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[WPRT 108-2]
[From the U.S. Government Publishing Office]

108th Congress 
 1st Session                COMMITTEE PRINT                       WMCP:
                                                                  108-2
_______________________________________________________________________
 
                      COMMITTEE ON WAYS AND MEANS

                     U.S. HOUSE OF REPRESENTATIVES

                               __________

                              R E P O R T

                                   on

                  TRADE MISSION TO SUB-SAHARAN AFRICA

[GRAPHIC NOT AVAILABLE IN  TIFF FORMAT]

                              JANUARY 2003

 Prepared for the use of Members of the Committee on Ways and Means by 
members of its staff. This document has not been officially approved by 
       the Committee and may not reflect the views of its Members

                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, JR., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM MCCCRERY, 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
PHIL ENGLISH, Pennsylvania           LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona               EARL POMEROY, North Dakota
JERRY WELLER, Illinois               MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri           STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
                    Allison H. Giles, Chief of Staff
                  Janice Mays, Minority Chief Counsel
                       MEMBERS OF THE DELEGATION
              Members of the U.S. House of Representatives

Hon. Bill Thomas, Chairman, Committee on Ways and Means
Hon. Jim Nussle, Chairman, Committee on the Budget
Hon. Edward Royce, Chairman, Subcommittee on Africa, Committee on 
  International Relations
Hon. Phil English
Hon. Jim McDermott

                      Committee on Ways and Means

Allison Giles, Chief of Staff
Bob Winters, Special Counsel

                         Subcommittee on Trade

Angela Ellard, Staff Director and Counsel
Meredith Broadbent, Professional Staff
David Kavanaugh, Professional Staff

                                 Other

Tom Sheehy, Staff Director, Subcommittee on Africa, Committee on 
  International Relations
John Veroneau, Assistant United States Trade Representative for 
  Legislative Affairs

                            C O N T E N T S

                              ----------                              
                                                                   Page
Members of the Delegation........................................   III
Outline of Trip Conclusions......................................     1
Discussion of Trip Meetings......................................     4
    Cape Verde...................................................     4
    Namibia......................................................     5
    Madagascar...................................................     9
    Mauritius....................................................    11
    South Africa.................................................    26

                      OUTLINE OF TRIP CONCLUSIONS

    Namibia, Madagascar, Mauritius, South Africa, and African 
Growth and Opportunity Act (AGOA) Forum and Ministerial
Success of the African Growth and Opportunity Act
     Expanded trade through AGOA has done more to 
improve fundamental economic conditions within Africa than aid. 
Many jobs have been created, allowing employees to support 
themselves and their families.
     AGOA has been successful, particularly in the 
apparel sector. U.S. imports under AGOA approach close to half 
of the value of all U.S. imports from the region.
     AGOA has been positively received and most 
countries have sought to take advantage of the opportunities. 
Some countries, like Nigeria, are far behind; Nigeria hopes to 
soon pass transshipment implementing legislation finally making 
it eligible for the apparel provisions. Others, like Mauritius, 
are far ahead and seek cheaper labor in countries like 
Madagascar.
     The AGOA legislation marked the first time ever 
that the U.S. Congress has granted preferential benefits to 
apparel from developing countries. The legislation was 
groundbreaking as well--no other country has provided deeper 
unilateral cuts for products that matter to Africa.
     African countries should seek to move beyond 
textiles and apparel. For example, Mauritius is seeking to 
develop an information technology sector.
Economic and Political Conditions
     Africa has tremendous contrasts. Even the 
wealthiest countries, such as South Africa, have two economies. 
The huge disparity between rich and poor and between black and 
white creates political and economic instability.
     Political destabilization in the region could 
erode investor confidence. For example, the deteriorating 
situation in Zimbabwe has repercussions throughout the region, 
as other African countries refuse to step in. At the same time, 
Madagascar's success in continuing to attract investment after 
political unrest following its election last year is a positive 
and hopeful sign.
Possible Extension and Expansion of AGOA
     The delegation strongly supports President Bush's 
statement that AGOA should be extended beyond 2008. Even though 
that deadline is far away, early renewal would boost investor 
confidence and assist them in making firm decisions.
     The expiration of the third country apparel 
benefits for the least developed countries in 2004 was the 
issue most discussed during the delegation's visit.
     Chairman Thomas described AGOA I as an ``act of 
faith,'' meaning that the need for additional benefits will 
have to be proven to many Members because of their controversy. 
Many Members may look at Africa's record in supporting U.S. 
positions in such fora as the World Trade Organization (WTO) in 
determining whether to continue or expand benefits.
     The best approach on third country fabrics is one 
of balance--i.e., providing incentives in the cut-and-sew area 
to bootstrap Africa into more value-added fabric production by 
creating a solid workforce and infrastructure and then 
transferring those skills to high-end production, as is 
occurring in Mauritius and Lesotho.
     However, the development has been slow. Lesotho, 
for example, which hopes to have a textile factory on line in 
2004 which is to supply 80 to 100% of the country's fabric 
needs, asked the delegation to extend the third country 
eligibility deadline so that it could assure infrastructure 
investors.
     It is important to encourage African countries to 
integrate regionally so that if some African countries cannot 
produce sufficient fabric for their cut-and-sew needs, they 
will purchase from other African countries and not from third 
countries. This is the best way to make Africa competitive in a 
post-quota world in 2005. However, it does not appear that any 
African country is yet ready, or will be ready by 2004, to 
fulfill this need.
     Use of regional instead of third country fabric 
maximizes the opportunity for U.S. raw material producers to 
supply Africa.
African Competition When Apparel Quotas are Eliminated
     When quotas are eliminated in 2005, Africa wants 
to be in the best position possible to compete with China. If 
an African fabric industry has not taken root, Africa has 
little hope of competing. China's vastness means it could 
easily overpower the market in 2005 when quotas are eliminated.
     Africa should be encouraged to develop particular 
niches so that it can compete with China, such as high-end 
products. The delegation also agreed to approach Customs on 
behalf of Nigeria to request that hand-loomed traditional 
fabric be extended benefits upon export to the United States 
under provisions already in the legislation.
     Africa has some advantages over China. For 
example, many of the industry representatives that the 
delegation spoke to mentioned that China's worker rights 
compliance rates are quite low compared to Africa, making 
Africa more attractive as a source.
U.S. Partnerships
     The United States produces some of the best inputs 
in the world. AGOA has paved the way in establishing a 
structure that rewards the use of U.S. or African inputs. U.S. 
cotton and U.S. yarn stand to be huge beneficiaries of the AGOA 
legislation.
     The delegation plans to explore opportunities for 
increasing U.S. partnerships in the region. One possibility is 
to seek funding through the Trade and Development Agency for a 
``reverse mission'' in which African cotton and yarn purchasers 
travel to the United States to meet with potential U.S. 
suppliers.

HIV/AIDS

     In some African countries, this epidemic is 
killing one out of every four or five people, creating 
tremendous political and economic costs which may affect 
investment decisions.
     There seems to be government awareness and 
recognition of the problem in Africa, even in countries where 
there had been initial resistance, such as South Africa. In 
touring a clinic specializing in the care of pregnant HIV-
positive women, the delegation was gratified to see how much 
progress has been made although still aware of the enormous 
challenges ahead.
     Africa needs continued U.S. financial and 
technical assistance to combat this epidemic.
     As much as an access to medicines issue, HIV/AIDS 
is an education and awareness problem. Prevention is key.
     In the WTO, Ministers should commit to not bring 
cases against poor countries utilizing compulsory licensing to 
obtain drugs to fight epidemics such as AIDS. At the same time, 
the United States Trade Representative (USTR) should seek a 
solution in the WTO that allows that only the least developed 
of countries to have this access, and drugs covered should only 
be those used to fight epidemics. Otherwise, abuse will lead to 
collapse of intellectual property rights.

Southern Africa Customs Union

     The Southern Africa Customs Union (SACU) provides 
an enormous opportunity to deepen and make permanent the 
benefits of AGOA while giving the United States access to the 
often protected markets of the SACU countries, particularly in 
the areas of services, intellectual property, investment 
rights, and industrial tariffs. Such a trade agreement would 
mature the relationship between Africa and the United States.
     Such an agreement should be more comprehensive 
than a SACU agreement with Europe, thus providing strong U.S./
Africa ties covering substantially all goods and services. An 
agreement would deepen U.S. economic and political ties to the 
region, lend momentum to U.S. development efforts, encourage 
greater U.S. investment, and promote regional integration and 
economic growth.
     At the same time, there is a tremendous variation 
in the economies of the five countries (South Africa, Namibia, 
Botswana, Lesotho, and Swaziland), complicating a negotiation.

Conflict Diamonds

     The United States should pass legislation as 
quickly as possible to put us in compliance with its WTO and 
Kimberley Process obligations.

Africa and the WTO

     Many Members may tie increased access under AGOA 
to a willingness by Africa to work with the United States in 
other fora, such as the WTO.
     The European Union (EU) has taken advantage of the 
traditional links between Africa and the EU to press Africa to 
support its agenda in the WTO against the United States in such 
important areas as genetically modified organisms, geographical 
indicators, agriculture subsidies negotiations, and industrial 
tariff reductions.
     Particularly in the area of genetically modified 
organism (GMO) corn, where the EU is exerting subtle but heavy 
pressure on the African countries to reject biotech corn, the 
EU's self-serving stance harms the African countries whose 
people are starving. At the same time, Europe's position does 
great damage to the biotech industry by fueling groundless 
fears that such products are unsafe and unhealthy.
     The U.S. goal to eliminate agricultural subsidies 
should be viewed positively in Africa because it would 
eliminate the distortions that subsidies create.
     In addition, the U.S. position on the elimination 
of non-agricultural market access (i.e., industrial tariffs) 
should be seen as a means to increase access of African 
products into the U.S. market. At the same time, the United 
States should continue to work with these countries to 
determine whether their tax structure should be adjusted 
because they depend on customs duties for revenue.
     African countries should be encouraged to make 
sanitary and phytosanitary decisions on the basis of sound 
science.

Technical Assistance

     African countries need continued technical 
assistance to establish viable economic capacity, a well-
grounded rule of law in the continent, and efficient government 
practices.

