Subcommittee on Trade of the House Ways and Means Committee - Trade with Sub-Saharan Africa and AGOA Acceleration Act of 2004

Federal News Service April 29, 2004 Thursday

April 29, 2004 Thursday

HEADLINE: HEARING OF THE SUBCOMMITTEE ON TRADE OF THE HOUSE COMMITTEE ON WAYS AND MEANS SUBJECT: TRADE WITH SUB-SAHARAN AFRICA AND AGOA ACCELERATION ACT OF 2004

CHAIRED BY: PHIL CRANE (R-IL)

WITNESSES PANEL I:

REP. EDWARD R. ROYCE (R-CA)

WITNESSES PANEL II: MPHO MALIE, MINISTER FOR TRADE AND INDUSTRY, THE KINGDOM OF LESOTHO; JAYAKRISHNA CUTTAREE, MINISTER OF FOREIGN AFFAIRS, INTERNATIONAL TRADE AND REGIONAL COOPERATION, MAURITIUS, IN HIS CAPACITY AS CHAIRPERSON, AFRICAN TRADE MINISTERS' CONFERENCE AND SPOKESPERSON FOR THE AFRICAN UNION;

DR. YUSUF ABDULRAHMAN NZIBO, AMBASSADOR, THE REPUBLIC OF KENYA LOCATION: 1100 LONGWORTH HOUSE OFFICE BUILDING, WASHINGTON, D.C.

TIME: 1:30 P.M.

BODY:

REP. PHIL CRANE (R-IL): We were surprised yesterday, as I am sure many or you are aware, with the realization that today we were not going to have any legislative activity on the floor. As a result, many people ran for the airport and caught flights out of here yesterday, but I do appreciate having the company with me on the committee. And I want to welcome all of you folks to this hearing of the Ways and Means Trade Subcommittee to focus on the impact of AGOA on the trade development in Africa and ways that Congress can correct interpretive problems in the law, encourage infrastructure improvements and generally accelerated the goals of the program. In addition the hearing will explore H.R. 4103, the "AGOA Acceleration Act."

And it is my pleasure to welcome our witnesses and distinguished guests to our hearing, but particularly one who will not be testifying, but is in our audience, the prime minister of Swaziland, and ministers and ambassadors from all over Africa.

The "Africa Growth and Opportunity Act," which I authored, was originally enacted in 2000 and was the product of nearly five years of bi-partisan cooperation with my colleagues on the committee: Jim McDermott, Charlie Rangel, William Jefferson and others. And AGOA has proven to be one of the most effective means of helping African nations develop and attract development and enhance the standard of living for their citizens. AGOA has also made a strong positive impact on the U.S.-Sub-Saharan African relations by helping to expand our trade relationship. Expanded trade opportunities not only help those countries develop a sustainable economic base, but also foster efficient government practices, political stability and a well- grounded rule of law. More importantly, AGOA has helped develop a more stable Africa-a step which strengthens security for America and the world.

Africa has benefited greatly from the Act's trade preferences with the United States. U.S. imports under AGOA-excluding the Generalized System of Preferences-have almost doubled from their 2001 level of $7.6 billion to their 2003 level of $13.2 billion. At the same time, 150,000 AGOA-related jobs have been created along with $340 million in foreign investment in the five leading AGOA countries. AGOA has also begun to have a positive affect on other areas by improving business practices in Africa and encouraging regional integration. However, despite these positive developments, many countries have not yet been able to benefit fully from AGOA, just as a key provision is set to expire.

H.R. 4103, the bipartisan AGOA Acceleration Act, provides the means for African countries to develop a more prosperous economic environment, a well-grounded rule of law, and efficient and acceptable government practices. By building on early successes, this bill will attempt to distribute more widely AGOA's benefits. The new legislation concentrates on four key items: First, an overall extension of AGOA until 2015; secondly, technical assistance, encouragement of activities to support infrastructure development, and capacity building studies to enable Africa to utilize the program fully; third, language fixing several implementation problems that have arisen since the program's enactment and encourage further integration among the region's economies; and four, an extension of the expiring provision that allows use of third-country fabric, that is, non-U.S. and non-African fabric, in garment manufacturing for lesser-developed African countries.

I realize that a strong regional economy needs to be based on more than just the textile and apparel industries. Modernizing infrastructure, diversification into other industries like agriculture, and building on natural strengths like eco-tourism, will help Africa secure a more stable future. The AGOA Acceleration Act includes several provisions aimed at just that: encouraging activities in support of infrastructure to increase eco-tourism and trade capacity; encouraging activities in support of transportation, energy, agriculture, and telecommunications infrastructure; and identifying eligible sub-Saharan African countries as having the greatest potential to increase marketable exports of agricultural products to the United States, but also the greatest need for technical assistance.

I believe helping Africa through trade will contribute to more fundamental improvements in governance and overall quality of life in Africa. Critical benefits for our African partners soon if Congress does not take immediate action. I strongly support the AGOA Acceleration Act for positive consideration by Congress in the coming weeks based on its strong bi-partisan support.

And I yield to the ranking minority on our Trade Subcommittee, Mr. Levin.

REP. CARL LEVIN (D-MI): Thank you, Mr. Chairman. I'm soon - in just a minute or so - going to have the rare privilege of yielding to Mr. Rangel, the ranking member. He usually yields to me.

But I wanted to say just a few words before I do that. I'm really pleased to join my colleagues here for the consideration of this bill, and I regret that I am going to leave to depart Washington and catch a plane. I'm going to take this testimony with me and read it on the plane.

