TRALAC - Trade Law Centre

Kenya’s textile sector to gain from rising US demand

Thursday, 18 November 2010

Source: Business Daily (Kenya)

Kenya’s textile sector is seeing a huge growth opportunity in the US where cash-strapped consumers are turning to lower priced duty-free imports from Africa as opposed to competitors from Asian markets whose exports to the biggest consumer market attract duty.

The aftermath of the recession is giving textile imports from Africa, under the African Growth and Opportunity Act (Agoa) agreement, a price leverage in the eyes of US consumers.

“We are seeing a shift in demand for textiles from countries like India, China, and Sri Lanka to African markets where the lack of duty makes exports relatively cheaper, especially now that international cotton prices are at an all time high” said Mr Jaswinder Bedi, the chairman of African Cotton and Textile Industries Federation.

“Four new textile industries were licensed last week and those already operational are running at full capacity,” he said, adding that the rising demand should help stop the slide in textile exports in the past few years.

The value of textile sales to the US under the Agoa agreement has been declining from a high of Sh21.7 billion ($ 272 million) in 2003, to Sh14 billion last year.

The recession in the US could also help other export items from Kenya, including fresh cut roses, sport fishing supplies, nuts, plastic products, jewellery, and essential oils. Total exports to the US have grown steadily from Sh12 billion in 2005 to Sh17.4 billion last year.

According to a new study, consumer spending in the US is expected to decline in the next five years on the back of a tough economic environment, a situation that analysts say gives advantage to cheaper imports.

Consumer demand in the US – the main driver of global economic growth for many years before the economic crisis – has fallen by about one percentage point from its peak of 71.5 per cent of GDP in early 2009.

The decline is expected to continue in the medium-term, with fears that there is no economic powerhouse to replace the dent in the US consumer spend.

“A decline in asset prices and the associated wealth effects for households, a sharp tightening of credit availability and a large increase in unemployment risk are widely expected to have a lasting downward impact on household spending (in the US),” the United Nations Conference for Trade and Development (UNCTAD) says in a study titled, “Global Rebalancing: Effects on Trade Flows and Employment”.

Exports from Africa, enjoying the lack of duty, are expected to have an edge in the new global market dynamics that is, however, expected to have far reaching negative impacts on jobs and exports for most countries targeting the US market.

For instance, China and Mexico are projected to see a decline of 0.51 and 0.14 per cent in textile exports in the coming years compared to a shrink of 0.02 per cent in Sub-Saharan Africa, based on 2008 pre-recession benchmarks.

Such a shrink in export volumes would translate into a decline in employment of 8.6 per cent for China, 4.1 per cent for Mexico, and 0.2 per cent for Sub-Saharan textile industries.

The UNCTAD report, however, indicates that in Sub-Saharan Africa, employment opportunities will grow marginally in the leather, metal, mining, meat and livestock sectors.

Before the financial crisis, the US household consumption accounted for about 16 per cent of global demand, with a significant part of the consumption consisting of imports. The decline in consumption, therefore, implies both a reduction in world demand and a decline in other countries’ export opportunities.

From 2000 to 2007, US imports grew 15 per cent to 17 per cent of the country’s GDP, boosting aggregate demand in the rest of the world by an estimated $937 billion.



“ Latest AGOA Trade Data currently available on AGOA.info


Click here to view a sector profile of Kenya'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.