Agoa extension ‘won’t help East Africa’

The East African | 25 December 2006

Agoa extension ‘won’t help East Africa’

By KEVIN J KELLEY
Special Correspondent

The recent approval of a five-year extension of permission to use foreign fabrics in Africa’s duty-free clothing exports to the US is seen by trade experts in Washington as helping to stabilise East Africa’s textile industries.

But the action last week by the US Congress is unlikely to reverse the downward trend in Kenya and Uganda’s apparel sales to the American market, the experts add.

East Africa’s clothing-export sector would have been devastated if the foreign-fabric allowance in the Africa Growth and Opportunity Act (Agoa) had been allowed to expire next year, as the law had stipulated.

Nearly all the apparel shipped to the US from Kenya, Tanzania and Uganda is made from cloth produced in Asia. Agoa exempts these manufactured items from US tariffs - a benefit that provides African exporters with a major advantage over competitors in other parts of the developing world.

Since Agoa took effect six years ago, Kenya’s annual apparel exports to the US have risen from $43.8 million to $270 million.

For Uganda, the corresponding figures are $13,000 and $4.8 million. And Tanzania’s apparel sales to the US grew from $41,000 in 2000 to $2.4 million last year. Kenyan officials estimate that 30,000 Agoa-related jobs have been created in the country since the start of the duty-free trade programme.

The economic gains reaped by East African countries as a result of Agoa will be at least partly preserved in the coming years due to extension of the foreign-fabric allowance through 2012.

Because the cotton-growing sector in East Africa cannot meet local demand, Kenya, Tanzania and Uganda all currently lack the wherewithal to produce their own fabrics.

The foreign-fabric extension, which is expected to be signed into law soon by President George W Bush, “will give us enough time as a country to develop our cotton sector,” says Peter Ogego, Kenya’s ambassador to the US.

But allowing Agoa-eligible exporters to continue using fabrics made in Asia actually discourages new investment in the African cotton-growing and fabric-manufact-uring sectors, says a trade association in Washington that lobbies to expand Agoa’s benefits.

The foreign-fabric extension will also do little to recoup the recent loss of US market share suffered by African apparel exporters, adds the Africa Coalition for Trade.

It notes that more than a quarter-million jobs have been lost in African clothing and textile industries due to the lifting of quotas last year on apparel exports to the US by giant Asian producers such as China and India.

Kenyan apparel sales to the US market fell $7 million in 2005 after years of rapid growth. Ugandan apparel exports to the US dropped to $1.2 million in the first nine months of this year, from $5.6 million during the corresponding period of 2006.

Agoa’s foreign-fabric allowance was very much in effect as these “staggering” losses occurred, the Africa Coalition for Trade points out. “It is painfully clear, therefore, that a simple extension of this provision will not staunch the flow of lost jobs and opportunities in Africa.”

“Africa cannot win a ‘race to the bottom’ in pursuit of low value-added manufacturing jobs against low-wage Asian apparel producers, many of which are state-subsidised or engage in unfair trade practices,” the coalition adds.

The Agoa amendments approved by the US Congress last week do include a few incentives for African fabric production.

For example, countries such as Kenya that produce denim will now be allowed to sell that material to blue jeans-manufacturers in other African states for duty-free export to the US.

African makers of jeans would have to make use of fabric available from African suppliers or sacrifice duty-free access to the US.

The Africa Coalition for Trade says it will push for a comprehensive broadening of Agoa’s benefits after the reconfigured US Congress begins work next month.

The new Democratic majority in both the US House and Senate may prove more receptive to the proposals advocated by the coalition.

source: East African