                      DISCUSSION OF TRIP MEETINGS

                               CAPE VERDE

Country Briefing With Ambassador Johnson

    During a refueling stop in Cape Verde, Members were briefed 
on economic and political conditions on the islands by U.S. 
Ambassador Johnson.
    Cape Verde is a series of ten islands off the coast of 
Africa. The climate is much like the Sahara Desert. Tourism is 
a substantial source of economic activity with major traffic 
flows coming from Europe. Historically, the islands have been 
one of the world's top producers of sea salt used to preserve 
catches in the fishing trade. Per capita income is 
approximately $1,300 per year. Expatriate Cape Verdeans, many 
living and working in the U.S., are a significant source of 
funds for the economy.
    With regard to energy, the country depends largely on oil 
from Angola. Energy production varies island by island. Access 
to potable water is also an issue that the nation will face as 
it seeks economic growth.
    The country is building exports under AGOA but also depends 
on international food aid and other forms of assistance. 
Portugal provides a substantial amount of aid. The Ambassador 
reported that the United States is providing Cape Verde with 
technical assistance in Cape Verde's bid to join the WTO. The 
country can produce wine, tuna and coffee, among other 
products, but appears unlikely to achieve self-sufficiency in 
agriculture.
    Politically, the country has a democratic orientation. The 
last two elections have been peaceful, and although the most 
recent election was decided by twelve votes, the transition 
between governments was peaceful.

                                NAMIBIA

    Namibia has a population of 1.74 million people and a gross 
domestic product of $4.2 billion growing at 3.9% per year. 
Namibia receives $178 million in foreign assistance including 
$7 million from the United States. The literacy rate is 81%, 
and due to former South African administration there is high 
quality infrastructure in place including roads and electricity 
distribution. Diamonds, base metals (zinc and copper), and 
white fish were Namibia's leading exports. U.S. exports to 
Namibia of $249 million consisted primarily of vehicles and 
parts. Namibia's exports to the United States annually total 
$38 million and consist largely of copper, fish and ocean 
products. Namibia has recently modernized its port at Walvis 
Bay and added major roadways, providing access to Johannesburg, 
South Africa, Zambia, and Zimbabwe.
    Namibia is a newly independent country having been ruled 
for decades by South Africa, which applied apartheid policies 
toward the population. As such, land reform is a major issue 
since white Namibians are the predominant landowners; however, 
Namibia is adhering to the rule of law as it addresses this 
distribution issue. The economy has historically been built on 
mineral extraction such as diamonds, zinc, and copper. Namibia 
is expanding into fostering tourism, agriculture, and value-
added hydrocarbon production. AGOA has already had a major 
impact on the economy by attracting manufacturing jobs. 
Namibian officials are enthusiastic about a U.S.-SACU Free 
Trade Agreement.

Country Team Briefing With Ambassador Kevin McGuire, Windhoek and 
        Etosha National Park, Namibia

    Ambassador McGuire and his team provided the delegation 
with a briefing on the political, economic, health, and 
wildlife conservation issues of Namibia with special attention 
paid to trade and the effects of the AGOA legislation. The 
Ambassador opened by noting the positive political atmosphere 
in Namibia and how the government wanted to use market-oriented 
policies to develop the country. This is remarkable given that 
many of Namibia's leaders once professed revolutionary and 
Marxist policies, but embassy staff maintain that a ``real 
conversion'' has occurred. Namibia has high indices on 
education and low levels of corruption. Like many newly 
independent African nations, Namibia is still dominated by 
revolutionary leaders of the ``old guard,'' but Namibia has a 
solid constitution and legitimate emerging opposition parties. 
The United States provides assistance to Namibia through U.S. 
Agency for International Development (USAID) to advance 
democracy building. On the issue of terrorism, the Ambassador 
complimented Namibian officials on understanding the issue and 
being willing to help fight terrorism.
    The Ambassador noted that the new Ramatex factory brought 
$200 million of foreign direct investment into the country from 
Malaysian investors and created 4,200 badly needed jobs. More 
textile/apparel investors (Taiwah Manufacturing and Rhino 
Manufacturing) are expected, soon adding $115 million in 
investment and 6,000 additional jobs--all directly attributable 
to AGOA. Within three years of AGOA, the three companies expect 
to hire 10,000 employees and export $120 million per year in 
products. The Ambassador noted that AGOA II gave Namibia Least 
Developed Country status for purposes of allowing Namibia freer 
use of non-regional fabric in its U.S. exports. This was 
justified because of the skewed per capita earnings in Namibia 
whereby most Namibians by which the few wealthier residents 
skew the statistics upward despite the fact that most Namibians 
are very poor.
    The embassy team also described the devastating impact of 
HIV/AIDS on Namibia. There is a 23.3% infection rate for 
pregnant women, and 230,000 Namibians are currently infected 
with the HIV/AIDS virus. By 2010, 20% of the country's gross 
domestic product (GDP) will be devoted to health care. By 2020 
there is a projected loss of 35% of the workforce. There are 
now 82,000 orphans, which will increase to 120,000 in three 
years. Namibia has one of the highest tuberculosis rates at 640 
per 100,000 persons. According to the Center for Disease 
Control (CDC) Officer, Namibia initially suffered because of 
the passive or unhelpful attitude toward HIV/AIDS of the South 
African government. Today the newly independent Namibian 
government is very active in recognizing the AIDS epidemic and 
working with the United States to fight against it. The 81 
Peace Corps members in Namibia help to educate Namibians on 
AIDS. The CDC Officer has an office at the Namibian Ministry of 
Health and works closely with Namibian officials.
    The CDC Officer addressed the question of AIDS drugs. He 
said that drugs and therapy are only part of the solution ``but 
not the solution.'' A lot of work must be done on prevention 
and education. AIDS drugs require very precise and continuous 
administering. The challenge is that with so many infected 
people, it is difficult to treat all of them. The government 
expects to be able to treat about 1,000 people without 
substantial foreign assistance. With assistance, Namibia can 
treat 40,000 over five years. Many Namibians are unaware that 
they are infected with the HIV/AIDS virus. The United States 
has played a key role in providing voluntary testing facilities 
and giving counseling. The Officer emphasized that counseling 
is often as important as treatment because people must 
recognize the behavior that leads to infection and must come to 
terms with the social pressures related to AIDS and sexual 
behavior.
    One strong foundation to begin with is the mother-child 
transmission program, which the United States began a few years 
ago and which Namibia is poised to pick up. Namibia also wants 
to begin an aggressive tuberculosis treatment program since 
AIDS threatens to reactivate latent tuberculosis bacteria that 
have otherwise been under control. In the opinion of the CDC 
Officer, the AIDS epidemic could lead to a tuberculosis 
epidemic. The USAID Officer described the education efforts to 
explain AIDS through radio and television. Community-based 
groups are now providing education in local languages. The 
Ambassador remarked that the U.S. Department of Defense (DoD) 
has also contributed to this effort in cooperation with the 
Namibian military, which also faces heavy infection rates. DoD 
has a multipurpose clinic in Walvis Bay, Namibia which is 
staffed in part by Peace Corp volunteers. Abbot Labs has 
offered to donate the tests for mother-child transmission, 
which cost $2 each.
    Embassy staff also briefed the delegation on wildlife 
conservation in Namibia, which has a reputation for effective 
and responsible conservation efforts as the delegation noted in 
the Etosha National Park. For example, the Convention on 
International Trade in Endangered Species (CITES) Secretariat 
that oversees the Agreement permitted Namibia the extraordinary 
act of selling 10,000 tons of ivory on the world market because 
of Namibia's excellent efforts to protect wild elephants. 
Normally the sale of ivory is strictly prohibited. The Namibian 
ivory was gathered as a result of culling activities when the 
population grew too large for the area and for natural 
resources to sustain.
    Chairman Thomas made the point that the current 
intellectual property debate in the WTO is far too narrowly 
focused. It detracts from the wider issues of healthcare and 
prevention programs that are important. Also, the epidemic will 
have severe consequences for the economies in Africa as large 
portions of the population die, leaving orphans and widows that 
must be cared for. Moreover, there are social implications for 
so many orphans being raised without parents.
    Chairman Thomas and the delegation noted that it is 
important that Members of Congress see the programs they vote 
for. A relatively small appropriations of $1 million can make a 
very large difference in countries like Namibia.
    Chairman Royce asked what USAID projects should be funded. 
The USAID Officer replied that the United States seeks stronger 
democratization in Namibia since it is now dominated by the 
revolutionary party SWAPO, South West African Peoples 
Organization. Currently the democratization funding is at zero 
but in the past there have been effective education programs in 
conjunction with the non-governmental organizations on advocacy 
skills. Most important, ``we do not want a chain reaction as in 
Zimbabwe,'' meaning that effective institution building and 
respect for rule of law principles can help Namibia work 
through its domestic issues fairly and without destabilizing 
effects.
    Chairman Thomas asked what could be gleaned from the trip 
that could be useful in attracting support for the SACU Free 
Trade Agreement. The Political Officer confessed that U.S. 
interest is small given the small economy and trade 
relationship with Namibia alone. U.S. companies are unlikely to 
be able to crack the public owned utility sectors. They have 
been commercialized but the government provides money as needed 
because the sectors employ so many people. There is potential 
for U.S. exports in agriculture and pre-cut housing (given the 
shortage of houses). Some U.S. companies like Oakwood Homes 
have experimented with houses that are shipping container 
shaped, i.e., the walls of the container become the walls of 
the house, and the fixtures are inside.
    Cotton grown in Namibia, where there is far more water than 
in the southern Kalahari desert region, is exported raw 
although more is expected to be used domestically with the new 
textile/apparel plants. Notably, the U.S. Cotton Council is 
visiting Namibia shortly because of interest in supplying the 
new textile plants. Namibia views the Free Trade Agreement 
(FTA) as a way to lock-in the AGOA benefits which will 
otherwise expire. Even before AGOA II provides more benefits to 
Namibia, the Namibian leadership recognized the benefits of 
diversifying the economy into value-added industry. For 
example, they are now trying to cut and polish diamonds rather 
than simply mine and export diamonds in their raw form. They 
rightly view this diversification as a way to develop the 
skills of their workforce.
    Chairman Nussle asked about the Namibian's views on GMOs. 
The Political Officer replied that Namibia has not been 
involved but is not opposed to GMOs. The only concern has been 
whether their use will impact exports to the EU, especially 
beef. Namibia buys white maize from the United States and also 
non-GMO corn and wheat. Capacity building assistance on the GMO 
issue would be helpful. Given the shortage of corn regionally, 
there have been some South African farmers who are planting GMO 
corn.
    The delegation took a ``windshield tour'' of Windhoek and 
observed the German influence on the architecture and also the 
clean and well-maintained streets and shopping areas. However, 
the lack of water and thus vegetation gave the landscape and 
residential areas a barren look. The delegation passed through 
the poorer areas of town which showed clean, well-kept, pre-
built houses often with televisions visible inside. The 
delegation noted that virtually all of the houses had some form 
of wall or fence often topped with barbed or razor wiring 
because of the high crime rate.

