October 22,1999

Roth Urges Senate to Take up and Approve his Africa Trade Manager's Amendment

WASHINGTON -- The Senate Friday debated whether to proceed to H.R. 434, "The African Growth and Opportunity Act" and take up Senator Roth's manager's amendment, entitled "The Trade and Development Act of 1999." Roth's amendment would:

• encourage increased trade and economic cooperation between the United States and sub-Saharan African ("SSA") countries

• enhance trade benefits for the countries of the Caribbean Basin

• reauthorize the Generalized System of Preferences program

• reauthorize the Trade Adjustment Assistance programs

Senate Finance Committee Chairman William V. Roth, Jr. (R-DE) today urged the Senate to take up and approve this legislation. He delivered the following statement on the floor of the Senate:

"Mr. President, I rise in support of the motion to proceed to H.R. 434. As Senator Grassley, Chairman of the Finance Committee's Trade Subcommittee, indicated last night, I will offer a manager's amendment - to be titled the Trade and Development Act of 1999 -- as a substitute for the House-passed language.

"That Act will include the Senate Finance Committee-reported bills on Africa, an expansion of the Caribbean Basin Initiative, a reauthorization of the Generalized System of Preferences program, and the reauthorization of our Trade Adjustment Assistance programs. I want to explain the intent behind these measures and my reasons for supporting their passage.

"Let me begin with Africa. No continent suffers more from poverty, hunger, and disease. Those problems have been compounded by colonialism, Cold War politics, corruption, social division, and environmental disaster. Our daily news records the desperate images of starving mothers and their children, small boys employed as the dogs of war, and the slaughter of wildlife as poachers attempt to eke out a living on the bare plains of Africa.

"The result has been the lowest living standards and the lowest life expectancy of any in the world. Those conditions have too often reinforced a dangerous cycle of war, political instability, and economic decay.

"What the daily news has too often overlooked are the efforts of so many of our African neighbors to restore political freedom, guarantee human rights, and foster economic hope.

"In the past decade, we have seen an end to apartheid in South Africa and the peaceful transition to black majority rule. We have seen Nelson Mandela go from political prisoner to president.

"We have witnessed the more recent restoration of economic links between South Africa and the former 'front-line states,' between Uganda and Tanzania, and between the Sub-Saharan region and the rest of the world. We have benefitted from the example of courage and dedication that many Sub-Saharan African states have provided as they confront the daunting challenges they face.

"We have also seen nothing short of a revolution in economic thinking. Africa has too frequently been the beneficiary of bad economic advice from well-meaning international institutions, technical advisers, and even creditors.

"That advice often encouraged crushing debt, confiscatory taxation, growth-killing devaluations, inefficient state-owned enterprises, and economic mismanagement. For too long, our African neighbors have been encouraged to adopt models of economic development that have, in fact, wasted their most valuable resource -- their people.

"That era has now come to an end. The new Africa is tackling its own problems and the new Africa can be the master of its own economic destiny.

"It is in that context that the African title of the Trade and Development Act is relevant. It offers tariff preferences to Sub-Saharan Africa that will encourage the economic foundation on which the eligible countries can build their own future. Equally important, it reflects a belief in the power of markets, incentives to investment, and human potential.

"That approach enjoys broad bipartisan support in both houses of Congress and by the President, who mentioned the bill as one of his top foreign policy and trade priorities in this year's State of the Union address. As the chart behind me attests, the legislation also enjoys broad support in the business community, among U.S. and foreign opinion leaders, as well as, most importantly, from the potential African beneficiaries themselves.

"Numerous U.S. businesses and business groups have expressed their support for moving this legislation. That group includes companies as diverse as Oracle, Cargill, General Motors, Enron, and The Limited.

"The list of supporters includes the NAACP, the Southern Christian Leadership Conference, and the National Council of Churches. It includes opinion leaders such as Nelson Mandela, Coretta Scott King, the Reverend Leon Sullivan who led much of the fight in this country to force change in South Africa under apartheid, and Robert Johnson, the founder of Black Entertainment Television who appeared before the Finance Committee in support of the legislation. And, most importantly, the legislation is endorsed by all 47 of the potential beneficiaries in Sub-Saharan Africa.

"The bill deserves our support as well.

"The Trade and Development Act of 1999 would do much the same for the Caribbean and Central America that it would do for Sub-Saharan Africa. It expands the existing benefits available under the Caribbean Basin Initiative program to include the duty-free and quota-free treatment of the value added in the Caribbean to apparel made from U.S. yarn and U.S. fabric.

"It is no understatement to say that the countries of the Caribbean and Central America have faced problems similar to those faced in Africa, and oftentimes on a similar scale. It was only a decade or so ago that Nicaragua was an avowedly Marxist state harboring guerrillas that sought to undermine the governments and economies of Central America. It was only a decade or so ago that El Salvador was confronted with bloody civil strife and a mass migration of its people northward to escape the conditions of poverty and hopelessness that recurring civil war had brought.

"More recently, the region has been hit by natural disasters, rather than the man-made variety. This past year, Hurricane Mitch devastated the islands of the Caribbean and the countries of Central America. Among the hardest hit were Honduras and Guatemala, where farms and factories were literally washed away overnight. Both countries confronted the need to rebuild their economic infrastructure from the ground up.

