The U.S. Trade Representative warned Rwanda it would lose some benefits under the African Growth and Opportunity Act (AGOA), America’s flagship trade legislation for Africa, after it increased tariffs on second-hand clothes to support its local garment industry.
“The president’s determinations underscore his commitment to enforcing our trade laws and ensuring fairness in our trade relationships,” Deputy U.S. Trade Representative C.J. Mahoney said.
It acted after receiving a complaint in March last year from the Secondary Materials and Recycled Textiles Association (SMART), a U.S.-based organization which represents companies that collect and resell Americans’ used clothing. Selling America’s used clothing - much of it donated to charities and the bulk of it originally made outside the United States - is a nearly $1 billion industry. Exports typically end up in poor nations. Africa is a key destination.
The 60-day grace period expires on May 28. The current dispute, which also initially involved Kenya, Tanzania and Uganda, has received none of the attention of Trump’s trade war with China
Under AGOA, enacted in 2000 with the aim of using trade to boost development, qualifying African countries are granted duty-free access to the U.S. market for 6,500 exported products.
“It delegitimizes so much of what we’ve worked for for so many years,” said Gail Strickler, who served as the top U.S. trade official on textiles until 2015. “I think it’s horrible. I think it’s sad. I think it’s pathetic and I think it’s obscene.”
Domestic demand for locally produced clothes has been stifled, east African governments say, by the ubiquity of cheap, second-hand garments imported from Europe and the United States. The manager of a clothing factory says the facility is only running at 40 percent capacity and second-hand garments, which can sell at well below his production costs, are at least partly to blame. In response, East African Community (EAC) members Kenya, Tanzania, Rwanda and Uganda increased tariffs on used clothing in July 2016. Rwanda hiked import duties from 20 cents to $2.50 per kilogram.
At Kigali’s Biryogo market, where shoppers pick through bales of used garments, the downside of the increase in duties was immediate.
“Before, even with a little money, you could buy enough second-hand clothes for a child. But some children in my neighborhood are now naked,” Fillette Umugwaneza, a mother of two told Reuters. “It is a disgrace to our country.”
Rwanda’s government argues such hardships will be short-lived. Opening new factories will create more, better-paid jobs, while expanding domestic consumption will cut its external trade deficit, it says. The government is seeking to attract companies targeting the export market, like U.S. designer Kate Spade which assembles high-end handbags in Rwanda. It’s a strategy that has flourished elsewhere in Africa under AGOA, with duty-free exports from the continent to the U.S. market almost quadrupling to over $1 billion since the law was enacted. The ultimatum from the office of the USTR, however, has thrown up a potential roadblock to further growth.
African nations initially tried to defend their position at a USTR hearing in July, rejecting SMART’s assertion that the new tariffs had cost 24,000 American jobs in the first nine months. Using U.S. trade data, they pointed out that the decline in exports to the EAC that SMART blamed for the job losses had already begun four years before the 2016 duty increase. The EAC also accused SMART of inflating the importance of the east African market to the industry. Trade data showed the United States shipped around $24 million worth of used clothing to the EAC in 2016. SMART, however, added another $100 million in exports it said were shipped to third countries for processing before being re-exported. By its calculation the EAC represented over a fifth of the U.S. industry’s global market.
The mere prospect of losing AGOA benefits was enough to push Kenya, which in 2017 exported nearly $340 million worth of apparel duty-free to the United States, to back down. Uganda and Tanzania followed Kenya’s example and capitulated, agreeing to roll back tariffs to pre-2016 levels. Rwanda has held out.
Rosa Whitaker, who was appointed by President Bill Clinton as the United States’ first Assistant Trade Representative for Africa and helped draft the original AGOA legislation. She called the Trump administration’s actions bullying and predicted they would backfire.
