TRALAC - Trade Law Centre

Crisis in Swazi Textile Industry

Friday, 09 April 2004

Source: Engineering News (South Africa)

Despite strong bipartisan support for the extension of the Africa Growth and Opportunity Act (Agoa), there is growing angst among many African apparel producers about whether the legislation will be approved before October. The date is key, as the vital ‘third country’ textile provision is set to expire on September 30, 2004.

The provision allows least-developed country-beneficiaries under Agoa, as well as Botswana and Namibia, to source textiles from non-African and non-US sources. This enables them to deal with the reality of insufficient competitively-priced material available from the 37 sub-Saharan countries eligible for Agoa, or from the US. For this reason, the 18 countries eligible for the third-country textile provision (competitive apparel producers such as South Africa and Mauritius are excluded) are desperate that the provision be extended beyond 2004. Alternatively, they will face a serious erosion of market share, and the closure or relocation of clothing businesses.

The request has been received sympathetically in Washington, DC, with lawmakers having made provision under the so-called Agoa III to extend the textile provision to 2008 and other Agoa benefits to 2015. The extension of the textile benefit is designed to encourage nascent commercial investment in textile, apparel and agribusiness infrastructure and capacity.

Two Bills, one before Congress and the other before the Senate, have been prepared, with the Congressional Bill having the support of Democratic Congressman Jim McDermott and the Senate Bill being backed by US Senate Foreign Relations Committee Chairperson, Republican Senator Dick Lugar. Lugar’s Bill is S 1900, while the companion House Bill, being introduced by McDermott and 11 cosponsors, is HR 3572.

Last month, Lugar met with ambassadors from six African nations to promote the passage of the US-African Partnership Act, introduced in the Senate last November.

But with the distraction of a Presidential campaign and the resultant shortening of the legislative season, it is understood that lawmakers are focusing only on those issues of utmost urgency. It appears that Agoa III is one of these, but there are no guarantees.

For their part, African apparel producers argue that its passage is urgent on three levels.

Firstly, investors require certainty.

Secondly, they argue that real benefits of Agoa have not been felt from the very beginning. This is because many countries really only began receiving the full benefit once they obtained the requisite export ‘visa’, which, in some cases, came through well behind the October 2000 Agoa implementation date.

The last reason relates to global changes in the textiles and clothing environment. The World Trade Organisation’s multifibre agreement, which sets quota limits, will expire as of January 1 next year. That means that African apparel producers, which currently enjoy both a tariff and a quota advantage, risk losing both in a matter of months, unless the tariff benefits, under Agoa, are extended.

The apparel makers hope that the US lawmakers and the executive have the same sense of urgency.