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AGOA Countries Poised for U.S. Export Boost

Revisions in U.S. policy seen benefiting Sub-Saharan sourcing.

GENEVA — The repeal of restrictive sourcing guidelines and continued duty free access to the U.S. market augur well for African apparel exports, according to a new United Nations report.

“African apparel exporters to the United States were given a new boost when the U.S. Congress repealed AGOA’s ‘abundant supply’ provision in October 2008,” said the U.N. study, referring to the African Growth & Opportunity Act.

The “Economic Development in Africa 2009” report concludes that as a result of the repeal, apparel suppliers from about 12 African countries, including Lesotho, Kenya, Madagascar, Mauritius and Botswana, could enhance their exports to the U.S. market.

The provision restricted the use by an apparel manufacturer of fabrics originating from non-AGOA countries. The need to comply with the provision had also “created uncertainty” among apparel importers, notes the report compiled by the U.N. Conference on Trade & Development.

However, U.N. and apparel industry analysts point out that given the contraction in U.S. apparel imports in 2008 from many nations, including AGOA countries, and with the decline continuing this year, it might take a while before the African exporters see a boost in shipments.

In 2008, exports of apparel to the U.S. from Lesotho fell 11.4 percent to $340 million compared with a year earlier, Madagascar’s dropped 3.6 percent to $279 million, Kenya’s dipped 0.9 percent to $247 million, Swaziland’s decreased 7.7 percent to $125 million and Mauritius’ declined 11.5 percent to $102 million, according to estimates by the International Textiles & Clothing Bureau.

Habib Ouane, director of UNCTAD’s division for Africa, was upbeat African countries in about three to five years might become a more attractive destination for apparel manufacturers now located in Asian nations, such as China. Ouane said in China, a combination of factors from mounting labor costs, environmental pressures and an appreciating national currency, especially if the yuan becomes fully convertible, could open new opportunities for lower-cost African nations.

But he conceded that for African nations to benefit from an erosion in Chinese competitiveness in labor-intensive manufacturing industries, like apparel, they would need to substantially boost their manufacturing capacity and infrastructure for facilitating trade.

Analysts at the ITCB agreed Africa’s lower labor cost could divert some apparel investment from China to Africa, but added even if the biggest emerging nations lose out, other countries in the region — such as India, Bangladesh, Vietnam and Indonesia — are likely to dominate the sector for a long time.