```

[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

 
                       U.S. TRADE RELATIONS WITH 
                           SUB-SAHARAN AFRICA

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 3, 1999

                               __________

                             Serial 106-64

                               __________

         Printed for the use of the Committee on Ways and Means

                    U.S. GOVERNMENT PRINTING OFFICE
66-044 CC                   WASHINGTON : 2000

_______________________________________________________________________
            For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 
                                 20402

                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel
                                 ------                                

                         Subcommittee on Trade

                  PHILIP M. CRANE, Illinois, Chairman
BILL THOMAS, California              SANDER M. LEVIN, Michigan
E. CLAY SHAW, Jr., Florida           CHARLES B. RANGEL, New York
AMO HOUGHTON, New York               RICHARD E. NEAL, Massachusetts
DAVE CAMP, Michigan                  MICHAEL R. McNULTY, New York
JIM RAMSTAD, Minnesota               WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington            XAVIER BECERRA, California
WALLY HERGER, California
JIM NUSSLE, Iowa

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.
                            C O N T E N T S

                              ----------                              

                                                                   Page

Advisories announcing the hearing................................     2

                               WITNESSES

U.S. Department of Commerce, Hon. William M. Daley, Secretary....    21
U.S. International Trade Commission, Robert A. Rogowsky, Director    70
                                 ------                                
African Continental Telecommunications Limited, and Inner City 
  Broadcasting Corporation, Hon. Percy E. Sutton.................    63
American Textile Manufacturers Institute, Carlos Moore...........    77
Cargill, Incorporated, Peter A. Kooi.............................    54
Constituency for Africa, and Empower America, Hon. Jack Kemp.....    30
Enron International, Tim Rebhorn.................................    59
Good Works International, LLC, Hon. Andrew Young.................    34
Gramm, Hon. Phil, a United States Senator from the State of Texas     8
Jackson, Hon. Jesse L., Jr., a Representative in Congress from 
  the State of Illinois..........................................     9
Kmart Corporation, Dale J. Apley, Jr.............................    96
MAST Industries, Inc., Karen Fedorko.............................    91
Mauritius, Republic of, His Excellency Chitmansing Jesseramsing, 
  Ambassador.....................................................    48
Senegal, Republic of, His Excellency Mamadou Mansour Seck, 
  Ambassador.....................................................    44
Uganda, Republic of, Hon. Amama Mbabazi, Minister of State for 
  Foreign Affairs................................................    40
Union of Needletrades, Industrial and Textile Employees, AFL-CIO, 
  Mark Levinson..................................................   100

                       SUBMISSIONS FOR THE RECORD

African Coalition for Trade, Inc., Paul Ryberg, Jr., letter......   110
Boeing Company, Arlington, VA, statement.........................   116
Ferroalloys Association, statement...............................   117
Footwear Industries of America, statement........................   119
International Mass Retail Association, Arlington, VA, statement 
  and attachments................................................   120
Luggage and Leather Goods Manufacturers of America, Inc., New 
  York, NY, statement............................................   124
National Cotton Council of America, Jack S. Hamilton, letter.....   126
National Retail Federation, statement............................   127
Neckwear Association of America, Inc., New York, NY, statement...   131
Nilit America Corporation, Greensboro, NC, Mac Cheek, statement..   132
United States Association of Importers of Textiles and Apparel, 
  New York, NY, Laura E. Jones, statement and attachments........   133

 
                       U.S. TRADE RELATIONS WITH 
                           SUB-SAHARAN AFRICA

                              ----------                              

                      WEDNESDAY, FEBRUARY 3, 1999

                  House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:52 a.m., in 
room 1100, Longworth House Office Building, Hon. Philip M. 
Crane (Chairman of the Subcommittee) presiding.
    [The advisories announcing the hearing follow:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON TRADE

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE

January 22, 1999

No. TR-1

                       Crane Announces Hearing on

              U.S. Trade Relations with Sub-Saharan Africa

    Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade 
of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on U.S. trade relations with Sub-
Saharan Africa. The hearing will take place on Wednesday, February 3, 
1999, in the main Committee hearing room, 1100 Longworth House Office 
Building, beginning at 10:00 a.m.
      

BACKGROUND:

      
    Sub-Saharan Africa consists of 48 diverse countries, many of which 
have undergone significant political and economic change in recent 
years. Since 1990, more than 25 African nations have held democratic 
elections. At the same time, more than 30 countries have instituted 
programs to replace their centralized economies with free markets under 
the guidance of bilateral and multilateral donors such as the World 
Bank and the International Monetary Fund. Despite the fact that 33 
countries in Sub-Saharan Africa are members of the World Trade 
Organization, U.S. trade with Sub-Saharan African countries remains 
low, relative to overall U.S. trade levels.
      
    In 1994, Congress passed the Uruguay Round Agreements Act (P.L. 
103-465), which required the President to submit five annual reports to 
Congress on the Administration's comprehensive trade and development 
policy for countries in Africa. On January 13, 1999, the President 
submitted his fourth report pursuant to this provision of law. The 
report describes the progress made in the implementation of the five 
components of the Administration's Partnership for Economic Growth and 
Opportunity in Africa: enhanced trade benefits to increase U.S.-African 
trade and investment flows; technical assistance; enhanced dialog with 
African countries; financing and debt relief; and continued U.S. 
leadership in multilateral fora to support private sector development, 
trade development, and institutional capacity building in African 
countries.
      
    During the 105th Congress, the U.S. House of Representatives passed 
the African Growth and Opportunity Act, H.R. 1432, which would have 
authorized a new U.S. trade and investment policy toward Sub-Saharan 
Africa. The bill, which the Senate did not consider, called for the 
designation of countries in Sub-Saharan Africa pursuing market-based 
economic reform to participate in benefits of the bill. The legislation 
extended trade benefits under the Generalized System of Preferences 
(GSP) for countries eligible to participate in the Act, and would have 
authorized the President to grant duty-free treatment to non-import 
sensitive products from Africa currently excluded from the GSP program. 
In addition, the bill called for the creation of a United States-Sub-
Saharan Africa Trade and Economic Cooperation Forum to provide a 
regular opportunity for the discussion of trade liberalization among 
the eligible countries. The bill also set as a policy objective the 
creation of a United States-Sub-Saharan Africa Free Trade Area. 
Furthermore, the bill would have restricted the imposition of quotas on 
textile and apparel products from Sub-Saharan African countries 
eligible to participate in the Act that adopt visa systems to guard 
against unlawful transshipment.
      
    In announcing the hearing, Chairman Crane stated: ``Last year, the 
House passed historic legislation to develop closer trade relations 
with countries in Sub-Saharan Africa committed to democracy and market-
based economic principles. Unfortunately, this legislation did not 
become law in the 105th Congress. I look forward to this opportunity to 
further explore how the African Growth and Opportunity Act, can promote 
mutually beneficial trade and investment opportunities between Africans 
and Americans.''
      

FOCUS OF THE HEARING:

      
    Witnesses are expected to address ways that the United States could 
develop closer trade relations with the countries of Sub-Saharan 
Africa, including provisions proposed in the African Growth and 
Opportunity Act.

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

      
    Requests to be heard at the hearing must be made by telephone to 
Traci Altman or Pete Davila at (202) 225-1721 no later than the close 
of business, Thursday, January 28, 1999. The telephone request should 
be followed by a formal written request to A.L. Singleton, Chief of 
Staff, Committee on Ways and Means, U.S. House of Representatives, 1102 
Longworth House Office Building, Washington, D.C. 20515. The staff of 
the Subcommittee on Trade will notify by telephone those scheduled to 
appear as soon as possible after the filing deadline. Any questions 
concerning a scheduled appearance should be directed to the 
Subcommittee on Trade staff at (202) 225-6649.
      
    In view of the limited time available to hear witnesses, the 
Subcommittee may not be able to accommodate all requests to be heard. 
Those persons and organizations not scheduled for an oral appearance 
are encouraged to submit written statements for the record of the 
hearing. All persons requesting to be heard, whether or not they are 
scheduled for oral testimony, will be notified as soon as possible 
after the filing deadline.
      
    Witnesses scheduled to present oral testimony are required to 
summarize briefly their written statements in no more than five 
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full 
written statement of each witness will be included in the printed 
record, in accordance with House Rules.
      
    In order to assure the most productive use of the limited amount of 
time available to question witnesses, all witnesses scheduled to appear 
before the Subcommittee are required to submit 200 copies, along with 
an IBM compatible 3.5-inch diskette in WordPerfect 5.1 format, of their 
prepared statement for review by Members prior to the hearing. 
Testimony should arrive at the Subcommittee on Trade office, room 1104 
Longworth House Office Building, no later than Monday, February 1, 
1999. Failure to do so may result in the witness being denied the 
opportunity to testify in person.
      

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect 5.1 format, with their name, address, and 
hearing date noted on a label, by the close of business, Wednesday, 
February 3, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways 
and Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Trade office, room 1104 Longworth House 
Office Building, by close of business the day before the hearing.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect 5.1 
format, typed in single space and may not exceed a total of 10 pages 
including attachments. Witnesses are advised that the Committee will 
rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
     The above restrictions and limitations apply only to material 
being submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at `http://WWW.HOUSE.GOV/WAYS__MEANS/'.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                

                         NOTICE--CHANGE IN TIME

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                         SUBCOMMITTEE ON TRADE

                                                CONTACT: (202) 225-6649
FOR IMMEDIATE RELEASE

February 1, 1999

No. TR-1-Revised

               Change in Time for Subcommittee Hearing on

                      Wednesday, February 3, 1999,

          on the U.S. Trade Relations with Sub-Saharan Africa

    Congressman Philip M. Crane (R-IL), Chairman of the Subcommittee on 
Trade of the Committee on Ways and Means, today announced that the 
Subcommittee hearing on U.S. trade relations with Sub-Saharan Africa, 
previously scheduled for Wednesday, February 3, 1999, at 10:00 a.m., in 
the main Committee hearing room, 1100 Longworth House Office Building, 
will now begin at 9:45 a.m.
      
    All other details for the hearing remain the same. (See 
Subcommittee press release No. TR-1, dated January 22, 1999.)

                                

    Chairman Crane [presiding]. The Subcommittee on Trade will 
come to order. Today we'll hear testimony from a number of 
distinguished witnesses on U.S. trade relations with Sub-
Saharan Africa. Yesterday I joined with over 60 of my 
colleagues, including Mr. Levin, Mr. Thomas, Mr. Rangel, Mr. 
Houghton, Mr. Neal, Mr. Ramstad, Mr. McNulty, Ms. Dunn, and Mr. 
Jefferson of the Trade Subcommittee in reintroducing the 
African Growth and Opportunity Act, H.R. 434. Last year this 
bipartisan legislation was passed by the House of 
Representatives, but was not taken up by the full Senate prior 
to adjournment. The delay in the enactment of this historic 
legislation has come at the expense not only of U.S. firms and 
workers who would benefit from increased access to the 
developing markets in the region, but also at the expense of 
the growing number of countries on the continent committed to 
free markets and democratic institutions. As a result, I 
believe that it is important for us to take action on this bill 
early in the 106th Congress in order to hasten its journey 
through the legislative process.
    I now recognize Mr. Levin, the new Ranking Member of the 
Subcommittee, for an opening statement.
    Mr. Levin. Thank you, Mr. Chairman. Thank you for convening 
this hearing on the African Growth and Opportunity Act. I am 
glad to join as cosponsor with you and with my friend and 
colleague Mr. Rangel, as well as other Members of this 
Subcommittee, the Full Committee, and outside of the Committee.
    This bill recognizes that in this era of economic 
globalization, the nature of trade relations has been changing. 
Developing economies have become increasingly involved in 
globalization. The nations of Sub-Saharan Africa must not be 
left behind. To help bring these countries into the global 
economy economic fold, however, we must do more than provide 
traditional development aid. While such aid is important, it 
must be complemented by strategies that foster growth and 
economic self-reliance. The African Growth and Opportunity Act 
recognizes that need and creates a partnership between the 
countries of Sub-Saharan Africa and the United States that will 
encourage both economic growth and democratic reform.
    It is important that as developing economies increasingly 
participate in economic globalization, we are sensitive to the 
impact on American businesses and workers. Economic integration 
between developed and developing economies that usually have 
different capital and labor markets can have a profound impact 
on all countries. As developing economies move toward free 
market systems, we must take steps to ensure that the result is 
to raise the living standards of all the people in those 
nations as well as strengthening rather than undermining the 
living standards here in the United States.
    Significantly, the bipartisan bill before us recognizes and 
addresses the link between labor and trade. It encourages the 
development of core labor standards in Sub-Saharan nations. 
Specifically, because the preferential trade provisions of this 
bill are based on the GSP statute in determining whether a 
country qualifies for expanded trade benefits under AGOA, the 
President must consider whether the country has or is ``taking 
steps to afford internationally recognized worker rights to its 
workers.''
    Internationally recognized worker rights in turn are 
defined under the GSP statute to include the right of 
association, the right to organize and bargain collectively, a 
prohibition against any form of forced or compulsory labor, a 
minimum age for employment of children, and acceptable 
conditions of work with respect to minimum wages, hours of 
work, and occupational safety and health.
    I am encouraged that this bill includes these provisions, 
and would urge my colleagues that this approach be kept in mind 
as we in Congress and the Administration work to build a new 
consensus that will lead us to a revival of a bipartisan 
approach on the broader issues of trade. As we look beyond this 
bill, I look forward to working to developing this consensus.
    We should also attempt in this spirit to work out 
differences over specific provisions regarding apparel and 
textiles. Last year the Senate adopted different provisions as 
we know, than the House, in consideration of the potential 
impact of increased trade with Sub-Saharan African nations on 
workers and businesses in the United States. I hope that we can 
meet early with the Senate to find common ground on this issue.
    Mr. Chairman, if I might yield to our friend and colleague, 
the Ranking Member of the Full Committee, Mr. Rangel, who has 
been such a leader in this effort for any additional comments.
    Mr. Rangel.
    Mr. Rangel. Thank you so much, Mr. Levin. Let me first 
thank Phil Crane for the leadership that he has provided in 
demonstrating the ability of the House to act in a bipartisan 
way if it's in the interests of the United States, and 
certainly in the interests of open trade. His leadership has 
been so helpful, as Congressman McDermott, and Jefferson, and 
Payne, and Royce, have worked together to put together this 
piece of legislation.
    This is a unique piece of legislation because we have not 
told the countries that are to be affected what we want them to 
do, but we have asked them how can we be better friends, how 
can we be better partners. It is a good feeling to see the 
entire African diplomatic corps, with its Ambassadors who have 
worked with us, have testified in front of this Committee, who 
have been at press conferences, to see that this legislation is 
the beginning of a great trade relationship that should exist.
    Let me thank Senator Gramm. I wish we can find more issues 
to be on the same side of, because in a fight, if we had to 
pick our team, I would want you on my side. You have been of 
tremendous assistance to us in helping us to understand the 
unique problems of your colleagues on the other side. I do hope 
that we will start early enough so that we can understand that 
compromise is not a dirty word, but we have to end up with an 
effective piece of legislation that set out to do what we want 
it to do.
    I want to thank Andrew Young, who is here, a unique 
individual that has not only served in the civil rights field, 
but he has been a Member of Congress, an ambassador to the 
United Nations, a mayor of Atlanta. But in the private sector, 
he and Ron Brown have done so much in educating America as to 
the needs of this great continent and the countries that 
involve.
    Of course I want to give a special thanks to a dear friend 
of mine, a neighbor of mine who was a successful politician, 
but more importantly, is a successful businessman. He will 
testify. His name is Percy Sutton. He comes from the village of 
Harlem, as I do. We share and talk about how we envied Speaker 
O'Neill when he went to Ireland, how we enjoyed vicariously 
when former Chairman Rostankowski went to Poland, and now we 
feel such a deep sense of pride when we go to Africa. So 
vicariously, this means a lot to Americans as well as to 
Africans.
    This is an exciting piece of legislation. We have a lot of 
heavy lifting to do on the other side. But, Mr. Chairman, your 
leadership is historic. I am certain that all of us should 
remember this one day, because I am certain that at some point 
in time, all of us would be able to say that we played a part, 
no matter how small, no matter how big, in making this 
possible.
    Jack Kemp, since leaving the Congress and leaving public 
service, has been an ambassador throughout this world. Your 
presence here enhances the ability of us to move forward in a 
bipartisan way.
    Thank you, Mr. Chairman. Thank you, Mr. Levin.
    [The opening statement of Hon. Jim Ramstad follows:]

Opening Statement of Hon. Jim Ramstad, a Representative in Congress 
from the State of Minnesota

    Mr. Chairman thank you for calling this important hearing 
today to discuss U.S. trade with Sub-Saharan Africa.
    During this hearing today, we will review legislation that 
you, I, and over 50 of our colleagues have cosponsored to 
create a new trade and investment policy for sub-Saharan 
Africa. I supported this legislation last Congress and I 
support it now because it is simply the right thing to do.
    Since 1990, more than 25 African nations have held 
democratic elections. Over 30 have instituted programs to 
replace their centralized economies with free markets. We all 
know stronger economies contribute to social and political 
stability, and we must take steps to help secure that 
stability.
    Increased investment and trade activity with the U.S. will 
improve the economic conditions of all the Sub-Saharan nations. 
And, as our Committee has heard in the past from African 
officials, they want this opportunity to industrialize their 
economies and facilitate technology transfers. They support the 
bill's efforts to encourage foreign investment and direct 
private sector involvement in further economic development in 
the region.
    Mr. Peter Kooi, President of the World Grain Trading Group 
of Cargill, a privately-held agribusiness headquartered in my 
district and an active member of the Corporate Council on 
Africa, will be testifying before our committee today. In 
reading his written statement last night, I was impressed to 
learn of the extensive involvement of Cargill as a public 
corporate citizen in Africa to help bring about economic and 
political development in the region. Cargill exemplifies what 
we are trying to achieve with this legislation.
    In addition, I was inspired by a sentence in his statement 
in which he says, ``what Africa needs, and what the African 
Growth and Opportunity Act Passed by the House of 
Representatives last year begins to offer, is a partnership.''
    Mr. Kooi is correct. I am proud to be involved in the 
development of this partnership and look forward to enacting 
this critical legislation before us today.
    Mr. Chairman, thanks again for calling this hearing. I look 
forward to the testimony of today's witnesses and learning more 
developing that partnership with the nations of Sub-Saharan 
Africa.
      

                                

    Chairman Crane. Thank you, Charlie. We have a whole list of 
witnesses to testify before us today. Unfortunately there are 
time constraints associated with our hearing, which will be 
followed by our Subcommittee markup of the bill later, this 
afternoon after lunch.
    Accordingly, I must inform all of our witnesses that we'll 
have to strictly enforce the 5-minute rule on oral 
presentations. Your written statements though will be made a 
part of the permanent record.
    Now I would like to introduce our first panel. The 
Honorable Phil Gramm, who has been referred to by my good 
friend Charlie Rangel, chairman of the Senate Banking 
Committee, who as I understand Charlie's remarks, will 
translate the bill to the Senate. Is that correct?
    Senator Gramm. Yes, that's right.
    Chairman Crane. Very good. And also Hon. Jesse Jackson, 
from my home State of Illinois.

STATEMENT OF HON. PHIL GRAMM, A UNITED STATES SENATOR FROM THE 
                         STATE OF TEXAS

    Senator Gramm. Mr. Chairman, first of all, thank you, and 
Charlie, thank you, for your kind comments. I want to thank 
you, Mr. Chairman, for your steadfast support for free trade 
over the years. I want to try to keep my remarks brief.
    I have often found myself as a conservative when we have 
been voting on foreign aid bills, realizing that most of the 
money we're spending is going to go to promote crony capitalism 
or socialism or programs that don't work. I have often wished 
we could find a way to really help people. I think in the 
African Growth and Opportunity Act--it sounds like Jack Kemp 
named the bill--we have a way to help people through trade.
    The points I would like to make are pretty simple. No. 1, 
this is a very modest bill. All of Sub-Saharan Africa combined 
sells America about .67 percent of the textiles that we buy 
around the world. If you look at the estimates by the ITC, they 
estimate that in all probability the opening up of trade as 
proposed by the President will probably mean that in the end, 
still maybe less than 1 percent of textile imports will come 
from Sub-Saharan Africa.
    The opposition to the bill has come principally from 
textile interests. Americans today on average pay $700 a family 
more for clothing than they would pay if we had free trade in 
textiles. No other industry in America is more protected. This 
is direct and clear theft in literally taking the clothes off 
the backs of working people. The fear that is raised by those 
who oppose the bill is that Africans might actually produce 
clothing that is cheaper or better, and Americans might 
actually buy it. My response to that is what is wrong with 
that?
    In the Senate, we had a provision added to the bill that 
required that the textiles that would come under the provisions 
of this bill would have to be made out of U.S. fabric, made 
from U.S. yarn. The point I want to be sure that everybody 
understands is that that kills this bill. There is no way that 
Africa, as non-competitive as it is in the very early stages of 
economic development, where you have got 750 million people, 
you have got per capita income of below $500 per person, there 
is no way if we have got to ship cloth and thread to Africa and 
use it in order for them to produce something to sell on our 
market that they can or will be competitive.
    So the Senate provision kills this bill. You can not be for 
this bill and be for that provision. So I hope the House will 
pass this bill again. I think the strongest force we should 
have in this debate is shame. People ought to be ashamed to be 
against this bill. The President went to Africa, took a lot of 
pictures, made a lot of promises. He came back, and quite 
frankly, he ought to be ashamed that he and his administration 
have not done more to promote this bill. Where is he standing 
up, speaking out for this bill?
    Second, for those who are trying to prevent this bill from 
working so that imports of textiles from Africa don't grow from 
.67 percent to 1 percent, it seems to me that that is totally 
unjustified. This is one of those issues where 750 million 
human beings are involved, where we ought to just say no to 
special interests.
    So I don't see any potential for a compromise on this 
provision. I hope you can pass the bill. I believe in 
conference if you do, that we can have conferees from the 
Senate Finance Committee that will drop the Senate provision. 
But if you don't drop the provision, you kill the bill. That is 
really my message, Mr. Chairman.
    Chairman Crane. Thank you.
    Mr. Jackson.

 STATEMENT OF HON. JESSE L. JACKSON, JR., A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Jackson. Mr. Chairman, Mr. Crane, Ranking Subcommittee 
Member Mr. Levin, and Full Committee Ranking Member Mr. Rangel, 
Members of the Subcommittee, thank you for this opportunity to 
discuss a new U.S. trade and economic development policy.
    Before I begin with my remarks, let me first begin by 
offering, which is quite uncustomary for me, an apology to Mr. 
Rangel and to other Members of the Subcommittee who have been 
working diligently to establish a new policy with Sub-Saharan 
Africa. It is not my intention to engage, as I have been 
accused, in a misinformation campaign. I am not necessarily 
against the African Growth and Opportunity Act, but I am 
certainly for the HOPE for Africa Act, which I respectfully 
submit for your review and for the record in my entire 
statement, along with some related charts and graphs.
    The acronym HOPE stands for human rights, opportunity, 
partnership, and empowerment, the moral, legal and 
developmental and humane principles underlying my bill. Last 
year when the African Growth and Opportunity Act of 1998 came 
before the Congress, the only option Members had was to vote 
for or against it. The two options were either to support that 
bill or support no bill at all. In reality, many of us were 
left with no option. We decided to create a third way.
    A broad-based group of African and U.S. citizens groups, 
church, labor, development, anti-hunger, and NGO's, have worked 
hard over the past several months to put together an 
alternative bill so that Members who do not support the African 
Growth and Opportunity Act have the option to choose and be for 
another bill.
    My legislation has a single aim, providing the policy and 
programs that would promote and support sovereign, equitable, 
and sustainable African development so that the needs of 
African people and the American people can be met. This 
proposal contains the policy initiatives that prove to be a 
subject of absolute consensus among the African economists, 
development and trade experts, and others with whom we work. 
No. 1, debt cancellation. No. 2, African sovereignty to choose 
economic policies. No. 3, sustainable economic opportunities. 
No. 4, the restoration of equal treatment for Africa concerning 
U.S. foreign aid.
    Let me first begin with debt relief, quickly. First and 
foremost, the HOPE for Africa Act seeks to eliminate the 
greatest obstacle to the realization of Africa's enormous 
economic potential and serves as the greatest barrier to 
American opportunity in Sub-Saharan Africa, the region's $230 
billion external debt. Sub-Saharan Africa, especially her 
poorest people, are inordinately burdened with this $230 
billion debt, whose service requirements now take up 20 percent 
of the export earnings of the Sub-Saharan African region, minus 
South Africa.
    Bilateral and multilateral debt burdens of Sub-Saharan 
Africa constitute a serious impediment to private sector 
development, stable democratic political structures, broad-
based economic growth, poverty eradication, the expansion of 
small and women-owned businesses, food security, agricultural 
development, aid at feeding the continent's people, 
environmental sustainability, and regional integration. Any 
policy for Africa and development that is intended to benefit 
Africa must be premised on unconditional debt cancellation.
    The history of U.S. cancellation of debt includes reversal 
of the U.S. demand that Germany pay 10 percent of its post-
World War II export earnings to recover debts owed prior to the 
war. Germany successfully negotiated for a rate which resulted 
in annual payments of less than 3.5 percent of export earnings. 
Currently, Mozambique, one of the world's poorest countries, 
pays over 20 percent of export earnings in debt service. To 
require African nations to compete in a global economy burdened 
with this debt is like throwing a person into the deep end of 
the pool with a ton of weights chained to their ankles.
    Second, self-determination. The HOPE for Africa Act is 
premised on the goals developed by African finance ministers, 
in cooperation with the Organization for African Unity. Thus, 
the HOPE for Africa Act states a new U.S. policy toward Africa 
based on the recognition that economic development must be 
measured by the well-being of the majority of the people and 
oriented toward following those goals.
    Strengthening diversity of Africa's economic production 
capacity, improving the level of people's income and pattern of 
distribution, adjusting the pattern of public expenditure to 
satisfy people's essential needs, providing, Mr. Crane, 
essential and institutional support for transition through debt 
relief.
    Let me just conclude, Mr. Chairman, that my bill also adds 
and restores the 1994 levels of this Congress of $802 million 
in vital foreign aid to Sub-Saharan Africa. In conclusion, 
President Clinton's State of the Union address, he said we must 
create a freer and fairer trading system for the 21st century. 
Trade has divided Americans too long. We must find a common 
ground on which business, workers, environmentalists, farmers, 
and government can stand together. We must tear down barriers, 
the President said, open markets and expand trade.
    At the same time, we must ensure that ordinary citizens in 
all countries benefit from trade, trade that promotes the 
dignity of work, the rights of workers, the protection of the 
environment. I agree and think that the HOPE for Africa Act of 
1999 comes closest to achieving these goals. The policy 
regarding Africa that Congress sets now will deeply affect the 
economic future of the continent and thus, the future of the 
African people for the next hundred or so years. With such high 
stakes, it is vital that we get the initial policy right. It is 
with this in mind that I will submit my legislation, which has 
broad-based support from African and U.S. development, trade 
and economic experts, and also the organizations in Africa and 
the United States, representing the interests of the majority 
of people who we believe will be affected.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]
    [Attachments are being retained in the Committee files.]

Statement of Hon. Jesse L. Jackson, Jr., a Representative in Congress 
from the State of Illinois

    Chairman, Mr. Crane; Ranking Subcommittee Member, Mr. 
Levin; Full Committee Ranking Member, Mr. Rangel; members of 
the subcommittee; thank you for this opportunity to discuss a 
new U.S./Africa trade and economic development policy.
    I respectfully submit for your review and for the record my 
entire statement, along with some related charts and graphs, 
and a summary of a bill that I will introduce shortly called 
``The HOPE for Africa Act of 1999.'' The HOPE acronym stands 
for Human Rights, Opportunity, Partnership and Empowerment and 
outlines the principles upon which the bill will be based.
    I am here today to state my support for legislation that 
would promote and support sovereign, equitable, sustainable 
African development, a goal which is in the mutual interest of 
the people of the United States and Africa. Such legislation 
would provide policies aimed at meeting the needs of the broad 
majority of African and American people.
    Because I seek legislation on Africa that meets these goals 
I strongly oppose the legislation being considered by the 
committee today which has been mis-named the ``African Growth 
and Opportunity Act.'' I agree with the sentiment expressed to 
this Congress last year by an ad hoc coalition of prominent 
African American leaders: it is better for Africa to have no 
bill at all than to have this bill pass. But happily, these are 
no longer our only two options.
    Today I am pleased to announce that I am introducing 
legislation on Africa that meets the central pro-Africa goals 
of equitable, sustainable development and respect for African 
self-determination.
    My legislation, the Human Rights, Opportunity, Partnership 
and Empowerment for Africa Act--the ``HOPE for Africa Act''--
has been developed over the past six months in consultation 
with African and U.S. citizens groups--church, labor, 
development, anti-hunger and more--as well as U.S. and African 
economists and trade specialists. This legislation focusses on 
policies that will be mutually beneficial for most people in 
Africa and in the United States.
    Many of the original participants in the Clinton 
Administration's 1995 ``dialogue'' on Africa, such as Coalition 
for Black Trade Unionists President Bill Lucy and Professor Ron 
Walters support this legislation--because it furthers the goals 
discussed in that dialogue--and oppose the African Growth and 
Opportunity Act which undermines those goals. Last year, 
opponents of the African Growth and Opportunity Act tried to 
work with the Administration and the Act's authors to modify 
that legislation to encompass the concerns and goals set forth 
in this testimony. Such attempts were rebuffed. Even floor 
amendments by my colleagues Rep. Waters and Rush were opposed 
by the bill's authors.
    Thus, I am now offering the HOPE for Africa Act because it 
would be immoral and wrong for the U.S. Congress to promote 
policies of either paternalism or colonialism toward Africa.
    Over the past 30 years, many African nations have overcome 
decades of imperialism by declaring independence from their 
European colonial status. We must not now reverse that progress 
by imposing an economic neo-colonialism of U.S. corporations 
and speculators. Yet the African Growth and Opportunity Act 
would mandate numerous policies that would foster just this 
result.
    We must respect the sovereignty of African nations, not 
treat them with paternalism. Yet the African Growth and 
Opportunity Act is the embodiment of paternalism: it imposes 
conditionalities designed to shape African economies to the 
benefit of U.S. business interests.
    Contempt for African economic self-determination defines 
this legislation--a posture most clearly exemplified by the 
Act's declaration that not one shred of its so-called benefits 
shall be conferred upon any African nation until that nation 
submits to U.S. imposed terms for how it shall run its 
economic, legal and social systems. We treat no other region of 
the world in this fashion.
    The HOPE for Africa Act, conversely, is focussed entirely 
on those policies that will promote the sovereign economic 
development of the African nations. On whom have we relied to 
determine what policies would accomplish this end? We have 
drawn directly from the policies developed by the Finance 
Ministers of the Sub-Saharan African countries in cooperation 
with the Organization for African Unity.
    Thus, first and foremost, the HOPE for Africa Act seeks to 
eliminate the greatest obstacle to the realization of Africa's 
enormous economic potential: the region's $230 billion in 
external debt. Sub-Saharan Africa, especially her poorest 
people, are inordinately burdened by this $230 billion debt 
whose service requirements now take over 20% of the export 
earnings of the SSA region (minus South Africa). Bilateral and 
multilateral debt burdens of Sub-Sahara Africa constitute a 
serious impediment to private-sector development, stable 
democratic political structures, broad-based economic growth, 
poverty eradication, the expansion of small and women-owned 
businesses, food security, agricultural development aimed at 
feeding the continent's people, environmental sustainability, 
and regional integration. Any policy for development in Africa 
that is intended to benefit Africa must be premised on 
unconditional debt cancellation. The history of U.S. 
cancellation of debt includes reversal of the U.S. demand that 
Germany pay 10% of its post-World War II export earnings to 
recover debts owed prior to the war. Germany successfully 
negotiated for a rate which resulted in annual payments of less 
than 3.5% of export earnings. Currently Mozambique, one of the 
world's poorest countries, pays over 20% of export earnings in 
debt service. To require African nations to compete in the 
global economy burdened with this debt is like throwing a 
person into the deep end of a pool with a ton of lead weights 
chained to their ankles.
    I was pleased by last week's announcement that the Clinton 
Administration's budget will include funds to forgive--by 
paying off--some of this debt. However, as we all know, the 
Administration's budget serves as a political document 
announcing the Administration's interests and goals. It is the 
lengthy congressional budget process that will actually create 
the nation's budget.
    We have sufficient experience with these matters to know 
what will likely happen to the Administration's fine demands 
for African debt relief in the hands of a Republican majority 
Congress. In light of this reality, it is entirely unacceptable 
to separate debt relief from the trade and economic provisions 
of an African policy. The likely outcome of this two-track 
approach is painfully clear: the economic and trade provisions 
benefiting U.S. business interests will pass and the debt 
relief that is the pre-condition for a successful African 
economic future will not.
    Indeed, the Clinton Administration has prioritized the 
passage of the trade and economic provisions, as written, above 
all else. When the point has been raised that debt relief 
measures are an essential component of any pro-Africa policy, 
the Administration has answered that adding debt or aid 
language would undermine the political viability of the bill. 
Yet, if the strength of Republican opposition to debt relief is 
as strong as the Administration suggests, then it is obvious 
that separate debt relief provisions have no hope of passage. 
Indeed, the only viable approach is to include debt relief in 
African legislation, making debt relief the ``price'' for the 
trade and economic provisions sought by the Republican 
majority.

          1. The Need for a New Approach to U.S.-Africa Policy

    The countries of Sub-Sahara Africa form a region of 
tremendous human creativity, vast natural and cultural wealth, 
enormous economic potential and enduring political 
significance, yet over the past decades, the standard of living 
for most Africans has been declining.
    Indeed, Africa is the only continent where economic 
production per person has declined throughout the last two 
decades. The per capita income for Sub-Sahara Africa averages 
less than $500 annually and per capita income fell from $752 in 
1980 when the neoliberal development model was initially 
imposed on numerous African countries to $613 in 1988 (in 
constant 1980 U.S. dollars). In 1996, 20 Sub-Saharan African 
countries were still below their per capita incomes of 20 years 
ago. Indeed, the World Bank reports that in Sub-Sahara Africa 
wages have not grown since 1970 and in the last decade alone 
family incomes have fallen by a third and the number of African 
families unable to meet their basic needs doubled.
    Africa has the largest number of the poorest countries in 
the world. Thirty-Three of the 41 Highly Indebted Poor 
Countries (HIPC) are located in Sub-Sahara Africa. Indeed, 
fifty percent of Africans live below the poverty line, 40% 
living on less than $1 per day. And 40% of Africans suffer from 
malnutrition and hunger, while one in five children in Africa 
die before the age of five. Many Sub-Sahara African countries 
are suffering from epidemics of AIDS, tuberculosis, malaria and 
other diseases, many of which are treatable or preventable with 
existing pharmaceutical and medical treatments;
    Africa's wealth in natural resources, oil, and minerals is 
immense. However, current development and economic models based 
on their export have denied the majority of African people any 
benefits from this vast wealth. Current large scale development 
projects have not been designed in a fashion that produces 
benefits to most Africans. For instance, oil and mining 
projects such as Sierra Rutile and Terebebe have not benefitted 
most Africans economically and have caused severe environmental 
damage and led to conflicts with local communities.
    There is ample evidence that one significant cause of this 
deterioration is the one-size-fits-all imposition of so-called 
Structural Adjustment policies mandated by institutions such as 
the International Monetary Fund (IMF.) In the past Congress, 
even many Members who supported increasing the U.S. 
contribution to the IMF agreed that IMF policies, such as 
requirements to cut domestic education, health and other core 
social services, have devastating effects on the populations of 
affected countries. The same critique was applied to IMF 
policies that foster speculation, promote wild currency 
fluctuations and extend rights to foreign investors to acquire 
control of nations' mineral, oil and other natural wealth at 
fire-sale prices. Also criticized were IMF policies which 
mandate cuts in corporate taxes and require privatization 
through divestiture of public assets services--such as 
telephone, banking, ports, mines, oil fields and more.
    During the period of income decline in Africa, the IMF, the 
World Bank and other international lending institutions and aid 
agencies have forced African nations to adhere to ``structural 
adjustment programs.'' These programs orient economies toward 
export production, placing downward pressure on wages, 
encouraging unsustainable resource exploitation and undermining 
food security. They lead to major reductions in government 
spending, including in the crucial areas of education, 
healthcare and environmental protection; and they particularly 
harm women, who are most severely hurt by the elimination of 
the social safety net and the policy's neglect of small and 
domestically oriented farmers. Many such farm policies, such as 
substitution of export crops for staple food production, use of 
chemical fertilizers, hybrid seeds and other products, have 
resulted in damage to local farmers and agriculture and loss of 
food security.
    These so-called structural adjustment programs impose a 
deregulatory and trade liberalization agenda that removes 
crucial government protections for society and leaves local 
business vulnerable to foreign multinationals; and they 
encourage wage cuts, including in the minimum wage, weakening 
of labor laws and labor rights, and government and private 
sector employment cuts. Structural adjustment programs force 
recessionary policies that most seriously victimize the poor; 
and they tend to exacerbate income and wealth inequalities and 
undermine basic well being as measured by access to food, 
shelter, medical services, and a sustainable livelihood, even 
when traditional economic indicators show economic growth.
    Moreover, even pro-corporate entities like the Organization 
for Economic Cooperation and Development have criticized recent 
trade regimes, such as the World Trade Organization and its 
Uruguay Round GATT rules, as contrary to the interests of 
African countries. Both the IMF and WTO require changes in 
agriculture policy that undermine food security. The policies 
mandate the replacement of domestic food crops with non-staple 
crops for export--so that nations can earn the hard currency 
necessary to service external debt.
    During the last Congress, as legislators and policy 
analysts looked beyond the name ``African Growth and 
Opportunity Act'' to study the legislation's binding 
provisions, we realized that the bill will intensify precisely 
the programs and policies of the IMF and WTO described above--
programs which have already had destructive effects in Sub-
Sahara Africa. It is these core provisions of the Africa Growth 
and Opportunity Act that led me to call the bill the African 
Recolonization Act and others to dub it ``Lethal Medicine for 
Africa.'' Indeed, the trade press now calls the bill ``NAFTA 
for Africa,'' because it so closely follows the NAFTA model 
which has done great damage to Mexico.
    Indeed, it was friends in Africa who first warned us of the 
bill's dangers. They noted that the Africa Growth and 
Opportunity Act, though wrapped in rhetoric about helping 
Africa, is explicitly designed to secure U.S. corporate 
interests at the expense of the interests and needs of the 
majority of African people and at the expense of African 
nations' sovereignty.
    These concerns were substantiated when we discovered the 
membership of the coalition promoting the bill. The so-called 
``African Growth and Opportunity Act, Inc.'' is comprised of 
U.S.-based oil and other multinational corporations, many of 
whom already suffer infamous reputations in Africa for their 
heinous human rights and environmental practices (and in some 
cases in the U.S. for their civil rights violations and union 
bashing). Africa Inc.'s advisory board includes the likes of 
Chester Crocker. The Members of the Committee will remember Mr. 
Crocker as the architect of the Reagan Administration's 
shameful ``constructive engagement'' policy with South Africa--
a policy that helped prop up the vicious Apartheid regime while 
South Africa's rightful leaders languished in jail.
    On the issue of who supports and opposes this legislation, 
much has been made of the official support of the Washington 
African Ambassadorial corp. Indeed, after South African 
President Nelson Mandela opposed the bill in a press conference 
standing next to President Clinton, South African Ambassador 
San sent a letter to Congress saying he supported the bill. 
Yet, in private, these Washington Ambassadors have repeatedly 
told my colleagues that their support for the bill was based on 
the understanding that failure to support the bill would be 
considered a slight to the U.S. government and that the only 
option was this bill or no attention to African at all.
    With the introduction of my legislation, the choice will no 
longer be one between the devil and the deep blue sea. Indeed, 
Geneva-based African ambassadors who deal daily with the WTO--
and with the other institutions whose good offices the bill 
imposes on Africa--have been among the critics of the Africa 
Growth and Opportunity Act. These officials had input into the 
development of my legislation through NGOs in their countries. 
For instance, the Africa Trade Network, representing 50 groups 
from across Africa--from South Africa's massive COSATU labor 
federation to small church, women's and anti-hunger groups 
throughout the continent--strongly opposes the African Growth 
and Opportunity Act and has participated in the design of my 
legislation.

     2. Grounds for Opposing the African Growth and Opportunity Act

    I am attaching to my testimony a detailed analysis of the 
Africa Growth and Opportunity Act prepared by TransAfrica. In 
sum the bill's core provisions include:
    A. Imposition of Harsh U.S. Conditions; Access for U.S. 
Corporations: The U.S. president must annually certify that 
African countries are meeting a U.S.-imposed set of conditions 
``favorable'' to foreign investment and trade. The conditions, 
which must be met for an African country to qualify for 
programs or benefits under the bill, include the entire neo-
liberal IMF-style economic program which has already devastated 
those African, Asian and Latin American countries on which it 
has been imposed. Among other provisions, this includes:
     Cutting domestic spending (health, education, 
welfare)
     Cutting corporate taxes
     Ending agriculture subsidies (vital for food 
security)
     Compliance with harsh IMF terms which mandate debt 
payment as the primary national goal
     Opening all sectors for foreign investment (thus 
giving up control of vital resources, including, for example, 
mineral wealth)
     Joining the World Trade Organization (WTO)
     Privatization of public assets, such as phone, 
electric services, timber lands, mines and more
    B. No Real Benefits for Africa: The main so-called benefit 
of the African Growth and Opportunity Act is additional access 
into the U.S. market for textiles and apparel. This is a cruel 
hoax, because under global trade rules, all textile and apparel 
quotas end in 2004 with the phase out of the MultiFiber 
Arrangement, at which point there will be, for all practical 
purposes, only one country involved in that sector--China. Even 
in the interim, the bill's textile provisions would allow 
Chinese-made textiles and apparel to be trans-shipped through 
Africa, and considered ``African,'' even if no work is done by, 
and no benefit accrues to, anyone in Africa.
    The other benefit provided in the bill is allowing all 
African countries to get the ``least developed country'' (LDC) 
benefits of an existing trade program for developing countries 
called GSP (Generalized System of Preferences.) However, most 
of the Sub-Saharan countries already have been designated as 
qualifying for the LDC treatment.
    Also listed in the bill as ``benefits'' for Africa are a 
series of items the Clinton Administration can do (and is 
doing) without legislation, including: a Africa-U.S. summit 
(set for March 1999), appointment of a special trade 
representative for Africa (done in 1998), designation of 
existing Import-Export Bank and Overseas Private Investment 
corporation resources for Africa (can be done by executive 
order), broader targeting of US Agency for International 
Development resources.
    C. Policies Demanded by Africans Left Out of the Bill: 
Missing from the bill is any mention of the four items that all 
African nations and Africa policy advocates agree are the basis 
for sovereign and sustainable development: debt relief, 
sovereignty to choose economic and social policy, fair trade 
and investment rules, and aid to overcome the damage done by 
rich countries' through their past exploitation of the 
continent.

         3. The Hope for Africa Act: A Forward-Looking Approach

    My legislation, developed through input from and dialogue 
with African and U.S. civic society groups, has a single aim: 
providing the policy and programs that would promote and 
support sovereign, equitable, sustainable African development 
so that the needs of the African people and the American people 
can be met.
    Our proposal contains the policy initiatives that proved to 
be a subject of absolute consensus among the African 
economists, development and trade experts and others with whom 
we worked:
     Debt Cancellation
     African Sovereignty to Chose Economic Policies
     Sustainable Economic Opportunities
     Restoration of Equal Treatment for Africa 
Concerning Foreign Aid
    I have attached a thorough summary of the provisions of my 
bill. But in brief, my bill includes:
    A. Debt Relief : African business development is not 
possible with 20% of all African export earnings now going into 
debt payment and no local credit markets possible. This is debt 
that has been repaid many times over, but with compound 
interest and new loans to pay the interest of old loans, this 
debt will never be ``officially'' satisfied. This debt must be 
wiped clean, a demand of the worldwide religious Jubilee 2000 
campaign.
    Thus, the HOPE for Africa Act calls for full cancellation 
of African foreign debt, starting with the relatively small 
debt owed the U.S. government and covering IMF, World Bank and 
private sector loans. Effectively, what needs to be done is to 
pay off the principle of the loans at the often 5 cents on the 
dollar value at which such debt is market valued. Getting rid 
of the principle terminates the chains of everlasting interest 
payments on the high book value (versus the significantly less 
market value) of the loans. The HOPE for Africa Act also 
includes enactment of a cap on future debt payments so that no 
African country shall pay an amount exceeding 5 percent of its 
annual export earnings toward the servicing of foreign loans, 
which is the agreement built into the Marshall Plan for debt-
burdened Europe after World War II.
    B. African Economic Self Determination: The HOPE for Africa 
Act is premised on the goals developed by African Finance 
Ministers in cooperation with the Organization for African 
Unity. Thus, the HOPE for Africa Act states a new U.S. policy 
toward Africa, based on the recognition that economic 
development must be measured by the well-being of the majority 
of people, and oriented toward the following goals:
     Strengthening and diversifying Africa's economic 
production capacity;
     Improving the level of people's incomes and the 
pattern of distribution;
     Adjusting the pattern of public expenditures to 
satisfy people's essential needs;
     Providing institutional support for transition 
through debt relief;
     Supporting sustainable development; and
     Promoting democracy, human rights and the strength 
of civil society.
    A key principle underlying these goals, and as specifically 
set forth by African finance Ministers in, for instance, the 
Lagos Plan, is freedom for each African country to self-
determine what economic policies suit the needs to their people 
and development. Top goals of the Lagos Plan are: food self-
sufficiency and security, potable water, shelter, primary 
health care, education and affordable transport.
    C. Trade and Investment Rules to Benefit People: The HOPE 
for Africa Act grants new access to the U.S. market for a broad 
range of goods produced in Africa, by Africans, and includes 
safeguards to ensure that the corporations manufacturing these 
goods respect the rights of their employees and the local 
environment.
    The Act grants African countries quota-free, duty-free 
market access for all goods listed under the Lome Treaty in 
which the U.S. is not a competing producer--these goods include 
a variety of minerals, tropical oils, and processed foods among 
other products.
    The Act transfers to African countries as much of China's 
textile and apparel quota as these countries can fill, with 
strong protections to ensure that imports from Africa are not 
merely transshipped from other points of origin. The Act 
extends existing benefits enjoyed by African nations under the 
Generalized System of Preferences (GSP), through 2002, 
eliminating the need to renew these benefits in each of the 
intervening years and avoiding the consequent delays.
    The Act is designed to ensure that African businesses and 
workers benefit from the new grants of duty-free access to the 
U.S. market. In order to achieve these ends, the Act requires 
that: All corporations benefiting from new duty-free market 
access have majority African ownership, employ at least 80% 
African workers and generate at least 60% of their products' 
value added in Africa; All such corporations respect 
internationally recognized labor rights, including the right to 
organize, and refrain from any use of child, forced, indentured 
or slave labor; And all such corporations that involve a joint-
venture arrangement with a firm based in the U.S., the E.U. or 
Japan comply with the environmental standards that would apply 
to a similar operation in that firm's home country. As well, 
all countries seeking new duty-free access comply with the core 
labor standards enumerated in the International Labor 
Organization treaties that many African nations have adopted. 
Finally, the bill would extend GSP status for Sub-Saharan 
African countries through 2002, as does the African Growth and 
Opportunity Act.
    D. Foreign Aid and Assistance Programs: The HOPE for Africa 
Act would restore Africa's budget line item, for foreign aid, 
with a set guaranteed amount of aid not to decline below 1994 
levels. This would restore parity for Africa with U.S. foreign 
aid treatment to other vital regions.
    The HOPE for Africa Act bill would increase, over the 
paltry sum offered in the African Growth and Opportunity Act, 
funding for the US Agency for International Development. 
However, the HOPE for Africa Act would re-allocate these funds 
in support of the Lagos Plan guidelines for social investment 
(rather than aimed at implementing the IMF's policies as is 
their use in the African Growth and Opportunity Act.) This 
includes set percentages for Microcredit projects; projects to 
provide basic health, education, transportation services to 
local populations; and agriculture projects promoting food 
security, development of sustainable, low input farming methods 
for staple crops.
    E. Business Facilitation: The Act provides for the targeted 
use of $650 million in existing Overseas Private Investment 
Corporation (OPIC) funding for the following purposes: $500 
million to create infrastructure funds that will support 
projects on basic health services, potable water, sanitation, 
schools, rural electrification and accessible transportation 
and $150 million for sustainable development projects.
    Decisional boards will be created to oversee these new OPIC 
funds and also designated Ex-Im Bank financing targeted to Sub-
Sahara Africa. Such decisional boards shall have majority 
private sector membership emphasizing individuals with 
expertise in human rights, labor rights, the environment and 
development. Board meetings will be public. Seventy percent of 
trade financing provided by the Ex-Im bank, and 70% of 
investment insurance provided by OPIC, will be allocated to 
small, women and minority-owned businesses with at least 60% 
African ownership. Fifty percent of funds for energy projects 
will be used for renewable and/or alternative energy 
development; environmental impact assessments will be conducted 
and made public wherever relevant.
    F. Review Process: The Act requires the President, three 
years after enactment, to give notice for public comment on the 
implementation results, successes and failure of the 
legislation--such comments to be made publicly available and 
submitted in whole to the U.S. Congress.

                               Conclusion

    The policies regarding Africa that the Congress sets now 
will deeply effect the economic future of the continent and, 
thus, the future of the African people. With such high stakes, 
it is vital that we get the initial policy right. It is with 
this in mind that I will submit my legislation, which has the 
broad-based support of African and U.S. development, trade and 
economic experts and also organizations in Africa and the U.S., 
representing the interests of the majority of the people who 
will be effected.
      

                                

    Chairman Crane. Thank you.
    Mr. Levin.
    Mr. Levin. Thank you. Well, welcome to both of you, Senator 
Gramm, the distinguished colleague of a friend of mine. Mr. 
Jackson, I am glad that you are here. Your testimony helps to 
kick off what I hope will be a wide scale discussion within the 
Congress and with the administration as to overall trade 
policy.
    Let me just say a couple of things quickly because we do 
need to move on, but your testimony is important. First of all, 
I support this bill. I do think it is very much a step in the 
right direction. It isn't all the answer to relationships with 
Africa or with its development.
    Senator Gramm, I do think we have to work hard to work out 
the provisions regarding textile and apparel. I must say to 
simply label those who are concerned about the impact on the 
textile and apparel industry as special interests, I'm not sure 
that moves us very far because every interest in that sense is 
a special interest. My own judgment is that the impact would be 
minimal. There are provisions in the bill that in essence 
address issues like labor market issues, and perhaps also 
capital market issues.
    I am optimistic that we can work out with your help the 
differences between the Senate and the House, and pass this 
legislation.
    To my friend, Congressman Jackson, I think you are right 
that debt relief is an important part of the picture, but we 
need to consider whether in addressing all the problems, in 
addressing problems, we have to tackle them all in one package. 
We don't have jurisdiction, this Subcommittee or in the Full 
Committee, over your proposal for full debt relief. It is a 
complicated issue, as you know. Examples can be set if we 
provide debt relief fully in one area as to what we might do in 
other areas.
    I think the thrust of this bill is that trade is a vital 
piece of the picture as well as economic assistance. I was once 
in AID as an assistant administrator. Senator Gramm, I don't 
think all the money went to capitalistic cronies and the like. 
There were some important features of our assistance program 
with the development assistance with Africa that were steps in 
the right direction. I agree with you, there were problems in 
other areas, substantial problems. These economies need to 
reform toward a full-market economy for them to use effectively 
development assistance.
    So I think you present kind of two ends of the spectrum 
here. I hope that what we can do is find the common ground on 
this bill and then move onto other broader trade bills and see 
if we can meet a consensus to move ahead legislation.
    Senator Gramm. Could I just respond very briefly? The 
provision that was in the Senate bill in the Finance Committee 
never got to the floor. We might have knocked it out on the 
floor. But if you've got to ship American cloth to Africa, and 
you have to sew it with American thread, the reality is we are 
claiming that we are doing something, but we're not doing it.
    There is nothing wrong with special interests. So far as I 
know, I am the only spokesman for public interest in 
Washington. I am always suspicious of anybody else who claims 
it. But I do believe, that what happened here is that the 
textile lobby saw this as a tiny little thing, but sort of a 
principle they were going to establish. They weren't going to 
give one inch.
    My point is, when you look at the big good to be gotten by 
expanding trade, and you look at the minuscule impact of this, 
this is one of those deals where we just have got to swallow 
hard and expand trade. Even the ITC, using single entry 
bookkeeping, which says how many jobs do you lose in areas 
where you are importing, not even looking at the jobs we might 
create exporting to Africa, says we are talking about 676 jobs. 
We have created 20 million jobs in the last 6 years. So I am 
just saying that we are talking about very small negative 
impacts using single entry bookkeeping, not even talking about 
expanding trade. While everybody wants to find a way they can 
satisfy every interest, I don't think you can satisfy every 
interest and have trade with Sub-Saharan Africa.
    Mr. Levin. Let me just say briefly, I agree that the impact 
would be very, very small. We should move ahead. I think if we 
work toward a broader common ground on the larger issue and how 
we approach these problems, there would not be the kind of 
strength of feeling about the provisions in this bill that 
you're right, would have a very small impact on the textile and 
apparel industry.
    So I hope we can work on the larger picture as we move to 
get this bill out of Subcommittee and then to Full Committee, 
and work out differences with the Senate.
    Mr. Jackson. Mr. Levin, if I might also have the 
opportunity to respond?
    Chairman Crane. Very briefly, because his time has long 
since expired.
    Mr. Jackson. Thank you, Mr. Crane, I certainly will. I 
would only take exception with the assertion that debt relief 
is something that we should not consider in this trade 
approach. If 20 percent of the poorest nations in Sub-Saharan 
Africa's export earning potential is going to service external 
debt, that is a major trade issue because it means by and large 
that many of those governments are going to have to choose 
between the education of their own people, the healthcare and 
basic services that governments provide, and paying off 
external debt.
    Very, very quickly, I was doing some searching on the 
Internet just yesterday and I happened to draw up a very large 
map, which I bring before your Committee and I certainly submit 
as part of my testimony. You can see the Internet since the 
passage of the Telecom Act, with the United States being 
central to the world information superhighway. Actually in the 
millions of bits of hosts, point to the United States, please, 
which is in the middle, you can see communication between 
Europe. You can see communications between South America, 
between Australia, and between the Far Eastern coast. Why is 
there absolutely very few, if any, Internet connections between 
Africa and the rest of the world? In part because most of these 
African American nations can't seven do what we do, one 
computer per classroom, invest in libraries, invest in 
infrastructure, because their debt burden is so high, they 
can't make basic decisions that we take for granted in our own 
Nation.
    That is going to have a direct impact on trade and the 
stabilization of their democracies in Sub-Saharan Africa, which 
will have a direct impact on our investment and whether or not 
those investments in Sub-Saharan Africa are going to be stable. 
So I would only implore this Committee to certainly as we 
continue to deliberate, to look very closely at the impact of 
debt relief so that these nations will not have to be servicing 
this debt, and make vital choices that can undermine the 
quality of life for their people.
