TRALAC - Trade Law Centre

Agoa's short supply ruling may aid countries in crisis

Tuesday, 21 January 2003

Source: Business Report

Durban - The US would probably implement the short supply ruling of the Africa Growth and Opportunity Act (Agoa) to help poor countries facing a temporary shortage of textiles, Walter Simeoni, SA Textile Industry's president, said yesterday.

Fresh from Agoa, Simeoni said the entire sub-Saharan African textile industry supported retaining the deadline for least developed countries to discontinue fabric imports from other sources by September 2004.

Small countries with an apparel industry based on fabric imports from the Far East were most prominent in lobbying for an extension, he said.

"We are reasonably confident that the deadline will not be rolled over, but poor countries will be able to apply for this ruling if necessary, relieving the pain that would be caused by job losses or lost investment."

But Jack Kipling, the chairman of the Export Council for the Clothing Industry, said the overall input from the majority of participants had undoubtedly been in favour of an extension.

"However, [US trade representative Robert] Zoellick cautioned delegates E that the challenge was to get sufficient support in [the US] congress."

The domestic textile industry expected to have invested R1.6 billion in new capacity by the end of 2004. Mauritius also made substantial investments on the continent, and French-speaking African countries were keen to be at the forefront of further investment.

Simeoni told delegates in Mauritius that South Africa currently had a 125 million kilogram short staple spinning capacity, including 6 million kilograms of new Agoa capacity.

However, total yarn capacity, including worsted yarn and continuous filaments, amounted to 202 million kilograms.

"Agoa will require 51 million kilograms, which will consist of the additional 6 [million] kilogram capacity, another 17 [million] kilograms in the planning or implementation phase and a further 15 million kilograms which will be freed due to an increase in the yarn import penetration into South Africa from 18 percent in 2002 to 30 percent in 2004," Simeoni said.

"Mauritius, Namibia and Lesotho will account for an additional capacity increase of 19 million kilograms, giving us a total new installed capacity of 57 million kilograms by the end of 2004," he said.

Simeoni was therefore confident there would be no yarn shortage for Agoa purposes by the end of 2004. "What Africa must concentrate on, however, is the manufacture of fine cotton yarns."

Several months will probably pass before minor adjustments to the act are published.

One of these is expected to be the introduction of a mechanism to allow US textile companies to invest in sub-Saharan Africa, which would further ensure sufficient capacity for apparel firms to meet Agoa orders.

Kipling said the most serious issue addressed at the forum had been the threat posed to global trade by terrorism.

The US's Container Security Initiative, which entails using hi-tech equipment to photograph the contents of containers, is likely to feature prominently this year.

"We have E the potential to turn this challenge into a distinct competitive advantage for South Africa," he said.

He said the value of US President George W Bush's announcement that he would ask congress to extend the 2008 deadline for Agoa lay in the certainty this would provide for investment bankers, who had been cautious about accepting industry assurances of Agoa's continuation.

"Agoa is much more than simply increasing exports to the US. It is equally aimed at encouraging regional co-operation," Kipling said.

Textile exports to the US have grown from R250.5 million in 2000 to R287.8 million between January and October 2002. Clothing exports rose from R790.8 million in 2000 to R1.3 billion for the 10 months to October last year.

The textile industry has fared better in the European Union (EU), with exports climbing from R824.4 million in 2000 to R1.2 billion from January to October 2002. However, clothing exports to Europe trail figures for the US, increasing from R395.8 million in 2000 to R460.7 million in October 2002.

Kipling said the UK continued to be the principal market, with exports valued at R347 million, representing 81 percent of total EU exports.