In 2014, AGOA countries accounted for just 1% of US garment imports

In 2014, AGOA countries accounted for just 1% of US garment imports

Re-energising US apparel imports from Africa has been among the recent concerns of US brands and retailers. But Mike Flanagan wonders if they’re missing the real problem: finding alternative apparel sources – in Africa or anywhere else – is a lot tougher than it looks.

For the past year, garment and textile businesses in Africa – and their US customers – have been preoccupied by the African Growth and Opportunity Act (AGOA). Signed into law in mid-2000, AGOA now offers US duty-free access for garments made in most countries south of the Sahara, wherever a garment’s raw materials come from: an almost unique privilege.

But in 2014, AGOA countries accounted for just 1% of US garment imports. Even worse, AGOA apparel imports in 2014 (measured in square metres of fabric) were 3% lower than in 2001, AGOA’s first full year - while US apparel imports overall grew 58%.

There are three common explanations for AGOA’s disappointing results:

  • AGOA’s stop-go history. AGOA’s "special rule" setting aside America’s usually tight apparel Rules of Origin to allow Asian fabric was renewed in 2006, a few months before it expired, and again in 2012 - just a few days before its second planned expiry date. The whole programme is due to expire in September this year, and fully supported legislative proposals for another extension (this time for ten years) were presented to Congress only in mid-April. Proposals for renewal had been around for the previous year – but couldn’t be submitted to Congress as US legislators remained in dispute. Neither buyers nor sellers can plan properly with the constant spectre of the programme disappearing.
  • Patchy case histories. The garment and textile industries of several countries nurtured under AGOA have shrivelled to almost nothing for very specific local reasons. In Namibia, for example, a planned "dirt-to-shirt" integrated spinning, weaving and garment assembly industry fell apart after pollution scandals and unresolved labour disputes. Swaziland’s eligibility was removed after its despotic government refused to allow basic labour rights, while Madagascar lost its eligibility (since reinstated) after a military coup.
  • The rise of China. In the graph of US imports (above), AGOA starts to fall in 2005 – the year quotas were dismantled on US and EU apparel imports, a move that undermined the competitiveness of AGOA countries.

Over the past year, as frustration about Congressional delays has mounted, discussion has focused on an alleged "urgent need for a stable AGOA". Very possibly: but will a stable AGOA help Africa’s embryonic apparel industry?

It’s not obvious why it should. Apparel exports from AGOA-eligible countries have suffered just as much in the EU – which offers them broadly identical benefits – as in the US since the beginning of this century. Europe has been more consistent, so the "stop-start" argument doesn’t apply.

Of course, the marketing environment for African-made garments is different in Europe, where they compete with duty-free imports from very poor Asian countries (like Bangladesh, Cambodia and Burma), a number of middle-income countries in Central America, major textile centres such as Pakistan, and all Europe’s neighbours around the Mediterranean. African exports have lost competitiveness against these countries for several reasons:

Easier access. Since 2000, Europe has made it easier for many developing countries to qualify for duty-free access.

Asia’s improving productivity. Back in 2004, low wages meant low garment prices. But since around 2010, the rules of garment making have been changed in two important ways.

  • Other "low wage" countries are following China’s productivity lessons. China’s productivity miracle has demonstrated to factories throughout Asia how working smarter can be more profitable than working cheaper or being forced to work harder. Garment factories in Bangladesh and Cambodia haven’t just started to become more efficient: the industry has attracted better support services, like locally available trim and far more efficient transport providers. Rising wages, predictably, have forced real improvements in factory productivity. Buyers aren’t deserting them for countries with lower wages still: they’re pushing current suppliers for better value.
  • Global prices no longer cushion inefficiency. Ten years ago, Bangladeshi investors flocked into developing garment factories because, with net profits of around 50% of sales, they seemed a licence to print money. While that boom in factory development brought dreadful safety and human rights standards, it also created an industry employing over four million people. The recent history of Burma shows why that doesn’t work anymore.

The race to the bottom is over. Burma’s apparel industry was reasonably buoyant until 2000, when Western sanctions effectively barred the country from exports. Although those sanctions started to be lifted over the past two years, Burma’s 2014 apparel exports to the West were still only half their level in 2000 because:

  • Western buyers are far more demanding about the standards – in production quality as well as safety, human rights and wages – they will accept;
  • Factory recruitment has to compete with a wide range of other businesses looking for workers;
  • Worker representatives are more demanding, better informed and better supported by sympathisers abroad.

I’m sure there are lots of buyers who’d love to re-start the race to the bottom. But it just isn’t a sport anyone’s playing these days.

Buyers certainly want cheaper prices. But they also want working conditions that won’t get their stores surrounded by protesters – and they want local facilities that ensure competitively priced garments are made to an agreed timetable, and are on a boat on a pre-agreed date.

Among the many investments these basic requirements call for are reliable power supplies, honest, competent and well-supported customs officials and efficient transport networks. Practically every loudly-touted new apparel development in Africa today is tens or hundreds of miles from the nearest port. That means new roads or railways costing hundreds of millions – or even billions – of dollars.

None of those things can be guaranteed. Which is why I suspect Africa’s share of the global apparel market will be no different in 15 years’ time from what it was 15 years ago. With or without AGOA.