TRALAC - Trade Law Centre

Lobbyist says US likely to punish East Africa over mitumba ban

Saturday, 26 August 2017

Source: Daily Nation (Kenya)

Donald Trump administration trade officials are likely to rule that three East African countries are violating eligibility terms for the US preferential trade programme for Africa, a lobbyist for Kenya warned on Friday.

“The stars are aligned” for such a ruling before the end of the year, said Washington based attorney Paul Ryberg, an expert on the Africa Growth and Opportunity Act (Agoa).

Mr Ryberg has been retained by both the Kenya Ministry of Industry, Trade and Cooperation and the Kenya Association of Manufacturers to lobby on Agoa-related matters.

At issue is a US government trade agency’s earlier-than-scheduled assessment of Agoa compliance in Rwanda, Tanzania and Uganda.

AGOA

The agency’s move to conduct this “out-of-cycle review” of their Agoa status came in response to a US business association’s petition in March urging that the three countries be barred from exporting clothing to the US under Agoa’s duty-free provisions.

The Secondary Materials and Recycled Textiles Association, known as Smart, argued at a public hearing in Washington in July that the cut-off of mitumba imports from the US runs counter to Agoa’s prohibition against “barriers to US trade.”

Officials from Rwanda, Tanzania and Uganda testified at the same hearing that their agreed-upon three-year phase-out of mitumba imports is a necessary tool for nurturing their own garment-producing industries.

The three targeted countries also contended that the mitumba ban does not contradict Agoa’s eligibility criteria.

PETITION

Mr Ryberg maintains that the US trade agency’s acceptance of Smart’s petition was based on an “erroneous” finding.

He said the mitumba ban does not violate Agoa standards because the clothing at issue was manufactured outside the United States and thus does not qualify as a “US export.” Nearly all the clothing sold in the US are made in other countries, Mr Ryberg noted.

He acknowledged however that “Smart was very smart — if you’ll excuse the pun — to move for an out-of-cycle review at this time because the Trump administration wants to show they’re tough on trade. And such a demonstration is easy to make in the case of “three poor countries that can’t fight back,” Mr Ryberg added.

Smart initially wanted Kenya included in the trade agency’s out-of-cycle review — a step that could have led to the loss of tens of thousands of Agoa-dependent jobs in Kenya.

IMPORTS

But US trade officials decided to exclude Kenya from the review on the grounds that the Nairobi government had reversed its move to join in a coordinated mitumba import ban by East African Community member-states.

Mr Ryberg said a new study by the US Agency for International Development (USAid) as signaling the likelihood of Trump administration punitive action against Rwanda, Tanzania and Uganda.

USAid’s East Africa Trade and Investment Hub concluded in a 30-page analysis issued last week that a ban on mitumba imports is not needed to bolster domestic clothing manufacturing in Africa.

“EAC policy makers would be well advised to keep both used clothing sector and AGOA export benefits while focusing on domestic industry development, knowing these are not mutually exclusive goals,” the USAid trade hub study concluded.

USAid estimates that the used clothing industry accounts for 355,000 jobs in the EAC countries, which in turn generate $230 million in income that supports some 1.4 million East Africans.

TEXTILES

The mitumba ban could meanwhile jeopardise another 219,000 jobs in East Africa related to Agoa, the study calculated. It noted that the EAC countries last year exported $435 million in goods to the US under Agoa, with clothing accounting for 88 per cent of the sum.

Tanzania would suffer significantly from loss of Agoa benefits because it has a small but significant clothing manufacturing sector, Mr Ryberg said.

“Uganda is trying to build its industry, and there has been some growth,” he added. “The sad thing is, this (the loss of Agoa eligibility) will nip it in the bud.”

Kenya is by far the largest Agoa beneficiary in East Africa and this standing motivated Nairobi’s decision to withdraw from the mitumba phase-out agreement.

Kenya companies registered $394 million in textile and apparel sales to US buyers last year.

Kenya is so eager to protect its Agoa-related revenues and jobs that it has retained not only Mr Ryberg’s firm but another Washington lobbying group to help ensure that it retains duty-free access to the US market.

TOURISM

The Sonoran Policy Group, which includes executives with previous ties to the Trump administration, has been retained at a rate of $100,000 per month for a period of at least three months to lobby on Kenya’s behalf in regard to Agoa and to promote tourism.

The law firm of Ryberg and Smith, LLC was recently hired primarily to lobby against Kenya’s inclusion in the out-of-cycle Agoa status review.

Disclosure forms filed at the US Justice Department show that Mr Ryberg’s firm is being paid a base retainer fee of $10,000.

The agreement with the Kenya Ministry of Industry, Trade and Cooperation calls for payment of an additional $25,000 for services that the firm would provide if US trade officials were to include Kenya in the out-of-cycle Agoa eligibility review.

Officials at the Kenya embassy in Washington did not respond to requests for comment on the lobbying agreement with Mr Ryberg’s firm.

 

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