TRALAC - Trade Law Centre

Southern Afica: Textile Firms Fighting for Survival

Saturday, 23 April 2005

Source: Inter Press Service (Johannesburg)

Southern African textile firms are feeling the effects of the quota system which the World Trade Organisation lifted in January.

To fend off the effects, textile managers are lobbying their governments to improve the climate for doing business in the 13-nation Southern African Development Community (SADC).

By improving the business climate, they hope that their governments' action would boost the competitiveness of the region's industry on the global textiles market.

The removal of the quota restrictions under the World Trade Organisation's (WTO's) 30-year-old Multi-Fibre Agreement (MFA) mean that poor African producers are no longer protected from stiff competition that the Asian mass producers pose.

Asian countries are expected to enjoy unlimited access to the duty-free American market after the quotas were lifted Jan. 1.

Agrina Mussa, president of the Association of SADC Chambers of Commerce and Industry (ASCCI), said they had produced a 'white paper' prescribing remedies to encourage domestic investment and production competitiveness.

The body, which acts as the voice of business in the SADC region, is based in the Malawian commercial hub of Blantyre.

Following the lapse of the WTO quotas, most Asian firms, which had invested in the region to take advantage of the African Growth and Opportunities Act (AGOA), have pulled out, Mussa said. AGOS provides duty-free access of African goods into the United States market.

"We need to look within (the SADC region) for investments which require that we have our own mills. For such investments to come; security, macroeconomic, good governance and labour issues need to be addressed," Mussa told IPS in an interview.

The pullout of the Asian investors has created job losses in the region.

With the phase out of the WTO quota system, thousands of jobs have gone. These jobs were created by Asian firms who used the region as a springboard for their exports to the tariff-free U.S. market.

In a new report 'Rags to Riches to Rags', the British-based charity, Christian Aid estimates that 27 million workers around the world could lose their jobs as a result of the quota's expiry.

In southern Africa, Lesotho, Malawi and South Africa have already reported cuts in thousands of jobs in the textile industry.

In Malawi 2,511 jobs were cut between January and March this year when a Taiwanese firm, Haps Garments, closed shop in the administrative capital of Lilongwe and relocated to Taipei.

A branch of Haps in Lesotho - where more than 10,000 textile workers have been rendered jobless - also closed in 2004.

Malawi has registered nine textile companies under AGOA, but not all of them are exporting to the United States. Between them, they employ more than 11,000 workers, who now face an uncertain future.

In the tiny kingdom of Swaziland where AGOA products constituted 83 percent of the country's exports, 30,000 jobs are at stake, according to a March 2005 survey conducted by the Zambia-based Common Market for Eastern and Southern Africa (Comesa).

"Any potential disruption to the local textiles and garments industry would be understandably resented, as this would present enormous social problems on the country," said the survey.

Watipaso Mkandawire, head of Comesa's Regional Investment Unit, told IPS from Zambia's capital Lusaka that the 19-member African trading bloc was concerned about the harm and disruption that the WTO quota decision was causing to the economies of the region.

In 2004, Malawi earned about 20 million dollars in textile exports from the U.S. market, according to a January 2005 country report on Malawi by the London-based think-tank Economist Intelligence Unit (EIU).

The report says the country's exports under AGOA jumped by 40 percent and that it emerged the third highest African exporter to the United States after South Africa and Cote d'Ivoire.

Malawi is organising a conference to address problems facing its textile industry.

Trade minister Martin Kansichi, who admits that the WTO decision has caught both government and industry unaware, said the conference would focus on how to revive the industry.

"What we need now are strategies that will prepare us for drastic changes in future," he said.

Concerned that the WTO decision could hurt poor African producers benefiting from AGOA, the U.S. government has since October 2004 instituted safeguard measures to contain specific Chinese textiles and apparels.

According to the U.S. government Committee for the Implementation of Textile Agreements (Cita), the measures aim at limiting disruptions that Chinese exports may cause to the U.S. market, if such distortions can be identified.

Under these measures, cotton knit shirts and blouses, cotton trousers, socks, and man-made fibre underwear would be reviewed and put under quotas if it is considered that they are causing market distortions.

The United States is permitted, under the provisions of China's WTO Accession Agreement, to apply safeguards on textile products from China in instances where those criteria are met.

"Free trade must be fair trade and we will work to ensure that American manufacturers and workers compete on a level playing field," Carlos Gutierrez, U.S. commerce secretary, said in a statement Apr. 4.

U.S. Embassy Public Affairs Officer in Malawi, Mitchell Moss says Malawi should take advantage of her cheap labour to venture into exports of other AGOA products. Up to 2,000 other product lines qualify.

Moss said the United States will convene an 'AGOA Forum' in Dakar, Senegal in July to prepare African textile firms to benefit from other duty-free AGOA exports.

"While the textile exports will not dry up overnight, it is clear that over the long-term, there will be need for a major re-alignment," he said.

In a new report, the U.S. Agency for International Development (USAID) urges African manufacturers to abide by governance issues attached to AGOA and fight corruption that has hindered private sector growth.

"Corruption is still a concern when dealing with bureaucracies," USAID noted.

Good governance is a key criteria for economic and trade benefits under AGOA, and the U.S. government has been assessing it since the windfall of AGOA in 2000 to determine those countries still eligible.

In the latest assessment Dec.21, 2004, President George W. Bush struck off Cote d'Ivoire from the list of 36 eligible African states. Zimbabwe is also excluded.

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