Visit to Ramatex textile and apparel factory, Windhoek, Namibia

    Ramatex Namibia is a subsidiary of Ramatex Berhad of 
Malaysia. The Namibian factory broke ground in August 2001 and 
is a fully integrated textile and garment manufacturing plant, 
currently employing 4,200 Namibians. Current exports go only to 
U.S. buyers including Sears, K-mart, and Target. Since 
beginning production in June 2002, exports total $11.5 million. 
The delegation was shown the manufacturing process and noted 
the 5-10 year old German built equipment used throughout the 
plant. There were a few, newer, Taiwan-built yarn spinners in 
use at the plant. Also notable was the relative lack of 
ergonomic seating for sewing, which contrasted with other 
plants visited on the trip. For example, worker seats were 
bare, narrow, wooden stools with no staging area for managing 
inputs and outputs at the work station. Nevertheless, the work 
area was clean and uncluttered. The delegation noted fire 
escape routes marked on the floor and other safety features 
such as worker ear plugs and masks. Workers typically work 9 
hour days, 5 days a week, and workers receive overtime for work 
on Saturday. Pay is 27 Rand per day minimum with an added 
piece-rate bonus incentive. Workers bring their own food.
    One problem encountered by this factory is the lack of 
transportation out of the factory and to the port. Trains and 
roads are a bottleneck for production. As with all aspects of 
the trip, HIV/AIDS casts a pall over the economic potential of 
the country given the projected loss of 35% of the workforce by 
2020 and 20% of the GDP devoted to health care expenses by 
2010.

Working Lunch, Windhoek, Namibia

    Foreign Minister Hamutenya hosted the delegation with Trade 
Minister Nyamu and Finance Minister Mbumba. The Ministers 
stressed their appreciation for the support that the United 
States is providing to improve relations with Namibia. The 
Ministers also viewed AGOA and a potential U.S.-South African 
Customs Union FTA very positively and made clear that Namibia 
intends to use market principles as a means to promote 
development of the economy and its human resources. Congressman 
McDermott took advantage of the opportunity to promote the 
interests of Boeing in providing a solution to Air Namibia's 
fleet restructuring needs. The delegation's visit and goals 
were positively reflected in the press.

                               MADAGASCAR

    En route to the AGOA Forum in Mauritius, the Delegation 
made a brief overnight stop in Madagascar. The focus of the 
visit was a January 13 tour of the COTONA vertically integrated 
textile and apparel facility in the highland industrial city of 
Antsirabe, a thirty minute flight by small plane from the 
capital. COTONA is one of the most modern fabric and apparel 
factories in sub-Saharan Africa.

Visit to COTONA textile and apparel factory opening, Antsirabe, 
        Madagascar

    The delegation joined President Ravalomanana in 
participating in the ceremonial opening (at the COTONA (French 
acronym for cotton mill of Antsirabe) industrial site) of the 
Cottonline apparel plant in which a U.S. firm, Brandot 
Holdings, is a 25 percent joint venture partner. Stressing the 
theme ``AGOA--Making a Difference in Africa,'' the factory 
partners and President Ravalomanana thanked the ``godfathers of 
AGOA'' for the framework that led to $40 million in investment 
and 3,000 new jobs at the site being visited. They cited AGOA 
as a catalyst for investment in new and upgraded facilities and 
a vehicle for improving the lives of thousands of Malagasy.
    The COTONA Complex was originally established by a 
Madagascar-based family firm (Groupe Socota) in the 1950s. 
COTONA developed into one of Madagascar's two major cotton 
fabric mills. The founders chose Antsirabe because of its 
central location and good transport connections, and the 
plant's production focused on the domestic Malagasy market for 
40 years. In the 1990s, imports of cheap Asian fabrics and used 
clothes forced COTONA to re-engineer itself in a strategic 
shift. COTONA turned up-market, adding more sophisticated 
equipment and targeting export markets through apparel firms in 
the Export Processing Zone (EPZ) established in 1990.
    COTONA supplemented its sales of fabric to EPZ firms by 
building its own apparel factory on the Antsirabe site--
Columbia Clothing Company. Commercial production at Columbia 
started in 2001 and now the firm employs 1,500 employees in two 
daily shifts. Opportunities under the AGOA legislation led to 
further equipment upgrades and the construction of an entirely 
new apparel factory, Cottonline. High capital costs and the 
desire to transfer and share expertise led to a four-way joint 
venture arrangement for the Cottonline factory. Equal joint 
venture partners are: the Madagascar firm Groupe Socota, the 
U.S. firm Brandot Holdings Ltd., and two Sri Lankan firms (MAST 
Holdings and Phoenix Ventures Ltd.). A large U.S. apparel buyer 
and distributor, MAS Industries, and its founder, Martin Trust, 
have been key in the development of purchases by the U.S. firm 
Limited Brands from COTONA. The two Sri Lankan firms had worked 
with Limited Brands and MAS Industries for more than a decade 
prior to the Cottonline project.
    The delegation toured the COTONA integrated fabric mills, 
which transform cotton fiber grown in northwestern and 
southwestern Madagascar into cotton fabric. The facility uses 
100 percent Malagasy cotton (4,500 tons per year of California 
Acala and Israeli Pima types) grown on Groupe Socota lands or 
purchased from other local producers. The building encompasses 
1 million square feet, on a 3 million square foot site. The 
CODEL viewed the spinning, weaving and finishing processes, the 
latter including bleaching, dyeing, and printing. Spinning 
operations include 23,000 spindles and several hundred high-
speed cone-winding spindles. Annual yarn production is 
substantial: 2,500 tons of open-end yarn, 1,200 tons of combed 
yarn, and 800 tons of carded yarn. High-speed weaving involves 
the latest generation of air-jet looms and dyeing, and printing 
and finishing equipment is state-of-the-art and all installed 
in 2000 or later.
    The COTONA fabric mills produce 22.5 million SMEs (square 
meter equivalents) per year. Principal U.S. customers include 
Limited Brands, Levi's-Dockers, and Gap, Inc. The delegation 
also toured the adjacent Columbia Clothing Company apparel 
facility, which was running an order for Express, a Limited 
Brands affiliate.
    The Cottonline plant represents new investment of $9 
million and covers 112,000 square feet. It runs in double 
shifts, with 1000 sewing operators producing both knit and 
woven garments on 500 machines. Chairman Thomas commented 
positively on the quality of the lighting and work environment, 
noting that both the sewing machines stands and workers' chairs 
were ergonomically sensitive. Initial products at Cottonline 
are knit tops for women and boxer shorts for men, with capacity 
to produce a full range of underwear, sleepwear and casual wear 
for men, women, and children.
    In the ceremonial opening, President Ravalomanana cut the 
ribbon to open the new Cottonline plant and heard the employees 
of the new facility sing the Malagasy national anthem on a 
factory floor decorated with U.S. and Malagasy flags. He and 
the factory partners spoke briefly before the delegation and 
invited guests. The President delivered his remarks entirely in 
English (then in Malagasy) emphasizing his business background 
and understanding that private sector investment must drive 
economic growth and development in Madagascar.
    In his speech and in a meeting with the delegation, 
Ravalomanana emphasized that Madagascar has re-opened for 
business after the recent political crisis and that he is 
committed to making his country ``number one'' in the African 
region. The joint venture partners stressed the 21st century 
technology, sharing of expertise and commitment to maintain and 
expand the facility at a world-class level. Chairman Thomas 
said that he viewed AGOA as the ``Africa GO Act'' and that 
export-led growth as exemplified by the fiber-to-garment 
operations in Antsirabe was just the sort of development the 
drafters intended.
    President Ravalomanana's presence at the factory, whose 
working conditions were exemplary, signaled that AGOA has made 
a difference in Madagascar that its leadership, and the private 
sector, wants to see continue.

                               MAURITIUS

Country Briefing With Ambassador Price and Deputy Chief of Mission Bisa 
        Williams, Port Louis, South Africa

    Mauritius is an ethnically and religiously diverse society. 
The official language is English. Socially, use of French and 
Creole are common. Per capita incomes are relatively high for 
the region, from $3,700 to $4,000/year.
    Mauritius has developed a democratic government. It is one 
of the most economically successful nations in the AGOA region. 
Historically dependent on sugar production, Mauritius has been 
very successful in developing a sophisticated, competitive 
textiles industry. The government has viewed developing a 
trained labor force as a crucial element of economic 
development and has, since achieving independence, made 
substantial investments in public education. As the government 
recognizes that increased costs will make it more difficult for 
Mauritius to remain competitive in textiles over the long term, 
the government is attempting to promote electronic commerce. 
Mauritian textiles companies are also examining other AGOA 
nations, particularly Madagascar, for investment opportunities. 
The Mauritian government has encouraged the private sector to 
make these kinds of investments.
    Mauritian businesses are increasingly entering offshore 
banking. Embassy officials noted the government has established 
a financial crimes unit and is cooperating with the United 
States in a number of areas.
    The Mauritian government identifies strongly with Africa 
and the AGOA nations. They have engaged in discussions to 
convey to other AGOA nations the techniques Mauritius used to 
develop its economy.
    Mauritius claims the islands in the chain which includes 
Diego Garcia where the United States has a substantial military 
presence. The Mauritian government disputes the United 
Kingdom's claims to these islands and has made attempts to draw 
the United States into discussions of Mauritian claims of 
sovereignly over Diego Garcia. Embassy staff noted that the 
United States continues to take the position that the United 
States has a valid agreement with the United Kingdom allowing 
use of Diego Garcia and that the United States will not engage 
in discussion of Diego Garcia's status with Mauritius.

AGOA Trade and Investment Forum

    In Mauritius the delegation participated in the AGOA Trade 
and Investment Forum or ``Government Forum'' and in several 
sessions of the Private Sector Forum and the non-governmental 
organizations (NGO) Forum which met simultaneously under the 
aegis of the Government Forum.
    The Government Forum was held on the Campus of the 
University of Mauritius. Ministerial delegations of up to eight 
members from the thirty-eight AGOA-eligible countries took part 
in plenary and breakout sessions addressing such themes as 
Trade, Conditions for Investment, and Investing in People. 
United States government agencies participating in the Forum 
included the U.S. Department of State, the U.S. Trade 
Representative, U.S. Department of Commerce, U.S. Department of 
the Treasury, U.S. Agency for International Development, and 
the Trade Development Agency. Chairman Thomas joined Ambassador 
Zoellick, Deputy Secretary of Commerce Sam Bodman, and AID 
Administer Andrew Natsio and counterparts in the Government of 
Mauritius on the stage at the opening ceremony of the AGOA 
Forum.
    During the ceremony Ambassador Zoellick pointed out that 
Africa's share of global trade has dropped from nearly 4 
percent in the 1960s to less than 2 percent today and that 
Africa has seen too little globalization, not too much. He 
urged Africans to consider how to compete successfully with 
China, India, and other apparel exporters when WTO quotas on 
apparel come off at the end of 2004. He said that Africa's 
voice matters in the Doha trade negotiations and that he wants 
to work with Africans, particularly as key deadlines in the 
agriculture talks approach. ``We also need to work together to 
ensure special treatment for truly needy countries--like those 
in Africa--and guard against efforts by better-off countries to 
insist on parity with Africa.''