    Thank you, Mr. Chairman.
    Chairman Crane. Mr. Rangel.
    Mr. Rangel. Thank you, Mr. Chairman. I know we have a time 
problem and we are anxious to hear from the Secretary of 
Commerce.
    I have already lauded the efforts of the Senator. Let me 
laud the efforts of my colleague in the House, Mr. Jackson. I 
would want to make it abundantly clear that when we have 
legislation, even though it might appear on the surface to be 
competitive, that it would seem to me that areas that you are 
concerned, some of those are directly related to our bill, and 
certainly as it relates to the reduction of debt relief, that 
is a major part of our bill.
    I am so pleased to see that your testimony that you gave 
this morning was not the same testimony that someone 
distributed under your name, because while your opposition to 
this legislation is pretty clear, in the written testimony it 
indicates that your position would be that it would be better 
for Africa to have no bill at all than to have this bill to 
pass. In view of the fact that we have worked with the 
representatives of these African countries, and they have 
worked so hard for the last half a dozen years to do what they 
think is in the best interests of their countries, I would 
assume that that would be an audacious statement, that it would 
be better for Africa to have no bill at all, when the African 
diplomatic corps, which includes the government of South 
Africa, would want the bill.
    Mr. Jackson. Let me, if I can, Mr. Chairman, certainly 
express my appreciation of your spirit with respect to the 
approach of this bill. There is a reason 186 Members of 
Congress voted against this bill in the last Congress. Not all 
of them voted for it simply on the basis of textiles and how 
textiles are being treated in the bill, or the issue of 
transshipment. Many of us recognize that there is history with 
respect to Africa, particularly as it relates to our country in 
the last 400 or so years. We would like to see a policy toward 
Africa that not only provides the kind of trade and development 
that the African Growth and Opportunity Act purports to 
accomplish, but also remedies some of the historical injustices 
that have occurred south of the Sub-Saharan African countries, 
including----
    Mr. Rangel. Mr. Jackson, we have a severe time restraint. 
My only question doesn't deal with the attitude of the Congress 
of the United States, but your statement in your written 
statement that it would be better for Africa to have no bill at 
all, I would want to know what would your response be to the 40 
African-American ambassadors that have worked for this bill, 
but you still believe that you would know better than they 
would know as to what would be best for their countries and 
continent?
    Mr. Jackson. Mr. Rangel, let me just recommend that as we 
go through the legislative process, that many of the concerns 
that we have raised in the HOPE for Africa Act can possibly 
still be incorporated into the African Growth and Opportunity 
Act.
    Mr. Rangel. I have no question about that.
    Mr. Jackson. Which will make the bill, from our 
perspective, a much better bill and a much stronger bill.
    Mr. Rangel. I would like to work with you toward that 
effort, but my question, which may remain answered, is that you 
would not want this record to state that in your opinion it is 
better for Africa to have no bill at all?
    Mr. Jackson. In its present form, Mr. Rangel, with the $230 
billion in Sub-Saharan African debt, the present terms of trade 
and the terms of contract that the United States is trying to 
establish with Sub-Saharan Africa, most of these African 
nations are not going to be able to service that debt. At this 
time, Mr. Rangel, that is my position.
    Mr. Rangel. Well, you further state that the sovereignty of 
the African nations would be in jeopardy. Actually, this is an 
American bill if it's signed into law. Then the African nation 
has the option as to whether or not they would want to 
participate. The present feeling is that they would, but they 
have an opportunity to take it to their legislative bodies to 
review it.
    Do you not feel that they have the opportunity to determine 
what is best for their country as it relates to their 
sovereignty?
    Mr. Jackson. Certainly they do, Mr. Chairman. I shall also 
never forget, because I would like to think that I have been 
part of this process for sometime myself, along with others, 
NGO's and other African ambassadors that we have met with in 
Geneva who have been working with the World Trade Organization 
for quite some time. In 1979, when I met with President Samore 
Michel of Mozambique 2 weeks or just a few weeks in the early 
eighties before he was killed in South Africa in a plane crash, 
we had only one discussion during the course of that 
conversation. I shall never forget it. Debt. He said it is the 
debt. It is the debt. At that time, they were still in 
contentious battles and struggles with South Africa on its 
southern border of Mozambique, the eastern border of 
Mozambique, and the northern border of South Africa.
    Mr. Rangel. When did this conversation take place?
    Mr. Jackson. In the early eighties.
    Mr. Rangel. In the eighties?
    Mr. Jackson. Yes, Sir.
    Mr. Rangel. Thank you.
    Mr. Jackson. I might add that Mozambique is still laboring 
under $10 billion in debt. Twenty percent of their export 
earning potential is still going to service that debt.
    Mr. Rangel. Let me thank you for your contribution.
    Chairman Crane. We thank you both for your testimony, 
appreciate it. Sorry for the brevity of our hearing here with 
regard to witnesses, but we are----
    Senator Gramm. Mr. Chairman, I would just add in response 
to Charlie's question that the passage of this bill by 
expanding exports will cut that debt burden almost in half. 
There are a lot of developing countries, like Korea, that bear 
a much greater debt burden on export earnings than 20 percent. 
The problem is not the debt, but the lack of income to pay it, 
it seems to me.
    Chairman Crane. All right. Our next witness is another 
fellow Illinoisan, Hon. William Daley, Secretary of the 
Department of Commerce. We know, Bill, that you are under tight 
time constraints too. Second, however, that little memento that 
I had staff show you, I want back. I showed that to your 
brother on a flight back to Illinois last week. He and I were 
on the same flight together. That's what reminded me of it. 
With that, proceed.

        STATEMENT OF HON. WILLIAM M. DALEY, SECRETARY, 
                  U.S. DEPARTMENT OF COMMERCE

    Secretary Daley. Thank you very much, Mr. Chairman. Thank 
you for showing me that memento. I really do appreciate it.
    Representative Levin, and Members of the Trade 
Subcommittee, I am honored to appear before you to discuss H.R. 
434, the African Growth and Opportunity Act, and more generally 
the steps we are taking to expand our economic partnership with 
Africa. I have submitted a detailed statement for the record, 
so I will be brief.
    I thank you, Mr. Chairman, and the Members of the 
Subcommittee who have been so active in working on a bipartisan 
basis to find ways to strengthen our relationship with the 
people of Africa. Your leadership was crucial in gaining 
passage of the Act by the full House last year. It will be 
essential in gaining enactment into law this year. The African 
Growth and Opportunity Act is a vital part of our effort to 
transform a relationship with Africa from one rooted in the 
cold war rivalries, to one based in prosperity through 
increased trade and increased investment.
    The legislation will implement the trade provisions of the 
Clinton administration's overall initiative, the Partnership 
for Economic Growth and Opportunity in Africa. The partnership 
aims to integrate Africa more fully into the world economy, and 
to build a stronger commercial partnership between Africa and 
the United States.
    In my 2 years as Secretary of Commerce, I have visited 
Africa four times, including with President Clinton last March, 
and Members of this Subcommittee. I look forward to a fifth 
visit to Africa in 2 weeks for a meeting of the Binational 
Commission with South Africa, co-chaired by Vice President Gore 
and Deputy President Mbeki. My most recent trip to the region 
was last December, when I lead a 15-company Presidential 
business development mission to South Africa, Kenya, Cote 
d'Ivoire, and Nigeria. Representative Jefferson and 
Representative Eddie Bernice Johnson contributed tremendously 
to the success of this mission.
    As you are aware, the majority of African countries have in 
recent years undertaken far-reaching reforms to build their 
economies and make them better commercial partners. Although 
Africa has not been immune to the effects of the Asian 
financial crisis, it appears that the continent will weather 
the storm better than many other regions. The IMF estimates 
that Africa's GDP growth will rebound to 4.7 this year, from 
3.3 in 1998. To be sure, falling Asian currencies have hurt our 
efforts to grow U.S. trade with Africa. We estimate the U.S. 
exports to Sub-Saharan Africa grew about 5 percent in 1998. 
That does exceed our export growth to Latin American and the 
Newly Independent States, and contrasts with the decline in our 
shipments to Asia. At the same time, we do see that we are 
being displaced in some areas by low-priced products from Asia.
    Still, our overall prospects to expand trade with Africa do 
remain bright. As African countries continue to implement 
reforms, U.S. business is responding to the growing commercial 
opportunities throughout the continent. So many firms applied 
for our business development mission in December, that I have 
asked the deputy secretary of Commerce, Robert Mallett, to lead 
another mission to Africa later this year.
    As the Subcommittee knows well, the bill would authorize 
the President to grant broader access to the U.S. market for 
those African countries that implement additional reforms to 
open their markets, would permit duty-free treatment for 
certain products currently excluded from GSP, while extending 
the GSP program for Africa for 10 years. It would provide 
quota-free treatment for imports of textiles and apparel.
    This important legislation is part of a coordinated effort 
to work with those African countries that are undertaking the 
reforms needed to strengthen their economies, to track new 
investment, improve intellectual property, and increase access 
to their markets for our exporters. The process will lead to 
more stable, peaceful, and prosperous Africa, and the United 
States will share in the benefits.
    With respect to specific concerns about illegal textile 
transshipments, Mr. Chairman, the administration is determined 
to ensure that the benefits of the textile measures accrue to 
African producers and U.S. purchasers.
    My full written statement also addresses other concerns 
some have raised about the legislation. For purposes of our 
dialog this morning, let me simply note that all this bill does 
is reward those African countries that are taking the various 
steps needed to grow their economies, moreover, and encouraging 
expanded commercial ties. This legislation is not meant to 
replace existing aid and economic development programs, which 
are an important part of our overall partnership, and which 
complement what we are trying to do on the trade and investment 
front. At the Department of Commerce, we are developing a broad 
program to focus our resources and adding to our commercial 
infrastructure throughout Africa.
    Finally, I want to highlight the Administration's plan to 
hold next month the first government ministerial level meeting 
with African leaders. Over the course of 3 days, we plan to 
discuss a wide range of important issues covering areas from 
economic reform, to governance, transparency, to conflict 
resolution. Much of this credit goes to the Members of this 
Subcommittee, who saw the need of this sort of high level 
meeting of United States and African government officials.
    Mr. Chairman, as we prepare for the 21st century, we need 
to focus on new opportunities presented in regions of the world 
which have too often been overlooked by U.S. companies. We urge 
the Congress to pass this important legislation, and again, 
thank you for the leadership in this effort.
    [The prepared statement follows:]

Statement of Hon. William M. Daley, Secretary, U.S. Department of 
Commerce

    Mr. Chairman, I appreciate the opportunity to appear before 
the Trade Subcommittee to testify on the Administration's plans 
to develop and expand trade with Africa. This is a subject of 
great importance to U.S. business and workers. The 
Administration strongly supports the African Growth and 
Opportunity Act (H.R. 434), and we are gratified that the Ways 
and Means Committee is focusing on Africa early in the 106th 
Congress.
    The trade and investment provisions of the Clinton 
Administration's Africa Initiative, The Partnership for 
Economic Growth and Opportunity in Africa, have two related 
objectives: to integrate Africa more fully into the global 
economy, and to build a viable commercial partnership between 
Africa and the United States for the mutual benefit of Africans 
and Americans. The African Growth and Opportunity Act is a 
vital tool to help transform our relationship with Africa from 
one rooted in the rivalry of the Cold War to one based on 
shared prosperity through increased trade and investment. We 
will work closely with both the House and the Senate to build 
bipartisan support for this legislation and achieve passage in 
the 106th Congress as expeditiously as possible.
    President Clinton's historic visit to Africa in March 1998 
stimulated a process of continuing partnership between the 
United States and Africa on several fronts, including regional 
security, civil aviation, education, health care, nutrition, 
and the environment, as well as trade and investment. The 
Administration is working now to implement the Partnership in 
all of those areas. We intend to use the upcoming first 
anniversary of the President's March 1998 trip to better 
highlight the many accomplishments in each of these areas, as 
well as to advance our ongoing initiatives and objectives. The 
Administration is planning the first ever ministerial-level 
meeting with African countries next month to discuss our 
cooperative partnership with Africa on issues including 
economic reform, trade and investment, governance, and conflict 
resolution.
    I was fortunate to have the opportunity to accompany the 
President on his visit last year to Ghana, Uganda, and South 
Africa. I have returned to Africa twice since then, most 
recently in December 1998 when I led a 15-company Presidential 
Business Development Mission to South Africa, Kenya, Cote 
d'Ivoire, and Nigeria. In fact, I have visited Africa four 
times in my two years as Secretary of Commerce, and I look 
forward to returning a fifth time later this month for meetings 
of the Binational Commission with South Africa, chaired by Vice 
President Gore and Deputy President Mbeki. I can assure you 
that we view Africa as a vibrant and growing commercial market 
in the 21st Century, and our commitment to Africa is a lasting 
one.
    Africa is important to the United States on several levels. 
It is the ancestral land of some 33 million Americans and the 
home of more than ten percent of the world's population. It is 
a continent whose wealth of human and natural resources remains 
largely underdeveloped.
    The American experience holds a particular relevance for 
Africa, because our peoples share many common goals and 
aspirations: democratic, responsive governments; basic human 
rights and personal security; freer movement of people, goods, 
and ideas; and prosperity based on free markets. These natural 
linkages place Americans in an enviable competitive position in 
Africa, yet that is a position that both our government and our 
businesses traditionally have not pursued aggressively.
    Much of the past reluctance of U.S. business to commit to 
Africa has been due to the region's unfavorable public image. 
For too long we have tended to focus only on the bad news--war, 
famine, disease, civil unrest, refugees, and economic 
stagnation. Certainly Africa faces enormous challenges, which 
cannot and must not be ignored. But the region also presents a 
wealth of opportunities. The majority of African governments 
are striving to implement democracy and energize their private 
sectors. As more and more Africans enjoy the benefits of 
democracy, they are also rededicating themselves to building 
prosperity on the basis of free markets. The Administration is 
determined that the United States should work closely with them 
in that effort, which is in our fundamental national interest.
    Many African countries have undertaken major economic 
reforms to boost their competitiveness, expand trade, and 
attract foreign investment. For example, the 14-member Southern 
African Development Community (SADC) is building greater 
regional integration, and in April will engage in far-reaching 
discussions with the United States on cooperation with both 
economic and political issues. South Africa and the United 
States have concluded a bilateral tax treaty and are working 
toward a Trade and Investment Framework Agreement. Mozambique 
has liberalized its trade and foreign exchange regimes, 
privatized its banking sector, and signed a bilateral 
investment treaty with the United States. Kenya, Uganda, and 
Tanzania have revived their lapsed regional economic 
association, and plan to formalize their union with a treaty in 
the near future. Meanwhile, they have made their currencies 
convertible, and ended import licensing requirements. The 
Common Market of Eastern and Southern Africa (COMESA) has 
harmonized documentation for invoices and vehicle registrations 
in an effort to ease the transit of goods from port to customs. 
In West Africa, Nigeria has made impressive strides toward 
economic reform at the same time as it moves toward restoring 
democracy. Nigeria has deregulated fuel prices, unified its 
exchange rate, and ended pre-shipment inspections for imports 
and exports. Cote d'Ivoire has eliminated most price controls 
and trade restrictions, and liberalized marketing of coffee and 
cocoa. These and other African countries have adopted more 
realistic exchange rates, tightened fiscal management, 
implemented privatization programs, and removed artificial 
barriers to trade and investment.

                 Effects of the Asian Financial Crisis

    As African countries implement far-reaching economic 
reforms, their economies are growing. According to the 
International Monetary Fund, Sub-Saharan Africa achieved 3.3% 
GDP growth in 1998. While that falls short of some earlier 
estimates, it is a vast improvement over the depressed growth 
rates of the early 1990's, and it comes in spite of the harsh 
effects of the Asian financial crisis on Africa's export 
earnings. The Asian crisis has taken its toll on Africa as 
world prices plummeted for the region's leading exports--
including oil, gold, copper, and diamonds. But the IMF 
estimates that African growth will rebound to 4.7% in 1999, as 
the worst of the financial crisis subsides.
    Depreciating Asian currencies have caused a decline in the 
U.S. market share in Africa, as well as those of most leading 
industrialized country suppliers. The U.S. export share in 
Africa fell to 6.1% in 1997 from 7.3% in 1996. France suffered 
a larger drop, and exporters in the United Kingdom, Germany, 
and Japan also experienced declines. Meanwhile, Asian suppliers 
(excluding Japan) enjoyed a doubling of their African market 
share. Despite this, it appears that U.S. exports to Africa in 
1998 will have grown about 5% from 1997, which exceeds the 
growth in our sales to Latin America and the Newly Independent 
States. This contrasts with a decline in U.S. global exports, 
as well as those to Asia and Eastern Europe.
    The good news is that the U.S. business community is 
responding aggressively to Africa's growing commercial 
opportunities. My business development mission to Africa 
attracted applications from more than 100 U.S. firms when it 
was originally scheduled for September 1998. Some firms were 
unable to join us when we had to reschedule the mission for 
December due to the terrorist bombings of our embassies in East 
Africa. However, we selected 15 companies from a broad range of 
sectors of critical importance to Africa--information 
technologies, petroleum, agribusiness, consumer products, 
health care, and basic infrastructure. The companies expressed 
unbridled enthusiasm over the prospects for increasing their 
commercial presence in Africa, and several representatives have 
returned since the mission to develop their contacts and 
explore new commercial opportunities.
    The mission demonstrated the readiness of U.S. business to 
participate fully in building Africa's prosperity, provided 
they encounter a level playing field, transparency and 
commitment to the rule of law, and a genuine interest in 
regional economic integration. In addition, we co-sponsored 
with the African Development Bank the first Joint U.S.-West 
African Legal Conference, a regional forum to highlight and 
examine the path to more effective legal foundations for trade 
and investment. We signed a number of agreements and memoranda 
on commercial cooperation and technical exchange. We engaged in 
frank discussions with senior government officials and private 
sector representatives, and we advocated for U.S. companies 
competing for several upcoming projects. Several companies 
announced plans to launch or expand projects to help develop 
Africa's great human potential by ``doing well by doing good,'' 
in the words of my predecessor, the late Ron Brown. These 
projects include: donations of laboratory equipment by Pfizer 
Corporation to schools in South Africa; an agreement by 
Monsanto Corporation to cooperate in developing a disease-
resistant sweet potato in Kenya; a contract for Princeton 
Medical Enterprises to provide medical equipment and training 
to a private hospital in Cote d'Ivoire; and an agreement 
between Georgia State University and the Government of Cote 
d'Ivoire to establish an international business administration 
and human resource development university in Abidjan.
    The interest on the part of U.S. business in participating 
far exceeded our mission capacity, and the limited time 
available did not allow us to visit all the countries that they 
requested be included. Therefore, I have asked Deputy Secretary 
of Commerce Robert Mallett to lead another mission to Africa 
later this year. Deputy Secretary Mallett is my full partner in 
developing and implementing our Africa program. He has 
conducted business outreach conferences on Africa throughout 
the Nation. He plans to participate in the African/African-
American Summit in Accra, Ghana in May, and will again 
participate in the World Economic Forum Summit on Southern 
Africa in Durban, South Africa in June.

                    Critical Role of the Africa Bill

    Most of what we need to do to strengthen our commercial 
ties with Africa can best be accomplished by the 
resourcefulness and ingenuity of our private sector. But we in 
government, both in the Executive and Legislative Branches, are 
in a position to assist and stimulate their efforts by 
addressing some of the remaining barriers to trade and 
investment in Africa. H.R. 434 is a critical element of what we 
need to do to accomplish that objective.
    As members of the Subcommittee know, having worked so hard 
to develop this legislation on a bipartisan basis, the African 
Growth and Opportunity Act would implement the trade provisions 
of the President's Partnership. It would authorize the 
President to grant broader access to the U.S. market for 
African countries that implement reforms to open their own 
markets and become more competitive. Specifically, it would 
allow the President to grant duty-free treatment for certain 
products presently excluded from the Generalized System of 
Preferences (GSP) program, and eliminate quotas, or maintain 
our no-quota policy, on imports of textiles and apparel from 
Sub-Saharan Africa. It would also extend the GSP program for 
ten years in Africa, ensuring greater certainty for prospective 
traders and investors.
    I am aware of the concerns that certain industries and 
unions have raised about some of the bill's provisions. Most of 
these concerns were highlighted when I testified in support of 
the legislation before the Senate Finance Committee last June. 
However, these provisions need to be considered in the context 
of the legislation and the President's Partnership as a whole. 
They constitute one important part of a coordinated approach to 
work with those African countries that are undertaking the 
reforms needed to strengthen their economies, attract new 
investment, improve intellectual property protection, and 
increase access to their markets for our exporters. As this 
process moves forward, it will lead to a more stable, peaceful, 
and prosperous Africa, and the United States will share in the 
benefits of that growth.
    Legitimate concerns have been expressed about the risks of 
illegal transshipment of textile and apparel products by non-
African manufacturers. The Administration is determined to 
ensure that the benefits of the textile measures in this 
legislation accrue to African producers and U.S. purchasers. I 
know the Subcommittee shares that view, and African governments 
have assured us they do as well. We note that the bill contains 
safeguard measures to deal with transshipments, and we welcome 
the opportunity to work with Congress and African supplier 
countries to ensure that illegal transshipment does not occur. 
We would also welcome the opportunity to work with Congress, 
industry, and labor to resolve other contentious issues.
    Others have raised concerns over the bill's so-called 
``conditionalities.'' These observers object to what they 
regard as the United States dictating a new set of conditions 
African countries must meet in order to benefit from the bill's 
provisions. In truth, however, the bill and the President's 
Partnership merely endorse the measures many African countries 
have already undertaken in an effort to boost their economies, 
become more competitive, and ensure that the fruits of 
political and economic reform are shared by more of their 
citizens. The measures are the generally accepted rules of 
conduct in the modern world economy, and they are standards 
most African countries are anxious to adopt.
    A small minority has expressed misgivings about the bill 
and the Partnership, alleging that they mask an effort by the 
United States to diminish its aid commitment to Africa while we 
use trade and investment as a wedge to dominate the region 
economically. Much to the contrary, the President has pledged 
to work toward increased aid levels to Africa. Aid and 
increased trade and investment are complementary. Healthy, 
literate, and well-fed people make for more stable societies, 
and stimulate a greater readiness to benefit from increased 
commercial exchange. Aid--on both a bilateral and multilateral 
basis--will remain an essential component of our commitment to 
Africa, and will reinforce the benefits gained with a sound 
trade and investment strategy.
    It is particularly important that African countries reduce 
tariffs, eliminate non-tariff barriers, and assume meaningful 
obligations in services trade. Those that do so should enjoy 
further encouragement under the President's Partnership, 
including such benefits as bilateral debt reduction, technical 
assistance in meeting their WTO obligations, and greater U.S. 
market access in the form of GSP duty-free treatment for 
several sensitive products which are currently excluded from 
such treatment, subject to review by the International Trade 
Commission for potential injury to U.S. industry and jobs.

                Implementation of the Africa Partnership

    While passage of the African Growth and Opportunity Act is 
essential, many provisions of the Partnership can be 
implemented without new legislation, and the Administration is 
moving ahead with those initiatives. For example, the Overseas 
Private Investment Corporation has established two new 
investment funds for Africa and is working to establish a third 
fund. The U.S. Trade Representative's office now has its first 
Assistant USTR for Africa and has moved ahead in negotiating 
Trade and Investment Framework Agreements with several 
countries. The Export-Import Bank has appointed a new Africa 
coordinator, created an advisory committee on Africa, and 
expanded public and private sector lending with several 
countries.
    At the Department of Commerce, we serve as the main 
catalyst for engaging the U.S. business community on Africa, 
and we work closely with other agencies to fulfill that 
important role. We are formulating a broad-based program to 
focus the Department's diverse expertise and resources on 
helping Africa build its commercial infrastructure. The 
initiative includes: programs of training and technical 
assistance; efforts to help Africa protect its resources and 
environment; and programs to promote increased trade and 
investment linkages. We, along with USAID, are also considering 
the establishment of commercial law development programs with 
selected African countries, to provide training and 
consultative services to lawmakers, regulators, judges, 
lawyers, and educators in the evaluation, development, and 
implementation of market-oriented commercial law systems.
    In addition, our Trade Information Center has put together 
extensive information on the Internet to help U.S. companies 
take advantage of the opportunities to export and do business 
with Africa. The Trade Information Center also advises U.S. 
exporters on country specific information, including 
information on all the African nations, through a nationwide 
toll-free number: 1-800-USA-TRADE.
    An important element of the Commerce initiative is a 
significant increase in our Commercial Service staffing in 
Africa, as reflected in the Administration's FY 2000 budget 
request for the Department. The President has requested $4.2 
million to fund the hiring of 12 new officers in Sub-Saharan 
Africa, including 6 to be assigned in countries not currently 
staffed by the Commercial Service.
    As noted, the African Growth and Opportunity Act is a 
critical element of the effort to forge a new kind of economic 
relationship between the United States and Africa. It would 
help increase peace and stability in Africa by spreading 
prosperity and strengthening the tide of economic reform. It 
would promote increased transparency, predictability, and the 
rule of law, making for an increasingly strong marketplace for 
U.S. exports. Throughout my travels to Africa I have met with 
unqualified support for the bill by African government and 
business leaders, who continue to urge its enactment.
    We therefore urge the Congress to pass this legislation, 
and in so doing to help integrate Sub-Saharan Africa into the 
global economy and build a more lasting and durable partnership 
for the benefit of Africans and Americans alike. I thank 
Chairman Crane and members of the Trade Subcommittee for your 
leadership in this historic effort.

                                

    Chairman Crane. Thank you, Mr. Secretary. The ITC study 
indicated that the House bill would have little effect on the 
domestic textile and apparel industry. The bill's opponents, 
however, have attacked the ITC for using ``a fatally flawed 
econometric model whose basic assumptions deny common sense and 
make the entire study worthless.'' Does the Administration have 
a position on the ITC's analysis of this bill?
    Secretary Daley. We feel that the analysis is much more 
accurate than the opponents believe it is, Mr. Chairman. There 
is no question there will be jobs affected, as there are in any 
sort of trade agreement. For those who are affected negatively, 
we have great concern and want to look for actions that we can 
take to help them and cushion the blow if there is one. But the 
impact on the U.S. textile industry would be minuscule, in our 
opinion.
    Chairman Crane. Thank you.
    Mr. Levin.
    Mr. Levin. Just a couple quick comments, and then maybe I 
will yield because time is limited, to Mr. Rangel or some of my 
colleagues who did not have an opportunity to participate 
earlier.
    Mr. Secretary, welcome. I think that your testimony answers 
any concerns about the interests of the Administration in 
Africa or its commitment to the passage of good legislation. I 
think everybody should read your testimony regarding specific 
provisions, including the textile apparel provisions. Clearly, 
we are going to have to work together to straighten out 
differences here.
    I think it touches the nerve of a much larger issue. That 
is, the overall impact of our increasing trade with developing 
economies on the American economic scene. I don't think that 
that larger issue, the concern about it, which I feel deeply 
should misshape the likely impact of increased trade here in 
textile and apparels. It is relatively small, but it involves a 
much larger issue. But it can't bear all the weight of 
resolution of this larger issue, as you and I and others have 
discussed. So we will welcome your active participation as we 
try to work out the textile apparel provisions.
    Also, I hope that everybody will read your full text and 
its relationship or its discussion on page 5 about 
conditionalities. We are imposing conditions on Africa. Our 
whole aim is to try to nurture a market economy in these 
countries. I don't think it is fair to say this is simply a 
conditionality and it's paternalism.
    Indeed, as I understand Mr. Jackson's bill, and I need to 
read it in detail, he sets down certain standards before there 
could be further trade relationships. These include some of the 
very provisions that we're concerned about, labor market, 
capital market provisions, perhaps. So I hope everybody will 
read your testimony on this.
    I think we should acknowledge that we are working in trade 
agreements toward other countries adopting a market economy 
relating to both capital and labor, and also that we are 
anxious that they move in that direction for their benefit as 
well as ours.
    Actually my time is up. I'll give back the remaining time, 
and see if others have questions, Mr. Chairman.
    Chairman Crane. Mr. Houghton.
    Mr. Houghton. Thank you very much, Mr. Chairman. I think 
the Act makes sense. We should have done it last year. We ought 
to do it now. Let me just ask you a question. The Act really 
concentrates on imports to this country. What about the exports 
from this country? What does it do to international trade? 
Also, what about the other countries around the world? Are they 
going to loosen up their demand for special preferences or 
quotas and things like that? What happens to the other people 
that could be recipients of African products?
    Secretary Daley. I believe, Congressman, to be frank with 
you, that we have concentrated too much on the potential 
imports that will come into this country. I think the 
opportunity for U.S. exports into a market of $700 million 
potential consumers is enormous. Our exports, as I mentioned, 
are now--our export growth was more this past year than it was 
in Latin America and in the Newly Independent States. The sort 
of interest that we had from U.S. companies on the trade 
mission indicates an enormous amount of interest in the 
countries in Africa, which this bill encourages to stay on the 
course of reform economically, if their economies improve, the 
standard of living improves, their consumers have ability in 
their companies to buy more U.S. products, that will obviously 
positively impact our exports. That is what we are focused on 
in our endeavors in the Department of Commerce, an increase in 
the number of commercial service people, doubling them 
throughout Africa, location and number of personnel. So we 
focus more on the export growth.
    A third of our economic success the last 6 years is a 
result of our exports, and with troubles in other parts of the 
world, we have got to concentrate more on that, in my opinion, 
during these difficult times, and not to worry as much, even 
though it's of concern, I agree with Congressman Levin, the 
trade deficit. Our economy is very strong. We are increasing 
our imports by virtue of the fact that our consumers are 
ravenous purchasers.
    Mr. Houghton. But as far as the other countries, I know 
that many times we take into our economy far more as a 
percentage of our imports and our gross domestic product than 
Japan, for example, takes into its economy. I just don't know 
what the other countries are doing. Because it's a vast market 
out there and we're only one slice of it.
    Are you, in your conversations, encouraging others? Or do 
you get any signals of what they are doing?
    Secretary Daley. Well, we have great concern that certain 
markets around the world which have historically been closed, 
closed to most U.S. products, are going to during these 
difficult times, especially in Asia, take steps that will even 
close them more.
    One of the very positive conditions or items that are in 
this bill is the fact that we want to see countries in Africa 
promote freer trade and open their markets more to products. It 
will help their consumers. It will help their industries. That 
is an example of what some may call a condition. It's a 
positive step towards economic reform that's going on in 
Africa.
    Mr. Houghton. Thank you.
    Chairman Crane. Mr. Rangel.
    Mr. Rangel. Thank you, Mr. Chairman. Mr. Secretary, when we 
lost Ron Brown, a lot of us thought that he was responsible for 
educating America as to the need to having a better working and 
trade relationship with the countries in Africa. I have to tell 
you that you have more than protected his legacy, not only for 
Ron and the Department of Commerce, but most importantly for 
our country and the millions of people on the continent of 
Africa.
    The question of conditionalities is a very sensitive 
question. A lot of African nations thought that that language 
might exclude Nigeria. It is just so interesting and exciting 
today to see that using conditionalities, no one could be a 
better beneficiary than the great people in Nigeria, as they 
have dramatically moved forward in terms of expressing full 
democracy for all of its people. Let me thank you for what you 
do for our country, and what you have done for the memory of my 
dear friend, Ron Brown.
    Secretary Daley. Thank you very much, Congressman. That is 
a very kind statement on your part. I did have the pleasure of 
visiting Nigeria briefly during this trade mission. It was the 
day after the first elections in 10 years. The enthusiasm and 
interest by Nigerian businesspeople in getting the different 
relationship with the United States was most remarkable. Thank 
you for your kind comments though.
    Chairman Crane. Well, Mr. Secretary, I know you are a tight 
time constraint. We have already run you over your limit. We 
greatly appreciate though your appearance here today and your 
testimony and support of the bill. Hopefully we'll be sending 
you a bill this year.
    Secretary Daley. We hope so.
    Chairman Crane. We have got to educate our Senators. It's a 
slow learning process, but it's doable.
    Secretary Daley. Thank you very much, Mr. Chairman.
    Chairman Crane. Thank you.
    Now we have the distinct honor of welcoming back two of our 
former colleagues who have gone on to a better world. One, a 
former Secretary of the Department of Housing and Urban 
Development, Jack Kemp. The other, former U.S. Ambassador to 
the United Nations, Andrew Young. But both of them former 
colleagues of course of ours here in the House.
    So gentlemen, if you will take seats. Again, let me remind 
you if you can confine your oral comments to 5 minutes or less, 
all of your printed statement will be a part of the permanent 
record.
    Jack, you can fire away.

  STATEMENT OF HON. JACK KEMP, CO-DIRECTOR, EMPOWER AMERICA, 
 BOARD MEMBER, CONSTITUENCY FOR AFRICA, FORMER SECRETARY, U.S. 
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT, AND FORMER MEMBER 
                          OF CONGRESS

    Mr. Kemp. Mr. Chairman, I am really pleased to be here. 
Thank you for this opportunity to testify. I am here on behalf 
of the Constituency for Africa, for which I am a member of the 
board. Constituency for Africa was started by Ambassador Andy 
Young and is now chaired by mayor Dinkins and our executive 
director, Mel Foote. It is an organization that is both black 
and white, as well as business and labor. It is comprised of 
people who are profoundly concerned about not only Africa, but 
the people of Africa. I think Mr. Rangel and yourself, Mr. 
Chairman, have both emphasized that for a free society, which 
sits on the edge of a new century, this is not a right-left 
issue. There are 750 million Africans in Sub-Saharan Africa who 
should have the same right as we do in the United States of 
America to purchase and to sell, to do business and engage in 
commerce and trade with Mexico, Latin America, Asia, Canada, 
Europe, and now Eastern Europe.
    The cold war is over. After every great war in this 
century, certain visionaries have looked upon the world in a 
way that engages the idea of opening up freedom, democracy, 
trade, peace and prosperity. I like what Phil Gramm said; 
people against this bill should be ashamed of themselves. I say 
this with all due respect. I am not trying to pick on anybody. 
I understand why there are different groups that hold opposing 
opinions. But clearly, this bill is on the side of a world into 
which we are moving with such dispatch and rapidity that it 
defies imagination.
    Congressman Jackson, who happens to be a friend of all of 
us in this room, showed a map of the Internet; the World Wide 
Web. Whether we like it or not, there is going to be a 
borderless world in cyberspace. This world is reaching Africa.
    Seated here in this room, Mr. Chairman, are members of the 
African diplomatic corps. Jesse Jackson is correct in pointing 
to debt relief and restructuring as one element of this effort. 
But you can't pay off debt unless you have a growing economy. 
You must measure debt against the size of the economy. This 
will help African nations; small, large, east, and west, to 
begin producing the type of income for its people upon which 
debt restructuring, debt relief, and ultimately debt payment 
can be made.
    So I believe this is a 21st century idea. I think it is 
absolutely essential that this bill be passed as quickly as 
possible. Now that the cold war is over, we can begin to think 
of what we did after World War II when we passed the Marshall 
Plan in the Congress with bipartisan support. Its focus was aid 
and trade. Aid and trade. Although we needed both, ultimately, 
trade became an essential ingredient in the Marshall Plan.
    I am briefly going to raise one issue that I am concerned 
about. As we enter the 21st century, we are watching the 
breakdown of the 35-year experiment with floating exchange 
rates. It's not working. I think we have reached a point, Mr. 
Chairman, where we are in essence witnessing a hault for the 
future of free trade. The competing currencies of the world 
don't float, they sink. With the help of the men and women on 
this Committee and other people who support this, including the 
CFA, Constituency for Africa. Passing this bill, I believe, is 
inevitable.
    Labor is concerned that we are competing with countries 
that have allowed their currency to collapse. Thus this 
collapse makes their exports into our economy cheaper and more 
competitive. I think it is absolutely essential that we begin 
to think about not only a new trade relationship with Africa, 
Sub-Saharan Africa, Latin America, Eastern Europe, Asia, et 
cetera. But, in addition, it is essential that we begin to 
formulate some policy toward rebuilding an international 
monetary system in which there's stability of exchange rates 
and in which countries do not use manipulated currencies to try 
to get an advantage. That is the ultimate zero-sum game. Today 
on this earth what is manifesting itself is trade wars 
exacerbated by monetary units of account that are being 
manipulated for advantage. That is the ultimate zero-sum game.
    So my hope is that there would be an attempt by the United 
States, both at the congressional and at the executive branch 
level, to build a new system that is tied together with the 
free trade zone with Africa. This would produce a system in 
which exchange rates are stable as well as an IMF that actually 
helps Third World countries grow instead of punishing them with 
fiscal austerity and high interest rates.
    I don't see how we can ever receive the benefits of a free 
trade zone with Africa at a time in which the IMF is running 
around Zimbabwe or other African countries as well as Asia or 
Latin America, and telling them to float their currency in 
order to boost exports and raise taxes to balance the budget. 
If we had followed that policy, our country would not be in a 
surplus today.
    I appreciate this hearing, Mr. Chairman. I want to thank 
you for the vision for which you, Charlie, and many other 
Members of this Committee are responsible.
    I turn it over to my good friend, whom I greatly respect, 
Ambassador Young.
    [The prepared statement follows:]

Statement of Hon. Jack Kemp, Co-Director, Empower America, Board 
Member, Constituency for Africa, Former Secretary, U.S. Department of 
Housing and Urban Development, and Former Member of Congress

    Thank you, Mr. Chairman, for inviting me to testify on H.R. 
434, the ``African Growth and Opportunity Act.'' Before I 
begin, let me pass along warm greetings from Mel Foote, 
Executive Director of the Constituency for Africa, and its 
Board of Directors. And I am especially pleased to be here with 
my old friend, Ambassador Andrew Young, who originally got me 
involved with CFA when he was Chairman of the Board.
    It is a pleasure to be here to discuss how to spread the 
blessings of freedom, enterprise, democracy and human rights to 
the widest possible group of people--and specifically, to the 
people of Africa, a place where for too long, too many of those 
benefits, of those human rights, have been lacking.
    The legislative initiative toward Africa again under 
consideration by this committee is vitally important. The 
legislative goals in this bill constitute a roadmap toward 
development: eliminating government corruption and minimizing 
government intervention in the market; encouraging private 
ownership and removing restrictions on investment; lowering tax 
rates and establishing stable money; promoting the free 
movement of goods and protecting property rights. If African 
countries navigate by these stars, and if the United States 
works with them to reduce tariff and nontariff barriers to 
trade and to negotiate free trade areas, there is no limit to 
the continent's potential.
    Since I last spoke to the Committee on the subject (April 
1997), I have visited Africa as a participant at the African 
African-American Summit in Harare, Zimbabwe, where I had the 
honor to meet President Nelson Mandela and many other 
distinguished African and African-American leaders.
    Mr. Chairman, much of Africa is growing dynamically today--
growing economically, politically, socially and most of all in 
the attention of the United States and the world. Shifts toward 
political and market liberalization are revitalizing and 
energizing the continent. We see a new generation of leaders 
implementing democratic reforms, expanding economic growth and 
unleashing the human spirit that will help bring greater 
prosperity and democracy to African nations. Problems and 
challenges abound, but the potential of both human and physical 
resources is enormous.
    Many of Africa's leaders, like President Museveni of Uganda 
and his colleagues, have revived the East African Community and 
brought trade liberalization and renewed economic growth to 
Uganda and the region.
    We have the spirit of Thabo Mbeki, who rejected the cramped 
goals of mere subsistence and African recovery or Western aid. 
It is not enough, as he has said, for us to work for ``African 
development.'' He said we must seek nothing less than an 
``African Renaissance.''
    And we have the great Leon Sullivan, whose memorable words 
on the universal desire of people to improve their living 
conditions and be free, I quoted all over the world and during 
my trip to Africa two years ago.
    Post-colonial and post-Cold War Africa has made 
considerable progress but its progress has not yet reached 
enough people. Though political stability has improved for much 
of the continent, too many African nations are still plagued 
with violence, disease and political unrest. And though 
economic growth is healthy, development is slowed by remaining 
political and economic barriers that hinder Africans from 
reaching their fullest God-given potential.
    By removing those barriers we can build an even stronger, 
more prosperous, more democratic Africa--a community of nations 
mutually benefiting each other, secured and sustained by broad-
based economic growth, trading openly with the rest of the 
world. In that spirit, I am pleased to be here today to discuss 
a way in which America might assist in this endeavor, not in a 
paternalistic sense, but as a true partner of the African 
continent and its great people.
    Some of the common themes in the policy mix of African 
countries enjoying strong economic growth, which would make 
them excellent partners, are: reasonable tax rates, 
particularly on personal incomes that allow individual Africans 
to flourish and prosper; stable monetary and exchange rate 
policies; and balanced policies on foreign investment with a 
focus on privatization and economic growth as the solid 
foundation that is the ultimate magnet for investment capital.
    Those African countries that have established successful 
economic policies want nothing more than to be able to continue 
the healthy trends they are experiencing, countries such as in 
Botswana and Uganda. But more than this, they wish to be able 
to reap the benefits of private capital flows and trade that 
follow naturally from such policies. They are not asking for a 
handout, or even for a long-term investment on sentimental 
grounds. They only seek to harness for their people the same 
market forces that have worked so prodigiously for the 
developed nations of the world.
    When this committee first opened the prospect of American 
trade and access to American markets and conceived of a direct 
relationship with Africa's new tigers, it was an audacious 
proposal. It still is, but it cannot work if it is implemented 
in an environment of currency turbulence. Remember the high 
hopes we all had for NAFTA--hopes that were crushed under a 
collapsing peso? Revival of those hopes has been stunted by the 
protectionist sentiments that arose from the currency chaos 
that followed the peso's devaluation.
    Since I last visited with the Committee to discuss this 
subject, currency chaos has spread. The world financial system 
has been thrown into turmoil, calling into question the 
beneficial effects of market forces and indeed creating doubt 
about the whole notion of economic globalization.
    Protectionist instincts, never far beneath the surface, are 
on the rise as a consequence of the global deflation in 
commodities and other raw materials. The U.S. steel industry, 
hurt by a record level of imports from Russia, Asia and other 
regions, is a prime example. These protectionist instincts are 
being misdirected at free and open trade instead of the real 
source of the problem--an international monetary arrangement of 
floating currencies, in which no currency is linked to a stable 
anchor and all countries are tempted to use currency 
devaluation as an economic policy instrument during times of 
economic duress.
    The current system clearly is a menace to the stability and 
viability of global markets. Since the 1970s, the Leviathan 
known as the International Monetary Fund has impoverished much 
of the developing world--such as helping to wipe out the 
savings of ordinary citizens and families in Mexico when it 
supported the devaluation of the peso four years ago--through 
its mindless formula of increasing taxes to balance budgets and 
depreciating currencies to promote going-out-of-business export 
sales. Despite promises to reform, the IMF continues to inflict 
its damaging policies on countries already suffering from 
financial and economic collapse. Rather than shelling out 
billions of dollars for the Fund, our Treasury Department 
should be hard at work figuring out how to reconstitute a 
stable international monetary system.
    The beginning of chaos in financial markets around the 
world can be traced to the devaluation of the Mexican peso four 
years ago. At the time, Fed Chairman Alan Greenspan essentially 
told the Senate Banking Committee that the impoverishment of 
Mexico would not have occurred if we were on a gold standard--
which would have meant that both the peso and the dollar were 
convertible into gold at a fixed rate. The same is true of the 
Asian crisis, which sent Thailand and Indonesia off track as 
the Fed's monetary deflation caused the dollar to depreciate 
against gold and other commodities.
    The economist and author Judy Shelton makes the connection 
between stable money and free trade: ``The real threat to the 
global trade system is thus the prevailing free-for-all 
approach to currency relations that engenders monetary 
nationalism and ultimately fosters a protectionist backlash. 
The solution is to set up an orderly international monetary 
system that would permit all nations to compete in the global 
marketplace based on a common unit of account.''
    The great 30-year experiment in floating exchange rates has 
clearly failed. Restoring world-wide currency stability must be 
our first order of business. Not only Africa, but also the 
world would greatly benefit from the establishment of a 
coherent and stable monetary foundation to support free markets 
and free trade and achieve far greater economic growth.
    Some people believe that by setting up currency boards we 
can curb monetary disorder. In certain countries under certain 
circumstances, that may be the right thing to do. But a 
country-by-country approach is an insufficient solution. The 
world desperately needs a new international monetary regime 
linked to gold.
    Such an arrangement would be the very antithesis of the so-
called ``new international financial architecture'' now being 
pursued by Deputy Treasury Secretary Lawrence Summers, who 
favors continued reliance on government-managed fiat currencies 
and who would grant expanded supervisory and central bank-like 
powers to that bureaucratic Leviathan, the IMF.
    That is why I propose a new international gold-price 
standard updated for today's sophisticated financial markets. 
We must restore a standard that makes the dollar ``as good as 
gold,'' in order to prevent the kind of hyper-inflations and 
deflations that Brazil and many Third World countries have 
experienced when they anchor their currency to the dollar and 
the value of the dollar changes. It is imperative that we do 
so. Indeed, the fate of the world economy depends upon 
restoring a global monetary anchor as soon as possible. Doing 
so would provide a lift to free trade and the global economy, 
and Africa would reap the benefits of the new international 
monetary system of stable prices and a currency with a constant 
value.
    In closing, I want to thank the committee for bringing the 
``African Growth and Opportunity Act'' up early in the 106th 
Congress. Let me reiterate that I believe some of the ideas 
contained in this legislation can make an important 
contribution to helping Africa take its rightful place in the 
global political economy.
    A democratic and economic revival of Africa would be 
mutually beneficial to Africa and her partners in trade, 
business and diplomacy. This is the genius of economic freedom 
from which every nation can benefit: no country succeeds at the 
expense of another. Everyone benefits from their neighbor's 
prosperity. It is the common ground on which to build a stable 
community.
    Thank you again, Mr. Chairman, for affording me an 
opportunity to address this crucial matter today. My very best 
to you and your colleagues as you continue your work to open 
this new relationship between Africa and the United States. I 
would now be happy to answer any questions from the committee.

                                

    Chairman Crane. Thank you, Jack.
    Fire away, Andy.

     STATEMENT OF HON. ANDREW YOUNG, CHAIRMAN, GOOD WORKS 
  INTERNATIONAL, LLC, FORMER UNITED STATES AMBASSADOR TO THE 
         UNITED NATIONS, AND FORMER MEMBER OF CONGRESS

    Reverend Young. Thank you very much, Mr. Chairman. It is 
pleasure to be with you. I'll take my few minutes to try to 
talk personally about this.
    What we are trying to do with Africa, and what I think you 
are trying to do with this bill, is almost the way I understand 
what my job was when I left this place and ended up as mayor of 
a city, and there were no more government funds. The cities 
were in debt. The government was in debt. I had only one choice 
for creating jobs, benefits, and opportunities for my citizens. 
That was through attracting trade and investment. We generated 
over the 8 years I was mayor some $70 billion in private 
investment. It came from all over the world. But in order to 
get it there, we had to have certain conditions. We use 
conditionality as a bad word, but conditions are those policies 
that made our government more effective in attracting capital. 
For instance, it would take you 7 months to get a building 
permit. That's a terrible condition for an investor. We worked 
out all of the environmental laws, all of the employment 
regulations. We even had very rigid affirmative action laws 
that we included. But you could get it done in less than an 
hour once we refined it and worked out those conditions. Then 
we found that there was no longer an impediment for new 
investment. In fact it facilitated new investment.
    That is sort of the thing that Africa needs. We have seen, 
where we have seen hope in Africa, it has largely been through 
private investment. There are some negative things said about 
privatization. But what privatization does is bring money, 
bring technology, bring management skill. It doesn't take 
anything away. When Southwestern Bell bought 30 percent of the 
South African Telecom, they brought in over $1 billion. They 
also brought in new equipment. They expanded the use, they 
dropped the cost of long distance service. They made more lines 
available to people who had been previously denied.
    If Africa is going to get on the Internet, it is going to 
be largely through privatization, private investment, private 
technology. No government, no matter how much money you give 
them, is going to be able to handle the technology that makes 
them part of the global communications network. But the same 
thing is true of almost everything else, airports, ports, water 
purification systems. Africa does not have to reinvent the 
wheel. Africa just needs access to the private capital, the 
private technology.
    What I see you trying to do in this bill is create a 
vehicle of support for those American businesses that are 
looking toward Africa. Now I have been in Africa at least a 
dozen times last year, from Eritrea, I mean from Ethiopia down 
to South Africa, and back up to Ivory Coast. There is both a 
tremendous amount of hope and promise, but there's also a 
tremendous amount of tragedy. Africa could go either way. I see 
this bill as a vote of confidence by the U.S. Congress, which I 
think will be followed by initiatives from the executive branch 
and from the State Department. Initiatives like debt relief, 
which doesn't need to be unconditional, but which could be 
negotiated debt relief where instead of just wiping off debt, 
you allow people to pay down their debt by investing in 
education and in healthcare. Swapping debt for development.
    We have had a good effort toward democratization of Africa. 
Africa has made clear progress. But we have not had the capital 
and the technology to promote the development. I think your 
bill will facilitate that process. I certainly encourage its 
passage.
    [The prepared statement follows:]

Statement of Hon. Andrew Young, Chairman, Good Works International, 
LLC, Former United States Ambassador to the United Nations, and Former 
Member of Congress

    In the past year, it seems that I have spent more time on 
the African continent than I have at home in Georgia and I 
always return with an increasing sense of urgency. Africa seems 
to be teetering on the pinnacle of her history. There can be a 
slow but rational descent into a valley of glorious peace and 
prosperity or the continent can plunge into a chasm of 
violence, disease and famine.
    A millenium of colonial domination, exploitation, naive 
cold war machinations, and greedy despotism has been countered 
by the determined efforts of missionary educators, enlightened 
administrators, and United Nations' efforts to end apartheid 
and the injustices of colonialism, while strengthening the 
social and technical infrastructure needed to secure 
sustainable development.
    For every African tale of horror that emblazons our media, 
I have also seen leaders emerge with vision and the 
determination to proclaim the dawn of new possibilities. The 
fear of bloodshed and destruction under apartheid has been 
replaced by the creative power of truth and reconciliation. The 
corruption and tyranny of Nigeria's military dictatorship has 
moved towards successful elections and a hopeful transition to 
civilian rule. The ruthless repression of the independent press 
in Zimbabwe is paralleled by a new generation of young 
entrepreneurs in the private sector and the continued presence 
of an aging Ian Smith freely walking the streets of Harare. 
Tanzania and Kenya survive the shameful embassy bombings and 
continue to struggle toward stable and prosperous democracies. 
Mozambique seems to be recovering from the cold war destruction 
and now attracts billions of dollars in private investment from 
Europe and South Africa while Angola continues to struggle with 
the results of a misguided U.S. policy that empowered the 
Savimbi war machine. Oil flows daily towards U.S. shores from 
Cabinda as the Angolan people suffer the legacy of 
contradiction. Growth and stability in Senegal and Cote 
d'Ivoire exist side by side with chaos in Sierra Leone and 
Liberia. Ghana is seen as a small miracle, as hope and despair 
wrestle in Uganda, Ethiopia and Eritrea.
    Africa's future is in the balance but the future of the 
global economy may be swaying in that same balance. We have the 
opportunity in the 106th Congress to help sway that balance 
toward the expansion of peace and prosperity through the 
passage of the Africa Growth and Opportunity Act. This Act 
could be passed at a crucial time for Africa. The global 
economic crisis, combined with bad weather and weak prices for 
commodity exports, slowed the growth in total output in Africa 
during the last two years. The world's leading economic experts 
do forecast a renewal of growth in Africa in the next few 
years, but there are concerns about the timing and the quality 
of this growth. Important sources of foreign investment, 
particularly from Asia, are now less dependable, and some 
commodity export prices remain weak. Africa's share of global 
exports remains at less than 3 percent, and there is precious 
little by way of investment capital in these countries. Now is 
a special time when U.S. assistance can make a difference.
    At the present historic moment, this Bill would send a 
signal of concern and commitment that Africa needs. It is not 
the whole answer, but it is enough to activate private 
investment, which will bring much needed capital, technology, 
management and training. It would be a sign that the new 
macroeconomic policies followed by some African countries are 
looked on with favor by leaders in this country. It would 
signal U.S. approval of structural reforms that support 
economic discipline, and it could signal approval and support 
for the successful resolution of armed conflicts. And it would 
show a willingness to help African economies through a 
development bump, the Asian financial crisis that was not of 
their own making.
    Africa may be the world's richest continent. Its oil 
reserves, mineral resources and a market of some 700 million 
people provide a missing link in the equation of the global 
economy. Africa's need for transportation, communication, food 
security, clean water and health care offers an absorptive 
capacity, which is available in very few places on the globe. 
The requirements of the Africa Growth and Opportunity Act of 
good governance and fiscal responsibility are simply basic 
necessities if Africa is to compete favorably for investment 
and trade. Corruption must be replaced by transparency and 
accountability. Government policies must compete for capital by 
assuring an equitable return on investment and providing a work 
force that is free to develop the best of their abilities in an 
honest marketplace.
    We have seen the folly of ``crony capitalism'' in Asia as 
well as greed and corruption in past governments of Africa, 
Europe and the Americas. The guidelines of the World Bank, 
International Monetary Fund and World Trade Organization are 
attempts to help nations learn from the mistakes of the past. 
Now we must all help these great international agencies as they 
take the next step in the evolution of their policy advice and 
recognize that there are many paths to economic policy 
discipline. Let us use the cultural differences among countries 
to form a stronger and even more disciplined policy process, 
and let the Africa Growth and Opportunity Act be a statement of 
the United States' intention to recognize good African economic 
policy.
    We must help nations to evolve and negotiate their way into 
the global economy. These institutions (World Bank, IMF, and 
World Trade Organization) are designed to help in that process. 
Only when there is a refusal to negotiate a plan or process of 
reform and financial rectitude do these institutions appear to 
be authoritarian. At the Georgia State University School of 
Public Policy we have been quite successful in working with 
governments from more than 30 countries in assisting them with 
their negotiations and with reaching agreements that are both 
acceptable to the IMF and responsible to the citizens that 
governments represent. The governments we have worked with at 
the Georgia State Policy Studies School have ranged from in 
size from Russia to Jamaica.
    Africa needs the growth and opportunity that this act 
intends, but it is equally true that the United States needs 
Africa.
    I am quite anxious about the present stalemate in the 
Middle East, both with regard to Israel and the Palestinians; 
but, even more so, with Iraq. This situation remains explosive 
in a region of aging monarchs and volatile masses. During the 
Arab oil embargo of the late 70's, it was African oil that 
provided the safety valve for the U.S. economy. The African 
Continental Shelf, from Senegal to Angola, is absolutely vital 
to the U.S. economy and military security. African oil is more 
abundant and defensible than is the oil in Kuwait. In fact, 
more recent geological surveys estimate reserves comparable to 
those in the Arabian Gulf. Yet, the investment of diplomacy, 
finances and military resources in the entire African continent 
would barely equal the expenditure in one week in the Middle 
East.
    The Africa Growth and Opportunity Act may be just the 
effort we need to begin a mobilization of conscience, concern 
and commitment to our vital interests on the African continent.

                                

    Chairman Crane. Thank you, Andrew.
    What obstacles, and I'll direct this to both of you, exist 
at present to the creation of jobs and investment capital in 
Sub-Saharan Africa? How do you feel our bill would address in a 
positive way the issue?
