US Senate approves exports rule stay

The US Senate finance committee has approved the extension of a rule that allows African textile firms to export garments made from imported fabric.

The vote on Wednesday now shifts attention on Congress, which is under pressure to pass the extension before it goes on recess next month.

The Bill seeks to extend the third-country fabric rule, which lapses in September to 2015, giving African countries that do not produce enough cotton for their textile industry a lifeline.

“A timely extension of this provision will help stem the tide of job losses in Africa and it will ensure that US retailers will have the certainty they need to help their businesses succeed and grow,” committee chairman Max Baucus, a Montana Democrat, said.

An extension of the third-country provision is expected to rescue hundreds of thousands of jobs in Africa’s clothing industry such as Kenya’s labour-intensive Export Processing Zones (EPZ).

Anxiety has been rising among the continent’s textile exporters as September 30, the official deadline for the lapse of African Growth and Opportunity’s (Agoa) third-country fabric rule draws nearer.

The lapse would have meant that any textile product made of imported material would either be locked out under the rules of origin or be subjected to heavy taxes like similar goods from other countries.

In Kenya, EPZ firms employed 32,251 workers by end of 2011. More than 80 per cent of their exports are textile products destined to the US under Agoa.

Statistics prepared by the Export Processing Zone Authority (EPZA) show that export of apparel to the US under Agoa grew from Sh16.2 billion in 2010 to 18.8 billion last year.

However, because of low production of raw materials such as cotton and sisal, the local textile industry relies on cotton and fabric from other regions such as Egypt, Uganda, Tanzania and Asia to produce the exports.

“A lapse of the third-country fabric rule would cause massive capital flight from the EPZs to Asia where energy and factors of production are relatively cheaper,” the African Cotton and Textile Industries Federation chairman Jaswinder Bedi said in a recent interview.

Under pressure to calm the nerves of uneasy investors, Trade minister Moses Wetang’ula announced at an exporters’ forum attended by President Kibaki two weeks ago that the US had finally agreed to extend the rule.

“I am happy to announce to you that the US government has finally yielded to intense campaign from the African group and agreed to extend the third-country fabric rule up to 2015,” Mr Wetang’ula told exporters.

He is one of the high-ranking government officials who joined the African team in Washington a month ago to press for extension of the third-country rule and for Agoa to be made a permanent arrangement.

“Our priority is to get the third country fabric rule renewed. As for making Agoa permanent, we have to wait until its current life which officially ends in 2015 comes up for review,” said US President Barack Obama’s adviser on international economics, Michael Froman, in Nairobi on Wednesday.