African Growth and Opportunity Act (AGOA): Background and Reauthorization

Brock R. Williams
Analyst in International Trade and Finance

The African Growth and Opportunity Act (AGOA) is a non-reciprocal trade preference program that provides duty-free treatment to U.S. imports of certain products from eligible sub-Saharan African (SSA) countries. Congress first authorized AGOA in 2000 to encourage export-led growth and economic development in SSA and improve U.S. economic relations with the region. Its current authorization expires on September 30, 2015.

In terms of tariff benefits and general eligibility criteria, AGOA is similar to the Generalized System of Preferences (GSP), a U.S. trade preference program that applies to more than 120 developing countries. AGOA, however, covers more products and includes additional eligibility criteria beyond those in GSP. Additionally, AGOA includes trade and development provisions beyond its duty-free preferences.

U.S. imports from AGOA beneficiary countries (AGOA countries) represent a very small share (2%) of total U.S. imports and are largely concentrated in energy-related products. Oil is consistently the top duty-free U.S. import from AGOA countries, accounting for 86% of such imports in 2012. Among non-energy products, apparel is the top export for a number of AGOA countries. U.S. apparel imports typically face relatively high tariffs and are excluded from dutyfree treatment in GSP, but are included in the AGOA preferences giving AGOA countries a competitive advantage over other apparel producers. Still, only a handful of countries, primarily Lesotho, Kenya, and Mauritius, make significant use of the apparel benefits. Apart from apparel and energy products, South Africa accounts for the bulk of U.S. imports under AGOA. As the most economically-advanced country in the region, South Africa also exports a much more diverse range of manufactured goods than other AGOA countries; vehicles in particular have become a major South African export under AGOA.

Most observers agree that AGOA has successfully led to increased and more diversified exports to the United States from sub-Saharan African countries. Despite this, Congress may wish to address a number of issues and challenges as it considers possible reauthorization of AGOA. Among these challenges is how current and potential AGOA beneficiaries can better utilize the AGOA program and its duty-free benefits. Studies suggest that even among some countries that do make significant use of the AGOA preferences, the low-skill apparel production which AGOA has spurred has not led to the production of higher-skill manufactured products. Other issues relate to the non-reciprocal nature of the AGOA preferences. Some argue that the United States should focus more on two-way trade agreements with the region, particularly with more advanced countries such as South Africa, given improving economic conditions in Africa in recent years. The European Union (EU), for example, has negotiated Economic Partnership Agreements (EPAs) with several African countries that provide some reciprocal tariff benefits, potentially placing U.S. firms at a competitive disadvantage relative to European firms in some markets.


Date of Report: August 2, 2013
Number of Pages: 20
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Trade Adjustment Assistance for Firms: Economic, Program, and Policy Issues

J. F. Hornbeck
Specialist in International Trade and Finance

Trade liberalization can enhance the economic welfare of all trade partners, but it also causes adjustment problems for some import-competing firms and workers. Congress has responded to these problems with trade adjustment assistance (TAA) programs for workers, firms, and farmers. This report discusses the TAA for Firms (TAAF) program and related policy issues. Congress first authorized TAA in 1962, including a new firm and industry assistance program administered by the Economic Development Administration (EDA) of the U.S. Department of Commerce. It provides technical assistance to help trade-affected firms make strategic adjustments to improve their global competitiveness. The Trade Adjustment Assistance Extension Act of 2013 (S. 1357) was introduced in the 113th Congress, which would maintain current annual funding levels ($16 million for the firms program) through 2020. President Obama also has supported passage TAA reauthorization, linking it to renewal of Trade Promotion Authorization (TPA).

EDA has released four annual reports under the new statutory requirements that point to administrative and operational improvements. The FY2012 TAAF annual report notes that two years after completion of the program, on average, firm sales increased by 26.8%, employment rose by 13.2%, and productivity increased by 11.9%, better outcomes than the benchmark manufacturing industry as a whole. This outcome is reported as being particularly encouraging given TAAF firms have had such a high “survival rate,” and yet face the additional burden of all having to adjust to import competition compared to the benchmark. Still these numbers varied significantly from the year before, and despite the high success rate for firms that “completed” the TAAF program, it is important to note that they represent only about half of all firms that had their adjustment proposals approved for assistance. The rest left the program for numerous reasons without completing the adjustment plan and were no longer monitored.

To address the evaluation issue more completely, the Government Accountability Office (GAO) conducted a comprehensive evaluation of TAAF program in 2012. It found that EDA’s administration and evaluation efforts had improved markedly because of changes provided in the 2009 legislation. GAO also confirmed EDA’s assessment that trade-impacted firms benefitted from specialized attention provided by TAAF assistance, but to a lesser extent. GAO found a “small and statistically significant relationship between program participation and sales,” which was particularly relevant to smaller firms, albeit also highly correlated with firms operating in high-growth industries. Employment effects were not found to be statistically significant.