This legislation is vital. We simply cannot allow expiration of AGOA. There has to be its renewal, point one. Point two, I would hope its extension, its continuation will spark all of us to take a look at one of the critical areas, textile and apparel, and to do so in a broader way, and not only in terms of one continent or one region. Some of us have been using that that be done, and it really hasn't been. And the last point that I wanted to make, I'm glad that there is in additional to our distinguished Mr. Royce and the distinguished representative of several countries testifying here, that we are going to have another panel, and that it will be diverse in its backgrounds and to some extent, diverse in its points of view.

Expansion of international trade is not a simple matter. It has complexities, and if we are going to come up with the right answers - and we must - we need to dip into a diverse set of views about how we expand and shape international trade.

So this is an important hearing.

And it is now, as I said, my privilege to yield to the distinguished ranking member of the entire committee, Charles Rangel of New York.

REP. CHARLES RANGEL (D-NY): Thank you so much, and I want to thank the chairman, Mr. Crane, for holding this hearing. I cannot think of anything in the last few years that have brought Bill Thomas together except the AGOA bill. And quite frankly, most trade bill this time of the election cycle are dead on arrival. But the enthusiastic support of expanding and not allowing the success of AGOA to expire is due in a large part to the sophistication and diligence of the African diplomatic corps.

Some of them are in the audience from Swaziland, Kenya, Mali, Lesotho, and the other diplomatic corps have learned a lot from the manner and the cooperation and the knowledge that you have managed to share with legislators who want to do the right thing, but needed the sophistication of how we can do it best.

I want to thank the members of the apparel industry that are here from Vanity Fair, Gap and MAST (ph) industries because, they, like my late and dear friend, Ron Brown, realized that business and democracies need more than just a flag and a gun. You need jobs, you need dreams, you need hopes, you need to care for people, and if we are going to be the beneficiary of free trade, we have to deal with countries that respect their workers, that give them an opportunity to get disposal income so that they can continue to buy American's goods and services.

And so the tremendous progress that has been made, not only in the creation of job, but living by the rule of law, providing assistance to trade unions, and removing tariffs, is really what Democrats and Republicans should be all about, rather than the politics of the day. This legislation and the cooperation of members of this committee and the House, from the private sector, from the diplomatic corps shows that bi-partisan works.

So I want to thank you, Mr. Chairman, for constantly reaching out to seeing where we can find areas of cooperation. And I do hope that we can get this bill speedily to the president.

REP. CRANE: Well, I thank you, Mr. Rangel, and I thank all of our colleagues that are able to be here today. And our first witness is the chair of the Africa Subcommittee of the House International Relations Committee, the Honorable Ed Royce from California.

And Mr. Royce, I yield to you for your presentation.

REP. EDWARD R. ROYCE (R-CA): Thank you, Mr. Chairman, and thank you very much for inviting me to testify before you on the "AGOA Acceleration Act of 2004." As one of its original co-sponsors, I very much enjoyed working with your Committee on this bipartisan legislation. I'd certainly like to take this moment to commend our Ranking Member Charlie Rangel, and to commend our chairman, Bill Thomas, and certainly you for the involvement in this process, and also Ranking Member Levin, as well.

We've go several cosponsors on the dais with you. One is Mr. Jefferson, another Ms. Dunn, and we thank them for their important work on this legislation as well.

I'll approach my support for H.R. 4103 from the position of chairing the Africa Subcommittee since 1997. Since taking the chairmanship, I've had an opportunity to work with you and others on your committee to see that Africa doesn't fall off the world economic map, where, in my view, it is teetering.

Today, three years into the program, we know that AGOA has worked. While many of us wish that more African countries and more African industries, particularly agricultural industries, were taking advantage of AGOA, we do know that it has managed to draw hundreds of millions of dollars of foreign investment to the continent, creating hundreds of thousands of desperately needed jobs across Africa. Several members, in fact, have had the opportunity to visit apparel plants in Africa and see this encouraging development first hand.

We've also seen AGOA spark difficult economic reforms across Africa. We've seem this happen as African countries have strived to maintain their AGOA eligibility. AGOA, in just a few short years, has given many Africans experience with the export-led economic growth that has lifted hundreds of millions of people out of poverty worldwide. This makes AGOA the most effective development aid program for Africa that I'm aware of.

AGOA also has bolstered our political relations with many African governments. Few African officials I've met with haven't taken the opportunity to express their support and appreciation for AGOA. And I think this is important diplomatic capital that we've gained.

In considering this legislation, I'd like to underscore that the African continent is at a crossroads. The vision many of us have been working on for years one of an increasingly stable and democratic Africa, one that is combating HIV/AIDS and exporting and importing more goods and services. AGOA has been central to our joint effort with Africans to see that this vision is their future. The other, very different path that Africa could get caught on, leads to even greater poverty and hunger and conflict and environmental degradation. To my mind, it's unclear which way Africa is headed. Its challenges are immense. What is quite clear though, is that our nation would suffer considerably-our growing security and economic interests on the continent would suffer, as would our humanitarian character-should Africa find itself on this downward path.