AGOA Private Sector Forum

    The parallel private sector event, the AGOA Private Sector 
Forum, was organized by the Mauritius American Chamber of 
Commerce (AmCham), the Corporate Council on Africa (CCA) and 
the African Coalition for Trade (ACT). Chairman Thomas 
participated in the opening panel at the AGOA Private Sector 
Forum that included Jaya Krishna Cuttaree, Minister of Industry 
and International Trade of Mauritius and Martin Trust, founder 
of MAST Industries and senior advisor to Limited Brands.
    In his address to the Forum, Minister Cuttaree praised the 
AGOA legislation for bringing about a significant increase in 
two-way trade between Africa and the United States. ``The 
benefits of expanded trade for African countries have come in 
the shape of more jobs and larger national incomes through 
exports,'' he said. ``These gains are all the more important as 
they offer the possibility for our economies to move beyond the 
constraints of exports of primary commodities and reach for 
higher levels of growth powered by manufactured exports as well 
as newly developed services. Economic growth in our region 
turns notably on foreign investment and technology transfers; 
AGOA has made a promising start in activating these flows.''
    In his remarks, Chairman Thomas said he came to Africa to 
analyze the effects of AGOA. Although Europe ``talks a good 
game,'' it was the United States Congress, he said, that was 
actually willing to open up unilaterally to African apparel and 
other products. AGOA II and Trade Promotion Authority passed by 
one vote twice in the House, and then by three votes on final 
passage of the conference report. In order to expand AGOA 
further, Chairman Thomas said, he will need to be able to make 
the case to Members of Congress that their votes have made a 
difference for Africans. The goal of AGOA is to encourage not 
only ``cut and sew'' apparel jobs, but also sophisticated 
management and marketing jobs, democratic reforms, and new 
opportunities to provide education. Chairman Thomas said he is 
looking for a closer relationship between African countries and 
the United States in the WTO. African countries and the United 
States have common interests in ensuring that science is the 
basis for sanitary and phytosanitary restrictions. Likewise, 
there should be a shared view about geographical indications, 
which are used to establish exclusive rights to trade for 
certain producers, building in an economic advantage for 
Europe.
    While saying Africa has a lot to be proud of in that the 
region has doubled its shipments of apparel exports to the 
United States in just two years, Martin Trust warned that China 
is looming as a huge competitor. He said the job of the apparel 
customer is to state clearly what product is wanted at what 
time, and the job of the factory is to do the rest--with no 
excuses. Customers, he said, expect: (1) acceptable quality no 
matter the price point; (2) competitive pricing; (3) strict 
compliance with legal and ethical standards; and (4) on time 
delivery. To be highly successful, the AGOA region needs to 
have a bigger and better African workforce. This will require 
technical education, on-the-job training, and ultimately 
technical schools to enhance and teach the skills needed in the 
textile and garment sector. Characterizing his message as 
``tough love'' from an ``old friend, committed supporter, and 
active investor,'' Mr. Trust said that Africa needs to 
establish market share, increased reliability, and a solid 
reputation for performance right now.

Lagesse School (Spouse Program)

    The school, which receives U.S. government support, 
provides blind and visually impaired students with life and job 
skills. School leadership explained that blindness is still 
stigmatized on Mauritius. Many families have historically 
limited education for visually impaired children. As a result, 
the school provides education in basic skills such as traveling 
alone and other functions which children will require for 
survival. Training in reading and other areas is provided as 
well. The school offers training in crafts as a means of 
providing job skills. Students are taught to make wicker 
products, including baskets and complex furniture, for retail 
sale. Other students were training for careers in therapeutic 
massage.

Queen Elizabeth College (Spouse Program)

    The College is a girls' school currently serving students 
in their teens. Training is provided in art, literature, the 
sciences and, increasingly, in computer skills. Students are 
selected through a series of competitive examinations. Because 
university space on Mauritius is limited, many of the students 
will seek higher education outside the country. The United 
Kingdom, France, and India are among the places students often 
seek schooling. A number of the students noted that they would 
like to study in the United States but that limitations imposed 
by U.S. immigration law made it hard for them to attend U.S. 
institutions.

Floreal Women's Center (Spouse Program)

    The group was introduced to the facility and its services 
by the Minister of Women's Rights, Child Development and Family 
Welfare, Mrs. Marie Arianne Navarre-Marie.
    The Center provides a diverse set of educational programs 
intended to improve women's economic and social standing. 
Programs ranged from home economics, nutrition, clothing 
production, stress management, handicrafts, and personal 
grooming to domestic violence prevention and child care. The 
Center's clinic also provides counseling and medical services.

Meeting With Deputy Prime Minister Berenger and Foreign Minister Gayan

    Under an agreement with the current prime minister, 
Berenger will become Prime Minister in the fall.
    Berenger opened the meeting by stating that Mauritius 
stands behind the United Nations and the United States in 
wanting Iraq to disarm. He explained that Mauritius has a small 
economy, making it vulnerable. He pointed to the special 
relationship that Mauritius has with the EU. He noted that the 
free trade agreements that the United States is negotiating 
threatens Mauritius.
    Chairman Thomas introduced the delegation, noting that it 
is bipartisan and represents two key Committees. He said that 
the United States has been pleased with the role that Mauritius 
has played in the Security Council and noted that the United 
States hopes that Mauritius can help find a successor that will 
be as conscientious. With respect to bilateral trade 
agreements, the Chairman said that such agreements allow the 
United States to make many friends, and he hastened to assure 
the Mauritian officials that they should not view such 
agreements as threatening. With respect to agriculture trade 
issues, he said that he hopes that Mauritius and the United 
States can stand together to assure that real science is 
utilized, both with respect to sanitary and phytosanitary 
issues as well as genetically modified organisms. He also asked 
for Mauritius' support in the WTO on geographical indicators, 
so that quality, and not merely historical origin, is the 
primary issue. He added that the United States and Mauritius 
have the potential for a long and prosperous relationship, and 
uniting instead of taking separate positions helps each 
country.
    Congressman McDermott then asked the Deputy Prime Minister 
what would make a difference for Mauritius with respect to 
AGOA. Berenger replied that Mauritius has been able to exploit 
key provisions of unilateral preference programs offered by the 
United States and the EU. As an example, he mentioned the EU 
sugar policy, which gives Mauritius access to the EU at three 
to four times the world price. As for textiles, he noted that 
Mauritius has benefitted from its relationship to the European 
Union, noting that Mauritius has to look out for itself. On 
Madagascar, he said that he thinks things are moving in the 
right direction after the troubled election last year, and 
Mauritius is trying to get the African Union to accept 
Madagascar as a full Member.
    Foreign Minister Gayan stated that AGOA is very young and 
has just begun. He said that Mauritians have a distorted 
understanding of the United States. Oil has historically been 
the major driving force for U.S. investment in Africa, but 
Africa can do other things. Decision-making in the United 
States, however, is complex because of its lobbying culture, 
and it is important to develop mechanisms for dealing with 
Congress directly to help Mauritians understand how to interact 
better.
    Gayan brought up the relationship between HIV/AIDS and the 
WTO, noting that there was an opportunity in the WTO to deal 
with this issue, but the United States did not go along with 
other countries. The issue is of grave concern, and Gayan asked 
the Members to explain the U.S. position. Galan then concluded 
by saying that there is a tendency to lump Africa into a single 
bloc, which does disservice to the notion of cooperation. He 
also noted that an opportunity to press Zimbabwe on land reform 
is being missed.
    Chairman Thomas responded to all of these comments, noting 
that Europe provides Mauritius with narrow opportunities so 
that ``if Mauritius is tied to history, it will be left behind 
by history.'' He answered the question on AIDS by saying that 
the United States has determined not to use WTO dispute 
settlement against an African country imposing compulsory 
licensing for an epidemic such as AIDS, but the United States 
believes this flexibility should not be used as an opportunity 
to ignore international law. On Zimbabwe, he stated that the 
delegation was greatly concerned about Mugabe's land policy, 
noting that perhaps the reaction in Africa has been tempered by 
its historical relationship with South Africa. He suggested 
that if the dispute is dealt with in a concerted way, Africa 
would be seen as maturing.
    Congressman McDermott mentioned that many former Mauritians 
are affected by the Zimbabwe land policy and that the United 
States and Mauritius should ``double team.'' The problem is 
related to colonization in general, and countries other than 
Zimbabwe, such as Namibia, are experiencing a similar problem.
    The Deputy Prime Minister said that Mauritius takes a broad 
view on the Zimbabwe question. It is wrong to attack Zimbabwe 
solely on the land issue; instead the issue is one of rule of 
law, democracy, and human rights. He noted that Mauritius 
recently prevented Zimbabwe from taking a leadership role in an 
international organization, which was seen as a strong signal. 
He then pointed to other countries in the region, noting that 
Angola and the Congo have progressed from civil war. Cote 
d'Ivoire, on the other hand, ``breaks our hearts.''
    He responded to the Chairman's question on geographical 
indicators by stating that it is not a big issue for Mauritius. 
He said he could not remember where Mauritius is on the issue 
but that Mauritius wants to be fair and open-minded. The 
Chairman responded by stating that the United States is looking 
for friends to help on such issues. He noted that the United 
States has opened its market to Africa despite political cost 
and hopes to work with Africa to overcome other differences. 
Congressman McDermott noted that the Mauritius Ambassador to 
the United States has been particularly effective in working 
with members of Congress. Chairman Thomas added that passage of 
the original AGOA bill was an ``act of faith'' for many 
Members, and he must continue to show Members that they made 
the right decision.
    Minister Gayan stated that it is very difficult to have an 
AGOA of indefinite duration. Africa needs a longer time span 
for investors to recoup their investments. Chairman Thomas said 
that he hopes that Africa can bootstrap and build upon the 
benefits in AGOA, particularly the third country fabric benefit 
for the least developed countries. If the third country 
provision is open-ended, only cut-and-sew operation will 
continue to develop. The AGOA dates are not termination dates, 
he said, but opportunities for monitoring progress. He added 
that he needs information to show Congress the progress that 
Africa is making on indigenous fabric production. He concluded 
that his preference is for short-term third country fabric, 
noting that an opening for all as part of a broader agreement 
is the better approach.
    Congressman McDermott noted that Chairman Thomas acted 
quickly to move AGOA II, and he cannot imagine that the 
Chairman would ``abandon'' Africa.
    Berenger concluded by saying that Africa needs funding for 
education and reform. He mentioned that Mauritius is trying to 
develop an information technology sector. He quoted Ghandi, who 
called Mauritius a ``great little country,'' noting Mauritius 
is improving all the time.

