Region: Continent-Wide
Issue Areas: +economy/development+ +US policy focus+
Summary Contents:
This posting contains a news release from the U.S.
International Trade Commission announcing a report on the
potential impact of eliminating quotas and tariffs on textile
and apparel imports from Sub-Saharan Africa, as well as
additional excerpts from the executive summary of the report.
The commission's conclusion is that such liberalization would
have relatively small impact on US industry.
+++++++++++++++++end profile++++++++++++++++++++++++++++++
LIBERALIZATION OF TEXTILE AND APPAREL IMPORTS FROM
SUB-SAHARAN AFRICA LIKELY TO HAVE LITTLE IMPACT ON U.S.
INDUSTRY
September 4, 1997 News Release 97-060 Inv. No. 332-379
Allowing duty-free and quota-free entry for textiles and
apparel from Sub-Saharan Africa would have a modest effect on
domestic producers' textile and apparel shipments, reports the
U.S. International Trade Commission (ITC) in its publication
Likely Impact of Providing Quota-Free and Duty-Free Entry to
Textiles and Apparel from Sub-Saharan Africa.
The ITC, an independent, nonpartisan, factfinding federal
agency, prepared the report at the request of the Committee on
Ways and Means of the U.S. House of Representatives. The
Committee asked the ITC to report on the likely impact of
granting quota-free and duty-free entry to textiles and
apparel from Sub-Saharan Africa. Legislation introduced in
April 1997 (H.R. 1432, The African Growth and Opportunity Act)
would grant such trade preferences. Following are highlights
of the report:
* Allowing duty-free and quota-free entry for textiles and
apparel from Sub-Saharan Africa (SSA) would result in a 0.1
percent decrease in domestic producers' apparel shipments and
a negligible effect on shipments of the domestic textile
industry.
* Seven of the 48 countries in SSA currently compete in the
global textile and apparel market and could expand exports to
the United States. They include Mauritius, South Africa,
Lesotho, Kenya, Swaziland, Madagascar, and Zimbabwe. Nine
other SSA countries have the potential to expand exports to
the United States should SSA be granted preferential U.S.
market access. They include Botswana, Cameroon, C"te d'Ivoire,
Ghana, Malawi, Mozambique, Nigeria, Tanzania, and Zambia. The
other SSA countries are less likely to compete in the U.S.
market; imports of textiles and apparel from most of them were
less than $100,000 each in 1996.
* U.S. imports of textiles and apparel from SSA grew by an
annual average of 18.8 percent during 1991-96 to $383 million,
or less than 1 percent of total U.S. imports of such goods.
They were concentrated in apparel, especially cotton shirts
and pants, and came mostly from Mauritius, South Africa, and
Lesotho.
* If both quotas and tariffs were removed from U.S. imports of
textiles and apparel from Sub-Saharan Africa, the ITC
estimated that U.S. imports of apparel from SSA would grow
between 26.4 percent and 45.9 percent (between $100 million
and $175 million) and net welfare to the U.S. economy would
rise between $47 million and $96 million. U.S. apparel imports
from the rest of the world would fall by not more than an
estimated 0.2 percent ($75 million). U.S. domestic shipments
of apparel would decline by about 0.1 percent ($47 million)
and result in employment losses of 676 full-time-equivalents
(an upper-bound estimate).
* For textiles, the Commission estimated that the removal of
duties would result in an increase in U.S. imports from SSA of
between 10.5 percent and 16.8 percent (between $2.5 million
and $4 million) and in a welfare gain between $0.6 million and
$1.5 million. Since the quota for textiles did not have a
restrictive effect in 1996, its removal would likely have a
negligible effect on trade. The expected increase in textile
imports from SSA would lead to a slight decline (not more than
0.05 percent) in textile imports from the rest of the world.
The likely impact on the U.S. textile industry and its workers
would be negligible.
* Removal of quotas alone on textile and apparel imports from
SSA would have a small impact on apparel trade and a
negligible effect on textile trade. The estimated increase in
apparel imports from SSA would range from 0.4 percent to 0.6
percent. U.S. consumers would benefit from quota removal, but
the welfare gains would be small (between $2.6 million and
$3.3 million). The impact of quota removal on U.S. producers
and workers would be negligible.
* Uncertainty regarding the economic environment in SSA with
respect to limited infrastructure development, macroeconomic
policies, and political instability, precluded assessing the
extent to which foreign direct investment would be attracted
to SSA, particularly in the short term. However, new
investment in SSA resulting from preferential access to the
U.S. market would likely be in the apparel sector. Entry
barriers for the production of apparel, compared with that for
textiles, are generally minimal in terms of capital and
infrastructure requirements.
* U.S. industry has expressed concern about a possible
increase in textile fraud, especially illegal transshipments
of Asian textiles and apparel through SSA to avoid U.S.
quotas. The legislation would require beneficiary exporting
countries in SSA to adopt a visa system to guard against
transshipment.
