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Africa: US Textile Imports
Date distributed (ymd): 970925
Document reposted by APIC
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Region: Continent-Wide Issue Areas: +economy/development+ +US policy focus+ Summary Contents: This posting contains a news release from the U.S. International Trade Commission announcing a report on the potential impact of eliminating quotas and tariffs on textile and apparel imports from Sub-Saharan Africa, as well as additional excerpts from the executive summary of the report. The commission's conclusion is that such liberalization would have relatively small impact on US industry.
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LIBERALIZATION OF TEXTILE AND APPAREL IMPORTS FROM SUB-SAHARAN AFRICA LIKELY TO HAVE LITTLE IMPACT ON U.S. INDUSTRY
September 4, 1997 News Release 97-060 Inv. No. 332-379
Allowing duty-free and quota-free entry for textiles and apparel from Sub-Saharan Africa would have a modest effect on domestic producers' textile and apparel shipments, reports the U.S. International Trade Commission (ITC) in its publication Likely Impact of Providing Quota-Free and Duty-Free Entry to Textiles and Apparel from Sub-Saharan Africa.
The ITC, an independent, nonpartisan, factfinding federal agency, prepared the report at the request of the Committee on Ways and Means of the U.S. House of Representatives. The Committee asked the ITC to report on the likely impact of granting quota-free and duty-free entry to textiles and apparel from Sub-Saharan Africa. Legislation introduced in April 1997 (H.R. 1432, The African Growth and Opportunity Act) would grant such trade preferences. Following are highlights of the report:
* Allowing duty-free and quota-free entry for textiles and apparel from Sub-Saharan Africa (SSA) would result in a 0.1 percent decrease in domestic producers' apparel shipments and a negligible effect on shipments of the domestic textile industry.
* Seven of the 48 countries in SSA currently compete in the global textile and apparel market and could expand exports to the United States. They include Mauritius, South Africa, Lesotho, Kenya, Swaziland, Madagascar, and Zimbabwe. Nine other SSA countries have the potential to expand exports to the United States should SSA be granted preferential U.S. market access. They include Botswana, Cameroon, C"te d'Ivoire, Ghana, Malawi, Mozambique, Nigeria, Tanzania, and Zambia. The other SSA countries are less likely to compete in the U.S. market; imports of textiles and apparel from most of them were less than $100,000 each in 1996.
* U.S. imports of textiles and apparel from SSA grew by an annual average of 18.8 percent during 1991-96 to $383 million, or less than 1 percent of total U.S. imports of such goods. They were concentrated in apparel, especially cotton shirts and pants, and came mostly from Mauritius, South Africa, and Lesotho.
* If both quotas and tariffs were removed from U.S. imports of textiles and apparel from Sub-Saharan Africa, the ITC estimated that U.S. imports of apparel from SSA would grow between 26.4 percent and 45.9 percent (between $100 million and $175 million) and net welfare to the U.S. economy would rise between $47 million and $96 million. U.S. apparel imports from the rest of the world would fall by not more than an estimated 0.2 percent ($75 million). U.S. domestic shipments of apparel would decline by about 0.1 percent ($47 million) and result in employment losses of 676 full-time-equivalents (an upper-bound estimate).
* For textiles, the Commission estimated that the removal of duties would result in an increase in U.S. imports from SSA of between 10.5 percent and 16.8 percent (between $2.5 million and $4 million) and in a welfare gain between $0.6 million and $1.5 million. Since the quota for textiles did not have a restrictive effect in 1996, its removal would likely have a negligible effect on trade. The expected increase in textile imports from SSA would lead to a slight decline (not more than 0.05 percent) in textile imports from the rest of the world. The likely impact on the U.S. textile industry and its workers would be negligible.
* Removal of quotas alone on textile and apparel imports from SSA would have a small impact on apparel trade and a negligible effect on textile trade. The estimated increase in apparel imports from SSA would range from 0.4 percent to 0.6 percent. U.S. consumers would benefit from quota removal, but the welfare gains would be small (between $2.6 million and $3.3 million). The impact of quota removal on U.S. producers and workers would be negligible.
* Uncertainty regarding the economic environment in SSA with respect to limited infrastructure development, macroeconomic policies, and political instability, precluded assessing the extent to which foreign direct investment would be attracted to SSA, particularly in the short term. However, new investment in SSA resulting from preferential access to the U.S. market would likely be in the apparel sector. Entry barriers for the production of apparel, compared with that for textiles, are generally minimal in terms of capital and infrastructure requirements.
