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AGOA Can Create 200,000 Jobs in Kenya

Published date:
Monday, 20 January 2003

A report released during a summit in Mauritius last week said Agoa could potentially enable as many as 200,000 Kenyans to find work, but critics of the policy have their doubts

KENYA COULD create about 200,000 jobs in the textile sub-sector under the Africa Growth and Opportunity Act ( Agoa), substantially boosting the new government's pledge to create 500,000 jobs annually.

A US trade report shows that Kenya's textile sales to America have soared from $189 million in 1999 to $577 million in 2001, following the establishment or reopening of nine textile firms that have created 20,000 jobs.

"Agoa could potentially enable as many as 200,000 Kenyans to find work," the report, released during last week's Agoa summit in Mauritius, said.

The summit was attended by officials from 38 African countries that benefit from the initiative, which eliminates quotas and duties on most African exports to the US.

It is estimated that Ksh200,000 ($2,500) is required to create a minimal wage job in Kenya meaning that an investment of Ksh40 billion ($500 million) would need to be channelled into the textile sub-sector.

The National Rainbow Coalition's pledge to create 500,000 jobs a year has been criticised on this basis since it would require an investment of Ksh100 billion ($1.25 billion) annually.

Kenya's job creation potential, however, will depend on the outcome of a petition to the US seeking to have the implementation of a law requiring Africa or the US to originate the fabrics used in the clothing shipped to the US deferred to 2008, when the Agoa lifespan expires.

The law is supposed to take effect in September 2004.

African ministers warned in Mauritius that the provision would lead to reversal of many of the trade gains that had been achieved. At present, many African countries eligible for the programme are permitted to use fabric made in Asia.

The change in the rules of origin would prove disastrous for the clothing manufacturing sector in Kenya, which relies heavily on imported yarn from Asia following the collapse of its cotton sector due to dumping of textiles onto the local market. US Trade Representative Robert Zoellick said at the Mauritius conference that the Bush team was aware of this concern but he made no commitment to seek modification of the law. "For Africa to compete effectively on international markets it must develop vertically integrated industries that grow cotton, spin the yarn, and manufacture finished products," Mr Zoellick noted.

Another potential danger for Africa lurks in the form of a World Trade Organisation agreement whereby the United States must lift all quotas on its textile imports by 2005. African manufacturers could then find themselves edged out of the US market by enormous shipments of low-priced goods from China, Thailand and other textile-making powerhouses in Asia.

However, Mr Zoellick observed that apparel imported by the United States from countries outside Africa would still be subject to tariffs of around 12 per cent. "An Agoa country would still benefit if it has zero per cent as opposed to 12 per cent," he argued.

Through a video address to the conference, President George W. Bush promised to ask Congress to extend Agoa's initiative beyond 2008 but there are fears that American lawmakers will shoot down the idea.

The American apparel industry has lost some 600,000 jobs in the past decade largely because of competition from cheap imports. The political muscle of US apparel makers, who delayed Agoa's enactment for over two years and weakened many of the original features remains formidable.

Kenya is among the few countries that have benefited from the initiative, which has seen American imports from sub-Saharan Africa surge by 60 per cent. The other notable beneficiaries are Mauritius, Lesotho, South Africa and Madagascar, countries that already had a textile-manufacturing base.

However, oil and minerals still account for well over 80 per cent of US imports from the African countries eligible for preferential trade treatment under Agoa, leading critics to argue that the programme has not helped diversify Africa's exports.

Textiles and clothing, the manufactured products that Agoa is primarily intended to promote, have also not experienced a boom in most African countries. Apparel still accounts for less than five per cent of US imports from the sub-Saharan region, despite the stimulus felt in Kenya and a few other countries.

The programme has, however, been credited with helping economic and political reforms in Africa due to its insistence on good governance as one of the criteria for eligibility. In order to become eligible for the trade programme, governments must meet a series of conditions involving human rights as well as open-market requirements.

The US State Department recently warned Swaziland and Eritrea that they could be denied Agoa's benefits unless they ended alleged human-rights violations. There have been fears that poor treatment of Kenyan workers at the Export Processing Zones where most textiles are manufactured may jeopardise Agoa's future.

The zone's employees last week staged demonstrations in Nairobi protesting over poor pay and working conditions, which critics say amount to flouting of human rights.

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