The foregoing is from the ITC report Likely Impact of
Providing Quota-Free and Duty-Free Entry to Textiles and
Apparel from Sub-Saharan Africa (Inv. No. 332-379, USITC
Publication 3056, September 1997). An executive summary of the
report is available at
http://www.usitc.gov/332S/ES3056.htm
The full report in Wordperfect is also available on the USITC
Web site. A printed copy may be requested by calling
202-205-1809 or by writing to the Secretary, U.S.
International Trade Commission, 500 E Street SW, Washington
D.C. 20436. Requests may be faxed to 202-205-2104.
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Executive Summary (Excerpts only -- the full Executive Summary
is 23K)
Product Coverage
The articles covered by this investigation are those subject
to textile agreements, namely textiles and apparel of cotton,
other vegetable fibers, wool, manmade fibers, and silk blends
(hereinafter referred to as sector goods). Used clothing and
other used textile items are a major U.S. export to SSA. Such
U.S. exports to SSA totaled $92 million in 1996; they were
eighth out of all U.S. exports to the region. Several SSA
countries have expressed concern about the adverse impact that
shipments of used apparel and textile articles have had on
their domestic textile and apparel sectors, as such goods
depress demand for locally made goods.
U.S. imports of sector goods from SSA grew by an annual
average of 18.8 percent during 1991-96 to $383 million, or
less than 1 percent of total U.S. sector imports. In 1996,
sector imports from SSA fell by 7 percent. Most sector imports
from SSA consist of apparel (93 percent of the 1996 total),
particularly basic cotton pants, shirts, and blouses. These
goods are especially suited to production in countries at the
initial stages of industrialization because manufacturing
involves standardized runs, simple tasks, and few styling
changes.
Some 80 percent of sector imports from SSA in 1996 came from
three countries--Mauritius (43 percent), South Africa (20
percent), and Lesotho (17 percent). Kenya followed with 7
percent of the total. Sector imports from most of the
remaining SSA countries were very small; 24 of the countries
each shipped less than $100,000 in 1996. Although sector goods
accounted for slightly less than 3 percent of total U.S.
merchandise imports from SSA in 1996, they represented a
significant share of the shipments from several SSA countries.
For example, sector goods accounted for 99 percent of total
U.S. imports from Lesotho, 76 percent for Mauritius, and 38
percent for Swaziland.
The transshipment of sector goods through third countries to
avoid quotas, as well as other types of textile fraud, is a
priority of the U.S. Customs Service, which has expanded
efforts to combat such illegal transshipments. Although
official data are not available on the extent of these
transshipments, the Customs Service has documented that eight
SSA countries have been used as illegal points of
transshipment: Kenya,1/ Lesotho, Mauritius, Mozambique, South
Africa, Tanzania, Togo, and Zimbabwe. ...
------------------------------------------------------------
1/ H. E. Dr. Benjamin E. Kipkorir, Ambassador
of the Republic of Kenya, stated that there was only one
instance of transshipment involving Kenya and that the
transshipment "was dealt with." Transcript of hearing, p. 12.
------------------------------------------------------------
Of the SSA countries currently competing in the global market,
South Africa has the largest textile and apparel sector ($2.0
billion), followed by Mauritius ($288 million), and Zimbabwe
($236 million). Mauritius stands out since the sector accounts
for 45 percent of its manufacturing value added.
Competitive Position of the Textile and Apparel Sector in SSA
Countries
SSA is a very small exporter of sector goods to the global
market, accounting for less than 1 percent of world exports of
such goods in 1995. SSA sector exports grew by an annual
average of 5.4 percent during 1990-95 to $1.7 billion,
two-thirds of which consisted of apparel. Sector exports
accounted for about 2 percent of the region's total exports in
1995. Mauritius and South Africa together generated
three-fourths of SSA's sector exports in 1995. The EU, with
its colonial ties to SSA, was the primary market for the
region's exports of textiles and apparel, accounting for just
over one-half of the total in 1994. The United States followed
with just under one-fourth of the total. Other SSA countries
accounted for 13 percent of exports.
For purposes of this report, the 48 SSA countries are divided
into three groups. The first group comprises the seven
countries that currently export textiles and apparel to
developed country markets such as the United States and the
EU. Although costs related to entry into foreign markets such
as the United States are often substantial, the growth and/or
current size of the export sectors in these SSA countries
suggests that costs related to entry and expansion are not
insurmountable. The second group consists of nine countries
that are considered to have the potential to expand exports of
textiles and apparel to the United States based, in part, on
past production and export performance. The third group
includes the 32 remaining SSA countries, which are less likely
to compete in the U.S. market for such goods.