If the U.S. Congress fails to pass this legislation before the third-country fabric provision expires in September, we will be undoing much of the good that AGOA has done. Intensified competition from China and other countries is soon coming as apparel trading rules are set to change. Unless we act, this will surely wipe out much of Africa's emerging apparel industry and many African jobs that have been created, and much hope will be wiped out as well. Already, I'm told, apparel orders for Africa are being put on hold or in some cases are being cancelled due to the uncertainty over Congress' action. Our credibility as a nation that takes an interest in the plight of the world's poorest continent is on the line.

So, the stakes for this seemingly modest legislation are high. Today, Mr. Chairman, I'm pulling an alarm for Africa and for America. Let's act, and do our part to direct Africa away from the hopeless path. Finally, I'll mention that this legislation has trade capacity building provisions that the Africa Subcommittee will soon review with a hearing. We've long recognized that African countries can use some help to take advantage of AGOA's preferential market access. This is an important part of H.R. 4103.

So, thank you again Mr. Chairman. I know that you and Chairman Thomas are committed to quick action to help Africa, and to help along our many interests on the continent. I'd also like to thank the other subcommittee members here today and mention again Mr. Emil Hoton (ph) who's an original co-sponsor of the bill as well.

Thank you, Mr. Chairman.

REP. CRANE: Thank you, Mr. Royce.

Are there any questions for Mr. Royce? Well, if not - let us express appreciation to you for being here. And we hope you catch your flight.

At any rate, we will now yield, let you depart and we will welcome our first panel. And our first panel includes the Honorable Malie, the minister for trade and industry in Lesotho. And the Honorable Cuttaree, the minister of foreign affairs from Mauritius, and His Excellency Dr. Nzibo, the ambassador of the Republic of Kenya. And if those witnesses will please take seats.

And, gentlemen, let me welcome you to the committee and let you know how much we appreciate your coming today and testifying, and how important your input is to what we're contemplating in the way of negotiating legislation here hopefully very soon that will address some of the problems that you may be addressing. And if you would try and keep your presentations to approximately five minutes, and then we'll open it up to questions and answers after all of you have testified.

And with that, we will start with the Honorable Mr. Malie from Lesotho, and he will be followed in turn by Mr. Cuttaree and then Dr. Nzibo. Please testify.

MIN. MPHO MALIE: Thank you. It is a great honor and privilege for me to appear and testify before the inaugural subcommittee on the AGOA Acceleration Act. Allow me, Chair, on behalf of the government of Lesotho to register sincere appreciation, gratitude and a sense of hope for the introduction of the legislation to accelerate the African Growth and Opportunity Act.

We were very much delighted to witness the continued bipartisan initiative to improve trade and development with Africa on April 1st, 2004, when Honorable Bill Thomas, the chairman of the House Committee on Ways and Means, accompanied inter alia by yourself, Mr. Chairman, representatives McDermott, Rangel, Royce, Houghton, Payne, Brady and others introduced the AGOA Acceleration Act.

Chair, we are talking about an act that is affecting over 700 million people living in the poorest part of the world, with over 80 percent of the world less developed countries within that region. We're talking about the region that has the highest unemployment rate in the world and also the highest world HIV infection and AIDS cases, and certainly really we are hoping that what this initiative is doing will help us a lot.

AGOA is an initiative by the American government to give a holding hand that will allow sub-Saharan African states to pull themselves up by the bootstrap. Chair, it is a bootstrap initiative that I would proudly like to indicate that it is working and has been extremely successful. In my country, since our certification in April 2001, we have been able to increase employment in the textile and clothing sector from 19,000 in the year 2000 to currently just over 50,000. We have also increased our exports into the United States from $140 million U.S. in 2000 to just over $400 million in the year 2003. And all these are directly attributed to AGOA.

The U.S. administration has been sensitive to implementation problems. And AGOA too, which was there to address the need to shape the inclusion of what's on maybe in the list of lesser developed economies for accession on third country fabric benefits. Serious problems have arisen again, the major one being the end of the third country fabric sourcing window, which comes to an end, come September 30th.

And because of the lack of vertical integration within our textile industries, this window has been responsible for foreign direct investment flows in our countries through the CMTs. And closure of that window says the competitiveness that we've had in respect to Far East and also China is going to come to an end. Uncertainty of the extension of this facility has resulted in cancellation and suspension of orders.

Lesotho, currently we have $40 million U.S. of suspended and cancelled orders, which has affected 23 factories and 37,000 jobs within those factories. Consequences of non-extension or even delays of the extension would be too ghastly to contemplate. Layoffs are already looming. Job losses, shutdowns and economy slowdown are inevitable. The above scenario would be exacerbated by the expiry of the Multi Fiber Arrangement, come January 2005.

Chair, this bill will, to a large extent, ameliorate the impact of the above phenomenon. This bill injects hope in the masses of our countries. It is a bill of hope. The hope-of integrating 80 percent of the world's LDCs onto the mainstream of world trade, the hope of fighting HIV and AIDS in the world's most infected countries, the hope of eradicating poverty and joblessness in those countries-lies in the passage of this bill into law. One could not agree more with Section 2 of the bill on findings. Those 10 findings within the bill are nothing else but the truth. The policy statement gives courage and hope to all of us, and Congress's support of the may aims of (NEPAD ?) are really encouraging, more so, of course, the 10 clearly spelled out ones, best testimony to get good intentions and support that the American Congress and people are willing to give to Africa.

Inclusion of expansion of social services, education and health, with priorities to addressing HIV/AIDS, malaria and tuberculosis are to be commended. Addressing agriculture on special-on sanitary and phytosanitary standards and capacity building says to all of us at last, at long last development to the masses, targeted to the masses, since most of the sub-Saharan African economies are centered on agriculture, with my own country, Lesotho, having 85 percent of its population rural.