AGOA Civil Society Forum

    Chairman Thomas began by noting that as its success was far 
from certain, passing AGOA was an ``act of faith'' by the 
Congress, but the idea of ``doing nothing for Africa wasn't 
working.'' He reported that in the ``political bargain'' to 
pass AGOA, other regions of the world had to suffer a loss of 
U.S. market share. He also emphasized the importance of 
technology transfer in textile investment in Africa; 
Congressional intent was not for the continent to ``get a few 
years of cut and sew'' out of AGOA.
    Chairman Thomas expressed hope that AGOA would encourage 
increased democracy and transparency, which would help the AGOA 
program receive continued support in Congress. He told the 
group he is looking for the opportunity to tell colleagues that 
positive results come from the increased market access that 
AGOA granted. He emphasized the sensitivity of the textile 
industry in the United States and said that many people were 
willing to give lip service to helping Africa, but when it came 
to granting greater market access to African goods, much of 
that support fell away. He concluded that Congress ``would 
continue to write [trade] legislation'' on Africa.
    Congressman McDermott reported that the United States 
needed a trade policy, but also an economic development policy 
for Africa, including an HIV/AIDS policy. He expressed hope 
that the United States would do a good job balancing these 
policies.
    Congressman English reported that as chairman of the steel 
caucus in Congress, he took an ``eclectic approach'' to trade. 
As an original co-sponsor of AGOA, he was interested in labor 
and environmental standards, being concerned about avoiding a 
``race to the bottom.'' He also noted that he was ``here to 
listen.''
    Chairman Nussle said that he is a newcomer to the issue and 
had supported AGOA ``out of faith.'' In supporting AGOA, he had 
an interest in moving away from aid to trade. He also noted 
that he is mindful of agriculture and is constantly looking to 
expand opportunities for U.S. agriculture abroad. He also 
emphasized that he was ``here to listen.''
    Congressman Royce stressed that AGOA was the United 
States'' effort to combat Africa's economic marginalization: 
``something had to be done to give African investment a 
boost.'' He noted that AGOA results-to-date were encouraging 
and reported that it would be desirable to move toward free 
trade agreements with African countries. FTAs would make AGOA 
benefits permanent. He discussed how AGOA, through its 
eligibility requirements, created leverage for economic reform 
in African countries.
    When asked about greater engagement with Africa, Chairman 
Thomas noted that AGOA II legislation cleared away the dispute 
over the duty treatment of merino wool apparel items and 
increased the caps on apparel imports. Congress took this 
action because it wanted people to know that it was concerned 
about Africa.
    When asked about eligibility criteria, Rep. McDermott noted 
that non-governmental organization's could provide a valuable 
set of eyes and ears in the community as to whether countries 
were abiding by the AGOA criteria. He stressed that he was 
interested in hearing from NGOs.
    Chairman Thomas was asked whether trade benefitted the 
``common man,'' to which he responded that the goal of AGOA was 
to maximize employment. If there are excessive demands about 
employment conditions, investors would be deterred from African 
countries. He noted that employment conditions in Madagascar 
textile plants the delegation visited are quite high. He 
emphasized that the goal was not to generate short-lived ``cut 
and sew operations'' in Africa. Congressman McDermott noted 
that some countries would be able to take advantage of AGOA, 
but others would not--and this competition among African 
countries was beneficial.
    When questioned about sanitary and phytosanitary standards, 
Chairman Thomas noted that the United States is making many 
technical efforts to help developing countries meet U.S. 
standards. He stressed that the WTO and others needed to ``get 
serious'' about standards. He also noted that the state of 
California spent a considerable amount countering non-
indigenous pests. For Africans seeking to export agricultural 
products, meeting these standards would be a major but fruitful 
investment. He stressed that the United States is not willing 
to compromise its food safety standards. Africa should strive 
to raise its standards, not lower U.S. standards. Congressman 
McDermott spoke about the importance of protecting the food 
supply. He noted that the U.S. intent is not to keep African 
products out but to raise health standards.
    Chairman Thomas responded to questions about GMOs by 
emphasizing that the goal was ``to minimize the propaganda and 
bad science.''
    When asked whether foreign policy considerations affected 
AGOA eligibility, Chairman Thomas noted that there is a tension 
in the U.S. system between the Congress and the executive 
branch, which does see trade as part of its broad political 
agenda, but that this was a healthy tension. He warned that 
Congress would not accede to the granting of market access 
under AGOA or any trade agreement if it is not consistent with 
the eligiblity criteria in legislation.
    Chairman Thomas noted that both bilateral and multilateral 
approaches to trade, when used simultaneously, are 
complementary, noting that ``collectively you can do a better 
job if individually you are improving.''
    When asked about HIV/AIDS, Chairman Thomas said that it is 
completely unacceptable that infection rates in some African 
countries are in the 33 percent range. It is a problem of 
``politics, economics, and logistics.'' The United States has 
agreed, he noted, not to bring nations to dispute resolution if 
they are addressing HIV/AIDS. Congressman McDermott emphasized 
the importance of African political leadership to combat the 
epidemic--``political capital must be spent.'' He also noted 
that in education efforts, ``the message must be delivered in 
the language that people make love in.'' He said that relaxing 
patent standards alone wouldn't be sufficient.
    The Lesotho labor organizer raised the issue of labor 
standards, and Congressman Thomas recognized that it is a 
challenging issue. He warned that U.S. companies could not be 
expected to invest in a developing country with an undeveloped 
workforce and abide by U.S. labor standards. That standard 
would result in no investment--``Standards are essential, but 
standards that would stop the process [of investment in the 
developing world] make no sense whatsoever. What we are doing 
is called a start.'' The first goal is to get countries to 
abide by their own laws. Congressman English stressed the 
importance of labor standards. He asked organizations to submit 
labor concerns to his congressional office. He noted that the 
labor standards issue ``is a work in progress.'' Congressman 
McDermott seconded the importance of NGOs contacting Congress.
    Congressman McDermott responded to a question on 
development aid by emphasizing that aid needs to augment trade 
and that the United States should coordinate the two.

Meeting With Nigerian Trade Minister Precious Ngelale, Mauritius

    The Nigerian Trade Minister has only recently assumed his 
post. He opened the meeting by saying that AGOA has provided 
important access to the U.S. market, giving Africa a 
competitive advantage that is so important because many 
countries are ahead and Africa faces many impediments. Nigeria 
intends to convene shortly a stakeholders' forum in order to 
sensitize Nigerians to the opportunities that AGOA provides. He 
said that Nigeria needs capacity assistance to develop the 
expertise to help utilize the legislation. He asked that the 
third country fabric provision be continued beyond 2004.
    Chairman Thomas noted that Nigeria has energy resources 
that make Nigeria different from other African countries, 
suggesting that Nigeria establish a niche as a supplier of 
fabric instead of apparel. The Minister responded that he hopes 
to obtain more information over the next few weeks on this 
issue and is collecting specifications from Mast Industries. He 
noted that Nigeria has other shortcomings to overcome.
    Chairman Thomas mentioned that Nigeria has not been 
certified for AGOA apparel benefits and asked how he can help. 
The Minister responded that the legislation authorizing the 
anti-transshipment measures necessary for certification has not 
yet passed the Nigerian legislature but is expected within the 
next few weeks. He then mentioned two other means for Members 
to be helpful. First, he asked that the technical definition of 
folkloric and hand-loomed articles be clarified. Nigeria 
produces handmade African print textiles (not apparel), for 
which there is no U.S.-produced equivalent, that are not 
eligible for benefits because of a Department of Commerce 
interpretation. Chairman Thomas offered to push the Department 
of Commerce on the eligibility for such traditional, handmade 
products given the lack of competition with U.S. products. The 
Minister also asked the Members to consider a linkage between 
the trade benefits of the Caribbean Basin legislation and the 
Africa legislation. The Chairman responded that this request 
was politically more difficult because it would require opening 
the market to everyone, making it hard to control.
    Chairman Thomas also raised the issue of HIV/AIDS, noting 
that awareness, not money, seems to be the biggest obstacle, 
because there is no authority structure to test people. The 
Minister responded that Nigeria's president is personally 
committed to raising awareness. Nigeria is beginning to make 
progress with antiviral drugs, and the Minister asked for 
continued assistance.

Meeting With Ambassador Linnet Deilly, Deputy USTR and U.S. 
        Representative to the WTO

    After some general discussion about the difference between 
Geneva representatives and ministers from capitals, Congressman 
English asked the Ambassador how the United States is viewed in 
the WTO. The Ambassador pointed first to agriculture, noting 
that the U.S. agriculture proposal is especially timely because 
of concerns over the U.S. farm bill. She also mentioned the 
U.S. zero duty proposal for industrial goods and said that she 
has been discussing with developing countries how their tax 
structures can be modified to provide a revenue base if customs 
duties are reduced through the WTO. She also mentioned that she 
is working with developing countries on the issue of ``special 
and differential treatment,'' noting that the more developed of 
the developing countries are concerned that they are being left 
out. She said that the developing countries realize that they 
need to reach consensus on this issue among themselves first. 
On services, she is concerned that only a few countries are 
active.
    Congressman English then asked about the prospects for the 
Ministerial meeting in Cancun in September. The Ambassador said 
that many important deadlines for determining modalities in 
several negotiations are yet to be determined. She pointed in 
particular to the March deadline in the agriculture 
negotiations for determining modalities, noting that she was 
concerned that the deadline would not be met, meaning that the 
issue must be resolved in the Cancun meeting in order to finish 
the Round on time.
    Congressman English asked if there is room in the WTO for 
improving transparency. The Ambassador replied that there has 
been slow progress, pointing to dispute settlement as a 
particular area of controversy. Congressman English then asked 
about the negotiations on antidumping, stating that it is hard 
for the United States to come up with reforms in this area. The 
Ambassador replied that the issue is on the agenda, and the New 
Zealand Ambassador, who heads the negotiating group, is 
sensitive to U.S. concerns. She hopes he remains as head of the 
group. In general, she thought these negotiations would have 
been more adversarial than they are, and she does not expect 
much development before the Cancun meeting.
    Chairman Thomas then asked why the EU brought the Foreign 
Sales Corporation case against the United States in the WTO. 
The Ambassador replied that the decision seemed to be 
``personality driven.'' Chairman Thomas stated that the United 
States intends to comply, although it is learning from the EU 
how to comply with the letter and not the spirit of the WTO. He 
said that Members are very frustrated by this case and will use 
every opportunity to put others on the defensive.
    Chairman Nussle added that the farm bill was borne of this 
frustration. U.S. farmers, he said, are ready for a trade war. 
The Ambassador responded that many WTO members understand this 
frustration, and she noted that the United States is living up 
to its agriculture obligations in the farm bill but showed a 
desire to increase subsidies in order to compete with others. 
Chairman Thomas noted that it will be difficult to bring a WTO 
agriculture agreement to Congress that does not make 
substantial changes--the United States must ``come home with 
something on agriculture, or don't come home.'' The Ambassador 
agreed that agriculture is the key opportunity for the United 
States. She noted that many countries in Africa agree with the 
U.S. position on subsidies, but it is difficult to get them to 
speak up.
    The Ambassador then brought up the issue of HIV/AIDS, 
noting that the United States was the only country to oppose 
the new trade related intellectual property rights language 
being offered in December. She said that she expects the issue 
to arise again in early February, and positions seem to have 
hardened in the meantime. She said that the issue is not part 
of the ``single undertaking'' in the WTO. When Chairman Thomas 
asked if the developing world will walk away from the new Round 
because of this issue, the Ambassador said that many countries 
believe they are merely implementing the Doha Declaration, 
although they are clarifying the ``constructive ambiguity'' on 
this issue in a manner with which the United States does not 
agree. The issue, she said, is consuming valuable time.