* The seven countries in group 1 are Mauritius, South Africa,
Lesotho, Kenya, Swaziland, Madagascar, and Zimbabwe. Mauritius
has the most developed, export-oriented apparel industry in
SSA, exporting quality apparel all over the world. U.S. sector
imports from Mauritius peaked at $191 million in 1995, and
then fell to $165 million in 1996. The price competitiveness
of Mauritian sector goods has declined recently because of
rising labor costs brought on by a tight labor market. As a
result, some Mauritian sector trade has shifted to neighboring
Madagascar. U.S. sector imports from Madagascar, which has a
low-cost, relatively skilled workforce, rose from less than $1
million a year in the early 1990s to $11 million in 1996.
* U.S. sector imports from South Africa have grown rapidly
since 1991, when the United States lifted the trade embargo
imposed against South Africa under the Comprehensive
Anti-Apartheid Act of 1986. Imports rose from $1.5 million in
1991 to $77 million in 1996; the pre-embargo peak was $55
million in 1985. South Africa is the largest producer of
sector goods in SSA, but it exports only a small share of its
production. Factors such as low productivity and the
limitations initially imposed during the period of
international sanctions hamper its ability to compete
globally, especially with Asian sector firms. In addition,
South Africa has relatively high labor costs, so the sector
tends to focus on the production of higher quality or niche
products for export. Nonetheless, South Africa has a developed
infrastructure and an established textile and apparel sector
upon which to expand production. Both Lesotho and Swaziland,
which have close trading relationships with South Africa, have
long-term potential to develop globally competitive textile
and apparel sectors.
* The trade sanctions on South Africa encouraged firms there
to shift production of sector goods for export to neighboring
Lesotho and Swaziland. The resulting increase in U.S. sector
imports from Lesotho, from negligible levels in the mid-1980s
to $27 million in 1991 and to $52 million in 1992, led to the
establishment of U.S. quotas. However, reflecting the
imposition of the quotas and the lifting of the U.S. trade
embargo on South Africa, sector imports from Lesotho leveled
off at slightly more than $60 million during 1994 and 1995,
and then rose to a high of $65 million in 1996. Sector imports
from Swaziland more than doubled between 1991 and 1994 to $15
million, and then fell to about $11 million in 1995 and 1996.
Both Lesotho and Swaziland, which have close trading
relationships with South Africa, have long-term potential to
develop globally competitive textile and apparel sectors.
* Zimbabwe's textile and apparel sector has shown the
capability to export to developed country markets, which
account for most of its sector exports. The 50-percent growth
in Zimbabwe's sector exports during 1990-95 partly reflected
efforts by apparel exporters to shift their product mix to
more fashionable and higher valued goods. Zimbabwe's textile
industry mainly exports low-valued cotton goods, such as yarn
and unfinished fabric. For the most part, the industry is
unable to competitively produce quality finished fabrics or
other textiles for export to developed country markets.
* U.S. sector imports from Kenya rose about sixfold during
1991-94, to a high of $37 million, before decreasing to just
under $28 million in 1996. Although these imports fell
following the establishment of U.S. quotas on Kenya's
shipments of certain shirts and pillowcases in 1994 and the
difficulty that the Government of Kenya and sector producers
had in allocating the quotas, Kenya's textile and apparel
sector has the capacity and capability to regain a share of
the U.S. market.
* The nine countries in group 2 that are considered to have
the potential to expand exports of sector goods to the United
States are Botswana, Cameroon, C"te d'Ivoire, Ghana, Malawi,
Mozambique, Nigeria, Tanzania, and Zambia. With the proper
amount of investment and the opportunity to export to the
United States with quota-free and duty-free status, these
countries would likely develop a textile and apparel sector
capable of competing in the U.S. market.
Views of Interested Parties
The Commission received written submissions from
representatives of five SSA countries, which support the
proposed legislation. The Ambassador of the Republic of Kenya
underscored the importance of removing quotas on imports from
his country, asserting that the U.S. decision to impose quotas
in 1994 has had a negative impact on the apparel sector of
Kenya's economy. The Mauritian Ambassador noted that imports
of sector goods from 46 of the 48 countries in SSA currently
enter free of quota and that sector imports from these nations
do not negatively affect the U.S. industry. ...
Representatives of the U.S. textile and apparel industry
opposed the opening of the U.S. market to sector goods from
low-wage countries in SSA. They expressed concern about
transshipments from Asian firms, which have quotas and
therefore would be the unintended beneficiaries of U.S.
efforts to assist SSA countries. Other interested parties,
including African textile and apparel trade associations and
U.S. importers of apparel, expressed support for the proposed
legislation as a means to increase the competitiveness of the
SSA textile and apparel sector and encourage overall economic
development in SSA countries. U.S. importers also supported
the measure as a means to obtain low-cost goods for sale in
the domestic market, thereby lowering the overall cost of
apparel in the United States.
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