TRALAC - Trade Law Centre

South African Exporters Welcome US-China Textile Pact

Monday, 21 November 2005

Source: Business Reports (South Africa)

The SA Clothing Industry Export Council has welcomed the US-China textile bilateral agreement that in effect reintroduces quotas on 34 categories of clothing and textiles until 2008. The agreement will result in renewed interest from US retail companies in sourcing from South Africa and other sub-Saharan African countries.

South Africa's exports declined by 38 percent this year following the lifting of the Multi-Fibre Arrangement (MFA) on January 1. The end of the MFA strangled trading opportunities with other clothing manufacturing countries that cannot compete with China, which has an unfair trading advantage as its currency is undervalued by up to 40 percent against the US dollar.

It also has a 13 percent export incentive and the government provides soft loans at 2.2 percent. Many of the companies are state-owned enterprises, which are not expected to make a return on their investment, provided they create job opportunities.

South Africa's decline in exports has been due to the expiry in March of the Duty Credit Certification System, a local export incentive for manufacturers. Although the industry was led to expect that this would be replaced by the interim clothing and textile industry development programme, this has not materialised.

Lesotho lost 7 000 jobs last December alone in anticipation of the end of the MFA as foreign investors packed up and left. Jack Kipling, the chairman of the SA Clothing Industry Export Council, said at the weekend that the agreement between the US and China was even more favourable than a similar agreement between the EU and China that would reintroduce quotas on a similar range of products, but only until 2007.

"Clothing manufacturing workers in more than 50 countries are better off thanks to this agreement, including 14 sub-Saharan African countries with sizeable clothing industries that were dependent on exports to the US market. The agreed quotas cover more than 80 percent of current sub-Saharan apparel exports to the US and should result in renewed interest in sourcing from the region," he said.

In a study conducted in the US in 2003 in anticipation of the end of the MFA, US retailers were predicting that they would reduce by two-thirds the number of countries they dealt with if no restrictions existed. It was predicted that as many as 20 million jobs worldwide could be lost to China.

When quotas were removed, these predictions were starting to prove accurate, with a number of countries facing the prospect of the collapse of their clothing and textile industries. Sub-Saharan Africa has been particularly hard hit.

Despite the recent agreements, which should create a more stable trade environment for apparel through to 2008, China's trade policies are still a serious problem.

The global alliance for fair textile trade has asked for a special textile sectoral in the World Trade Organisation's Doha development round to address the issue in December. This could reopen the debate on quotas.

Download a copy of the Memorandum of Understanding (MoU) from AGOA.info's archives here. ( File size 369kb)



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


Click here to view a sector profile of South Africa’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.