SEATTLE — The African Growth and Opportunity (AGOA) Act Forum concluded in Lomé, Togo on August 10 without resolving tensions between the U.S. and the nations of the East African Community (EAC). The free trade deal between the U.S. and African countries, in effect until 2025, is endangered by recent economic stimulus policies enacted in the EAC.
The EAC consists of Uganda, Rwanda, Tanzania, Kenya, Burundi and South Sudan. The group, as part of its EAC Vision 2050 and Industrialization Policy, aims to increase its manufacturing industry from 8.7 percent of GDP in 2016 to 25 percent of GDP in 2032. The EAC ban on secondhand clothing is intended to spur growth in the manufacturing sector.
However, this ban violates the terms of AGOA. The free trade act eliminates tough restrictions on African exporters entering the U.S. in exchange for preferential treatment of U.S. products in African markets. U.S. exports of secondhand goods are protected under the act.
The act includes an out-of-cycle review process that allows U.S. industries to complain to the U.S. Trade Representative (USTR) if an African country participating in AGOA enacts domestic policy that undermines that industry’s interests. Consequently, the Secondary Materials and Recycled Textiles Association (SMART) filed a petition in March 2017 accusing Uganda, Rwanda, Tanzania and Kenya of violating AGOA by proposing the ban and by imposing higher tariffs on imported used clothing. Kenya has since discarded these policies to comply with AGOA. Currently, USTR is reviewing the participation of Uganda, Rwanda and Tanzania in AGOA.
U.S. exports to Uganda, Rwanda and Tanzania totaled $281 million in 2016, with secondhand goods comprising much of this total. Acting assistant USTR for Africa Constance Hamilton estimates that a full ban on the importation of used goods would eliminate 40,000 jobs in the U.S.
Currently, used clothing imports in the EAC are so cheap that domestic clothing producers cannot compete. Thus, growth in the local textile industry is stifled by foreign competitors. The EAC ban on secondhand clothing imports could stimulate local economies by creating new jobs.
However, the ban will raise clothing prices substantially in the EAC and local manufacturers are not prepared to meet a sudden skyrocketing demand for their products. Thus, the EAC ban on secondhand clothing could create a market vacuum. This demand might be filled by imports of cheap new clothing from foreign markets or by smuggled secondhand clothing rather than by increased output from domestic manufacturers.
Experts like Hamilton support a co-existence between growth of local production and foreign secondhand clothing imports rather than a total ban on used goods. A government-led stimulus of the manufacturing industry could occur even while secondhand clothing imports continue permeating local markets. This would allow for economic growth while still meeting immediate consumer needs.
Currently, Uganda, Rwanda and Tanzania plan to proceed with the import ban despite U.S. insistence that the policy violates AGOA. Future participation of these nations in AGOA remains uncertain.
– Katherine Parks