Chair, as indicated, the bill is a bill of hope. One cannot overemphasize the urgency of having this bill in the statute book by June 2004. We would also like to record our appreciation of development dimensions of the section of the bill in reaction to the technical assistance provisions that will make it easier for sub- Saharan Africa to develop the framework to participate in the benefits and take full advantage of the proposed extension by three years of the third country fabric provision.

In conclusion, I would like to reiterate that AGOA has facilitated new investment, created jobs, and helped form commercial linkages that continue to foster new investment opportunities and increase prosperity in sub-Saharan Africa over the long term. We have seen in Lesotho $140 million investment in a denim mill that is now bringing about interregional trade, with over 50,000 metric tons of cotton per month from the region. Chair, we remain confident that our hopes will turn into reality and that this bill of hope will be treated the way the agency deserves and move through both houses by June this year, allowing even those sub-Saharan states that are still to benefit-to be certified and benefit of this great initiative to come on board. I thank you, Chair.

REP. CRANE: Thank you, Minister Malie.

And now Minister Cuttaree, if you will please make a presentation.

MIN. JAYAKRISHNA CUTTAREE: Thank you very much, Chair and members of the committee, for giving me the opportunity to talk to you this afternoon.

The enactment of the African Growth and Opportunity Act in May 2000 was a bold new step in the economic relations between the United States and sub-Saharan Africa. Until then, these relations had been based solely on aid and a rather condescending attitude towards Africa which could be summed up as benign neglect. In fact, very few, if any, departments of the U.S. administration had Africa desks and those that existed were of minor interest. Indeed, until the passage of the AGOA, there was no Africa desk at the U.S. Trade Representative's Office, which reflected this unwillingness to consider Africa, and sub-Saharan Africa in particular, as a serious economic partner for the United States.

AGOA introduced a new concept, that through trade and commercial development there could be created sustainable economic development in Africa. Through the development of trade between the USA and Africa, genuine jobs could be created, a manufacturing basis could develop, women could play a greater role in the economic development of their country, and African countries could participate in the global economy. The spin-off from this development would be greater investment in infrastructure, the higher demand for education to have skilled workers, and the growth of both political and economic democracy.

The success of AGOA has gone beyond the hopes of its promoters. Hundreds of thousands of jobs have been created in Lesotho, Kenya, Botswana, Mozambique, Madagascar, Senegal and Mali. New opportunities have been created from automobile production by BMW in South Africa, to information technology development in Senegal and Ghana. Africa has ensured an effective presence in Washington through the African Ambassadors' Group in the U.S. capital, which allows to increase the flow of money and interest into Africa in such sectors as the fight against HIV/AIDS and the combat against poverty.

Indeed, while AGOA I was enacted in May 2000, there has now been an AGOA II also enacted and an AGOA III which is presently making its way through Congress. This reflects the dynamic relationship between the USA and Africa and the extension and expansion of economic partnership between the two continents. We certainly hope that this dynamism will continue and extend AGOA to the most important area of African concern, agriculture, so that our continent can change from being a net food importer to again being a major food exporter to the world.

Certainly, textile and apparel have helped African countries to develop, but until the fundamental issue of agricultural production and export is faced and achieved, Africa will remain the poor relative of the global economy.

At the present time, however, African countries are faced with a serious dilemma.

Almost all sub-Saharan African countries are allowed to use fabric from anywhere in the world to start up their clothing industry. This provision ends on the 30th of September, 2004. The hundreds of thousands of jobs referred to above are now in serious jeopardy if this provision is not renewed. That will not only create serious economic hardship for the infant industries in sub-Saharan Africa but will also certainly create political and social disruption for those countries that have begun their manufacturing development. With the end of the Multi Fiber Agreement on the 1st of January, 2005, these African countries will be faced with direct competition from the traditional major exporters such as China, India and Pakistan, which all have integrated industries, producing their own cotton, spinning and weaving and then making the clothing. Unless urgent action is taken to pass AGOA III, there will be serious effects on African textile and clothing production.

Chair, AGOA has been a catalyst for new thinking in Africa. Its provisions not only require that African countries take concrete steps towards political and economic democracy, but they encourage an essential element in the African renaissance, which is the steady movement toward regional integration. The drive by regional trading blocs such as SADC, COMESA and ECOWAS to lower tariffs among themselves has resulted in an increased total intra-African trade volume and in an increase in the proportion of recorded trade. This means that African governments are gaining an increased revenue from legitimate trade between our own countries.

AGOA is the keystone of the economic partnership between the USA and Africa. It has encouraged a sea-change in these relations by forcing the U.S. administration to take Africa seriously and to create specific departments in the executive. It has managed to create a bipartisan coalition in Congress and ensured that help for poorer countries can transcend political divides in the United States. It has empowered African countries in the reality of new businesses and investment but also in the ability of Africa to be heard on Capitol Hill and within the U.S. administration. Indeed, with AGOA, we certainly believe that a new dawn has opened in U.S.-Africa economic relations.

Thank you.

REP. CRANE: Thank you very much, Minister Cuttaree, and now Ambassador Nzibo.

