TRALAC - Trade Law Centre

Asian Textile Houses flee Lesotho after Quotas End

Friday, 28 January 2005

Source: Engineering News (South Africa)

Asian-owned textile firms are fleeing Lesotho after the end of a global quota agreement left the impoverished southern African state unable to compete in the US with cheaper Chinese exports, unions say.

Massive reform is needed if the remaining industry, which makes T-shirts and jeans for US chains like Gap and Timberland and employs thousands, is not to disappear entirely from Lesotho, they say.

"In the last quarter of last year ... six factories closed down, drastically increasing the number of unemployed people," Bahlakoana Lebakae, deputy general secretary of the Clothing and Allied Workers Union said this week.

"This is a direct result of the removal since the first of January of the quota system."

One of the poorest countries in the world, Lesotho, which is enclosed within the borders of South Africa, already suffers from high unemployment, serious food shortages and an HIV/Aids infection rate of around 30%.

The multifibre agreement - phased out over the last decade, finally ending on New Year's Day - set worldwide quotas for textile production, limiting the amount cheaper Asian textile sweat-shops could produce.

With its expiry, Lesotho's remaining factories, mainly Chinese and Taiwanese owned but employing thousands of local women, are relying on the US African Growth and Opportunity Act (Agoa).

Lesotho is the largest sub-Saharan exporter under Agoa, which allows some African states to avoid the 10% to 20% tariffs paid by Asian producers exporting to the US.

But a rising South African rand, to which Lesotho's maloti currency is tied, is making its exports less competitive.

And countries that use third-country fabrics for their exports - such as Lesotho, which imports cotton from Asia - will only be able to take advantage of Agoa until 2007, although they may be able to use cotton from African producers such as Mali instead.

Unions say if nothing is done, the situation for Lesotho's textile workers will only get worse. Trade Minister Mpho Malie is flying to the US to try to persuade clothing firms to keep buying from Lesotho.

"Retaining the remaining industry will depend on the negotiations of ministers with the American markets," Secretary of the Lesotho Congress of Democratic Unions Elliot Ramochela said. - Reuters.



“AGOA Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Lesotho’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: (click each link to view)

  • 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.