Meeting With Lesotho, Trade and Industry Minister Mpho Mallie, Jan. 15, 
        2003, Mauritius

    Chairman Thomas opened the meeting with Lesotho's Minister 
of Trade and Industry Mpho Mallie and his delegation by saying 
``I have been told you are a success story but that you believe 
your success is due to a short term window and that you are 
working hard to turn that window into a door.'' Minister Mallie 
agreed that Lesotho has taken full advantage of AGOA, 
particularly the temporary exception that allows least 
developed countries like Lesotho to use third country fabric 
until 2004. The Minister explained that the Lesotho government 
is still ``riding the crest of a wave'' as a result of 
elections in 2002, but democracy has raised expectations among 
citizens in Lesotho. He said the Government, defending itself 
against ``the enemies of democracy,'' is under tremendous 
pressure to demonstrate that ``democracy delivers'' improved 
living standards and a more equitable distribution of income.
    Minister Mallie said that AGOA has allowed Africans to 
``pull ourselves up by our bootstraps.'' He noted that 18 out 
of 38 eligible countries have been certified under the 
transhipment provisions to export apparel benefitting from AGOA 
preferences to the United States and that eight other countries 
are in the pipeline for certification. While Lesotho has 
succeeded in attracting investors to establish the biggest 
denim mill in sub-Saharan Africa, Minister Mallie is concerned 
about what happens to countries that have not yet been 
certified. He noted that the U.S.-Chile Agreement secured 
access for apparel made from third country fabric for ten years 
(under the trade preference levels) and that Chile's capacity 
to produce indigenous fabric far exceeds Lesotho's.
    Chairman Thomas noted that, for investors, stability is 
important and that the United States contemplates a ``free 
trade layer on top of AGOA'' in the form of a permanent free 
trade agreement with SACU countries. He urged the Minister to 
think in terms of building on current success by investing 
``back in the African region'' so that investment doesn't 
always have to come from Sri Lanka, Taiwan, and other Asians 
countries. Chairman Thomas expressed his concern with countries 
like Nigeria who have yet to pass the necessary legislation to 
make them eligible for certification (for apparel benefits) 
under AGOA. In light of these delays, it will be difficult to 
extend the third country fabric provision ``because Members of 
Congress have been promised action and concrete results.'' He 
asked what progress Congress could expect from uncertified 
countries if the third country fabric provision is extended.
    Minister Mallie turned the discussion to the case of 
Lesotho, which has succeeded in meeting the challenge of 
putting the necessary legal framework in place to be certified 
for apparel benefits. He said that a short extension of the 
third country fabric provision would give stability to 
investors in Lesotho and encourage additional investments in 
new fabric and yarn mills. Negotiations on these potential 
projects are fairly advanced but hinge on Lesotho's ability to 
support the projects with adequate infrastructure, including 
power and water. He said a study has been commissioned for the 
Metolong water project, which would dam the area in order to 
supply water to industrial sites under consideration by 
investors in the city of Maseru. Unfortunately, Lesotho has the 
additional problem of securing funding to construct this 
infrastructure to supply the factories, and time is running out 
on the third country fabric provision. Before the textile and 
yarn production can come on line, Lesotho will face a 
requirement to use local (or U.S.) fabric.
    Chairman Thomas said that he appreciated this very 
concrete, practical example of problems that Lesotho, a country 
that has made huge efforts to comply with AGOA conditionality, 
was having in making further progress in the face of the 2004 
expiration of the third country fabric provision. This example, 
said the Chairman, is ``a real thing I can sell'' in Congress.

Working Lunch Meeting With National Retail Federation

    Erik Autor, Vice President of the National Retail 
Association, noted that ethical and security compliance issues 
increase the costs for apparel production at a time when prices 
are dropping, creating a daunting challenge. He mentioned that 
the AGOA certification process has been slow, which in turn 
slows investment decisions. He raised the question of whether 
the African industry can survive the expiration of third 
country fabric eligibility in 2004 and the end of global quotas 
in 2005. However, he also noted that the retail industry knows 
that it is risky to deal entirely with China instead because he 
expects a large number of safeguard cases once quotas expire. 
He suggested a short extension of the third country fabric 
provision to allow the African industry to develop its own 
fabric and yarn production. A long extension, however, would 
hamper the development of this industry. He also suggested a 
transition rule out of third country fabric to either a series 
of tariff rate quotas that would be ratcheted down or to an EU-
style rule of origin (requiring double transformation using 
third country yarn but regional fabric--fabric forward--which 
would be easier for suppliers because the rule would be same 
for the United States and the EU).
    The Shibani representative noted that he would not invest 
in a spinning operation in Africa because it is too expensive; 
he would rather purchase yarn. He agreed that a double 
transformation rule would be better in Africa. He noted that 
Africa cannot compete with China's wage levels.
    Chairman Thomas noted that China cannot be stopped in its 
drive to develop. He asked how a favorable environment for 
Africa can be created instead. Autor replied that China beats 
Africa on price, quality, and on time delivery--China could 
clothe the world. Janet Rivett-Carnac noted that the vendor 
base has contracted. Chairman Royce asked about the 
differential in the labor rates between China and Africa. Autor 
noted that Chinese wage rates are very low, particularly where 
workers are imported from rural areas to work in textile mills. 
He noted that many retailers are looking to Vietnam, which is 
expected to be a major player and is increasingly a competitor 
of China for labor. Although the wage rate is approximately $95 
a month in Vietnam (versus $55-60 in Africa), the workers are 
quite skilled. Rivett-Carnac noted that China has a huge 
advantage because the cost of fabric is the largest component 
in the cost of apparel and China's fabric production is state 
owned. In response to a question from Chairman Royce as to 
whether China's fabric production is subsidized, Autor noted 
that China is indeed vulnerable to unfair trade cases.
    Chairman Thomas remarked that worker conditions in the 
African factories visited by the delegation seem to be quite 
good, while in China, it is necessary to see the entire factory 
to understand the working conditions. Autor responded that 
Sears estimates that China's worker rights compliance is only 
about 45% (primarily because China employs so many workers from 
the rural areas), while Vietnam and Bangladesh have a 98% 
compliance rate.

AGOA Forum Sponsored by Non-Governmental Organizations

    Congressman McDermott attended the opening of the NGO Forum 
and gave introductory remarks expressing his pleasure in seeing 
the benefits of AGOA and the potential to further progress. His 
comments follow.
    Given how trade with the United States has helped the Asian 
economies, a similar relationship between the African nations 
and the United States should also lead to enormous potential 
for Africa. The historical policy of simply giving aid and 
assistance is not creating satisfactory results. Mauritius led 
the effort to change U.S. policy from aid to trade. Congressman 
Rangel and Chairman Crane were critical to passage of the 
original AGOA legislation, and more recently Chairman Thomas' 
leadership in passing AGOA II shows that the Congress will 
remain engaged in sub-Saharan African trade matters. ``As 
Africa flourishes so does the United States.'' Regarding 
agriculture, Africa needs to push for the curtailment of U.S. 
and EU agriculture subsidies and work toward the means of 
getting their goods to market. The United States needs to work 
on giving assistance to African exporters on how to meet the 
strict SPS requirements of the West. The delegation saw in 
Namibia how important infrastructure is to growing African 
economies. AIDS is the single most important challenge facing 
Africa given that it can destroy the society and the economy--
farmers, teachers, health workers, parents. Hopefully, AGOA 
will show that Africa can compete in the world market. Africans 
and Americans should not focus exclusively on trade; African 
nations need to invest in people, education, and healthcare 
too.

Bilateral Meeting With South African Minister for Trade, Alec Erwin

    Chairman Thomas invited Minister Erwin to comment on the 
SACU Free Trade Agreement with the United States, HIV/AIDS, and 
multilateral negotiations at WTO. Minister Erwin expressed the 
same concerns that other AGOA beneficiaries did, primarily 
focusing on the problems related to the expiration of the Act 
and the general ``footloose'' nature of the textile and apparel 
industry. By this he explained that the textile and apparel 
industry is perceived to be able to easily open and close 
facilities and thus is not a dependable direct investor for a 
developing country. For these reasons, the SACU-FTA is an 
exciting prospect to lock-in AGOA benefits for SACU. Minister 
Erwin noted that non-AGOA exports are much larger and more 
important for South Africa since it is very competitive on 
energy. Fabrics are in short supply in South Africa, and it has 
the workforce and capital to invest in sophisticated machines 
and operations that bring more certainty and better jobs to the 
country. For example, Lesotho benefits from its access to South 
African infrastructure--roads, water, and energy, and South 
Africa can provide many of the accessories for apparel, such as 
zippers and buttons, that support Lesotho's new industry.
    According to Minister Erwin, the export problems that South 
Africa faces with the United States are certain tariff 
escalations and peaks ``on anything expensive.'' Also, South 
African sugar, including glucose for chemical or food products, 
and various products face an average of 7% tariffs. Their goal 
in the U.S. FTA is to replicate the benefits they receive with 
the EU. Erwin commented on trade with Europe as being very 
complex. For example, the top twenty export categories to 
Germany are also the top 20 imports. With the United States, 
South Africa's dominant export is diamonds, and it imports the 
usual high-tech equipment such as computers. South Africa also 
does well exporting fiber products to Mauritius.
    Regarding Namibia, Minister Erwin noted that it had a 
shortage of water in the south and thus was more competitive 
with apparel and spinning rather than textile production. Like 
Lesotho, Namibia benefits from South Africa's cheap energy. 
Also, Namibia has a good, skilled workforce that has a lower 
cost than South Africa.
    Mr. McDermott asked whether the expiration of the third-
party fabric provision is good for South Africa. Erwin replied 
that South Africa can supply some but not all third party fiber 
or fabric. So, South Africa supports the extension of the third 
party fabric provision past 2004. He also noted that South 
Africa can supply fabrics and fibers cheaply in part because of 
their energy surplus, but not nearly the range of products that 
the United States demands. In general, South Africa exports 
bulk product to nearby countries like Lesotho or Namibia. More 
expensive exports remain in South Africa in order to fly to the 
United States or Europe. South Africa would like lower cost 
production to migrate out of the country thus leaving more 
skilled industries and jobs to remain such as engineering and 
chemical products. South Africa does not expect to be a 
clothing-driven economy but will remain involved in textile 
production for the benefit of other SACU countries. This is 
unlike the EU-South Africa trade agreement in which only South 
Africa's interests are involved.
    Minister Erwin commented on South Africa's general free 
trade views. It is engaged in trade negotiations with Mercosur 
and China. Chairman Thomas asked Minister Erwin to comment on 
multilateral issues. Minister Erwin said that the South African 
agriculture industry is closely unified with the United States' 
stance in the WTO although South African farmers are also 
critical of the U.S. farm bill. He then provided a brief 
analysis of different multilateral issues. He noted that South 
Africa differs with the United States on Rules but holds 
similar views as the United States on GMOs, Geographical 
Indications, Competition, SPS, and Market Access.
    The delegation also discussed some of the peculiar 
infrastructure conditions in southern Africa, in particular the 
rail system. Southern Africa inherited two non-compatible rail 
gauges, one built by the British and one by the Germans. New 
additions require the Africans to choose which gauge to use.

