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Eyeing Africa’s Role in World Trade

NEW YORK — The potential for African apparel producers to compete in the world market — and along the way generate the economic growth seen as critical to keeping its nations stable and peaceful — will be a key topic at next...

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NEW YORK — The potential for African apparel producers to compete in the world market — and along the way generate the economic growth seen as critical to keeping its nations stable and peaceful — will be a key topic at next week’s Sub-Saharan Africa Trade & Economic Cooperation Forum, to be held in Port Louis, Mauritius.

A delegation of executives from major U.S. importers, including J.C. Penney Co., Target Corp., Limited Inc. and Sears, Roebuck & Co., is expected to attend the five-day summit at the island nation, located in the Indian Ocean off the east coast of Africa. They will join U.S. officials, including U.S. Trade Representative Robert Zoellick and Congressmen Jim McDermott (D., Wash.), Edward Royce (R., Calif.) and Bill Thomas (R. Calif.), as well as top ministers from the 35 sub-Saharan African nations, including Mauritius, South Africa, Lesotho and Kenya.

Apparel and textiles manufactured in the region have enjoyed duty- and quota-free access to the U.S. since October 2000, when the Africa Growth & Opportunity Act — a companion law to the Caribbean Basin Trade Partnership Act —took effect. Since then, African exports of textiles and apparel have risen significantly.

According to Commerce Department data, shipments of textiles and apparel from sub-Saharan nations to the U.S. were up 12.5 percent for the 12-month period ended in October to $1.09 billion worth of products. That gives the region a 1.6 percent share of U.S. imports in that category. In all of 2001, the region’s exports in those categories rose 25.6 percent.

The AGOA law allows lesser-developed nations in the trade program to import fabric from third countries, like China, sew it into garments and export them duty- and quota-free. Given that many of the sub-Saharan African nations have underdeveloped textile industries, that has been a key part of the program so far.

Peter McGrath, president of J.C. Penney Purchasing Co. and chairman of the U.S. Association of Importers of Textiles & Apparel, said he was headed to Mauritius with a multipart agenda.

“There are two messages we’re trying to explain to the African government people and business people,” he said. “One is what it is to do business with U.S. retailers.…We are going to articulate what our business requirements are from soup to nuts, from human rights compliance to quality — all the issues you would think of.”

This story first appeared in the January 7, 2003 issue of WWD.  Subscribe Today.

Nancy Marino, senior vice president of worldwide sourcing and brand development at Hoffman Estates, Ill.-based Sears and a member of the USA-ITA delegation, said her group’s agenda will be to help African manufacturers understand how they need to adapt to do business with U.S. retailers.

“It’s not as easy as they think it is and the clock is ticking as we approach 2005,” she said. “We’ve not seen as much progress as we’d like to see in that part of the world. We hope we can help them better understand what it will take to be competitive in the future.”

She said key hurdles that African apparel manufacturers face include setting up local fabric production and cutting turn times.

Penney’s McGrath added: “The second part of our message is going to be to make the African countries aware of the implications of the current AGOA agreement, that the third-country fabric provision expires in 2004, as well as the implications of a quota-less manufacturing environment in 2005. Those are two enormous challenges, hurdles that they have to overcome. We are also going to look for enhancement to the current AGOA bill that would benefit U.S. retailers and African countries.”

McGrath and Marino, along with Limited Inc. vice president of strategic sourcing Ron Shulman and other USA-ITA members, will present their agenda in a Tuesday session. Representatives of the National Retail Federation, as well as several major manufacturers from the region, are also scheduled to speak.

President Bush had been scheduled to attend the summit, but late last month the White House released a statement saying he would delay his trip because of other current events on the national and world stage.

A growing concern in the U.S. government is how developing nations whose economies rely heavily on apparel and textile exports will fare in 2005, when the nations of the World Trade Organization drop quotas on those products. That event is expected to provoke a surge of exports from China, and many industry sources have wondered how well manufacturers in Africa and elsewhere will be able to handle that competition. Speakers at several sessions are scheduled to discuss the post-2005 environment.

“There is a lot of concern, not without merit, that the AGOA benefits are really going to decrease once global quotas go off. There is a short window of opportunity for a lot of producers to get competitive in that time frame,” said Erik Autor, vice president and international trade counsel at the NRF. “The thing I’m going to be talking about specifically is going to be what changes producers can expect once the global quota system ends.”

The AGOA law has been a significant boost to Lesotho, Kenya and Swaziland, each of which has seen its exports to the U.S. surge by more than 50 percent in the 12 months ended in October. However, local stability plays a key role in developing an export business. (See chart, this page.)

One clear example of that is Madagascar, which was engulfed in turmoil for much of last year following a disputed presidential election. Supporters of both candidates declared a general strike that for seven months brought most business in the nation’s capital to a halt and resulted in the closing of the island’s major port. Major importers canceled orders, while some producers, including Novel Denim Holdings Ltd., decided to shut their Madagascan operations outright.

Overall, Madagascar’s shipments to the U.S. were off 47.1 percent for the first 10 months of 2002, erasing most of the 62.4 percent export growth in 2001.

Next week’s meeting, which runs from Jan. 13-17, is the second of its kind. The first AGOA forum was held in Washington in October 2001.

The region’s manufacturers, particularly the companies based in Mauritius, which in many cases also operate factories in Madagascar and on the mainland, have been major suppliers to European apparel companies for more than a decade. U.S. executives said they expected the AGOA Forum to give them a chance to develop stronger connections with the region’s suppliers.

“The only way that AGOA is really going to continue to be a huge success is if we have dialogue between business people in Africa with the U.S. companies, so we can work together to build long-term relationships,” said Julia Hughes, the Washington vice president for the USA-ITA. “If you never see each other or know each other, it’s hard for you to get to know each other.”

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