    Reverend Young. Well, for instance, I think yes, it's true 
that Mozambique has a significant amount of debt, debt which I 
agree we helped to cause, because we helped, our bad policies 
of a period worked to destabilize Mozambique. But in spite of 
that, Mozambique has attracted about $1.5 billion of private 
investment. There's another $4 billion on the books. That is 
largely because the president of Mozambique has been back and 
forth here with the Corporate Council on Africa, has worked out 
relations with the business world, and has been able to sell 
Mozambique as a site for investment and opportunity.
    I think that this is going to happen in many more places. I 
think my colleague is right on Zimbabwe. We didn't treat 
Zimbabwe the same way we treated Uganda on the IMF because we 
happen to like President Museveni a little better than we like 
President Mugabi, but there is a sense in which Zimbabwe is 
even more democratic and where its private sector, which is 
unrelated to the government and antagonistic to the government 
in many respects, is made up of 30- to 40-year olds who were 
educated in British and American universities and moving the 
country forward, in spite of sometimes bad government policies 
by my friend Robert Mugabe.
    Mr. Kemp. Could I add to what Andy said? Seated behind me 
with Ambassador Edith Sampala of Uganda, is the minister of 
foreign affairs, Minister Amama Mbabazi. We were in South 
Africa last summer to hear the presidents of different 
countries, such as President Museveni, as Andy Young pointed 
out, or Mugabi, or Mbeki, who talked about an African 
renaissance. The force of Africa toward private enterprise, 
toward trade, toward capital investment, is so irreversible, in 
my opinion. There will be policies now and then that are 
mistaken, and no one defends that. But there are mistaken 
policies all over the world. The right to be free is the right 
to make mistakes and correct them.
    Andy is right. May I say to the Chairman that this would be 
a huge signal to the world that America is taking Africa 
seriously. In addition, we are sending more than just a 
symbolic message to American business to invest in Africa. We 
are sending a signal to the 750 million people in Sub-Saharan 
Africa that you too have the same right to trade openly, and 
freely, whether it be on the Internet and the World Wide Web or 
in textiles or produce or commodity. We are saying that you 
have the same rights in the world community today as those 
which we are granting to Latin America, Asia, and Eastern 
Europe. It seems to me it would be an embarrassment to this 
country on the eve of a new century, one that we hope is a 
democratic century for the world, not to allow Africa to 
participate in this explosion of technology, trade, commerce, 
and capital investment.
    Chairman Crane. Thank you.
    Mr. Levin.
    Mr. Levin. Thank you, Mr. Chairman.
    Welcome to both of you. I think you have been eloquent and 
have put this bill in perspective.
    Mr. Kemp, I think you are right about the currency issues. 
We just can't resolve them in this bill. The fact we can't 
doesn't mean we should not move on this.
    To our friend whom we deeply admire, I don't know whether 
to call you Congressman, Ambassador, whatever, Reverend.
    Reverend Young. That's right.
    Mr. Levin. That's better. Reverend Young. I think you have 
helped put the issues of so-called conditionality in 
perspective. I mean obviously we want our policies to help move 
Africa toward free capital and labor markets. There is 
conditionality in a sense built into it, because if they move 
in the opposite direction, our policies would be different.
    So just, Jack Kemp covered it. But Andy, if you would, you 
have been there so often. Just say a word about where you think 
African nations by and large are moving in terms of free 
capital and labor markets. Is there now a trend that you, as 
Jack Kemp says, you think is irreversible?
    Reverend Young. There is no question that it is 
irreversible. While we are debating, the private money from 
Europe and Asia is already coming in. I think the presence of 
American investment balances it out and keeps it from being 
neo-colonialism. Neo-colonialism was a domination or 
redomination by one economy. The thing that protects Africa is 
American business competing with French and Spanish and 
Portuguese and Malaysian business, and working out competitive 
contracts that lower prices and that offer more.
    Mr. Levin. Thank you. Thank you, Mr. Chairman.
    Chairman Crane. Mr. Houghton.
    Mr. Houghton. Thank you very much, Mr. Chairman.
    Gentlemen, great to be with you. I just want to try to put 
this in perspective. The U.S. Government basically is 
eliminating or reducing tariffs. They are not putting any 
additional money in. They may redirect money from existing 
funds for the OPIC, but that's it. So what the basic benefit is 
by reducing those tariffs, or eliminating them, the quotas in 
the United States, they are providing the opportunity for 
American businessmen to go in.
    Now how effective is that going to be?
    Reverend Young. Just in the places that I know, and I think 
you'll hear the African ambassadors, but I have been very 
impressed going to Uganda and seeing the American companies 
there. Coca Cola alone, from my hometown, has put in more than 
$1 billion on the African continent. They are not a charitable 
organization. They expect people to drink Coca Cola because 
they expect these economies to grow. They also employ more 
Africans than maybe any other American corporation. So their 
investment creates jobs.
    What we are saying is that smaller companies need a little 
more encouragement from the Government. We need to push this 
trend a little more so that it's more than just a few, a 
handful of major multinationals that are moving toward Africa, 
but that Africa can have a broad base of private investment.
    Mr. Kemp. Could I just add one point? I agree with 
Ambassador Young, but I would take it just a step further. 
Don't do it for Coca Cola, don't do it for Cargill, who is 
going to be testifying later. With all due respect, you ought 
to do it for people. Do it for the entrepreneur. Do it for the 
right of consumers in Africa and for the United States to be 
able to participate in that technology that was addressed by 
Jesse Jackson when he showed us a map of the World Wide Web yet 
to reach Africa. It will never come to Africa unless we can 
begin to show that the United States and the developed world is 
as interested in Africa as we are in Eastern Europe.
    I would like to make one other point as a postscript. This, 
I would like to direct to my old friend and colleague from New 
York. I used this metaphor when I testified last year on this 
bill. I was in the Miami Airport for the Super Bowl. My wife 
and I were walking by the duty free shop. You have never seen a 
duty free shop until you are in the Miami Airport. It is made 
up of Latinos, Hispanics, Africans, but they are all very 
wealthy people. There were first class air passengers on all of 
the airlines coming in and out of Miami. I thought ``trade is 
not just for rich people''. Right now, however, it is because 
they are the ones who can afford to go in a duty free shop, 
afterall, they are traveling first class into foreign 
countries.
    Ultimately a duty and tariff-free world is in the interest 
of the poor. They should be able to buy and sell and 
participate in trade with all people. Don't do this for big 
companies. Do it for small companies. Don't do it for rich 
folks. Do it for people who want to someday be rich. Ultimately 
this movement toward freedom and democracy is to the benefit of 
the poor as opposed to those who are already at the top of the 
pyramid, with all due respect to Coca Cola. Do it for the tiny 
little businessmen and women both in Africa as well as the 
United States, who want to participate in the exciting 
technologies of the 21st century.
    Mr. Houghton. I guess what I was trying to do was to put 
this thing into perspective with the long term, because what 
this does is allows American manufacturers to go in and invest, 
and come back into this country with their finished product. It 
also allows anyone else, hopefully members of that nation, to 
borrow money or to get money and to do the same thing.
    But it's a small step. I mean I think, I really think that 
there is a much larger operation. I think it's a great deal and 
we ought to do it, and no question about it. But I don't think 
we ought to think that this is the panacea. It's not. It is 
only a small, small beginning. Thank you very much, Mr. 
Chairman.
    Chairman Crane. Thank you.
    Mr. Rangel.
    Mr. Rangel. Thank you, Mr. Chairman. It is amazing, Jack, 
how after listening to you I feel that I'm just not doing 
anything. You are just an energizer. It is seriously an honor 
to have both of you, who have made such an outstanding 
contribution, not just for a better America, but for a better 
world, to be a part of the launching of this ship that I know 
when it's finally signed into law that people all over the 
world would wonder how did it get started. So let me thank both 
of you.
    Reverend, Congressman, Ambassador Young, could you refresh 
my recollection as to the date and time that you left the 
United Nations?
    Reverend Young. It was December 1979.
    Mr. Rangel. 1979. If I recall correctly, your exit was 
accelerated by a visit that you had made with members of the 
PLO. I just thought that you might want to know that the 
Republican leadership of both the House and the Senate has 
invited Yasir Arafat to pray with them this morning. It is my 
understanding that Mr. Arafat is lobbying the Hill. And if 
there is any advice that you would want to give us to protect 
our seats, I hope that you might feel free to tell us. But you 
should know it's a really fast changing world. Thank you for 
your courage.
    Reverend Young. Unfortunately, Mr. Chairman--I'm sorry, 
Minority.
    Mr. Rangel. That's OK. They are getting ready for that.
    [Laughter.]
    Reverend Young. It wasn't fast enough, because I think that 
my concern was that the generations of young Palestinians that 
now seem to be very much in control were not even in existence 
then. If we could have talked to the PLO, who actually, I never 
met with Arafat. I met with a professor at Columbia University 
who was the representative of the PLO at the United Nations. 
But people were so emotional about it, we never focused on 
that.
    Mr. Rangel. Well thank you for realizing how important it 
was then, and especially now, as all of us move forward to try 
to conclude the Y River Treaty. Thank you.
    Chairman Crane. Thank you both. We appreciate your support 
for our effort here to expand our relations with that neglected 
portion of the world.
    I now would like to request that the next two panels on the 
schedule participate together. That would be Amama Mbabazi, 
minister of State for Uganda, Ambassador Mamadou Mansour Seck 
from Senegal, and the Ambassador from Mauritius, Chitmansing 
Jesseramsing. Also Pete Kooi, with the World Grain Trading 
Group, Cargill, Incorporated, Tim Rebhorn, commercial director, 
Iron and Steel Initiatives, Enron Corp., and Hon. Percy Sutton, 
chairman emeritus, Inner City Broadcasting Corp. in New York.
    If you folks will be seated. Let me again remind everyone 
that if you can please confine your oral presentations to 5 
minutes or less, your printed statements will be made a part of 
the permanent record. You can monitor the time constraints by 
that little light in front, green light. When it turns red, 
please try and wrap up the oral presentation.
    With that then, we will proceed in the order in which I 
introduced all of you to come to the dais. That's first Hon. 
Amama Mbabazi.

STATEMENT OF HON. AMAMA MBABAZI, MINISTER OF STATE FOR FOREIGN 
                  AFFAIRS, REPUBLIC OF UGANDA

    Mr. Mbabazi. Mr. Chairman, honorable Members of the Ways 
and Means Committee, ladies and gentlemen, good morning. I am 
pleased to be here today to share the views of the government 
of Uganda on U.S. trade relations with Sub-Saharan Africa, with 
particular emphasis on the African Growth and Opportunity Act, 
which we regard as an important milestone in the United States-
Africa relations.
    I wish first of all, Mr. Chairman, to commend you and 
Ranking Member, Honorable Charles Rangel, and all your 
colleagues for working tirelessly for this act. I wish also to 
thank Members of the House for passing the Act in the House of 
Representatives last year. We acknowledge with gratitude the 
many well-wishers and supporters of this act from corporate 
America, NGO's, the religious community, and the general 
public.
    Uganda welcomes this initiative. In fact, when it was in 
its early stages, President Museveni was one of the first 
African leaders to support it. He expressed Uganda's support in 
a letter he sent to President Clinton and other letters he sent 
to officials of the administration, Senators, and Members of 
this House. Uganda still supports this act, and appeals for its 
passage through the current 106th Congress.
    We support enactment of this Act into law because among 
other things, it aims at promoting trade and private sector 
investment in Sub-Saharan Africa. This Act, elements of which 
have already been reflected in the Clinton administration 
policy, marks an appropriate and respectable approach in which 
African countries will be engaged as trading partners with the 
United States for the benefit of all. We appreciate that we 
continue to be consulted and our views are being considered.
    This Act is being considered at a critical moment of 
tremendous opportunity in Africa. The continent is undergoing 
political and economic transformation which we believe will 
have significant implications for the world economy in general, 
and the United States in particular. Africa offers the United 
States a new market frontier. Approximately 700 million people 
live in Africa, accounting for more than 12 percent of the 
world's population. In 30 years, this will represent 17 percent 
of the world's population of about 1.6 billion people.
    This is significant because it represents a large, but 
untapped market for U.S. products and services. The potential 
for the benefits of this new U.S. trade policy for business on 
both sides of the continent is enormous.
    As for the benefit to Africa, I would like to give you one 
example to illustrate the point. Uganda receives in terms of 
tax revenue approximately $50 million annually from one of the 
biggest private foreign companies operating in the country. 
This excludes the revenue the country gets from utilities, 
water, electricity and so on, all the amount of money they 
spend on buying raw materials for their factory. All put 
together, this makes this company one of the biggest sources of 
national revenue in Uganda. As President Museveni once noted, 
if Uganda had 1,000 of such companies, Uganda would graduate 
from the begging club and join the donor's club.
    As Uganda's economy grows through trade with the United 
States, thousands of jobs will be created in Uganda and in the 
United States. Mr. Chairman, this is what real partnership is 
all about. We therefore commend this change in America's policy 
toward Africa, and welcome your support and increased interest 
in our continent.
    Let me comment briefly on the current aid relationship 
between Africa and the United States. Africa has for long been 
an aid recipient from the United States. This aid, in my view, 
has not had the same impact it created in Europe under the 
Marshall Plan or in Japan after World War II. Aid to Europe and 
Japan was very much linked, as Hon. Kemp has just stated, to 
trade. That is why it succeeded. We believe that the 
development of Africa will also require the same type of aid, 
one linked to trade.
    Of course there are many reasons which have contributed to 
the failure of aid policy in Africa. The most obvious one is 
the poor quality of leadership that dominated most African 
countries after independence. In many countries, including my 
own Uganda, there was dictatorship, which among other things 
suppressed entrepreneurship. Today however, there is an 
increasing number of African leaders who are committed to 
democratic governance and free market policies. The situation 
has rapidly improved.
    In the case of Uganda, Mr. Chairman, the country has made a 
remarkable recovery. Democracy and respect for human rights are 
the cornerstone of our country's governance. The economy has 
been liberalized and the government has made the private sector 
the engine of economic growth.
    To implement economic recovery programs, the government has 
successfully undertaken the following measures, among other 
things: Reduced the intervention of the central government in 
the micro management of the economy; privatized state-owned 
enterprises; adopted correct macro economic policies which have 
resulted in a stable single digit rate of inflation and 
stimulated the economic growth at the rate of an average of 6.5 
percent for the last 10 consecutive years; removed the few 
remaining non-tariff barriers to international trade; initiated 
the process of reforming commercial laws; liberalized the 
capital account, which makes Uganda one of the most liberal 
economies in the world; established a stock exchange; promoted 
the expansion of markets which resulted in the creation of 
regional markets; and harmonized tariffs within the East 
African Cooperation framework.
    Given that economic and political reforms have taken root 
in Uganda, the new change in the United States/Africa 
relationship will bring about a fundamental change in trade and 
investment between the two countries. Uganda is in the process 
of negotiating a United States/Uganda investment treaty to 
facilitate this.
    I wish therefore in conclusion, Mr. Chairman, to reiterate 
that the passage of this Act will develop closer U.S. trade 
relations with the countries of Sub-Saharan Africa. In 
particular, it will send a strong message to corporate America 
to look closer at the enormous opportunities for investing in 
Africa. Investments will stimulate growth and revitalize our 
economies. It will open African markets to U.S. products and 
services. It will give African products access to the U.S. 
markets. We therefore, urge all to fully support this bill.
    [The prepared statement follows:]

Statement of Hon. Amama Mbabazi, Minister of State for Foreign Affairs, 
Republic of Uganda

    Good Morning Mr. Chairman, Hon. members of the Ways and Means 
Committee, ladies and gentlemen.
    I am pleased to be here today to share with you the views of the 
Government of Uganda on U.S. trade relations with Sub-Saharan Africa 
with particular emphasis on the ``The African Growth and Opportunity 
Act,'' which we regard as an important milestone in United States/
Africa relations.
    I wish first of all to commend you, Mr. Chairman, Ranking Member 
Hon. Charles Rangel, and all your colleagues for working tirelessly for 
this Act. I wish also to thank Members of the House for passing the Act 
in the House of Representatives last year. We acknowledge with 
gratitude the many well-wishers and supporters of this Act; from 
Corporate America, NGOs, the Religious Community and the general 
public.
    Uganda welcomes this initiative. In fact, when it was in its early 
stages President Museveni was one of the first African leaders to 
support it. He expressed Uganda's support in a letter he sent to 
President Clinton and in other letters to officials of his 
administration as well as to Senators and Members of the House of 
Representatives. Uganda still supports this Act and appeals for its 
passage during the current 106th Congress.
    We support enactment of this Act into law because it, inter alia, 
aims at promoting trade and private sector investment in Sub-Saharan 
Africa. This Act--elements of which have already been reflected in the 
Clinton Administration policy--marks an appropriate and respectable 
approach in which African countries will be engaged as trading partners 
with the United States for the benefit of all. We appreciate that we 
continue to be consulted and our views are being considered
    The African Growth and Opportunity Act is being considered at a 
critical moment of tremendous opportunity in Africa. The continent is 
undergoing political and economic transformation which we believe will 
have significant implications for the world economy in general and for 
the United States in particular. Africa offers the U.S. a new market 
frontier. Approximately 700 million people live in Africa, accounting 
for more than 12 percent of the world's population. In 30 years, this 
will represent 17 percent of the world's population of about 1.6 
billion people. This is significant because it represents a large but 
untapped market for U.S. products and services. The potential for the 
benefits of this new U.S. trade policy for business on both sides of 
the continent is enormous.
    As for the benefit to Africa, I would like to give one example to 
illustrate the importance of private investment; Uganda receives in 
terms of tax revenue approximately $50 million annually from one of the 
biggest private foreign companies operating in the country. This 
excludes the revenue the country gets from utilities--water and 
electricity, from buying raw materials from local farmers, wages for 
employees, and many other benefits, all put together makes this company 
one of the biggest sources of national revenue. As President Museveni 
once noted, if Uganda had a thousand of such companies, we would join 
the donor's club.
    As Uganda's economy grows through trade with the United States, 
thousands of jobs will be created in Uganda and the United States. Mr. 
Chairman, this is what real partnership is about.
    We therefore commend this change in Americas policy toward Africa 
and welcome your support and increased interest in our continent.
    Let me comment briefly on the current aid recipient relationship 
which has so far characterized United States/Africa relations. Africa 
has for long been an aid recipient from the United States. This aid in 
my view has not had the same impact it created in Europe under the 
Marshall Plan or in Japan after World War II. Aid to Europe and Japan 
was very much linked to trade and that is why it succeeded. We believe 
that the development of Africa will also require the same type of aid--
one linked to trade.
    Of course, there are many reasons which have contributed to the 
failure of aid policy in Africa. The most obvious one is the poor 
quality of leadership that dominated most African countries after 
Independence. In many countries, including my own Uganda, there was 
dictatorship which among other things suppressed entrepreneurship. 
Today however, there is an increasing number of African leaders who are 
committed to democratic governance and free market policies. The 
situation has rapidly improved.
    In the case of Uganda, the country has made a remarkable recovery. 
Democracy and respect for human rights are the cornerstone of our 
country's governance. The economy has been liberalized and government 
has made the private sector the engine for economic growth. To 
implement economic recovery programs, government has successfully 
undertaken the following measures, among others:
     reduced the intervention of the central government in the 
micro management of the economy;
     privatized state-owned enterprises;
     adopted correct macro-economic policies which has resulted 
in a stable single digit rate of inflation and stimulated the economic 
growth rate to an average of 6.5 percent for the 10 consecutive years;
     removed the few remaining non-tariff barriers to 
international trade;
     initiated the process of reforming commercial laws;
     liberalized the capital account, which makes Uganda one of 
the most liberal economies in the world;
     established a stock exchange
     promoted the expansion of markets which resulted in the 
creation of the East African Cooperation (EAC) to be upgraded by July 
1999 to a common market and the larger common market for Eastern and 
Southern Africa (COMESA);
     harmonized tariffs within the East African Cooperation 
framework.
    Given that economic and political reforms have taken root in 
Uganda, the new change in the United States/Africa relations will bring 
about a fundamental change in trade and investment between the two 
countries. Uganda is in the process of negotiating a United States/
Uganda investment treaty to facilitate this.
    In conclusion, I wish to reiterate that the passage of the Act will 
develop closer U.S. trade relations with the countries of Sub-Saharan 
Africa. In particular:
    1. It will send a strong message to Corporate America to look 
closer at the enormous opportunities for investing in Africa. 
Investments will stimulate growth and revitalize our economies.
    2. It will open African markets to U.S. products and services.
    3. It will give African products access to U.S. markets.
    Thank you.

                                

    Chairman Crane. Thank you.
    Now Ambassador Mansour Seck.

 STATEMENT OF HIS EXCELLENCY MAMADOU MANSOUR SECK, AMBASSADOR, 
                      REPUBLIC OF SENEGAL

    Ambassador Seck. Thank you, Mr. Chair. As an African 
ambassador, I thank Honorable Crane, the Chair, McDermott, 
Rangel, Jefferson, Royce, who helped us to understand the 
American democracy and also to interact with you and your 
staff, because we learned that it is more important sometimes 
to learn from and to work with your staff because they are your 
memory. For 5 years, I think since 1995, we have been 
interacting with them for this piece of legislation.
    As an African ambassador, I feel honored and pleased to be 
a part of this undertaking for a real partnership between the 
United States and the continent of Africa. Maybe for the first 
time we Africans have the unique opportunity in this process to 
give our thoughts about cooperation for a mutual benefit, 
namely, the enactment of the Growth and Opportunity in Africa, 
the end of dependence. You will notice that in the title, all 
the words are very important. When you say growth and 
opportunity in Africa, that means that it's for the well-being 
of our people. When you speak about the end of dependency, that 
means that we recognize our dignity as human beings, as 
partners.
    What we want is just a rendezvous of give and take between 
our two continents. Therefore, as early as 1996, we sent a 
memorandum to the White House, to the Congress, and to the 
administration to give our proposal for enhancing our 
cooperation. Among the ideas what we said was that we Africans, 
we appreciate the Presidential report entitled ``Comprehensive 
Trade and Development Policy for the Countries of Africa.'' We 
were determined to assist in transforming these concerted 
efforts into concrete results.
    In our document, we underline that economic assistance 
still remains a necessity for the time being, the private 
sector is of paramount important. We emphasized the promotion 
of trade and investment. As the people before me said, the 
continent represents 10 percent or more of the population of 
this world, and our market is untapped mostly from the U.S. 
services.
    The Europeans, the Japanese, the other Asians are aware of 
this fact, and they are everywhere in Africa. The U.S. share in 
our market is only 7 percent, whereas the Europeans is 44 
percent. I remember the late Ron Brown declaring in Dakar, 
Senegal during the 1995 African-American Summit that we have to 
correct that. We are here not only to welcome the idea, but to 
put it into reality.
    In our memorandum, we suggest also to have a summit between 
your president and our presidents every 2 years, and also a 
forum between your ministers and our ministers. You can see 
that we're talking about interaction and give and take between 
you and us.
    We have a lot of negative points, like the crises in 
Africa. We don't have to hide them. But we have some positive 
points also. For example, the growth of Sub-Saharan Africa, for 
the last 3 years in a row has been more than 5 percent. If I 
remember, America performed a very good year last year, with 4 
percent growth. The secretary of Treasury recognizes that if 
you invest in Africa, you have a return of 30 percent. As 
somebody said before me, the U.S. exports to Africa represents 
$6 billion, creating 100,000 jobs. This is very important.
    I have to conclude. Our continent wants only to be treated 
like Europe and Asia. Africa in general shares the same 
universal values as America, for a quest of well being, 
freedom, more justice, more democracy for the global village 
where we all are neighbors.
    In this context, we already shared side by side World War 
I, World War II, and Desert Storm. Senegal and Niger were among 
those countries. Senegal, my country lost a lot of soldiers 
during this conflict, meaning that we have shared these moral 
values, why not share the environment of our economy?
    I finish by quoting President Clinton during his historic 
visit to Africa. ``Perhaps'' he said, ``the worst sin America 
ever committed about Africa was the sin of neglect and 
ignorance.'' This is what he said in Uganda. In Senegal, he 
said, ``We import about as much oil from Africa as we do from 
the Persian Gulf. We export more to Africa than to all of the 
former Soviet Union. And Americans should know that our 
investments in Sub-Saharan Africa are in return of 30 percent, 
higher than any other continent in the world.'' I quote him in 
South Africa, ``Yes, Africa needs the world more than ever. It 
is equally time that the world needs Africa.'' Thank you very 
much, Mr. Chairman.
    [The prepared statement follows:]

Statement of His Excellency Mamadou Mansour Seck, Ambassador, Republic 
of Senegal

    Dear Chair, Ladies and Gentlemen.
    As an African Ambassador, I feel honored and pleased to be a part 
of this undertaking for a real partnership between the US and the 
continent of Africa. Maybe for the first time we Africans have the 
unique opportunity, in this process to give our thoughts about a 
cooperation for a mutual benefit, namely the enactment of the ``Growth 
and Opportunity in Africa, the End of Dependency.'' You will notice 
that in the title all the words are important ``Growth and 
Opportunity'' represents the well being of our people but the ``the End 
of Dependency'' represents our dignity as human beings.
    In fact, since 1995, the African diplomatic corps has been working 
closely with Congress, the White House and the Administration and even 
the business community to build this piece of legislation, which will 
create a legal framework within which America and Africa will cooperate 
to develop their economies. We want to forge a rendezvous of ``give and 
take'' between our two continents, a ``win-win situation''.
    Therefore, already in May 1996, we sent a memorandum to the White 
House, to the Congress and to the Administration to give our proposal 
for enhancing our cooperation.
    I will extract some of our main ideas from this document. 

                I. The African Diplomat Corps Memorandum

    First, we appreciate the presidential report entitled 
``Comprehensive Trade and Development Policy for the Countries of 
Africa'' on February 96 and we stressed, I quote, ``We, African 
Ambassadors are encouraged by those positive developments and we are 
determined to assist in transforming these concerted efforts into 
concrete results''.
    As a contribution and in consultation with the US business 
community, we issued on June 95 a document entitled ``Policy 
Recommendations of the Development of the US Economic Agenda for 
Africa.''
    In our document, we underline the fact that:
     Economic assistance still remains a necessary complement 
to help the African countries become viable trading partners;
     The private sector is of paramount importance
     We emphasized the promotion of trade and investment for 
our development in partnership with the US public and private sector.
    Africa represents a population of 700 million people who aspire to 
be not only consumers but also producers of goods and services. Our 
vast untapped market is widely opened to the US goods and services.
    The Europeans, the Japanese and other Asians are aware of that fact 
and present everywhere in Africa. Today, the US share in the African 
market represents only 7% whereas the European market represents 40%.
    I remember the late Ron Brown declaring in Dakar, Senegal during 
the 1995 African-American Summit that this has to be corrected. We are 
here not only to welcome this idea, but to also put it into reality.
    We also stress in this document our strong support for a Summit on 
a regular basis between the leaders of our 2 continents for a ``US-
Africa Trade and Investment Partnership'' as soon as possible. The idea 
of an ``annual high level Forum'' among our ministers to ``evaluate and 
monitor the implementation of our partnership'' was also strongly 
proposed. We hope to start these meetings in March 1999. 

                     II. Other reasons for the Bill

    At this point, I will mention some other reasons why the enactment 
of this Bill is important and beneficial to you Americans and to us 
Africans.
    1. The average growth rate of the GNP for SSA countries for the 
last 3 years is 5%, it is almost 10% for some others. Generally, 3% is 
a good average for many countries (US 4% in 1998).
    2. The US Secretary of Treasury recognizes that the return on 
direct investment in Africa is about 30% when the average return 
worldwide does not exceed 14%.
    3. US exports to Africa total 6 billions dollars, meaning more than 
US exports to the former Soviet Union. These exports generate 100,000 
jobs in the US.
    4. At the end of 1998, more than 48 African countries were 
connected to the Internet.
    5. 12% of the US population is of African descent.
    6. 30 Sub-Saharan African countries are actively democratizing or 
are already democracies. My country Senegal for example, has 30 
different political parties and has never experienced any military coup 
d'etat.
    7. The state-owned companies are in the process of being privatized 
all over the continent.
    8. Senegal and Niger were part of Desert Storm campaign against 
aggression and injustice.
    9. The House passed this bill last year already.

                       III. Comments of the Bill

    In the section entitled ``The Findings,'' you can read ``The 
Congress finds that it is in the mutual economic interest of the US and 
Sub-Saharan Africa to promote stable and sustainable economic growth in 
Sub-Saharan Africa and that sustained and economic growth in Sub-
Saharan Africa depends in large measure upon the development of a 
receptive environment for trade and investment''.
    The US seeks to assist SSA countries and the private sector in 
these countries to achieve economic self-reliance by:
     Strengthening and expanding the private sector
     Encouraging increased trade and investment between the US 
and SSA
     Reducing tariffs, non-tariffs barriers and other obstacles
     Assisting SSA in their efforts for regional integration
     Negotiating free trade areas
     Establishing a US-SSA trade and investment partnership
     Focusing on countries committed to accountable 
governments, economic reforms and the eradication of poverty
     Establishing a US-SSA Economic Cooperation Forum
     Supporting the building of civil societies.
    In section 3 titled ``Statement of Policy,'' the Congress supports 
``Economic Self-reliance'' for SSA particularly for those countries 
committed to:
     Economic and political reforms
     Market incentives and private sector growth
     Eradication of poverty and
     The importance of women to economic growth and 
development.
    The section 4 titled ``Eligibility requirements'' states that to be 
eligible, an African country must:
     Respect the human rights
     Promote free movements of goods and services between the 
US and SSA
     Promote exports through joint-venture projects
     Protect property rights
     Promote appropriate fiscal system and avoid double 
taxation
     Promote measures to create a conducive environment to 
domestic and foreign investments
     Promote regional markets
     Eliminate government corruption
     Support the private sector
     Privatize government-controlled enterprises
     Observe the rules of law
     Comply with international regulations issued by the World 
Trade Organization (WTO) and the IMF
     Promote the micro-enterprises
    Section 5 ``The US-SSA Trade and Economic Cooperation Forum'' reads 
in the declaration of policy that:
    ``The President shall convene annual high level meetings between 
appropriate officials of the US government of the SSA countries in 
order to foster close economic ties between the US and SSA''.
    ``The President shall direct the Secretary of Commerce, the 
Secretary of Treasury, the Secretary of State and the USTR to host the 
first annual meeting with counterparts of such secretaries from the 
governments of SSA countries, the secretary general of the OAU, the 
Government officials etc. . . . to discuss matters like expanding trade 
and investment relations between the US and SSA''.
    ``The President will encourage US NGOs and private sector to host 
annual meetings with their African counterparts in conjunction with the 
US-Africa Forum.
    ``The President shall meet with the heads of African governments no 
later than 12 months after the enactment''.
    Section 6 through section 16 proposes a US-SSA Free Trade Area 
eliminating barriers and encouraging exports.
    Section 7 stresses that the lack of competitiveness of SSA in the 
global market makes it a limited threat to US jobs.
    African textile and apparel exports to the US represent less than 
1% of the total of 54 billions dollars.
    Even if that percentage remains around 3%, there will be no threat. 
In fact Asian, among them China, export more than 70% of that market 
without being considered a threat.
    Kenya, Mauritius and other African countries must adopt an 
efficient visa system ``against unlawful trans-shipment of textile and 
apparel goods and the use of counterfeit documents''.
    ``The President shall continue the existing no quota pole on 
countries in SSA.'' He will submit a report to the Congress on the 
growth in textiles and apparels exports to the US each year in order to 
protect workers and US consumers.
    In section 8, The Generalized System of Preferences states that 
``The President may provide duty-free treatment for any article set 
forth'' if, after the advice of the International Trade Commission, he 
considers that such article is not sensitive.
    The duty-free rule will terminate in June 2009.
    In section 9, US role in the African debt reduction, especially for 
HIPC countries will happen through the International Bank for 
Reconstruction and Development (IBRD), the IMF and ADB.
    In section 11, the ``OPIC will initiate equity funds in support of 
projects in SSA. Funds of 500 millions should be used in support of the 
infrastructure projects in SSA. It also state that ``The Eximbank will 
facilitate operative support by US commercial banks for trade with the 
SSA''.
    Section 16 provides the possibility for the US to donate to 
governments of SSA ``air traffic control equipment that is no longer in 
use with a technical assistance.''

                        IV. Critics of the Bill

    1. We know that the bill is not perfect. Now, even European 
countries like France are amending their constitution to comply with 
the European Union treaty.
    2. In this bill, there is a guarantee of continuous oversight. 
President has to report to the Congress every year to assess the 
success of this undertaking. On the other side, African countries are 
free to make their own assessment.
    3. Together Africa and the US can improve the bill as we go along 
with its implementation.
    4. In many of the requirements for eligibility, even though some of 
them are hard to meet. We have experience with the same 
conditionalities with the Bretton Woods Institution (World Bank and 
IMF).

                               Conclusion

    This bill must represent a wide framework within which America and 
Africa will express their will to work together for the integration of 
Africa into the global economy of the next millenium. A win-win 
situation of mutual benefit will be the result especially for the US 
business community.
    Our Continent wants only to be treated like the Continents of 
Europe, Asia and America. Africa in general shares the same universal 
values than America: quest for our well being, for our freedom, for 
more justice and for more democracy in the global village where we all 
are neighbors.
    If in this context, we already shared side by side World War I, 
World War II and Desert Storm. If we risked our lives for the same 
freedom and justice, why can't we share the same economic environment 
for the well being of our people?
    One of our dreams, for Africa is to be a part of a network 
enhancing our cooperation with the US. Last year, Congress enacted the 
``Seeds of Hope Act.'' This year, we hope that not only the House and 
the Senate will pass this bill, but also that the US will ratify the 
``Convention to combat Desertification'' that have already ratified by 
almost all the African countries.
    I will conclude by quoting President Clinton during his historic 
visit to our continent.
    In Uganda, March 1998: ``Perhaps the worst sin America ever 
committed about Africa was the sin of neglect and ignorance''.
    In Senegal, March 1998: ``We import about as much oil from Africa 
as we do from the Persian Gulf. We export more to Africa than to all 
the former Soviet Union. And Americans should know that our investments 
in SSA are in a return of 30%, higher than any other continent in the 
entire world''.
    In South Africa, March 1998: ``Yes, Africa needs the world more 
than ever. It is equally time that the world needs Africa''.
    We African Ambassadors thank Honorable Crane, McDermott, Rangel, 
Jefferson, Royce, Payne, McKinney, Jackson Lee, Norton, Hastings, Hall, 
to name few, for introducing this bill.
    I thank also Honorable Gingrich and my dear friends General Collin 
Powell and Jack Kemp, for supporting this bill.
    I thank you.

                                

    Chairman Crane. Thank you.
    Our next witness is Mr. Jesseramsing.

     STATEMENT OF HIS EXCELLENCY CHITMANSING JESSERAMSING, 
               AMBASSADOR, REPUBLIC OF MAURITIUS

    Ambassador Jesseramsing. Chairman Crane, Members of the 
Committee, I would like to thank you for your invitation for me 
to speak on the African Growth and Opportunity bill. I would 
also like to commend you on the admirable speed with which your 
Committee is dealing with this historic piece of legislation. 
Certainly all of us in Africa are watching with great interest 
and excitement the passage of this bill through this Congress. 
We warmly applaud the support that this Committee has provided 
for the Africa bill, both in the 105th Congress and what's 
going on in this present Congress.
    The Africa bill is a good bill for America. It's a good 
bill for Africa. It is a modest bill, but one that lays a solid 
foundation for the development of a strong framework to 
encourage mutually beneficial economic partnership. It is 
fitting that considering the traditional ethnic, racial, and 
cultural links that bind the African continent over the 
centuries with America, the United States is strengthening its 
ties, its economic ties with Africa.
    Despite being a forgotten continent in the mind of many 
Americans, Africa imports more from the United States than does 
the whole of the former Soviet Union. These imports directly 
provide work for thousands, hundreds of thousands of Americans. 
But, Mr. Chairman, African exports to the United States are 
overwhelmingly raw primary products, which are then refined 
here in America and transformed into manufactured products, 
both creating many, many more American jobs, and also providing 
the American customer with a greater variety of affordable 
goods.
    As a latecomer to the African marketplace, the United 
States finds itself in competition with the European companies 
that have been implanted in the African soil for decades, if 
not centuries. This is part of history. It's the colonial past. 
It's the empires that were built around.
    If 7 percent of African imports are American, then 44 
percent come from Europe. Mr. Chairman, we know well your 
dedication to free trade. So we welcome greater American 
interest in Africa to stimulate competition, and offer Africa 
additional sources for both goods and markets.
    The question was put earlier about the terms of 
investments, what do Americans gain in terms of trading with 
Africa. If you take the case of many African countries, 
certainly South Africa and Mauritius, recently things which 
were unheard of where all the investments and all the biddings 
were done by European countries, Qualcomm is now in Mauritius. 
They won a bid. Microsoft has installed itself. Then again, we 
bought Boeing planes and so on, instead of you know, the 
traditional ones of going to Europe for Airbus and so on. So 
there is a movement toward buying American.
    The Africa bill would set up the institutional framework 
that will expand the increasingly dynamic partnership between 
the United States and Africa, and would permit African 
countries a greater freedom in their commercial and economic 
choices.
    Mr. Chairman, Africa we know has had a negative image. It's 
too often stereotyped in the international media. Yes, there 
are conflicts, but there are conflicts in Europe also. There is 
unemployment, there is underdevelopment, but yes, there is 
today, hope. There is a renaissance in Africa. Then we have to 
remember that two power houses in Africa, South Africa, 
Nigeria, are now reintegrating the international community. 
Regional economic blocs such as the South African Development 
Community, SADC, the Economic Community of Western African 
States, ECOWAS, the Common Market for Eastern and Southern 
Africa, COMESA, and the East African Cooperation Tri-partite 
Commission are all overcoming national and natural boundaries 
to create more vibrant and modern economies.
    From the almost total domination of state-run economies 
during the cold war period, most African countries are nowadays 
democratizing and adopting liberal economic policies. Eight out 
of ten Sub-Saharan African countries are now members of the 
World Trade Organization and are implementing International 
Monetary Fund and World Bank programs of reform. There is a 
strong democratization process going on in Africa. This has 
been heralded by the U.S. State Department itself. Africa is on 
the move, and this bill is important at this historic moment.
    It is important to Africa that this bill passes the U.S. 
Congress with all its provisions, especially its trade 
provisions in tact. With the rapid globalization of the world 
economy, there is every danger that Africa finds itself 
marginalized. More advanced developing countries in South East 
Asia and Latin America have suffered major economic upheavals 
as they adjust to this new climate of the world economic order. 
We in Africa have fragile economies, and we are much more 
vulnerable.
    It is certainly not in the interest of the United States to 
have an Africa in chaos. The Africa bill is opportune as 
African countries seek to create the proper enabling 
environment for business and commercial development that it 
would be a crime of historic proportion not to have it passed. 
We in Africa believe that the Africa bill will develop our 
economies, to increase trade and investment opportunities, thus 
making us more able to better withstand the shocks of the world 
market and also to be a strong economic partner with the United 
States.
    In conclusion, the way forward for Africa must be through 
the development of a manufacturing sector, which will create 
meaningful and sustained employment for the unemployed, develop 
an industrial culture, and develop a work force that will be 
also consumers, and end this cycle of poverty and despair for 
the youth of Africa. The Africa bill does provide the basic 
modest trade proposals. These proposals are a drop in the ocean 
for the U.S. economy, but for us it's a riverswell and it will 
revitalize and invigorate the economies of Sub-Saharan Africa.
    Several African countries, including my own, Mauritius, 
have developed quickly after implementing sound economic 
policies. Mauritius, which in the sixties was a typical African 
basket case, boasts today a dynamic economy with full 
employment and a strong democratic framework. It is also 
encouraging regional cooperation through our own Mauritian 
investments in other African countries.
    Finally, Mr. Chairman, we're talking of 700 million people, 
men, women, children, may live a better life and longer and 
happier life if they can actively participate in national 
policies through a democratic process, if they can participate 
more effectively in their national economy through liberal 
economic policies, and also if they can feel they are not the 
forgotten of this world, but that they have a hope for a better 
tomorrow.
    Mr. Chairman, and Members of the Committee, this bill does 
in its own modest way, it lays the foundation for an improved 
today and does give that hope for a better, far better 
tomorrow. Thank you.
    [The prepared statement follows:]

Statement of His Excellency Chitmansing Jesseramsing, Ambassador, 
Republic of Mauritius

                             1. Background

    It is quite appropriate that the genesis of the Africa 
Growth and Opportunity Bill was in the Uruguay Round Agreement 
Act (Section 134) passed by the US Congress on December 8th 
1994. That the US Congress had to mandate the President to 
develop a trade and investment policy toward Africa emphasized 
how little attention had previously been paid to the African 
continent as a possible economic partner for the United States. 
Furthermore Section 134 recognized the need to integrate Africa 
into the new Uruguay Round/GATT international trading system in 
the context of the developing globalization of the world 
economy. Failure of such an integration would confirm the 
increasing marginalization of a massive continent of 700 
million people rich in mineral, natural and human resources.
    The history of American interaction with Africa until now 
has been marked by the military demands of the Cold War, the 
strategic importance of a few individual African countries and 
a general benign economic neglect. Yet despite this Africa has 
been an important source of primary products for the United 
States and is a major market among the developing and 
transitional economies of the world.
    As the United States comes to terms with its new role as 
sole super-power with the end of the Cold War and as the major 
and most dynamic economy in the world so it has to rethink its 
relations with the African continent. This re-thinking is also 
spurred on by a more dynamic and economically important Afro-
American community that is justifiably seeking to develop ties, 
economic and cultural with the motherland from which so many 
millions of its sons and daughters were dramatically and rudely 
torn.
    As the United States does carry out this rethinking about 
its relationship with Africa it also recognizes that an Africa 
in chaos is a serious threat to the national security of 
America. As the burden of the role of international policeman 
is thrust, willingly or unwillingly, on the shoulders of the 
United States, and as the hot spots of the world increase both 
in number and in intensity, the United States has no interest 
in an Africa that is disintegrating into intra-state and inter-
state conflicts. Not only conflict but a lack of sophistication 
and preparedness in African countries permits serious threats 
to US interests and personnel as shown so dramatically in the 
terrible bombings of the US embassies in Dar-es-Salaam and 
Nairobi last year.
    The United States can no longer afford to ignore Africa. It 
can no longer afford to permit a poor level of development on 
the continent. The United States must act now for every minute 
lost in encouraging economic development in Africa today will 
cost ten times more in the future for the developed countries. 
It makes much more sense to have strong and economically viable 
trading partner than a dangerous, unstable economic time-bomb 
waiting to go off.
    Past efforts to help Africa on the part of the United 
States have not achieved the expected results. The aid 
programmes which have been in place for some time certainly 
help particular groups and needy people. There is no question 
that they should be continued and certainly stepped up, for 
Africa has serious need of all the help it can get.
    Present efforts to deal with the heavy indebtedness of many 
of the African countries should be pushed vigorously forward 
and the writing off of these debts by the international 
community would be a major push to bring many African countries 
out of their convoluted poverty situations. But there must be a 
way forward, a dynamic programme that offers hope, sound 
economic programmes and a sense of partnership rather than 
subservience. This way forward is the Africa Growth and 
Opportunity Bill.

                    2. The Immediacy of the Problem

    A major obstacle to African countries in their fight to integrate 
the global economy is the limited window of opportunity that faces 
them. The post-Uruguay Round implementation of free trade measures and 
greater global economic integration is moving ahead apace. By the year 
2005 the Multi Fiber Agreement (MFA) will be phased out, the Free Trade 
Area of the Americas (FTAA) will be in place, and NAFTA will have 
reached complete economic integration.
    Time is certainly not on the side of the Sub-Saharan African (SSA) 
countries.
    The Africa and Growth and Opportunity Bill does provide a basis for 
the development of meaningful trade and investment opportunities 
between the United States and Africa. But just as importantly, it does 
provide for these opportunities in the immediate term.
    The failure to enact this legislation will create serious delays 
that will certainly considerably hamper the efforts of the African 
countries to profit from the window of opportunity that is available at 
present. This in turn may have the consequence that finding solutions 
to problems in Africa in the future will be far more costly and 
daunting to the international community than speedy and effective 
action at the present time, It will certainly also mean that Africa 
will not be able to play its anticipated role as a developed partner in 
trade with the United States, providing markets for US goods and 
business opportunities for US companies.
    This is why Mauritius urges the US Congress to pass the Africa 
Growth and Opportunity Bill with especially its trade and investment 
provisions intact, as soon as possible, for delay may be fatal to this 
legislation.

                   3. Trade and Investment Provisions

    This submission, while supporting unequivocally the whole Bill as 
it stands, will concentrate specifically on those two economic elements 
which can be of immediate effect on the Sub-Saharan African countries,

(a) OPIC Funds

    The Africa Bill does provide for the setting up of funds for 
infrastructure projects and equity to be overseen by the Overseas 
Private Investment Corporation (OPIC). The poor situation of the 
infrastructure in Sub Saharan Africa, particularly in terms of 
transport, with 14 land-locked countries, is a major handicap for our 
continent to participate in the growing international trade of the post 
Uruguay-Round world. The speedy enactment of this Bill would permit the 
use of these funds to improve in the immediate the physical 
infrastructure of the Sub-Saharan African countries.

(b) Textile and Apparel

    However, the major element in the Africa Bill which would allow for 
the immediate development of some manufacturing basis in Africa, is the 
provision for quota and duty-free access to the United States for 
exports of textile and apparel from Sub Saharan Africa.
    Mauritius is the main exporter of apparel to the United States in 
the SSA region and our experience has shown that this method of 
industrialization can help considerably to overcome some of the grave 
problems facing African countries today.
    To create sustainable growth, to create employment for young job 
seekers, to gain foreign exchange and to develop an export-oriented 
economy. African countries have realized the necessity to develop their 
manufacturing base. History has shown that the cheapest and most 
quickly set up manufacturing industry is apparel production. Since some 
SSA countries are also producers of raw materials such as cotton, the 
development of the clothing industry could create a more sold 
integrated industry if it uses local fabric or regionally produced 
fabric from another SSA country.
    However there are few SSA countries which have begun their textile 
or apparel industries, and those that have, are for the most part in an 
infant stage. Any SSA country wanting to develop its textile and 
apparel industry has only a very short time in which to do so for with 
the new Uruguay Round GATT Agreement and the setting up of the WTO, the 
quota restrictions on the world's major textile producers will be ended 
with the phase out of the Multi-Fiber Agreement (MFA) on 1st Jan. 2005.
    Therefore on that date countries like China, India, Pakistan, 
Bangladesh, Vietnam which have massive cheap labour pools, raw 
materials and a long tradition of textile and apparel production will 
have unrestricted access into the markets of the developed countries 
and will clearly sweep away any competition from inexperienced 
competitors such as Sub Saharan Africa.
    This is the importance of the duty free element in the Africa 
Growth and Opportunity Bill, for with that duty at about 17% on 
average, the Sub Saharan African countries could continue to compete if 
they have that advantage over the other exporters who would have quota 
free but not duty free and would still have to pay the 17% tariff.
    (I) US International Trade Commission. The US International Trade 
Commission was asked by the US House of Representatives Ways and Means 
Committee to look into the effect on the US economy of providing quota-
free and duty-free exports to the United States of Sub-Saharan African 
exports of textiles and apparel.
    Their conclusions published in the USITC Investigation No. 332-379, 
Publication 3056 of September 1997 were as follows:
     Since SSA countries exports in these categories 
represented less than 1% of total global imports into the USA, even a 
doubling or tripling of such SSA exports would have little effect on 
the US economy;
     The USITC estimated that such measures would entail at 
most the loss of some 676 jobs in the United States.
     The USITC believed that at least 16 SSA countries would 
benefit immediately from these measures, and that others could benefit 
in the future if they set up such industries.
    (II) US Industry attacks against Africa Bill Textile Provisions. 
The American Textile Manufacturers' Institute (ATMI) is concerned that 
textile fabric from the Far East and Asia will be made up into clothing 
in Sub Saharan Africa and will enter the USA quota-free and duty-free 
under the Africa Bill, thus undermining its own strategy of using the 
Caribbean and Mexico for apparel making from US textile fabric.
    Therefore they have stated that the granting of quota-free and 
duty-free to SSA countries will have the following negatives for the US 
economy.
    (III) Responses to these Arguments--Job Losses. There has been a 
major loss of jobs in the US textile and apparel industries over the 
past twenty years. During that period SSA exports have represented less 
than 1% of total imports in this sector into the USA. The job losses in 
these industries have been principally engendered from the relocation 
of US companies to the CBI countries and Mexico.
    The USITC has stated that complete quota-free and duty-free entry 
of textile and apparel from SSA would create not more than 676 job 
losses.
    Even if SSA countries doubled or tripled their exports to the USA 
it would not cause major job losses in the USA which is principally, 
due to higher wages, an up-market clothing producer, and not a cheap 
low-market producer as the African countries would start of as. Any job 
losses would probably occur in Asia as production is shifted from there 
to Africa.
    Transshipment. The US Customs have criticized the ATMI for their 
scaremongering statement in the ATMI's submission to the House Ways and 
Means Committee of the 105th US Congress in a letter from Ms. Janet L. 
Labuda, Director, International Trade Management, US Customs to the 
ATMI.
    ``I am very concerned by the fact that false and misleading 
information was disseminated and that this information was attributed 
to US Customs. To prevent this from happening again, I would request 
that your organization submit information or statements to US Customs 
prior to their public release when any information or statement is 
attributed to US Customs.''
    46 of 48 SSA countries have quota-free entry to the USA and all 
have quota-free and duty-free entry to Europe under the Lome 
Convention. Yet up till now neither the USA nor the EU have found any 
major transshipment through Africa to their markets. In fact the SSA 
exports to the USA represent less than 1% of all imports and so any 
transshipment, if there should be any, is minimal. US Customs have 
found no case of transshipment going through Africa since 1996.
    The Africa Growth and Opportunity Bill does also provide for 
control against illegal transshipment through the introduction of a 
Visa system in partnership with US Customs. Furthermore heavy penalties 
are imposed on any company which is caught involved in illegal 
transshipment.
    (IV) Foreign Workers. The ATMI in its attempts to de-rail the 
Africa Bill, as well as some US NGOs have stated that the textile 
provisions will not help African workers but foreign, i.e. Asian 
workers, will be brought into Africa to carry out the production. They 
have based themselves on the experience of the Northern Marianas, 
islands which are part of the United States.
    The whole purpose of encouraging the development of a textile and 
apparel industry in Africa is precisely because there is a very large 
unemployment problem there and it would be suicidal politically for 
mainland African countries to introduce foreign workers in place of 
their own unemployed. Furthermore the suggestion that foreign workers 
are needed in Africa is tainted with the concept that African workers 
cannot do the work, which is false.
    Owing to its tiny population (1.1 million) and rapid economic 
development Mauritius has been forced to use foreign workers, but, they 
represented in 1997, 5.3% of the total work force and 8.6% of the 
textile and apparel industry work force. The Mauritian textile industry 
is 72% wholly owned by Mauritians and Mauritian capital makes up an 
important part of the remaining companies. All foreign workers in 
Mauritius are governed by the local labour laws, and are protected by 
minimum standards of working conditions that are enforced by the 
Government of Mauritius. Furthermore, since the workers are under 
contract and so only temporarily in the island, the Government of 
Mauritius ensures that companies employing foreign workers have return 
air tickets for these workers to leave if and when they want, even 
before the expiry of their contract. Mauritius is a long time democracy 
with freedom of association, reflected in very free trade unions, 
freedom of speech reflected in a very free press, and any abuses of 
foreign workers' rights would be quickly brought to the notice of the 
general public.
    A good number of Mauritian enterprises have also set up factories 
in other African countries creating jobs and sustainable economic 
growth: for example, in Madagascar where 25,000 jobs have been created 
by the 44 Mauritian companies in the Malagasy Free Zone, as well as in 
Lesotho, Mozambique and Tanzania. Africa is helping Africa.
    Mauritian textile and apparel companies export to renowned up-
market companies in the United States and Europe all of which require 
strict adherence to their Codes of Conduct for production, including: 
no child labour, no forced labour, no compulsory overtime, acceptable 
working conditions, and freedom of association.

                             4. Conclusion

    The Africa Growth and Opportunity Bill comes at a decisive moment 
in the relations between he United States and Africa. The visits of 
President Clinton, Vice President Gore, the First Lady, Hilary Rodham 
Clinton, Secretary of State Hon. Albright and other members of the 
Cabinet have focused attention on the real possibilities of increased 
economic partnership between Africa and the United States. The 
unprecedented Presidential visit to 6 Sub-Saharan African countries has 
certainly given the impetus for increased collaboration between the 
United States and Africa.
    The Congressional Delegation visit led by Congressman Charles 
Rangel, together with a large number of American businessmen from a 
wide panoply of companies, covering manufacturing, telecommunications, 
information and financial services, to several African countries 
including Mauritius in December 1997, also reflected this growing 
interest in economic relations between the United States and Africa.
    The Bill comes at a historic moment as we enter together the 21st 
century with the sincere hope that Africa, having undertaken 
successfully its ``Renaissance,'' may take its rightful place at the 
table of nations, no longer as supplicant but as mature participant 
capable of being a solid partner in international economic development.
    However, the opportunity to achieve something of concrete, 
something of worthwhile, is only present for a short time and we must 
seize that time. Delay and disappointment today will cause greater 
problems in the future.
    There are economic measures in this Bill which can create the 
necessary ennobling environment for mutually beneficial business 
development between the United Sates and Africa. These measures are the 
essence of the Bill, and without them, the Bill would not be able to 
deliver it's promises.
    While there is concern by the US domestic textile and apparel 
industries about these provisions, the facts are there to show that 
Sub-Saharan Africa will not be a major threat to the US economy, but in 
reality will be able to develop into an important source of jobs and 
exports for US companies. The Africa Growth and Opportunity is 
therefore a win-win situation for both USA and Africa.

                                

    Chairman Crane. Thank you, Mr. Jesseramsing.
    Mr. Kooi.

  STATEMENT OF PETER A. KOOI, PRESIDENT, WORLD GRAIN TRADING 
      GROUP, CARGILL, INCORPORATED, MINNEAPOLIS, MINNESOTA

    Mr. Kooi. Mr. Chairman, Members of the Committee, thank you 
very much for your invitation to discuss economic opportunities 
and development in Africa. My name is Peter Kooi. I am a 
corporate vice president and president of the World Grain 
Trading Group of Cargill, Incorporated. Cargill is a privately-
held agribusiness company founded over 130 years ago in Iowa. 
Today Cargill is headquartered in Minneapolis, Minnesota, and 
is involved in marketing, processing, distributing commodities 
with some 80,000 employees in 65 countries. We have trading 
relationships in an additional 130 countries.
    Cargill is no stranger to the developing world, nor to 
Africa. We believe the legislative initiative you are 
considering today is needed to accelerate economic and 
political development in Sub-Saharan Africa.
    I am Cargill's representative to the South African 
Development Council. Cargill is an active member of the 
Corporate Council on Africa. We have been pleased to 
participate in President Clinton's historic trip to Africa, and 
Secretary Daley's recent trade mission there. Cargill's current 
businesses in Africa include processing and trading in cotton, 
coffee, cocoa, oilseeds, rice, sugar, and grain, and in rural 
development, through a subsidiary company, Cargill Technical 
Services. We now have offices and facilities in 10 African Sub-
Saharan countries, with annual sales of $220 million from our 
asset-based businesses, and total trade of $1.3 billion.