AMB. YUSUF ABDULRAHMAN NZIBO: Mr. Chairman, members of the House Ways and Means Trade Subcommittee, on behalf of the African Diplomatic Corps, the people of Africa, and the governments, I thank you for giving me this opportunity to speak on behalf of millions of Africans whose lives depend upon this particular bill, an extension of AGOA. I'm here especially to speak on behalf of millions of women and children in Africa whose lives and expectation and hope lie on the extension of AGOA. By empowering women and children, you are giving us not only hope but you're giving us an opportunity to sustain those values of democracy and good governance that you so much love.

Let me first start by acknowledging the good work that this committee does, and especially you members of this committee. You have been the champion of our causes in Africa. You know best how much AGOA has done for us, and especially our women. By empowering our women, you're empowering a continent. From the shores of Senegal, to the Table Mountains in South Africa, AGOA has brought not only hope but tremendous change in our lives, and therefore our hopes lie on you to give us this opportunity.

Many countries in Africa today are going through democratic changes. Peaceful transition of powers have taken place and are aggressively looking for trade and investment opportunities. As we've heard, regional integrations are bringing new hopes for our people. In my own country, Kenya-Kenya has been a good example of the current democratic change that has taken place, empowering our people to fight against corruption, fight against terrorism. AGOA has brought new life, new expectations, created more jobs across the whole continent, created better livelihoods, given our people opportunity to acquire education and means of survival. The women are a backbone of change, and AGO has given them that opportunity, for if you empower them, you're empowering a continent of the future.

Mr. Chairman, we cannot talk of the U.S.-Africa relations without talking about AGOA. AGOA for us is more than just a trade bill. It has become a credible source of hope, an effective tool to fight hunger, poverty, diseases that affect over 700 million people. If you are to fight HIV/AIDS effectively, malaria, tuberculosis and other infectious diseases, it is only through AGOA that we can bring hope to millions of Africans.

The changes that have taken place in the last three years have been incredible. We've seen new foundations being laid and formidable relationships between the U.S. and Africa. This partnership brings hope and expectation, for it has transformed millions of lives of Africans, created opportunities and better relationships between government and their people.

Mr. Chairman, success stories in Africa cut across. In my own country, Kenya, for example, since I became a leader before AGOA in 2001, we've created over 150,000 jobs, textile exports have more than quadrupled. We've seen investments increase by over 23 percent, and this story can be told across the continent. Most important, thousands of people across the continent have become much more happier, healthier, productive, and are able to acquire basic means of survival. Women are able to find better jobs and investments, and their incomes and their families' lives have improved.

And these stories can be told across the continent, with greater technical assistance. And I'm thankful that this has received bipartisan support. Across this country our women have come and have acquired means of trade, and capacity building has been improved. And we hope that by extending AGOA, these opportunities will be given to us.

However, if this bill is not passed and changes are brought abruptly, all the positive things that we talked about, it will bring a lot of frustrations in the fight to sustain democracy to fight terrorism, and give opportunity to our people. AGOA, therefore, brings real and sustainable change for Africa. It is my humble opinion, Mr. Chairman, as I take my new job as ambassador to Saudi Arabia and Iraq next week, that you will give us this hope of changing and bringing a better life for Africa. This is a win-win situation for both Africa and the USA.

Thank you.

REP. CRANE: Thank you, Mr. Ambassador.

Minister Malie, Lesotho has been very successful under AGOA and is achieving the results that Congress intended, namely attracting new investment, establishing manufacturing facilities and in textiles, beginning to create a vertically integrated industry. What challenges did you face in taking advantage of the AGOA program and how did you overcome them? Also, what advice would you give to other African countries that have not been as successful as you have?

AMB. MALIE: Chair, I would first of all like to indicate that we addressed ourselves as government to issues of stability, good governance. We came up with anti-corruption laws and made sure that we create a conducive environment for investment within the country. We have made efforts to come up with the correct infrastructure to enable the investors to move in, and also to come up with the correct legal framework in terms of investment, in terms of competition, in terms of security on investment to try and attract those. But the core issue really is peace and stability and the rule of law. And I think that has been one of the major contributing factors to us seeing investors coming into the country.

We have certainly experienced a lot of problems, very serious problems indeed, in terms of the infrastructure. We haven't been able to provide the kind of infrastructure that is needed in terms of utilities, in terms of the roads, in terms of the factory shells that investors are looking for. And we have a lot of investors that are there in the pipeline and we haven't experienced the growth as much as on paper and on the ground we've experienced it, but I think there is better potential in the building.

The fact that is addressing infrastructure issues is going to be of great assistance to all of us.

But I'd like to say to everybody within the region that stability and the rule of law are major issues in terms of the ingredients that we need to be able to attract FDIs.

REP. CRANE: Very good.

Minister Cuttaree, I know that Mauritius benefits from the EU sugar program. But how are EU and U.S. agricultural subsidies impacting the rest of Africa, and isn't it in Africa's interest to cut those subsidies?

MIN. CUTTAREE: Indeed, sir. Well, since you mentioned the sugar industry of Mauritius, you know that historically Mauritius was in fact colonized for its-and then the people who came in there lived off the sugar industry, and that for years we've been selling our sugar to the United Kingdom. And when the United Kingdom joined the European Union, the access of the Commonwealth countries, essentially Mauritius and some Caribbean islands, was guaranteed. And this is how we benefit from the same prices and a quota which the European farmers get.

But obviously, you know, we are living today in a very dynamic situation. And the-we all know that pressure within Europe on the prices and the major subsidies paid to the European farmers are actually very strong. And we know that with the pressures of the level of the WTO, inevitably there will be reductions in domestic support and subsidies, both in the United States and in Europe. And this is why in Mauritius today we are reforming our industry, we are making it more competitive, we are making it a leaner and more technologically-driven industry. We are going into other production, like gas and coal to produce energy. We are going into ethanol.

