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AGOA Apparel Exports up but Danger Ahead?

Published date:
Friday, 10 October 2003

Total exports of apparel from the AGOA-beneficiary countries are up 37% year-on-year to August 2003, while the proportion of exports qualifying for duty-free access under AGOA rose marginally from 72% to 75%.

With the cut-off date for the use of third-country textile inputs only a year away, more than three-quarters of all AGOA apparel exports thus far this year still utilised foreign inputs. This proportion has remained unchanged relative to the same period in 2002.

Lesotho, Kenya, Mauritius, Madagascar, Lesotho and South Africa continue to be the only AGOA-eligible countries benefiting from the Act. Despite a weaker US-dollar, Lesotho (the largest apparel exporter under AGOA) has only managed to increase its year-on-year apparel exports under AGOA by 12%. With the local currency (which is linked to the South African Rand) having risen in value by on average more than 30% over the corresponding period, this small change in US$ denominated exports in fact represents a nominal decline in local currency terms.

In addition, Lesotho is one of the countries qualifying for less-restrictive rules of origin for its apparel exports, at least until September 2004. This is because the country is classified as being a “lesser developed beneficiary country” in terms of the AGOA legislation. Despite this, Lesotho’s apparel exporters continue to source their textiles from third countries such as Taiwan and China and export only under the lesser-developed-country rule. Unless the country can build up sufficient textile manufacturing capacity over the next year, it is likely to experience a significant drop in apparel exports to the US.

Kenya has experienced rapid growth in AGOA-eligible apparel exports, which in US$-terms rose by more than 70% year-on-year to August 2003. Mauritius’ apparel exports under AGOA rose by a third, Madagascar’s by 50%, South Africa’s by 61%, Swaziland’s by 70%.

While AGOA only permits apparel to be exported duty-free to the US, a small number of “handicraft textiles” also qualify for duty-free benefits. These “folklore” hand-loomed fabrics and handmade articles made from such hand-loomed fabric may be exported duty-free from Kenya, Lesotho, Botswana, Malawi, Swaziland, Namibia, Zambia and Ghana.

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