    Our experience in Africa convinces us that unlocking 
Africa's latent agricultural productivity is the best way to 
begin self-sustaining broad-based development. Let me give an 
example from Uganda. We currently purchase 4,000 tons a month 
of coffee from small farmers. Our plant in Kampala employs 
local workers, who clean, grade, and bag coffee for export to 
Europe. With Cargill's practice of reinvesting most of its 
earnings inside the country, Uganda benefits from increased 
local cash-flow, spending power, as well as from our investment 
in the processing facility.
    As successful as these efforts in Uganda and elsewhere may 
be, the development needs in Africa can not be met by the 
private sector alone. What Africa needs, and what the African 
Growth and Opportunity Act passed last year begins to offer is 
a partnership, each participant in the effort working with its 
unique skills, resources, and abilities, can contribute to the 
solution.
    To move Africa from subsistence to dynamic growth requires 
real collaboration among local governments, multi-lateral 
development banks, and agribusiness. For a country to be 
attractive to agribusiness does not require a huge asset 
investment, but it does require some investment. In countries 
like Uganda, to use my earlier example, investors in 
agribusiness development do need one specific infrastructure. 
It's transportation. If the farmer is to get his coffee to the 
buyer, and the buyer to get the coffee to the processing plant, 
and the plant to get it to an export port, the coffee can 
become a world-priced product, generating cash for more 
internal investment and foreign exchange earnings for the 
national account. This moves the cycle of improvement upward.
    To achieve stable political and economic environments, 
local governments can be well supported through the World Bank 
and MDBs. The provisions in the legislation for continual 
consultation on policies is a critical part of that support. No 
one outside of the country can make the next step happen. The 
governments locally must establish responsible, fair, and 
transparent trade, fiscal, and monetary policies with properly 
valued exchange rates, a legal system based on the rule of law, 
not the rule of individuals. Law that enforces laws against 
bribery and corruption. Secure rights of property ownership, a 
reliable enforceable law of property and contracts, credit 
policies focused on the farm sector, and a movement toward 
democracy, civil development, and greater individual freedoms.
    Were these conditions or at least most of them exist, 
private enterprise and especially agribusiness can help take 
the development process to the next level. We come to the 
pathway through which needs can be met both within Africa and 
in the parts of the world that are markets for African 
products. As economies are strengthened and local and regional 
prosperity grows, the Africans themselves have increased 
capacity to purchase. They seek improvements in their diets and 
in the way they live, creating a market for imported food, 
clothing, and consumer and capital goods, technology and 
further investment.
    The African countries can, and if we all contribute to the 
effort, will become a larger market for those goods reflecting 
the United States' comparative advantages. This upward spiral 
requires each partner in the development process to play its 
role well. The African governments, foreign government like the 
United States, the aid community, multilateral development 
banks, universities, and research organizations and private 
enterprise, each must contribute what we are most capable of 
doing for the benefit of the people of Africa and the people of 
the United States.
    Again, thank you for the opportunity to speak with you this 
morning. I would be pleased to answer questions.
    [The prepared statement follows:]

Statement of Peter A. Kooi, President, World Grain Trading Group, 
Cargill, Incorporated, Minneapolis, Minnesota

    Mister Chairman, Members of the Committee:
    I am pleased to submit this testimony to discuss economic 
opportunities and development in Africa. My name is Peter Kooi. 
I am President of the World Grain Trading Group of Cargill, 
Incorporated. Cargill is a privately-held agribusiness company 
founded over 130 years ago in Iowa. Today, Cargill is 
headquartered in Minneapolis, Minnesota, and is involved in 
marketing, processing and distributing commodities, with some 
80,600 employees in 65 countries, and we have trading 
relationships in 130 additional countries.
    Cargill is no stranger to the developing world, nor to 
Africa. We believe the legislative initiative you are 
considering today is needed to accelerate economic and 
political development in Sub-Saharan Africa. I am Cargill's 
representative to the South African Development Council and 
Cargill is an active member of the Corporate Council on Africa. 
We have been pleased to participate in President Clinton's 
historic trip to Africa and Secretary Daley's recent trade 
mission there.
    Cargill has been a trading partner with African countries 
for many years, and also has been part of African development 
through our subsidiary, Cargill Technical Services (CTS). We 
have been active ``on the ground'' within Africa since 1981. 
Our current businesses in Africa include processing and trading 
cotton, coffee, cocoa, oilseeds and rice; sugar, tallow, 
rubber, malt and grain trading; and the rural development work 
of CTS. We now have offices and facilities in ten African Sub-
Saharan countries, with annual sales of $220 million from our 
asset-based businesses trading within Africa, and total trade 
(inside and through exports and imports) of $1.3 billion. In 
these ten countries, Cargill has a full-time workforce of about 
1000, and we employ another 1300 seasonal workers. Only 15 of 
these people are foreign service employees, or expatriates.
    Our experience in Africa convinces us that sustainable 
development must begin with agriculture. Attached to this 
testimony is a copy of the November 1998 Cargill Bulletin, 
``Agriculture and Sub-Saharan Africa.'' Agriculture is the 
foundation stone for every African economy. Unlocking Africa's 
latent agricultural productivity is the best way to begin self-
sustaining, broad-based development. Let me illustrate how that 
happens by describing how we have invested in Africa.
    Our efforts in Africa focus on providing a market for the 
farmer and the goods he produces. We help the farmer learn how 
to use inputs to improve yields and to plant and harvest more 
efficiently. We add value to farm production through our in-
country processing, ginning and milling businesses. We provide 
the farmer with a way to market their products. In some cases, 
such as coffee, cocoa or cotton, where Africa has a comparative 
advantage to other parts of the world, that market may be the 
export market. In just the past month, we increased our 
investment in Africa as we began construction of a cocoa 
processing plant in Cote d'Ivoire. In other cases, we help to 
create a local or regional market.
    Let me give a couple examples.
    The first is from Uganda. We currently purchase 4,000 tons 
of coffee every month from small farmers. Our plant in Kampala, 
employing local workers, cleans, grades and bags the coffee for 
export to Europe. And, with Cargill's practice of reinvesting 
most of its earnings inside the country, Uganda benefits from 
increased local cash flow and spending power, as well as from 
our investment in the processing facility.
    In South Africa, the government has taken steps in recent 
years to adopt policies supportive of open markets and economic 
development. We have seen changes in the marketing of maize, 
one of the country's most important agricultural products.
    Previously, the government-owned and -run maize marketing 
boards were intended to ``assure food security.'' In fact, what 
they did was prevent the development of a functioning market 
system. Prices were fixed by the boards, without reference to 
the demands of the market, so farmers planted what the boards 
would pay for, and not what the market wanted. For example, in 
many years the board supported the production of yellow maize, 
despite a strong demand for white maize.
    The new government did not want to support the old system 
that was seen, more than anything, as protection for the white 
commercial farmers. It wanted to build a system that would be 
responsive to the market, make food more cheaply available to 
all their consumers and take advantage of the unique strengths 
of South African agriculture. The Ministry of Agriculture 
worked with the partnership I have described above. The 
ministry brought together agribusiness companies with agronomic 
experts and South African farmers and built a new, stronger and 
more transparent system.
    They began by removing price controls from the domestic 
market, though they did not immediately disband the boards. 
This slow and cautious approach allowed all parts of the 
economy to adjust to the change, and protected the farmers' 
planting decisions for the short term. As a first step, 
internal prices were allowed to be established by the rules of 
supply and demand, rather than by artificial restrictions of a 
government-run board. Slowly, they opened the export market, 
and for a period, the commodity traders competed in the export 
markets side-by-side with the state-run boards. Gradually, 
traders were allowed to take price risk, then price supports 
were removed, and exports were allowed to freely respond to and 
compete in the international market.
    A small futures exchange was created for white and yellow 
maize, so that prices in those commodities were more 
transparent to the market. The government set up a grain 
information service, so that farmers could learn how to make 
informed planting choices and compete in the free market, 
rather than being dictated to by the boards. Exports and 
imports both moved freely into and out of the country.
    White maize prices rose 150 percent, driven by predictions 
of the impact of El Nino, stimulating farmers to continue 
planting white maize, and leaving the yellow maize to be 
imported. South African farmers are able to capitalize on the 
market demand for white maize and find it more cost effective 
and better for the economy to import yellow maize when there is 
a shortage. Maize trading has now reached 30,000 metric tons 
daily.
    In South Africa, Cargill has assisted and participated in 
this change. We believe that situations like these from Uganda 
and South Africa are good examples of our company living its 
vision statement: ``to raise standards of living around the 
world by delivering increased value to producers and 
consumers.'' We increased outputs of already established crops, 
and we added value through our trading and processing 
businesses, creating jobs and income.
    In other parts of Africa, Cargill has been ginning and 
trading cotton in Malawi, Tanzania and Zimbabwe (where we are 
contributing strength to the local economies by employing women 
in the gins). We have been exporting cocoa beans from Nigeria, 
the Cameroon, Ghana and Cote d'Ivoire for several years.
    As successful as these modest efforts may be, the 
development needs in Africa cannot be met by the private sector 
alone.
    Nor can they be met by the aid community alone. Private 
Voluntary Organizations (``PVO's) can help to initiate 
development efforts and spread their benefits, but sustainable 
growth requires well-functioning markets and entrepreneurial 
opportunities. Government's role is to create an environment, 
infrastructure and socio-political stability that promote 
development, reform and growth in their countries. They do need 
help and support. The challenges of Sub-Saharan Africa, 
particularly debt burdens, population growth, under employment, 
poverty and disease, would confound any government operating in 
the best of circumstances.
    What Africa needs, and what the African Growth and 
Opportunity Act passed by the House of Representatives last 
year begins to offer, is a partnership. Each participant in the 
effort--working with its unique skills, resources and 
abilities--can contribute to the solution.
    Let me briefly describe how the members of that 
partnership, working together through various stages of 
development, can raise standards of living in Africa.
    People living in poverty have little margin for error in 
feeding themselves. Crop fluctuations or other natural 
disasters create risks of severe hunger. Those risks usually 
can be overcome through trade or relief efforts. What can 
compound shortages and imperil relief from imports is civil 
strife. When civil order fails, risks of famine increase and 
assistance efforts are imperiled. Consequently, maintaining 
civil order and building political legitimacy are critical 
responsibilities of governments and the institutions that seek 
to help them. Indeed, order and legitimacy are necessary 
preconditions for effective assistance.
    Beyond the point of crisis, Non-governmental organizations, 
or ``NGO's,'' working with the World Bank and through 
development banks, can help. Cargill Technical Services, which 
often partners with aid institutions, has provided technical 
assistance in helping farmers to improve their productivity. 
This has ranged from help and advice on research into better 
seed varieties to development of better storage facilities 
(African farmers may lose up to 40% of their harvested crop to 
insects, rodents and weather damage) to the development of 
village-sized hand-operated oilseed presses to allow farmers to 
produce edible oil for their own needs.
    U.S. and international research institutions provide help 
over longer time lines by adapting technologies to local needs, 
supporting indigenous research and extension services and 
building up local agricultural support institutions.
    While the improvements realized through these efforts are 
necessary, they are not sufficient for self-sustaining growth. 
They are not enough to break out of a subsistence economy to a 
dynamic growing economy.
    To make this next step requires real collaboration among 
local governments, multilateral development banks and 
agribusiness. In some respects, the answer for the next level 
of development lies in a phrase made famous in a movie made 
some years ago: ``If you build it, they will come.''
    Investors choose countries with at least the basic 
infrastructure, as well as stable political and economic 
environments, needed to earn decent returns. For a country to 
be attractive to agribusiness does not require huge asset 
investment, but it does require some investment. In countries 
like Uganda, to use my earlier example, investors in 
agribusiness development do need specific infrastructure: 
transportation and energy.
    To achieve stable political and economic environments, the 
role of the local governments becomes critical. Their efforts 
can be well supported through the World Bank and the multi-
lateral development banks, and the provisions in the 
legislation for continual consultation on policies are a 
critical part of that support. But no one outside of the 
country can make this next step happen. The governments locally 
must establish:
     responsible, fair and transparent trade, fiscal 
and monetary policies;
     properly valued exchange rates;
     a legal system based on the rule of law, not the 
rule of individuals;
     laws that are enforced against bribery and 
corruption;
     secure rights of property ownership;
     a reliable and enforceable law of contracts and a 
fair, transparent dispute resolution system;
     credit policies focused on the farm sector; and,
     a movement toward democracy, civil development and 
greater individual freedoms.
    Where these conditions (or, at least most of them) exist, 
private enterprise, and especially agribusiness, can help take 
the development process to the next level. We become the 
pathway through which needs can be met--both within Africa and 
in the parts of the world that are markets for African 
products. Agribusiness uses the global market to match the 
needs of the rest of the world with the capabilities of Africa. 
When the countries of Africa are meeting needs beyond their 
borders and are meeting the needs of their people beyond mere 
survival or subsistence, indigenous wealth is generated.
    As economies are strengthened and local and regional 
prosperity grows, the Africans themselves have increased 
capacity to purchase. They seek improvements in their diets and 
in the way they live, creating a market for imported food, 
clothing and consumer goods. They also become a market for 
capital goods, technology, and further investment. The African 
countries can and, if we all contribute to the effort, will 
become a larger market for those goods reflecting the United 
States' comparative advantages.
    Eventually, these countries will join, in real economic, 
social and political terms, the international marketplace, 
realizing food and economic security. Once that position is 
achieved, internal threats to peace subside and openness to 
international intercourse increases.
    This upward spiral requires each partner in the development 
process to play its role well. The African governments, the 
foreign governments (like the United States), the aid 
community, the multilateral development banks, universities and 
research organizations and private enterprise--each must 
contribute what we are most capable of doing, for the benefit 
of the people of Africa and the people of the United States.
    [Attachments are being retained in the Committee files.]

                                

    Chairman Crane. Thank you. Next, Mr. Rebhorn.

 STATEMENT OF TIM REBHORN, COMMERCIAL DIRECTOR, IRON AND STEEL 
        INITIATIVES, ENRON INTERNATIONAL, HOUSTON, TEXAS

    Mr. Rebhorn. Mr. Chairman, Members of the Committee, thank 
you for the opportunity to testify today in support of 
expanding trade relations between the United States and Africa. 
Enron is one of the world's leading integrated electricity and 
natural gas companies, which owns and operates approximately 
$30 billion in energy-related assets globally. I am an 
infrastructure project developer for Enron, which means that I 
travel to Africa and look for and implement investments for my 
company.
    In Africa, Enron is currently developing energy-related 
infrastructure projects valued at over $3 billion. We are 
currently exploring potential opportunities in more than 10 
African countries and expect a high level of activity there in 
the future. A project which is representative of our interests 
in African investment is the Pande Gas/Maputo iron and steel 
project in Mozambique. The project will utilize trapped natural 
gas discovered some 30 years ago, and will facilitate 
construction of a 600-kilometer natural gas pipeline to supply 
competitively priced fuel for the capital city, spur further 
industrial development along the corridor between Johannesburg 
and Maputo, and create 8,000 direct and indirect jobs in the 
Maputo area.
    After 20 years of civil war, Mozambique has emerged as an 
example of what democracy and private investment can do. The 
government will hold multi-party elections this year, and has 
instituted legislation to encourage private investment in 
infrastructure, which has been virtually ignored for the last 
two decades.
    So, if the African nations are doing their part to 
encourage investment, and the private sector is wading in, how 
can Congress help support U.S. policy objectives for economic 
growth in Africa? The large equity investment Enron and its 
partners will make in this project requires over $1 billion in 
loans to support the total capital requirement for the project. 
This amount of debt is simply not available from commercial 
lenders for either this project in Mozambique or for projects 
in the majority of countries in Sub-Saharan Africa. 
Fortunately, sources of debt like the U.S. Eximbank, OPIC, and 
the World Bank, are available to finance projects in developing 
regions. It's noteworthy that this debt is backed by assets and 
contracts which make up the project. The lenders will not make 
such loans to the project available unless there is sufficient 
comfort that the loans will be repaid from revenues generated 
by the project--the same standard applied by commercial banks.
    Since many African countries lack a long repayment history, 
they suffer from the unavailability of commercial funding for 
their much-needed infrastructure projects. This legislation 
helps remedy this problem in a way that is an efficient, 
market-based use of American tax dollars which properly 
incentivizes African governments, while at the same time, 
creates new markets for U.S. goods and services. These projects 
will in turn generate revenue for the African governments in 
the form of royalties and taxes, which can be used for the 
provision of basic services and debt repayment.
    Enron supports the passage of the African Growth and 
Opportunity Act in the 106th Congress. We believe this 
legislation will increase United States-Africa trade and 
investment flows, support continued economic growth in Sub-
Saharan Africa, and further Africa's successful integration 
into the global trading community. Enron's support of this 
legislation is predicated on our belief that the legislation 
fosters an environment for growth and democratization in which 
U.S. companies like Enron can successfully compete.
    Currently U.S. business is at a serious disadvantage in 
gaining access to the African market. British and French 
investments were 300 percent and 200 percent greater 
respectively than U.S. investments during the nineties. 
Enactment of the African Growth and Opportunity Act will change 
this equation by helping U.S. companies compete with the 
already established and growing market presence of our foreign 
competitors. This legislation enhances trade and investment 
policy to support the economic partnership between the United 
States and Sub-Saharan Africa and promotes U.S. competitiveness 
in the region.
    Sub-Saharan Africa represents new opportunities for 
American exporters, particularly for infrastructure and energy 
projects. These projects can offset some of the setbacks U.S. 
exporters are currently experiencing in Asian markets, and 
position U.S. companies to capture their fair share of 
opportunities created by this growth. New export markets in 
Africa will increase the number of domestic jobs created over 
the next decade. Higher living standards in Africa will in turn 
contribute to stability, peace, and democracy--fundamental 
goals of U.S. foreign policy.
    The African Growth and Opportunity Act is crafted to create 
an important economic opportunity for the United States and 
African interests. I personally have seen tremendous growth in 
Africa while developing our project in Mozambique. I know that 
the African people will welcome the challenges contained within 
this legislation. I respectfully request that this 
Subcommittee, the Full Committee, and the Congress support this 
legislation, and let the world know just how much the United 
States and Africa can accomplish working together.
    I would be pleased to answer any questions from this 
distinguished Committee. Thank you for your attention to my 
testimony.
    [The prepared statement of Mr. Rebhorn follows:]

Statement of Tim Rebhorn, Commercial Director, Iron and Steel 
Initiatives, Enron International, Houston, Texas

    Mr. Chairman, Members of the Committee, thank you for the 
opportunity to testify today in support of expanding trade 
relations between the United States and Africa.
    My name is Tim Rebhorn, and I am an infrastructure project 
developer for Enron International in Houston, Texas. Enron is 
one of the world's leading integrated electricity and natural 
gas companies, which owns approximately $30 billion in energy 
related assets, produces electricity and natural gas, develops, 
constructs and operates energy and water facilities worldwide 
and delivers physical commodities and risk management and 
financial services to customers around the world.

                            Enron In Africa

    In Africa, Enron is currently developing energy related 
infrastructure projects valued at over $3.0 billion. Enron has 
been active developing projects in Africa for several years. We 
are currently exploring potential opportunities in more than 10 
African countries and expect a high-level of activity there in 
the future.
    A project which is representative of our interest in 
African investment is the Pande Gas/Maputo Iron & Steel Project 
in Mozambique. We have cooperated closely with the Government 
of Mozambique during the development of this project. The 
project will create a large anchor customer which will utilize 
the natural gas discovered some 30 years ago in Mozambique, but 
which has lain dormant. This anchor project will facilitate 
construction of a natural gas pipeline to supply competitively 
priced fuel to the capital city and spur further industrial 
development along the corridor between Johannesburg and Maputo.
    An example of the spurred industrial development is the 
Maputo and Matola ports, which before the war in Mozambique 
handled more than 12 million tons of cargo per year, but now 
handle less than 3 million tons annually. These ports are in 
much need of investment. The Pande Gas/Maputo Iron & Steel 
Project will increase volumes through the ports by an 
additional 200%, help to fund rejuvenation of the harbor 
infrastructure, and provide an additional outlet for products 
in Mozambique and South Africa to world markets.
    The present value of the tax and gas revenue to the 
Government of Mozambique from the Pande Gas/Maputo Iron & Steel 
Project is $350 million. Most importantly, the 8,000 direct and 
indirect jobs created during the construction and operation of 
the project will become the base of a skilled workforce that 
will enable significant additional investment to the area.
    The large equity investment Enron and its partners will 
make in this project requires over $1 billion in loans to 
support the total capital requirement. This amount of debt is 
simply not available from commercial lenders for either this 
project in Mozambique or for projects in the majority of 
countries in Sub-Saharan Africa. Fortunately, sources of debt 
like the US Export-Import Bank, Overseas Private Investment 
Corporation (OPIC), and the World Bank are available to finance 
projects in this important region. It is note-worthy that this 
debt is backed by assets and contracts which make up the 
project, and the lenders will not make such loans to the 
project available unless there is sufficient proof that the 
loans will be repaid from revenues generated by the project--
the same standard applied by commercial banks. However, since 
many African countries lack a long re-payment history, they 
suffer from the unavailability of commercial funding for their 
much needed infrastructure projects. The legislation you are 
considering today remedies this problem in a way that is an 
efficient, market-based use of American tax dollars, while at 
the same time is a creator of additional new markets for U.S. 
goods and services.

                 The Africa Growth and Opportunity Act

    Enron supports the passage of the African Growth and 
Opportunity Act in the 106th Congress. We believe this 
legislation will increase U.S.-Africa trade and investment 
flows, support continued economic growth in Sub-Saharan Africa, 
and further Africa's successful integration into the global 
trading community. Enron's support of this legislation is 
predicated on our belief that the legislation fosters an 
environment for growth and democratization in which U.S. 
companies like Enron can successfully compete.
    Since 1995, real GDP growth in Sub-Saharan Africa has 
averaged 4 percent or more annually. Although today this 
represents one of the higher growth rates in the global 
economy, one must consider the small economic base from which 
they begin and recognize they still have a long way to go. 
Private capital is waiting to flow into Africa--incentives like 
those provided by this legislation in the form of trade 
privileges helps create an environment which encourages an 
atmosphere comfortable for investors and helps the U.S. 
government reach its policy objectives sooner.
    In the past few years, over 2,000 state enterprises have 
been privatized in African countries, raising over $2.3 billion 
in government revenue. This revenue is invested in education, 
public health, common infrastructure, and repayment of debt. 
Enron believes privatization of the African energy sector is 
imperative for enhanced economic growth and we encourage the 
governments of the African nations to proceed down the path of 
privatization. We discourage the disincentive of continued 
bilateral and multilateral direct aid to government controlled 
pipeline and power projects--if the project is necessary, the 
market can find a better way to complete it more efficiently.

Promote U.S. Competitiveness in Africa

    Currently, U.S. business is at a serious disadvantage in gaining 
access to the African market. The African market, with its 800 million 
consumers, has already been recognized by our European competitors. 
British and French investments were 300% and 200% greater, 
respectively, than U.S. investments during the early 1990s. The British 
and French investments helped establish the substantial European 
presence in the region which we see today.
    Enactment of the African Growth and Opportunity Act will change 
this equation by helping U.S. companies compete with the already-
established, and growing market-presence of our foreign competitors. To 
this end, the bill establishes the U.S.-Africa Economic Forum and 
directs the President to negotiate a U.S.--Africa Free Trade Area.
    U.S. exporters are ready and eager to do business in Sub-Saharan 
Africa. The needs of the emerging African nations present a unique 
opportunity to create new infrastructure projects, such as expanded 
power generation and transmission. This legislation enhances trade and 
investment policy to support the economic partnership between the 
United States and Sub-Saharan Africa and promotes U.S. competitiveness 
in the region.

Expand U.S. Export Opportunities in Africa

    The African Growth and Opportunity Act provides the framework 
necessary to increase U.S. investment in the region. The bill will 
expand the availability of export finance, insurance and guarantees 
which will support increased U.S. exports and create more export-
related jobs for American workers. For example, risk insurance by the 
Overseas Private Investment Corporation (OPIC) and loans/loan 
guarantees by the Export-Import Bank of the United States will help 
U.S. exporters gain access to developing African markets. Accordingly, 
the bill will establish a $150 million equity fund and a $500 million 
infrastructure fund for Sub-Saharan Africa and require the Export-
Import Bank and OPIC to take prompt measures to increase their 
activities in Sub-Saharan Africa. These programs will provide loans and 
insurance to U.S. companies not otherwise made available or too 
expensive to be economically feasible.
    The African Growth and Opportunity Act provides effective responses 
to the challenges facing Sub-Saharan Africa in increasing trade and 
attracting new foreign investment. To help stimulate African exports, 
the bill, in turn, builds on the well-established principles of the 
Generalized System of Preferences (GSP) to support African 
entrepreneurship and trade-related employment.
    This legislation also challenges each African country to meet the 
standards of democratization and human rights that are deeply held by 
the citizens of the U.S.

Trade With Africa Is Good For The United States

    Sub-Saharan Africa represents new opportunities for 
American exporters, particularly for infrastructure and energy 
projects. These projects can offset some of the setbacks U.S. 
exporters are currently experiencing in the Asian markets. The 
total number of jobs supported by U.S. exports of goods and 
services reached a record 12 million by 1999. New export 
markets in Africa will significantly raise the number of 
domestic jobs created over the next decade. Increased 
prosperity and higher living standards in Africa in turn will 
contribute to stability, peace and democracy -fundamental goals 
of U.S. foreign policy.

Trade With The United States Is Good For Africa

    Enactment of the African Growth and Opportunity Act will 
make a significant contribution to the economic development of 
Sub-Saharan Africa and help to raise the standard of living for 
the people of this region by making the resources of our 
private investment and trade more widely available. Economic 
progress will, in turn, contribute to stability, peace and 
democracy, which are long-term objectives of the more than 40 
African nations this bill intends to reach. The African 
Diplomatic Corps and African leaders have been working 
assiduously towards the passage of the African trade bill, and 
they believe this legislation is designed to advance the best 
interests of the African people by raising their standard of 
living.
    The African Growth and Opportunity Act is crafted to create 
an important economic opportunity for U.S. and African 
interests. I personally have seen tremendous growth in Africa 
while developing our project in Mozambique, and I know the 
African people will welcome the challenges contained within 
this legislation. I respectfully request that this 
Subcommittee, the Full Committee, and the Congress support this 
legislation and let the world know just how much the U.S. and 
Africa can accomplish together.
    I would be pleased to answers any questions from this 
distinguished Committee. Thank you for your attention to my 
testimony.

                                

    Chairman Crane. Thank you. Before our final witness, I 
would like to yield to our distinguished colleague, Mr. Rangel.
    Mr. Rangel. Thank you, Mr. Chairman, for giving me the 
honor to introduce Percy Sutton, our next witness.
    Mr. Sutton, I was adding up the number of years that we 
have known each other. When it came out to be over 50 years, I 
started redoing it, thinking that there must have been 
something wrong with my arithmetic. But to my colleagues, I can 
think of no one other than my late brother, Ralph, that has 
been more instrumental in my political advancement, whatever 
success it's been. I wanted to publicly thank him, not only for 
sharing with me that friendship, but the great contribution he 
has made to our country as a Tuskegee war veteran and the first 
one to fly when discrimination prevailed in World War II, and 
to come back home and to continue that in the civil rights 
field, to be successful as a State legislator, then as borough 
president, to be successful as a businessman. But here today to 
thank you for the bridge that you have built between the United 
States and Africa, the friendships that you have made, the 
trade and contact that you have done, and the fact that you are 
still willing to become that partner with all of Americans, 
especially those from the Village of Harlem. Thank you for 
taking the time out to share your experiences with us today. I 
personally and politically appreciate it. We would like to hear 
from you.

     STATEMENT OF HON. PERCY E. SUTTON, CHAIRMAN, AFRICAN 
  CONTINENTAL TELECOMMUNICATIONS LIMITED, CHAIRMAN EMERITUS, 
 INNER CITY BROADCASTING CORPORATION, NEW YORK, NEW YORK, AND 
             FORMER PRESIDENT, BOROUGH OF MANHATTAN

    Mr. Sutton. Thank you very much, Mr. Congressman.
    Mr. Chairman Crane, Mr. Ranking Member of the Subcommittee, 
Mr. Levin, Ranking Member of the House Ways and Means 
Committee, Congressman Rangel, Ms. Dunn, Mr. Jefferson, old 
friend, all, Mr. Houghton, good seeing you again, Sir. Some of 
you may remember, I was here last year to testify with regard 
to this bill and I left here quite satisfied and excited that 
the Senate surely would pass the bill. It didn't happen. So 
today when I saw the Senator from Texas, Mr. Gramm present, I 
thanked him for being present. I reminded him that I was from 
San Antonio, Texas. He said as I passed him, he said, good, I'm 
testifying here today. Ask some of your family in Texas to 
support me. I am not prepared to ask all of them to support 
him, but we'll divide up. It's a large family. To get support 
of this bill, I will ask half of them at least to support the 
Senator in his next move.
    My lady, gentlemen, I come from a large family in Texas. I 
grew up on a farm. I watched planes fly over me. I got 
interested in technology as a child. In my family, my father, 
my mother were Pan-Africanists. I am a Pan-African. My mother 
and father taught each of my 14 brothers and sisters, all from 
the same mother and father, that Africa was our homeland, Mr. 
Jefferson. My mother comes from New Orleans. And that we must 
all, every Sutton as we went forward in life, we were 
businesspeople. As we went forward in life, we must support 
Africa as our homeland. We must fight for the freedom of 
Africa. We were not even free then, because our businesses were 
operating under segregated circumstances in San Antonio, Texas. 
The civil rights movement, my brothers and sisters were going 
to jail in the civil rights movement, as I went to jail in the 
civil rights movement. But always we were taught that Africa 
was a place to go and to help, as we helped ourselves here in 
America.
    I am, my lady and gentlemen, a lawyer and I'm a 
businessperson. I own radio stations around America. I own 
radio stations in New York City. Two of those radio stations 
were at one time considered the voice of Africa during the 
freedom movement. To those stations came leaders and 
representatives of the African freedom movement to get their 
story to the public. We did so, in California, Texas, Michigan.
    I am also in the cable television business. I am here today 
not as a chairman emeritus, not because my wife and my son 
voted against me and put me out as chairman of Inner City 
Broadcasting Corp., that happens with age, but I did also want 
to tell you there is a life after government service.
    I was for many years in the State legislature and president 
of Berman Hotten in New York City for 12 years, too long. I ran 
for mayor. When people say I left government, I didn't leave 
government. I was evicted from government many years ago. To 
see today my old friend Jack Kemp being here testifying, to see 
Andy Young, persons that I have known all through the years, to 
see them involved in Africa makes me very, very happy. I am 
happy because I feel that I am paying tribute to my mother and 
father. But more important than that, for 40 years, I have been 
in and out of Africa supporting causes, freedom movements. One 
of the dreams that I have always had is that one day the 
African Nation would be treated as some other nations are, free 
trade. For no nation, no continent can come to status in this 
world without a free economy, good government, and access to 
the rest of the world.
    To be a person in the media, in politics, in government, 
and to all of the years see other nations developing through 
trade, we've done it. We have used tariffs, we've used 
sanctions, we have used a variety of things to discourage trade 
and to improve trade. I said I was going to put a face on this.
    When I saw young Mr. Jackson, who I have known since he was 
a child, testifying here today against the bill, I love him, I 
love his father, I have been his father's lawyer from the time 
since his father has been a father, and all those years to see 
him testifying saying let's get the bills settled, let's get 
debt first. And then he put a map up there. The map showed how 
few things there are in Africa. He was talking about the 
Internet. Well let me complete this and tell you another reason 
why I am supporting this bill.
    I have a large investment in a telecommunications company. 
It is called African Continental Telecommunication, as do 
others have a large investment. We have more than 18 licenses 
to produce telecommunications. We have a proposal and a 
contract with a major company that will use $450 million of 
labor and materials to get our satellite up over the continent 
of Africa. When launched in the year 2003, that satellite will 
permit one to speak into the hand-held phone, reach the 
satellite, and come down to another hand-held phone anywhere in 
the continent of Africa, or come down to enter the Earth 
station to be transmitted to anywhere else in the world.
    In the course of doing this, in the course of raising 
money, we have as our investment banker, Lehman Brothers, a 
major investment banking company. But as we have sought to get 
investments from other persons here in America, in the past a 
difficulty has been that too often American investors look at 
Africa as though it was a place into which you pour money and 
don't get anything out. That is not a fact of life.
    Let me read to you. There is a man now who was in some pain 
who is before a judge. The concern is whether or not he shall 
be able to continue the free-wheeling way that he's been 
operating. He is called Bill Gates. He has a little company 
called Microsoft. He has, I understand, some wealth in this 
world. He said, ``Africa is one of the most exciting continents 
we're working in,'' that is Microsoft, ``and despite its 
complexities, we see it as one of the fastest growing regions 
that Microsoft is currently operating in. The Internet is the 
single most important tool that will open Africa up to the rest 
of the world. It is the future of communication worldwide, and 
Africa is not as far behind as some people believe.''
    Surveys show that many of Africa's businesses think Mr. 
Gates is right. More than half of the companies sampled for the 
Africa Competitive Report responded that Internet access is 
widely available, although prices remain high. However, there 
is a general trend of optimism now held by African businesses 
with regard to the application of technology. Twenty-three 
African nations in the survey reported that they anticipated 
access to the Internet will soon increase in quality, while 
decreasing in price. Why do I mention that? I mention that 
because when Mr. Jackson talked about the Internet, one of the 
things that our satellite will do, this satellite that reaches 
the entirety of this continent of 750 million people, where 
only 3 percent of the entire continent have telephones in their 
businesses or in their homes, or telephones are easily 
available.
    I became interested when Congressman Rangel at the time I 
was evicted from public office in 1977 after 12 years, arranged 
for me to meet with a number of persons of importance that he 
thought might be helpful to me in Africa. I got into spot oil 
trading out of Nigeria. It was great money, but one of the 
cruelest and injurious feelings one can get, when one has 
barrels of oil out in the ocean going to the refinery, but 
can't get insurance because one can't get to the telephone to 
reach Lloyds of London, standing in line. In my trading in 
heavy machinery in other parts of Africa, to wait and wait and 
wait for a telephone. One of the things as a part of the 
infrastructure is telecommunications.
    But let me tell you also of the value of our trading with 
Africa. Africa is an open market. If we can enter into a free 
trade agreement with them, if we can have access to their 
economies, and they have access, the trade is really going to 
be to our benefit. In our satellite, more than 400 million 
manhours of work or materials and other things go into 
producing that satellite. American labor benefits from that. 
Then African labor takes over. So they are in each of the 
instances.
    Let me close with this. For all of those people who say, 
and my friends in the labor movement may I just tell you that I 
am a life member of the Transport Workers Union from the time 
that I was conducting the subways of the city of New York and 
going to law school and to graduate school at the same time, I 
tell you that the advantages my lady and gentlemen, the 
advantages are all to us. To think that it has taken this long 
before you, Mr. Chairman, before you, Mr. Houghton, became 
sponsors, to get even initiation of action on free trade, is to 
condemn that which should have happened. Condemn the fact that 
nobody of real strength became interested.
    I thank you very much for entertaining this. As someone who 
has been in government, in politics, may I wish you good 
elections.
    [The prepared statement follows:]

Statement of Hon. Percy E. Sutton, Chairman, African Continental 
Telecommunications Limited, Chairman Emeritus, Inner City Broadcasting 
Corporation, and former President, Borough of Manhattan

    Mr. Chairman Crane, and distinguished members of this very 
important Sub-Committee on Trade, of the House Ways and Means 
Committee, of the House of Representatives, I come to you from the 
Village of Harlem in the City of New York.
    Mr. Chairman, and distinguished members, I am especially grateful 
for the opportunity to be able to offer my comments to you, as you seek 
to structure, once again, an important economic access route for the 
developing nations of Sub-Saharan Africa.
    I come with warm feelings about that which you, propose in your 
legislation. Really, it is more than a warm feeling, it is a feeling of 
high excitation, as Sub-Saharan Africa Free Trade is, in my view, an 
essential element in an African nation's move toward economic 
development and maturity.
    In today's society, we are all members of a Global village, with 
interacting economic gains or losses as a part of our every day 
existence. In these circumstances, Free Trade is as essential to a 
nation's economic development and advancement as is its energy supply, 
its natural resources, its telecommunications, its highways, its roads, 
its rivers, and its various means by which its populace inter-connects 
and advances economically, within its own borders, and gains access to 
the economies of other nations, outside its borders.
    My presence here is occasioned by a notice and invitation from my 
next door neighbor in Harlem; my colleague and friend--Harlem's ``star 
of stars''--the Honorable and beloved Charles B. Rangel, your colleague 
and ranking member of the House Ways and Means Committee.
    I am most grateful to the Honorable Charlie Rangel. It was so very 
good of him to reach out to me and suggest that I appear here, as he 
knows of my long-time emotional, business, cultural and social interest 
in, and attachment to, the continent of Africa.
    I am a Pan Africanist. I became so as a son of Pan Africanist, 
parents, who lived and breathed their love for Africa.
    You can imagine, I hope, my sense of pleasure in being here today 
to support your proposed legislation, which will help my nation of 
birth, these United States, while also helping the place of birth of my 
ancestors: Africa.
    Mr. Chairman, and distinguished members, no continent and no nation 
can come to appropriate social, economic or cultural, competitive 
status without a stable government, an open economy and a well 
developed infrastructure. An infrastructure inclusive of 
telecommunications; a matter about which you will learn, I have intense 
interest and involvement.
    Your legislation to initiate Free Trade with nations in Sub-Saharan 
Africa, is a great step towards economic advancement of those nations 
and is of benefit both to the continent of Africa and the United 
States.
    Mr. Chairman, and distinguished members, for more than forty years 
I have, on a regular basis, visited, conducted business in, 
communicated with, supported, promoted and/or advanced efforts designed 
to bring the nations of Africa into economic openness and into a 
favorable relationship to these United States.
    I did so in my love for both Africa and America, and out of my 
conviction that there was mutual benefit to be found from inter-
relationships between nations on the African continent and the United 
States. Relationships as to form of government, culture, political 
practices, products or economies. I did so also because I have an 
ancestral and emotional attachment to Africa, as the continent of my 
forebearers.
    My father and mother were educators and business people in Texas. 
They gave to me and my brothers and sisters many educational and 
business opportunities; although both the education and business 
opportunities were under strictly segregated circumstance--as was the 
practice during my ``growing up'' years in Texas.
    In all of the years of my youth, my father and mother were 
constantly pounding into their children's heads a love for Africa. They 
told us that Africa was our Homeland and that we had an obligation to 
be involved in the future of our Homeland and its people, as free 
people; governing themselves as free people, in an open society.
    Mr. Chairman, distinguished members, The African Competitive Report 
of 1998, published by the World Economic Forum, following the gathering 
at the May 1998, Southern Africa Economic Summit, held in Winhoek, 
Namibia, stated that:

          One of the greatest challenges in the 21st century is the 
        integration of the African continent into the Global economy.

    Your efforts in this proposed legislation, I am confident, 
can play a very large role in integrating the African continent 
into the Global economy; with mutual benefits to the nations of 
Africa and the people of the United States.
    As a part of integrating Africa into the Global economy, it 
is clear that reducing the United States import restrictions, 
to allow textiles and clothing and other products from Sub-
Saharan Africa, would help to develop the textile and clothing 
industries, in at least eight African nations, at a very small 
loss of American jobs. Such an opening of the U.S. market to 
African products would help U.S. consumers, with only a small 
number of job losses by American labor. Which losses can be 
matched by job gains elsewhere in the American economy.
    Similar import restrictive policies in the European Union 
and east Asia restrict products from African nations. But they 
also restrict the development of African consumers of imported 
goods.
    Because the connection between manufactured exports and 
growth of a nation's economy is very strong, it is unlikely 
that nations in Africa will achieve and sustain rates of 
growth, necessary to an open and free economy, without further 
development of the manufacturing of exports. And, it is 
unlikely that the manufacturing sector of African nations will 
develop as needed as long as major international markets remain 
closed to them.
    Recently foreign businesses have begun to look at Africa 
with much more favor and African policymakers are moving 
steadily on the path of governmental and economic reform, and 
free economies; all of which is reassuring to foreign 
investors. Indeed, the latest World Investment Report, states 
that: ``Returns on foreign, direct investment in Africa, are 
high, especially in comparison with other emerging nations.''
    One major American company's chief executive; Mr. Bill 
Gates of Microsoft, stated recently:

          Africa is one of the most exciting continents we are working 
        in, and despite its complexities we see it as one of the 
        fastest growing regions that Microsoft is currently operating 
        in. The Internet is the single most important tool that will 
        open Africa up to the rest of the world. It is the future of 
        communication worldwide and Africa is not as far behind as some 
        people believe.

    Surveys show that many of Africa's businesses think Mr. Gates is 
right. More than half of the companies sampled for The Africa 
Competitiveness Report responded that Internet access is widely 
available, although prices remain high.
    However, there is a general trend of optimism now being felt by 
African businesses, with regard to the application of technology to 
various business operations. In twenty three (23) African nations 
surveyed companies report that they anticipate that access to the 
Internet will soon increase in quality, while decreasing in price.
    Mr. Chairman, and distinguished members, please permit me to give 
you some historical background as to why I feel so strongly about the 
possibility of the successful implementation of your Free Trade 
efforts, if your proposals are enacted into law. Let me deal with the 
great economic possibilities for both the United States and the nations 
of Sub-Saharan Africa operating under a Free Trade law.
    I am the founder, and now Chairman Emeritus, of Inner City 
Broadcasting Corporation, a New York City-based radio, cable 
television, television production and entertainment company, with 
interests in telecommunications.
    With regard to our radio operations; from the year 1972, to the 
present, our company's radio stations in New York: WLIB-AM and WBLS-FM, 
have been considered by many as the ``Voices of Africa, in America.''
    During the various African freedom movements, in the 1970's and 
1980's, one of our radio stations, WLIB-AM, served as a vehicle for 
African freedom movements contact with American supporters.
    Both of our New York radio stations: WLIB-AM and WBLS-FM, were 
often the place of first stop on the schedule of leaders and 
representatives of the African freedom movements, upon their arrival in 
the United States. Aware of Americas historic sense of support of 
freedom for all people, they came to us seeking access to our radio 
microphones; to tell their story to the American public. They received 
access to our microphones, our hearts, our finances, and the American 
public.
    For many years I, my family and my company, have supported 
activities, propagandizing the development of open economies on the 
African continent. You, in your action, in this legislation are giving 
to me, my family and my company great hope.
    Mr. Chairman, and distinguished members, for more than forty years 
I have, on a regular basis, visited, read about, communicated with, 
supported, promoted and advanced efforts designed to bring the nations 
of the continent of Africa to the forefront of world attention. I did 
so, in the conviction that there were mutual benefits to be had from 
the sharing of cultures, practices and products between the United 
States and the continent of Africa.
    Now, through successful legislative enactment of the African Growth 
and Opportunity Act, and the beneficial elements which you include in 
your legislation, the United States--Sub-Saharan Africa Trade and 
Economic Cooperation Forum and the Free Trade area, I believe that I 
shall, in my lifetime, see many nations with democratically elected and 
stable governments and profitable and growing open economies. Economies 
encouraged by your action and that of the U.S. Senate and the President 
of these United States, in the year 1999.
    Mr. Chairman, and distinguished members, another business in which 
I play a role is, the African Continental Telecommunications Limited 
(ACTEL); an Africa-based telecommunications company designed to furnish 
state of the art, satellite-based telecommunications services to the 
entire continent of Africa.
    ACTEL is represented by Lehman Brothers investment bankers, and 
ably directed by the former head of AT&T's Skynet Satellite Services as 
the President and Chief Executive Officer. I serve as Chairman of 
ACTEL.
    It is the business of ACTEL to not only furnish telephone service 
to the residents and businesses on the African continent but to also 
provide Internet and telemedicine and distant learning; as well as 
other much-needed telecommunications-based, technology-based, services, 
delivered to the people and businesses on the African continent. There 
is a great need for these telecommunications services in Africa.
    Mr. Chairman Crane, distinguished members, in the entire continent 
of Africa, fewer than three percent (3%) of the residents and 
businesses have telephones on their premises, or easily accessible to 
them.
    While my colleagues in ACTEL and I look at the tiny rate of three 
percent (3%) teledensity, in the entirety of Africa, we at the same 
time, see a ninety seven percent (97%) opportunity for ACTEL to do good 
financially, while doing well for the development of the nations on the 
African continent, in their economies and social, cultural and 
governmental activities.
    This three percent (3%) teledensity, in a continent of more than 
seven hundred fifty million (750,000,000) people, unless improved upon 
in the near future, does not bode well for a speedy economic 
development in the nations of Africa; even if nations in Sub-Saharan 
Africa gain the benefit of your proposed legislation. However, I am 
convinced that such legislation will help develop a climate that will 
encourage investments in ventures in Africa. And I am also convinced 
that our company ACTEL will be a beneficiary of this climate.
    Mr. Chairman, and distinguished members, I was here to testify last 
year, when you began your good work on this subject of Free Trade, in 
relation to Africa. I testified in strong support of your action.
    After testifying we, in ACTEL, were highly energized and pleased by 
the later action of the 105th Congress of the U.S. House of 
Representatives, in its passage of the African Growth and Opportunity 
Act, H.R. 1432. For a moment, we were very excited by the possibility 
of the United States Senate considering, endorsing and enacting your 
legislation.
    Particularly appealing to me and my colleagues in ACTEL were those 
provisions which would create a United States--Sub-Saharan Africa Trade 
and Economic Cooperation Forum, and a United States--Sub-Saharan Africa 
Trade Area. Both provisions would assist our company's, efforts by 
creating a climate of greater acceptability of the continent of Africa 
as a ``go to'' place, for American investors and product and service 
providers. Unfortunately the U.S. Senate did not act upon your 
proposals and we are here again; with great hope that this time the 
Senate will give support and act to legislate favorably.
    Mr. Chairman, and distinguished members, although not presently 
publicized, I can attest to you that there are great opportunities for 
American investors in Africa. And the end product of many of these 
investments can greatly benefit the businesses and people on the 
continent of Africa; while also benefiting American investors and 
American labor and products and services.
    The company, Inner City Broadcasting Corporation and my wife and I, 
personally have invested more than sixteen million ($16.0M) dollars in 
this African telecommunications project, ACTEL. We believe in it for 
ourselves. We believe in it for America and we believe in it for 
Africa.
    The investors in African Continental Telecommunications Limited 
(ACTEL) have an opportunity for dramatic and highly profitable returns 
on their investment. While doing so, these investors are also 
contributing to the advancement of the economics of Africa; as ACTEL 
carries essential telephone and other telecommunications related 
services to the people and businesses on the African continent, ACTEL 
will also provides job opportunities and investment and business 
opportunities to the African populace.
    These job and business opportunities made available to the African 
populace by ACTEL, will be good, will not be low paying, non-desirous 
positions; but rather, they will be jobs and good contractual 
agreements to provide business products and services to ACTEL as well 
as other opportunities ranging from common labor through high 
administrative, finance and high technology management positions; all 
the way up to the highest management positions in the company; as well 
as powerful Board of Directors and Advisory Council memberships.
    A completed ACTEL project will have a ratio of one (1) American to 
twenty (20) Africans. Fewer than twenty (20) Americans, or non-
Africans, will be involved in ACTEL's management and work force: A work 
force exceeding two thousand (2,000) diversified positions.
    In ACTEL's development launching and operation, American companies 
will supply more than eighty percent (80%) of the materials, machinery, 
equipment and apparatus. However, once in operation Africans will 
become eighty percent (80%) of the labor force and one hundred percent 
(100%) of the contracted supplier business force. This is good for 
Africa. It is good for America.
    Mr. Chairman, distinguished members, an historic difficulty in 
gaining a foothold for ACTEL in Africa, has not been the obtaining of 
the working agreements, rights and licenses, to do business in the 
individual nations of Africa--as many Americans and other nationals 
have experienced--rather, ACTEL's difficulty has been in the absence of 
an existing Free Trade agreement between the United States and the 
majority of the nations of Africa to create a favorable climate for 
potential investors in African ventures. It is this favorable climate 
that your Free Trade bill will produce that makes us hopeful.
    A Free Trade climate between the United States and nations of 
Africa in your legislation's economic focus, creates a favorable 
impression in the mind of an investor who is faced with considering an 
investment in a business, operating on the continent of Africa.
    We, in ACTEL, do not, in any way, blame the absence of a Free Trade 
agreement between the United States and the nations of Africa for our 
inability to gain early investors in ACTEL. However, the absence of a 
Free Trade climate has been a constant injury to our ability to gain 
additional investors, as too many Americans still have a view of Africa 
as the ``dark continent,'' a continent into which investors pour money, 
but don't get money out. While such is not the case, as attested to by 
Microsoft's Bill Gates. It has remained too long as a perception.
    Notwithstanding this too often held belief we, in ACTEL have made 
much progress and will commence our initial operation of ACTEL in 
Africa by delivering telecommunications services via VSAT first in the 
nation of Zambia, no later than the fourth quarter of this year, 1999. 
Then, Zambia; then Botswana; Zimbabwe; Malawi, Namibia; and Mozambique, 
Ghana and other nations, until 2003.
    By the third quarter of the year 2003 ACTEL will be furnishing 
``state of the art'' telecommunications services to every nation on the 
continent of Africa.
    I close, Mr. Chairman and distinguished members, by recalling that 
last year there were complaints from some elements of organized labor 
in the United States against your proposed legislation.
    Opening up the American market to African exports has been opposed 
by some in the U.S. labor movement who see importance of textiles, 
apparel and certain products from Africa as a threat to the American 
labor movement.
    Permit me, on a personal basis, as a Life member of the TWU 
(Transport Workers Union), since my days in graduate and law school, to 
express the belief that the impact of African exports to the United 
States will be minuscule, compared with the general benefit accruing to 
American labor as Free Trade between the African continent and the 
United States moves forward and American workers labor to produce 
products to be exported to African nations.
    In this regard, our company ACTEL will generate more than three 
thousand job-hours of labor for American laborers during the process of 
manufacturing the apparatus, machinery and equipment and the assembling 
and launching of our Pan-Africa satellite. Many of these job-hours will 
be at high wages paid to American laborers. Thereafter, in operation 
African labor and business will benefit from jobs and business 
opportunities arising from ACTEL.
    Mr. Chairman, and distinguished member, I think that, at least in 
our instance, both the American labor and the African labor force will 
benefit.
    I conclude by thanking you, so very much, for hearing my comments.
    I thank you for your action on behalf of Free Trade with the Sub-
Saharan nations of Africa.
    And, as one who, at one time, was involved in politics and 
government, I wish to you, good elections.

                                

    Chairman Crane. Thank you, Mr. Sutton. Let me thank all of 
our witnesses who testified.
    We will now call our next panel rather than going through 
our normal question and answer because we're about to get 
confronted with votes on the floor. We are going to have to 
call some of our next panel back after that 1-hour break.
    So thank all of you for your testimony. As I say, all 
written remarks will be made a part of the permanent record 
too.
    With that, now I would like to call our final panel, Robert 
Rogowsky, Carlos Moore, Karen Fedorko, Dale Apley, and Mark 
Levinson. We will proceed in the order that I introduced you. 
That was Robert Rogowsky, Carlos Moore, Karen Fedorko, Dale 
Apley, and Mark Levinson.

 STATEMENT OF ROBERT A. ROGOWSKY, DIRECTOR OF OPERATIONS, U.S. 
                 INTERNATIONAL TRADE COMMISSION

    Mr. Rogowsky. Thank you, Mr. Chairman, and Members. It is 
an honor to be here to talk on this important issue. At the 
request of the Committee on Ways and Means, the U.S. 
International Trade Commission conducted a study of the 
competitiveness of the textile and apparel industries in Sub-
Saharan African countries, and the economic impact on U.S. 
producers, workers, and consumers of tariff-free and quota-free 
entry of imports of textiles and apparel from Sub-Saharan 
Africa.
    I want to focus my comments on the following question. What 
would have been the effect on the United States textiles and 
apparel sector if other things being held equal, the tariffs 
and quotas applied to U.S. imports of these products from Sub-
Saharan Africa had been eliminated in 1996. This is the 
question that the Commission tried to answer.
    The Commission's analysis is not an econometric analysis. 
There is some confusion about that. I think that part of the 
criticisms we faced have been the fact that people have 
misunderstood the analysis. The Commission's analysis is not a 
statistical forecast analysis. It does not tell what will 
happen if tariffs and quotas are 
actually removed. It provides an assessment of the effects of 
the proposed policy change, if in place, in the year we studied 
it.
    To provide a more complete picture of the possible effects 
of elimination of quotas and a reduction of tariffs, ITC staff 
calculated lower and upper bound ranges of the effect. I want 
to highlight the upper bound or worst case scenario. These are 
the circumstances that led to the largest reduction in U.S. 
shipments and employment. In this exercise, staff stretched 
each of the factors that affect the calculation to its highest 
reasonable levels to estimate a maximum effect on the United 
States. Under this upper bound scenario, imports of apparel 
increased by 46 percent to about $557 million. Net U.S. welfare 
increases by approximately $96 million. Imports from the rest 
of the world decline by about approximately .2 percent. 
Domestic shipments decline by about .1 percent. Assuming that 
the decline in employment tracks a decline in production, about 
676 jobs are eliminated.
    Arguments have been made that the study did not deal 
adequately with transshipment through and foreign investment 
into Sub-Saharan Africa. These factors in fact were 
incorporated implicitly into the staff's quantitative analysis 
by expanding Sub-Saharan Africa's supply capability.
    At the request of the staff of the Ways and Means 
Committee, ITC staff went beyond this to also analyze what 
would happen if U.S. imports from Sub-Saharan Africa increased 
nearly tenfold. This increase raised Sub-Saharan African 
imports to the United States to 3.5 billion. In this case, the 
decline in U.S. apparel shipments is about six-tenths of 1 
percent, or $767 million worth.
    So although the quantitative analysis conducted by staff is 
not an explicit analysis of investment and/or potential 
transshipment through, it does shed light on the potential 
effects of significant foreign direct investment into and 
transshipment through those countries.
    Is it likely that Sub-Saharan Africa will achieve this 
level of export growth in the foreseeable future? The general 
economic conditions suggest that it will be difficult to reach 
those levels. Let me stop here, and say I would be happy to 
answer any questions.
    [The prepared statement follows:]

Statement of Robert A. Rogowsky, Director of Operations, 
U.S. International Trade Commission

    On January 14, 1997, the U.S. International Trade 
Commission (Commission) received a request from the Committee 
on Ways and Means of the U. S. House of Representatives for an 
investigation under section 332(g) of the Tariff Act of 1930 
(19 U.S.C. 1332(g)) regarding the likely impact of granting 
quota-free and duty-free entry to textiles and apparel from 48 
countries of Sub-Saharan Africa (SSA). Specifically, the 
Committee requested that the Commission provide--
    (1) a review of any relevant literature on this issue 
prepared by governmental and nongovernmental organizations;
    (2) an assessment of the competitiveness of the textile and 
apparel industries in SSA countries, to the extent possible;
    (3) a qualitative and quantitative assessment of the 
economic impact on U.S. producers, workers, and consumers of 
quota-free entry for imports of textiles and apparel from SSA. 