So we are going away from the sugar industry to a sugarcane industry. That is-the end product is no longer the sugar now. So we think that within a few years' time, we'll be able to wean away from our dependence on the European market and be a more global player. But this demands resources, this demands energy and vision, and we are trying to do it this way.

Evidently, as spokesperson for Africa, I said in my statement this afternoon that the key export of Africa will be agriculture. And this is why we support the bipartisan approach which has been developed-or which is being developed now between the European Union and the United States. And why we don't go much beyond that, I think it is because we feel also that there are certain dangers at the same time, because Africa, as my colleagues have explained, we need infrastructure. We need the capacity to produce, not only for our market but we need to be able to export competitively, and this demands infrastructure: roads, ports, skills, sanitary and phytosanitary ability. All these problems take time, and this is why we welcome that through a program like AGOA, we are going in this direction to build this capacity building.

But the fear is also that if you have a very quick liberalization of agricultural trade, we in Africa, we might find ourselves in a situation where before we can actually prepare ourselves to export to the world market, we find larger developing countries like Brazil or others taking the market, which is being opened essentially for us.

Thank you, Chair.

REP. CRANE: Thank you, Mr. Minister.

Ambassador Nzibo, Kenya has been playing a very constructive role in the WTO recently, and can you comment on how your country hopes to benefit from negotiations in the WTO and from liberalization of trade worldwide?

AMB. NZIBO: Mr. Chairman, as you are aware, Kenya, like all other African countries, in the last few years has gone towards-has made tremendous change towards reaching out not only to the region, being part of COMESA, but also trying to export to the rest of the world. We've been very active in WTO negotiations and also very active in negotiations with the U.S. authorities.

Our hope lies in diversification. We are an agricultural country like most African countries. We want to diversify. We have an infant industry. Our textile industry, as you know, Mr. Chairman, was almost collapsing. It is AGOA that has brought hopes, created millions of jobs, and the spiral effect of AGOA has been tremendous. We depend very heavily on tourism, Mr. Chairman. And unfortunately because of the threats of terrorism, our tourism industry is badly affected. We're now trying to diversify and believe it's only through trade and through negotiating effectively with African partners in the world trade and through fair means of trade that hopes can begin to flow, not only to Kenya but to the rest of the continent.

Thank you.

REP. CRANE: Thank you, Mr. Ambassador.

Mr. Rangel.

REP. RANGEL: Thank you, Mr. Chairman, and thank all of you for exciting testimony. It just makes us feel good to see democracy spreading the rule of law, improving the quality of life, improving the hope and the opportunities that are there. One of the major problems, political problems we have with most trade agreements is the failure to include basic labor standards in these bills and the countries that don't have laws or don't enforce their laws, and the conditions surrounding the work is generally-and the inability to organize and to strike and to get time off to be with their families and enjoy the profits of their work.

Could each of you briefly share with me the conditions at the workplace, whether there is a minimum wage or health benefits or mandatory overtime, if there is overtime? Just how have you improved the conditions of work for your workers?

Minister Malie, we can start with you.

AMB. MALIE: Thank you, Congressman Rangel. I would like to indicate that what we are doing in Lesotho, we have started sometime back now tripartite arrangement whereby government, the employees and labor come together to thrash out labor issues inclusive of minimum wages, conditions within the factories, and all the conditions and the compliance into the International Labor Organization pact. In fact, what we have done now, in my delegation I have a member of trade unions, a representative of the trade unions who has come along with us, because we make sure that in all our endeavors in terms of industrialization, labor is carried along.

The trade unions are free to move into factories, and we have in my delegation, again, the chairperson of the Lesotho Textile Exporters Association. And there's a close working together between labor, the employees and government in making sure that we respect the rights of our people who are working within those factories.

REP. RANGEL: Thank you.

AMB. MALIE: One thing that has helped us a lot is the visa situation within AGOA where you are afraid to move in an check on these issues of labor and environment to make sure that we are complying and we are doing the right things within our economies.

REP. RANGEL: Thank you.

Minister Cuttaree.

MIN. CUTTAREE: Thank you, sir. I think we all know that Mauritius has had a very long tradition of democracy and of freedom of association. In fact, the concept of freedom of association is enshrined in our constitutions. Therefore, trade unions have been a part of the political and economic landscape of Mauritius for decades. Today, in fact, the trade union movement is considered as a partner with the government and also with the private sector. And full tripartite meetings, for example, to decide wages compensation is done regularly before any budget is presented.

At the same time, we have a National Economic and Social Council, which is a forum for tripartite dialogue on matters of economic interest, where government, private sector and the trade union movement meet regularly to discuss economic orientations for the country. We also have a Trade Union Trust Fund, which is there to ensure-which gets grants from government but which is run by the trade union movement for the training of trade unions, because we believe, of course, that the trade union movement should be a movement to fight for better conditions of work for workers, but that it would also be a partner in the development of the country.

And also we have remuneration orders, which is legislation which governs every economic sector of the country for the private sector-not for the government, for the private sector-where the conditions of work, the wages, minimum wages, are laid down, overtime work is controlled, holidays, meal allowance and clothing allowance, everything is in the law. And we have a very strong labor department which ensures that the law is respected. We also have a court, a labor court, which deals expeditiously with matters concerning violation of labor laws. And the irony of it all is that today we are being told that if you want to progress further on the path of economic development and to integrate more the global system, we need to have more flexibility in our labor legislation.

