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Oxfam Welcomes New Trade Proposal but Urges Improvements to Help Developing Countries

By Oxfam

Washington, DC—International aid agency Oxfam welcomed new trade legislation introduced by House Ways and Means Committee Chairman Bill Thomas (D-CA) but urged that certain provisions in the legislation be improved to offer more opportunity for the poor in developing countries.

The bill would extend for one year an expiring provision of the African Growth & Opportunity Act that enables apparel manufacturers in least-developed countries in Africa to use fabric from any country. This would encourage apparel companies to continue sourcing from sub-Saharan Africa, which is vital to preserving the jobs of thousands of workers, mainly women, who lack other economic alternatives. However, after October 1, 2008, apparel manufacturers would be required to switch to a stricter rule that requires at least 50 percent African-content (such as fabric and labor), gradually increasing to 60-percent by 2015. While Africa’s existing cut and sew operations could make up a certain percentage of the value-added requirement, the bulk would need to come from the new production of fabric in Africa.

“This temporary extension is critical today to ensure that the jobs upon which thousands of women depend for their livelihoods do not disappear tomorrow,” said Oxfam America President Raymond C. Offenheiser. “But we are concerned that this proposal could set the bar too high in too short of a time period for the struggling African apparel sector. Building up a viable textile and apparel industry takes many years and huge amounts of capital.”

The bill would also provide tax incentives to companies that invest in sub-Saharan Africa in sectors other than extractive industries and include Haiti into the grouping of developing countries that receive apparel benefits.

“Tax incentives to encourage companies to invest in sub-Saharan Africa are a welcome addition to the US’ development strategy for Africa.” said Offenheiser. “Extending duty-free benefits for Haitian apparel is a positive step, but we should simplify the rules to encourage sourcing from the poorest country in the Western Hemisphere.”

The bill also proposes a two year extension of the Generalized System of Preferences, which provides duty-free benefits for many products to over 100 countries. However, new restrictions would exclude certain sectors in India and Brazil from duty-free treatment.

“The continuation of duty-free programs like GSP provides the vital opportunity for developing countries to use trade as a way of achieving sustained economic growth and poverty reduction.” said Offenheiser. “But the exclusion of some developing countries from the GSP program is troubling, given the millions of poor people who are employed in sectors that directly benefit from duty-free benefits.”

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