5 June 2018

East Africa: Trump Against Rwanda in Trade War Over Used Clothes

Photo: Nation Media Group
Bales of second-hand clothes being transported in Nakuru, Kenya. Rwanda has impounded hundreds of tonnes of used clothes, shoes and leather products being smuggled into the country.

When East African countries announced a ban on the import of second-hand clothes to help their own textile industries, this irked US President Donald Trump. All but Rwanda have now backtracked. What's at stake?

It's one of US President Donald Trump's trade wars that makes few headlines: The one over used clothes.

In 2016, member states of the East African Community (EAC) came up with a plan to ban second-hand clothes and shoes by 2019. The EAC doubled a common external tariff rate for worn clothing to $0.40 (€0.34) per kilogram. Rwanda increased its per-kilogram import tax to $2.50.

Trump threatened to retaliate, saying the tax goes against the African Growth and Opportunity Act (AGOA). At the end of March, Trump announced he would suspend the application of duty‑free treatment to all AGOA-eligible goods in the clothing sector for the Republic of Rwanda within 60 days.

Rwanda didn't budge and let Trump's deadline run out last week. That means the US is now likely to impose tariffs on textile products and shoes from Rwanda.

"Legally speaking, the US has the right to impose a penalty because, within AGOA, Rwanda is supposed to remove all barriers to US goods," Christopher Kayumba, an analyst and senior lecturer at the University of Rwanda, told DW.

"But the spirit of AGOA is to help poor countries to evolve," he added.

"I was surprised that a country as big and rich as the US [would] insist on exporting its second-hand clothes to a poor country like Rwanda," he said.

Hampering Rwanda's development

"We see that second-hand clothes are undermining the textile industry within the country. In that sense it was surprising that the Trump administration would want to sanction Rwanda when Rwanda is trying to put in place the policy that will help it grow long-term," Kayumba said.

It all started in March last year, when American trade organization SMART -- the Secondary Materials and Recycled Textiles Association -- complained to the US Trade Representative's office, claiming the import ban harmed US industry. SMART claimed that at least 40,000 US-based jobs were at risk.

The Trump administration then put Rwanda, Tanzania and Uganda under review for AGOA eligibility (Kenya was exempt from this review) regarding their decision to phase in an import ban on used clothing and shoes.

"The review found that this import ban harms the US used clothing industry and is inconsistent with AGOA beneficiary criteria for countries to eliminate barriers to US trade and investment," the US Trade Representative's Office wrote in a statement.

Tanzania and Uganda promised to reduce or eliminate their import barriers. But Rwanda was not willing to change its stance on its tariffs.

"Rwanda doesn't really export very much. They don't have large-scale, domestic manufacturers," said Ben Shepherd, a consulting fellow with Chatham House's Africa Program.

"There are big cost implications for them, because they are such a long way from ports whereas Kenya has a significant manufacturing industry; Tanzania to some extent and Uganda as well," Shepherd told DW.

"So the fright of a trade war with the US in terms of reciprocal power, getting into a difficult trading relationship with a major international player, you can see this would make them a bit more concerned because there is more at stake," he said.

"Rwandans can afford to pick a fight, because there is less to lose in terms of trade for them," Shepherd added. "They don't like to be pushed around and they don't like to see themselves being pushed around and are emerging as something of a leader in terms of an African confidence to push back against impositions of the outside world."

Depending on second-hand clothes?

And then there are the people in Rwanda who make a living from selling used clothes -- or those who simply can't afford more expensive items made in Rwanda.

"Banning second-hand clothes in the short term, of course it will affect those who work in the industry here -- I think about 400," said analyst Kayumba.

"But in the long-term I believe if it is banned totally -- that is, banning second-hand clothes and leather products from the US and all other countries including in Asia, I think it will help the leather industry and the textile industry to grow in Rwanda."

According to a study by the US Agency for International Aid (USAid), the US supplies almost 20 percent of total direct exports of used clothing to the EAC.

The quantity is significantly higher when indirect exports are added to the mix -- as in when the US ships clothing to the United Arab Emirates, China, Pakistan, India and other countries where garments are sorted, cleaned and repackaged for re-export to African countries.

But exporting used clothing to the EAC makes up such a small percentage of trade, says Garth Frazer, an associate professor of business economics and public policy at the University of Toronto. He has served as an advisor to both the Ugandan and Rwandan governments regarding trade policy.

"Used-clothing exports from the US to all EAC countries combined had an all-time peak of US$43 million in 2012, which is 0.003 per cent of American exports. This is a truly negligible industry from the American perspective," Frazer wrote. "Its trifling economic value is not surprising as this industry essentially takes items that might otherwise go to the garbage and ships them to Africa."

Frazer added that the US was more interested in "protecting tiny, marginal American industries than in being "a leader in development assistance."

Rwanda

Rwanda Has Achieved Universal Healthcare

With more than 90 per cent of Rwandans covered under the community-based health insurance scheme locally known as… Read more »

See What Everyone is Watching

Copyright © 2018 Deutsche Welle. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.