Textile industry on hold
July 30, 2012
The sewing machines in many African factories that normally produce Calvin Klein t-shirts or Levis jeans have been lying idle for weeks. A provision in the African Growth and Opportunity Act (AGOA) that allows sub-Saharan African countries to export duty-free to the US market expires on September 30.
The bill that extends the provision has stalled, due to a row in the Senate over the funding of AGOA. Faced with uncertainty and the possible hike in production costs if the duty is charged, major US customers are no longer placing orders.
Waiting for US decisions
The provision allows for duty-free import of clothing produced in eligible countries in Sub-Saharan African with yarn and fabric imported from countries like China and India. If US lawmakers don't act before they go on their month long August recess, sub-Saharan countries will, at least temporarily, loose their duty-free access – and with it millions of dollars.
“The amount of business lost is close to $50 million (40 million euros). Kenya is the most affected country, as they are the major exporter of textiles, close to 20 million dollars worth of orders were lost”, Rajeev Arora, the Executive Director of the African Cotton and Textiles Industries based in Nairobi, told DW.
Arora represents textile companies from 20 African countries – from Egypt to South Africa. It was his job to prevent the trade provision from running out. He spent the last two years travelling between Africa and the US, lobbying for an extension of AGOA.
In theory, his job was not a difficult one. “Not one person has said that extending this is bad for the United States or for Africa”, Witney Scheidman, from the Brookings Institute told DW.
Trade not Aid?
AGOA is an integral part of US development strategy, summed up with the slogan “trade not aid.” The Act was first passed in 2000. It allows for some 6,000 goods and products to enter the US market without paying import duties.
The rationale behind AGOA: US companies outsource their low-cost production to Africa, thereby creating jobs – in particular for women. Local economies prosper, which in turn leads to a general wellbeing and more democracy.
Scheidman estimates that AGOA has led to the creation of some 300,000 jobs and another 1.5 million indirect jobs, which has impacted on an estimated 10 million people. “AGOA is a very viable framework for economic development and certainly it's a very important transition point from the traditional donor-recipient relationship – to one where the US and Africa can move forward on the basis of mutual benefits.”
Domestic issues
But while everyone recognises the benefits involved in AGOA, domestic issues got in the way, Scheiman says. Drawn-out bureaucratic procedures, coupled with a general paralysis of the US Congress, slowed down the process - to the detriment of African exporters who may have lost up to 35 percent of their orders, Scheidman believes.
Many of the newly-created jobs are currently under threat. Take Lesotho: 45,000 people in the tiny country in Southern Africa are employed in the textiles industry – more than in any other sector. They sew clothes for the big US labels, such as Gap, Calvin Klein or Levis Strauss. Lesotho depends heavily on AGOA and its preferential access to the US market. According to the Lesotho National Development Corporation, out of a total of 40 textile factories, 15 have already reduced production or closed completely.
In need of a long-term framework
Rajeev Arora estimates that some 15,000 jobs have been lost in the textiles industry so far - Kenya, Lesotho, Swaziland, Mauritius and Ethiopia are particularly affected. On average, it takes some four to five months to fulfil an order. Arora is convinced that the African textiles industry is unlikely to recover before 2013.
“The idea was to develop the industry right from cotton fibre to fashion.” But AGOA is a short term-provision, which is periodically renewed by three or four years. At least 15 or 20 year-long provisions are needed, Arora blieves, to build a sustainable industry.
But even if the bill is passed in the next days, Arora is likely to continue travelling a lot: In three years, the entire AGOA expires – and African sewing machines may stand still again.