TRALAC - Trade Law Centre

Lobbies push for extension of fabric exports to US

Sunday, 23 October 2011

Source: Business Daily (Kenya)

Influential American business lobby groups have launched a fresh bid to have the US Congress extend a rule that allows for duty-free importation of African garments made from imported inputs.

The third country fabric rule of the African Growth and Opportunity Act (Agoa) will lapse in September next year, locking out the bulk of textile imports from eligible African states such as Kenya.

The American business group calling itself “Supporters of Africa Trade in Washington” said the timing for its campaign was necessary to ensure that the economic problems sweeping across the US do not distract policy makers from improving trade ties with Africa.

“Renewal of the third country fabric rule is virtually assured.

There is no opposition about that and all that is left is a vehicle on which to place it,” Stephen Lande, president of Manchester Trade told Business Daily in an e-mail last week.

Manchester Trade is one of the groups in the coalition that is championing the plight of African beneficiaries of Agoa. Together with lobby groups such as the Corporate Council on Africa (CCA), Manchester Trade is a co-convener of the Agoa Forum — the annual platform that brings together African policy makers and investors with US counterparts every year to review progress of the preferential trade instrument.

“Basically, we do not need much lobbying since there is almost unanimous support on the Hill, the administration and within the business community to renew this provision.

I believe that by mid next year a vehicle will have appeared on which this provision could be appended,” said Mr Lande.

The plan to phase out the third country fabric rule was crafted to encourage African firms to develop full internal value chains — from input to finished goods — creating numerous jobs in the process.

The rule was initially meant to lapse in September 2007 but the continent successfully lobbied for its five year extension.

The American groups join African private sector lobby groups, trade ministers and their diplomatic missions in Washington that have intensified campaigns for the extension of the third party fabric rule for another five years.

The African delegates took a common position to push jointly for the renewal of the window in June when they met for this year’s Agoa Forum held in Lusaka, Zambia.

“African countries interested in seeing the third country fabric rule extended next year have to interact directly with Congress members through their diplomatic representations in Washington to make it clear to them how important this provision is to their economies”, Mr Timothy McCoy, CCA’s Vice President in charge of business development told the Business Daily at an earlier teleconference interview.

In Kenya where textile firms import close to 90 per cent of the 180, 000 bales of raw cotton or semi finished fabric that they use to make garments for export to US, the lapse of third party provision in September 2012 could cause massive capital flights from Export Processing Zones.

Data from the Export Processing Zone Authority indicates that export of apparel to the US under Agoa grew by 26.5 per cent over the Sh12.7 billion in 2009 to Sh16.1 billion last year.

The apparel enterprises accounted for 77.6 of the 31,157 employees at the EPZs by end of last year. Yet to make cotton based garments, textile firms in Kenya have to obtain 90 per cent of cotton from regional markets such as Tanzania, Uganda, Sudan and Egypt. The lapse of third party country rule will henceforth lock out such items from the US market.

“The growing support for African course by various lobby groups on the ground has strengthened the request that we put earlier before the Congress and raised hope that it will be considered before the November-December recess begins,” said Mr Jaswinder Bedi, chairman of Kenya Association of Manufacturers.

The push for the extension of the third country fabric rule comes at a time that the weakening shilling has seen local textile firms making premium earnings from exports.

Trade instrument

Mr Bedi said the evolving unity among African countries was also crucial in fighting off competition from Asian countries such as Cambodia and Bangladesh which have also applied for duty and quota-free access to US market.

“These low-cost Asian countries are already exporting to US 10 times Africa’s combined export volumes and this means handing them a duty-and-quota-free facility will completely wipe out the continent’s textile industry,” said Mr Bedi who is also the chairman of African Cotton and Textile Industries Federation (ACTIF).

Last week, the US Chamber of Commerce and the American Chambers of Commerce in Africa — the two lobby groups of American firms eying opportunities in Africa — wrote to members of Congress seeking to make Agoa a permanent trade instrument.

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“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Kenya's bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include: (click each link to view)

  • AGOA-Beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.




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