Tuesday, August 1, 2017

AGOA or NOGOA

In an effort to foster local textile manufacturing, Rwanda, Uganda, and Tanzania have committed to phasing out the importation of Second-Hand Clothes (SHC) from the United States by 2019, despite the United States’ looming threat to reconsider the East African Community (EAC) members’ eligibility for duty-free access to the American market under the African Growth and Opportunity Act (AGOA). The move has sparked widespread debate, as the ban would directly affect governments, businesses, and the poor, in East Africa and the US alike. As an American who is deeply passionate about understanding and tackling the roots of global poverty, this issue challenges me to wrestle with all sorts of practical and ideological questions... 

Is America’s aid policy hampering African development? 


Is it fair for the EAC to be removed from AGOA?


What is AGOA anyhow, and is it any good? 


And of course, is it morally dubious to sell used clothes to Africans?


Where do we take our stance? 

The Ethics of Selling Second-Hand-Clothes

What may surprise many, including myself, is that our donated clothes are sold for profit to the EAC, and around the world, for that matter. While seemingly incredulous at first, freely donating clothes would undercut local textiles even more. An illuminating study by CUTS International reports, “the cotton produced in Africa (EAC) is spun and woven in Asia, converted into apparels and shipped to the USA and EU to be worn for 2-3 years and shipped back to Africa (EAC) as used clothing, to clothe up to 70% of the African population.” The demand for local fabric in the EAC is low precisely because the “fabric market is choked by SHC, which has led to the closure of several [at least six] textile mills” in Kenya and Uganda. 

As development leaders will point out (i.e. Paul Polak), donations and government subsidies undercut local manufacturing and prevent the economic forces of supply and demand from shaping new markets.

Furthermore, American’s typically perceive used clothes as worn, tattered, and out of date, especially the ones donated to Africa. But that isn’t always the case. At the marketplaces where I lived in Rwanda, the used clothes were of surprisingly good quality and I would shop there. I even brought the clothes back to the States and wore them without anyone noticing (or at least saying anything)! There is significantly more overlap between the used and new clothes markets in East Africa than in America.

AGOA and United States Aid

AGOA is a piece of US legislation first signed into law by President Clinton in 2000. At it’s core, the AGOA initiative is designed to increase Africa’s access to the US market by providing duty-free entry to the US, with a provision specifically encouraging “textiles and apparel” exports from developing countries in Africa to the US. In light of this, shouldn’t a ban, or the tariffs recently imposed by the EAC, be promoted under AGOA? Increasing prices on second-hand clothes would foster African textile mills, build local economies, and encourage EAC exports of textiles and apparel to the US, a primary objective of AGOA. However, in response to Rwanda's recent tariff hike on SHC from $0.20/kg to $2.50/kg, the US is reconsidering Rwanda's eligibility for AGOA membership.

There is a not-so-subtle conflict of interest written into the eligibility criteria for countries participating under AGOA. The criteria state that beneficiaries must “promote the development of private enterprise” within their country and work toward “the elimination of barriers to United States trade and investment”. The exportation of SHC from the US is aligned with America’s trade interests but at odds with the development of private textile enterprises in the EAC. It is by the latter criterion that President Trump may choose to disqualify Rwanda, Uganda, and Tanzania from AGOA. 

Unfortunately, this isn’t the first time the US has enacted aid programs encumbered by self-interest. Bill Clinton’s trade policy forced Haiti to drop its tariffs on US rice exports, resulting in the obliteration of Haitian rice farming, with a plus up for Arkansas’ rice farmers (Clinton apologized in 2010). Moreover, during the Cold War, as development economist Dambisa Moyo writes, aid was the tool of a political contest, given not by “how deserving a country might be… but rather the willingness of a desperately impoverished country to ally itself with one camp or another” (Dead Aid, p 14).

So which is it? Aid or trade? When the rubber meets the road, one criterion will take precedence over the other. The answer depends on the motives and priorities behind AGOA. Interestingly, the AGOA website never describes the program as “aid,” but rather as bilateral trade. However, its apparel provision is unequivocally focused on the growth of “lesser developed” countries, and the Seychelles was “graduated out of AGOA… due to the country gaining developed country status." AGOA seems to be trade, with a humanitarian "aid" mission. 

That said, the data highlights the United States’ obvious preference for African minerals and oil over textiles. The plots below depict the recent imports/exports from Nigeria and the DR Congo (major sources of oil and minerals), as well as the EAC. Remember, AGOA aims to increase Africa’s market access, or in other words, increase exports from Africa to the US. But the EAC consistently has a negative trade balance. Despite AGOA providing a provision specifically for African apparel, the US, in practice, prefers to foster oil and mineral exports from Africa. Personally, I think the EAC should be encouraged to produce a product worth exporting under AGOA. Furthermore, I am excited to see how the new “Made in Rwanda” initiative will encourage Rwandan creativity, design, and entrepreneurship, in markets beyond just textiles. 







On a philosophical note, I wrestle with whether it is beneficial to foster African exports, in light of globalization and industrialism? Take Nigeria for instance. As a result of AGOA, Nigeria’s economy is becoming more dependent on America’s demand, and the global supply, for oil. Similarly, the success of Rwandan coffee growers (currently an export under AGOA) hinges on our cravings for caffeine and the whims of the market. If (and that is an if) AGOA exists to satiate our culture of Hummers and Starbucks, at the expense of African jobs and creativity, at what point does our trade policy, and even our aid policy, become a form of economic colonialism? Furthermore, does a country’s participation in the global economic arena require its industrialization? When it came to the revival of villages in the face of industrialization, Gandhi wrote,
The revival of the village is possible only when it is no more exploited. Industrialization on a mass scale will necessarily lead to passive or active exploitation of the villagers as the problems of competition and marketing come in. Therefore we have to concentrate on the village being self-contained, manufacturing mainly for use. 

As Gandhi was extremely skeptical of industrialization (to put it lightly), due to its potential for worker exploitation, social stratification, and unsustainable urbanization, so must we be cognizant of policies that promote unsustainable socio-economic systems in Africa. 

Alternatives to banning Second-Hand-Clothes
Of course, a ban on used clothes could backfire on the EAC by removing the poor’s access to affordable clothes and putting local resellers at risk of closing. Last year, Zimbabwe reversed its ban on use clothes for the sake of the effected poor. Furthermore, there is no guarantee that the ban will help East African garment makers as Asian producers will provide stiff competition.

This article explains a few alternatives, including a ban on certain types of clothes, such as undergarments or high-quality used clothes, and a phased approach that would ease tensions with the US and allowing local industry to develop over time. 

For example, the US could negotiate with the EAC a price and/or tax increase on US clothes exports that is mutually beneficial. US businesses selling SHC could increase their prices and the the US government could place an export tax on SHC exports to the EAC, commensurate to the EAC’s import tax. The effect would be the same on EAC consumers and textile industries (an increase in the price of used clothes), but the extra revenue would be shared among the governments and US businesses.

In summary, I believe the US should retain Rwanda, Uganda, and Tanzania's membership under AGOA and work with East Africa to negotiate a phased or partial ban on SHC. Furthermore, the US should be more consistent in its application of AGOA, by encouraging African manufacturing and exports over US imports, and not preferring oil over textiles.