The Committee also asked that the Commission address the 
potential shifting of global textile and apparel production 
facilities to SSA that might occur as a result of the changes 
contained in proposed legislation. (The Committee specifically 
referenced H.R. 4198, African Growth and Opportunity: The End 
of Dependency Act of 1996, introduced in the 104th Congress, 
and stated that a similar bill would be introduced in the 105th 
Congress); and
    (4) a qualitative and quantitative assessment of the 
economic impact on U.S. producers, workers, and consumers of 
eliminating the exclusion of textiles and apparel from SSA 
countries from coverage under the Generalized System of 
Preferences (GSP), in addition to quota-free entry for imports 
from these countries.
    The Committee also requested that the Commission identify 
the specific types of textile and apparel articles which are 
most likely to be produced in SSA and which would have the most 
significant impact on U.S. producers, workers, and consumers.
    The following sections delineate the major findings of the 
Commission's report and address these concerns.

                            Product Coverage

    The articles covered by the Commission's investigation are 
those subject to textile agreements, namely textiles and 
apparel of cotton, other vegetable fibers, wool, manmade 
fibers, and silk blends. U.S. imports of textiles and apparel 
from SSA grew by an annual average of 18.8 percent from 1991-
96, to $383 million, or less than 1 percent of total U.S. 
sector imports. In 1997, U.S. imports of these goods reached 
$454.9 million. Most textiles and apparel imports from SSA 
consisted of apparel (93 percent of the 1996 total), 
particularly basic cotton pants, shirts, and blouses. These 
goods are especially suited to production in countries at the 
initial stages of industrialization because manufacturing 
involves standardized runs, simple tasks, and few styling 
changes.
    Approximately 80 percent of textile and apparel imports 
from SSA in 1996 came from three countries--Mauritius (43 
percent), South Africa (20 percent), and Lesotho (17 percent). 
Kenya followed with 7 percent of the total. Textile and apparel 
imports from most of the remaining SSA countries were very 
small; 24 of the countries each shipped less than $100,000 in 
1996. Although textiles and apparel accounted for slightly less 
than 3 percent of total U.S. merchandise imports from SSA in 
1996, they represented a significant share of the shipments 
from several SSA countries. For example, textiles and apparel 
accounted for 99 percent of total U.S. imports from Lesotho, 76 
percent for Mauritius, and 38 percent for Swaziland.

                Economic Overview of Sub-Saharan Africa

    SSA is made up of a diverse set of countries. In 1995, 
South Africa had the largest economy, with a gross national 
product (GNP) of $131 billion; Nigeria was second, with $28 
billion. The smallest, based on available information, was Sao 
Tome and Principe, with GNP amounting to $45 million. Most 
countries in the region rank among the poorest in the world. 
The World Bank classified 38 of the 48 SSA countries in the 
lowest income group (GNP per capita of $765 or less in 1995) 
and 6 in the lower middle income group ($766 to $3,035); the 
remaining 4 countries are in the upper middle income group 
($3,036 to $9,385). The average annual growth rate of the 
region's gross domestic product (GDP), fell from 1.7 percent 
during 1980-90 to 1.4 percent during 1990-95. The region's 
growth was much lower than that of most other lower and middle-
income country groups during 1990-95.
    Although many SSA countries rely heavily on agriculture, 
the services sector accounts for the largest share of SSA GDP. 
From 1980 to 1995, services' share of SSA GDP rose from 38 to 
48 percent, while industry's share fell from 36 to 30 percent, 
and agriculture's share declined from 24 to 20 percent. The 
latest available data show that agriculture accounted for 68 
percent of SSA employment in 1990. Manufacturing value added 
accounted for more than 20 percent of GDP in only six SSA 
countries--between 20 and 25 percent for Burkina Faso, 
Mauritius, and South Africa, 30 percent for Zambia and 
Zimbabwe, and 36 percent for Swaziland.
    Overall SSA exports decreased by 24 percent during 1980-93, 
to $62 billion. A major portion of the decline was accounted 
for by the drop in exports of Nigeria (55 percent) and the 
Democratic Republic of the Congo (36 percent). The share of SSA 
exports accounted for by fuels, minerals, and metals fell from 
61 to 40 percent during the period; ``other manufactures'' rose 
from 16 to 36 percent. On a geographic basis, SSA exports to 
the European Union (EU) declined by 31 percent during the 
period, to $18.9 billion, and exports to the United States fell 
by 21 percent, to $13.0 billion. Exports to the rest of the 
world dropped by 21 percent to $30.1 billion. The decline in 
SSA exports to the EU occurred despite trade preferences 
afforded SSA under the Lome Convention.
    During the past decade, many SSA countries began the 
process of economic reform. To varying degrees, these countries 
initiated reforms that were designed to stabilize foreign 
exchange rates, liberalize trade and investment, and promote 
foreign direct investment (FDI) and free enterprise. 
Nevertheless, SSA still lags behind other developing countries 
in terms of net private capital flows, including FDI. Although 
the levels of net FDI and portfolio equity have increased 
during the 1990's for the region as a whole, in 1997 total 
foreign investment in SSA accounted for only 3.3 percent of 
total foreign investment in all developing countries.\1\ A 
small number of SSA countries have attracted most of the net 
private capital and FDI flows into the region. For example, 
Nigeria, Angola, and Ghana accounted for approximately 58 
percent of net FDI in 1995.
---------------------------------------------------------------------------
    \1\ Based on preliminary estimates. Source: World Bank, Global 
Development Finance 1998, Country Tables, pp. 14-38.
---------------------------------------------------------------------------
    Such low levels of FDI and foreign exchange earnings have 
not been sufficient to meet the developmental needs of the 
regions. SSA countries, as a group, have had to borrow from 
international institutions, leading to a significant debt 
burden for the region. The World Bank classifies 31 of the 48 
SSA countries as ``severely indebted.'' The ratio of total 
external debt to either GNP or exports of goods and services 
for SSA is higher than the respective ratios for other regions, 
such as South Asia, Latin America and the Caribbean, and the 
Middle East and North Africa. Such high debt burdens can have a 
detrimental effect on economic growth both by acting as a 
disincentive to investment and by potentially increasing 
uncertainty.
    The size of the domestic markets in most of the countries 
in the region may also serve as a disincentive to both domestic 
and foreign investment. Extreme poverty hinders the growth of a 
consumer market in many of the region's countries. Moreover, in 
recent years, SSA textile and apparel producers have had to 
contend with growing competition from U.S. exports of used 
clothing and other used textile items. At $92 million in 1996, 
these products were the eighth largest U.S. export to the 
region. Several SSA countries have expressed concern about the 
adverse impact that shipments of used apparel and textile 
articles have had on their domestic textile and apparel 
sectors, as such goods depress demand for locally made goods. 
The growth in U.S. exports of these goods has served as a 
disincentive to investment in new production capacity or to 
upgrading existing plants and equipment.
    Finally, although the level of infrastructure varies among 
SSA countries, the region as a whole lags behind other low- to 
middle-income regions. SSA's infrastructure deficiencies 
contribute to the region's difficulty in attracting FDI and 
additional domestic investment.

Competitive Position of the Textile and Apparel Sector in SSA Countries

    Recent data on the value added for the textile and apparel 
sector are limited. Of the SSA countries currently competing in 
the global market, South Africa has the largest textile and 
apparel sector ($2.0 billion in 1993), followed by Mauritius 
($288 million in 1992), and Zimbabwe ($236 million in 1993). 
Mauritius stands out since the sector accounts for 45 percent 
of its manufacturing value added.
    SSA is a very small exporter of textiles and apparel to the 
global market, accounting for less than 1 percent of world 
exports of such goods in 1995. SSA textile and apparel exports 
grew by an annual average of 5.4 percent during 1990-95 to $1.7 
billion, two-thirds of which consisted of apparel. Textile and 
apparel exports accounted for about 2 percent of the region's 
total exports in 1995. Mauritius and South Africa together 
generated three-fourths of SSA's sector exports in 1995. The 
EU, with its colonial ties to SSA, was the primary market for 
the region's exports of textiles and apparel, accounting for 
just over one-half of the total in 1994. The United States 
followed with just under one-fourth of the total. Other SSA 
countries accounted for 13 percent of exports.
    If SSA countries are granted free access into U.S. textile 
and apparel market, transportation costs are an important 
factor that will determine the level of exports. Because SSA 
textile and apparel exports, and African exports as a whole, 
are relatively small, SSA exporters cannot enjoy the cost 
advantages from the economies of scale in shipping afforded to 
exporters in larger markets, such as in East Asia. A recent 
quick survey of freight forwarders offers some insight. Port-
to-port costs for apparel shipped from Hong Kong to New York is 
$2,620 per 40 foot container and takes 20 days. In the same 
mode, Mauritius faces $4,300 and 42 days. South Africa faces 
$3,800 and 40 days; Uganda, $8,270 (with inland freight) and 42 
days. Most of the shipping lines go to SSA via such European 
ports as Antwerp or Rotterdam. After stopping in Europe, 
containers shipped to Kenya or Zimbabwe may go via Durban, 
South Africa, where the container must be transferred to a 
feeder carrier that may service Durban only every 15 days. Most 
shippers service South Africa and east Africa weekly, and sail 
to west Africa every 21 days.
    Long delivery times, high transportation costs, and 
uncertainties involved in shipping finished products from SSA 
are important disincentives to developing production there. In 
addition to high quality, the highly competitive U.S. apparel 
retail market demands low-inventory and quick response supply. 
SSA countries, therefore, must overcome substantial hurdles 
beyond gaining free access to the U.S. textile and apparel 
market to meet these requirements.
    In the Commission's report, the 48 SSA countries are 
divided into three groups. The first group comprises the seven 
countries that are established textiles and apparel industries 
that have been able to compete in developed country markets 
such as the United States and the EU. The second group consists 
of nine countries that are considered to have the potential to 
expand exports of textiles and apparel to the United States 
based, in part, on past production and export performance. The 
third group includes the 32 remaining SSA countries, which are 
less likely to compete in the U.S. market for such goods.
     The seven countries in the first group are 
Mauritius, South Africa, Lesotho, Kenya, Swaziland, Madagascar, 
and Zimbabwe. Mauritius has the most developed, export-oriented 
apparel industry in SSA, exporting quality apparel all over the 
world. U.S. textile and apparel imports from Mauritius peaked 
at $191 million in 1995, and then fell to $165 million in 1996. 
The price competitiveness of Mauritian textiles and apparel has 
declined recently because of rising labor costs brought on by a 
tight labor market. As a result, some Mauritian sector trade 
has shifted to neighboring Madagascar. U.S. textile and apparel 
imports from Madagascar, which has a low-cost, relatively 
skilled workforce, rose from less than $1 million a year in the 
early 1990s to $11 million in 1996.
     U.S. textile and apparel imports from South Africa 
have grown rapidly since 1991, when the United States lifted 
the trade embargo imposed against South Africa under the 
Comprehensive Anti-Apartheid Act of 1986. Imports rose from 
$1.5 million in 1991 to $77 million in 1996; the pre-embargo 
peak was $55 million in 1985. South Africa is the largest 
producer of textiles and apparel in SSA, but it exports only a 
small share of its production. Factors such as low productivity 
and the limitations initially imposed during the period of 
international sanctions hamper its ability to compete globally, 
especially with Asian firms. In addition, South Africa has 
relatively high labor costs, so South African firms tend to 
focus on the production of higher quality or niche products for 
export. Nonetheless, South Africa has a developed 
infrastructure and an established textile and apparel sector 
upon which to expand production. Both Lesotho and Swaziland, 
which have close trading relationships with South Africa, have 
long-term potential to develop globally competitive textile and 
apparel sectors.
     The trade sanctions imposed on South Africa 
encouraged firms there to shift production of textiles and 
apparel for export to neighboring Lesotho and Swaziland. The 
resulting increase in U.S. textile and apparel imports from 
Lesotho from negligible levels in the mid-1980s to $27 million 
in 1991 and to $52 million in 1992, led to the establishment of 
U.S. quotas. However, reflecting the imposition of the quotas 
and the lifting of the U.S. trade embargo on South Africa, 
textile and apparel imports from Lesotho leveled off at 
slightly more than $60 million during 1994 and 1995, and then 
rose to a high of $65 million in 1996. Since 1995 Lesotho's 
exports of textiles and apparel to the United States have not 
been covered by quotas. Textile and apparel imports from 
Swaziland more than doubled between 1991 and 1994 to $15 
million, and then fell to about $11 million in 1995 and 1996. 
Both Lesotho and Swaziland, which have close trading 
relationships with South Africa, have long-term potential to 
develop globally competitive textile and apparel sectors.
     Zimbabwe's textile and apparel sector has shown 
the capability to export to developed country markets, which 
account for most of its exports of textiles and apparel. The 
50-percent growth in Zimbabwe's sector exports during 1990-95 
partly reflected efforts by apparel exporters to shift their 
product mix to more fashionable and higher valued goods. 
Zimbabwe's textile industry mainly exports low-valued cotton 
goods, such as yarn and unfinished fabric. For the most part, 
the industry is unable to competitively produce quality 
finished fabrics or other textiles for export to developed 
country markets. Moreover, the country's textile and apparel 
manufacturers are at a disadvantage relative to other major SSA 
supplier countries such as Kenya and South Africa, given both 
the distance of these firms from major ports and the fact that 
it is a land-locked economy.
     U.S. textile and apparel imports from Kenya rose 
about sixfold during 1991-94, to a high of $37 million, before 
decreasing to just under $28 million in 1996. These imports 
fell following the establishment of U.S. quotas on Kenya's 
shipments of certain shirts and pillowcases in 1994. However, 
in 1996, none of the quotas applied to Kenya's exports to the 
United States were filled. Kenya's textile and apparel sector 
appears to have both the capacity and capability to regain a 
share of the U.S. market.
     The nine countries in the second group that are 
considered to have the potential to expand exports of textiles 
and apparel to the United States are Botswana, Cameroon, Cote 
d'Ivoire, Ghana, Malawi, Mozambique, Nigeria, Tanzania, and 
Zambia. The preference margins provided by the proposed 
legislation could afford these countries a chance to develop 
textile and apparel sectors capable of competing in the U.S. 
market under the right circumstances. These circumstances 
include (i) being able to attract sufficient foreign investment 
and know-how and (ii) the WTO's Agreement on Textiles and 
Clothing (ATC) eliminating quotas on all members is does not 
eliminate any advantage the proposed legislation might offer.
     The 32 remaining countries (group 3), which are 
considered less likely to compete in the U.S. textile and 
apparel market, are among the poorest in the world. Some of 
these countries have no formal textile or apparel industry. 
Moreover, although various disincentives to investment that 
have been discussed above affect the region as a whole, the 
countries in this third group are particularly hampered by 
small internal markets for these products, inadequate 
infrastructure, political instability, and/or limited natural 
resources.

                          Quantitative results

    The quantitative analysis undertaken by Commission staff addresses 
the following question: What would have been the effect on the two U.S. 
industry sectors (textiles and apparel) if, ceteris paribus, the 
tariffs and quotas applied to U.S. imports of these products from SSA 
had been eliminated in 1996? By assuming that all other U.S. policies 
(monetary, fiscal, and trade) remain the same, the analysis focuses on 
the effect from changes in the specific policies under question, in 
isolation from the rest of the U.S. economy. The analysis is not a 
forecast; it does not tell what will happen if tariffs and quotas are 
actually removed. It provides an assessment of the effects of the 
proposed policy change.
    The quantitative analysis is based on the value of U.S. domestic 
shipments in 1996, the respective 1996 values of U.S. imports from SSA 
and from the rest of the world, the average imported weighted tariffs 
applied to these goods in 1996 and staff estimates of the tax 
equivalents of the quotas applied to the U.S. imports of apparel from 
Mauritius, which were the only ones that were actually binding. Because 
only these two quotas imposed constraints, it is not surprising that 
removal of the quotas had little impact. The analysis also relies on 
several behavioral parameters that reflect the degree to which U.S. 
consumers, U.S. producers, SSA suppliers, and other foreign suppliers 
respond to price changes in the U.S. market.
    The information on these market behavior parameters was taken from 
previous research on textiles and apparel and is documented in the 
Commission's report. Supply responses from SSA are of particular 
concern. Short term responses may come from existing inventories, 
shifting supply from existing customers, and increasing hours of 
operation of existing manufacturing facilities. Long term responses 
involve adding new manufacturing capacity and employing and training 
new workers. Given the limited empirical research in this area, 
however, and to provide a more complete picture of the possible effects 
of elimination of quotas and the reduction of tariffs, staff used lower 
and upper-bound ranges rather than relying on a given estimate for each 
of the parameters.
    I want to highlight the upper-bound scenario, the worst-case from 
the U.S. industry perspective. This is the circumstance that leads to 
the largest reduction in U.S. shipments and employment. This situation 
occurs with: (i) moderate price responsiveness of U.S. consumers in 
terms of their aggregate purchases, (ii) high price responsiveness on 
the part of U.S. producers, (iii) a high price responsiveness of SSA 
and other foreign producers, and (iv) a willingness on the part of 
consumers to shift purchases between goods produced in the United 
States, SSA, and the rest of the world in response to changes in the 
respective prices for these products. In this exercise, staff stretched 
each of these parameters to its highest reasonable level to estimate a 
maximal effect on the U.S.
    Under the ``upper-bound'' scenario, eliminating both tariffs and 
quotas, U.S. imports of apparel increase by 46 percent (to $557.3 
million). Net U.S. welfare increases by approximately $96 million. 
Imports from the rest of the world decline by 0.2 percent. Domestic 
shipments decline by 0.1 percent. Assuming that a decline in employment 
tracks a decline in production, around 676 jobs (or, more precisely, 
full time job equivalents) are eliminated.
    Subsequent to the release of the study, arguments have been made 
that the study did not deal adequately with transshipment and foreign 
investment in SSA as means of increasing SSA exports to the U.S. 
market.\2\ These issues, in fact, have been incorporated implicitly 
into staff's quantitative analysis by including scenarios in which SSA 
suppliers are able to respond very aggressively to changes in price. 
Transshipment and increased foreign investment mean SSA countries can 
increase their supply to the United States. These factors are accounted 
for in the analysis by expanding SSA's supply capability.

    \2\ The transshipment of textiles and apparel through third 
countries to avoid quotas, as well as other types of textile fraud, is 
by no means a trivial concern. It is a priority of the U.S. Customs 
Service, which has expanded efforts to combat such illegal 
transshipments. Although official data are not available on the extent 
of these transshipments, the Customs Service has documented a number of 
instances where SSA countries have been used as illegal points of 
transshipment. Under textile agreements negotiated with exporting 
countries, the United States may send ``jump teams'' to foreign 
countries to verify production capacity of a factory. In addition, the 
United States may apply transshipments to the quota of the true country 
of origin and charge up to three times the amount of the transshipment 
against quotas in the event of repeated circumvention by a country.

          First, staff compared the results of the ``upper-bound'' 
        scenario (same assumptions regarding the price responsiveness 
        of U.S. consumers, U.S. producers, and other foreign 
        suppliers), but completely eliminates any supply constraint on 
        apparel from SSA (an infinite supply elasticity). Under this 
        scenario, tariff and quota removal results in a 61 percent 
        increase in U.S. imports from the region ($616.2 million). 
        However, the changes in U.S. imports from other suppliers and 
        U.S. production do not differ significantly from the initial 
        ``upper-bound'' scenario. In other words, our quantitative 
        analysis in both cases suggests a decline in U.S. apparel 
        production of around one-tenth of 1 percent.
          Second, at the request of the staff of the Ways & Means 
        Committee, ITC staff also analyzed what would happen if U.S. 
        imports from SSA were to increase ten-fold, reaching $3.5 
        billion (i.e., roughly $2.9 billion greater than the results 
        generated by the quantitative analysis outlined above). Even in 
        this case, the decline in U.S. apparel shipments is relatively 
        small (i.e., by six-tenths of one percent, or $767.1 million). 
        Although the quantitative analysis conducted by staff is not an 
        explicit analysis of strategic investment in the region or 
        potential transshipments through the region, the sensitivity 
        analysis does shed light on the potential effects of 
        significant FDI into and transshipment through SSA on the U.S. 
        economy.

    It is unlikely that SSA will achieve this level of export growth in 
the near term because of the general economic climate prevailing in the 
region. Although several SSA countries have developed successful 
textile and apparel industries, the industries in most of the countries 
within the region face a wide variety of constraints. Government 
ownership of lucrative or critical sectors of the economy precludes 
much foreign investment. In many Sub-Saharan countries, banking, 
insurance, petroleum, utilities, telecommunications, mining, and in 
some cases, manufacturing sectors are government-owned monopolies. 
Regulatory impediments--such as slow and insufficiently transparent 
licensing, outdated business laws, and unreliable judicial systems that 
do not provide effective dispute settlement--also deter foreign 
investment. Many countries still impose price controls and restrictions 
on foreign-exchange transactions, profit remittance, and foreign 
ownership of land and assets. Tax administration is poor in some 
instances and tax rates are often high.
    Infrastructure development in the region lags behind other low- to 
middle-income regions and contributes to the region's difficulty in 
attracting FDI. These problems, significantly greater than the average 
experience in either East Asia or in Latin America and the Caribbean, 
include inadequate roads and port facilities, poor communications 
(average waiting time for a telephone line in 1995 was 15 years versus 
one year in East Asia), unreliable public power, and poor access to 
necessities such as water. The high debt burden makes exchange rates 
uncertain and deters foreign investment. Political stability remains 
problematic. Some of the more successful economies, such as Mauritius, 
face a serious labor shortage and relatively high labor costs.
    I hope that this clarifies the scope and findings of the 
Commission's study. I would be pleased to address any questions that 
remain.

                                

    Chairman Crane. Thank you very kindly.
    Our next witness, Mr. Moore.

 STATEMENT OF CARLOS MOORE, EXECUTIVE VICE PRESIDENT, AMERICAN 
                TEXTILE MANUFACTURERS INSTITUTE

    Mr. Moore. Thank you, Mr. Chairman. I am representing the 
American Textile Manufacturers Institute. We are the national 
trade association of the textile mill products industry. Let me 
emphasize that our members make fabrics, yarns, thread, and 
home furnishings that we supply to apparel makers and other 
customers around the world.
    Mr. Chairman, no one quarrels with the objective of the 
Sub-Saharan trade legislation, to help promote economic growth 
and improved well being of the people of Sub-Saharan Africa. 
However, we understand that the bill to be introduced in the 
House will be virtually identical to the badly flawed version 
of the African Growth and Opportunity Act that was narrowly 
approved last year by the House.
    If this is the case, it is truly unfortunate, because that 
bill will not achieve its objective of helping Africa. It will 
imperil the livelihoods of thousands of U.S. textile workers. 
The textile and apparel provisions of this bill will not 
promote jobs and economic growth in Africa. They will promote 
instead massive illegal transshipments of Asian apparel through 
Sub-Saharan Africa to gain duty-free access to the U.S. market. 
China will be the winner, and Africa and the U.S. will be the 
losers. For these reasons, our board of directors unanimously 
agreed to oppose that version of the legislation. ATMI will 
focus its efforts to convince our supporters in the House and 
Senate to amend the bill or prevent its passage.
    Let me turn for a minute now to how the bill creates a 
transshipment super highway. As U.S. Customs has testified on 
many occasions, illegal transshipments of apparel and textiles 
are already a major problem. In 1993, acting deputy 
commissioner of Customs, Sam Banks, testifying before a House 
Committee said, ``you could take a pretty conservative estimate 
that the problem is a $2 billion problem.''
    So you can see, we already have a severe transshipment 
problem, even without this bill. It is a problem that stretches 
around the globe, encompassing almost 40 countries that U.S. 
Customs have identified as major transshipment routes. We have 
included in our written statement a map from the U.S. Customs 
Service showing this.
    Africa remains a transshipment route. Recently, a Hong Kong 
national, Peter Yeung, was charged in New York by the U.S. 
Attorney with massive quota fraud. U.S. Customs identified two 
of his transshipment routes to be through Sub-Saharan countries 
of Zimbabwe and Mozambique.
    Because this legislation also removes duties, the incentive 
to cheat will become even more enticing. Mr. Chairman, by 
putting in U.S. yarn and fabric and thread provisions, 
transshipments will be stopped cold in their tracks. U.S. 
Customs would be in charge of the administration of the bill, 
and it can effectively administer exports of cut pieces, as it 
does now under the so-called 807A program with other countries.
    I would like now to turn to the ITC report. Just how bad is 
it? You have heard a defense of it. But keep in mind one thing. 
Supporters of the House bill make two arguments that seem to be 
in direct conflict. First, they argue that the House bill and 
its textile provisions will be a vitally important tool for 
significant economic development and growth for sub-Sahara. 
Then in nearly the next breath they State that U.S. textile 
workers and manufacturers have no need to worry because the ITC 
study shows that imported apparel will grow only slightly.
    Both these arguments can not be true. If the House bill 
would actually succeed in promoting significant development 
through more apparel exports to the United States, there would 
be a bigger impact. Otherwise, if this bill will not produce 
the development, the Committee and the Congress are wasting 
their time with those provisions.
    Regarding the transshipment issue, the ITC simply assume 
there would be none. They did take it into account, but then 
they assumed it away. They also chose to ignore the historical 
record. They say that there will be only $179 million annual 
increased imports. They ignored Mexico. They ignored the growth 
of trade under NAFTA. They ignored the Northern Marianas, if 
you want to cite a more comparable example, where imports have 
grown by over $700 million over the last few years.
    But the biggest factor that they ignored is, and you heard 
it today, they said that other things being equal. Other things 
are not equal when you remove duties. There is an enormous 
incentive to invest. They did not include that enormous 
incentive to invest. That is why you get such a small amount of 
trade. Now they did examine some upward bound, but again, 
that's an assumption.
    Finally, Senator Gramm, Mr. Chairman, said that it was not 
feasible to use U.S. yarns and fabric. I would like to point 
out that it takes less than a month, 17 days to be precise, for 
a cargo ship to go from Charleston to Cape Town. This is based 
on Lykes Line's own data. The cost of shipping is not 
prohibitive. It's relatively small compared to the duty savings 
of the apparel.
    I would like to also point out the U.S. textile industry 
already ships nearly $1 billion worth of rolled fabric to Asia 
each year. Much of that comes back to the United States in 
garment form. If it was non-competitive, why would Asia be 
buying this fabric? We also ship half a billion dollars worth 
of cut pieces to many countries around the world. Look at Sri 
Lanka, an Asian country thousands of miles farther away from 
the United States than Africa. It buys $26 million worth of 
rolled fabric a year, which it sends back in garment form. It 
gets no duty break.
    Mr. Chairman, if Sri Lanka can make money using U.S. 
fabric, why couldn't Sub-Saharan countries, with lower wage 
rates, lower transportation costs, faster transit times, and 
zero duties?
    In conclusion, we would urge the Committee to change this 
bill in today's markup to put in the provisions we suggest that 
will create a true partnership in all of the efforts to develop 
jobs in Africa. How successful would such a partnership be? I 
would like to just cite the apparel investment opportunities. 
For example, a $50 million investment would build a single 
integrated textile mill of modest size. It would create jobs of 
around 150 workers. A $50 million investment in apparel 
manufacturing could build 10 world scale apparel plants and 
create jobs for over 5,000 workers.
    Mr. Chairman, we urge you to take into account the change 
in provisions that we suggest for textiles and apparel. Thank 
you.
    [The prepared statement follows:]

Statement of Carlos Moore, Executive Vice President, American Textile 
Manufacturers Institute

    This statement is submitted by the American Textile Manufacturers 
Institute (ATMI), the national association of the textile mill products 
industry. ATMI's members collectively account for approximately three 
quarters of the textile fibers processed in the United States and are 
engaged in the manufacture and marketing of nearly every kind of 
textile product.
    Our testimony is divided into three segments: (1) a short section 
regarding the history of Sub-Saharan Africa legislation in the last 
Congress and the political ramifications of proceeding down the same 
path as last year; (2) our analysis of the bill's flaws and potential 
impact on our industry and workers; and (3) a discussion on the merits 
and feasibility of the Senate Finance Committee bill from the last 
Congress, which required the use of U.S. yarn and fabric for imported 
garments assembled in Sub-Saharan Africa to qualify for duty-free, 
quota-free treatment, and which we believe turns the bill into a win-
win situation for both American and African workers.

                        Background/ATMI Position

    No one quarrels with the objective of the Sub-Saharan Africa 
legislation -to help promote economic growth and improve the well-being 
of the people of Sub-Saharan Africa. However, ATMI understands that the 
bill to be introduced in the House of Representatives will be virtually 
identical to the badly flawed version of the African Growth and 
Opportunity Act that was narrowly approved last year by the House.
    This legislation as currently written will not achieve its 
objective and will imperil the livelihoods of thousands of U.S. textile 
workers. The textile and apparel provisions of this bill will not 
promote jobs and economic growth in Africa; they will promote instead 
massive illegal transshipments of Asian apparel through Sub-Saharan 
Africa to gain duty-free access to the U.S. market. China will be the 
winner and Africa and the U.S. will be the losers. For these reasons, 
ATMI's Board of Directors unanimously agreed to oppose this legislation 
and ATMI will focus efforts to convince our supporters in the House and 
Senate to amend it or to prevent its passage.
    When the House considered this proposal last year, we pointed out 
its significant flaws and urged the House to permit an amendment that 
would have addressed our industry's concerns and created a true 
economic partnership between the United States textile industry and a 
newly energized apparel sector in Sub-Saharan Africa. This amended 
legislation would have provided a ``win-win'' situation for workers in 
the United States and in Africa. Regrettably, a separate vote did not 
occur.
    However, the Senate Finance Committee replaced the House textile 
and apparel section with new U.S. yarn and fabric provisions. We urge 
the Subcommittee in its mark-up scheduled for later today to substitute 
the same provisions into the version that will be considered by the 
House. If last year's flawed House bill can be changed so that both 
African and U.S. workers benefit, ultimate passage becomes virtually 
assured.

                        How is the Bill Flawed?

    Turning now to the specifics of the legislation, ATMI is opposed to 
the African Growth and Opportunity Act in the form that the House voted 
on last year. Our primary concern remains:
     The bill is an open invitation to massive customs fraud 
that will turn Sub-Saharan Africa into a 48-nation transshipment 
superhighway. The result will be that billions of dollars of illegal 
Asian transshipments will enter the U.S. at zero duty, resulting in job 
losses for thousands of workers, many of whom are African-Americans, in 
the U.S. textile/apparel/fiber industry complex.
     In addition, the bill will deprive workers in Sub-Saharan 
Africa of the much-needed investment which a fraud-free bill might 
otherwise encourage.
    The bill has other flaws:
     It is bad trade policy in that it unilaterally opens up 
the U.S. market without providing any benefits to U.S. workers. Indeed, 
many Sub-Saharan countries ban the importation of U.S. textile and 
apparel products and will be able to continue to ban their importation 
under this bill even though this violates their WTO commitments.
     It relies on an International Trade Commission study \1\ 
that contains three major flaws and which dramatically underestimates 
the number of U.S. jobs which could be lost as a result of this 
legislation.
---------------------------------------------------------------------------
    \1\ Likely Impact of Providing Quota-Free and Duty-Free Entry to 
Textiles and Apparel From Sub-Saharan Africa; Investigation No. 332-
379; September; 1997.
---------------------------------------------------------------------------
     It will permit Asian manufacturers to legally exploit an 
ineffective rule of origin to gain the benefits of the bill by doing 
very little actual manufacturing in Sub-Saharan Africa. As a result, 
the bill will chiefly benefit Asian manufacturers, not African workers. 
We also have concerns that highly skilled, low-wage Asian workers may 
be imported into Sub-Saharan Africa, displacing job opportunities for 
African workers. We note that this phenomenon is already occurring in 
Mauritius, the Northern Marianas, Oman, Qatar and Bahrain.
     Asian transshipments through Sub-Saharan Africa will cause 
additional economic hardship and large-scale job losses in the 
Caribbean by threatening billions of dollars of textile and apparel 
trade that has developed on the basis of export sales of apparel to the 
U.S. market. Thousands of workers in Mexico face a similar threat.
     The bill violates the rules of the World Trade 
Organization (WTO) and thus will require a waiver from that body. This 
will almost surely lead to demands for equivalent treatment by other 
WTO members which could, if granted, amount to billions of dollars of 
quota giveaways to Asian textile and apparel exporters. Ironically, 
Asian exporters could thus ``win'' in two ways: by sending billions of 
dollars of illegal transshipments through Africa and also by demanding 
and receiving increases in quota levels or other concessions.
     It contravenes commitments made to the U.S. textile 
industry and Congress by the Administration during the Uruguay Round to 
maintain the balance of concessions whereby quota phaseouts and tariff 
reductions will follow the WTO agreement.
    Each of these points is further elaborated on in Attachment I.
    We would state to the committee at the outset that our opposition 
to the legislation in its present form is not because we oppose trade 
agreements. On the contrary, we support trade agreements that create 
meaningful economic partnerships between the United States and its 
trading partners. Consequently, ATMI supported the U.S.-Canada Free 
Trade Agreement and we supported and worked hard for the passage of 
NAFTA. ATMI also supports the thus far unsuccessful attempt to bring 
Chile into NAFTA and we work for the passage of Caribbean Basin parity 
legislation. Our industry is not opposed to trade liberalization that 
is balanced, reciprocal, enforceable and beneficial to the parties 
concerned. The African Growth and Opportunity Act, however, is none of 
that; it is bad trade policy and ill-conceived legislation.
    The simple truth is the textile and apparel provisions of this 
legislation, as currently written, will fail to assist Sub-Saharan 
Africa and will hurt U.S. workers and productions by creating new 
incentives for massive illegal transshipments of textiles and apparel 
products from Asia through Africa. Instead of creating an economic 
partnership between the United States and Sub-Saharan Africa, it will 
create an economic partnership between Africa and Asia to the detriment 
of African and U.S. workers.

           How the Bill Creates a Transshipment Superhighway?

    As U.S. Customs has testified on many occasions, illegal 
transshipment of textile and apparel products is already a major 
problem. This bill, however, does not merely make that problem worse--
it creates a whole new and immensely lucrative reason to cheat. Today, 
the sole reason that countries illegally transship through third 
countries is to avoid quotas imposed on their own exports. The 
countries that most often fill their quotas--China and Pakistan--are 
the biggest transshippers and they do so in a big, big way. In 1993 
Acting Deputy Commissioner of Customs Sam Banks, testifying before a 
House committee, said, ``you could take a pretty conservative estimate 
that the problem is a $2 billion problem'' (see Exhibit A).
    So you can see that we already have a severe transshipment problem 
even without this bill. It is a problem that stretches across the 
globe, encompassing almost 40 countries that U.S. Customs has 
identified as ``major transshipment routes'' (see Exhibit B). Who else 
is involved is an open question. According to testimony before 
Congress, U.S. Customs has found evidence of transshipment activity in 
virtually every country that it has visited, including Canada, Mexico, 
France, Chile, Mongolia and Syria and Yugoslavia. Recently a Hong Kong 
national, Peter Yeung, was charged in New York by the U.S. Attorney 
with massive quota fraud. U.S. Customs identified two of his 
transshipment routes to be through the Sub-Saharan countries of 
Zimbabwe and Mozambique.
    Because this legislation also removes duties, the incentive to 
cheat will become immeasurably more enticing. Today, importers of Asian 
apparel pay more than $4 billion a year in duties to the U.S. Treasury 
regardless of whether they illegally transship those goods or not. If 
this bill passes, Asian manufacturers could reduce their costs by 
enormous amounts each year by transshipping those goods through Sub-
Saharan Africa and thus avoiding duties--money which would then not be 
received by the U.S. Treasury.
    As it is written now, this bill creates an incentive for anyone 
already tempted to avoid quotas to transship through Sub-Saharan Africa 
and avoid duties. In addition, this bill expands the universe of 
potential transshippers from those whose quotas fill--a relatively 
small number of countries--to anyone who pays duties. In the highly 
competitive world of international textile and apparel trade where 
pennies saved in the production of a garment are regarded as 
significant, this bill represents an invitation for unscrupulous 
importers and exporters to cheat on a massive scale.
    Who will stop this potential flood of new transshipments? The 
proposed legislation entrusts enforcement of this agreement to Customs 
agencies in Sub-Saharan Africa. These are the same agencies that the 
U.S. Government (among others, including some of the African 
governments in question) has described as being characterized by 
``systemic corruption'' (see Attachment I:1.5). So the argument of some 
African nations that they will be able to police themselves is highly 
questionable. Many have not been able to do so now--why should anyone 
think they will be able to when those willing to cheat are attracted by 
duty-free access to the U.S.? We would ask the Committee to consider 
whether they would trust their own jobs to Customs officers in 
countries with a reputation for corruption? We respectively suggest 
they should not ask U.S. textile workers to do the same.
    Unfortunately, even if we could guarantee that Customs agents in 
Sub-Saharan Africa had the manpower, the training and the ability to 
monitor this trade, this legislation still does not include a single 
truly effective anti-transshipment measure to prevent transshipments. 
The visa system this bill proposes is smoke and mirrors. This system, 
which would be administered by Customs officers in Sub-Saharan Africa, 
requires no verification of where the goods are made, no inspections of 
facilities, and was, in fact, never designed to stop transshipments. 
China, Hong Kong, and Pakistan have operated under an identical visa 
system for more than fifteen years--and transshipments from and through 
these countries continues to be rampant.
    Other proposed anti-transshipment measures--such as triple charging 
or banning companies who are caught transshipping--presupposes that 
either Customs officials in Sub-Saharan Africa can and will catch 
transshippers and turn them over to U.S. Customs or that U.S. Customs 
will do it on its own. These are, by the way, the same anti-fraud 
measures currently in place with every major Asian exporting nation. We 
will let you judge the results by their success thus far: triple-
charging last year amounted to around $10 million (out of billions of 
dollars in suspected transshipments). While a number of Hong Kong and 
Macau companies that have been put on suspected transshipper lists, the 
evidence is that many have reincorporated under new names and begun 
transshipping again.
    Questions were raised last year about our statement concerning 
transshipments and Customs enforcement. In fact, we understand that 
your Subcommittee asked U.S. Customs to review our statement and that 
U.S. Customs addressed several points that we made. Let me state 
categorically that Customs did not challenge any of our arguments about 
massive transshipment that would result from the bill and the serious 
problem of Customs dealing with Asian goods moving through 48 Sub-
Saharan African countries. Instead, Customs commented on several minor 
technical points such as how large a presence it has overseas (note: we 
amended our statement to note that it has a single office in the Sub-
Saharan African region).
    The U.S. yarn and fabric provisions will transshipment cold in its 
tracks. The bill puts U.S. Customs in charge of the trade that will 
occur with Sub-Saharan Africa by requiring exports from the region to 
use U.S. fabrics and yarns in order to gain duty-free and quota-free 
benefits. U.S. Customs can effectively administer the exports of U.S. 
cut pieces of fabric as it does now under the so-called 807A program 
with other countries. U.S. Customs can also keep track of uncut fabric 
sent to Sub-Saharan Africa for cutting and sewing. It can then grant 
duty-free access to the apparel sent back to the U.S. that corresponds 
to the fabrics sent from the U.S. This approach requires no significant 
increase in Customs resources and does not rely on other countries' 
customs services.

                    Just How Bad is the ITC Report?

    Supporters of the House bill make two arguments that seem to be in 
direct conflict. First, they argue that the House bill will be a 
vitally important tool for significant economic development and growth 
for Sub-Saharan Africa. Then, in nearly the next breath, they state 
that U.S. textile workers and manufacturers have no need to worry 
because the ITC study shows that imported apparel from Sub-Saharan 
Africa will grow only slightly--by a maximum of $179 million annually. 
Both these arguments cannot be true.
    If the House bill were to actually succeed in promoting significant 
economic development through growth in apparel exports to the U.S., 
these exports will, obviously, have to be more than the small increase 
in trade predicted by the ITC. Otherwise, the Committee and the 
Congress are wasting their time with the legislation.
    So what is wrong with these two arguments? Let us assume that 
nothing is wrong with the first one: the House bill results in major 
growth in Sub-Saharan apparel exports to the U.S. (We believe for 
reasons already stated that most of this trade would be Asian 
transshipments.) Could the ITC report be wrong?
    Mr. Chairman, the Committee may be wondering why ATMI doesn't also 
join the chorus and quote the ITC report? After all, the ITC says very 
little trade (and hence very little damage to U.S. workers and output) 
will result. We can only wish this conclusion was correct, but it is 
not and its flaws must be disclosed to prevent its use from clouding 
the real damage that the proposed House bill would produce.
    As we pointed out last year, the ITC study has three major flaws: 
(1) it dismisses the transshipment issue out of hand; (2) it ignores 
real-life examples where duty-free, quota-free access for textiles and 
apparel has been granted; and (3) it uses a fatally flawed econometric 
model whose basic assumptions deny common sense and make the entire 
study worthless.
    Regarding the transshipment issue, the ITC simply assumed there 
would be none. It ignored the reality of Asian manufacturers who 
already illegally transship several billions of dollars a year to the 
U.S. and the fact that these same manufacturers have already used Sub-
Saharan Africa as transshipment routes. The ITC then went on to assume 
that dropping duties from 18% to 0% would not constitute an incentive 
for Asian manufacturers to transship through Sub-Saharan Africa. We ask 
the Committee to consider whether this makes any sense. As you can see 
by the attached map prepared by the U.S. Customs Service, Asian 
manufacturers already illegally transship goods through almost 40 
countries just to avoid quotas while continuing to pay full duties. 
Consider Mr. Peter Yeung from Hong Kong who is currently charged with 
transshipping through two Sub-Saharan countries. If Asian manufacturers 
could also save 18% of their costs by transshipping through Sub-Saharan 
Africa rather than other countries, why wouldn't they?
    Unfortunately, the ITC also chose to ignore the historical record 
as well. The ITC claims that as a result of this bill, imports of 
apparel from Sub-Saharan Africa will increase by at most only $179 
million over a ten-year time period. It got this number from an 
econometric model that it evidently trusted more than the facts at 
hand.
    The basic fact is that when you grant duty-free access for textiles 
or apparel to ANYONE, imports increase dramatically. In the five short 
years that NAFTA has been in effect (1994-1998), imports of textiles 
and apparel from Mexico have grown 261 percent in physical terms and 
288 percent in dollar terms. This is what happens when textile and 
apparel imports are made quota-free and duty-free. This is not economic 
theory; this is real life.
    Now, you may wonder whether Mexico is a relevant example, being a 
close neighbor with long-standing trade ties. Let us look then at the 
Northern Marianas, a tiny island enclave in the western Pacific, 
halfway around the world and thousands of miles farther away than 
Africa. The Northern Marianas, which is smaller in size than the city 
of Jacksonville Florida, has received duty-free, quota-free status as a 
result of being a U.S. territory. And, over the last five years, 
exports of apparel from the Northern Marianas have increased by over 
$700 million or over 300%. Today, the Northern Marianas constitutes the 
fastest growing source of imported apparel in the world. These islands 
have no other ``comparative'' advantage than having duty-free and 
quota-free access to the United States. In fact, the labor is even 
imported from China and other low wage Asian countries.
    How then did the ITC come by its figure of $179 million and the 
loss of only 676 U.S. jobs? You may be surprised to learn that the ITC 
created this number by assuming that NO ONE would invest in Sub-Saharan 
Africa. According to the ITC, the correct figure for new investment in 
Sub-Saharan Africa if this bill passes is ZERO. If the ITC is correct, 
then the Congress should drop this bill and move on to other business.
    The Subcommittee doesn't have to take ATMI's word regarding the 
flaws in the ITC report. A study conducted last year by the Economic 
Strategy Institute (ESI) confirmed that the ITC's econometric study 
assumed that the bill would lead to no new investment. We ask that the 
Committee review the ESI study (Attachment II) carefully before they 
cite the ITC's ``numerology'' on this issue.

            How Feasible is it to Use U.S. Yarn and Fabric?

    Last year, the Senate Finance Committee reported a bill which 
sought to make this a mutually beneficial trade bill, and would help 
both Africa and the United States by creating a new economic 
partnership between the U.S. textile and Sub-Saharan apparel 
industries. This approach is comparable to the effort made on the House 
floor last year to improve the bill, and it is worthy of the 
committee's support this year.
    We urge the Subcommittee to make a change to the proposed bill that 
would both ensure that goods are actually made in Sub-Saharan Africa--
not in Asia--and would not displace U.S. textile jobs. That change 
would be to require apparel made in Sub-Saharan Africa to use U.S. 
fabrics made of U.S. yarns if the apparel is to enter the U.S. duty-
free and quota-free. These are the same provisions made in the Senate 
Finance Committee's bill last year.
    With such an approach, Asian manufacturers would be denied the use 
of Sub-Saharan Africa as a transshipment platform--any garment entering 
the U.S. from Sub-Saharan Africa without documented proof that it had 
been assembled in a specific plant in Sub-Saharan Africa from fabric 
sent to that plant from the U.S. would have to pay full duty. These 
manufacturers would use Sub-Saharan Africa as a legitimate assembly 
platform--they would invest and create real jobs in Sub-Saharan Africa 
because the heretofore cheaper alternative of transshipping had been 
denied to them.
    Such a system would be a win-win both for workers in Sub-Saharan 
Africa and for workers in the United States. Apparel investment and 
jobs would flow to Africa as it became a new legitimate assembly 
platform for the U.S. market while textile workers in the U.S. would 
benefit from increased orders of U.S. manufactured fabrics and yarns 
(see Exhibit C).
    How successful would such a partnership be? As one of the primary 
purposes of the bill is to create jobs in Sub-Saharan Africa, apparel 
investment should be targeted rather than textile investment, which is 
much more capital intensive and creates far fewer jobs per dollar 
invested. For example, a $50 million dollar investment would build a 
single integrated weaving mill and create jobs for around 150 workers. 
Compare this to a $50 million investment in apparel manufacturing, 
which would build ten apparel plants and create jobs for over 5,000 
workers \2\. With apparel investment, it is much easier to target to 
meet your development needs.
---------------------------------------------------------------------------
    \2\ Source: Werner International
---------------------------------------------------------------------------
    Many Asian countries fill their apparel quotas each year--and every 
year importers must look outside of Asia to fill orders. Sub-Saharan 
Africa already offers importers lower wages and better proximity. What 
this bill adds is the kind of duty break that propelled Mexico in four 
years time to become the premier supplier of apparel for the U.S. 
market. Running at an average savings of 18% per garment, such savings 
offer enormous advantages in the extremely competitive world of textile 
and apparel garment production.
    However, supporters of the House bill have raised questions about 
such an approach. Some have said that it would not be cost-effective if 
U.S. fabric had to be used. They say that transportation takes too 
long; one person testified it would take 80 days to ship from the U.S. 
to Africa. Another said the fabric would add enormous and prohibitive 
costs to a garment. Where such bizarre notions come from we cannot 
say--only that the people who stated them are ignoring the realities of 
international trade in textiles and apparel.
    The truth is that it takes less than a month--17 days to be 
precise--for a cargo ship to go from Charleston, South Carolina to Cape 
Town, South Africa. This is according to Lykes Lines, an international 
shipping company, which ships to South Africa from the United States. 
(If 17 days sounds like a long time, keep in mind that orders for 
garments are typically made six to nine months in advance of actual 
production.)
[GRAPHIC] [TIFF OMITTED] T6044.006

    Regarding the cost of shipping, according to Lykes Lines 
and ATMI member companies who already export fabric to Sub-
Saharan Africa, the shipping cost for U.S. apparel fabric sent 
to South Africa ranges from $.09 to $.14 per garment. This 
accounts for approximately 1.3 percent of the total cost of a 
finished garment. Duty savings, on the other hand, ranges from 
$1.25 to $1.66 per garment (see below). We should note as well 
that transportation costs from the U.S. to Kenya, Senegal, the 
Ivory Coast and Ethiopia were also analyzed and they were all 
slightly less than South Africa's costs.

                            Cost of Shipping Fabric Is Small Compared to Duty Savings
----------------------------------------------------------------------------------------------------------------
                                                                Ocean Freight Cost to
                           Garment                               Ship Fabric For One     Duty Savings if Garment
                                                               Garment To Capetown, SA    Enters U.S. Duty-Free
----------------------------------------------------------------------------------------------------------------
Man's Cotton Twill Trouser..................................                     $.09                     $1.53
Man's Cotton Oxford Dress Shirt.............................                      .07                      1.66
Man's Cotton Golf Shirt.....................................                      .14                      1.25
----------------------------------------------------------------------------------------------------------------
Sources: Lykes Lines, ATMI member companies.

    Regarding the relative cost of U.S. fabric, an argument has been 
made that this cost will be prohibitive. Of the many false statements 
uttered about this proposal, this is the most astounding. While an 
attached analysis by Werner International (see Attachment III) shows 
that this is not so--in fact, it shows that garments sourced in Sub-
Saharan Africa with U.S. fabric are cheaper, by almost 10 percent, than 
identical garments made in the Far East, we ask the Committee to 
consider the following facts:
    1. The U.S. textile industry already ships nearly one billion 
dollars worth of rolled fabric to Asia each year--much of which comes 
back to U.S. in garment form. If the U.S. fabric were non-competitive, 
then why would Asia--thousands of miles further away from the U.S. than 
Africa--be buying so much U.S. fabric\3\? (See Exhibits D & F)
---------------------------------------------------------------------------
    \3\ According the WTO, the United States is the 6th largest 
exporter of textile products in the world.
---------------------------------------------------------------------------
    2. Over one-half billion dollars worth of apparel is shipped from 
Asia to the United States each year made of U.S. textile components 
under the 807 program.\4\ If the U.S. textile products were non-
competitive, we wonder why would Asia be doing so much shopping for 
products in the U.S.? Keep in mind that Sub-Saharan Africa 
manufacturers would pay ZERO duty while Asian manufacturers must still 
pay around 12% under the 807 program (see Exhibit E).
---------------------------------------------------------------------------
    \4\ This figure does not even include rolled uncut fabric from the 
U.S. which is not eligible for duty savings under the 807 program. 
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[GRAPHIC] [TIFF OMITTED] T6044.009

    Let us cite several specific cases. Morocco currently sends the 
U.S. $36 million a year worth of apparel made from U.S. textile 
components. Morocco has nearly the same shipping times, U.S. fabric 
costs and transportation costs as any Sub-Saharan Africa country. And 
under the 807 program, Morocco still pays a duty on the value added in 
that country--while Sub-Saharan Africa would pay ZERO duties.
    Look also at Sri Lanka, an Asian country thousands of miles farther 
away from the U.S. than Africa, which buys $26 million worth of U.S. 
rolled fabric a year. Sri Lanka sends all of this fabric back to the 
U.S. in garment form . . . and it gets no duty break at all! If Sri 
Lanka can make money using U.S. fabric, why couldn't a Sub-Saharan 
Africa country, with lower wage rates, lower transportation costs, 
faster transit times and a duty break averaging 18 percent? The same 
question might be posed with respect to the $40 million worth of fabric 
which the U.S. exported to the Philippines in 1997.
    As for those importers that say they would never source goods out 
of Sub-Saharan Africa under such a plan, we point out that these same 
importers claimed that the rules of origin under NAFTA were so 
restrictive that they would not be able to do business. And yet Mexico 
and Canada have shipped billions of dollars worth of additional textile 
and apparel products since NAFTA has passed. In fact, these same 
importers have made Mexico the largest supplier of apparel to the 
United States.
    These are also the same importers who said that rule of origin 
changes made during the Uruguay Round would cripple their ability to 
import from the Far East--and yet the Far East has increased its 
apparel exports to the U.S. by billions of dollars since the agreement 
was signed. Their arguments must be taken with a grain of salt.

                               Conclusion

    In conclusion, the African Growth and Opportunity Act as expected 
to be considered by this Subcommittee needs to be changed. We support 
its aims and objectives, but conclude that the evidence is overwhelming 
that the bill's own objectives will not be realized. Instead, we are 
convinced that African workers will lose out, Asian manufactures will 
win, fraud and corruption will increase. And, further, contrary to what 
its supporters contend, grave harm will be inflicted on the livelihoods 
of thousands of American workers, including many African American 
workers, in the textile/apparel/fiber complex.
    Therefore, we urge the Committee to change this bill in today's 
markup by substituting the textile and apparel provisions of the bill 
with new language that requires U.S. yarns and fabrics. Such a change 
would create a new and meaningful economic partnership between the U.S. 
textile industry and a newly energized Sub-Saharan apparel sector. It 
would benefit both Sub-Saharan Africa and the United States and 
therefore would gain broad support and stand the best chance of being 
enacted.
    [The attachments are being retained in the Committee Files.]

                                

    Chairman Crane. Ms. Fedorko.

   STATEMENT OF KAREN FEDORKO, EXECUTIVE VICE PRESIDENT, AND 
 GENERAL MANAGER, MAST INDUSTRIES, INC., ANDOVER, MASSACHUSETTS

    Ms. Fedorko. Mr. Chairman, I want you to know how much MAST 
Industries and The Limited, Inc. appreciate your efforts along 
with Mr. Rangel, Mr. McDermott, Mr. Jefferson and others to 
persevere in this important legislative initiative. We also 
appreciate the Administration's ongoing support and especially 
the tireless efforts of Assistant U.S. Trade Representative 
Rosa Whitaker. Thank you.
    Last September I visited Zimbabwe, Ghana, Madagascar, and 
several other African countries with my boss, Marty Trust, and 
other colleagues. I met scores of African entrepreneurs. Mr. 
Chairman, every single one of the businesspeople I met had the 
same question. When will the African Growth and Opportunity Act 
become law? Make no mistake, the dynamic businesspeople of 
Africa do want more trade with the United States. They are 
intensely focused on this Congress's effort to make that 
happen.
    I would like to offer a perspective on why this bill and 
the incentives it offers are necessary. The enormous economic 
promise of Africa is clear. But as a businessperson, I also 
know that Africa can still be a challenging place. If any of 
you doubt the difficulties of doing business in Africa, I 
invite you to try to have Federal Express deliver an urgent 
shipment of clothing samples to a factory in Madagascar in less 
than 5 days, or try to book yourself on a non-stop flight to 
any port in Africa. It's not possible from Washington. It's 
still not possible to find a local access dial in for American 
Online in Madagascar and many other countries. AT&T USA-Direct 
dial service is likewise unavailable. Direct shipping and air 
cargo service for most African ports to the United States east 
coast can't be done.
    I raise these difficulties not as a criticism of Africa, 
but in order to demonstrate how much those of us in the 
American business community need a push toward Africa. Last 
year's Africa bill caused people like me to reconsider the view 
that Africa is just too hard. We need to continue to fight 
against that impulse. I ask you to help us by making another 
run at this legislation.
    Mr. Chairman, Africa deserves a chance to compete for a 
share of the U.S. clothing market. I am convinced that the 
elements the House approved last year would make that happen. 
But there has been a fundamental misunderstanding about this 
question of just who Africa would be competing with. I would 
like to clear that up.
    If the bill you passed last year is enacted, African 
garment producers won't be competing against American textile 
and apparel workers, but Africa will be competing with Korea, 
China, Taiwan, Hong Kong, and other large-scale Asian garment 
exporters. The chance to compete with these Asian producers is 
exactly what Africa needs in order to grow.
