Rwanda’s President Paul Kagame has insisted that Rwanda will proceed with its plan to phase-out importation of second-hand clothes despite threats from the US that the move could lead to a review of his country’s eligibility for duty-free access to the American market.
President Kagame recently made the remarks while addressing a news conference moments after submitting his nomination papers to the National Electoral Commission (NEC).
Kenya, Uganda, Rwanda, Burundi, Tanzania and South Sudan decided to fully ban imported second-hand clothes and shoes by 2019, arguing it would help member countries boost domestic clothes manufacturing.
Secondary Materials and Recycled Textiles Association (SMART); an association of textile companies in the United States of America (USA); members argue that the decision by the East African Community (EAC) to ban imports of used clothing and footwear is imposing significant economic hardship on the USA’s used clothing industry. The petitioners argue that the ban directly contradicts requirements that AGOA beneficiaries work towards eliminating “barriers to United States trade and investment” and promote “economic policies to reduce poverty”.
The Office of the United States Trade Representative (USTR) has, as a result, initiated a review of the eligibility of Uganda, Rwanda and Tanzania to receive benefits under AGOA. The EAC nations are one of the most important markets for U.S. industry’s used clothing exports with direct American exports to the EAC member countries totaling approximately $24 million in 2016. U.S. imports under AGOA totaled $43 million in 2016, up from $33 million in 2015 while exports were $281 million in 2016, up from $257 million in 2015.
The review is further fuelled by efforts from EAC towards the ban. For example Tanzanian Parliament voted in of June 2016, to approve a budget that doubled import duties on second hand clothing, increasing the tariffs from 0.2 to 0.4 US dollars per kilogram. During the same month, Kenya and Uganda also announced tariff increases on used clothing imports similar to those announced by Tanzania while Rwanda raised import duties on second hand clothing by from 0.2 to 2.5 US dollars per kilogram.
The petitioners observed that the tariff increases are so high that they amount to a de facto ban on second hand clothes, which made it clear that EAC member states are moving towards the ban.
President Kagame said the situation leads Rwanda to make a choice between continued importation of used clothes and developing the local textile industry.
“Rwanda and other countries in the region that are part of AGOA, have to do other things, we have to grow and establish our industries,” President Kagame said. “We are put in a situation where we have to choose; you choose to be a recipient of used clothes with a threat hanging or choose to grow our textile industries, which Rwandans deserve at the expense of being part of AGOA. This is the choice we find that we have to make. As far as I am concerned, making the choice is simple, we might suffer consequences. Even when confronted with difficult choices, there is always a way,” he added.
The President noted that this is not the first time that Rwanda has had to make tough decisions in the interest of citizens.
Rwandan Efforts towards autonomy
In the 2017/18 budget estimates, the government eased taxes on inputs under the Made-in-Rwanda initiative, which is expected to facilitate the growth of the local textile industry.
President Kagame is one of the African heads of state advocating for improved engagement terms between African countries and Western countries for mutual benefit. Kagame has said several times that it’s time to consider Africa as an equal partner in development as opposed to a beneficiary requiring donations and aid.
As part of the move to make the continent less dependent on external financing, Kagame was last year asked to spearhead the African Union reforms. The President said that the intention by African leaders to change status quo was a huge step. “The fact that the leaders of Africa have found it necessary to do things different is a very big step,” he said. Going forward, he said the move by the continent will reduce the impact of external factors on the continent’s socio- economic progress.
Reactions from Member Countries
In Tanzania members of the business community have voiced different concerns over the possibility of Tanzania losing eligibility to AGOA.
However Tanzania Private Sector Foundation’s (TPSF) executive director Godfrey Simbeye said the decision had little effect on the country’s economy since there are few industries that are taking advantage of the market. According to him, Tanzania, Rwanda and Uganda in 2016 only exported approximately Sh100 billion worth of textiles free of charge to the US market, up from Sh73 billion a year before.
The U.S. on the other hand exported to EAC goods worth Sh618 billion in 2016 and Sh565.4 billion during the previous year.
Simbeye added that removal of Tanzania from AGOA could be a blessing in disguise as the country has embarked in its own industrialization drive.
In direct contradiction, Exim Bank Investment banking manager George Assenga said the decision by the U.S. might cost the country in two areas, namely: insecure market for the country’s end products and dwindling in export earnings.
Kenya unlike neighbouring states has withdrawn the proposed ban. Kenya’s Trade and Industrialization Principal Secretary Dr Chris Kiptoo said the country had decided to comply with the African Growth and Opportunity Act (AGOA) conditions, “When we saw the petition filed in March, we knew that the lobby group had strong arguments,” he said.
This is contrary to statements made in May this year by Betty Maina, principal secretary in the Kenyan ministry of labor and EAC affairs, at the East African Manufacturing and Business Summit held in Rwanda. Maina said: “That’s the aspiration of all regional heads of state and that’s something that has been upheld. Over the last few years, all the countries have been building up their textile industry with a view to ensuring that it can supply decent and competitively priced new cloths that will replace demand for used cloths.” Maina added that, “Kenya seeks to expand availability of new clothing made in the country to other east African countries and it is committed to ensuring that consumers “have an affordable choice of locally made textiles so that overtime, we can completely eliminate used clothing.”
Kenya has therefore been excused from the review due to its recent actions including reversing tariff increases, that took effect on July 1, 2017, and committing not to ban imports of used clothing through policy measures that are more trade-restrictive than necessary to protect human health. USTR will however continue to monitor Kenya’s actions to follow through on its commitments.
About The African Growth and Opportunity Act (AGOA)
The African Growth and Opportunity Act (AGOA) was signed into law on May 18, 2000 as Title 1 of The Trade and Development Act of 2000. The Act offers tangible incentives for African countries to continue their efforts to open their economies and build free markets.
AGOA provides trade preferences for quota and duty-free entry into the United States for certain goods, expanding the benefits under the Generalized System of Preferences (GSP) program. Notably, AGOA has helped expanded market access for textile and apparel goods into the United States for eligible countries, though many other goods are also included such as such as cut flowers, horticultural products, automotive components and steel.
Some allege that AGOA is in contradiction with the rules of WTO; the intergovernmental organization that regulates international trade and it is seen as a one-sided agreement as there was little African involvement in its preparation. AGOA has also been criticized for being “dominated by oil and raw materials” After the enactment of AGOA, “exports have increased by more than 500 per cent from around $8.2 billion then to $54 billion in 2011, although about 90 per cent of these are natural resources, mainly oil.”