AGOA: A lesson to learn from Rwanda 

In 2015 the Presidents of Kenya, Rwanda, Uganda and Tanzania agreed that by 2018 their countries should  be able to become more sufficient in the production of textiles using local  raw materials and industries.
Ezra Nnko28 January 20224 min

On May 18, 2000, then-US President Bill Clinton signed a memorandum on the establishment of trade relations on recovery and abolition of tariffs between the United States and sub-Saharan Africa, known as African Growth Opportunity Act (AGOA).

Initially thirty four  Sub-saharan countries joined the treaty and later other six joined to make   40 countries.  Through the time there have  been  admission and expulsion  of different nations in AGOA depending on whether they meet or violate the terms of the agreement.

Unlike many international trade agreements, in the AGOA agreement the United States had a special mandate to decide which country to join and which country should be expelled  from the agreement based on its terms. There are other terms which have been  set on Article 111, sub-section 506A, which give the  President of the United States to decide to terminate designation of a country which he considers to be unfit to continue to be a beneficiary of the Convention and that repulsed state has no legal authority to question or appeal the termination of membership of the contract.

For instance 16 May 2006, Ivory Coast was included in the agreement and a few months later lost its legal mandate after the county’s general election did not satisfy the US government also the claims of threatening the implementation of US foreign policy, a few months later it was reinstated and continued to benefit.

East African countries Tanzania, Kenya, Uganda, Burundi and Rwanda have been close allies of the United States and members of AGOA for more than twenty years. For instance individual countries like Tanzania through the agreement have access to trade in the US market with more than 6,500 products.

Despite the term the balance of trade between the two countries have continued to be unfavorable to Tanzania taking example in 2018 and 2019  were exports to the United States worth USD 96.8 Million while imports were valued at USD 331.9 Million and imported goods from the United States worth USD 332 Million and sold goods to the United States worth USD 130 Million respectively.

The United States has been importing from Tanzania minerals and footwear as well as agricultural products specifically cashew, coffee and honey while Tanzania has been importing from the United States  wheat, agriculture implements, pharmatheuticals and second-hand clothes known as Mtumba which account for ninety  percent of Tanzania clothing. Despite Tanzania being a cotton grower country and having 15 textiles, the country depends on second hand clothes accessed through the AGOA agreement.

In 2015 the Presidents of Kenya, Rwanda, Uganda and Tanzania agreed to begin reducing second-hand imports to boost the agricultural, transportation and manufacturing sectors in their countries. The strategy was planned  by 2018, their countries should  be able to become more sufficient in the production of textiles using local  raw materials and industries.

One of the strategies employed was to increase the import duty on the product from USD 0.20 to USD 2.50 per kg. Fearing a market loss of its products, the American Second Material and Recycled Textiles Association alerted their government on the impact of East Africa’s decision  to its economy, leading  then-US President Donald J Trump decided to force East African countries to abandon their plan before February 23, 2018.

Only Rwanda agreed to continue with its plans to increase tariffs on the commodity, leading the United States to suspend the country from AGOA. Rwanda has been trading more on Coffee with the United States and in 2018 exported products worth USD 870 Million equivalent to only 4% of US goods imported into Rwanda that year.

The Rwandan government was urged to launch a strategy to market European countries for products exempted from the AGOA agreement. The Made in Rwanda  campaign, one of its main objectives, is to focus on manufacturing and textile production with special emphasis, to achieve the decision made by East African presidents in 2015.

The Rwandan government established one Kigali Garment factory and revived the Utexrwa Textile Company. The Utexrwa factory was responsible for the production of clothing for security officers, student and corporate clothing and government agencies. To facilitate these industries, the Rwandan government reduced tariffs on imported cotton products as well as manufactured spare parts.

The main goal of the Rwandan government by 2030 is to become the center of the textile trade in the East African region where the four East African countries currently account for 13% of secondhand exports of USD 274 Million.

In Tanzania, cotton is among the most productive cash crops, with an estimated population of approximately 15 million people involved in the crop cultivation  in more than 45 districts. Seventy percent  of Cotton grown in the country is exported as raw and imported as manufactured end products.

Tanzania for three years (2013-2016) imported used clothing worth USD 59 Million (equivalent to Tsh 137 Billion) from the United States and Canada while China and India being the largest suppliers of the clothes in Tanzania. As a nation we have a lot to learn from countries that are trying to take action in a difficult way, we still have a chance to go back to the era of trying to move the nation forward in the agricultural and industrial sectors.

We can return to build an independent nation. It is also important for the nation to discuss broadly the pros and cons of potential economic prosperity through international trade agreements. It is not too late to start over.

Ezra Nnko is a political and international relation analyst based in Iringa. He is available through ezra.nnko@gmail.com or mobile contact +255 765 571 917. These are the writer’s own opinions and do not necessarily reflect on the viewpoint of The Chanzo Initiative. Do you want your views to feature on our pages? Contact our editors at editor@thechanzo.com for further inquiries.

Ezra Nnko

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