“African countries, from what they’re telling me, are feeling abandoned. We’ve just ceded it to China.”
https://www.reuters.com/article/us-rwanda-usa-trade-insight/trump-versus-rwanda-in-trade-battle-over-used-clothes-idUSKCN1IP0WB
“The president’s determinations underscore his commitment to enforcing our trade laws and ensuring fairness in our trade relationships,” Deputy U.S. Trade Representative C.J. Mahoney said.
It acted after receiving a complaint in March last year from the Secondary Materials and Recycled Textiles Association (SMART), a U.S.-based organization which represents companies that collect and resell Americans’ used clothing. Selling America’s used clothing - much of it donated to charities and the bulk of it originally made outside the United States - is a nearly $1 billion industry. Exports typically end up in poor nations. Africa is a key destination.
The 60-day grace period expires on May 28. The current dispute, which also initially involved Kenya, Tanzania and Uganda, has received none of the attention of Trump’s trade war with China
Under AGOA, enacted in 2000 with the aim of using trade to boost development, qualifying African countries are granted duty-free access to the U.S. market for 6,500 exported products.
“It delegitimizes so much of what we’ve worked for for so many years,” said Gail Strickler, who served as the top U.S. trade official on textiles until 2015. “I think it’s horrible. I think it’s sad. I think it’s pathetic and I think it’s obscene.”
Domestic demand for locally produced clothes has been stifled, east African governments say, by the ubiquity of cheap, second-hand garments imported from Europe and the United States. The manager of a clothing factory says the facility is only running at 40 percent capacity and second-hand garments, which can sell at well below his production costs, are at least partly to blame. In response, East African Community (EAC) members Kenya, Tanzania, Rwanda and Uganda increased tariffs on used clothing in July 2016. Rwanda hiked import duties from 20 cents to $2.50 per kilogram.
At Kigali’s Biryogo market, where shoppers pick through bales of used garments, the downside of the increase in duties was immediate.
“Before, even with a little money, you could buy enough second-hand clothes for a child. But some children in my neighborhood are now naked,” Fillette Umugwaneza, a mother of two told Reuters. “It is a disgrace to our country.”
Rwanda’s government argues such hardships will be short-lived. Opening new factories will create more, better-paid jobs, while expanding domestic consumption will cut its external trade deficit, it says. The government is seeking to attract companies targeting the export market, like U.S. designer Kate Spade which assembles high-end handbags in Rwanda. It’s a strategy that has flourished elsewhere in Africa under AGOA, with duty-free exports from the continent to the U.S. market almost quadrupling to over $1 billion since the law was enacted. The ultimatum from the office of the USTR, however, has thrown up a potential roadblock to further growth.
African nations initially tried to defend their position at a USTR hearing in July, rejecting SMART’s assertion that the new tariffs had cost 24,000 American jobs in the first nine months. Using U.S. trade data, they pointed out that the decline in exports to the EAC that SMART blamed for the job losses had already begun four years before the 2016 duty increase. The EAC also accused SMART of inflating the importance of the east African market to the industry. Trade data showed the United States shipped around $24 million worth of used clothing to the EAC in 2016. SMART, however, added another $100 million in exports it said were shipped to third countries for processing before being re-exported. By its calculation the EAC represented over a fifth of the U.S. industry’s global market.
The mere prospect of losing AGOA benefits was enough to push Kenya, which in 2017 exported nearly $340 million worth of apparel duty-free to the United States, to back down. Uganda and Tanzania followed Kenya’s example and capitulated, agreeing to roll back tariffs to pre-2016 levels. Rwanda has held out.
Rosa Whitaker, who was appointed by President Bill Clinton as the United States’ first Assistant Trade Representative for Africa and helped draft the original AGOA legislation. She called the Trump administration’s actions bullying and predicted they would backfire.
“African countries, from what they’re telling me, are feeling abandoned. We’ve just ceded it to China.”
https://www.reuters.com/article/us-rwanda-usa-trade-insight/trump-versus-rwanda-in-trade-battle-over-used-clothes-idUSKCN1IP0WB
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