President Trump has suspended the application of duty-free treatment for all apparel products from Rwanda

President Trump has suspended the application of duty-free treatment for all apparel products from Rwanda

US President Donald Trump has suspended the application of duty-free treatment for all apparel products from Rwanda due to a trade dispute over the East African country's increased tariffs on US used clothing and footwear.

The announcement, made yesterday (30 July) by the US Trade Representative's office, enforces the eligibility criteria established by Congress for trade preferences under the African Growth and Opportunity Act (AGOA).

"We regret this outcome and hope it is temporary," said Deputy United States Trade Representative CJ Mahoney. "But if the AGOA eligibility criteria are to have any meaning, they have to be enforced – particularly where, as here, other AGOA members took action in order remain in compliance."

Mahoney argues Trump's action is "measured and proportional." It suspends AGOA benefits for a class of imports that totalled US$1.5m in 2017, which accounts for around 3% of Rwanda's total exports to the US.

Rwanda remains eligible to receive non-apparel benefits available under AGOA, and Mahoney says the President's action does not affect the vast majority of Rwanda's exports to the US.

"We look forward to working with Rwanda to resolve this issue so that benefits in the apparel sector may be restored."

When Congress first passed AGOA in 2000, it imposed certain eligibility criteria to encourage recipient countries to adopt free market-oriented development models and to ensure fair market access for US firms. The AGOA eligibility requirements include: "making continual progress towards establishing...a market-based economy...[and] the elimination of barriers to United States trade and investment."

An AGOA issue relating to new barriers to US trade and investment first arose in 2015 when the East African Community (EAC) established a plan to ban imports of used clothing and footwear. The USTR's engagement on this issue intensified in 2016 when the EAC announced it would phase in the ban by 2019. Thereafter, three EAC AGOA beneficiaries – Kenya, Tanzania, and Uganda – worked with the US and took actions to revise their policies. The USTR says Rwanda has insisted on keeping in place a policy that has raised tariffs on imports of used apparel and footwear by more than 1,000%, effectively banning imports of these products.

The USTR says efforts over the past two years to address the issue with the Government of Rwanda have been unsuccessful.

As a result, in March the President determined that Rwanda was not making sufficient progress towards the elimination of barriers to United States trade and investment and was, therefore, out of compliance with AGOA's eligibility requirements.

The Administration says it supports continued engagement with the aim of restoring market access for used apparel and bringing Rwanda into compliance with AGOA's eligibility requirements.

African countries export cotton to Asia where it is spun into yarn and made into fabric from which garments are made and sold to big brands in Europe and the US. Charity and thrift shops then buy the clothes after they have been worn and discarded. On the bottom of the consumption chain are African countries that import bales of the used clothes, and even underwear, for sale in the thriving informal markets common on the continent, which imports 32% of the world's used clothes valued at US$1bn.

Last month, Rwanda's government said it is to take over the tax obligations of its apparel exporters to ensure they are not significantly affected by the anticipated suspension of duty-free access to the US market under AGOA.