TRALAC - Trade Law Centre

Asian countries' eagerness to strike FTA a lesson for African textile sector

Monday, 24 May 2010

Source: Business Daily (Kenya)

The race by Asian countries to strike a free trade area (FTA) with the Europe puts the Kenyan textile producers between a hard place and a rock as far as their search for alternative export destinations go.

For some time, Kenyan producers, like players from other sub Saharan African countries, have been betting on the Economic Partnership Agreements (EPAs) as an opportunity to penetrate the EU market, reducing overdependence on the increasingly competitive American market.

Taking a cue from the hugely successfully African Growth and Opportunity Act (Agoa) through which the American government has opened up its market to 90 per cent of African textile exports, the European Commission in 2000 moved to include textile and apparel among the African items that it will permit to enter its market duty-and-quota free.

African textile producers had initially hailed the move as an avenue to escape the cutthroat competition that the Asian market has since posed in the US market following the 2005 expiry of the multi fibre agreement that used to buffer them.

While a recovering US economy has lifted the hopes of players across the labour intensive sector, a lingering FTA between the low-cost Asian firms and the EU can only create another battlefront with Asian textile firms, dashing African hopes of ever finding an alternative export destination in the years to come.

Both Pakistan and India are at advanced stages in their talks to initiate a free trade area with EU with India said to be preparing to sign its pact any time in the coming weeks, granting their firms easy access to the vast European markets.

An FTA can either reduce or completely eliminate the already low common external tariffs that Asian products currently encounter to enter EU markets.

Compared to the American market which maintains higher tariff walls of between 16 and 32 per cent on products from countries with which it maintains not preferential trade agreements, EU’s external tariffs range from eight to 14 per cent.

From a nationalist point of view, it is easy to commiserate with local producers because some of the issues raised so far are beyond their control.

However, in an era of liberalised trade, it is difficult to imagine an international trade without competition and the African textile players must wake up to this reality because they need these ‘difficult markets’ to grow their sales.

Available statistics put the volume of Africa’s textile exports at Sh130.9 billion ($1.7 bn), less than one per cent of the global textile sales.

A joint initiative between governments and sector players is needed to come up with right policy mix to counter growing competition in international markets.