The African Growth and Opportunity Act (AGOA) and How it Will Affect Apparel Sourcing: Discussion Questions from FASH455

agoa1

#1 How will the United States specifically benefit from the AGOA? Who is on the opposing side of the AGOA?

#2 We know sourcing from Asia means “cheap” and sourcing from the Western-Hemisphere means “fast”. But what could be incentives for U.S. companies to source from Africa? In other words, what are the unique competitiveness of Africa as a sourcing destination?

#3 Will the “third-country fabric” provision in the AGOA discourage investment in Africa’s textile industry? Why or why not?

#4 Why do you think the AGOA doesn’t adopt the “yarn-forward” rules of origin? Should it?

#5 It is said that the AGOA has been “underutilized” by the apparel industry. What is your view?

#6 What are the considerations behind the 10-year extension of the AGOA in 2015? To decide whether to further extend the AGOA beyond 2025, what factors should be considered?

Please feel free to share your thoughts and recommend any additional articles/readings/resources relevant to the discussion. Please mention the question # in your reply.

Advertisements

Author: Sheng Lu

Professor @ University of Delaware

9 thoughts on “The African Growth and Opportunity Act (AGOA) and How it Will Affect Apparel Sourcing: Discussion Questions from FASH455”

  1. in regards to question 4 I feel that the AGOA does not want to accept a yarn forward point of origin because currently they do not have the money or infrastructure to create textiles, so they feel they will be more profitable with fabric forward since they have cheap labor and have the ability to produce garments, but I feel that in the long run like we discussed in class with Vietnam yarn forward will be better for the AGOA because countries who can support yarn forward currently will invest in Africa’s industry and this will help Africa gain capitol and eventually be able to support yarn forward and be more profitable than they would be with fabric forward.

    1. Agree with your thought that SSA countries don’t have the capacity to locally make textiles. Importing textiles from the US often is not a workable option either because of the distance. It is hoped that with more US apparel companies sourcing from SSA, it will create incentives for investing textile mills in SSA. But personally I think this is just a wishful thinking at this point…

  2. #4 Why do you think the AGOA doesn’t adopt the “yarn-forward” rules of origin? Should it?

    Due to the forces behind globalization, foreign investment has become very common between countries, and is now a vital part of the global economy. Importing goods, especially those that belong to the textile and apparel industry has become a controversial all the while important topic of conversation, especially in the US. The textile and apparel industry has assisted struggling countries to jump-start their economy and help further the developing country’s advancement. The African Growth and Opportunity Act (AGOA) is a trade agreement between the US and Sub-Saharan African Countries (SSA) that advocates for SSA countries to create business relations with the US. Under AGOA, SSA countries have learned to be players in the global market, while the US increases their trade and investment relationships. Manufacturing apparel has become a leading export for SSA countries and plays a dominant role in the progression of the region’s economic development. To facilitate the advancement of both parties, it is vital for the SSA countries to work under the “third country fabric provision” allowing for fabric forward rules of origin. The trade agreement under AGOA allows maximum flexibility for production, cost efficiency and a competitive edge against Chinese and Indian manufacturers. Without the third country fabric provision most SSA countries would not be eligible to partake in global trade or compete with labor-oriented countries. If the AGOA were to adopt yarn forward rules of origin I strongly believe that SSA social and economic development will be restricted. Since the establishment of the AGOA and fabric forward rules of origin, SSA countries have been given the opportunities to contribute to the global economy and improve their economic stance in addition to an increase in job availability.

    1. as you said ” If the AGOA were to adopt yarn forward rules of origin I strongly believe that SSA social and economic development will be restricted. Since the establishment of the AGOA and fabric forward rules of origin, SSA countries have been given the opportunities to contribute to the global economy and improve their economic stance in addition to an increase in job availability.” But will that apply to Vietnam in TPP and Mexico in NAFTA as well?

  3. If AGOA was to adopt more yarn forward rules of origin then as a global sector they can strive. However currently there are not enough resources to produce textiles with the most marginal benefit or work facilities to produce the products. In turn AGOA uses fabric forward rules of origin. Here they are able to produce garments at lower costs with a wider range for flexibility in the stages of production as well as producing these garments more efficiently. Unfortunately, it seems as if the SSA economic development might be staggered a bit if AGOA adopted these rules of origin.

  4. Regarding question #3, they are giving incentives for countries such as Ethiopia and Tanzania to build textile mills because countries such as the United States are already sourcing their apparel from these countries. This is making it harder and harder to not have growth within the apparel industry for African countries. Many countries are expecting Africa’s apparel industry to have expand within the next few years.

  5. #4 Why do you think the AGOA doesn’t adopt the “yarn-forward” rules of origin? Should it?
    For question 4, I think that AGOA does not have capital and resources to adopt the “yarn-forward” rules of origin. If AGOA accept the rule, the trades for them cannot work successfully. AGOA definitely need the textiles importing from other countries. Moreover, fabric-forward can bring AGOA more benefits. And fashion companies in America can obtain lower price for products from AGOA.

  6. #5 It is said that the AGOA has been “underutilized” by the apparel industry. What is your view?

    I absolutely feel that AGOA and SSA countries are highly underutilized. From working with Water is Life Kenya, I have been exposed to the many barriers these countries face: great discrepancies and lack of communication or agreement between neighboring governments, lack of basic resources such as water, lack of factory infrastructure (mainly still in the early stages of development, working out of huts or cottages), and vast unawareness of both outsourcing retailers and global consumers. In order for AGOA to be better utilized and for these villages and communities to be furthered through the development process, there needs to be a call to action AND incentive for investments from highly developed nations like the US. How to do this? That is the difficult question.

  7. Related to T&A industry, AGOA regulates producers must use U.S. raw materials, which effectively blocks local upstream sectors. Because AGOA requires products exported to the U.S. in the host country. Indian and Chinese clothing manufacturers always mark their products Made in Kenya, and transship to the U.S. through Africa to obtain preferential treatments. Therefore, AGOA does not create bigger market share for African companies, and U.S. benefits from AGOA.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s