For a broader policy discussion on TAA, see CRS Report R41922, Trade Adjustment Assistance (TAA) and Its Role in U.S. Trade Policy, by J. F. Hornbeck. See also CRS Report R42012, Trade Adjustment Assistance for Workers, by Benjamin Collins and CRS Report R40206, Trade Adjustment Assistance for Farmers, by Remy Jurenas.


Date of Report: August 5, 2013
Number of Pages: 11
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ATPA Renewal: Background and Issues

M. Angeles Villarreal
Specialist in International Trade and Finance

The Andean Trade Preference Act (ATPA) extends duty-free treatment to certain U.S. imports that meet domestic content and other requirements from Ecuador. There were four countries originally designated to qualify for trade preferences under ATPA, including Bolivia, Colombia, Ecuador, and Peru. Colombia and Peru are no longer designated beneficiary countries because both countries have free trade agreements with the United States that have entered into force. In the case of Bolivia, trade preferences were suspended in December 2008 because Bolivia failed to meet ATPA eligibility criteria related to counter-narcotics cooperation. Bolivia may only be reinstated as a beneficiary country under ATPA if Congress approves legislation to do so.

The purpose of ATPA is to promote economic growth in the Andean region and to encourage a shift away from dependence on illegal drugs by supporting legitimate economic activities. ATPA (Title II of P.L. 102-182) was enacted on December 4, 1991. It was renewed and modified under the Andean Trade Promotion and Drug Eradication Act (ATPDEA; Title XXXI of P.L. 107-210) on August 6, 2002, extending trade preferences until December 31, 2006. Since that time, Congress has provided several short-term extensions of ATPA. The most recent extension took place on October 12, 2011, when the 112th Congress enacted implementing legislation for the U.S.-Colombia Trade Promotion Agreement (P.L. 112-42). As part of the free trade agreement (FTA) implementing legislation, ATPA was renewed for Colombia and Ecuador until July 31, 2013. The implementing legislation directed the President to terminate Colombia’s status as a designated beneficiary country once the agreement entered into force. The U.S.-Colombia FTA entered into force on May 15, 2012.

The impact of the ATPA on coca production in Andean countries has been small and mostly indirect, according to a 2012 study by the U.S. International Trade Commission. The study reports that illegal coca cultivation fell substantially in Andean countries from a 20-year peak of 232,500 hectares in 2007 to 187,000 in 2010. The study also reports that the ATPA, in combination with other alternative development programs, may indirectly have helped support job growth in certain exports from Andean countries, such as fresh-cut flowers, asparagus, bananas, and pineapples.

The trade effects of ATPA on the U.S. economy have been minimal because the amount of U.S. trade with the Andean region is low. The value of duty-free U.S. imports under ATPA accounts for about 0.8% of total U.S. imports, or 0.1% of the U.S. gross domestic product (GDP). Over 80% of U.S. imports from ATPA countries enter duty-free under various trade preference programs or through normal trade relations.

The 113th Congress may consider whether or not to continue renewing ATPA for Ecuador. Policymakers may also consider broader reform of U.S. trade preference programs, including the Generalized System of Preferences (GSP). Some Members of Congress maintain that ATPA has been responsible for helping the Andean region progress economically over the 18-year life of the program. Critics of ATPA argue that unilateral trade programs are ineffective and that trade preferences should not be extended to countries that do not support U.S. foreign and trade policies. The Ecuadorian government’s announcement that it no longer wanted to receive ATPA preferences may have overshadowed the debate for Congress on whether or not to renew ATPA. On June 27, 2013, top Ecuadorian government officials announced that the country was renouncing trade preferences from the United States under ATPA.


Date of Report: July 16, 2013
Number of Pages: 14
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Outsourcing and Insourcing Jobs in the U.S. Economy: Evidence Based on Foreign Investment Data

James K. Jackson
Specialist in International Trade and Finance

The impact of foreign direct investment on U.S. employment continues to attract national attention. While local communities compete with one another for investment projects, many of the residents of those communities fear losing their jobs as U.S. companies seek out foreign locations and foreign workers to perform work that traditionally has been done in the United States, generally referred to as outsourcing. Some observers suggest that current U.S. experiences with outsourcing are different from those that have preceded them and that this merits legislative actions by Congress to blunt the economic impact of these activities. Other observers argue that investing abroad by U.S. multinational companies impedes the growth of new jobs in the economy and thwarts the nation’s investments in high technology sectors. Some opponents also argue that mid-career workers who lose good-paying manufacturing and service-sector jobs likely will never recover their standard of living.

Economists and others generally argue that free and unimpeded international flows of capital ultimately have a positive impact on both domestic and foreign economies. Direct investment is unique among international capital flows because it adds permanently to the capital stock and skill set of a nation, but it also challenges the general theory of capital flows because of the presence of strong cross-border and intra-industry investment. Supporters contend that to the extent that foreign investment shifts jobs abroad, it is a minor component of the overall economic picture and that it is offset somewhat by the investment of foreign firms in the U.S. economy (referred to as insourcing), which supports existing jobs and creates new jobs in the economy.

