The USA’s African Growth and Opportunity Act (AGOA) and East African Trade
We reported earlier this year that Kenya was negotiating a bilateral free trade agreement (FTA) with the USA. This was partly due to concerns that the AGOA would not be renewed if Trump was re-elected as President. The Kenyan move was also partly due to a spate between the East Africa Community (EAC) block of countries (Burundi, Kenya, Rwanda, South-Sudan, Tanzania, and Uganda) and the USA dating back to 2015. The EAC countries at the time announced that they would all put in place high tariffs on the import of second-hand clothing or “chagua” in order to reduce the importation of large quantities of cheap used clothing, mostly from the US and the UK, which the African nations said were stifling the growth of their garment industries. The US responded that the proposed tariffs would violate free-trade agreements, and it threatened to remove the EAC countries from the AGOA. All EAC members except for Rwanda then backed down but Rwanda introduced a tariff of $4 per kilo on imports of used clothing in 2018. The US responded by imposing tariffs of 30% on Rwandan clothing, where there had previously been none. Some experts, however, doubted if Rwanda would be able to build a competitive clothing industry – while Uganda, Kenya, Tanzania, Ethiopia and Burundi are major cotton producing countries, Rwanda needs to import cotton for production – however despite these pessimistic views, an active textile manufacturing business is emerging in Rwanda.
Meanwhile, Kenya has also negotiated a Strategic Economic Partnership Agreement (EPA) with the UK. This is part of the UK’s “Aid for Trade” policy and is designed to assist Kenyan exporters to expand their presence in the UK market after 31 December when the UK leaves the EU (Brexit). The other 5 East African Community (EAC) countries are also invited to sign the EPA. The UK has been desperately trying to sign trade deals in Africa in order to prepare for post-Brexit. Its development aid has been reduced by £4 billion due to economic pressures caused by Brexit and COVID.
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