House Passes Trade Bill With Textile Provisions

The US House of Representatives has passed legislation designed to bolster the apparel industries
of Sub-Saharan African nations and the Dominican Republic by permitting apparel using some fabric
made outside of those areas to benefit from the preferential trade agreements. US textile
manufacturers have gone along with the legislation, because they do not see any major problems
resulting from the use of limited amounts of inputs from outside of those areas.

The bill, passed with strong bipartisan support, would on a trial basis authorize a “2-for-1”
textile and apparel program for the Dominican Republic. Under that program, when producers of
apparel purchase a certain quantity of fabric that is eligible for preferential treatment — for
example, 2 square meters — they can ship an additional square meter regardless of where the fabric
was made.

The bill also repeals the so-called “Abundant Supply” provision of the African Growth and
Opportunity Act (AGOA). That provision in the original law encouraged or required African apparel
producers to first use locally produced fabric before sourcing fabric from other sources such as
Asia. While well-intended, that requirement has not had the desired effect, and in fact has harmed
the apparel industries in some African nations.

The legislation calls for the US government to conduct a study to find new ways of
encouraging investment in African textile manufacturing.

August 5, 2008