Thank you.

REP. RANGEL: Thank you.

Mr. Ambassador.

AMB. NZIBO: Honorable Rangel, let me first acknowledge the leadership of the champion for the common man. And I think your question has to do with the plight of the common person in Africa. As you know, Kenya has had a very strong tradition of trade unions. In fact, before we were allowed to form political parties, we were allowed to form trade unions. And we've had a stable country, and changes that we went through that brought in a democratically elected government, peacefully elected government. Kibaki was elected overwhelmingly on the hope of bringing change, and part of it to bring change for the thousands of employees in industry and the agricultural sector.

We had a problem with the export processing zones where workers were not allowed, but Honorable Kitui (ph) worked very hard two years ago to bring that change to allow workers in the trade union movement to form trade unions, to join trade unions, and we have a very strong textile trade union that has worked in all the sectors. So we don't have labor problems in Kenya. The NGO community also has been a very strong watchdog in terms of the rights of the workers. So I'd like to assure you that the interest of the workers-and the workers themselves are fighting very hard to ensure that they have the (approve ?) of places. They have a very skilled labor force, well- educated, and they're free to form and join any union.

Thank you.

REP. RANGEL: Lastly, do you know of a mandatory seven-day week work in your countries in certain factories where the workers have to work seven days, nine, 10, 11 hours a day? Do you know of any circumstances where employees are forced to work seven days a week, I'm asking?

AMB. NZIBO: No, sir. The only thing I know is that the workers are free to accept overtime.

REP. RANGEL: Okay.

Thank you, Mr. Chairman.

REP. CRANE: Thank you.

REP. JENNIFER DUNN (R-WA): Thank you very much, Mr. Chairman.

And thank you, gentlemen, for being with us today. It is a great honor to be an original cosponsor of AGOA III. And, Ambassador Nzibo, you articulated something that occurred to me, as I've heard testimony on AGOA, and that is your comments that by empowering our women, you empower our continent, and that's, I think, a very important perspective, and I like hearing that and I like the fact that you are focused on that. I think that's very important.

I have a couple of questions, and I'm wondering-I would like to focus on the fact that AGOA III does not make the third nation fabric benefit retroactive. And I'd like to hear each of you state what the pros and cons of making this benefit retroactive are, particularly if we're not able to get this trade agreement passed before September 30th of this year. Could you go over some of the plusses and minuses for us, please? Minister Malie, would you like to start?

AMB. MALIE: Thanks. Thank you very much. I think the most important thing is to send out the right signals to the buyers. We are already experiencing a lot of problems because of the uncertainty of the extension of the third country fabric sourcing arrangement. As I'd indicated, we have cancellations and orders that have been put in abeyance to the tune of $40 million U.S., which affects about 23 factories and about 37,000 jobs in those factories.

What the major problem is currently is the buyers. There is that fear from their part that if we go ahead and there is no retroactive clause to this, or there is no extension, what is going to happen to those orders that we are going to be placing and are going to be arriving in the United States after September 30th? So I think the major issue is sending out the right signals to the American buyers. And the bill-they are hanging on the bill becoming law before September-in fact, before August, because by then some of these orders would have been shifted on to Asian manufacturers. So really, for us, there is a great urgency to see that the bill comes into law by-circumstances allowing by the end of June. That would assist and alleviate the programs that are there on the ground. The buyers are highly sensitive to the process.

MIN. CUTTAREE: Thank you. Well, as you know, I am the minister of foreign affairs and international trade of Mauritius. But as you also know about Mauritius, we don't benefit from the third country fabric provision. But nevertheless, I think that it's a very important issue you raise, because the whole question is the psychology-to me, the psychology of the buyer. When a buyer is trying to place an order, he wants to know at the end of the day, what is the price he's going to pay. And if he doesn't know that the third country fabric is going to be renewed and that he's going to be able to buy duty free, it will be very difficult for him to decide to place an order.

Theoretically, the proposal you made concerning retroactive effect can help, but certainly I think-I mean, I don't live in the United States, but I understand that the legislative process in the United States is very complicated. And there is no certainty-although there can be lots of support for a measure-but there is no certainty until that measure is passed. And if I were a buyer, I wouldn't bank on the retroactive effect actually being voted. And in a situation like that, the orders might go elsewhere.

Thank you.

AMB. NZIBO: I'd like to echo the sentiment of my honorable ministers here. As you are aware, one of the biggest problems really for AGOA has been capacity building. And I'd like to thank particularly Ambassador Zoellick and his able staff, especially Ms. Holly Lyza (ph) and also Rosa Witzka (ph) for giving-especially women-that opportunity for training, the capacity. And as you know, many of us depend on third country fabrics. We don't have that capacity yet. And if this acceleration bill is not passed by then, it will mean rolling back all the positive effects of what AGOA has done for many countries.

So my opinion is that it should be passed, in fact, immediately to enable the good work that the U.S. has enabled Africa to do to continue, especially in empowering our people and in opening up democratic change.

Thank you.

REP. DUNN: Thank you, gentlemen.

And, Mr. Chairman, I certainly would urge that we put our shoulders to the wheel, and together with your strong sponsorship and the championship of Mr. Rangel and others on this committee, that we get this important trade agreement passed as soon as possible.

