The Trade and Development Act of 2000

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T H E W H I T E H O U S E

The Trade and Development Act of 2000

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THE TRADE AND DEVELOPMENT ACT OF 2000: STRENGTHENING OUR
ECONOMIC PARTNERSHIP WITH SUB-SAHARAN AFRICA AND THE CARIBBEAN BASIN

May 18, 2000

TODAY, PRESIDENT CLINTON WILL SIGN INTO LAW THE TRADE AND DEVELOPMENT ACT OF 2000. The measure includes the Africa Growth and Opportunity Act (AGOA) and the U.S.-Caribbean Basin Trade Partnership Act (CBTPA) and other important provisions. This package advances U.S. economic and security interests by strengthening our relationship with regions of the world that are making significant strides in terms of economic development and political reform. It will expand two-way trade and create incentives for the countries of sub-Saharan Africa (SSA) and the Caribbean Basin to continue reforming their economies and participate more fully in the benefits of the global economy.

STRENGTHENING OUR PARTNERSHIP WITH AFRICA THROUGH THE AFRICAN GROWTH AND OPPORTUNITY ACT. The 48 nations of sub-Saharan Africa make up a market of 700 million people that offers enormous commercial potential for U.S. exporters. In 1998, for example, our exports to Africa amounted to more than $6.5 billion -- more than 45 percent greater than those to all the countries of the former Soviet Union combined. Yet, U.S. trade with Africa still represented merely 1 percent of our total trade that year. There is room for our trading relationship to grow and benefit both markets as Africa develops. AGOA will promote reforms in Africa that will leverage efforts to increase investment, expand economic growth, and reduce poverty. Among other provisions, the Act will:

Expand the Generalized System of Preferences (GSP) program to provide duty-free treatment to virtually all products exported to the U.S. from sub-Saharan Africa. The GSP program provides preferential tariff treatment for imports of developing countries that satisfy certain eligibility requirements.
Institutionalize a high-level economic dialogue and take initial steps toward consideration of a Free Trade Area.
Protect African workers and U.S. jobs through the creation of tough safeguards against trans-shipment; i.e., shipping an item through a beneficiary country that was in fact manufactured in a third country so as to gain illegal access to the American market on preferential terms.
Require that human rights and internationally recognized worker rights be respected.

STRENGTHENING OUR TIES TO THE CARIBBEAN THROUGH THE U.S.-CARIBBEAN BASIN TRADE PARTNERSHIP ACT. The 23 independent countries of the Caribbean Basin region together form the sixth largest export market for U.S. goods, totaling $19 billion and absorbing 2.7 percent of U.S. exports in 1999. But the devastation of Hurricanes Mitch and Georges in 1998 set the regional economy back. To help repair the damage and promote long-term growth, the aAct, among other provisions, will:

Expand the CBI program to extend preferential tariff treatment to textile and apparel products assembled from U.S. fabric that have been excluded from the program. This will encourage additional U.S. exports of cotton and yarn and U.S. investment in the region, while improving the global competitive position of the U.S. textile industry.
Extend preferential tariff treatment to textile handicrafts and all non-textile products currently excluded from such treatment under the existing Caribbean Basin Initiative.
Reduce duty rates on textiles covered by the agreement by up to 100 percent, and such products would be free of quantitative restrictions. For other products, the tariff rate would be reduced up to 100 percent of the difference between the current rate and the rate applicable to Mexican goods under the NAFTA.
Conditions countries' eligibility for these expanded trade benefits on Require the fulfillment of WTO obligations, protection of intellectual property rights, cooperation in counter-narcotics efforts, and respect for core labor standards.

THE TRADE AND DEVELOPMENT ACT OF 2000 IS PART OF PRESIDENT CLINTON'S LARGER TRADE AND DEVELOPMENT AGENDA. ForIn too many poor countries, foreign debt obligations, major public health challenges, infectious disease (especially HIV/AIDS), and illiteracy and inadequate workforce skills inadequate basic education impede efforts to reduce poverty and capitalize on opportunities in the global economypresented by expanding international trade and investment. To meet this three-pronged challenge, the President has:

