27 June 2017

East Africa: Agoa Row Is Wake Up Call On Agriculture

Photo: Michael Kakumirizi/Daily Monitor
Heaps of second-hand clothes.

In recent days, the big story in the East African region has been the US threat to withdraw export benefits enjoyed by Tanzania, Kenya, Rwanda and Burundi through what is popularly known as Agoa.

Agoa is the acronym for "African Growth and Opportunity Act", backed by a law passed in 2000 in the US to provide a window in which tax-free products would be exported to the US domestic market from Agoa qualifying countries in Africa, including those in our East African Community bloc.

For countries which fully utilised the opportunity, Agoa benefits have been immense. Kenya, for example, has so created nearly 70,000 Agoa-related jobs and in 2016, it exported to the US products valued at Sh867 billion, eight times more than the combined exports of Sh100 billion by Tanzania, Rwanda and Burundi.

The Agoa Act has thus been a signature trade deal between the US and African fledgling economies.

With another extension of the benefits in the last term of President Obama's presidency, the Agoa deal was expected to continue.

But now things are changing. A powerful US trade lobby group wants Agoa benefits for EAC withdrawn and have petitioned President Donald Trump to kick the EAC out of the arrangement.

The lobby group is targeting Tanzania, Rwanda and Burundi because of their decision to phase out importation of second hand clothes and shoes. Kenya is spared because it has rescinded on the EAC agreement to ban "mitumba" or impose huge taxes on such imports.

The US lobby has been angered by the decision to ban "mitumba" imports because that would hugely impact on its multi-billion dollar business selling used clothes and shoes to Africa countries.

Textile industries

But these countries have undertaken to establish their own textile industries, among others. The collective agreement to ban "mitumba" imports or impose higher taxes to deter such imports was informed by that decision.

While it isn't immediately clear what impact the move by Kenya would have, the other EAC countries have vowed to stick to their commitment to ban "mitumba" imports. President John Magufuli last week reiterated the position while addressing a public meeting in the Coast Region.

He says Tanzania is committed to reviving cotton farming to feed its textile industries, which is crucial in his industrialisation drive. Tanzania had a thriving textile industry in the late 1960s and 70s but the factories have since collapsed and consequently, cotton farming has suffered.

Rwandan President Paul Kagame added his voice in the face of the US threat and advanced the same position as Tanzania's. He says the US may as well "keep its Agoa" and let the EAC bloc revive its textile and leather industries.

The worrying trend, however, is that these same countries appear not to aligning their dream with the reality that budget funding for agriculture has continued to decline over the years.

Tanzania is a good example, where national budgetary allocation to this key sector is a mere 3 per cent! It means, we cannot to talk of industrialisation while we give lip service to agriculture which preoccupies about 80 per cent of working-age Tanzanians.

The Agoa threat should serve as a wake-up call to the EAC region.

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