TRALAC - Trade Law Centre

Political Developments Unlikely to Jeopardise US-Sacu Trade Deal

Thursday, 01 April 2004

Source: UN Integrated Regional Information Networks

Delays in the extension of the African Growth and Opportunities Act (AGOA) by the US have caused a crisis in the Swazi textile industry. According to Sipho Mamba, Secretary-General of the Swaziland Manufacturing and Allied Workers Union, many jobs are being lost due to the uncertainty over AGOA. “Already about one thousand garments workers out of 28,000 employed nationally have lost their jobs because of the uncertainty over AGOA. Each worker supports 10 dependants," he said. Almost a quarter of Swaziland’s population are either directly or indirectly dependent on the factories that export under AGOA, according to Swaziland’s Ministry of Enterprise and Employment.

The main rule that needs to be updated relates to the origin of raw materials for the finished goods. Raw materials must be sourced from AGOA member countries, or else the goods do not qualify to be zero-rated when coming into the US. In terms of the current system Swaziland’s ability to be zero-rated for duties will fall away at the end of September 2004 if they continue to use raw materials that are imported from Asia.

While there has been a great deal of talk about the extension of AGOA until 2015, with an extension of four years being placed on the rules of origin, no real result has come from them. Two bills have been introduced into congress to extend AGOA, but both of these have stalled. As a result no apparel exporters have received an order to be delivered after 30 September 2004.

Businesses have met with the Swazi Prime Minister Themba Dlamini in order to try to galvanise the government into being more proactive with the issue. Robert Maxwell, secretary-general of the Swaziland Exporters Association emphasised the need for prompt action, saying in a statement: "As employers, we are doing everything possible to avert the possible disaster which might befall the country".

While September may still appear to be a little way off, US retailers generally place orders six months in advance, which means that even if an extension of AGOA is approved, businesses in Swaziland will already begin to suffer from a decrease in orders in two weeks time.

"Once we lose customers, it will be hard to get them back. If the delay in AGOA legislation is temporary, we can reopen and rehire workers in six months. If it is permanent, there won't be an Asian-owned garment factory still here next year," said the manager of one Asian-owned garment factory in the Matsapha Industrial Estate near the central commercial city, Manzini.

The fact that orders are being shifted away from countries like Swaziland has already been confirmed by Florizelle Lister, assistant United States trade representative for Africa in her testimony before the Senate Foreign Relations Committee last week.

The renewal of AGOA comes at an inopportune time from a US point of view. With the US presidential elections not far away, extending AGOA may be seen as a politically unwise move since this will create the impression that trade is being taken away from US garment factories. Swaziland is almost completely dependent on imported raw materials in order to make apparel, and will find it difficult to source these raw materials at a reasonable price from other African countries.

Another factor that has been weighing on Swaziland has been the fact that its currency, the lilangeni, has strengthened tremendously in the recent past as a result of it being pegged to the strong South African Rand. As the manager of one garment factory said: "Our products are twice as expensive as they were two years ago, because of the strengthening rand. This erases the advantage of our goods going into the US without duty taxes".



“AGOA Latest AGOA Trade Data on AGOA.info


Click here to view a sector profile of Swaziland’s bilateral trade with the United States, disaggregated by total exports and imports, AGOA exports and GSP exports.


Other regularly updated trade statistics on AGOA.info include:

  • AGOA-beneficiary Countries’ AGOA and GSP Trade Aggregates

  • AGOA Trade by Industry Sector

  • Apparel Trade under AGOA’s Wearing Apparel Provisions

  • Latest Apparel Quotas under AGOA

  • Bilateral Trade Data for all AGOA-eligible countries individually.