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Can US trade help Africa?

Published date:
Tuesday, 11 August 2009

Sudath Perera has every reason to be content. He started up his textiles factory outside the Kenyan capital Nairobi nine years ago; today, he employs 1500 workers and turns over between 18 and 20 million U.S. dollars a year.

“We are contributing to the local economy by creating employment,” he says. “And indirectly there are a lot of local suppliers also relying on us.”

Perera’s factory is one of thousands of businesses on the continent that are taking advantage of a U.S. trade programme under which certain goods from around 40 sub-Saharan African countries can be imported to the States duty-free.

It’s known as AGOA – the African Growth and Opportunity Act – and was one of the main reasons for U.S. Secretary of State Hillary Clinton’s visit to the continent.

“The ingredients are all here for an extraordinary explosion of growth, prosperity and progress,” said Clinton at the AGOA forum in Nairobi last week. “I know how important it is to translate legislation like AGOA into daily changes that people can look to.”

Many on the continent say they’re already feeling those changes. Textiles factory worker Christine Mwende didn’t have a job before Perera employed her; and though the 120 dollar-a-month salary she makes is low by Western standards, she says it’s made all the difference.

“This job has really helped me,” she told Reuters Africa Journal correspondent Vivianne Mukakizima. “When I started working here, my child had not started school – but he is now in class 4.”

Kenya’s minister of trade, Amos Kimunya, says his country is definitely seeing the benefits. “America is a huge consumer market, it’s a super-power,” he told Reuters. “We are doing business with Europe and America but we could do more and believe that the future lies in more trade not aid … not waiting for handouts.”

But handouts are exactly what’s making life so difficult for farmers on the other side of the continent.

They produce cotton, which should, in theory, go into making the textiles that African factories are exporting to the States duty-free. But cotton from Burkina Faso is struggling on the global market because it is competing with cotton from the United States, which is heavily subsidised by the American government.

It means that prices in recent years have been at their lowest point since the 1970s and experts say that if western countries stopped giving subsidies to farmers, global cotton prices could go up by as much as 28 percent.

“The framing of our market has always been to what I call developed country markets”, says Kenyan economist James Shikwati, who feels that African countries should focus more on trading with each other. “If developed markets subsidise their farmers it becomes very difficult for African cotton to access such markets. We have cases where farmers abandon the cotton farming itself because there is nobody to purchase their cotton.”

One small growth market is organic cotton, which many women in Burkina Faso are now turning to, because the pesticides that can cause fertility problems are not used – and because of the profit margin.

“With normal cotton you have to borrow money to buy fertiliser,” says farmer Juliana Dabire. “At the end of the season, when you take your money, it’s not always possible to make a profit. But I have almost no debts to pay after cultivating. So when I finish, I can keep all the money that they give me.”

The 250 dollar net profit that she made last year helped feed 9 children, repair her house and buy bicycles for her two eldest sons.

But even though organic cotton from farmers like her goes into making Victoria’s Secret underwear, she herself buys all her clothes second-hand.

It is the other major competitor for African textiles: the clothes that are donated by individuals in the West, but that become a thriving informal industry once they reach Africa. A shirt in one of the millions of second-hand markets on the continent can retail for as little as 1 dollar – less than the cost of producing one new.

In spite of the incentives, trade from Africa still accounts for a tiny percentage of global business. America, which champions itself as a big supporter of African industries, only gets about 3 percent of its total imports from Africa.

Economic analyst James Shikwati said: “AGOA is very clear that they are looking at the interest of America in terms of how to grow business in Africa. So what we need to do as Africans is to ask ourselves how can we develop our own interests? Because you are not going to benefit if you have no interests at all.”

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