    Speaking for our company, I cannot think of a single 
instance in which orders we might place with African suppliers 
would displace any production which we are currently 
contracting with U.S.-based clothing manufacturers. We are 
looking to Africa for simpler products and for products that 
just aren't produced in the United States, like hand-linked 
sweaters that Madagascar is starting to make. That is a product 
that competes directly with China, not Virginia or North 
Carolina or Georgia. Under the incentives scheme contained in 
last year's bill, 100 percent of the new orders we would 
consider placing in Africa are currently placed in East Asia.
    Another concern raised about the textile provisions of the 
African Growth and Opportunity Act is that this would lead to 
massive illegal transshipment of apparel through an African 
quota-free zone. I find the notion advanced by lobbyists from 
the textile industry who oppose trade with Africa, that Africa 
will automatically become, in their words, a transshipment 
superhighway, somewhat offensive and insulting to African 
countries. The notion that democratically-elected governments 
would cheat their own people out of opportunities for some 
manufacturer in another continent is absurd. A country like 
Madagascar wants every job possible for its own people.
    I know the prime ministers of the two biggest apparel 
exporters in Sub-Saharan Africa. They are committed to policing 
their borders and enforcing a standard of zero tolerance with 
respect to illegal transhipment. I also know that U.S. Customs 
will have unrestricted access to any factory producing goods 
for our company.
    I hasten to add, however, that the goal of expanded trade 
will not be achieved if the textile provisions are watered down 
with restrictive origin rules for fabric and other components. 
The House did the right thing last year by rejecting a proposal 
which would have provided quota-free benefits only to garments 
assembled in Africa using 100 percent U.S.-formed and cut 
fabric. I am not aware of a single major retail company that 
would move to expand trade with Africa under a U.S. fabric only 
rule.
    Mr. Chairman, I have built my career on developing 
partnerships with garment makers around the world. We are ready 
to partner with dynamic entrepreneurs in Sub-Saharan Africa to 
develop solid business relationships, convey our technical and 
marketing expertise, and promote African prosperity that will 
benefit U.S. exporters in all sectors of our economy. A hand 
up, rather than a handout. Trade, not aid. The African Growth 
and Opportunity Act is the right thing to do, and it will lead 
to partnerships that this Committee, this Congress, Democrats 
and Republicans, and especially the American people can be 
proud of.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]

Statement of Karen Fedorko, Executive Vice President, and General 
Manager, MAST Industries, Inc., Andover, Massachusetts

    Mr. Chairman, I appreciate the opportunity to comment on the Africa 
Growth and Opportunity Act. My comments today reflect the views of Mast 
Industries, Inc. on behalf of itself and The Limited, Inc. MAST 
Industries, a global contract manufacturer of casual clothing, is a 
subsidiary of The Limited, Inc., the world's largest specialty retailer 
of apparel, operating over 5,600 stores nationwide and with over $9 
billion in U.S. sales. The Limited, Inc. is the 18th largest private 
sector employer in the United States.
    Our companies were disappointed that the Africa trade legislation 
passed by the House last year failed to be considered by the full 
Senate. And so I want to extend our gratitude to this Committee for 
persevering in the effort to advance this important bill. I especially 
want to single out Chairman Crane, Mr. Rangel, Mr. McDermott, Mr. 
Royce, and Mr. Jefferson for their vigorous support. I also want to 
acknowledge the efforts of the Clinton Administration to keep this 
initiative moving forward, including President Clinton's endorsement 
during his State of the Union address. We particularly appreciate the 
hard work of Assistant U.S. Trade Representative Rosa Whitaker.
    Until I became involved in this issue in the middle of last year, I 
had had little exposure to the legislative process here in Washington. 
But I have been enormously impressed by the broad bipartisan support 
that exists for the Africa Growth and Opportunity Act, and by the 
remarkably diverse coalition of U.S. businesses that are clearly so 
interested in helping Africa reach its economic potential. I hope we 
can take advantage of these factors in 1999 to win enactment of this 
bill.
    I have also been struck by the tremendous interest in this 
legislation among African business people. Last September, I visited a 
number of African countries along with colleagues from MAST Industries, 
including our President, Martin Trust. Our itinerary included Zimbabwe, 
Ghana, and Madagascar, and our aim was to evaluate clothing production 
capacity in those and other countries. During our visit, I met scores 
of African entrepreneurs. And Mr. Chairman, every single one of the 
business people I met in Africa had the same question for me: ``when 
will the Africa Growth and Opportunity Act become law?'' Make no 
mistake. The dynamic business people of Africa do want expanded trade 
with the United States, and they are intensely focussed on this 
Congress's efforts to help bring that about.

               U.S. Business Needs a Push Towards Africa

    Since I started focussing more on Africa a year or so ago, it has 
also become clear to me that the challenges of doing business there 
remain considerable. I am talking here about very practical things that 
really matter for a business like the one I'm in. If any of you doubt 
the difficulties of doing business in Africa, I invite you to try to 
have Federal Express deliver an urgent shipment of clothing samples to 
a factory in Madagascar in less than five days. Or try to book yourself 
on a direct airplane flight to any point in Africa (it can't be done 
from Washington!). It's still not possible to find a local access dial-
in for America Online in Madagascar and many other African countries, 
and AT&T's USA-Direct service is likewise unavailable. Direct shipping 
and air cargo service from Antananarivo to the U.S. East Coast can't be 
done.
    I raise these practical difficulties not as a criticism of Africa, 
but in order to demonstrate how much those of us in the American 
business community need the special ``push'' towards Africa represented 
by the Africa Growth and Opportunity Act. The bill that this Committee 
approved last year, and which met with success on the House floor, will 
go a long way to reversing the belief among many in the business 
community that it is simply not worth the time and effort to try and 
develop real and lasting relationships with African entrepreneurs. On 
behalf of both American and African business people, I urge you to 
fight to make this legislation a reality.

                  Africa Deserves a Chance to Compete

    The refreshing thing about the Africa Growth and Opportunity Act is 
that it recognizes that facilitating trade between the United States 
and Africa is one of the best ways to promote stable economic and 
political development and vigorous markets for American exports. And it 
recognizes that this can absolutely be done without harming American 
companies and their workers. This proposal is not about threats to U.S. 
jobs. It's about giving African countries an opportunity to compete--I 
repeat, ``to compete''--for their fair share of American trade and 
American investment.
    The establishment of a quota-free zone for qualifying Sub-Saharan 
countries, and the possibility of duty-free GSP treatment for some 
textile and clothing products made in Africa, simply makes good sense. 
These provisions, which were included in the bill passed by the House 
last March, will help African countries begin to rely on trade instead 
of aid. They are the elements of the legislation that will have the 
most direct impact in strengthening trade and investment ties between 
the U.S. and Africa. And they will not have a negative impact on 
textile and clothing workers in this country--despite what others have 
tried to argue. I urge the Committee to ensure that these provisions 
from last year's bill are preserved in any legislation that moves 
forward in 1999.
    I should also note that the tariff reductions envisioned in this 
legislation represent more than a benefit for Africa. They also 
represent a very real ``tax cut'' for every American family that buys 
clothes. When you consider that man-made fiber T-shirts can be taxed at 
29% when they come into this country, you get a sense of how heavily 
taxed this country's clothing consumers are--taxes which fall, 
disproportionately, on those least able to afford them. By eliminating 
taxes on some imports of clothing from Africa, your legislation makes 
at least a start in addressing that problem.

                       But Compete Against Whom?

    You've just heard me say that Africa deserves a chance to compete 
for a share of the clothing market in this country, and I'm convinced 
that the bill you approved last year would make that happen. But 
outside this Committee, there has been a fundamental misunderstanding 
about this question of just who Africa would be competing against, and 
I'd like to try to clear that up.
    Contrary to what some have argued, if the bill you passed last year 
is enacted, African garment producers will not be competing against 
American textile and apparel workers. African manufacturers would be 
competing with Korea, China, Taiwan, Hong Kong and other large-scale 
Asian garment exporters. The chance to compete with these longtime 
Asian producers is exactly what Africa needs in order to grow.
    The argument that the quota-free and GSP provisions of the bill 
will lead to a flood of imports, displacing American garment workers 
are just not realistic. The production capacity on the continent is 
extremely low, and the range of products we could expect to source in 
Africa would probably be quite narrow for the foreseeable future. Let's 
not lose sight of the fact that, in 1997, imports from Sub-Saharan 
Africa accounted for only about one percent of global U.S. clothing 
imports, a level that has remained constant for at least the past five 
years.
    Speaking for my own company, I cannot personally think of a single 
instance in which orders we might place with African suppliers would 
displace any production which we are currently contracting with U.S.-
based clothing manufacturers. We depend on our American suppliers to 
provide us with the kind of specialized, technology-intensive textile 
production that American workers do better than anyone else. We would 
be looking to Africa for simpler products, and for products that just 
aren't produced here in the United States, like the fully-fashioned 
hand-linked sweaters that Madagascar is starting to export. That's a 
product that competes with China, not with Virginia or North Carolina 
or Georgia.
    The bottom line is that, under the incentive scheme contained in 
last year's bill, Africa would suddenly become significantly more 
competitive with producers we currently work with in East Asia, and I 
do foresee that we would shift orders away from Asian vendors and 
towards some of our new contacts in Africa. In that case, obviously, 
the effect in terms of total imports to the U.S. would be a ``wash,'' 
with no impact at all in terms of employment in the U.S. industry. In 
fact, when I do the numbers for our company under a scenario of the 
bill passed last year by the House, 100 percent of the new orders we 
would consider placing in Africa are currently placed in East Asia. 
Once again--the bill the House passed last year makes Africa more 
competitive vis-a-vis Asia, and does not pose a threat to the U.S. 
industry.

            Ensuring that Imports from Africa are Legitimate

    Let me address another concern that has been raised about the 
textile provisions of the Africa Growth and Opportunity Act, namely the 
fear that this would lead to massive illegal transshipment of apparel 
through an African ``quota-free zone,'' or other efforts to circumvent 
rules of origin.
    As a general matter, these concerns have been overblown. The anti-
circumvention safeguards which the House included in last year's bill 
were reasonable and effective. Moreover, we should ask ourselves, why 
would African countries want to shortchange themselves of the 
opportunity for the growth provided by new manufacturing opportunities? 
The government officials and garment producers I've met throughout 
Africa know very well that it is completely in their own interest to 
guard vigorously against transshipment. As apparel production in some 
parts of Africa increases, our company is actively encouraging African 
factory managers to establish an ``open-door policy'' with U.S. Customs 
and the Governments that I talk with in the region clearly intend to 
have ``zero-tolerance'' toward illegal transshipment.
    I would also like to comment on the proposal that would limit the 
duty free and quota free benefits of the Africa legislation to apparel 
that is ``wholly assembled'' in Sub-Saharan Africa. None of the 
merchandise that I have purchased from the region is assembled anywhere 
except within the Sub-Saharan region. The idea here is to ensure that 
only garments that are completely assembled in African factories 
benefit from the preferences extended under the legislation, and to 
eliminate the possibility for manipulation of origin rules. From my 
perspective, the ``wholly assembled'' concept is a very workable 
proposal. It would be relatively easy to verify. And, ultimately, it 
advances the goal of developing a strong garment production capacity 
that will enable African countries to compete effectively against 
producers in Asia. Our company would support such an addition to the 
Africa legislation.

    A ``U.S. Fabric Only'' Rule Won't Achieve the Bill's Objectives

    I hasten to add, however, that the goal of expanded trade will not 
be achieved if the textile provisions are watered down with restrictive 
origin rules for fabric and other components. The House did the right 
thing last year by rejecting a proposal which would have provided 
quota-free benefits only to garments which are sewn together in Africa 
from fabric which is both formed and cut in the United States. In our 
business, this sort of offshore assembly of U.S.-made pieces is known 
as ``807A'' trade.
    From the perspective of retailers and importers, the addition of a 
``U.S. fabric only'' restriction to the Africa bill would eliminate the 
commercial significance of these provisions and would gut the objective 
of building stronger commercial ties between companies like mine and 
garment producers in Africa.
    ``807A'' works in the Caribbean, since distances are short and 
turnaround times can be quick. But shipping individual U.S.-cut garment 
pieces to Africa for assembly and subsequent reshipment back to the 
United States is too costly and much too slow, particularly in a 
business like ours, where fashion trends require us to move in hours or 
days rather than weeks or months. I am not aware of a single major 
retail company that would move to expand trade with Africa under a 
``U.S. fabric only'' rule.
    To those who hold up so-called studies claiming that a ``U.S. 
fabric only'' rule is feasible--I would issue this challenge: name one 
single U.S. company that has pledged to utilize this regime. Putting a 
bunch of numbers on piece of paper is one thing. Finding a company that 
will commit to new investments in Africa under these restrictive rules 
is quite another. To those companies lobbying to restrict this bill to 
``U.S. fabric only'' rule, I would pose this question: ``if we adopt 
this rule will your company place new orders in Africa?'' I am pretty 
sure I know what their answer will be to that question. My company is 
already doing tens of millions of dollars of new business in Africa. We 
understand the art of the possible. And under the bill passed by the 
House last year, we will significantly expand what we do in Africa.
    However, if the bill is passed with a ``U.S. fabric only'' rule, 
that new business won't follow. At the end of the day, proponents of a 
U.S.-only rule really do not want to expand trade with Africa--despite 
their efforts to mask their opposition with complicated policy 
``alternatives'' that would do nothing to actually encourage greater 
trade and investment in Africa.

                It's Time for a Partnership with Africa

    As someone who has developed partnerships with garment makers 
around the world, I am convinced that the time has come for producers 
in Africa to have a piece of the action. My company, MAST Industries, 
is committed to the concept of partnership with our global 
manufacturing partners. We want very much to partner with dynamic 
entrepreneurs in Sub-Saharan Africa--to develop solid business 
relationships, to convey our technical and marketing expertise, and to 
promote African prosperity that will benefit U.S. exporters in all 
sectors of our economy.
    I want to make a prediction today. If the Congress passes this bill 
and the President signs this legislation (as he has promised to), 
millions of dollars of new orders will placed in African countries 
almost overnight. US businessmen and women start traveling to Africa in 
large numbers and as the standard of living in African countries rises, 
you can bet that US exporters and US jobs will also benefit--from farm 
products to pharmaceuticals, from airlines to online services, from jet 
engines and aircraft to financial services, from software to hardware. 
Make no mistake about it--this bill will mean good jobs and good wages 
for Americans and a desperately needed opportunity to alleviate poverty 
and strengthen young democracies in Africa.
    A hand up rather than a handout--trade, not just aid. It is the 
right thing to do. This will be a partnership that this Committee, this 
Congress, Democrats and Republicans and especially the American people, 
will be proud of.
    Mr. Chairman, thank you again for the opportunity to appear, and 
for this Committee's efforts to advance this important legislation.

                                

    Chairman Crane. Thank you, Ms. Fedorko.
    We are going to have to go into recess now until 1 o'clock 
sharp. If there are conflicts with any of you as far as flight 
connections, things like that, feel free to make your exit. But 
otherwise, if you are going to be here, if you could as many of 
you as possible, be back here at 1 p.m., we're in your debt.
    The Committee now stands in recess until 1 p.m.
    [Recess.]
    Chairman Crane. The Committee will reconvene. Any of our 
witnesses who are still--oh, very good. All right, I think next 
in line is Mr. Apley.

  STATEMENT OF DALE J. APLEY, JR., DIVISIONAL VICE PRESIDENT, 
        PUBLIC POLICY, KMART CORPORATION, TROY, MICHIGAN

    Mr. Apley. Thank you, Mr. Chairman, and Members of the 
Committee, for the opportunity to comment on the African Growth 
and Opportunity Act. Today my comments reflect the views of 
Kmart Corp., the Nation's third largest retailer. Kmart Corp. 
was founded 100 years ago in Detroit, Michigan as the S.S. 
Kresge Co. Since our beginning, the consuming public has looked 
to our stores for the every day necessities of life at prices 
their family budgets can afford.
    Kmart operates more than 2,100 traditional discount and 
Super Kmart centers in the United States. On average, there is 
a Kmart store located within 15 miles of every home in the 
United States. With more than 250,000 employees, we are the 
seventh largest employer in the United States, offering jobs 
and benefits to a broad cross section of our Nation's work 
force. Kmart has a reputation as a discount retailer that 
provides a wide selection of products from clothing and beauty, 
healthcare, to sporting goods and small appliances at low 
prices that hardworking, average Americans can afford. This is 
and always has been our business.
    We want to provide the widest choice at the best price. 
With our roots strongly established in the United States, we 
prefer to directly source the products we sell from U.S. 
manufacturers to meet the standards our shoppers expect. 
However, as a member of the greater economy, we also recognize 
the competitive importance of international trade to our 
company, our customers, and the Nation's economy. Insisting on 
adherence to high standards for the production and manufacture 
of all goods, we import products from facilities worldwide.
    That is why I am honored to be able to add Kmart's support 
for the African Growth and Opportunity Act. The fact that 
Secretary Daley and Secretary Kemp, Ambassador Young, Senator 
Gramm were here today to express their support for this 
legislation is a testimony to the strong bipartisan consensus 
behind expanding U.S. trade and investment relations with 
Africa.
    The benefits of increased trade with Sub-Saharan Africa are 
clear. With any emerging economy, the development of the 
employment base and the national infrastructure ultimately give 
under-developed countries the basic ability to do business with 
other 
nations. The elimination of quotas for qualifying Sub-Saharan 
countries and the duty-free GSP treatment for some textile and 
clothing products made in Africa will expand export 
opportunities from these areas and allow the people of these 
countries to compete seriously in the global marketplace.
    While Kmart Corp. has been sourcing a variety of products 
from various outlets in Africa, the enactment of this bill 
would encourage us to increase our orders with African 
suppliers. We are confident that we can expand our activities 
in Africa without any reduction in the work contracted with 
U.S.-based manufacturers. We foresee that any increase in 
orders with African producers would simply represent a shift 
away from production in Asia. This bill would simply allow Sub-
Saharan Africa to compete with China, Pakistan, India, and the 
countries of S.E. Asia, and does not pose a threat to the U.S. 
industry.
    The International Trade Commission's recent analysis has 
confirmed this by stating that Africa's ability to produce 
textiles over the next decade is still very limited, and that 
they will likely increase their exports in the next decade by 
at least 3 percent. Currently Sub-Saharan Africa accounts for 
less than 1 percent of total U.S. imports on textiles and 
apparel. The commission's final analysis concluded this bill 
would create a small shift from Far Eastern suppliers than U.S. 
manufacturers.
    Kmart has a long reputation of working in partnership with 
reputable suppliers who share a commitment to human rights and 
the ethical standards of conduct. To maintain our commitment to 
these principles, we have established a workplace code of 
conduct, which requires all Kmart suppliers and their 
subcontractors to provide a clean, safe, and healthy work 
environment, and to engage in fair and ethical employment 
practices. This code of conduct is enforced through a global 
independent monitoring firm and requires all suppliers and 
subcontractors to make their facilities available for 
inspections at any time. We work closely with our suppliers to 
maintain our standards, and reserve the right to terminate 
relationships and cancel orders with suppliers that don't 
comply with these strict standards.
    We understand that our customers depend on the quality and 
value of our products and the underlying integrity of the 
workplaces which produce them. Kmart is on the forefront of the 
fight against child labor, forced labor, unfair wages, and 
discrimination. The African Growth and Opportunity Act will 
help forward this endeavor, and force other facilities to raise 
their standards because of the duty-free provisions of the 
bill, which are built upon the very successful GSP program.
    While the African Growth and Opportunity Act is good for 
retailers, it is also good for America as a whole. Africa is an 
untapped emerging market in the world, and it has potential for 
expansive growth. This legislation would provide a launching 
pad for the American exports to Africa, by enabling us to 
expand our imports from Africa. The United States can not 
increase imports to a country that does not have the means to 
buy our goods. By buying goods from African countries, we would 
be exchanging capital, which in turn could be used to purchase 
American products. Importing Sub-Saharan African goods will 
create a great export opportunity for the United States, and 
increased exports to Africa will create not only capital, but 
also jobs in the United States.
    The African Growth and Opportunity Act is a win-win 
prospect for everybody. The legislation would help us to ensure 
that companies such as Kmart are able to provide the best 
quality goods to our customers at the lowest possible prices. 
On a larger scale, as the African economy emerges, this bill 
offers a great opportunity for U.S. businesses to maximize 
trade and investment opportunities in Africa.
    The African Growth and Opportunity Act will stimulate 
private investment in Africa, and will shift the U.S. policy 
toward Africa from aid to trade for the Sub-Saharan countries 
that have committed to economic and political reform. I hope 
that each member will recognize Africa's tremendous potential 
and the importance of this legislation to all parties involved, 
and in doing so, will support the African Growth and 
Opportunity Act. Thank you.
    [The prepared statement follows:]

Statement of Dale J. Apley, Jr. Divisional Vice President, Public 
Policy, Kmart Corporation, Troy, Michigan

    Mr. Chairman and members of the Committee, thank you for the 
opportunity to comment on the Africa Growth and Opportunity Act.
    I am Dale Apley, Divisional Vice President, Public Policy of Kmart 
Corporation, the nation's third largest retailer.
    Kmart Corporation was founded 100 years ago in Detroit, Michigan as 
the S.S. Kresge company. Since our beginnings, the consuming public has 
looked to our stores--first their local Kresge ``five and dime'' stores 
and now their hometown Kmart, Big Kmart or Super Kmart Center--for the 
everyday necessities of life at prices their family budgets can afford.
    Today, Kmart operates more than 2,100 traditional discount and 
Super Kmart Centers in the United States. On average, there is a Kmart 
store located within 15 miles of every home in the United States.
    With more than 250,000 employees, we are the 7th largest employer 
in the United States, offering jobs and benefits to a broad cross-
section of our nation's workforce.
    Kmart has a reputation as a discount retailer that provides a wide 
selection of products--from clothing to health and beauty care, to 
sporting goods and small appliances--at low prices that hard-working, 
average Americans can afford. This is and always has been our business.
    We want to provide the widest choice at the best price. With our 
roots strongly established in the U.S., we prefer to directly source 
the products we sell from U.S. manufacturers that meet the standards 
our shoppers expect. As a member of the greater economy, we also 
recognize the competitive importance of international trade to our 
Company, our customers, and the nation's economy. Insisting on 
adherence to high standards for the production and manufacture of all 
goods, we also import products from facilities worldwide.
    That is why I am honored to be able to add Kmart's support for the 
Africa Growth and Opportunity Act. The fact that Secretary Daley and 
Secretary Kemp are here today to express their support for this 
legislation is a testimony to the strong bipartisan consensus behind 
expanding U.S. trade and investment relations with Africa.
    The benefits of increased trade with Sub-Saharan Africa are clear. 
With any emerging economy, the development of an employment base and a 
national infrastructure ultimately give underdeveloped countries the 
basic ability to do business with other nations. The elimination of 
quotas for qualifying Sub-Saharan countries, and the duty-free 
Generalized Systems of Preferences treatment for some textile and 
clothing products made in Africa will expand export opportunities for 
these areas and allow the people of these countries to compete 
seriously in the global marketplace.
    While Kmart Corporation has been sourcing a variety of products 
from various outlets in Africa, the enactment of this bill would 
encourage us to increase our orders with African suppliers. We are 
confident that we can expand our activities in Africa, without any 
reductions in work contracted U.S.-based manufacturers.
    We foresee that any increase in orders with African producers would 
represent a shift away from production in Asia. This bill would simply 
allow Sub-Saharan Africa to compete with China, Pakistan, India, and 
the countries of Southeast Asia and does not pose a threat to the U.S. 
Industry.
    The International Trade Commission's recent analysis has confirmed 
this by stating that Africa's ability to produce textile over the next 
decade is still very limited, and that they will likely increase their 
exports in the next decade at best by about 3 percent. Currently, Sub-
Saharan Africa accounts for less than 1 percent of total U.S. imports 
of textiles and apparel. The Commission's final analysis concluded that 
this bill would create a small shift from Far Eastern suppliers than 
U.S. manufacturers.
    Kmart has a long tradition of working in partnership with reputable 
suppliers who share our commitment to human rights and ethical 
standards of conduct. To maintain our commitment to these principles, 
Kmart has established a Workplace Code of Conduct, which requires all 
Kmart suppliers and their subcontractors to provide a clean, safe and 
healthy work environment and to engage in fair and ethical employment 
practices. This Code of Conduct is enforced through a global 
independent monitoring firm and requires all suppliers and 
subcontractors to make their facilities available for inspections at 
any time. We work closely with our suppliers to maintain our standards 
and reserve the right to terminate any relationship and cancel all 
orders with any supplier that doesn't comply with these strict 
standards.
    We understand that our customers depend on the quality and value of 
our products and the underlying integrity of the workplaces which 
produce them, and Kmart is on the forefront of the fight against child 
labor, forced labor, unfair wages and discrimination. The African 
Growth and Opportunity Act will help forward this endeavor and force 
other facilities to raise their standards because the duty-free 
provisions of the bill are built upon the very successful Generalized 
System of Preferences (GSP) program, which links worker's rights and 
workplace conditions to trade concessions.
    While the African Growth and Opportunity Act is good for retailers, 
it is also good for America as a whole. Africa is an untapped emerging 
market in the world and it has the potential for expansive growth. This 
legislation would provide a launching pad for American exports to 
Africa by enabling us to expand our imports from Africa. The United 
States cannot increase exports to a country that does not have the 
means to buy our goods. By buying goods from African countries, we 
would be exchanging capital which can in turn be used to purchase 
American exports. Importing Sub-Sahara African goods will create a 
great export opportunity for the U.S., and increased exports to Africa 
will create not only capital, but also jobs in the United States.
    While many legislators, companies and consumers already recognize 
the advantages of increased trade with Africa, some have expressed 
concern. I have already explained that the United States will prosper 
economically from the African Growth and Opportunity Act, but some are 
afraid that the provisions that eliminate quotas will encourage quota 
fraud and transshipment of clothing produced in Asia. This is 
absolutely untrue. U.S. Customs officials have reported that Africa is 
not currently a platform for transshipment. In addition, because 
production of apparel in the African countries is extremely limited, a 
dramatic increase in apparel exports would be quickly noticed and 
easily tracked by the U.S. Customs Service. Nevertheless, as an extra 
precaution, the House-passed version of the African Growth and 
Opportunity Act addresses the potential for transshipment problems by 
requiring the importers of textiles and apparel to obtain import visas 
for all products shipped from Sub-Saharan Africa. It also imposes a 
``one strike and you're out'' penalty for Sub-Saharan exporters who 
commit quota fraud.
    The African Growth and Opportunity Act is a win-win prospect for 
everyone. This legislation will help to ensure that companies, such as 
Kmart, are able to provide the best quality goods to our customers at 
the lowest possible prices. On a larger scale, as the African economy 
emerges, this bill offers a great opportunity for U.S. businesses to 
maximize trade and investment opportunities in Africa. The African 
Growth and Opportunity Act will stimulate private investment in Africa 
and will transfer the U.S. policy toward Africa from aid to trade for 
Sub-Saharan countries committed to economic and political reform.
    I hope that each member will recognize Africa's tremendous 
potential and the importance of this legislation to all parties 
involved and in doing so, will support the African Growth and 
Opportunity Act. ]

                                

    Chairman Crane. Thank you.
    Mr. Levinson.

     STATEMENT OF MARK LEVINSON, CHIEF ECONOMIST, UNION OF 
    NEEDLETRADES, INDUSTRIAL AND TEXTILE EMPLOYEES, AFL-CIO

    Mr. Levinson. Thank you, Mr. Chairman. My name is Mark 
Levinson. I am the chief economist of UNITE, which represents 
250,000 workers in textile, apparel, and other related 
industries. I appreciate the opportunity to testify at this 
hearing.
    The bill's most glaring omission is its failure to include 
labor rights as a pre-condition for countries to gain 
eligibility for expanded trade. In the absence of core labor 
rights as defined by the International Labor Organization, 
there is nothing to ensure that the wealth generated by 
increased trade is shared by the workers in Africa. If we have 
learned anything from the debate on and defeat of fast track, 
it is that the American people believe that trade and 
investment agreements should protect workers, as well as 
investors.
    There are many in Africa who agree with us. Representatives 
of trade unions in the African regional organization of the 
International Confederation of Free Trade Unions met last June 
to consider the African Growth and Opportunity Act. One of 
their conclusions was that ``without a guarantee that workers 
rights will be respected, violations of their rights will 
worsen.'' The South African Clothing and Textile Workers Union 
has informed UNITE that they ``are strongly opposed to the 
conditionalities in the bill.'' They see the bill as ``an 
attempt to protect and advance the interests of corporations 
and will not advance the interests of Africa's poor.'' Consider 
the situation of South Africa and Lesotho and Swaziland. 
Lesotho and Swaziland each lie entirely within South Africa's 
borders. They are small countries, and each is considerably 
poorer than South Africa. In each country, worker's rights are 
not respected. In each country, according to the U.S. 
International Trade Commission, there is a significant chance 
that a competitive exporting industry will emerge. In Lesotho, 
many companies pay below the minimum wage and have very long 
working hours, often locking workers in until an order is 
finished. The U.S. State Department has noted in its annual 
Human Rights Report that no legally sanctioned strike has 
occurred in Lesotho since independence in 1966, and that 
employees are often threatened with expulsion from the country 
and loss of employment if they join unions.
    Observance of workers' rights, of workers' human rights in 
Swaziland is even more rare than in Lesotho. There, an official 
of a trade union federation recalls a strike can be punished by 
a fine or a maximum of 5 years imprisonment, or both. 
Subsequently, can be banned for 5 years from holding trade 
union office. Police intimidation and violence against trade 
union demonstrations and strikes are ruthless.
    Lesotho and Swaziland have one-half of 1 percent of the 
population of Sub-Saharan Africa, but account for almost 20 
percent of the region's apparel exports to the United States. 
While these countries have 7 percent of the population of South 
Africa, their apparel exports to the United States are 42 
percent greater than South Africa's. The current bill before 
the Subcommittee would create a situation in which South 
African apparel workers face the reality of investment shifting 
to those countries where labor costs are lower because of human 
rights abuses.
    Another example. In Uganda, the Uganda Textile Garment 
Leather and Allied Workers Union is the sole union organizing 
in the apparel sector. It has a membership of over 2,400 
workers in 16 factories. In 13 of these factories, the union 
represents well over 50 percent of the workers. Following 
privatization, which this bill encourages, all but one former 
state-run company withdrew recognition of the union. The one 
company that hasn't is threatening to follow the others in 
withdrawing its recognition of the union. The African Growth 
and Opportunity Act does nothing to prevent this kind of attack 
on workers.
    Are these not examples of the race to the bottom? By 
failing to link trade and investment with worker rights, the 
African Growth and Opportunity Act does nothing to prevent such 
a destructive race.
    There are other provisions in the bill which lead me to 
question whether it is in the interest of most Africans. The 
bill requires countries to adopt market-oriented policy changes 
analogous to those imposed under the structural adjustment 
programs of the World Bank and the IMF, government spending 
cuts, reduced corporate taxes, wholesale privatization, removal 
of trade barriers, and diminished protection for national 
industries.
    As Harvard economist Danny Roderick put it in a paper on 
Africa, the fundamentals for long-term growth are human 
resources, physical infrastructure, macro economic stability, 
and the rule of law. Governments that undertake investments in 
these areas will be rewarded with increased rates of growth. 
Too much focus on outward orientation and openness can even be 
counter-productive if it diverts policymakers' attention away 
from the fundamentals listed above and treats trade rather than 
per capita income as a yardstick of success.
    I agree with what ATMI said on transshipments, so I won't 
repeat that. I also agree with what they said about the ITC 
study. I would like to point out to the Committee what the ITC 
in its own testimony said about their study, ``The analysis is 
not a forecast. It does not tell what will happen if tariffs 
and quotas are actually removed.'' Some of the bill's 
supporters I think should understand that limitation of the ITC 
study.
    Let me just end with the following thought. U.S. policy 
toward Africa should be judged by its effect on the lives of 
ordinary people. Broad-based development requires that workers 
enjoy internationally recognized human rights and that policies 
produce improvements in physical infrastructure, production of 
basic commodities for national, regional, and international 
markets, promotion of locally-owned enterprises, and sufficient 
government control to balance private capital needs with 
broader social needs. This bill falls short in all of these 
areas. Thank you.
    [The prepared statement follows:]

Statement of Mark Levinson, Chief Economist, Union of Needletrades, 
Industrial and Textile Employees, AFL-CIO

    My name is Mark Levinson. I am Chief Economist of UNITE which 
represents 250,000 workers in textile, apparel and other related 
industries. I appreciate the opportunity to testify at this hearing. 
UNITE supports the goal of the African Growth and Opportunity Act: ``to 
promote stable and sustainable economic growth and development in Sub-
Saharan Africa.'' We believe, however, that many provisions of the bill 
work directly counter to that goal.

                   Trade, Investment and Labor Rights

    In a speech at the World Trade Organization (WTO) last year, 
President Clinton stated:

          In order to build a trading system for the 21st century that 
        honors our values and expands opportunity, we must do more to 
        ensure that spirited economic competition among nations never 
        becomes a race to the bottom--in environmental protections, 
        consumer protections, or labor standards. We should be leveling 
        up, not leveling down. Without such a strategy, we cannot build 
        the necessary public support for continued expansion of trade. 
        Working people will only assume the risks of a free 
        international market if they have confidence that the system 
        will work for them.

    I agree with President Clinton. But the African Growth and 
Opportunity Act does not embody these principles. The bill's most 
glaring omission is its failure to include labor rights as a 
precondition for countries to gain eligibility for expanded trade. In 
the absence of core labor rights, as defined by the International Labor 
Organization, there is nothing to ensure that the wealth generated by 
increased trade is shared by the workers in Africa. That leads to an 
economic race to the bottom. If we have learned anything from the 
debate on and defeat of fast track, it is that the American people 
believe that trade and investment agreements should protect workers as 
well as investors.
    There are many in Africa who agree with us. During President 
Clinton's trip to Africa a year ago, South African President Nelson 
Mandela announced that the South African government has serious 
reservations about the African Growth and Opportunity Act. ``To us, it 
is not acceptable,'' he said.
    Representatives of trade unions in the African Regional 
Organization (AFRO) of the International Confederation of Free Trade 
Unions (ICFTU) met last June to consider the African Growth and 
Opportunity Act. One of their conclusions was that: ``Without a 
guarantee that workers' rights will be respected, violations of their 
rights will worsen.'' The South African Clothing and Textile Workers 
Union (SACTWU) has informed UNITE that they are ``strongly opposed to 
the conditionalities'' in the bill. They see the bill as ``an attempt 
to protect and advance the interest of corporationsand will not advance 
the interest of Africa's poor.''
    African workers who have struggled to gain recognition for 
fundamental human rights confront the threat of having their gains 
undermined by competition from within Africa as well as from without. 
Andrew Kailembo, General Secretary of ICFTU-AFRO, put it this way:

          How can those using unfair or even oppressive labor practices 
        and denying their own citizens freedom of association have 
        access to international markets? Why should goods produced in 
        slave like conditions be allowed to compete with those produced 
        in relatively free conditions? It is in this context that the 
        link between the core labor standards and international trade 
        becomes inevitable. It is not a push for any global minimum 
        wage; neither is it a protectionist ploy against competition.

    Consider the situation of South Africa and Lesotho and Swaziland. 
Lesotho and Swaziland each lie entirely within South Africa's borders. 
They are small countries and each is considerably poorer than South 
Africa. And in each country, workers' rights are not respected.
    In the opinion of the U.S. International Trade Commission (ITC), 
``there is a significant chance that a competitive exporting industry 
will emerge'' in Lesotho. And in Swaziland, according to the ITC, 
``[g]iven proper investment and some degree of government coordination 
to encourage the development of this sector, Swaziland could become a 
significant exporter of textile and apparel goods to the United States 
if Sub-Saharan African countries were granted preferential access to 
the U.S. market.''
    Most of the investment in the Lesotho textile and apparel sectors 
comes from South Africa and Taiwan. According to the International 
Confederation of Free Trade Unions (ICFTU), this investment has taken 
place on the basis of a guarantee that the companies would be able to 
disregard labor legislation. Many companies pay below the minimum wage, 
and have very long working hours--often locking workers in until an 
order is finished. Employers refuse sick-pay leave and engage in almost 
constant unfair dismissal practices. In many factories, deductions are 
made from wages for workers found talking, or using the toilet more 
than once a day. On several occasions police have addressed workers at 
factory floor level advising them to leave the union, or elect new 
leaders, or allow the police to form a union for them.
    Lesotho maintains several export-oriented industrial zones where 70 
percent of employment is in the textiles, garment and leather sectors. 
Lesotho's labor law is supposed to apply in the country's industrial 
zones, but police stations at the entrances to the zones stop union 
organizers from getting in. The U.S. State Department has noted in its 
annual human rights report that no legally sanctioned strike has 
occurred in Lesotho since independence in 1966, and that employees are 
often threatened with expulsion from the country and loss of employment 
once they join unions. There is credible evidence, the State Department 
found, that some employers in the textile and garment sector use 
blacklists to deny employment to workers who have been fired by another 
employer within that sector.
    Among the incidents that have occurred in Lesotho:
     Last February, workers and management at one of the 
largest clothing manufacturers in Lesotho had been involved in a wage 
dispute for one week. Following a court eviction order, armed police 
stormed the building, shooting at random, reportedly injuring more than 
40 workers and killing one woman.
     In 1995, police opened fire on striking workers at Maseru 
Clothing and Mustang Shoes, injuring 18 workers, one of them seriously.
     In 1993, three textile and apparel sector companies 
dismissed their entire work forces, amounting to over 1,500 workers, 
when workers there formed unions.
    Observance of workers' human rights in Swaziland is even more rare 
than in Lesotho. There, an official of a trade union federation who 
calls a strike can be punished by a fine or a maximum of five years' 
imprisonment, or both, and subsequently can be banned for five years 
from holding trade union office. Police can attend union meetings. 
Police intimidation and violence against trade union demonstrations and 
strikes are ruthless. In August 1994 police killed one worker and 
seriously wounded others during a month-long strike at a sugar company. 
Government agents attempted to murder the Swaziland Federation of Trade 
Unions' General Secretary in 1995. The ICFTU concluded in a recent 
report to the World Trade Organization that violations of freedom of 
association and the right to collective bargaining in Swaziland are so 
serious and widespread that they have a negative impact on wages and 
working conditions in every sector, including the traded sector.
    Lesotho and Swaziland have 0.5% of the population of Sub-Saharan 
Africa but account for fully 23% of the region's apparel exports to the 
U.S. And while these countries have 7% of the population of South 
Africa, their apparel exports to the U.S. are 42% greater than South 
Africa's. The current bill before the Subcommittee would create a 
situation in which South African apparel workers face the reality of 
investment shifting to those countries where labor costs are lower 
because of human rights abuses.
    In Uganda, the Uganda Textile, Garment, Leather and Allied Workers' 
Union is the sole union organizing in the apparel sector. It has a 
membership of 2,420 workers in 16 factories. In 13 of these factories 
the union represents well over 50% of the workers. Following 
privatization, all but one former state-run company withdrew 
recognition of the union. This one company is threatening to follow the 
others in withdrawing its recognition of the union. The African Growth 
and Opportunity Act does nothing to prevent this kind of attack on 
workers.
    Are these not examples of the ``race to the bottom'' that President 
Clinton warned against? By failing to link trade and investment with 
worker rights, the African Growth and Opportunity Act does nothing to 
prevent such a destructive race.

                     Rigid Eligibility Requirements

    There are other provisions in the bill that lead me to question 
whether it is in the interest of most Africans. The bill requires 
countries to adopt market-oriented policy changes analogous to those 
imposed under the structural adjustment programs of the World Bank and 
the International Monetary Fund: government spending cuts, reduced 
corporate taxes, wholesale privatization, removal of trade barriers and 
diminished protection for national industries.
    The African Growth and Opportunity Act would even threaten current 
GSP beneficiaries in Africa with a loss of preferential tariffs if they 
fail to meet these market-oriented eligibility requirements. And while 
the bill also lists poverty reduction, social investment and human 
rights as factors to be considered in assessing eligibility, without 
clear enforcement mechanisms these criteria are eclipsed by the bill's 
central concern with market liberalization.
    Achieving economic development through exports and foreign 
investment is problematic in much of Africa, where infrastructure and 
social services have deteriorated following IMF/World Bank-mandated 
government spending cuts. Market liberalization does not address that 
problem or promote development of local industries. In fact it may 
undermine the very sectors which would allow African economies to 
develop the capacity to supply the U.S. market.
    In a paper on Africa, Harvard University economist Dani Rodrik put 
it this way:

          The fundamentals for long-term growth are human resources, 
        physical infrastructure, macroeconomic stability, and the rule 
        of law. Governments that undertake investments in these areas 
        will be rewarded with increased rates of growth.Too much focus 
        on ``outward orientation'' and ``openness'' can even be 
        counterproductive if it diverts policy makers' attention away 
        from the fundamentals listed above and treats trade rather than 
        per-capita income as a yardstick of success.

    Trade and investment initiatives should not take the place of 
development assistance. Debt relief is crucial for many countries to be 
able to take advantage of new programs. Currently, debt service 
payments claim 80% of Africa's foreign exchange earnings and total four 
times the amount spent on health care throughout the region.
    The African Growth bill acknowledges the importance of continued 
development assistance programs and the urgent need for substantial 
debt relief but makes no additional funding available for these 
programs.
    The problem with this bill is summarized well by the distinguished 
African political scientist Mahmood Mamdani:

          After a decade of liberalization, the issues for Africa are 
        those that expand the boundaries of meaningful choice in the 
        era of globalization. The U.S. African Growth and Opportunity 
        Act, tilt[s] the balance of reform away from choice to an 
        external imposition. Rather than a helping hand, it read like a 
        set of terms that every African country must meet before 
        getting ease of access to the American market. Many people here 
        wonder whether the United States is opting for regimes that are 
        willing to impose economic reforms designed in Washington, even 
        if the same regimes deny the opposition the right to organize 
        If the era of single-party politics taught us one thing, it is 
        that monopoly is as corrupting in politics as in the economy.

                       Transshipment is a Problem

    The U.S. Customs Service has already identified eight Sub-Saharan 
African countries as transshipment routes. By creating a large region 
of quota-free and duty-free textile and apparel imports, the bill will 
exacerbate the transshipment problem.
    The bill attempts to deal with transshipment by setting up a visa 
system. Every significant textile and apparel exporter to the U.S. 
currently is required to have a visa system to certify the country of 
origin of their exports. There is a little evidence that it works. 
Transshipment remains a major problem and this legislation creates a 
new financial incentive to transship. Thousands of American jobs have 
been lost due to violations of our international agreements. Thousands 
more could be lost because of this legislation. In addition, the duty-
free status for goods shipped through Africa will cost the Treasury 
hundreds of millions of dollars in lost revenue.
    We are also concerned about ``legal'' transshipment. Section 
503(a)(2) of the Trade Act of 1974 requires that the direct costs of 
processing operations performed in the beneficiary country be at least 
35% of the value of the product. The African Growth and Opportunity Act 
amends that by allowing 15% percent of the value to be met by inputs 
from the United States. Thus only 20% of the value of a garment needs 
to be of African origin in order to qualify for duty-and quota-free 
treatment. This means that an American importer can ship plastic bags, 
hangers, thread, buttons, shoulder pads, etc., valued at 15% of the 
finished item to the African factory. A Chinese manufacturer, for 
example, could cut Chinese fabric, sew it into a garment and ship it to 
Africa. The African factory could sew in a ``Made in Africa'' label, 
inspect the garment, trim loose threads, do any necessary repairs, 
press the garment, package it (all valued at 20% of the finished item) 
and ship it to the U.S. duty-free and quota-free. Is this the best way 
to encourage a legitimate apparel industry in Africa; or is it a way 
for importers to get around quotas and duties in other countries?
    Another problem is that the bill does not require that African 
workers be actually employed making the goods that are shipped duty-
free and quota-free to the U.S. market. Some companies have found it 
advantageous to import workers, who are forced to work under conditions 
amounting to indentured servitude, into African countries. For example, 
there are several thousand guest workers in Mauritius working in that 
country's growing apparel industry. Without a requirement that a high 
percentage of indigenous workers be used in industries shipping goods 
to the U.S. under the pending bill, there is no guarantee that Africans 
will benefit.

           Significant Damage Could be Done to U.S. Industry

    The bill states that ``it will be very difficult'' for textile and 
apparel exports to the United States from Sub-Saharan Africa to 
increase from less than 1 percent share of total U.S. imports to three 
percent of total imports. In fact a study by the ITC claims that the 
African Growth and Opportunity Act will cause a minor increase of 
imports and negligible job loss.
    Can these predictions be taken seriously?
    In 1986, after the passage of the Caribbean Basin Initiative, the 
U.S. International Trade Commission reassuringly claimed that 
``Caribbean countries play a relatively minor role in U.S. imports of 
textiles and apparel,'' supplying $500 million or 3 percent of the 
total in 1984. In 1997, imports of textile and apparel products from 
CBI countries were valued at $7.8 billion. Imports from CBI countries 
currently constitute almost 14 percent of all U.S. textile and apparel 
imports.
    In 1993, prior to NAFTA, Mexico supplied only $1.1 billion of 
apparel to the United States--under 4 percent of total U.S. apparel 
imports. In its 1993 report the ITC said that ``even if U.S. apparel 
imports from Mexico grow by as much as 200 percent in the long run the 
U.S. industry's labor force will likely decline by about three 
percent.'' According to the 1997 ITC report on the effect of NAFTA, 
total employment in the apparel industry declined by 138,000, a 14% 
decline. (Of course, not all of this can be attributed to Mexico). The 
ITC also predicted that removal of U.S. quotas and tariffs would likely 
result in an increase in U.S. apparel imports from Mexico of roughly 45 
percent in the short term and 57 percent in the long term. In fact, 
between 1993 and 1997 imports of apparel from Mexico increased by 350%. 
Mexico now accounts for over 13% of U.S. apparel imports.
    Perhaps the Committee will understand if UNITE has little 
confidence in studies by the ITC which predict little harm to the 
domestic industry.

                               Conclusion

    There is nothing wrong with African countries having access to U.S. 
markets. But this should not be done at the expense of workers in 
America or in Africa. Market access should be linked to adherence to 
internationally recognized labor rights. As an incentive to promote 
labor rights, apparel and textile quota should be transferred from 
countries that do not respect labor rights to those that do.
    U.S. policy toward Africa should be judged by its effect on the 
lives of ordinary people. Broad-based development requires that workers 
enjoy internationally recognized human rights, and that policies 
produce improvements in physical infrastructure; production of basic 
commodities for national, regional and international markets; promotion 
of locally owned enterprises; and sufficient government control to 
balance private capital needs with broader societal needs. This bill 
falls short in all these areas.
    The essential point was expressed well in a letter to the Senate 
last year circulated by Randall Robinson of TransAfrica and signed by 
many prominent African Americans:

          Under the cover of an appealing name . . . the Lugar-Crane 
        bill contains numerous provisions mainly aimed at benefiting 
        large foreign private investors and multi-national corporations 
        at the expense of true and equitable African development.

                                

    Chairman Crane. Thank you.
    Mr. Rogowsky, Mr. Moore says that your commission's study 
of our bill contains three major flaws which dramatically 
underestimate the number of U.S. jobs that could be lost as a 
result of the bill. Are you aware of that?
    Mr. Rogowsky. Yes, Sir.
    Chairman Crane. Could you respond?
    Mr. Rogowsky. Yes. I can. They, for the most part, argue 
that we do not take account of transshipment and foreign 
investment into Africa. I think they make their case a little 
too strongly to say that we say it is zero or that we ignore 
it. We don't ignore it.
    I think partly it is because they misunderstand the kind of 
analysis that we performed. They are looking at a statistical 
kind of analysis in which one creates a forecast of the future, 
in which case you would look at our examination of past 
investment and past transshipment, by which you would then 
project into the future of what that investment and 
transhipment might be.
    That is not the kind of analysis that we did. I think they 
misunderstand it. If you'll excuse my economic jargon for just 
a second, what we did was a comparative static nonlinear 
partial-equilibrium analysis, which is basically an assessment 
that looks at the world as it exists today and it takes a 
policy change, puts that policy change into the world as we 
know it today, and tries to understand what that change would 
be, how that would affect other policies, how it would affect 
production, how it would affect employment, how it would affect 
imports. That was the analysis we performed.
    So instead of having an historical look at transshipment 
and investment in Africa, what we did was incorporate those in 
the amount of imports that would come in from Africa. That was 
the variable that we changed. So there assumed in the analysis, 
by virtue of the increase in imports. We took it beyond that 
which we would think would happen in Africa by doing a near 
tenfold increase. That tenfold increase would incorporate quite 
a bit of investment, successful investment, and quite a bit of 
transshipment. I will also say that the data that we used 
included transshipment data that was already in, because that's 
counted in as Africa trade.
    So I think our analysis actually does a good job of 
projecting what a pretty optimistic view of African production 
would be and its effect on the United States.
    Chairman Crane. I would like to just add that this bill 
contains the strongest language ever proposed to enforce 
against illegal transshipment of textile and apparel products. 
That's not to say it's perfect, but it's tougher than anything 
before.
    Let me ask, and I'll address this to Ms. Fedorko, the 
textile and apparel provisions of the bill, according to Mr. 
Moore, would promote instead massive illegal transshipments of 
Asian apparel through Sub-Saharan Africa to gain duty-free 
access to our market. What is your assessment of that?
    Ms. Fedorko. I would say that in a very time-sensitive 
business that we're in, to be transshipping garments through 
different regions of the world just doesn't make any sense. I 
think that if we are going to manufacture and produce a product 
in a particular region of the world, we want to be able to 
produce that product wholly in that particular area, and get it 
to the United States as quickly as possible and into our retail 
companies.
    Chairman Crane. Is it realistic to contemplate a U.S. 
fabric rule that would require shipment to Sub-Saharan Africa 
and then shipment back here, I mean economically?
    Ms. Fedorko. A U.S. fabric clause would absolutely mean 
nothing. For us to ship fabric or components from the United 
States to Africa, manufacture the products in Africa, ship the 
products back to the United States, just doesn't make any 
sense. I mean it's just too long, too time consuming, and it 
just doesn't work for our business.
    Chairman Crane. Too expensive too.
    Ms. Fedorko. Yes.
    Chairman Crane. Thank you.
    Mr. Levin.
    Mr. Levin. Thank you, Mr. Chairman. This has been an 
excellent panel. You know, looking or hearing your disagreement 
one might get discouraged, but actually I am encouraged because 
at least we're talking about an issue that I think is relevant, 
and some have suggested it isn't. But here we are, Trade 
Subcommittee, and we are talking as we should be about the 
potential impact of a bill on businesses and jobs in the United 
States, pluses and minuses. So the notion that it doesn't 
matter, it's irrelevant, just pass the bill, I think we're 
learning that we have to take on the set of issues that the 
five of you have been talking about, and about which you 
disagree.
    I think it is encouraging the President, we're talking 
about developing economies and the impact of trade with them 
and competition with them with their different structures than 
the United States on American businesses and workers. The 
President, in his economic club speech in Detroit talked very 
much about the need to consider these factors, and there must 
not be a race to the bottom, the same language that you said, 
Mr. Levinson, though he favors the bill and you don't. But 
there is agreement on that, and that we need to work to level 
up and not level down. So we're making progress here. We're at 
least now incorporating in our consideration a broader view of 
what trade issues are.
    So let me just say a word and ask a question. It is being 
said though in this case, we're talking about a very small 
impact. It isn't like some of the larger trade issues. Whatever 
is said about the study from the ITC, we're talking about at 
this point a relatively small impact, that we have to look at 
all of them.
    Second, that it would displace, what would be displaced 
would not be American sourcing, but sourcing from other 
nations. I think we need to go into both of those. But I want 
to concentrate for 1 second on whether the labor market, I 
don't like labor rights so much as a phrase, but the labor 
market, labor standards, core labor rights issues aren't 
involved.
    Now, Mr. Levinson, as I understand the way this is 
structured, the trade provisions tie into GSP. With GSP, as I 
said in my opening statement, you have provisions that are very 
explicit in terms of core labor standards. As I understand, 
I'll just read to you from the GSP, it says, ``The President 
shall not designate any such countries not taking or is not 
taking steps to afford internationally recognized worker rights 
to workers in that country.'' The Committee report, and I find 
this a positive step forward, because you know we have been 
arguing whether we should consider labor market issues as well 
as others. The Committee report pointed out that the GSP 
program has within it a clear set of references to these 
issues.
    So enlighten me. It seems to me to be there in a meaningful 
sense.
    Mr. Levinson. Well, that is an important point. The way I 
read this bill, it even threatens current GSP beneficiaries in 
Africa with the loss of preferential tariffs if they don't meet 
a whole set of criteria listed in this bill, the 
conditionalities in this bill. Now I think that I think is a 
problem with this bill, and that labor rights aren't in those 
conditionalities.
    Mr. Levin. But they are in the GSP.
    Mr. Levinson. They are.
    Mr. Levin. And so it seems to me that there is agreement 
here that there are conditionalities, that we are not assuming 
that regardless of how they go or what the impact is on the 
United States, more trade is automatically better. We are 
saying there are conditionalities. It seems to me that the 
conditionality regarding core labor rights is built in through 
the GSP mechanism.
    We ought to talk about this further because we are going to 
mark this bill up. I am going to support it, and I think it is 
a good step forward, but I think we need to look at that issue. 
We also need to look at the transshipment issue. If we don't 
have time today, before the next markup. It's been said these 
are the strongest transshipment provisions, Mr. Chairman, that 
have been incorporated into law. I think that is one of the 
issues we need to work out now and then with the Senate.
    So maybe because the red light is on, we should be in 
further touch, all of us, after this meeting to see if what you 
say may not be there isn't really there. Thank you, Mr. 
Chairman.
    Chairman Crane. Mr. Camp.
    Mr. Camp. Thank you, Mr. Chairman. I wanted to thank all of 
the panel for being here. I am sorry I wasn't here for your 
verbal testimony. We had a meeting with the Speaker. But I did 
want to thank Mr. Apley. I have read his written comments, and 
particularly for setting out in a very clear way what the 
benefits of increased Sub-Saharan trade would be. I appreciate 
all of you coming. Thank you.
    Chairman Crane. Mr. Jefferson.
    Mr. Jefferson. Thank you, Mr. Chairman. I suppose I want to 
make a statement, and perhaps it will work itself into a 
question. Let's see if it does. I was on a trip with the 
President, the trip that he made to Africa in March of last 
year. This issue of transshipment and corruption came up in a 
meeting in Uganda, where there were six African heads of state, 
the president of Uganda, of the Democratic Republic of Congo, 
of Kenya, of Tanzania, of Eritrea, and of Ethiopia. I'm sorry, 
Eritrea wasn't there. It was represented by someone, but the 
Ethiopian president, Meles, was there.
    When the issue came up as to whether this bill was going to 
permit the sort of transshipment activities being discussed by 
Mr. Moore, that Chinese products would be substituted for 
African products and simply labeled as if they were coming from 
Africa, each one of them stood to take strong exception to that 
whole line of thinking. They made the point I think very, very 
strongly that they wanted to create jobs in their own 
countries, they wanted to have their people working, they 
wanted to create the industry and manufacturing there, on their 
own soil. They would have no interest whatsoever in having a 
system that permitted transshipment as the order of the day 
with respect to this sort of manufacturing.