Debt Relief: Helped lead our G-7 partners to adopt the Cologne Debt Initiative, which will reduce the debts of over 30 of the poorest countries by an estimated 70 percent when combined with previous efforts.
Infectious Disease: Proposed in his budget this year a $1 billion tax incentive aimed at stimulating the development of vaccines for poor countries, a $50 million contribution to the Global Alliance for Vaccines Initiative, and a $100 million increase in foreign assistance for AIDS prevention and care. He has also appealed to the World Bank and other multilateral development banks to increase low interest loans for infectious diseases by $400 million to $900 million.
Basic Education/Combating Child Labor: Proposed in his budget this year a 50 percent increase in U.S. assistance for improving access to basic education and combating child labor in developing countries, including $45 million for the International Program to Eliminate Child Labor, and $55 million in new funding for targeted bilateral educational aid to developing countries.

DETAILS OF THE

TRADE AND DEVELOPMENT ACT OF 2000

SUMMARY. This bipartisan legislation includes the Africa Growth and Opportunity Act (AGOA) and the U.S.-Caribbean Basin Trade Partnership Act (CBTPA), and other important provisions. This package advances U.S. economic and security interests by strengthening our relationship with regions of the world that are making significant strides in terms of economic development and political reform. It will expand two-way trade and create incentives for the countries of sub-Saharan Africa (SSA) and the Caribbean Basin to continue reforming their economies and increase their participation in the benefits of the global economy. And, it will contribute to the continuation of our own strong economic performance by encouraging the opening of markets and the reduction of poverty in countries with hundreds of millions of potential consumers of American exports.

STRENGTHENING OUR PARTNERSHIP WITH AFRICA THROUGH THE AFRICAN GROWTH AND OPPORTUNITY ACT. This Act promises to deepen our economic partnership with Africa and expand two-way trade to the benefit of both partners. It will also encourage SSA countries to undertake economic reforms and engage in the world economy. As reform spurs growth in Africa, it will create new and bigger markets for U.S. exports, as the following statistics indicate:

The 48 countries of sub-Saharan Africa constitute a market of more than 700 million people.
Our exports to Africa, amounting to more than $6.5 billion in 1998, are more than 45 percent greater than those to all the countries of the former Soviet Union combined.
Although our exports to Africa grew more than eight percent in 1998, our trade with Africa accounts for only 1 percent of our total trade.
The United States accounted for only 6.1 percent of the African market -- while Asian exports have captured 28 percent.

AGOA lies in America's interest because it promotes the types of reforms in Africa that will make sub-Saharan nations better allies and better trading partners. It has the support of virtually all African governments, including that of South Africa. The Act's specific provisions will:

Establish, as U.S. policy, a framework of incentives to encourage greater economic growth and self-reliance through enhanced international trade and investment in Africa.
Expand the Generalized System of Preferences (GSP) program by providing duty-free treatment to virtually all products from sub-Saharan Africa. The GSP program provides preferential tariff treatment for imports of developing countries that satisfy certain eligibility requirements.
Extend duty-free, quota-free benefits to apparel made in Africa from U.S. yarn and U.S. fabric or from yarns not available in the U.S.
Grant duty-free, quota-free benefits to apparel made in Africa from African fabric to a limit that grows over time. The escalating cap starts at 1.5 percent of U.S. imports of all apparels and rises over eight years to 3.5 percent. Africa's current share is only 1.1 percent of the U.S. apparel market.
Provide four years of special incentives for apparel industry investments in least developed countries.
Protect African workers and U.S. jobs by requiring tough safeguards against trans-shipment (i.e., shipping an item through a beneficiary country that was actually manufactured in a third country not eligible for the bill's preferential tariff treatment) and respect for internationally recognized worker rights and human rights.
Institutionalize annual high-level discussions to promote trade, investment and development through creation of a U.S.-Africa Trade and Economic Cooperation Forum.
Develop a plan to establish a free trade agreement with SSA countries.
Provide additional technical assistance to help Africans take maximum advantage of the opportunities available in the expanding global trading system.
Encourage the American private sector to take a more active role in combating AIDS/HIV in Africa and establish eradication of AIDS as a top priority of the U.S. government. AGOA is the first trade bill to address the challenge of AIDS/HIV directly.
Other provisions of the Act include: creation of an Overseas Private Investment Corporation (OPIC) Infrastructure Fund to encourage investment in crucial transportation, power, and other infrastructure projects; and expansion of trade financing through the U.S. Export-Import Bank.