Bilateral Meeting With Kenyan Minister for Trade, Mukhisa Kutiyu

    Minister Kutiyu described Kenya's various issues such as 
the benefits Kenya derive from AGOA, but also that Kenya seeks 
to move beyond AGOA benefits. He sees growth through further 
integration with the region and the rest of world. Kenya has 
some trade problems with the United States related to the 
complex nature of U.S. inspectional services and the ability to 
understand and meet U.S. product standards for inspections and 
packaging. Delegation members acknowledged that they recognize 
the general difficulty many African nations have in meeting 
U.S. agricultural standards. The United States has recently 
announced efforts to station U.S. inspection experts at hubs in 
Africa in order to provide technical assistance to African 
exporters. The Kenyan delegation received this information with 
appreciation.
    Another problem proving to be more intractable is the 
bombing of the American embassy in Mbasa, which has caused 
business to be reluctant in investing in Kenya. The Kenyans 
noted a general stigma has since attached to the country. The 
Kenya delegation commented that Kenyans consider Americans to 
be good partners. Kenya also seeks more assistance for trade 
capacity building, and they are grateful for what USAID has 
provided their country. Minister Kutiyu noted that women in 
Kenya have also benefitted from enhanced trade and AGOA. He 
expressed concern about the expiration of AGOA and the chilling 
effect the deadline has on Kenya's ability to attract new 
business.
    Minister Kutiyu also emphasized the importance of 
maintaining good credit arrangements for Kenya. Kenya is 
willing to put ``seed money'' into building the infrastructure 
required by businesses. Some infrastructure is difficult to 
accommodate, however. For example, when tourists come with 
credit cards, small street vendors with stalls are not able to 
accept them.
    Minister Kutiyu noted that his party won on promises to 
fight corruption and to rely upon market principles. Last week 
the government's major anticorruption bill passed, and a public 
ethics bill is being considered with new conditions that will 
remove any form of corruption. ``We are staking our political 
future on it.'' He recalled anecdotes of how local police would 
ask overcrowded busses for bribes, and this pent up frustration 
by the public has boiled over. Chairman Thomas asked whether 
there were any big cases that highlighted Kenyan efforts, and 
Minister Kutiyu said there have been a couple.
    The Kenyan delegation returned the discussion to the 1988 
terrorist attack on the U.S. embassy and its chilling effect on 
business. Also, the U.S. treatment left a bad impression on 
Kenyans because the Kenyan victims received compassionate 
mention and some payment to affected relatives, but the U.S. 
press emphasized the fewer Americans who were harmed. Last year 
there was an attempt to blow up a passenger airplane. The 
Kenyan delegation stated that Kenya had suffered more than 
other African countries from terrorism, and although it joined 
the war against terrorism, Kenya remains a soft target with no 
capacity to preempt such a strike. Chairman Thomas mentioned a 
similar problem in South American countries due to the presence 
and violence of drug lords. The Kenyans described their poor 
infrastructure and how this affected farmers' ability to get 
goods to market, and there is a need for partnerships to help 
replace transportation facilities.
    On the issue of subsidies, the Kenyan minister noted that 
Kenya votes with the United States at the WTO in wanting to 
remove subsidies, but Kenya's trade with the United States is 
selective and smaller than that with Europe. Subsidies allow 
countries to sell cheaper into markets that Kenya could be 
competitive in, such as wheat, milk, and meat. ``We should 
export but instead we import these goods.'' The delegation 
noted this to be common ground that Kenya and the United States 
shared. Also, on the issue of biotech, Minister Kutiyu stated 
that he supported its use and Kenya wants to ``maximize 
production with science.''

                              SOUTH AFRICA

    South Africa has a population of 44.6 million people and a 
gross domestic product of $126 billion growing at 2.0% per 
year. South Africa currently has a high rate of unemployment at 
28.8%, and although the national currency (the Rand) 
dramatically fell several years ago, there has been a strong 
increase in the last two years. South Africa remains a deeply 
segregated society with very uneven distributions of wealth and 
income, despite efforts by the new government to create 
affirmative action and black empowerment policies. There have 
been marked improvements recently in public housing and 
electrification for poor communities. South Africa exports $42 
billion to the United States, largely minerals such as 
diamonds, iron, ores, and soda ash. U.S. exports to South 
Africa of $3 billion consist of aircraft, computers, television 
and radio parts, and medical equipment. Moreover, the United 
States has $2.8 billion in direct foreign investment in South 
Africa, the top investors being SBC Communications, Dow 
Chemical, and Coca-Cola. The relative political stability, 
excellent infrastructure, and respect for the rule of law 
create an attractive commercial atmosphere for foreign 
companies although there remain some government monopolies in 
areas such as telecommunications.
    South Africa is a newly independent nation having gone 
through decades of civil strife due to the infamous apartheid 
government that denied basic human and legal rights to the 
majority of the black South African populous. A new government 
was created in 1994, and until outlawed, African National 
Congress (ANC) became the majority governing party in the first 
election. Opposition parties have not yet formed although there 
are signs of fractures beginning in the ANC as the older, 
revolutionary generation turns over power to younger members.

Country Briefing With Ambassador Hume, Capetown, South Africa

    Ambassador Hume and his country team provided an overview 
of United States-South Africa relations, regional and domestic 
politics, the HIV/AIDS crisis, the economic situation, and 
cooperation with the United States on international crime and 
terrorism.
    The Ambassador noted that South Africa has pursued a 
parliamentary system of government since apartheid ended, along 
with economic reforms. The African National Congress (ANC) has 
significant power under the current system, in which 
legislators are elected under party controlled ``lists'' rather 
than directly by voters. The ANC currently controls 66% of the 
seats in Parliament. There are a number of parties smaller than 
the ANC, but there is little coordinated opposition to the 
majority. The ANC's strong majority is perceived as a potential 
but not present danger to democracy because there is freedom of 
press and speech and a great deal of open debate and criticism 
of various government actions. The major focus of the 
government has been in improving the economy and providing more 
opportunities for black South Africans. The government 
emphasizes rule of law and democratic values. Voters are 
seeking increased economic growth, job creation, and control of 
crime.
    Crime is a serious problem. South Africa has the world's 
highest rates of homicide and rape. There are media reports of 
Al Qaeda and other terrorists present in South Africa. The 
government is cooperating with the United States on security 
and law enforcement issues. The United States is providing 
South Africa with assistance such as by training prosecutors 
and developing laws.
    The AIDS pandemic is the most significant health crisis 
facing the nation. AIDS is already producing high death rates 
in women in the early 20s and men in their early 30s. South 
Africa is the most affected country in the world with 5 million 
HIV infected individuals, representing with 25% of young women, 
22% of the military, and 30% of miners--one of the most 
important industries in South Africa. The death rate will 
continue to climb through 2010. Life expectancy is expected to 
fall from 59 years to 41. The disease affects all economic and 
ethnic groups. Current expectations are that the disease will 
create millions of orphaned children during the next decade. 
Efforts to deal with the disease have been hampered by the 
government's acceptance of spurious scientific views 
disclaiming the link between HIV and AIDS. Some South African 
officials have publicly denied the link, undermining public 
health agency efforts to provide care and prevent disease 
transmission. Former President Nelson Mandela has stated that 
his one regret is that he did not initiate a comprehensive 
program of HIV/AIDS awareness and treatment. Since his 
retirement, he has spent a great deal of time raising money and 
awareness of the issues and even criticizing President Mbeki 
and the ANC for its inaction.
    Government agencies are providing assistance to pregnant 
women in an effort to prevent transmission of the disease to 
infants. Private companies have also initiated programs to 
educate people about the disease and to prevent transmission. 
The U.S. Agency for International Development, the National 
Institute of Health, and the Kaiser Foundation are working in 
South America on AIDS care and prevention programs. NIH has 
established grant programs to support treatment and research.
    In the foreign policy arena, South Africa is leading 
efforts within the region to promote economic union. South 
African President Mbeki is a supporter of open government, and 
the country has supplied 1,700 peacekeepers to Burundi to 
support the peace process there. Similarly, South Africa has 
placed peacekeepers in the Congo. However, South Africa has 
been reluctant to criticize the actions of President Mugabe in 
Zimbabwe despite his property seizures, economic policies that 
have led to starvation conditions, and the general 
destabilizing effect his policies have caused.
    South Africa has developed strong ties with the United 
States. There are frequent high-level government meetings. Five 
U.S. cabinet members visited the country last year. The two 
nations are cooperating on peace and security issues in the 
region, international crime, and international health issues 
such as AIDS, sexually transmitted diseases, child abuse, and 
alcoholism.
    The region is also facing a severe food shortage. Adverse 
weather conditions and the Government of Zimbabwe's change in 
land ownership policy have reduced farm output. Some 14.4 
million people in the region need food aid at this time, 6.7 
million of them in Zimbabwe. The United States has donated over 
500,000 metric tons of food aid with a value of over $260 
million. Some governments, however, are rejecting aid because 
of their refusal to accept product produced with GMOs. Zambia 
has rejected GMO product outright, while Mozambique and 
Zimbabwe are imposing strict labeling and milling requirements 
that limit the distribution of the food aid.
    South Africa's 2001 GDP was $110 billion. The nation 
dominates the region; its economy represents 25% of the GDP, of 
all of Africa. It is the third largest beneficiary from the 
AGOA legislation. The government has maintained sound economic 
policies since 1994. Government deficits have been relatively 
low as a percentage of GDP, and the central bank has operated 
independently of the executive branch and has adopted 
conservative policies.
    The nation has continued to divert its economy since the 
transition to majority rule. Manufacturing has increased while 
minerals production now represents less than 10% of the 
economy. Efforts are being made to engage in adding value to 
the nation's mineral products. The telecommunications and other 
infrastructure systems are in good condition, and the financial 
sector is highly developed.
    Agriculture represents under 4% of the economy, and the 
nation is relatively self-sufficient. Wine and processed fruits 
are prominent sources of exports. Grain prices have escalated 
significantly, particularly for maize and meal, due to 
abnormally low crop yields and a weak Rand. There are no 
marketing boards or price controls in the agriculture sector.
    Exports fueled the nation's 3% economic growth last year. 
Similar growth is expected this year, despite expectations that 
a strengthening Rand will reduce exports. AGOA programs have 
contributed to economic growth and to expanded exports. Last 
year, AGOA supported 89,000 jobs in the country, up from a 
level in excess of 60,000 in 2001. The AGOA II legislation, 
particularly expansion of access to the U.S. market for merino 
wool and sweater products, has further extended opportunities.
    Bilateral trade with the United States exceeded $7 billion 
during 2001, more than the level of bilateral trade between the 
United States and Chile. Major U.S. exports include aircraft, 
pharmaceuticals, and computers. There remains a significant 
divide in the distribution of wealth. Some 60% of black south 
Africans live in poverty. Black per capita GDP is slightly more 
than $1,000 while white South Africans have a per capita GDP 
over $7,000. The government is attempting to improve the 
standard of living through a number of programs. Since 1994, 
the government has built 1.2 million units of low cost housing, 
has extended electricity service to 70% of the nation's houses, 
and has improved water services to the point where 84% of the 
public have access to clean water.
    The nation does face a number of economic challenges. The 
HIV/AIDS pandemic threatens to undermine the nation's work 
force, and levels of savings and investment are rapidly 
falling. A series of labor issues, including rigid labor laws 
and a shortage of skilled labor, could limit growth. Violent 
crime has destabilized the economy. There are also continuing 
questions about black economy empowerment policies; Embassy 
staff noted that a recently leaked draft government paper on 
``reforms'' in investment policies caused panic among investors 
and a sharp drop in investment values. Finally, uncertainty 
about potential spill over impacts from instability in Zimbabwe 
has raised concerns for investors.