    So they were perplexed, it seemed, as to how we could think 
that this is what the Africans had in mind. They pledged to us 
every effort they could make to make sure it didn't happen, 
because if it did, the bill would mean very little to their own 
people.
    So I think you ought to take into account not the reports 
that are being made by someone who suggests that there is 
systemic corruption as your report says here in Africa. Perhaps 
there is, but this bill in some respects, or this bill would 
not make any sense at all were it not for the new spirit of the 
leadership in Africa that is saying today this is the old 
Africa. This is not what we want to do in the future. This is 
not what is going to happen under this bill. They made their 
pledge quite strongly to us. I think is the spirit in which I 
believe we ought to pursue this legislation, that the African 
governments are depending upon this as a way to strengthen 
their own economies, and not the other way around. There's 
also, as has been pointed out by the Chair and others, very 
strong provisions in here that make that difficult to be done 
in any event.
    I want to know if this issue of ``you can't have it both 
ways,'' Mr. Moore, that you said a minute ago about the ITC 
thing, that it will have very little impact on our jobs in this 
country, and at the same time, be beneficial to Africa. I 
think, although and I maybe should ask both of you that 
question, I think that it means that in the large sense of all 
the textiles, the billions of dollars, the $49 billion or 
something like that in textiles coming to this country from 
various places around the world, the impact if Africa expands 
another 2 percentage points or whatever, will be minimal 
compared to what's already going on here. But on the other 
hand, in their own countries, on their own soil, there will be 
tremendous activity around the production. Therefore, many more 
jobs created, I think some figure in the hundreds of thousands 
or something like that, of jobs in Africa, but very little job 
loss here.
    Why do you think that one can't exist with the other, that 
they are inconsistent? Why is the ITC report wrong in that 
regard?
    Mr. Moore. Was this for me, Mr. Jefferson?
    Mr. Jefferson. For both of you really, but I hope you'll 
give it a shot. Then maybe I can be responded to.
    Mr. Moore. Well, the evidence of what's happened in the 
past whenever we have gone to a duty-free, quota-free 
arrangement with a country would show quite different outcomes 
from the ITC report. The ITC reported that gains from Mexico 
would be rather modest with NAFTA. The gains from Mexico, 
because of duty-free, quota-free textiles and apparel have been 
enormous, with 300-
percent increases in an already substantial amount of trade. In 
fact, Mexico passed China in 1998 as our largest supplier of 
imported apparel. So it does grow.
    The more relevant example may be the Northern Mariana 
Islands. They have no comparative advantage. The only 
comparative advantage is that they are a territory of the 
United States and they have quota-free, duty-free access to our 
market. This year they will ship us well over $1 billion of 
apparel, up from practically nothing a few years ago. They 
don't even have the labor. The labor is imported Chinese labor 
or Bangladeshi. So the incentives are there. That is what was 
ignored in the ITC report, much less the major mistake that 
with the ITC report they assume that there was not going to be 
any significant new development, any new investment, excuse me. 
So they assumed away the problem.
    Mr. Jefferson, if I might make just a comment about 
transshipment, because you made a statement there and several 
others, including the chairman, about transshipments. Today 
China, by whatever estimate, transships illegally somewhere 
between $2 and $4 billion. We have spent a lot of money with 
investigators in the Far East. We found evidence, clear 
evidence of transshipment, which we have shared with our 
government. But most of that transshipment today goes through 
two places, Hong Kong and Macau.
    Now they have a rule of law, a transparent system. They are 
not as big as the District of Columbia maybe. I may have my 
geography a little wrong, but I know they are pretty small. I 
have been there many times. Yet we can not seem to curb 
effectively that transshipment. It's not a question of the 
African countries not wanting to curb transshipment. I think 
the Hong Kong authorities want to curb it. It's just very 
difficult to do, very difficult to trace where that product was 
produced. I think that by expanding it through Africa, they 
will take away jobs from African production. They will take 
away jobs from U.S. textile workers.
    Chairman Crane. Let me interrupt here. I am sorry, Mr. 
Jefferson and witnesses, but we have 5 minutes left to mark up. 
So I have got to thank you all for your participation. Sorry 
for the extenuating circumstances. I look forward to hearing 
from you again too. Thank you.
    [Whereupon, at 1:35 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

Statement of Paul Ryberg, Jr., President, African Coalition for Trade, 
Inc.

    This statement is submitted by the African Coalition for Trade, 
Inc. (ACT) for the record of the Committee of Ways and Means' February 
3, 1999 hearing on the African Growth and Opportunity Act (the Africa 
Bill). On behalf of the private sector in Sub-Saharan Africa (SSA), ACT 
encourages the Committee on Ways and Means to give favorable and prompt 
consideration to the Africa Bill, which would establish a long-overdue 
comprehensive U.S. policy in support of economic development in SSA.
    ACT is a non-profit, member supported trade association dedicated 
to enhancing the opportunities for mutually beneficial trade and 
investment between the private sectors in the United States and SSA. 
ACT's membership consists of private sector organizations from 
Madagascar, Mauritius, Mozambique and South Africa. Most of ACT's 
members are themselves chambers of commerce and trade associations, 
each with numerous companies as their members. ACT, therefore, 
indirectly represents the views hundreds of private sector companies in 
SSA. In addition, the Common Market of Eastern and Southern Africa 
(COMESA), a regional trade promotion and integration body consisting of 
21 African nations, is an associate member of ACT.
    Experience has shown that the foundation necessary for sustained 
economic development can best be established through direct private 
sector participation. The Africa Bill puts this experience into action 
by encouraging private sector participation in the economic development 
of SSA through incentives for investment and expanded opportunities for 
mutually beneficial trade. While the Africa Bill will definitely assist 
in the further economic development of Africa, it will simultaneously 
benefit the United States by creating new opportunities to export U.S. 
products, which will in turn create new jobs in the United States. In 
short, the Africa Bill makes good sense for both Africa and the United 
States.
    While all provisions of the Africa Bill are important, Sections 8 
and 9 of the bill are critical to the successful economic development 
of SSA. Sections 8 and 9 would: (1) lift U.S. quotas on apparel 
imported from countries in SSA that adopt satisfactory measures to 
prevent transshipment and (2) eliminate U.S. import duties on ``non-
sensitive'' apparel products from these countries. Of all the 
provisions of the Africa Bill, only Sections 8 and 9 would create new 
jobs in the short term and create an opportunity for an immediate 
expansion of trade necessary to fuel economic development in this 
region.
    While providing quota-free/duty-free access for textiles and 
apparel from SSA would provide an immediate boost to the economic 
development of those countries, implementing Sections 8 and 9 would 
have at most only a marginal impact on the U.S. apparel and textile 
industry and on U.S. employment. Because of the safeguards already 
built into Sections 8 and 9, there is virtually no risk to the U.S. 
textile/apparel industry, and the U.S. International Trade Commission 
(ITC) has confirmed that the impact on the U.S. industry would be 
negligible.

  I. Establishing Successful Apparel Industries Is An Important First 
        Step In The Economic Development of Sub-Saharan Africa.

    In a common pattern that has been repeated around the world, one of 
the first steps taken by countries to develop their economies is to 
establish an apparel industry. Because the start-up capital costs are 
relatively low and the technological requirements are not usually 
great, apparel manufacturing is one of the few viable options available 
to developing countries trying to establish a manufacturing base. 
Apparel manufacturing creates immediate employment opportunities in 
developing countries, which typically have high unemployment. Creating 
a successful apparel industry has typically served as a building block 
for developing countries to expand into other areas of manufacturing.
    This pattern has begun to be followed in SSA. Prior to the early 
1980s, almost no apparel manufacturing existed in SSA. In 1983, only 
two SSA countries--South Africa and Mauritius--exported apparel to the 
United States, and their combined exports totaled only 26.608 million 
square meters (sm), or 0.3 percent of total U.S. apparel and textile 
imports.\1\ By 1998, 10 SSA countries were exporting apparel and 
textiles to the United States, totaling to 143.473 million sm or 0.55 
percent of total U.S. imports.\2\
---------------------------------------------------------------------------
    \1\ December 1983 Major Shippers Report, U.S. Department of 
Commerce, International Trade Administration, Office of Textiles and 
Apparel (Major Shippers Report).
    \2\ November 1998 Major Shippers Report.
---------------------------------------------------------------------------
    To place this in perspective, no SSA country ranks among the top 40 
apparel and textile exporters to the United States, while every other 
region of the world is represented in the top 40. As a further point of 
reference, in 1998 Mexico--by itself--exported to the United States 25 
times the total volume of apparel and textile products supplied by all 
of SSA.
    Even more telling, when the Africa Bill was first introduced in 
1996, SSA accounted for 0.68 percent of total U.S. textile/apparel 
imports. By 1998, SSA textile/apparel exports had dropped to a 0.55 
percent share of total U.S. imports. By comparison, during this same 
period, imports from Mexico grew by 60 percent, and imports from the 
Caribbean Basin Initiative (CBI) increased by 35 percent.\3\ In short, 
apparel and textile imports from SSA are declining as a share of total 
U.S. imports and remain literally a drop in the bucket of the total 
U.S. market.
---------------------------------------------------------------------------
    \3\ November 1998 Major Shippers Report.
---------------------------------------------------------------------------
    In light of the elimination of import quotas on major textile and 
apparel exporters in 2005 pursuant to the Uruguay Round Agreement on 
Textiles and Clothing (ATC), coupled with the tremendous advantages 
already enjoyed by Mexico under NAFTA, SSA will never achieve 
meaningful access to the U.S. market unless something is done 
immediately to assist in the development of apparel manufacturing in 
SSA. The Africa Bill will provide the necessary impetus for developing 
a successful apparel industry in SSA, which in turn will provide the 
foundation for further economic development in the region.

 II. The Uruguay Round ATC and NAFTA Create New Risks For Sub-Saharan 
                        African Apparel Exports.

    The gradual phasing out of country quotas under the Multifiber 
Arrangement (MFA) by 2005, as required by the Uruguay Round ATC, will 
result in intense competition for access to the U.S. market. Without 
the Africa Bill, it is doubtful whether small and relatively new 
producers like the SSA countries can even maintain their existing small 
market share, once the quotas are lifted on large, low-cost producers 
like China, Pakistan, India, Hong Kong and Indonesia. SSA exporters, 
therefore, face a very limited window of opportunity to establish 
meaningful apparel trade with the United States.
    Even before the Uruguay Round was completed, however, U.S. trade 
policy had begun to shift in favor of Western Hemisphere regionalism, 
as exemplified by NAFTA, the negotiations to create a Free Trade Area 
of the Americas (FTAA), and proposals to expand the trade preferences 
accorded to the CBI countries. There is a real risk that further 
expansion of Western Hemisphere trade preferences may curtail commerce 
between the United States and SSA unless steps are taken to provide new 
trade opportunities for SSA. This risk can be seen most clearly in the 
case of NAFTA.
    Under the Uruguay Round ATC, U.S. quotas on apparel imports will be 
phased out over ten years. Under NAFTA, however, U.S. quotas on Mexican 
apparel products that meet NAFTA's rule of origin were eliminated 
January 1, 1994, and U.S. quotas on non-originating Mexican apparel 
products will be phased out more quickly than under the ATC, with most 
such quotas to be eliminated by 2001.
    Equally important, Mexican apparel products have a permanent duty 
advantage as a result of NAFTA. Under the ATC, U.S. tariffs on SSA 
apparel exports will be reduced--but not eliminated--over ten years. In 
contrast, under NAFTA, U.S. tariffs on qualifying Mexican apparel 
products were reduced effective January 1, 1994, to lower than MFN 
levels and will be eliminated completely by 1999-2003. Moreover, non-
originating Mexican apparel products are subject to preferential duty 
rates under tariff rate quotas. As illustrated by the following table, 
SSA apparel products are already at a substantial duty disadvantage 
compared to the same products imported from Mexico.

----------------------------------------------------------------------------------------------------------------
                                                                Imported From Africa      Imported From Mexico
                                                                     Under GATT                Under NAFTA
                                                             ---------------------------------------------------
         HTS No. (Category)                   Product                        Reduced
                                                               1998 Duty     Duty by     1998 Duty     Reduced
                                                                  [In       2004  [In       [In       Duty  [In
                                                                percent]     percent]     percent]     percent]
----------------------------------------------------------------------------------------------------------------
6205.20.20 (340)....................  Men's/boys' cotton            20.5%        19.7%         3.3%    0% (1999)
                                       shirts.
6203.42.40 (347)....................  Men's/boys' cotton             17.3         16.6          2.9     0 (1999)
                                       trousers.
6204.62.40 (348)....................  Women's/girls' cotton          17.3         16.6          2.9     0 (1999)
                                       trousers.
6110.20.20 (345)....................  Knit cotton sweaters..         19.0         16.5         10.3     0 (2003)
6206.30.30 (341)....................  Women's/girls' cotton          16.0         15.4            0            0
                                       blouses.
----------------------------------------------------------------------------------------------------------------

    Thus, NAFTA grants Mexico preferential access--in terms of both 
quotas and duties--for its apparel and textile exports to the United 
States. Of course, these NAFTA preferences for Mexico have affected 
imports from all other regions, not just SSA. For instance, there has 
been much discussion of the negative impact of NAFTA on textile/apparel 
imports from the CBI countries, and legislation has been proposed to 
provide ``NAFTA parity'' for the CBI. By comparison, however, SSA 
textile/apparel exports to the United States have suffered far worse 
than have CBI exports since NAFTA took effect:

                           U.S. Textile/Apparel Imports from CBI vs. SSA, 1995-1998\1\
----------------------------------------------------------------------------------------------------------------
                                Imports from CBI                                         Imports from SSA
----------------------------------------------------------------------------------------------------------------
                                                                    % of Total                      % of Total
                                                    Million sm        Imports       Million sm        Imports
----------------------------------------------------------------------------------------------------------------
1995............................................       2,171.972            11.8         140.458            0.76
1996............................................       2,389.444            12.5         130.128            0.68
1997............................................       2,978.703            13.0         141.016            0.61
1998............................................       3,223.413            12.4         143.473            0.55
  % Change......................................           48.4%            5.1%            2.2%           27.6%
----------------------------------------------------------------------------------------------------------------
\1\ Major Shippers Reports, 1995-November 1998. Data for 1998 represents imports during 12 months ending
  November 1998.

    Thus, despite the disadvantages suffered by the CBI countries due 
to the NAFTA preferences enjoyed by Mexico, the CBI countries have 
nevertheless managed to expand their textile/apparel exports to the 
U.S. market by nearly 50 percent since NAFTA took effect, and their 
share of the total U.S. import market has actually increased by 5.1 
percent. By contrast, U.S. textile/apparel imports from SSA have grown 
by a mere 2.2 percent in absolute volume during the same period, while 
SSA's share of total U.S. imports has fallen a dramatic 27.6 percent 
since NAFTA took effect. It is clear, therefore, that the need for 
``NAFTA parity'' is far greater for SSA than for the CBI countries.
    While no one expects that enactment of the Africa Bill would make 
SSA fully competitive with Mexico, providing quota-free/duty-free 
access for SSA products will make SSA competitive with other regions 
and enable SSA to obtain reasonable access to the U.S. market in the 
face of the challenges presented by the Uruguay Round ATC and NAFTA.

   III. Textile/Apparel Imports From SSA Pose No Threat To The U.S. 
                               Industry.

    The U.S. ITC has concluded that granting quota-free/duty-free 
access to apparel and textiles from SSA, under the terms proposed by 
the Africa Bill, would lead to an increase in apparel imports from SSA 
of between 26.4-45.9 percent, and an increase in textile imports of 
10.5-16.8 percent.\4\ In other words, under the Africa Bill apparel/
textile imports from SSA would still be less than 1.0 percent of total 
U.S. textile/apparel imports.
---------------------------------------------------------------------------
    \4\ Likely Impact of Providing Quota-Free and Duty-Free Entry to 
Textiles and Apparel From Sub-Saharan Africa, U.S. International Trade 
Commission, Investigation No. 332-379, Publication No. 3056 (September 
1997) (hereinafter referred to as ITC Report).
---------------------------------------------------------------------------
    Even with this assumed growth, SSA would remain far and away the 
smallest regional supplier of textiles and apparel to the United 
States. There is no risk of the U.S. market being swamped with apparel 
imports from SSA.
    Moreover, the types of products SSA would be likely to export 
confirm that there would be little, if any, harm to the U.S. apparel/
textile industry as a result of the Africa Bill. Start-up apparel 
manufacturing operations, like those that would be established in SSA, 
almost always produce low-end products such as cotton T-shirts and 
underwear. The U.S. apparel industry, however, manufactures primarily 
more sophisticated and more value-added products, and very little of 
the entry-level type products is currently produced in the United 
States. As a result, increased imports from SSA would displace imports 
from other countries, primarily in Asia, rather than U.S. production.
    In addition, the Africa Bill has built-in safeguards to prevent 
injury to the U.S. apparel/ textile industry. Section 9 of the Africa 
Bill provides that duty-free treatment will be accorded only to 
products that are found not to be ``import-sensitive.'' In other words, 
if imports from SSA of a particular type of apparel product are 
considered likely to cause harm to the domestic industry, such products 
will not be eligible for duty-free treatment, thereby eliminating most 
of the incentive to export such products.

         IV. There Is Little Risk of Transshipment Through SSA

    It has been suggested that massive illegal transshipment of Asian 
apparel through SSA will occur if SSA is granted quota-free/duty-free 
access to the U.S. market. The facts, however, prove the contrary.
    The assertion that massive transshipment would occur simply ignores 
the viable anti-transshipment measures already contained in the Africa 
Bill. Thus, Section 8 requires the adoption of ``functioning and 
efficient'' visa systems in each of the SSA countries as a precondition 
of quota-free access to the U.S. market. In close cooperation with the 
U.S. Customs Service, Mauritius implemented such a visa system in 1995, 
and it has proven to be highly effective in preventing transshipment.
    Similarly, the Africa Bill continues the standard rules of origin 
for apparel--the ``Breaux-Cardin'' rules of origin--which require that 
35 percent of the value of the product must be added in SSA in order 
for the product to be eligible for duty-free access. The cost of the 
fabric used in making a garment typically constitutes approximately 60 
percent of the total value of the garment. With only 40 percent of the 
value remaining to be accounted for by cutting, sewing and finishing, 
it is readily apparent that all of the assembly and finishing has to 
occur in SSA for the Africa Bill's value-added requirement to be met. 
It will not be possible, therefore, for partially assembled garments 
from Asia to qualify for quota-free/duty-free access as a result of 
minor processing in SSA.
    Moreover, the Custom Service has developed aggressive new tactics 
to prevent transshipment, including ``jump teams'' to conduct on-site 
inspections, requiring import documentation to prove the productive 
facilities and the number of employees at the factory, etc. If there 
were a sudden surge in apparel imports from a country in SSA that had 
not previously been an exporter to the United States, we are confident 
that the Customs Service would immediately and effectively investigate 
whether the imports were legitimate or transshipped.
    Most importantly, transshipment through SSA has not been a problem 
in Europe, where SSA apparel has had access for years similar to that 
proposed by the Africa Bill. Moreover, 46 of the 48 SSA countries 
already have quota-free access to the U.S. market. If SSA were an 
attractive opportunity for transshipment, one would suspect that the 
absence of quotas on these countries would already have led to 
significant transshipment. The U.S. Customs Service has recently 
confirmed, however, that transshipment is not a significant problem in 
SSA.\5\ Indeed, the Customs Service's most recent list of transshippers 
identifies nearly 100 companies known to have illegally transshipped 
apparel to the United States, but not one of the companies on the list 
is located in SSA. 63 Fed. Reg. S3493 (Oct. 5, 1998). In short, illegal 
transshipment through SSA will not be a problem under the Africa Bill.
---------------------------------------------------------------------------
    \5\ See May 15, 1998 edition of Inside U.S. Trade and reprinted 
letter from Janet L. Labuda, Director of International Trade Manager of 
the Customs Service. In her letter, Ms. Labuda chastised ATMI for 
distorting the facts in its submissions in opposition to the Africa 
Bill and stated: ``While it is true that we have found some 
transshipment from Sub-Saharan countries, we would not consider these 
significant or part of an organized pattern. The most recent 
transshipment findings were isolated instances generally occurring 
prior to 1996.''
---------------------------------------------------------------------------

      V. The 807A/809 Programs Are Not Viable Alternatives For SSA

    It has been suggested that the limited quota-free/duty-free apparel 
trade provisions of the Africa Bill should be replaced with the 807A or 
809 programs.\6\ The proponents of the 807A/809 alternative suggest 
that this approach should work in SSA because of the success of the 807 
program in the CBI region.\7\ The 807 program has indeed been a success 
in the CBI, making the CBI countries, taken together, the number one 
supplier of apparel to the United States. The 807 program has worked in 
the CBI for three reasons: (1) direct involvement by U.S. apparel or 
textile companies--usually to the point of full or partial ownership of 
the operations in the CBI; (2) low transportation costs due to 
proximity to the United States; and (3) ``quick response,'' i.e., the 
ability to complete and deliver orders in the shortest possible time, 
again due to short transport times. None of these factors is present in 
the case of SSA.
---------------------------------------------------------------------------
    \6\ Under the 807A program only apparel assembled in SSA from 
fabric that was made and cut in the United States would qualify for 
quota-free/duty-free treatment. Under the 809 program only apparel made 
in SSA from uncut U.S.-origin fabric would be eligible.
    \7\ Under the 807 program, preferential access and reduced duty 
treatment apply to apparel assembled abroad from U.S.-origin 
components.
---------------------------------------------------------------------------
    First, the 807 program is theoretically available to SSA today, but 
U.S. apparel and textile companies have shown no interest in 
establishing operations in SSA under 807. Indeed, in testimony before 
the ITC in Investigation No. 332-379, Mr. Larry Martin, President of 
the American Apparel Manufacturers Association, admitted that, even 
under the quota-free/duty-free terms of the Africa Bill, U.S. companies 
were unlikely to establish operations in SSA, primarily due to the 
great distance from the United States and resulting long transport 
time.
    Second, SSA exports are generally at a competitive disadvantage, 
compared to similar products exported from other regions, because of 
the considerably higher freight costs involved in shipping products 
from SSA to the United States.\8\
---------------------------------------------------------------------------
    \8\ ITC Investigation No. 332-379, Transcript of May 1, 1997 
hearing at 47.

          Overall, the countries of Sub-Saharan Africa generally are at 
        an important transport cost disadvantage relative to 
        competitors . . . [I]nternational transport cost have a 
        significant adverse impact on the level of African exports.\9\
---------------------------------------------------------------------------
    \9\ Alexander Yeats, Azita Amjadi, Ulrich Reinche, Francis Ng, Did 
External Barriers Cause the Marginalization of Sub-Saharan Africa in 
World Trade, World Bank (1996). The authors also observed that 
transportation costs are up to 25 percent higher for the 14 land-locked 
countries of SSA than for the coastal countries.

    In its investigation of the textile provisions of the Africa Bill, 
the ITC likewise concluded that the African transportation cost 
disadvantage affects the apparel industry, with the cost of shipping 
apparel from SSA to the United States exceeding the cost of 
transporting like products from either Asia or the Caribbean by a 
significant margin.\10\
---------------------------------------------------------------------------
    \10\ ITC Report at 3-18--3-19.
---------------------------------------------------------------------------
    The proposed 807A/809 program for SSA would compound this existing 
freight disadvantage by adding the requirement that the fabric must 
first be transported from the United States to SSA. As a result of this 
additional freight cost, the 807A/809 proposal would increase the total 
cost of finished garments made in SSA by at least 10 percent, as 
compared to the total cost of the same garment made from African-origin 
fabric.
    Even with duty-free treatment under the 807A/809 program, the 
additional 10 percent freight disadvantage transport cost makes the 
benefit of duty-free access illusory. After the duty reductions 
required by the Uruguay Round ATC, the average U.S. duty on SSA apparel 
will be approximately 14.1 percent.\11\The 10 percent additional 
transportation costs required by the 807A/809 proposal virtually wipe 
out the benefit of duty-free access.
---------------------------------------------------------------------------
    \11\ Peter Harrold, The Impact of the Uruguay Round on Africa, The 
World Bank, Report No. 311 (1995).
---------------------------------------------------------------------------
    Third, the 807A/809 proposal would add considerably to the time 
required to produce apparel in SSA and deliver the finished product to 
buyers in the United States. It takes approximately 50 days to receive 
delivery of fabric from the United States to the 11 SSA countries 
located on the east coast of Africa, and transport time is even longer 
for the 14 land-locked countries of SSA. Significantly, most of the SSA 
countries with existing apparel industries are either on the east coast 
of Africa or are land-locked.
    In the modern apparel industry, the time required between placing 
an order and receiving delivery of finished garments is critical and 
can make the difference between the buyer's choice of one supplier over 
another, all other factors being equal. Adding 50 days to the turn-
around time for SSA apparel will place SSA exporters at another serious 
competitive disadvantage vis-a-vis Asian and Western Hemisphere 
producers.
    In summary, none of the factors necessary for the 807A/809 program 
to succeed--involvement by U.S. companies, low transportation costs, 
and quick turn-around--would be present in SSA. The 807A/809 program, 
therefore, would be doomed to failure in SSA.

            VI. The Africa Bill Will Benefit African Workers

    Certain opponents of the Africa Bill have made the incredible 
assertion that passing the bill will lead to a flood of non-African 
workers (allegedly from Asia) being imported to SSA to work in the 
apparel factories. These critics assert that African workers will not 
benefit from the Africa Bill.
    This contention has no basis in fact. The countries of SSA have a 
huge supply of available labor. In some SSA countries, the unemployment 
rate is as high as 50 percent. Moreover, labor costs in most SSA 
countries are fully competitive with Asian wages. It makes no economic 
sense, therefore, for SSA apparel manufacturers to import foreign labor 
instead of utilizing the abundant and competitively priced local labor.
    It has been pointed out that foreign labor is currently used in 
Mauritius. This is due to unique and temporary circumstances in 
Mauritius that are not duplicated elsewhere in SSA and that are 
currently being phased out in Mauritius. Mauritius is a small island 
off the east coast of Africa. It has a total population of only 1.1 
million. Mauritius has a long history of stable and open democracy and 
respect for human rights, including strict protection of labor rights. 
Labor in Mauritius is unionized, the right to collective bargaining is 
guaranteed by law, the unions are quite active in protecting the rights 
of their members, and working standards and conditions are regulated by 
the government.
    Because of growth in employment in both the apparel industry and 
other sectors, coupled with its limited labor pool, Mauritius has 
experienced a tight labor market in its apparel industry. By contrast, 
most other countries in SSA have high unemployment.
    As a result of these unique conditions in Mauritius, its apparel 
manufacturers were forced to employ a limited number of foreign 
nationals. Foreign workers have been used on a temporary basis while 
(1) the apparel industry has been making the transition from low-cost, 
labor-intensive manufacturing to higher value-added products that are 
more capital-intensive and (2) Mauritian companies develop apparel 
manufacturing facilitates in neighboring countries with abundant labor. 
Consistent with the regional integration objectives of the Africa Bill, 
Mauritian companies have opened or are currently investing in 
production facilities in high-unemployment countries like Madagascar, 
Lesotho, and Mozambique. These new plants employ workers from the 
depressed local labor markets, providing thousands of jobs. In 
Madagascar, for example, Mauritian companies have created 25,000 new 
jobs over the past five years.
    The Government of Mauritius authorized the use of foreign workers 
on a temporary basis only, and it is planning to phase out their use 
altogether. Foreign workers constitute only 8.6 percent of the apparel 
industry work force. Moreover, these workers receive standard Mauritian 
wages and are fully covered by the Mauritian labor laws.
    There is no basis for the contention that local workers in SSA will 
not benefit from passage of the apparel trade provisions of the Africa 
Bill. On the contrary, the Africa Bill will provide tens of thousands 
of new job opportunities in SSA, and the benefits of these new jobs 
will go to the local workers, not to imported foreign labor.\12\
---------------------------------------------------------------------------
    \12\ For example, the South African apparel industry has estimated 
that enactment of the African Bill would lead to the creation of 30,000 
new apparel jobs in South Africa alone. See March 26, 1998 edition of 
The Cape Argus.
---------------------------------------------------------------------------

                               Conclusion

    The apparel trade provisions of the Africa Bill present a unique 
opportunity to assist SSA apparel to become competitive in the U.S. 
market. The bill would lead to a modest increase in apparel imports 
from SSA, and it would create tens of thousands of new jobs in SSA. The 
development of a healthy apparel industry in SSA would, in turn, serve 
as a catalyst for economic development in other sectors in the region, 
thereby making SSA a significant trading partner with the United States 
and, ultimately, a substantial and reliable market for exports of U.S. 
products.
    There is a limited window of opportunity for SSA apparel exports to 
establish themselves in the U.S. market, however, as the quotas on 
larger, lower-cost producers are being phased out by 2005 pursuant to 
the Uruguay Round ATC. If SSA apparel exports have not managed to 
obtain a meaningful share of the U.S. market prior to 2005, SSA apparel 
exports to the United States probably never will become anything more 
than a drop in the bucket. In that event, SSA will have lost one of the 
few proven foundations for sustainable economic development.

                                

Statement of The Boeing Company, Arlington, VA

    Boeing appreciates this opportunity to comment on its trade 
relationship with Africa and affirm its support for the Africa Growth 
and Opportunity Act. The company congratulates the Congress and the 
Administration for its efforts to focus government institutions and 
policy on African trade issues. Efforts within U.S. export-enhancement 
agencies--Export Import Bank, Overseas Private Investment Corporation, 
and Trade and Development Agency--are particularly beneficial. Boeing 
also applauds the Congress, Department of Transportation Secretary 
Rodney Slater, and the Administration for their leadership in promoting 
Africa's air safety and security--necessary precursors to growth--
through the Safe Skies for Africa initiative.
    Taking the next step of passing the Africa Growth and Opportunity 
Act through both houses of Congress will strengthen the efforts already 
underway, and initiate sorely-needed reforms and enhancements for 
deepening our commitment to trade with our African partners.
    Boeing has a long history of providing commercial jet airplanes to 
African carriers. From the first model 707-320 delivered to a South 
African carrier in 1960, to the delivery of one of the most popular 
airplanes in the world, the twin-aisle 767-300ER, to an Ethiopian 
carrier last month, we value our partnership with African airlines. In 
fact, 66 percent of today's African fleet is Boeing-built, 367 of 559 
jet airplanes valued at $18 billion (1998 dollars) in U.S. exports. 
These exports mean jobs, not just for Boeing employees in 27 states, 
but also for its extended supplier chain of approximately 6000 small, 
medium, and large U.S. companies across the nation.
    The Boeing Company is planning for continued growth on the African 
continent. Despite the challenges engulfing certain African countries, 
the company estimates Africa will require nearly 750 additional new and 
used airplanes in the next 20 years, totaling approximately $30 billion 
in high-tech, high-value potential U.S. exports. This export total for 
airplane equipment excludes the substantial potential U.S. exports that 
accompany airplane sales--exports generated by the need to support the 
equipment, cargo handling, security and safety, and passenger handling 
components of a complete air transportation infrastructure and system.
    And the jobs benefits are not limited to our shores. Demand for 
Africa-based services and manufacturing to support increased travel and 
tourism industries is growing, increasing wealth and opportunity.
    A robust transportation system is one of the basic building blocks 
needed for economic growth, and air transport systems are a major piece 
of the puzzle. As cultural and regulatory engagement and economic 
investments grow, so do the demands for safe, reliable, and efficient 
passenger, package and cargo delivery. In Africa's case it is 
particularly vital because of the continent's vast geographic spread 
and the fact that surface transportation links between points are less 
developed.
    As African nations continue to develop they will require 
substantial new investments, straining existing trade and investment 
regimes, including the U.S. export-support agencies ExIm, OPIC, and 
TDA. We must broaden bilateral and multilateral relations to support 
growing U.S. exports and investments, and aid in increasing the 
purchasing power of African countries so they can participate fully in 
the rapidly integrating global economy. The African Growth and 
Opportunity Act will help relieve pressures by increasing dialogue 
between nations and support for ExIm, OPIC, and TDA. This will 
strengthen the economic position of African trade partners and clear 
away some of the barriers that bog down and harm trade relations. 
Boeing urges all Members of the House and Senate to support this 
legislation.
    Africa will progress down the path of development with or without 
heightened U.S. involvement. Our government can, however, influence the 
rate and direction of the continent's development and grow the 
bilateral relationships.
    We have a choice as a nation to engage Africa more meaningfully as 
it develops or accept the status quo. Boeing urges the Congress to 
support the African Growth and Opportunity Act and similar efforts to 
deepen our commercial, institutional, and cultural links, benefiting 
countries on both sides of the Atlantic.

                                

Statement of The Ferroalloys Association

    On behalf of The Ferroalloy Association (TFA) and its members, we 
write to express our concerns over two provisions which were included 
in last year's African Growth and Opportunity Act and hereby request 
that our comments be included as part of the written record. The 
Ferroalloys Association supported the goal of the act ``to facilitate 
the social and economic development of the countries of Sub-Saharan 
Africa in a manner which strengthens and expands market-led economic 
growth consistent with equitable and efficient development and which 
reduces poverty and increases employment among the poor.'' However, as 
mentioned, there are two specific provisions within the Generalized 
System of Preferences (GSP) section of the bill that TFA opposed and 
will continue to oppose in any new proposal put forward in the 106th 
Congress.

               Background on The Ferroalloys Association

    The Ferroalloys Association is an industry advocacy group made up 
of the producers of chromium, manganese, silicon, vanadium ferroalloys 
and related basic alloys/metals in the United States. Founded in 1971, 
TFA represents over 20 companies with facilities in 25 different 
states.
    Approximately 100 years ago, the U.S. ferroalloy industry emerged 
with the introduction of the electric arc furnace. Soon thereafter, it 
expanded rapidly to meet the needs of the United States for projectiles 
and armor plates during the Spanish American War.
    Ferroalloys are high strength metals created by submerged electric 
arc smelting, induction melting, alumino/silicothermic reduction 
processes, and vacuum reduction furnaces, as well as by electrolytic 
processes. More than fifty different alloys and metals in hundreds of 
compositions and sizes are produced by the ferroalloy industry for use 
in the manufacturing of batteries, stainless steel, iron, and aluminum. 
The industry also produces vital materials used in the production of 
chemicals, semi-conductors, solar cells, coatings, and catalysts.
    In the 1970's and 80's, the U.S. ferroalloy industry declined 
sharply, largely due to foreign import penetration and rising 
environmental standards. From 1970 to 1990, the annual domestic 
production of alloys dramatically decreased from 2,340,000 to 645,000 
net tons per year, while imports increased from 350,000 to 1,490,000 
net tons per year. Foreign competitors flooded the U.S. market at 
significantly lower prices, resulting from foreign government 
subsidization of electricity costs, capital investments, 
transportation, and taxes. As a result, U.S. producers faced high 
operating costs and declining prices which forced them to reluctantly 
lay off workers and shut down plants at an alarming rate. These 
closings resulted in plants abandoning vital research and development 
programs in order to remain in business. Simultaneously, the U.S. 
government imposed strict environmental standards on metals producers, 
forcing companies to direct large amounts of capital to environmental 
control equipment.
    Although American ferroalloy producers still suffer from high 
levels of import penetration, they are recovering and more able to 
compete in the global market. Improved federal government support, 
coupled with the industry's renewed commitment to quality and 
performance, will enable the domestic ferroalloy industry to reclaim 
its place in the world economy. The U.S. ferroalloy industry has 
resurfaced as a core of producers who are attempting to gather the 
resources and public policy support necessary to effectively compete in 
the fierce global market. Increased technological quality, along with 
stronger U.S. trade laws designed to challenge import penetration, 
enabled domestic producers to become more globally competitive, 
resulting in greater industry success.

         Rule of Origin Change Could Lead to Duty Circumvention

    First, TFA is concerned with the change in the rule of origin 
calculation for countries in Sub-Saharan Africa. Decreasing the 
percentage value of an article from ``processing operations performed'' 
in the eligible countries may ultimately lead to a situation of duty 
circumvention. Other countries will run their products through Sub-
Saharan African nations, having only minor packaging changes actually 
take place there, in order to ``originate'' in those countries. This 
does a disservice both to the U.S. Treasury which will collect lower 
duties, and more importantly to the Sub-Saharan African nations who do 
not get the advantage of increased higher paying jobs associated with 
more substantial processing. The only entity which benefits from this 
provision are the third-party countries which undertake duty 
circumvention.

   Waiver of Competitive Need Limit Violates the Purpose of the GSP 
                                Program

    Second, TFA opposes the designation of all Sub-Saharan Africa 
nations on par with Least Developed Beneficiary Developing Countries 
(LDBDCs) with the automatic waiver of the competitive need limit. 
Specifically, TFA opposes the inclusion of this language which violates 
two of the founding purposes of the GSP program. The GSP program was 
initially proposed to ``promote the development of developing countries 
which often need temporary preferential advantage to compete 
effectively with industrialized countries.'' A permanent waiver of the 
competitive need limit violates the ``temporary preferential 
advantage'' purpose, and does not permit any inquiry into whether or 
not the nation can ``compete effectively with industrialized 
countries'' in that industry. TFA is not necessarily opposed to the 
idea of waivers of the competitive need limit. However, the GSP program 
already effectively deals with this issue by only allowing the waiver 
for properly designated LDBDCs. Thus, the decision as to whether or not 
a country is an LDBDC should decide whether or not a country can waive 
the limit. In fact, several Sub-Saharan Africa nations are already 
considered LDBDCs. There is no need to give a blanket waiver to all 
Sub-Saharan Africa nations.

                               Conclusion

    In closing, TFA would like to make it clear that domestic 
industries other than ferroalloys will be harmed if these provisions 
are included in the 106th Congress. Unfortunately, this bill has been 
portrayed as only a concern of the textile industry. Clearly, this is 
not the case. If the issues TFA outlined above are not addressed, this 
bill will have detrimental effects on the ferroalloy industry and many 
others. TFA strongly urges the Trade Subcommittee to look closely at 
the language contained in last year's version of the bill and oppose 
its inclusion.

                                

Statement of the Footwear Industries of America, Inc.

               I. Introduction and Statement of Position

    This statement is submitted on behalf of Footwear Industries of 
America, Inc. (FIA), a trade association representing domestic 
manufacturers and distributors of nonrubber footwear, and a substantial 
portion of their suppliers. The domestic nonrubber footwear industry 
encompasses men's, women's, children's, athletic, work, slippers, and 
other footwear. The industry is located in 34 states where it operates 
in over 300 footwear manufacturing establishments.
    This statement responds to the Subcommittee on Trade's request for 
input from interested parties regarding trade with Sub-Saharan Africa.
    The domestic nonrubber footwear industry is opposed to the 
elimination of the exclusion of nonrubber footwear from coverage under 
the GSP for Sub-Saharan African countries. Tremendous import growth 
over the years has devastated this domestic industry and left it a 
shell of what it once was. Duty-free treatment for nonrubber footwear 
will stimulate rapid growth in imports from Sub-Saharan African 
countries, which will erode further the fragile health of the remaining 
domestic producers. More factories will close and more workers will 
lose their jobs. Economic development in Africa should not come at the 
expense of U.S. industry, particularly one that has already suffered so 
much from imports.

           II. The Nonrubber Footwear Industry is Extremely 
                            Import-Sensitive

    U.S. imports of nonrubber footwear have increased so rapidly over 
the past years as to capture almost the entire U.S. market. Imports of 
nonrubber footwear rose from 726 million pairs in 1984 to 1.24 billion 
pairs in 1997. In 1997, imports had almost 93 percent of the U.S. 
market. Job losses in this industry due to imports have been 
staggering.
    The huge growth in imports has displaced domestic production and 
caused plant closings and layoffs. In the last three years alone 30 
factories have shut their doors. Most of these factories were located 
in small towns with limited employment opportunities for laid off shoe 
workers. The toll in lost jobs has been staggering as employment in the 
nonrubber footwear industry fell by 65 percent between 1984 and 1997, 
from 114,700 workers to only 40,500.
    The U.S. Government has long recognized the products of the 
nonrubber footwear industry as import-sensitive:
     they are statutorily excluded from duty-free treatment 
under certain trade preference programs, including the Caribbean Basin 
Initiative, the Andean Trade Preference Act, and the Generalized System 
of Preference;
     most categories of nonrubber footwear were exempted from 
duty cuts in the Tokyo and Uruguay Trade Rounds because injury due to 
imports had been found to exist; and
     they were deemed to be among the most sensitive U.S. 
products in the NAFTA tariff negotiations with Mexico, designated for 
stage C (i.e., ten-year phase out).
    Further evidence of the injury suffered by the domestic industry is 
found in the numerous trade actions it has been forced to take over the 
years, including four Section 201 cases, a 301 case, and several 
countervailing duty cases.
    The Government understood that less developed countries, eager to 
industrialize and with low paid work forces, posed a real threat to 
domestic producers. Today the plight of the domestic industry is even 
more precarious and the vulnerability to imports that much greater.

 III. Sub-Saharan African Countries Have the Potential to Become Major 
                     Suppliers to the United States

    Less developed countries regard the development of a footwear 
industry as an important first step along the road of 
industrialization. As shoe-making technology has spread throughout the 
world, these countries have built footwear factories and directed much 
of the production to the United States. New suppliers have emerged 
rapidly to compete with existing suppliers.
    U.S. imports of nonrubber footwear illustrates this development. In 
1984 Taiwan and Korea were the two largest suppliers of nonrubber 
footwear to the United States accounting for 59 percent of total 
imports. Imports from China of 12.7 million pairs accounted for less 
than 2 percent of imports. By 1996 China had become the largest 
supplier of nonrubber footwear to the United States (750.9 million 
pairs) accounting for 68 percent of total imports. Although Taiwan's 
and Korea's share of total imports in 1996 fell to less than 3 percent, 
imports from the two countries were still large (27.9 million pairs 
valued at $341 million).
    Sub-Saharan Africa has not yet become a major player in worldwide 
nonrubber footwear trade. But the building blocks of a formidable 
footwear industry--cheap labor, a desire to industrialize, and a 
rapidly developing leather industry--are in place. FIA notes in 
particular a major effort by international development organizations to 
help in the development of the African leather industry. These 
organizations, the International Trade Centre UNCTAD/WTO, the Food and 
Agricultural Organization of the United Nations, and the United Nations 
Industrial Development Organization, are undertaking major efforts to 
not only grow the African leather industry but also to help it expand 
into the production and exportation of leather-related goods including 
footwear.
    Duty-free entry of nonrubber footwear from Sub-Saharan African 
countries will be a powerful stimulant to the production of nonrubber 
footwear in African countries. And much of this production will make 
its way to the United States as African producers will enjoy a 
significant competitive advantage in the U.S. market over other foreign 
producers, who must pay U.S. duties on these products. The 
transshipment of nonrubber footwear through Sub-Saharan African 
countries by non-African producers to avoid U.S. duties will lead to 
even greater levels of imports from the region

                             IV. Conclusion

    The domestic nonrubber footwear industry has been wracked by 
imports. Footwear was excluded from coverage under the GSP in order to 
provide some protection for domestic producers. Eliminate this 
exclusion now and soon the domestic industry will have to contend with 
increased imports from yet another region of the world. Africa needs to 
grow and prosper. But this must not come at the expense of closed shoe 
factories and unemployed shoe workers. FIA requests that other means be 
found to stimulate development in Africa.

                                

Statement of the International Mass Retail Association, Arlington, VA

    This statement is submitted on behalf of the International Mass 
Retail Association, which represents the mass retail industry--
consumers' first choice for price, value and convenience. Its 
membership includes the fastest growing retailers in the world--
discount department stores, home centers, category dominant specialty 
discounters, catalogue showrooms, dollar stores, warehouse clubs, deep 
discount drugstores, and off-price stores--and the manufacturers who 
supply them. IMRA retail members operate more than 77,000 American 
stores and employ millions of workers. One in every ten Americans works 
in the mass retail industry, and IMRA retail members represent over 
$411 billion in annual sales.
    IMRA fully supports initiatives to liberalize trade between the 
United States and the countries of Sub-Saharan Africa (SSA). Recent 
trends in the U.S. retail market offer SSA apparel, home furnishings, 
and footwear producers opportunities to develop their exports in a way 
that will foster job growth and development in the region--to the 
immediate benefit of American consumers, and the long-range benefit of 
U.S. exports and investment. We believe it will do this without harm to 
U.S. textile and apparel producers. In addition to Afrocentric 
products, opportunities abound for the export from SSA producers of 
basic apparel in the low- to mid-priced ranges--the consumer markets of 
key importance to IMRA members.
    In some SSA countries, sufficient domestic and foreign investment 
has already produced factories capable of competing with those in Asia; 
in others, however, much needs to be done to remove significant 
constraints to competitiveness. The United States could do much to 
encourage development in these economies by removing its textile and 
apparel barriers to their exports, and by expanding and making 
permanent GSP benefits in the region.
    For this reason IMRA fully supports the provisions of the Africa 
Growth and Opportunity Act, as passed by the U.S. House of 
Representatives in 1998.

          The Sub-Saharan Region Offers Sourcing Opportunities

    SSA suppliers offer U.S. retailers opportunities to source two very 
different types of products: ethnic Afrocentric home furnishings and 
clothing, and low- to moderately priced basic apparel products.
    The American market is unique among developed country apparel 
markets in that a relatively large and a growing market exists for 
ethnic apparel and home furnishing products, and in particular for 
Afrocentric apparel and home furnishings. Just under 34 million 
consumers--almost 13 percent of the U.S. population--describe 
themselves as African-American. School curricula are increasingly 
emphasizing ethnic heritage, fueling a future generation of demand for 
consumer products tailored to an appreciation of that heritage. A 
market for Afrocentric products, from woodcarvings and books to home 
furnishings (throw pillows and sheets, for example) to apparel, has 
been growing. Some estimate the total spending power of African 
American consumers at $300 billion.
    Retailers are responding to this growing demand for ``Afrocentric'' 
products. Many IMRA members have initiated product lines directed at 
African-American customers, which incorporate goods--apparel as well as 
handicrafts--with African-inspired themes. Indeed, an entire handicraft 
export industry developed in Ghana to supply major U.S. retailers.
    Demand for ethnic, handcrafted merchandise is particularly strong 
in the growing home products sector, and to a much smaller extent in 
apparel. So far U.S. manufacturers have supplied most of this demand. 
U.S. suppliers have taken African designs and modified them to American 
tastes. Nevertheless, authenticity is important for some consumers. 
Consequently, retailers are keen to source such products from Africa.
    In apparel, SSA countries are most competitive today in exporting 
basic garments, such as shirts, T-shirts and trousers. The U.S. market 
for these products is highly competitive, and price is a major factor 
in a consumer's decision to purchase a given product. These items are 
``bread and butter'' items for IMRA member stores.
    Apparel and home furnishings sourcing from SSA is complicated by a 
host of factors that are in most cases the consequence of 
underdevelopment. With time and opportunity, many of them can be 
eliminated and the region can compete.
    Importers require particularly large volumes in the U.S. market, 
which is dominated by mass retailers such as those represented by IMRA. 
To meet these orders, African exporters must either coordinate the 
production of many independent, small, traditional producers or invest 
in a factory where the items can be manufactured or assembled in-house. 
There has yet to be much investment in facilities in Africa to 
manufacture crafts in large quantities, and achieving volume production 
in handicrafts continues to revolve around the coordination of many 
small producers in most cases. One of Africa's greatest impediments to 
handicraft exports today is lack of experienced export intermediaries 
to play this coordinating role.
    Poor sea freight infrastructure in Africa often delays shipments. 
Ships routinely arrive in port late and leave late. Ocean freight rates 
in SSA are expensive compared to Asia. Arrival and departure dates of 
ships are subject to change at a moment's notice and security at the 
port is often a problem for exporters who do not load and seal their 
own containers. Many exporters are thus forced to send goods via 
airfreight, which costs at least three times more than sea cargo. 
Exporters in landlocked nations like Zimbabwe rely almost exclusively 
on airfreight because customs duties and other ``fees'' on intra-
African trade are generally extraordinarily expensive.
    Poor internal infrastructure creates hurdles for on-time delivery. 
During the rainy seasons dirt roads can become impassable. Lack of 
electricity keeps workers from being able to work longer hours to meet 
a deadline and limits production to a single shift.
    Because of significant delivery problems throughout SSA, handicraft 
intermediaries in Africa as well as foreign wholesalers who have 
specialized in African craft imports state that they have to keep 
rather significant levels of inventory in order to ensure on-time 
delivery. This adds another cost to the product since inventories must 
be financed and stored.
    Using letters of credit (LCs) for imports of handicrafts from 
Africa is virtually impossible unless there is an experienced 
intermediary handling the order because many artisans are ill prepared 
for dealing with international financial documents. But even if there 
is a qualified intermediary, using a letter of credit poses problems in 
Africa. Delivery delays, which are commonplace, can invalidate an LC. 
Delays and extra costs ensue to open a new LC. In addition, African 
banks are reluctant to extend credit based on LCs, particularly to 
first-time exporters, because there is a significant risk of non-
shipment. Until African exporters develop a track record of success, 
banks will be reticent to lend.

    Providing Duty-Free Treatment Through GSP Can Make A Difference

    SSA suppliers face so many difficulties that it's a wonder that 
anyone is really interested in doing business there. But there is 
interest, and the textile examples provided below show how reducing 
duties can make a big difference in sourcing decisions. Table 1 shows 
the average per-dozen values for total U.S. imports of men's cotton 
blue denim trousers in 1995. It shows that two of the three leading SSA 
suppliers of this product to the United States were quite competitive 
in basic cost compared to Mexico and China, and higher than CBI 
producers, with per-dozen values of $86 (South Africa and Lesotho). 
However, import duties of 17.4 percent ad valorem and freight charges 
boost these SSA producers' costs considerably, putting them well out of 
the range of Mexico and CBI producers, but still below China. Mauritius 
remains a relatively expensive source even if duties are eliminated. If 
duties were eliminated on U.S. imports of these SSA products, some SSA 
suppliers clearly would become quite strong alternative suppliers to 
China and other similarly priced Asian suppliers.
    It is important to note, however, that duty-free status would not 
jeopardize suppliers in Mexico or the CBI. These areas enjoy proximity 
advantages that SSA suppliers can never achieve. For this reason, 
efforts that would tie SSA textile benefits to the use of U.S. inputs 
such as yarn or fabric simply will not work. No IMRA member would be 
interested in doing business in Africa--even duty free--if the program 
requires the movement of raw materials and intermediary inputs from the 
United States, 10,000 miles to Africa and then a return trip with 
finished product. Those who would attempt to create a trade program 
that parallels the program in the Caribbean Basin have missed the 
essential point: Africa is much farther away, and much less well 
developed than Mexico or the CBI.
    For these reasons IMRA supports The Africa Growth and Opportunity 
Act which would extend the GSP program for nine years and remove the 
statutory exclusions for products like textiles and apparel. This 
approach, which does not limit inputs to production will attract more 
investment in the region, stimulate the production of regional fabrics 
and yarns, and give the countries of SSA a real tangible benefit with 
which to compete against the large Asian suppliers.

             For Textile Products, Duty Free is Not Enough

    Obviously, the elimination of duties reduces the usual costs of 
doing business and can make the countries of Sub-Saharan Africa more 
competitive with other, far more developed suppliers, particularly 
those in Asia. Reducing tariffs is very important to spurring 
development in the region, because, by-and-large, the countries of Sub-
Saharan Africa are not governed by import quotas.
    But reducing tariffs alone is not sufficient.
    IMRA's members say that intangible ``uncertainty costs'' also limit 
their ability and desire to do business in the region. These costs 
include such intangibles as the child labor situation, intellectual 
property rights protection, and of course the most important intangible 
of all--the chance that the United States will impose quotas on 
products from the source country in the near-or mid-term. In the past, 
it has not taken a large level of exports for the United States to 
invoke its safeguard rights under the Agreement on Textiles and 
Clothing (ATC) to impose new quotas on so-called ``sensitive'' 
categories like cotton shirts and pants.
    Table 2 provides a textbook example of the chilling affect this 
safeguard has on development. Kenya had begun to develop a promising 
textile and apparel export industry when in 1994 the United States 
effectively shut it down by imposing quotas on ``sensitive'' categories 
like cotton shirts and trousers. The quotas not only limited Kenya's 
export potential, but they scared off retailers and importers. The fact 
that today Kenya does not fill its quotas does not mean that the quotas 
have no impact, it simply means that the potential for development has 
been shut down.
    History tells us that quotas on categories such as cotton shirts 
and trousers are almost inevitable. This fear or uncertainty cannot be 
minimized, but it is also extremely difficult to quantify. IMRA 
strongly believes that Congress should establish an explicit ``no-quota 
policy'' so that investors can have some assurance that quotas or the 
threat of quotas will not shut down investment.
    For this reason IMRA supports the Africa Growth and Opportunity 
Act, which would maintain an explicit no-quota policy for the SSA 
region.

                            Domestic Impact

    Trade liberalization does not just provide benefits to the nations 
of SSA. U.S. consumers benefit as well. In 1997, IMRA conducted an 
economic analysis of providing duty free treatment for textile and 
apparel exports from the Sub-Saharan region. Using the International 
Trade Commission's COMPAS model we determined that a no-tariff policy 
would lower consumer costs, without significant damage to domestic 
producers. Tariff elimination applied to exports from the Sub-Saharan 
region would lower the cost of all apparel sold in the United States, 
including U.S.-made apparel. Such a policy would also direct economic 
resources into sectors of the U.S. economy where they would be used 
more efficiently. We estimate that the value of lower prices and 
greater economic efficiency will total between $72.2 million to $93.1 
million each year at wholesale. The retail value of these cost benefits 
would be higher.
    Offsetting these gains would be extremely modest losses by U.S. 
producers of $5.6 million to $7.2 million--a far cry from the enormous 
loss of jobs that some producers have suggested, should we expand trade 
opportunities with the SSA region. Indeed, our analysis is based on 
providing duty-free treatment to all products from the SSA region. The 
Africa Growth and Opportunity Act would apply duty-free treatment only 
to those products, which the President determined were not import 
sensitive. While this provision will reduce somewhat the benefits to 
consumers, it should eliminate any worry that the bill will harm 
American workers.
    For this reason, IMRA strongly opposes recent suggestions that the 
trade benefits accorded SSA be limited only to products, which contain 
U.S. fabric and/or yarn. This proposal is simply unworkable. No IMRA 
member would be interested in doing business in Africa if it first had 
to purchase U.S. fabric and/or yarn, then ship it to Africa tens of 
thousands of miles round-trip for assembly.
    Such a proposal will not encourage investment in Africa. 
Transportation costs are too high, and distances between the United 
States and Africa are too vast. Even if transportation costs were 
lower, U.S. retailers would have no incentive to make such investments, 
since similar programs exist for Caribbean and Mexican suppliers. North 
American suppliers have one overriding advantage--their proximity to 
U.S. markets which makes turn-around times shorter and allows retailers 
to place orders much closer to the intended selling seasons.
    If Congress is serious about encouraging investment in Africa, it 
must develop a program that works for Africa. The idea of tying African 
production to U.S. inputs simply will not accomplish the goals intended 
in the Africa Growth and Opportunity Act. Moreover it perpetuates a 
colonial-style approach to fostering development in the region that the 
Act, as initially drafted, is intended to end.