STRENGTHENING OUR TIES TO THE CARIBBEAN THROUGH THE U.S.-CARIBBEAN BASIN TRADE PARTNERSHIP ACT. In recent years, the countries of the Caribbean Basin have formed an increasingly important export market for our goods, as the following figures illustrate:

The 23 independent countries of the Caribbean Basin together formed the sixth largest export market for U.S. goods in 1999.
Since the enactment of the Caribbean Basin Economic Recovery Act (CBERA) in 1984, U.S. exports to the region have more than tripled to $19 billion in 1999. The Caribbean Basin countries absorbed 2.7% of total U.S. exports in 1999.

But Hurricanes Mitch and Georges of 1998 took a terrible toll -- $12 billion in damages, by some estimates -- on the nations of the Caribbean Basin. Forming a complement to the disaster relief the U.S. has already provided, CBTPA will help CBI countries get back on their feet and grow over the long-term. That will help not only U.S. exports; it will create the conditions in which healthy democracies can thrive. Specifically, CBTPA will:

Offer temporary trade benefits to Caribbean Basin countries to facilitate their economic development and reconstruction after 1998's devastating hurricanes, place them on a more equal competitive basis with Mexico in the U.S. market, and reinforce the region's trend toward more openness in the conduct of economic policy.
Encourage development of trade and investment policies that will facilitate their ultimate participation in the Free Trade Area of the Americas (FTAA).
Expand the CBI program to extend preferential tariff treatment to certain textile and apparel products assembled from U.S. fabric that have been excluded from the program. This will encourage additional U.S. exports of cotton and yarn and U.S. investment in the region and strengthen the international competitive position of the U.S. textile industry.
Extend preferential tariff treatment to textile handicrafts and all non-textile products currently excluded from such treatment under the existing Caribbean Basin Initiative.
Reduce duty rates for textiles covered by the agreement by up to 100 percent, and such products would be free of quantitative restrictions. For other products, the tariff rate would be reduced up to 100 percent of the difference between the current rate and the rate applicable to Mexican goods under the NAFTA.
Provide safeguard provisions on covered textile products. Tariff benefits could be modified under the same conditions as in the NAFTA in the event of disruptive import surges.
Conditions countries' eligibility for these expanded trade benefits on fulfillment of WTO obligations pertaining to fair trade, cooperation in counter-narcotics efforts, and respect for core labor standards.

OTHER PROVISIONS OF THE TRADE AND DEVELOPMENT ACT OF 2000. The Act also:

Improves enforcement of fair trade rules by requiring periodic changes in foreign products subject to U.S. retaliation when a foreign government persists in its failure to comply with a WTO decision.
Expands the list of worker rights criteria countries must meet to be eligible for trade preference programs like GSP, CBI, and AGOA to include implementation of the recent International Labor Organization Convention banning the worst forms of child labor.
Provides relief from high tariffs on wool fabric that has hurt competitiveness of the U.S. wool suit manufacturing industry.
Promotes economic growth and democracy in other developing countries. The Act determines that the emigration laws and practices of Albania, Kyrgyzstan, and other countries are in compliance with the Jackson-Vanik amendment of the 1974 Trade Act, and thus are now eligible for normal trade relations status with the United States. That means that the U.S. will grant these countries the same trading rights we grant to other WTO members when these nations join that organization in the near future. Increased trade will lead to a better relationship with the U.S. and a surer path to democracy for these newly independent nations.

BENEFITS OF FREER TRADE. Since the creation of the General Agreement on Tariffs and Trade in 1948, Democratic and Republican Administrations, working in partnership with Congress, have concluded eight negotiating Rounds, signed hundreds of bilateral trade agreements, and opened markets for American goods. All this has helped to:

increase global trade 15-fold;
boost real production in the United States 5-fold; and
augment real average American per capita income 3-fold.

Since the conclusion of the Uruguay Round in 1994, a more open world economy has helped American exports rise by over $200 billion (51 percent). Export expansion accounted for more than one-quarter of U.S. economic growth between 1992 and 1998. Average real wages have grown 6.3 percent under President Clinton, with export-related jobs paying 15 percent more on average than non-export-related jobs.

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