US President Donald Trump decided last week to suspend duty-free treatment on US imports of apparel products from Rwanda under the African Growth and Opportunity Act (AGOA). The sanction, which is set to take effect in early June, is in reaction to the East African country’s decision to raise tariffs on second-hand clothing with a view to phasing out imports and encouraging the development of local manufacturing capacity in the clothing sector.

The AGOA is a unilateral preference regime that provides to eligible Sub-Saharan African countries duty-free quota-free access to the US market for close to 6,500 products.

First introduced in 2000 under the Clinton administration, the scheme has since then formed the cornerstone of trade relations between the US and Sub-Saharan Africa. When its initial 15-year period of validity came to an end in 2015, the AGOA was renewed for an additional period of 10 years, and is thus expected to remain in force until 2025. (See Bridges Africa, 1 July 2015)

The suspension of AGOA benefits for Rwanda follows an “out-of-cycle” review launched in June 2017 in response to a petition filed by the Secondary Materials and Recycled Textiles Association (SMART). In this document, the business association complained against a March 2016 decision by members of the East African Community (EAC) to phase out the imports of second-hand clothing by 2019, arguing that such action would impose “significant economic hardship” on the US used clothing industry. (See Bridges Africa, 17 August 2017)

“Based on the results of the review, the President determined that Rwanda is not making sufficient progress toward the elimination of barriers to U.S. trade and investment, and therefore is out of compliance with eligibility requirements of AGOA,” reads a press release from the Office of the United States Trade Representatives.

“AGOA is a commendable unilateral gesture to African countries, including Rwanda, meant to promote trade and development through exports. The withdrawal of AGOA benefits is at the discretion of the United States,” indicated the Rwandan government in a short statement published after the announcement of the sanction.

Although also targeted by the review, Tanzania and Uganda have been spared similar action by the US, the Office of the United States Trade Representative indicating that both countries have “taken steps toward eliminating prohibitive tariff rates on imports of used clothing and footwear and committed not to phase in a ban of these products.”

Kenya was not included in the review by the USTR, as at the time of its launch, the country had taken actions to reverse tariff increases and vowed not to impose restrictions on imports of second-hand clothing that would go beyond protection of human health. The two other members of the EAC, Burundi and South Sudan, are already excluded from the AGOA.

The decision of suspending trade preferences for Rwanda’s apparel sector, rather than putting an end to the country’s eligibility as AGOA beneficiary, is intended to allow for “continued engagement” with a view towards restoring preferential market access, indicates the USTR.

“I commend Tanzania and Uganda for taking corrective steps to address the United States’ concerns. We have and will continue to work with Rwanda to resolve this situation,” said Deputy USTR C.J. Mahoney. “Rwanda has already exercised flexibility by providing written proposals to accommodate both sides. We look forward to a response to the proposals as well as a productive dialogue with the United States on these important trade and development matters. Rwanda remains committed to finding a mutually agreeable resolution to the outstanding issues,” reportedly said Rwanda’s Minister for Trade and Industry Vincent Munyeshyaka.

“Developing manufacturing capacity in apparel and other industries is a high priority for Rwanda’s economic development. The announced intention to suspend AGOA eligibility for apparel exports from Rwanda is unfortunate, but the maintenance of eligibility for other sectors is welcome,” he added.

Source: International Centre For Trade Sustainable Development

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