Broad, comprehensive data on U.S. multinational companies generally lag behind current events by two years and were not developed to address the issue of jobs outsourcing. Many economists argue, however, that there is little evidence to date to support the notion that the overseas investment activities of U.S. multinational companies play a significant role in the rate at which jobs are created in the U.S. economy. Instead, they argue that the source of job creation in the economy is rooted in the combination of macroeconomic policies the nation has chosen, the rate of productivity growth, and the availability of resources. This report addresses these issues by analyzing the extent of direct investment into and out of the economy, the role such investment plays in U.S. trade, jobs, and production, and the relationship between direct investment and the broader economic changes that are occurring in the U.S. economy.


Date of Report: July 21, 2013
Number of Pages: 56
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U.S.-Taiwan Relationship: Overview of Policy Issues

Shirley A. Kan
Specialist in Asian Security Affairs

Wayne M. Morrison
Specialist in Asian Trade and Finance

The purpose and scope of this CRS report is to provide a succinct overview with analysis of the major issues in the U.S. policy on Taiwan. This report will be updated as warranted. Taiwan formally calls itself the sovereign Republic of China (ROC), tracing its political lineage to the ROC set up after the revolution in 1911 in China. The ROC government retreated to Taipei in 1949. The United States recognized the ROC until the end of 1978 and has maintained a nondiplomatic relationship with Taiwan after recognition of the People’s Republic of China (PRC) in Beijing in 1979. The State Department claims an “unofficial” U.S. relationship with Taiwan, despite official contacts that include arms sales. The Taiwan Relations Act (TRA) of 1979, P.L. 96-8, has governed policy in the absence of a diplomatic relationship or a defense treaty. Other key statements that guide policy are the three U.S.-PRC Joint Communiqués of 1972, 1979, and 1982; as well as the “Six Assurances” of 1982. (See also CRS Report RL30341, China/Taiwan: Evolution of the “One China” Policy—Key Statements from Washington, Beijing, and Taipei.)

For decades, Taiwan has been of significant security, economic, and political interest to the United States. In 2012, Taiwan was the 11th-largest U.S. trading partner. Taiwan is a major innovator and producer of information technology (IT) products, many of which are assembled in the PRC by Taiwan-invested firms there. Ties or tension across the Taiwan Strait affect international security (with potential U.S. intervention), the U.S.-Taiwan relationship, and U.S.- PRC cooperation. While the United States does not diplomatically recognize Taiwan, it is in reality an important autonomous actor. Today, 23 countries (including the Vatican) have diplomatic relations with Taiwan as the ROC. Taiwan’s 23 million people enjoy self-governance with democratic elections. After Taiwan’s presidential election in 2008, the United States congratulated Taiwan as a “beacon of democracy.” Democracy has offered Taiwan’s people a greater say in their status, given competing politics about Taiwan’s national identity and priorities. Taiwan held presidential and legislative elections in January 2012. Kuomintang (KMT) President Ma Ying-jeou won re-election against the Democratic Progressive Party’s (DPP) candidate.

Since Taiwan and the PRC resumed their quasi-official dialogue in 2008 under President Ma and cross-strait tension decreased, some have stressed the need to take steps by the United States and by Taiwan to strengthen their relationship to advance U.S. interests. Another approach has viewed closer cross-strait engagement as allowing U.S. attention to shift to expand cooperation with a rising China, which opposes U.S. arms sales and other dealings with Taiwan. In any case, Washington and Taipei have put more efforts into their respective relations with Beijing, while contending that they have pursued a positive, parallel U.S.-Taiwan relationship.

Taiwan’s President Ma Ying-jeou has sought U.S. support for his policies, including Taiwan’s inclusion in the U.S. Visa Waiver Program (VWP) (in 2012), the International Civil Aviation Organization (ICAO), and talks on maritime territorial disputes in the East and South China Seas. Taiwan and the Philippines are concluding parallel investigations into the incident on May 9, when the Coast Guard of the Philippines (a U.S. treaty ally) shot at a Taiwan fishing boat, resulting in the death of a Taiwan fisherman, Taiwan’s sanctions, and bilateral tension. Other policy issues include whether to approve arms sales, restart Cabinet-level visits, and continue trade talks under the Trade and Investment Framework Agreement (TIFA), or TIFA talks (resumed in March 2013). The United States has concerns about Taiwan’s restrictions on U.S. beef and pork, even as Taiwan has claimed attention to international organizations and standards.

Legislation in the 113th Congress includes H.R. 419, H.R. 772, H.R. 1151, H.R. 1960, H.Con.Res. 29, H.Res. 185, S. 12, S. 579, S. 1197, and S.Res. 167. Other congressional actions have focused on arms sales. (See CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since 1990.)


Date of Report: July 2, 2013
Number of Pages: 44
Order Number: R41952
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