                      Table 1.--Men's Cotton Blue Denim Jeans, 1995 (HTS No. 6203.42.4010)
                                               [Dollars per Dozen]
----------------------------------------------------------------------------------------------------------------
                                                                              Int'l.                     SSA
                                                   Customs       Import      Freight,                  Supplier
                     Source                         Value        Duties     Insurance      Total       Total if
                                                                             Charges*                 Duty-Free
----------------------------------------------------------------------------------------------------------------
Mauritius......................................      $108.59       $19.11       $11.99      $139.69      $120.58
South Africa...................................        86.75        15.26         3.18       105.17        89.93
Lesotho........................................        86.23        15.18         3.05       104.46        89.28
Mexico.........................................        89.72         0.57         0.77        91.06         n.a.
CBI Countries..................................        76.83         4.76         1.84        83.43         n.a.
China..........................................        88.22        15.51         4.35       108.08         n.a.
----------------------------------------------------------------------------------------------------------------
*Freight from the port of export to the first port of entry to The United States.
Source: The Trade Partnership from U.S. Census data.

           Table 2.--U.S. Apparel Imports from Kenya, 1994-96
------------------------------------------------------------------------
                                       1994         1995         1996
------------------------------------------------------------------------
Cotton Apparel:
  334 MB Other Coats (doz.)......        3,348       16,160       16,992
  336 Dresses (doz.).............          503        2,525       19,087
  340 MB Woven Shirts (doz.).....      395,039      388,247      230,591
  347 MB Trousers (doz.).........      249,236      184,795      197,041
MMF Apparel:
  636 Dresses (doz.).............            0           12       16,257
Silk Blend and Veg. Fiber
 Apparel:
  847 MB Trousers (doz.).........           72        1,547       16,215
Home Furnishings:
  360 Cotton Pillowcases (Nos.)..    1,973,160      598,656      426,576
  361 Sheets (Nos.)..............      158,424      510,864       67,560
------------------------------------------------------------------------
Source: U.S. Department of Commerce, Office of Textiles and Apparel,
  Major Shippers 1996.

                                

Statement of the Luggage and Leather Goods Manufacturers of America, 
Inc., New York, NY

               I. Introduction and Statement of Position

    This statement is submitted on behalf of the Luggage and Leather 
Goods Manufacturers of America, Inc. (LLGMA), a trade association 
representing the U.S. luggage, flat goods, and handbag industries, in 
connection with the House Ways and Means Trade Subcommittee's request 
for input from interested parties on legislative proposals to expand 
trade with Sub-Saharan Africa.
    Last year, the Committee passed legislation, H.R. 1432, the African 
Growth and Opportunity Act, which would eliminate the statutory 
exclusion of textile and non-textile luggage, handbags, and flat goods 
from the Generalized System of Preferences (GSP) for Sub-Saharan 
African countries. The U.S. travel goods industry is opposed to the 
elimination of the exclusion of its products from the GSP program. The 
industry is similarly opposed to quota-free treatment for textile 
products.
    Textile luggage of all types is subject to quotas when imported 
from China, Taiwan, and Korea. Textile handbags and flat goods are also 
subject to various textile restraints. Tremendous import growth over 
the years has ravaged the domestic travel goods industry. Duty-free and 
quota-free treatment for luggage, flat goods, and handbags will 
stimulate rapid growth in imports from Sub-Saharan African countries, 
which will erode further the fragile health of domestic producers. More 
factories will close and more workers will lose their jobs. Economic 
development in Africa should not come at the expense of the U.S. travel 
goods industry.

   II. The Luggage, Flat Goods, and Handbag Industries are Extremely 
                            Import-Sensitive

    The increase in U.S. imports of luggage, flat goods, and handbags 
over the past years has been remarkable. To provide some measure of 
protection for the travel goods industry, its products were excluded by 
statute from GSP eligibility 15 years ago. Since that time, U.S. 
imports of luggage have quadrupled, reaching over $2.3 billion; imports 
of flat goods have tripled to $500 million; and imports of handbags 
have almost doubled to $1 billion. Over 80 percent of luggage imports 
and 70 percent of flat goods and handbag imports originate in less-
developed countries.
    The growth of imports has displaced domestic production and caused 
plant closings and layoffs. Many companies have exited the business 
altogether or have been forced to import some or all of their product 
lines in order to compete. Employment in the luggage industry fell by 
more than 20 percent between 1984 and 1997. The loss of jobs in the 
flat goods and handbag industries was even more severe as the number of 
employees plunged by 58 percent between 1984 and 1997. These imports' 
low prices have exerted powerful downward pressures on domestic prices 
further hindering the viability of domestic producers.
    The U.S. Congress and Executive Branch have long recognized the 
luggage, flat goods, and handbags industries as import-sensitive:
     they are statutorily excluded from duty-free treatment 
under certain trade preference programs, including the Caribbean Basin 
Initiative (CBI), the Andean Trade Preference Act (ATPA), and the GSP;
     their tariffs were cut only slightly or not at all in the 
Uruguay Trade Round negotiations; and
     they were deemed to be among the most sensitive U.S. 
products in the NAFTA tariff negotiations with Mexico, designated for 
stage ``C'' (i.e., ten-year phase out).
    Congress took affirmative action in 1984 to add a statutory 
exclusion to the GSP program for luggage, flat goods, and handbags of 
non-textile\1\ materials on the basis of extreme import sensitivity. At 
the time Congress granted the exemption, it was understood that less-
developed countries, eager to industrialize and with low paid work 
forces, posed a real threat to domestic producers. Today the plight of 
the domestic industry is even more precarious, as imports in this 
sector have tripled since 1984, and the vulnerability to imports that 
much greater.
---------------------------------------------------------------------------
    \1\ Textile luggage, flat goods, and handbags are subject to the 
GSP statutory exclusion for textiles and apparel since they are 
considered to be ``textile and apparel products which are subject to 
textile agreements.''
---------------------------------------------------------------------------

 III.Sub-Saharan African Countries Have the Potential to Become Major 
                     Suppliers to the United States

    One of the defining characteristics of the world economy today is 
the mobility of the factors of production to those regions and 
countries with the lowest labor costs. This is particularly true in the 
case of labor-intensive industries such as luggage, flat goods, and 
handbags, factories for which can be built quickly and production 
expanded rapidly. Foreign producers of these products scour the globe 
for low-wage countries and then quickly establish production facilities 
to make goods for export to the United States. When labor costs 
increase, these producers often shut down their facilities and move 
their operations to other low-wage countries.
    Trends in U.S. imports of luggage illustrate the changing 
composition of supplier countries as producers have shifted production 
to take advantage of lower wage rates. In 1984 Taiwan and Korea were 
the two largest suppliers of luggage to the United States accounting 
for 78 percent of total imports. In 1998, China, the Philippines, and 
Thailand were the predominant suppliers of luggage to the U.S. market. 
Although there has been a major and rapid shift of luggage production 
to lower cost countries, Taiwan and Korea continue to be major 
suppliers of luggage to the U.S. market.
    Duty-free entry of luggage, flat goods, and handbags from Sub-
Saharan African countries will create powerful incentives for foreign 
producers of these goods to establish new or additional operations 
there. First, prospective foreign producers will enjoy wage rates among 
the lowest in the world. Second, they will greatly benefit from a 
burgeoning leather industry that is being developed via monetary as 
well as ``hands-on'' assistance by international development banks and 
organizations. Third, they will enjoy a major competitive advantage 
over producers in other developing countries, which are required to pay 
the significant U.S. duties on these goods.
    The domestic industry will also be vulnerable to transshipment of 
luggage, flat goods, and handbags through Sub-Saharan African countries 
to avoid U.S. duties and quotas. In recent years, many foreign 
producers have resorted to the illegal transshipment of their goods 
through third countries to evade U.S. quotas. The U.S. Customs Service 
has undertaken strenuous efforts to combat this problem, but the 
magnitude of the task is immense. Forty-eight Sub-Saharan African 
countries with duty-free access to the United States will impose on 
Customs a near impossible enforcement burden. This illegal movement of 
goods will exacerbate further the import problem faced by the domestic 
industry.

                             IV. Conclusion

    The domestic luggage, flat goods, and handbag industries have been 
battered by imports, particularly from less-developed countries. To 
provide some measure of protection for the leather-related industries, 
Congress excluded their products from coverage under GSP. Eliminating 
this exclusion and the potent threat of quota restraints now will lead 
to an influx of imports from Sub-Saharan African countries and will 
inflict more harm upon these domestic industries. Economic development 
in Africa is a worthy goal, but the preservation of American industry 
and American jobs is important, too. LLGMA urges the Subcommittee to 
remove luggage, flat goods, and handbags from preferential tariff and 
quota provisions of legislative proposals to enhance U.S. preferential 
trade benefits for Sub-Saharan African countries.

                                

                         National Cotton Council of America
                                       Washington, DC 20036
                                                   February 1, 1999
The Honorable Philip M. Crane
Chairman, Subcommittee on Trade
Ways and Means Committee
U.S. House of Representatives
Washington, DC 20515

Re: Sub-Saharan Africa Trade Preferences

    Dear Mr. Chairman:

    The National Cotton Council of America would like to go on record 
again concerning proposals to grant significant textile trade 
preferences to Sub-Saharan Africa. The National Cotton Council is the 
central organization of the United States cotton industry. Its members 
include producers, ginners, oilseed crushers, merchants, cooperatives, 
warehousemen, and textile manufacturers. While a majority of the 
industry is concentrated in 17 cotton producing states, stretching from 
the Carolinas to California, the downstream manufacturers of cotton 
apparel and homefurnishings are located in virtually every state.
    In attempting to grant trade preferences to the Sub-Saharan region, 
the legislation in fact opens doors for Asian textile and apparel 
manufacturers to use Africa merely as an export platform for sending 
their own textile and apparel products to the United States. If our 
competitors follow their past practice, they will produce apparel 
articles in Asia (using Asian yarns and fabrics), send them to the Sub-
Saharan region for labeling and packaging and then export those items 
to the U.S. labeled as being produced in the Sub-Saharan region. 
Labeling and packaging work obviously does not lead to long-term 
manufacturing capabilities.
    The significant duty break contained in the legislation creates a 
huge incentive for Asian countries to transship their products. Even 
without a special duty break, transshipments are already a $2-4 billion 
problem which U.S. Customs has had little success in bringing under 
control. Further, the textile provisions contain an ineffective overall 
rule of origin and lack any rule of origin at all for the component 
products (the textile fabrics and yarns). The bill contains no 
effective enforcement mechanisms against fraud.
    Experience in this hemisphere shows that preferential textile 
trading arrangements can be drafted in such a way as to benefit the 
countries involved and the United States as well. Such an arrangement 
would provide duty-free and quota-free access to the U.S. textile 
market for apparel articles that had been manufactured in the region 
using U.S. textile components. By providing duty-free and quota-free 
access, such an arrangement would give African workers a significant 
competitive advantage.
    This arrangement would also ensure that countries cannot transship 
their products and would also mean that workers in Africa, not Asia, 
would do the most valuable and important work.
    We have additional concerns that can also be addressed through 
minor amendments to the legislation. For example, at least two of the 
countries that could benefit from this legislation (Tanzania and to a 
lesser extent Kenya) have ignored generally accepted international 
trading rules, including those designed to settle disputes quickly and 
easily. We believe applying countries should be determined to adhere 
generally to internationally accepted trading norms before the 
President grants beneficiary status.
    The National Cotton Council of America, therefore, recommends that 
the legislation be amended to:
    1. Extend duty and quota free access for apparel products from a 
beneficiary country that have been assembled in those countries from 
U.S. textiles. Specifically, we recommend the legislation provide 
benefits to apparel articles assembled in the country from U.S. fabrics 
made from U.S. yarn and to apparel articles cut and assembled in the 
country from U.S. fabric made from U.S. yarn and sewn in the African 
region with U.S. thread. These benefits are similar to those commonly 
referred to as 807(a) and 809 textile benefits. Handloomed, handmade 
and folklore articles originating in the participating country would 
also be given preferential treatment.
    2. Include provisions (as part of an 807a/809 type program) 
designed to prevent illegal transshipment of textile articles through 
appropriate penalties and even suspension of benefits if the problem is 
not corrected.
    3. Allow public comment on the Presidential determination of 
eligibility and include a requirement that applying countries comply 
with generally accepted international trading rules.
    We are aware of the interest in this legislation and the sincere 
efforts to promote the economies of the Sub-Saharan region. We look 
forward to working with you on this matter.
            Sincerely,
                                           Jack S. Hamilton
                                                          President

                                

Statement of the National Retail Federation

                            I. Introduction

    The National Retail Federation (NRF) is the world's largest retail 
trade association with membership that includes the leading department, 
specialty, discount, mass merchandise, and independent stores, as well 
as 32 national and 50 state associations. NRF members represent an 
industry that encompasses more than 1.4 million U.S. retail 
establishments, employs more than 20 million people--about 1 in 5 
American workers--and registered 1998 sales of $2.7 trillion. NRF's 
international members operate stores in more than 50 nations.
    NRF strongly supports the ``Africa Growth and Opportunity Act'' 
(H.R. 434), which, with minor modifications is identical to H.R. 1432 
as passed by the House of Representatives in 1998. Unlike the weaker 
version of the Africa trade initiative reported last year by the Senate 
Finance Committee, H.R. 434 will provide much-needed incentives for 
American companies to work with producers in Sub-Saharan Africa in ways 
that will promote economic development in the region. Increased 
economic development and expanded trade opportunities in Sub-Saharan 
Africa will benefit not only Africans, but also U.S. consumers, 
exporters (including those in the U.S. textile and apparel industries), 
and importers (including U.S. retailers). As a result, H.R. 434 will 
enhance the competitiveness of countries in Sub-Saharan Africa as 
suppliers, and help attract much-needed foreign investment in the 
region.

   II. Sub-Saharan Africa Faces Significant Hurdles to International 
            Competitiveness Which Will Only Worsen With Time

    It should come as no surprise that the obstacles to economic 
development in Sub-Saharan Africa are daunting. Due to a variety of 
factors, including political and economic instability and poor 
infrastructure, many international investors and product buyers have 
historically shunned the region. While there have been improvements 
recently, many producers in Sub-Saharan Africa have poor business 
skills, are relatively inexperienced with letters of credit, and fail 
to appreciate the importance of meeting delivery deadlines. Many cannot 
produce to U.S. order, size, and quality requirements. Distances to 
ports can be long and complicated by cumbersome customs controls that 
delay shipments unnecessarily, forcing many exporters to rely on more 
expensive air freight to ship product to the United States.
    All these hurdles have one overriding effect--they raise the cost 
of doing business in Sub-Saharan Africa. A buyer in time-sensitive 
businesses, such as apparel retail, risks delays that result in 
shortages during peak selling seasons. Special letters of credit and 
air freight costs raise product costs relative to competitors in Asia 
and Latin America. The need to ensure quality, guard against illegal 
transshipments, and a host of other pitfalls virtually compels a U.S. 
retailer to maintain a full-time presence in the region, adding to the 
cost of doing business in Sub-Saharan Africa.
    Given these obstacles, it is no surprise that when U.S. retailers 
face a choice of where to conduct business, whether sourcing products 
or investing, Africa is often the last choice behind Latin America and 
Asia, both of which have a number of key advantages. Latin America 
enjoys the advantage of proximity to U.S. markets and a network of 
existing preferential trade arrangements. Asia has good infrastructure, 
extended business relationships, and, as shown in the table below, much 
lower costs and shorter timeframes in shipping to the United States 
than Africa.

----------------------------------------------------------------------------------------------------------------
                 From                             To               Rate/40' container       Best Transit Time
----------------------------------------------------------------------------------------------------------------
Durban...............................  New York...............                    $3635                  21 days
Durban...............................  Los Angeles............                    $3935                  30 days
Capetown.............................  New York...............                    $3635                  18 days
Capetown.............................  Los Angeles............                    $3935                  27 days
Shanghai.............................  Los Angeles............                    $2738                  15 days
Hong Kong............................  Los Angeles............                    $1750                  12 days
----------------------------------------------------------------------------------------------------------------
Source: J.C. Penney Company, Inc.

    Without some major change in the current situation, Sub-Saharan 
Africa will become even less competitive vis-a-vis other developing 
countries in Latin America and Asia, particularly after December 31, 
2004. After that point, all textile and apparel quotas disappear as a 
result of full implementation of the WTO Agreement on Textiles and 
Clothing (ATC). Without quotas to impede their trade, Asia and Latin 
America's advantages as suppliers of textile and apparel products, with 
their large populations and developed industries, are enhanced 
substantially. Meanwhile, what few advantages Sub-Saharan Africa 
currently has (comparatively few quotas and low labor costs) will be 
largely negated. If we do not provide the means for Sub-Saharan Africa 
to develop their own textile and apparel industry before the 2005 quota 
phaseout is completed, their competitive disadvantage will forever hold 
them off the playing field.
    Indeed, the serious competitive handicaps facing Sub-Saharan Africa 
and the short time frame in which to address the problem, argue for a 
trade initiative that goes well beyond those contemplated for other 
regions, such as the enhanced trade benefits proposal for the Caribbean 
Basin Initiative countries. All things being equal, Sub-Saharan Africa 
will continue to lose out to Latin America and Asia.

   III. The United States Can Do Much To Offset Some Of Those Hurdles

    Although there is relatively little the United States can do 
directly, at least in the near term, to eliminate political instability 
in Sub-Saharan Africa, or even to build or repair the transportation 
system or educate entire work forces, the United States can do much to 
lower costs of doing business in Sub-Saharan Africa in ways that would 
at least begin the process of economic development in the region. This 
includes providing duty-free and quota-free access to exports of 
products exported from the region to the United States--including basic 
apparel, footwear, and home furnishings. These products in particular, 
have proven to be critical to the establishment of manufacturing 
capability in developing countries, which, in turn, gives these 
countries a basis for economic growth.
    Indeed, there is something fundamentally flawed with current 
policy, which, with one hand distributes financial aid for development, 
but with the other, limits exports to the United States with quotas and 
some of the highest tariff rates in the U.S. schedule. For example, 
when a Sub-Saharan producer begins to establish itself as a competitive 
producer of a given basic apparel product, as have Mauritius and Kenya, 
the U.S. response is to limit those countries' exports with quotas. The 
quotas--even the prospect of new quotas--have a chilling effect on 
much-needed foreign investment in the region, as the case of Kenya 
demonstrates. As soon as the United States began to impose quotas on 
U.S. imports of men's and boys' cotton woven shirts and cotton 
pillowcases, U.S. retail interest in sourcing from Kenya virtually 
evaporated. The risks are simply too great that new orders will be 
restricted by quota.

IV. H.R. 434 Is A Critical Step In Helping the Economic Development of 
                           Sub-Saharan Africa

    Sub-Saharan African producers have the potential to be good, 
reliable suppliers to the U.S. market for such products as basic 
apparel, footwear, and home furnishings. These are products generally 
in short supply because (a) U.S. manufacturers cannot meet all of U.S. 
demand for low-cost apparel and (b) other foreign suppliers are limited 
by quotas that fill regularly.
    While most large U.S. retailers have explored the region's 
potential, particularly as a possible alternative to Asia suppliers of 
these products, many have backed away from committing large orders to 
Sub-Saharan African producers. Indeed, many have left the region 
altogether, in part, due to the problems mentioned above. While duty-
free and quota-free benefits available under H.R. 434 will not 
necessarily bring them back in droves, these incentives in the 
legislation will help to rekindle interest in sourcing from Sub-Saharan 
Africa, particularly for several large U.S. retailers. These benefits 
could also be just the incentive to spark additional foreign investment 
in the region, and thereby provide much-needed jobs and training to the 
work force and allow them to become good, reliable, and quality 
suppliers to the United States.

  V. H.R. 434 Provides Important Trade Benefits To Sub-Saharan Africa

    Among the most important benefits in H.R. 434 for Sub-Saharan 
Africa are the provisions liberalizing trade in textile and apparel 
products, which are intended to stimulate business activity between the 
United States and countries in the Sub-Saharan region. Thus, the bill 
is of great interest to the U.S. retail industry, which sells the 
majority of apparel imported into the United States. The following 
provisions offer the greatest incentives for the U.S. retail industry 
to expand business activity in the region and are of greatest value to 
beneficiary countries in Sub-Saharan Africa:
     Elimination of existing quotas on textile and apparel 
exports to the United States from Kenya and Mauritius after those 
countries establish visa systems adequate to guard against 
transshipment;
     A requirement that the President continue the existing no-
quota policy with respect to textile and apparel imports from other 
Sub-Saharan African countries; and
     Authorization for duty-free treatment under the 
Generalized System of Preferences (GSP) to products from Sub-Saharan 
Africa that are currently excluded from the GSP program if the U.S. 
International Trade Commission (ITC) finds that those products are not 
sensitive to imports from Sub-Saharan African countries.
    Some argue that, like the 1998 Senate Finance Committee version of 
the Africa trade bill, H.R. 434 should include a U.S.-yarn and fabric 
only rule (so called 807A/809 provisions) in order for textile and 
apparel products from Sub-Saharan Africa to be eligible for trade 
preferences under the program. They argue that such a restrictive rule 
of origin is necessary to minimize the adverse impact of increased 
trade on U.S. workers and to diminish the possibility of illegal 
transshipment from countries outside the region. The NRF views such a 
provision not only as unwarranted, but as negating the very benefits 
this legislation would provide Sub-Saharan African countries.
    Given the many obstacles to doing business in Sub-Saharan Africa--
distance, lack of infrastructure, undeveloped business culture--
addition of a U.S. fabric-only rule would merely add one more hurdle 
making it harder, not easier, for American retailers to begin or expand 
business operations in the region. Retailers today no longer have the 
luxury of excessively long lead times. In fact, the development cycle 
for clothing is shortening. A requirement that fabric be shipped from 
the United States to Africa for sewing and then returned to the United 
States presents unacceptably long lead times and imposes substantially 
higher costs.
    Thus, If such a restrictive rule of origin were included in H.R. 
434, American retailers would have no incentive to increase their 
business activities in Sub-Saharan Africa compared to other, closer and 
more advanced regions, such as Asia and Latin America. Thus, the very 
advantages that the legislation seeks to provide to Sub-Saharan Africa 
would be negated by inclusion of such a rule.
    In addition, NRF would argue that such a restrictive rule of origin 
that mandates the use of only U.S. yarn and fabric, essentially creates 
a government-sanctioned monopoly market for the U.S. textile industry. 
Such a requirement is not an example of greater reciprocity in trade as 
some would claim. Rather, it is a particularly egregious example of 
managed trade, that also smacks of neo-colonialism. However, in the end 
a U.S. yarn and fabric-only rule applied to Africa will do little to 
help the U.S. textile industry, if, as a result, the U.S. retail 
industry is unable to do business there.
    Finally, as discussed in greater detail below, NRF would argue that 
a restrictive U.S. yarn and fabric only rule is uncalled for if the 
sole premise for including it is ostensibly to protect U.S. jobs and 
safeguard against transshipment.

 VI. The Africa Growth and Opportunity Act Will Not Result in Textile 
     And Apparel Transshipment Or Any Significant Loss Of U.S. Jobs

    The textile interests and other critics of the Africa trade bill 
cite two reasons for opposing the initiative--(1) the potential for 
Sub-Saharan Africa to become a transshipment point for Asian textile 
and apparel products; and (2) job loses in the United States as a 
result of competition from imports of African textile and apparel 
products. Closer scrutiny of both claims shows them to be unsupported 
by any credible evidence and reveals them to be mere bogus scare 
tactics promoted by special interests that want to kill the Africa 
bill.

A. The Transshipment Issue

    Opposition to the Africa trade bill based on concerns about massive 
transshipment from Asia through Africa to avoid U.S. textile and 
apparel quotas is misplaced for the following reasons:
     The high shipping costs to and from Africa (noted in the 
chart above) and the extremely long distances involved, would make 
transshipping goods from Asia to the United States through Africa 
prohibitively expensive and time consuming.
     Although the Lome Agreement already provides African 
textile and apparel products duty-free and quota-free access to Europe, 
there has been no appreciable transshipment from Asia through Africa to 
the European Union, to avoid European quotas on Asian products.
     H.R. 434 already contains strong protections against 
transshipment, including a visa system and authority for the President 
to deny trade benefits under the program to otherwise eligible 
beneficiary countries if they do not provide sufficient protection 
against transshipment.
     The U.S. Customs Service has effective procedures in place 
to counteract transshipment, as U.S. Customs jump teams have proven in 
both Hong Kong and Macau.
     With a very small, infant textile and apparel industry, it 
would be a fairly straightforward exercise for U.S. Customs to guard 
against transshipment by matching the production capacity of factories 
in Sub-Saharan Africa with shipments to the United States.
     The problems of transshipment is created mainly by our 
textile and apparel quota system, and should, therefore, largely 
disappear once those quotas are eliminated over the next six years as 
required by the WTO Agreement on Textiles and Clothing.
    If there is legitimate concern about a potential transshipment 
problem, it is not a reason to oppose the bill. Rather, those concerns 
should be addressed through measures that will enhance customs 
enforcement without undermining the trade benefits of the legislation.

B. The Jobs Issue

    The job-loss claims by opponents of the Africa trade initiative are 
also not credible. The U.S. International Trade Commission (ITC) and 
the World Bank have conducted the only objective and thorough studies 
on the potential effects in the United States as a result of the Africa 
initiative. Both confirm that the House Africa trade bill will not harm 
U.S. jobs or industry. The ITC study in particular calculates that less 
than 700 jobs, at most, would be adversely affected by increased 
apparel imports from Africa. This possible negative impact on a 
comparative handful of jobs in one of the most protected industries in 
the United States is simply not a persuasive reason to oppose the 
Africa trade initiative for several reasons;
     Although the only adverse impact of the initiative would 
be on apparel jobs, many U.S. apparel manufacturers support the House 
Africa trade bill.
     Although the U.S. textile industry opposes the Africa 
trade bill, it will be unaffected by trade with Sub-Saharan Africa, 
which has no internationally competitive textile industry, and is 
unlikely to have one for some time.
     While the overall economic impact of the Africa trade 
initiative on the United States will be relatively modest, increased 
trade with Africa will provide net benefits to the entire country, 
including American consumers, through a broader selection of 
reasonably-priced products.
     Expanded trade with Africa will give competitive U.S. 
industries, such as the retail sector, new business opportunities and 
the ability to create new and better jobs in both the United States and 
Africa.
     The United States has an essentially full-employment 
economy, in which any jobs lost from trade with Africa would be more 
than offset by the overall increase in jobs as a result of healthy 
economic growth in the United States, brought about, in no small 
measure, by increased trade--both exports and imports.
     Trade adjustment assistance is available to the few 
workers who may be displaced as a result of increased imports from 
Africa.
    While expanded trade between Africa and the United States will be 
of substantial benefit to the Sub-Saharan Africa region, both the World 
Bank and ITC studies demonstrate that increased imports from Africa 
will have a negligible impact on the U.S. textile and apparel 
industries. Currently, the countries of Sub-Saharan Africa account for 
less than 1 percent of total U.S. textile and apparel imports. Even if 
one is optimistic and assumes that trade in these products triples as a 
result of the Africa trade initiative, the region would still be a 
comparatively tiny supplier to the U.S. market. Indeed, even if Sub-
Saharan Africa were to export its entire textile and apparel production 
to the United States, it would account for less than 10 percent of U.S. 
imports.\1\
---------------------------------------------------------------------------
    \1\ There are no solid data for Sub-Saharan Africa (SSA) textile 
and apparel production. As an estimate of regional production, the 
International Trade Commission (ITC) used value-added data from World 
Bank sources for 1993 (the most recent year available) for the seven 
largest textile and apparel producing SSA countries. Using this figure, 
total production comes to just under $3 billion. Of this, the SSA 
exported just over half ($1.55 billion) in 1994, of which approximately 
$360 million went to the United States and much of the remainder to 
Europe. Total U.S. textile and apparel imports in 1994 were $40 
billion. Therefore, if SSA had exported all its 1993 production to the 
United States, it would represent 7 percent of total U.S. textile and 
apparel imports.
    Source: Laura Baughman, The Trade Partnership
---------------------------------------------------------------------------
    These conclusions are also supported by European statistics. As 
noted above, the Lome; Agreement already provides Sub-Saharan Africa 
virtually unrestricted duty and quota-free access to the E.U. market 
for their textile and clothing exports. Nonetheless, Sub-Saharan Africa 
still accounts for just over 2 percent of textile and clothing imports 
into the E.U., with Asian countries, which are still largely subject to 
quotas, accounting for the majority of E.U. imports.
    When one seriously examines the evidence, it is clear that the 
arguments raised by textile interests as reasons to oppose the Africa 
bill are merely disingenuous attempts to undermine this important 
trade-expanding initiative and preserve a self-serving system that 
limits imports at the expense of the American consumer and broader U.S. 
policy interests.

                            VII. Conclusion

    In conclusion, America's retailers strongly support H.R. 434. The 
retail industry urges both the House and the Senate to pass this 
important legislation without adding unwise and unnecessary provisions, 
such as a U.S. yarn and fabric-only rule, which would only serve to 
defeat the positive goals of the legislation and hurt the very people 
it seeks to help. Let us not continue in this legislation the current, 
short-sighted development policy for Africa that gives with one hand 
while taking away with the other.

                                

Statement of the Neckwear Association of America, Inc., New York, NY

                              Introduction

    This statement is submitted on behalf of the Neckwear Association 
of America (NAA), a trade association representing domestic necktie 
producers and their suppliers. NAA's member companies account for the 
vast majority of neckties produced in the United States. This statement 
responds to the Subcommittee's request for public comment on providing 
preferential trade access to the U.S. market for countries in Sub-
Saharan Africa.
    Last year the House passed H.R. 1432, the African Growth and 
Opportunity Act, which would have eliminated the exclusion of apparel 
from coverage under the Generalized System of Preferences (GSP) and 
liberalized quota access to the U.S. market for textile products that 
originate in Sub-Saharan African countries. The neckwear industry is 
opposed to these provisions. Rapid growth in imports, particularly from 
less developed Asian countries, has harmed the domestic necktie 
industry. Duty-free and quota-free treatment for apparel from Sub-
Saharan African countries will subject domestic apparel producers to 
increased imports from a whole new area of the developing world.

        The U.S. Necktie Industry is Extremely Import-Sensitive

    U.S. imports of neckties have grown steadily in the 90's, from 1.7 
million dozen in 1990 to 3.0 million dozen in 1997. Much of the growth 
in imports came from new Asian suppliers. For example, necktie imports 
from Korea jumped from 225,687 dozen in 1990 to 1.2 million dozen in 
1997, a more than five-fold increase.
    The increase in imports has come at the expense of the domestic 
industry. Sales and production have remained stagnant during this 
period. Many companies have simply been unable to stay afloat in the 
face of low-price imports from developing countries. Those that remain 
in business must deal with greatly reduced profit margins, which 
creates an uncertain future for their companies and the men and women 
they employ. U.S. necktie producers can ill afford further increases in 
imports from low-wage countries.

 III. Sub-Saharan African Countries Have the Potential to Become Major 
                     Suppliers to the United States

    Sub-Saharan African countries are poised to start down the path of 
industrialization. All of the ingredients are in place for this to 
happen--a very low-wage work force, abundant raw materials, and a 
developed world eager to assist in the task. An apparel industry will 
be one of the first industries to develop by virtue of its labor 
intensity and the relative ease with which sewing and assembly 
operations can be established. Sub-Saharan African countries will be no 
different than the many other less developed countries that have 
developed apparel industries virtually overnight. Duty-free and quota-
free access to the United States for apparel will only hasten this 
development.

                             IV. Conclusion

    Neckties and other articles of apparel were excluded by statute 
from duty-free treatment under the Generalized System of Preferences in 
1974 when the program was first implemented. The exclusion was an 
important recognition by Congress and the Executive Branch that the 
apparel industry was extremely susceptible to damage from low-cost 
import competition. Necktie imports today play a much more substantial 
role in the domestic market than they did back then. The NAA 
understands and appreciates the importance of helping Africa to develop 
economically but this help should not result in lost jobs and lost 
output in the U.S. necktie industry.

                                

Statement of Mac Cheek, President, Nilit America Corporation, 
Greensboro, NC

    Chairman Crane and distinguished members of the Subcommittee on 
Trade of the Committee on Ways and Means, I want to thank you for the 
opportunity to appear before you today to express our desires and 
concerns on U.S. trade relations with Sub-Saharan Africa and any 
legislation that may affect such trade. Specifically, we encourage the 
U.S. Congress to abstain from placing U.S. country of origin 
requirements on yarns and fabric used to make apparel in Sub-Saharan 
countries in order for the apparel imports to the U.S. to remain quota-
free. We encourage the U.S. House of Representatives to demonstrate 
leadership on this important legislation and maintain the provisions on 
textiles and apparel as originally written in Section 8 of H.R. 1432 
passed by the House in the 105th Congress.
    The provisions of Section 8 provide for ``eliminating trade 
barriers and encouraging exports.'' Part of the provisions describe the 
minimal impact the export of apparel made in Sub-Saharan countries 
(with no restrictions) is having and will have on the U.S. domestic 
industry. The provision to ``lay the groundwork for sustained growth in 
textile and apparel exports and trade under agreed rules and 
disciplines'' can only be managed if special origin requirements are 
not placed on goods allowed to be traded freely into the United States.
    Before elaborating on our position, I would like to acquaint you 
with Nilit America Corporation. We supply fine denier, high-quality 
nylon 66 to U.S. hosiery manufacturers and texturerizers. We have been 
located in Greensboro, North Carolina since 1991 but were working in 
the United States through agents for many years prior to that date. We 
directly employ only 7 people in Greensboro but 70 U.S. manufacturers 
rely on our supply of fine denier, high-quality nylon 66 thus we 
indirectly impact tens of thousands U.S. workers.
    We strongly support the expansion of trade benefits to Sub-Saharan 
Africa and believe that through free-trade and not aid, these countries 
can begin to enter the global marketplace. It is through the 
elimination of trade barriers that economies can begin to experience 
the benefits of true competition. Nilit America is the offspring of 
Nilit Israel. We directly employ over 600 people in Israel, both Arabs 
and Jews in one of the designated industrial zones. Nilit America is 
the result of the growth in business experienced under the U.S.-Israel 
Free Trade Agreement. Our company is an example of the benefits that 
can be realized through the elimination of trade barriers. We have 
grown over 500% in just five years. The ability to trade freely 
products manufactured in Israel with the United States enabled us to 
build a firm that allows downstream manufacturers, such as the hosiery 
industry, to maintain domestic production and to compete with imports 
from low labor cost countries such as China.
    The majority of countries in Sub-Saharan Africa are lesser-
developed developing countries. After agriculture, one of the 
historical industries which a developing country can quickly assimilate 
is the manufacture of textiles and apparel. Given the sensitivity of 
allowing unrestricted trade in agricultural products, we should seek to 
ensure that other manufacturing options for these countries do not 
become subject to restrictive trade requirements. Specifically, in the 
last Congress, U.S. interest groups attempted to require that only 
apparel products made in Sub-Saharan African countries from fabric that 
had been made in the U.S. from yarns that had been made in the U.S. 
would be allowed quota free entry. From a practical trade standpoint, 
the cost of shipping U.S.-made fabric from U.S.-made yarns to Africa 
for assembly before returning the finished goods to the U.S. is cost 
and time prohibitive. Such requirements would be so costly as to 
effectively ban any quota free apparel merchandise from Sub-Saharan 
countries. Similar requirements are in effect under the NAFTA and for 
Caribbean countries, however, their close physical proximity to the 
U.S. makes such a proposition a viable trade practice.
    Of course, Nilit America has a vested interest in ensuring that no 
requirements are imposed on textiles and apparel made in Sub-Saharan 
Africa since our fine denier high-quality nylon 66 yarns are made in 
Israel. It was the U.S.-Israel Free Trade Agreement that ignited the 
manufacturing of specialty nylons in Israel and exporting them to the 
United States. If we are allowed to ship our fine denier, high-quality 
nylon 66 yarns to manufacturers in Sub-Saharan Africa, we can increase 
our work force in Israel and the United States. If made in the U.S. 
requirements are imposed on apparel made in Sub-Saharan Africa, the 
manufacturers will not use our nylon nor likely the U.S. made nylons 
given the cost and time involved in exporting from the U.S. to Africa, 
thus, the possible benefits of your legislation would be nullified. 
Additionally, the legislation targeted to benefit Sub-Saharan Africa 
would have an adverse effect on a Free Trade Agreement negotiated 
between the U.S. and Israel.
    Therefore, we encourage you, Mr. Chairman, and your esteemed 
colleagues, to hold fast to the principles of free trade. Do not let 
special interest groups influence your decision to develop a viable 
open trade relationship with Sub-Saharan Africa. Keep the provisions of 
Section 8 as originally proposed in H.R. 1432. If origin-specific 
requirements are placed on the apparel products manufactured in Sub-
Saharan the principles contained in Section 8 will be nullified. Your 
commitment to free trade and the development of free enterprise in Sub-
Saharan Africa are to be commended. Thank you for this opportunity to 
comment and for holding hearings on this important trade issue. Please 
feel free to contact me if you have any questions on the issues raised 
in my statement.

                                

Statement of the United States Association of Importers of Textiles
and Apparel, New York, NY

                                Summary

    The U.S. Association of Importers of Textiles and Apparel, USA-ITA, 
supports legislation to ensure the expansion of U.S. trade with Sub-
Saharan Africa. Providing quota-free and duty-free entry to textiles 
and apparel from Sub-Saharan Africa could have a substantial beneficial 
impact on Sub-Saharan Africa and on American consumers. This policy 
also has the potential to benefit the U.S. domestic textile industry as 
well as U.S. retailers and importers.
    Given the low levels of development within Sub-Saharan Africa and 
the small trade from the region, the need for quotas on these countries 
is questionable. Further, given the fact that the few existing quotas 
have not been fully utilized, a policy of quota-free treatment alone 
arguably would be comparable to the status quo, although it would 
provide potential investors with a sense of certainty they do not have 
today.
    Duty-free treatment is one of the few means available to encourage 
investment in the region. Duty-free treatment for Sub-Saharan African 
textile and apparel products may be more significant than quota-free 
treatment, in terms of a measurable impact on trade.
    An express policy of a quota-free, duty-free treatment for textile 
and apparel products sourced from the Sub-Saharan region also provides 
a basis for these countries to compete against Asian suppliers. Many 
traditional suppliers of textiles and apparel are becoming less 
competitive as a result of rising costs, tighter quotas, and now, the 
financial crisis. The opportunities available under the African Growth 
and Opportunity Act will permit the region to better prepare for an era 
in which all quotas on textile and apparel products will be eliminated. 
There can be no question that it is producers in Asia who would be most 
vulnerable to an erosion of trade if the Africa Growth and Opportunity 
Act of 1999 becomes law, not U.S. firms.

                               Discussion

                            I. About USA-ITA

    USA-ITA is an association founded in 1989 with more than 200 
members involved in the textile and apparel business. USA-ITA members 
source textile and apparel products both domestically and overseas. 
Members include manufacturers, distributors, retailers, and related 
service providers, such as shipping lines and customs brokers. USA-ITA 
member companies account for over $55 billion in U.S. sales annually 
and employ more than one million American workers. These are good 
jobs--in production, design, freight forwarding, distribution, sales 
and other services--well paying, skilled jobs that Americans want to 
have.
    The ability of USA-ITA members to respond appropriately to consumer 
demand, and thereby maintain and increase competitiveness in the world 
marketplace, and to expand the number of good jobs in the United 
States, is very much dependent upon U.S. textile and apparel trade 
policy. So long as there is uncertainty, including the threat that 
quotas will be established on speculative and newly developing 
opportunities, the ability of importers and retailers to consider these 
options and offer the benefits to consumers is greatly constrained. 
Therefore, USA-ITA strongly supports the establishment of an express 
United States Government policy to provide quota-free and duty-free 
entry to textiles and apparel from Sub-Saharan Africa.

 II. U.S. Textile and Apparel Importers Need An Incentive To Consider 
                           Sub-Saharan Africa

    The reasons why textile and apparel trade from Sub-Saharan 
Africa has been so minimal are many.

Distance

    Currently, investment in this region is not particularly 
attractive for the textile and apparel import community largely 
because the region is extremely distant from the United States. 
The travel time to reach Sub-Saharan Africa is long. While 
there are direct air flights from New York to Johannesburg, 
South Africa that take only about 11 hours, other Sub-Saharan 
sites are more difficult to reach. By airplane, it takes some 
20 hours of flying time over two days to get to either Kenya or 
Mauritius, both because of the distance and because connections 
are limited. That is just for personnel, such as buyers, to 
reach the area. For most of the Sub-Saharan nations, the 
infrastructure is also highly limited, making movement beyond 
port areas difficult if not overly time consuming or altogether 
impossible. That makes land-locked Sub-Saharan nations even 
less viable options.
    For the movement of goods, however, the time involved is 
even more extreme: it takes at least a month, and typically 40 
to 45 days for goods to move by ship from Mauritius to New 
York. In part this is due to the lack of major container 
facilities within Sub-Saharan Africa, so the region is reliant 
upon ``feeder'' carriers to move goods to ports where they can 
be consolidated with other shipments before actually heading 
for the United States. At that point, the distance between Sub-
Saharan Africa and the United States accounts for the rest of 
the excessive time involved. And time is a major consideration 
in the fashion business. So is cost. The shipping costs 
involved, particularly when raw materials also must be brought 
into the region, undermine manufacturing savings that may be 
achieved through low labor costs. To some extent, the long lead 
times and high ocean shipping costs have meant that air 
shipping merchandise is an equivalent option, a strong 
indicator of the expensiveness of sourcing from Sub-Saharan 
Africa.

Political instability

    Political instability in the region also has no doubt had 
some impact on new investment in the region, and on the 
willingness of some companies to maintain investment over the 
long term. While there is a limit on the extent to which these 
geographic and political disincentives can be ameliorated, U.S. 
textile policy also has worked against the region. Unless U.S. 
policy is revised, there is little that is likely to entice 
American companies to seriously consider the Sub-Saharan 
region.

Uncertainty regarding U.S. Textile Policy

    Those few American companies that have ventured into new 
regions of the world have learned the hard way that U.S. 
textile policy can quickly put their plans in jeopardy. The 
most recent example comes from those companies that shifted 
production into Cambodia. Although the United States conferred 
``normal trade relations'' duty treatment on Cambodia in 1997, 
companies found themselves in 1999 caught in U.S. Textile 
Program plans to establish a comprehensive system of quotas 
that now greatly limit textile trade from that nascent 
industry.
    U.S. companies entering Sub-Saharan African countries have 
suffered a similar fate. Their forays into the region have not 
necessarily been rewarded--to the contrary, these companies 
have been slapped with quotas established under the U.S. 
Textile Program and with changes in the origin rules that 
determine whether those products are African. The result has 
been that although trade from the region has increased 
slightly, from 100.8 million ``square meter equivalents,'' or 
SME (the standard measure used in the U.S. Textile Program), in 
1992 to 138 million SME for the one year period ending November 
1998, its share of total imports of textile and apparel imports 
into the United States is only 0.58 percent. In recent years, 
trade from the region has actually fallen as a percent of total 
U.S. textile and apparel imports, with the largest trade 
increases from Mexico, Canada and the Caribbean Basin 
countries.
    For example, there are a number of quotas on trade from 
Mauritius, one of the very few Sub-Saharan countries to 
actually develop a relatively varied textile and apparel 
manufacturing business. Mauritius' trade in textile and apparel 
products in 1997 was slightly less than its trade in those 
goods in 1992, measured in million SME:

 
------------------------------------------------------------------------
   1992       1993       1994       1995      1996      1997     YE11/98
------------------------------------------------------------------------
36.3          46.5       50.5       46.5       34.4      34.2      37.3
------------------------------------------------------------------------
Source: Trade Monitoring Service, International Development Systems,
  Inc.

    During this period, some two dozen categories of goods 
produced in Mauritius were subject to U.S. quotas, although 
throughout this period Mauritius' trade has never accounted for 
more than 0.29 percent of total imports of textiles and apparel 
into the United States.
    Kenya, the only other Sub-Sahara African country subject to 
U.S. quotas, has suffered an additional and slightly different 
fate. First, in 1994, when it was introduced to the U.S. 
Textile Program as a result of the establishment of two quotas, 
one on pillowcases (category 360) and the other on cotton and 
man-made fiber woven men's and boys shirts (categories 340/
640), some 10,000 Kenyans lost their jobs and more than 30 
companies exited the textile/apparel business.\1\ Between 1995 
and 1996, Kenya's trade in shirts, categories 340/640, declined 
by more than 40 percent, from 392,519 dozen to 235,079 dozen. 
In 1997, Kenya's trade in woven shirts was 214,073 dozen and 
the most recent U.S. trade statistics show that the trade 
continues to decline to just 193,671 dozen woven shirts shipped 
in the last twelve months.
---------------------------------------------------------------------------
    \1\ Source: Asian Wall Street Journal, July 16, 1996, Page A-1, by 
Michael Phillips. According to the article, ``Before the move 
[imposition of U.S. of quotas], Kenya boasted more than 40 textile and 
apparel companies employing at least 14,700 workers.'' The article 
cites as its source ``an unofficial study by World Bank Economist Tyler 
Biggs.''
---------------------------------------------------------------------------
    Second, Kenya is also a victim of the change in the U.S. 
rules of origin for textile products, implemented on July 1, 
1996. Kenya's trade in bed sheets, which was not under a U.S. 
quota, was effectively put out of business as a result of the 
rules change. Its related trade in pillowcases, which has been 
under quota, also has been devastated. Under the pre-July 1, 
1996 rules, if a fitted sheet, a flat sheet, or a pillowcase, 
were subjected to sufficient cutting and sewing operations, the 
country of origin was where those cutting and sewing operations 
occurred.
    Now, however, under the new rules, where the fabric is 
woven determines origin, regardless of the many and substantial 
processes that may follow elsewhere. Within the town of 
Mombassa, Kenya that has meant the shut down of the only 
manufacturing facilities in the town, because Mombassa produced 
fitted and embellished flat sheets, and pillowcases, from 
fabric sourced in Pakistan. Kenya is not a fabric producing 
country. Thus, Kenya went from shipping 510,864 numbers 
(pieces) of cotton sheets (category 361) to the United States 
in 1995 to shipping only 67,560 numbers of cotton sheets in 
1996, a decline of 86.78 percent. And, trade in cotton 
pillowcases (category 360) went down from 598,656 numbers in 
1995 to 426,576 numbers in 1996. In 1997 and 1998, there was no 
trade in these products.
    The quota levels established for these Sub-Saharan 
countries also have been extremely small. These small levels of 
trade that mean only a few importers can get involved. While it 
is the nature of the U.S. textile program that those who come 
latest to the business are going to be permitted an 
increasingly smaller piece of the quota pie, the knowledge of 
this basic reality works as a strong disincentive for an 
importer to enter a location such as Sub-Saharan Africa.
    The region is already so far away, thereby greatly 
increasing costs and time, and making it that much more 
difficult to manage, that there must be something else to 
overcome these disincentives. One incentive would be to have an 
assurance that a sufficient and commercially viable quantity 
can be obtained. A larger quantity generally means lower per 
piece costs because items such as shipping costs can be 
apportioned over that greater quantity. Clearly, a second 
incentive would be duty free treatment, again to compensate for 
the increased shipping costs.

 III. The U.S. Already May Have a No Quota Policy on Sub-Saharan Africa

    As a practical matter, there are two related reasons why the United 
States may already have a de facto no quota policy with regard to Sub-
Saharan Africa. First, with most of the nations in Sub-Saharan Africa 
already members of the World Trade Organization, the likelihood that 
any of these countries would have their textile trade subjected to new 
U.S. quota actions appears minimal. Since the WTO went into effect on 
January 1, 1995, and as a consequence of the rules established by the 
WTO's Agreement on Textiles and Clothing, it would be extremely 
difficult for the United States to justify a unilateral quota action on 
one of these African nations absent an astronomical expansion of trade.
    Second, to the extent that there is a reluctance on the part of the 
United States to place restraints on South Africa, WTO rules serve to 
limit the ability of the United States to limit other Sub-Saharan 
countries trading in those same products but shipping smaller 
quantities than South Africa.
    Until recently, South Africa stood out as an example of how one 
Sub-Saharan country has been able to expand its trade in textile and 
apparel products, at least in part because no quotas have been imposed 
on its trade since the trade embargo was lifted. In addition, there is 
a perception that as part of a U.S. policy to support the South African 
non-apartheid government, the United States may be more reluctant to 
impose limits on that country's trade. Unfortunately, like the region 
as a whole, in recent trade statistics even South Africa's exports of 
these goods (in million square meter equivalents) have begun to fall:

 
------------------------------------------------------------------------
     1994           1995           1996           1997         YE11/98
------------------------------------------------------------------------
23.8                34.9           48.7           50.0           40.7
------------------------------------------------------------------------

    From the perspective of U.S. importers and retailers long 
accustomed to the U.S. Textile Program, there is still uncertainty. The 
possibility that quotas could be established if they were to take a 
chance and begin expanding sourcing from another African nation 
continues to serve as a disincentive. It is that perceived threat that 
has kept importers from moving forward in Sub-Saharan African nations.
    A de facto policy, without an explicit policy statement from the 
U.S. Government is not enough. U.S. Textile Program officials appear to 
have recognized this fact, at least with respect to the Caribbean. Late 
last year, one Administration official, the Chairman of the inter-
agency Committee for the Implementation of Textile Agreements, finally 
stated publicly that it is U.S. policy not to restrict textile trade 
from the Caribbean with new quotas, thereby explaining why the 
Committee had decided to seek a restraint on Cambodia when trade from 
Caribbean suppliers was greater. It was only after that statement was 
issued that U.S. firms looking toward sourcing in the Caribbean felt 
secure in that business decision. A similar statement, in the form of 
this legislation, would go a long way toward providing the assurances 
necessary for U.S. firms to seriously consider sourcing in the Sub-
Saharan region.

  IV. Asia Faces A Greater Risk Than U.S. or North American Producers 
  From An Express U.S. Policy On Textile Trade With Sub-Saharan Africa

    It is only Asia that could lose sales as a result of a change in 
U.S. policy toward Sub-Saharan Africa, not American manufacturers and 
not Mexican or Caribbean businesses. The reason is a combination of 
costs and shipping times.
    Currently, Mexico enjoys an advantage unmatched by most other 
suppliers, as evidenced by skyrocketing expansion of its textile and 
apparel trade to the United States, catapulting it to the position of 
Number One supplier of textile and apparel products to the U.S. market 
(accounting for almost 14 percent of the imports). Besides its close 
proximity to the U.S. market, including a land border that permits the 
movement of goods by truck, duties on products which qualify under 
NAFTA rules are already at or near zero and soon all qualifying 
products will be at zero duties. Thus, Mexican made goods can get to 
the U.S. market faster and cheaper than many products from many other 
suppliers.
    Caribbean-based trade also shares the advantage of close proximity 
and low labor costs, accounting for 12.5 percent of the textile and 
apparel imports. Arguably, the Caribbean countries do operate at a 
disadvantage to Mexico because they do not enjoy NAFTA duty rates and 
because there may be some additional shipping time and costs involved.
    Asian suppliers cannot compete with the shipping costs and time 
advantages offered by Mexico and the Caribbean. In addition, labor 
rates in Asian nations have been moving up, making these countries less 
competitive on that basis as well. Add to that the fact that Asian 
goods are subject to regular most-favored-nation duty rates, while 
Mexican made products avoid most of the brunt of high U.S. duty rates, 
and the Caribbean is able to reduce its duty exposure through ``807'' 
type trade, and it is not surprising that Asian suppliers are 
considered more costly and even high-end. And for more than the last 
year, the continent has been in the throes of a financial crisis that 
has led to civil unrest and substantially undermined confidence in 
traditional Asian suppliers of textile and apparel products. These 
factors are contributing to the expansion of trade from Mexico and the 
Caribbean at the expense of Asian suppliers.

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    Thus, while labor costs in Sub-Saharan Africa generally may be low 
(although productivity is probably not as great as in more accomplished 
textile and apparel producing nations), the remote location of Sub-
Saharan Africa vis-a-vis the U.S. market causing higher shipping costs, 
and the application of the high U.S. duty rates places costs for 
sourcing from this region above, or at best on a par with, Asia. 
Eliminating the duties on African-made products would most likely make 
these products more competitive with Asian made goods, but still no 
where near the price points possible for Mexican and Caribbean made 
goods.
    U.S. producers also would not be threatened by the elimination of 
duties on Sub-Saharan textile and apparel products. To the extent 
domestic production has declined in recent years, it is because U.S. 
producers of apparel have chosen to move assembly jobs and plants to 
Mexico and the Caribbean while maintaining their ability to meet the 
``quick response'' requirements of their customers. Given the costs and 
time involved, these producers are not going to move production to 
Africa. Moreover, U.S. textile producers are not going to lose sales to 
Sub-Saharan Africa because these countries do not have textile 
manufacturing facilities. To the contrary, because of the need to 
provide raw materials to Sub-Saharan nations, increased production of 
apparel and home furnishings there may offer significant opportunities 
for U.S. textile mills to sell to those countries.

V. Concerns About Use of Sub-Saharan Africa as an Illegal Transshipment 
                   Point Can Be Effectively Addressed

    Throughout the debate on the Africa Growth and Opportunity Act, 
some domestic producers have insisted that if Sub-Saharan Africa is 
encouraged to expand its textile and apparel trade and is not subject 
to quota restraints, it could become a point for illegal transshipment, 
with products labeled as made in Sub-Saharan African countries which 
are actually produced elsewhere. These concerns are grossly overstated. 
Logistically, transshipment from Asia to Africa makes little sense. 
However, USA-ITA recognizes that this concern must be fully addressed--
and it can be. The potential for illegal transshipment can be 
effectively addressed through inter-governmental cooperation, education 
programs, company compliance programs, and eventually visa systems.
    USA-ITA is confident that if these governments and their industries 
are provided with the necessary training on the U.S. rules of origin 
for textile and apparel products, the expectations of U.S. importers 
and retailers with regard to matters such as factory verifications, 
U.S. Customs entry requirements, and on how a visa, or export 
licensing, system operates, the potential for illegal transshipment is 
substantially minimized. A cooperation and exchange program between 
U.S. and Sub-Saharan customs officials could be particularly effective. 
Further, under current U.S. Customs Service ``reasonable care 
standards,'' it is incumbent upon all U.S. firms doing business abroad 
to establish and enforce effective compliance programs, including the 
maintenance of acceptable, accurate and reliable recordkeeping systems 
establishing where production took place. The full cooperation of 
foreign factories with these requirements is a condition of purchase 
orders, as is the right of purchasers to observe the production of the 
merchandise and conduct quality control checks. These systems provide 
the basis for a strong anti-transshipment compliance program, and the 
considerable investment U.S. firms have made in these comprehensive 
programs must be recognized.
    In addition, while the establishment of visa systems, under which 
exporting governments license their exports of textile products to the 
U.S. market, may not be immediately feasible for a number of these 
countries, because it would require the creation of a new bureaucracy 
and a system for controlling documents, ultimately this may be 
appropriate. USA-ITA stands ready to assist in both education efforts 
and the development of a workable visa program.
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