REP. CRANE: I couldn't agree with you more. Thank you.

Mr. Jefferson.

REP. WILLIAM J. JEFFERSON (D-LA): Thank you.

Honorable ministers, your excellency, Mr. Ambassador, you've been wonderfully brilliant and articulate advocates for the extension of AGOA and for the good work that AGOA has already accomplished in your countries, so thank you very much for your testimony.

I noticed that under the experience that we've had so far, a great deal of the exports, AGOA exports, have been in energy and energy related areas and the rest-the largest then after that has been in the apparel area. When you look at what's allowed in now, footwear, luggage watches, certainly electronic products and steel products, very important products.

My question is, if we-if this bill is extended, and I believe that it will be, what do you see as what we need to do to get Africa engaged in bringing in some of these other highly valuable products in this marketplace?

Minister Malie, or whomever?

AMB. MALIE: Thank you very much, Congressman Jefferson. But I think in the case of Lesotho, what we did because of that lack of capacity on the ground and the issues of supply chains, what we decided, we'd focus deliberately and consciously on textiles, because of their nature of being labor-intensive and creation-the volume that we're able to create in terms of employment on the ground are fairly substantial. We had an unemployment rate of 45 percent within the country and we had to target an area and put our efforts in an area where we think we'd be able to reap benefits and get results out of.

But what we are also doing, we are trying to diversify on the ground. And one area that we think we should be through the extensions, both the third country fabric sourcing, and also extension of AGOA beyond 2008. It's to move into the area of agriculture and develop other industries within the country. We had been exporting asparagus to Europe and canned peaches and beans within the region. And we would like to go out and concretize and stabilize that area.

Another area that we've been doing fairly well recently in is in electronics. We have a factory that has opened up in TV manufacturing. But we are selling those within the region, within South Africa. But I think we would like to take full advantage of the extensions and try and make sure that in terms of agriculture and in terms of electronics, we explore the U.S. market as well.

REP. JEFFERSON: Thank you.

AMB. MALIE: And that capacity building within AGOA III is --

REP. JEFFERSON: We'll have to do that, yeah. Thank you.

MIN. CUTTAREE: Thank you very much. I think there are two issues which are responsible for the situation we find ourselves in in Africa. First of all, direct foreign investment, and the level of skills, I think. And the two are interlinked. If you look, for example, at the history of industrialization of my own country, Mauritius, in the late '70s when the tensions started to come within Asia, China, Hong Kong, Taiwan, and at the same time, when the Hong Kong companies couldn't get further market access in Europe and in the United States because of the quota system, these people that came to Mauritius because of the stability we had, political and economic stability, and there was also lots of labor available at cheap rates and labor which was educated.

And these people that came in, they bring in with them their plants, their market, and their know-how, and the use the people there. And gradually the local Mauritians, especially people in the sugar industry, where there was-who had funds available-they invested it in the textile sector and then ultimately in the tourism sector, and you had the development, because in Mauritius we generated our own investment funds from the proceeds of the sugar industry.

Now, today, if you want to go into some other area, it is very difficult for an entrepreneur form one of our countries to understand the markets like the United States. But if it is-a foreign investor comes, he brings with him the knowledge of markets, which is extremely important. And he also knows about the technology. And he comes with that and he uses the people there and all of the resources available. And, unfortunately, the problem of diversification of production in Africa today is due to a large extent to the fact that there is no investment going into production of goods in Africa today. As we all know, if you look at the figures, most of the investment going into Africa has been in extractive industries. And this is why under AGOA we've been trying to lobby to get more investment coming from the United States into our country.

Thank you.

REP. JEFFERSON: Thank you.

AMB. NZIBO: Honorable Jefferson, let me first acknowledge your leadership in bringing investments to Africa. In the last four years I've been here, I've interacted with you and I know the good work you're doing.

REP. JEFFERSON: Thank you.

AMB. NZIBO: What Africa needs is American investment for us to be able to diversify. AGOA has given us that opportunity, but we still lack American investments. I know Colin Powell-secretary of State, the Honorable Colin Powell says capital is shy. We are creating all the conducive conditions to attract American investment. The rate of return on investments in Africa are very high. Many of our countries are very heavily dependent on agriculture, including Kenya. Unfortunately, our markets are Europe. We have not been able to penetrate this market because of lack of good communications, direct links between Africa and the U.S. And I know you are working also in this area, but we need to do more of that.

We have very good horticulture products that are covered by AGOA, flowers and all that, and we would like to see whatever is provided in AGOA that Africa takes advantage. But the biggest problem really has been the capacity, especially to meet the conditions, the high standards of the U.S. And I'm happy that Africa is receiving that technical support and we will we ask for more.

Thank you.

REP. JEFFERSON: Thank you very much.

Thank you, Mr. Chairman.

REP. CRANE: Well, let me express my appreciation to all of you for your presence here today and your testimony, and ask you if you will to please consider, depending upon the time permitted to you, to communicate to other colleagues, members of Congress, the importance of this legislation. And we look forward to getting this bill passed as quickly as possible. And I thank you for your presence here to date.

Mr. Rangel.

REP. RANGEL: Thank you. It would be helpful if you could ask your embassies to forward to us any literature you have as to the working conditions and the opportunity for people to have free association, because that is the biggest obstacle that we have to overcome, how you treat your workers? Okay.

MR. : Thank you.

REP. RANGEL: Thank you.

REP. CRANE: Thank you so much.

(End Panel Two)