Visit to the Michael Mapongwana Community Health Center, Khayelitsha, 
        South Africa

    The Western Cape Province has the most progressive HIV/AIDS 
policies in South Africa, with a program that is nearing 100 
percent coverage in the use of nevarapine to prevent Mother to 
Child HIV Transmission (MTCT). The Western Cape also has begun 
to introduce anti-retroviral (ARV) AIDS treatment in public 
health clinics with plans for full implementation over the next 
three years. The use of ARVs has been piloted for over three 
years in Khayelitsha by Doctors Without Borders (French acronym 
MSF) in coordination with the provincial health department. As 
of July 2002, the province has also worked in partnership with 
a British NGO relying exclusively on local medical 
practitioners at a clinic in Guguletu. Dr. Fareed Abdullah, the 
delegation's host for the visit, is the architect for the 
province's programs, which also include a strong health and 
life skills education program in schools.
    This robust program began in 1999, when the Western Cape 
Provincial Government was controlled by an opposition coalition 
without ANC participation--the New National Party (NNP) plus 
the Democratic Party, later merged into the Democratic Alliance 
(DA). When the NNP walked out of the DA and formed a new ruling 
provincial coalition with the ANC late last year, however, the 
new government quickly and publicly pledged its continued 
commitment to the existing health program. The current 
coalition government's Health Minister, Piet Meyer, is from the 
NNP.
    The province and Doctors Without Borders are the joint 
recipients of a grant from a consortium of U.S. and 
international foundations through Columbia University's Mailman 
School of Public Health for ``MTCT-Plus,'' a program that 
includes AIDS treatment with MTCT programing. The Michael 
Mapongwana clinic, therefore, administers nevarapine at its 
maternity clinic to impede transmission of HIV from mothers to 
their children, and the adjacent MSF clinic makes ARV therapy 
available to afflicted adults, including mothers. There is also 
a package of psychosocial support, including community outreach 
and education, patient education, and counseling. Hope 
Worldwide also participates in counseling and community 
outreach in Khayelitsha, including at the Michael M. clinic. 
Hope Worldwide is strongly supported by USAID in South Africa.
    The clinic in Khayelitsha serves the surrounding 
impoverished area for the purpose of providing treatment and 
prevention counseling to women to prevent Mother to Child HIV 
Transmission. The area has a 22% infection rate. It has a 3-
year old pilot program for the use of the drug nevarapine, an 
anti-retroviral AIDS treatment. The clinic is sponsored by 
Doctors Without Borders, a French-based organization, in 
coordination with the Western Cape provincial health 
department.
    Khayelitsha is largely populated by temporary tin plate-
sided constructions, although many receive electricity due to 
government efforts. The delegation passed miles of slum areas 
and was told that Khayelitsha is home to over 750,000 people on 
the outskirts of the more affluent Capetown. Nonetheless, the 
delegation noted the first class road system that runs 
throughout the area. Embassy staff remarked that the former 
South African government required such a system in order to 
exercise control over the population and also to provide 
transportation for those who traveled to work.
    The clinic is a one-level building with administrative 
offices to process women seeking treatment, testing, or 
counseling. There was a common waiting room, and the delegation 
saw several dozen patients. The clinic also has 10 beds for 
women in labor. Part of the program involves a group counseling 
and education session in which HIV and AIDS is explained as 
well as behavior that can lead to infection. Since 
breastfeeding accounts for 15% of mother-child transmissions, 
part of the counseling involves dissuading women from 
breastfeeding despite the social and cultural pressures to the 
contrary. Particularly effective were women who had been 
effectively treated and could demonstrate that while they had 
HIV/AIDS, their children did not. The clinic has tested over 
20,000 women, which Dr. Abdullah commented was a high 
proportion of the community and which helped take the stigma of 
the clinic away. Most women tell their spouses of the test 
results, despite the high risk that their spouses will abandon 
them. There is an effort to attract the spouses for testing and 
treatment. One dose of the drug nevarapine decreases 
transmission by 50%.

CODEL Physician's Professional Observations (Lt. Cmdr. Timothy Burgess, 
        U.S. Navy)

    The maternity clinic in Khayelitsha was notable for its 
modern and well-equipped (by Sub-Saharan African standards) 
obstetrical facilities, with the exception of open wards for 
laboring women (versus private or semi-private rooms). The 
model program for interruption of mother-child transmission of 
HIV appeared to be comprehensive and effective. Dr. Abdullah 
indicated that transmission rates in his program were decreased 
by ``about 50%,'' which is consistent with results in other 
settings such as Thailand. On further specific questioning, 
Gray Handley from the U.S. Embassy indicated that the actual 
figure ranged from 23-50%. It was not possible to ascertain 
data on how advanced the HIV disease is with the patients since 
there are no facilities nor funds to collect the data; the 
information is of interest because it would impact both the 
expected transmission rate as well as the expected benefit of 
MCTC interruption therapy.
    For South Africa the largest issue affecting the provision 
of antiretroviral therapy is governmental acceptance of current 
theories and practices, as was discussed by a number of the 
members including Chairman Thomas and Congressman Royce. For 
Africa, generally the first key issue is identifying infected 
individuals. Regardless of the intervention (counseling on 
prevention, targeting MTCT, providing ARV therapy, etc.), 
identification of infected individuals is the first step. This 
involves two factors: Having a reliable, cheap, easy test 
available, and persuading the population to accept and 
participate in testing. In Namibia, the CDC program relies on a 
particular commercially available rapid diagnostic test.
    All testing must be accompanied by counseling and 
psychosocial support: a positive test may cause tremendous 
emotional stress and potential ostracism if publicized, but a 
negative test may result in a false sense of security or 
invulnerability that results in subsequent increased behavioral 
risks. A separate issue is that of discordant results among 
couples (one partner positive, the other negative). In 
societies where women have less standing than men, a positive 
result could result in ostracism--at best--if the husband is 
negative or (much more likely) refuses testing. This question 
was posed in Khayelitsha, but statistics were not available.
    ARV medications are not without risk, primarily societal 
risk. They are not one-time interventions, except in the case 
of MTCT prevention with nevarapine; they must be taken for life 
to treat an established infection. The drugs must be taken as 
prescribed in sometimes complicated regimens, or they are 
ineffective. Not only are they ineffective for the individual 
who is not adherent to the regimen, but the risk of HIV 
resistance to ARV meds is markedly increased. That is, partial 
treatment may lead to a person's own HIV becoming ARV-
resistant; this could result in transmission of resistant virus 
to others, analogous to the situation with multi-drug resistant 
TB. Resistant HIV has already emerged in the United States, 
before widespread use of ARV in Africa. So the risk of a direct 
contribution of resistant HIV developing in Africa (from poorly 
administered drugs) to global spread of resistant HIV may or 
may not be significant, but the possibility certainly exists 
and data is probably not available to quantify the risk yet.
    Simple provision of medications, at whatever cost and by 
whomever, whether patent-protected or not, is not the solution 
to the problem of HIV/AIDS in Africa, or anywhere. The ultimate 
solution is disease prevention (ideally transmission 
prevention, either behavioral or with a vaccine). Progress on 
this front is being made (in part by the U.S. military, 
incidentally), but this solution is not imminent. The interim 
solution involves interruption of transmission and, where 
possible, treatment of infection. But absolutely pivotal to 
these interventions is an infrastructure that supports them. 
Such infrastructure is very unlikely to exist without 
governmental support in-country.

Visit to BMD Textile Plant in Capetown, South Africa

    Chairman Thomas toured the 40,000 square meter BMD Textile 
manufacturing plant at Capetown. In addition to high quality 
fabrics and apparel, the plant manufactures technical textiles 
such as tarpaulins, commercial banners, awning fabric, and 
geosynthetics for engineering, agriculture, mining, and 
building applications. The plant uses state-of-the-art computer 
graphic design and fabric finishing controls.

Press Conference in Capetown, South Africa

    The delegation met with local press, who asked about the 
prospects of an AGOA extension, findings of the CODEL, and the 
problems of the continued leadership of President Mugabe in 
Zimbabwe. The local press reported the delegation's views that 
President Mugabe was a harmful element to his own people and 
should leave office. Chairman Royce commented that this crisis 
has affected South Africa by making the area less attractive 
and stable for foreign investment. Other criticisms the 
delegation voiced were that President Mugabe had stolen last 
year's election, opposition leaders had been murdered, and food 
was being used as a political weapon and going first to the 
military and political leaders.
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