AGOA, EAC center of trade war with U.S.
By: Charles Lotara
East African countries have been the beneficiaries of the African Growth and Opportunity Act (AGOA) since its enactment in 2000 to legally allow the United States to sell used clothes to Sub-Saharan Africa.
But that was then, and things are currently taking a different shape as some African countries are threatening to pull out of the deal. Rwanda remained at the forefront of this pullout campaign despite the imposition of sanctions by the U.S.
Earlier this year, Rwanda vowed to impose total ban on imports of secondhand clothes and have raised tariffs on such goods.
Development analysts say the move away from importing used clothes will restore pride and dignity to Rwandans who used to sifting through piles of secondhand garments imported from Western countries, particularly the U.S.
East African governments initially argued that domestic demand for locally made clothes was being suffocated by cheap secondhand apparel.
Today, Rwanda stands alone in this trade battle when Uganda and Tanzania briefly resisted the deal and backed down following export restriction warning by the U.S government.
“In response to a petition filed by the U.S used clothing industry in March 2017, the Administration an out-of-circle review of Rwanda, Tanzania, and Uganda’s AGOA eligibility regarding their decisions to phase in a ban on imports of used clothing and footwear.
“The review found that this import ban harms the U.S used clothing industry and is inconsistent with AGOA beneficiary criteria for countries to eliminate barriers to U.S. trade and investment,” the Office of the United States Trade Representative said in a statement.
The American government frets on the basis of fear that shunning secondhand clothes by Sub-Saharan African countries could hamper the development of the textile industry. But AGOA has about 39 member countries from Sub-Saharan Africa and it’s baffling why withdrawal by East African countries and Rwanda in particular means a lot to the U.S.
“The President determined that Rwanda is not making sufficient progress toward the elimination of barriers to U.S. trade and investment and therefore is out of compliance with eligibility requirements of AGOA,” the statement continued.
It is also estimated that EAC’s secondhand apparel ban could cost 40,000 U.S. jobs and $124 million in exports.
AGOA, a U.S. trade preference program was passed to help spur market-led economic growth and development in sub-Saharan Africa and deepen U.S. trade and investment ties with the region. Since its enactment, the Act was amended five times by the U.S Congress, making some technical changes and renewing the trade preferences through September 30, 2015.
According to the United States Trade Representative (USTR), “AGOA has been the cornerstone of America’s economic engagement with sub-Saharan Africa over the past fourteen years.”
A finding by Congressional Research Service reveals that economic conditions in Africa have changed considerably since the initial passage of AGOA legislation. Annual real gross domestic product (GDP) growth was a half percentage point lower than global GDP growth in the decade leading up to AGOA’s passage (1990-2000).
Ironically, the region still contains many of the world’s poorest countries and faces significant economic challenges, some observers and policymakers argue that changing economic conditions warrant an evolution in U.S. policy, focused more strongly on private sector investment and increasing two-way trade.
In recent years, Sub-Saharan Africa’s growing economic potential and abundant natural resources have attracted other foreign investors, including state-supported enterprises from countries such as China, which is now the region’s largest trading partner.
A survey by USAID shows that Chinese exports of cheap, ready-made clothes to East Africa is worth $1.2 billion, which far outstrips the value of second-hand clothing imports being bought by the poorest 40% of the population in East Africa.