KENYA TO LAY UNDERSEA CABLE TO FUJAIRAH

Textile exports from Africa have sufferred a setback in recent times due to abolishment of quote system

A frica’s textile producers and exporters are suffering from the impact of new World Trade Organisation (WTO) rules that has opened up their sector to the forces of the free market. In 2005, the quota system in industrial nations was abolished and thus provided African countries an opportunity to export their goods to global markets.

The result is that more than 250,000 jobs have been lost in Africa, affecting more than a million family members. Most jobs have been lost in Lesotho, South Africa, Swaziland, Nigeria, Ghana, Mauritius, Zambia, Madagascar, Tanzania, Malawi, Namibia and Kenya.

The Multi-Fibre Arrangement (MFA), set up in 1974, was designed to protect producers in the world’s biggest markets – the United States, Canada and the European Union – from the more efficient ones emerging in Asia at the time. For decades, there was a limit to the amount of textiles other countries could export to the largest markets. This limit mainly affected the world’s major producers, such as China, India, Hong Kong, Taiwan and South Korea. But these restrictions brought advantages to the many smaller textile-exporting countries that stepped in to fill the gap.

Under the MFA, textile companies from the major Asian producers set up subsidiaries in African countries such as Lesotho, a country that enjoys duty-free access to the US under the African Growth and Opportunity Act (AGOA). As a result, textiles and clothing became Lesotho’s economic mainstay, and at one point the industry employed 56,000 workers, accounting for virtually every manufacturing job in the country.

Today, Lesotho provides a telling example of the grave impact of the expiration of the MFA. Most, if not all, foreign investors come from Asia, mainly Taiwan and China,” notes Daniel Maraisane, head of the country’s main clothing workers’ union. “With the end of the quota system, those investors say it’s now easier and cheaper to manufacture in China and India. So they are starting to go back home. There’s simply no way Lesotho can compete with such giants.”

Statistics show that within the first three months of 2005 – immediately after the lifting of the quotas – imports of cotton trousers from China shot up by  500 per cent and of cotton shirts by 350 per cent. In Europe, the increases in the import of certain categories of clothes exceeded 2,000 per cent.

On the other hand, to encourage imports of more modern equipment and to enhance competitiveness, Kenya’s government removed taxes on all cotton ginning and textile manufacturing machinery to lure textile companies into its export-processing zones (EPZs).

As a result, apparel exports from Kenya to the US increased from $44-million in 2000 to over $250 million in 2006, making Kenya the second-largest exporter of clothing to the US from sub-Saharan Africa.

However, to diversify their exports, African countries need to significantly improve access to international markets and reducing protectionist practices, such as subsidies.

 

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