In the News

Infant industries in Africa, and tariffs and trade with the US

Penny Brooks

29th May 2018

What do you do with your cast-off clothing? If you donate it to charity, are you raising the standard of living for some of the world's poorest, or holding back development of infant textile industries in their country? Should Rwanda be able to sell clothes to America duty free - a status it enjoys under the Africa Growth and Opportunity Act (Agoa) - and is Rwanda's domestic clothing industry harmed more by imports of cheap second-hand clothing from the West (currently being bought by the poorest 40% of the population in East Africa), or cheap new clothing from China (which is actually much more expensive to buy, and so unaffordable for many)?

Just a few of the questions raised by this very interesting article.

Agoa is US trade legislation designed to boost trade and investment in qualifying African countries by granting duty-free access to 6,500 exported products. However, in 2015 the East African Community announced that imported second-hand clothing would be banned from their markets from 2019, as it threatens the market for locally-made garments, and Rwanda increased tariffs on imported used clothes from $0.20 (£0.15) to $2.50 (£1.90) per kg in 2016.

In retaliation for this protectionism, the Office of the US Trade Representative (USTR) threatened to remove four East African countries - Kenya, Uganda, Tanzania and Rwanda - from Agoa. Uganda, Tanzania and Kenya have backed down, but Rwanda, which exports less to the US than the other three, has not done so.

As a result, the US is now imposing tariffs on clothing exports from the tiny East African nation. Yet it still provides duty-free access to its market to many other countries that have created barriers to US exports - including India and Brazil.

Penny Brooks

Formerly Head of Business and Economics and now Economics teacher, Business and Economics blogger and presenter for Tutor2u, and private tutor

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