US legislators seek extension of Agoa textile imports rule

A group of senior US legislators has introduced a Bill that seeks to expedite the extension of a special waiver that allows for duty-free importation of African garments made using fabric from other countries.

The Bill was tabled last week in both the Senate and the House of Representatives, raising hope for textile exporters in countries such as Kenya where production of cotton remains insufficient.

The rule popularly known as the Third-country Rule of the preferential African Growth Opportunity Act (Agoa) initiative is scheduled to lapse in September and threatens to lock out the bulk of textile imports from eligible African states such as Kenya.

“This is a win-win legislation that builds upon our nation’s goal of strengthening economic relations with Africa, while ensuring that our regional trade agreement with Central America and the Dominican Republic continues to succeed,” Senator Orrin Hatch, an Utah Republican, was quoted by Reuters saying.

The legislation seeks to renew the waiver until September 2015, when the entire Agoa will be up for renewal.

Without the Third-Country Rule, countries that manufacture garments from imported fabric, like Kenya, would be locked out of the lucrative US market.

Though the Act originally covered the eight-year period from October 2000 to September 2008, amendments by then US President George Bush in July 2004 extended it to 2015.

“This must-do legislation has strong bipartisan and broad industry support. It will benefit US global competitiveness, aid US employment and global development, and strengthen our ties with 55 US trading partners in Africa and the Western Hemisphere,” House Ways and Means Committee Chairman Dave Camp, a Michigan Republican, said in a statement.

US Secretary of State Hillary Clinton last week said President Barack Obama’s administration also favoured the extension of the trade rule that has helped to improve trade with Africa under the Agoa initiative.

Several players in the Kenyan textile industry hope for the extension to help guarantee supply of raw material. In Kenya where textile firms import close to 90 per cent of the 180, 000 bales of raw cotton or semi finished fabric that they use to make garments for export to the US, the lapse of the rule could cause massive capital flight from Export Processing Zones (EPZs).

The apparel firms accounted for 80.3 per cent of the 32,251 employees at the EPZs by end of 2011, the Economic Survey 2012 shows. Yet to make cotton-based garments, textile firms in Kenya have to obtain 90 per cent of cotton from regional markets such as Tanzania, Uganda, Sudan and Egypt.

Kenya’s trade with America is mainly anchored on the Agoa initiate which was crafted to supplement then existing US trade plans with developing nations and sought to expand duty-free benefits that were previously only available under the Generalised System of Preferences (GSP).

Several Kenyan products, notably apparel and agricultural produce are big beneficiaries of this arrangement in which import duty is lifted on all eligible African products and preferential market access granted upon compliance with set Rules of Origin (ROO).

Textile and apparel exports to the US market remained strong in 2011 and fetched the country Sh18.77 billion in 2011 compared to the previous year’s Sh16.19 billion, according the Economic Survey 2012.

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