"Since 1983, the countries of the region have been eligible for enhanced tariff preferences under the Caribbean Basin Initiative. The CBI was expressly designed to encourage private investment and an economic partnership between the firms in the United States and firms in the Caribbean. The CBI accomplished that objective.

"In 1993, however, with the conclusion of the NAFTA, the margin of preference enjoyed by the CBI beneficiaries was undercut by the preferential treatment accorded Mexican goods under that agreement. That was particularly significant in the area of textiles and apparel, where the NAFTA rules of origin gradually encouraged a shift in U.S. investment and trade from the region to Mexico.

"In order to make good on the initial promise of the CBI, the Caribbean title of the manager's amendment would encourage the manufacture in the Caribbean Basin region of apparel articles made from U.S. fabric woven with U.S. yarns. In effect, the bill would simply restore the margin of preference it previously enjoyed in the region in such manufacturing.

"At this point, it is worth outlining the reasons why the Finance Committee settled on the particular package of benefits extended to textiles and apparel under both the Africa and CBI titles of the manager's amendment.

"For many years, we have employed a program that encouraged production sharing between the United States and many countries in the developing world. That program - generally known as the '807' program - allowed for the export of U.S.-manufactured components off-shore for assembly.

"Under the '807' program, when the assembly was complete and the goods were returned to the United States, the importer paid duty only on the amount of value added offshore in the assembly process.

"Do such programs work? The answer, based on the latest reports of the International Trade Commission, is an unequivocal yes. They work for both the beneficiary countries and for American firms.

"Production sharing programs, according to the ITC, are used by American companies to minimize their overall costs and improve competitiveness. Indeed, in most instances, American firms experience 'enhanced overall competitiveness' that 'allows companies to maintain higher U.S. production and employment levels than might otherwise be possible.' In short, the programs reflected in both the Africa and CBI titles of the manager's amendment are designed to create a 'win-win' outcome for the regions and for American firms.

"The American textile industry's latest analyses vindicate the approach we adopted in the Finance Committee.

"I think it is fair to say that when we started the process of considering these programs for Africa and the Caribbean in the 105th Congress, the textile industry was lukewarm at best. What they have found in the intervening three years is that the bill proposed by the Finance Committee would help create a competitive platform from which American firms could compete effectively on a global basis even in the face of fierce competition from exporters such as China and India.

"According to the respected industry consultant, Nathan Associates, the Finance Committee bill would 'increase U.S. textile shipments by $8.8 billion and increase U.S. textile and textile-related employment by 121,400 by the end of five years.'

"That result led the President of the American Textile Manufacturers Institute, Doug Ellis of Southern Mills, to conclude that the Senate Finance Committee bill would have a 'very strong and direct positive impact . . . on U.S. textile production and jobs.' He indicated that the legislation will 'significantly enhance' trade between the United States and the beneficiary countries. For that reason, ATMI, urged the Congress to support the Finance Committee's bill.

"What is more, U.S. wholesalers, retailers, and consumers benefit as well. The direct effect of the duty preferences extended under the manager's amendment will be to lower the cost of apparel products sold in the United States as cost savings are passed on to the consumer.

"The indirect effect is that, by ensuring the continuing competitiveness of the U.S. industry, the bill would also encourage continuing competition well into the future. That competition ultimately means a broader range of higher quality goods available to the consumer at lower prices.

"I want to pause here to reempha my basic point. Under the manager's amendment, everyone in the U.S. textile and apparel market - from the farmer growing cotton, to the yarn-spinner, to the fabric-maker, to the apparel manufacturer, to the retailer, to the consumer - wins under the Finance Committee bill. The same holds true for the beneficiary countries.

"Now, I would be remiss if I failed to mention two other particularly important provisions of the manager's amendment. The first is the renewal of the Generalized System of Preferences. The GSP program lapsed in June of this year. Much depends on its renewal.

"The program was designed to create an incentive to investment in the developing world. Since its inception in 1975, the GSP program has done just that. Now, however, in the absence of the renewal of the program, that needed incentive to productive capital investment will be cut off. Many American firms that depend on the GSP program will be hurt along with the beneficiary countries.

"The second additional item is the reauthorization of the Trade Adjustment Assistance programs. The TAA programs are designed to help U.S. workers and firms adjust to new levels of import competition.

"I have always maintained that those that benefit from trade should care for those who are hurt by the economic adjustment trade can engender. For that reason, I rushed to the floor to object when there was an initiative to do away with these programs in the past. In my view, the TAA programs represent a down payment on the commitment we must make to workers in the United States if we want them to join us in support of the benefits trade brings.

"In closing, let me urge my colleagues to listen carefully to the debate they will hear in the coming hours on the motion to proceed to H.R. 434. I firmly believe that my colleagues will hear no meaningful objection to the Senate Finance Committee's approach to providing additional trade incentives to Sub-Saharan Africa, the Caribbean, or the developing world generally through the renewal of GSP. Nor can there be any principled objection to the renewal of the TAA programs.

"This is a significant step in favor of engagement with our neighbors in Africa and the Caribbean to help them surmount their own economic problems. I urge my colleagues to vote for the motion to proceed to the bill."