-owned apparel producers. By promoting greater apparel exports from sub-Saharan Africa and the Caribbean Basin to the United States, U.S. producers operating in these countries will become more competitive with apparel imported from Asia. Importantly, U.S. consumers will benefit through lower prices.

In the longer-term, the economies in these regions are expected to generate greater economic growth, providing new opportunities for U.S. trade and investment.

About The Author John Manzella [Full Bio]

John Manzella, founder of the Manzella Report, is a world-recognized speaker, author of several books, and an international columnist on global business, trade policy, labor, and the latest economic trends. His valuable insight, analysis and strategic direction have been vital to many of the world's largest corporations, associations and universities preparing for the business, economic and political challenges ahead.




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