TRALAC - Trade Law Centre

EU-Asia FTA affects African textile exports

Saturday, 22 May 2010

Source: Fibre2Fashion

In their quest for an alternate market, Kenyan textile manufacturers are facing tough competition, as the low-priced Asian manufacturers are seeking free-trade agreements (FTA) with the European Union (EU).

For instance, India and Pakistan are currently working on their FTA with EU that would permit their industries easy access in to the EU markets.

These FTAs that are getting signed between Asian countries and EU are likely to reduce the tariffs further, thereby, increasing the level of Asian exports in to the EU markets.

As per Jaswinder Bedi, Chairman of Textile Manufacturers Association of Kenya, low-cost fabrics from India, China and other Asian countries have been reducing their markets in US but yet they prefer the US market due to its protective tariffs.

According to data obtained from the African Cotton and Textile Industries Federation, as compared to the international sales of fabrics, the volume of Africa’s fabric exports are lower by one percent, standing at Sh 130.9 billion (US $1.7 billion).

Over 90 percent of the African exports of textiles enter the US markets, which was allowing entry of low-priced Asian textiles after the expiry of the Multi Fibre Agreement (MFA) in 2005.

MFA once provided protective armour to countries like US against the invasion of goods from developing countries in to their markets.

EU’s tariff rates on imported fabrics is within the range of 8-14 percent, which is far less as compared to the American market that continues to hold increased tariff rates in the range of 16-32 percent, on textile goods imported from countries with which it retains standard trade agreements.

After the African Growth and Opportunity Act (AGOA) unlocked the American market for African textile goods in 2000, EU too included in the Economic Partnership Agreements (EPAs) textile and garment goods in the list of products that was allowed to enter its market duty-and-quota free.

However, it’s been ten years since EPA talks had commenced, but African textile owners retain that, lesser external tariffs, which EU had extended to other regions were the main cause behind allowing textiles to enter their market from developing countries.