* U.S. industry has expressed concern about a possible increase in textile fraud, especially illegal transshipments of Asian textiles and apparel through SSA to avoid U.S. quotas. The legislation would require beneficiary exporting countries in SSA to adopt a visa system to guard against transshipment.
The foregoing is from the ITC report Likely Impact of Providing Quota-Free and Duty-Free Entry to Textiles and Apparel from Sub-Saharan Africa (Inv. No. 332-379, USITC Publication 3056, September 1997). An executive summary of the report is available at http://www.usitc.gov/332S/ES3056.htm The full report in Wordperfect is also available on the USITC Web site. A printed copy may be requested by calling 202-205-1809 or by writing to the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington D.C. 20436. Requests may be faxed to 202-205-2104.
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Executive Summary (Excerpts only -- the full Executive Summary is 23K)
Product Coverage
The articles covered by this investigation are those subject to textile agreements, namely textiles and apparel of cotton, other vegetable fibers, wool, manmade fibers, and silk blends (hereinafter referred to as sector goods). Used clothing and other used textile items are a major U.S. export to SSA. Such U.S. exports to SSA totaled $92 million in 1996; they were eighth out of all U.S. exports to the region. Several SSA countries have expressed concern about the adverse impact that shipments of used apparel and textile articles have had on their domestic textile and apparel sectors, as such goods depress demand for locally made goods.
U.S. imports of sector goods from SSA grew by an annual average of 18.8 percent during 1991-96 to $383 million, or less than 1 percent of total U.S. sector imports. In 1996, sector imports from SSA fell by 7 percent. Most sector imports from SSA consist of apparel (93 percent of the 1996 total), particularly basic cotton pants, shirts, and blouses. These goods are especially suited to production in countries at the initial stages of industrialization because manufacturing involves standardized runs, simple tasks, and few styling changes.
Some 80 percent of sector imports from SSA in 1996 came from three countries--Mauritius (43 percent), South Africa (20 percent), and Lesotho (17 percent). Kenya followed with 7 percent of the total. Sector imports from most of the remaining SSA countries were very small; 24 of the countries each shipped less than $100,000 in 1996. Although sector goods accounted for slightly less than 3 percent of total U.S. merchandise imports from SSA in 1996, they represented a significant share of the shipments from several SSA countries. For example, sector goods accounted for 99 percent of total U.S. imports from Lesotho, 76 percent for Mauritius, and 38 percent for Swaziland.
The transshipment of sector goods through third countries to avoid quotas, as well as other types of textile fraud, is a priority of the U.S. Customs Service, which has expanded efforts to combat such illegal transshipments. Although official data are not available on the extent of these transshipments, the Customs Service has documented that eight SSA countries have been used as illegal points of transshipment: Kenya,1/ Lesotho, Mauritius, Mozambique, South Africa, Tanzania, Togo, and Zimbabwe. ...
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1/ H. E. Dr. Benjamin E. Kipkorir, Ambassador of the Republic of Kenya, stated that there was only one instance of transshipment involving Kenya and that the transshipment "was dealt with." Transcript of hearing, p. 12.
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Of the SSA countries currently competing in the global market, South Africa has the largest textile and apparel sector ($2.0 billion), followed by Mauritius ($288 million), and Zimbabwe ($236 million). Mauritius stands out since the sector accounts for 45 percent of its manufacturing value added.
Competitive Position of the Textile and Apparel Sector in SSA Countries
SSA is a very small exporter of sector goods to the global market, accounting for less than 1 percent of world exports of such goods in 1995. SSA sector exports grew by an annual average of 5.4 percent during 1990-95 to $1.7 billion, two-thirds of which consisted of apparel. Sector exports accounted for about 2 percent of the region's total exports in 1995. Mauritius and South Africa together generated three-fourths of SSA's sector exports in 1995. The EU, with its colonial ties to SSA, was the primary market for the region's exports of textiles and apparel, accounting for just over one-half of the total in 1994. The United States followed with just under one-fourth of the total. Other SSA countries accounted for 13 percent of exports.
For purposes of this report, the 48 SSA countries are divided into three groups. The first group comprises the seven countries that currently export textiles and apparel to developed country markets such as the United States and the EU. Although costs related to entry into foreign markets such as the United States are often substantial, the growth and/or current size of the export sectors in these SSA countries suggests that costs related to entry and expansion are not insurmountable. The second group consists of nine countries that are considered to have the potential to expand exports of textiles and apparel to the United States based, in part, on past production and export performance. The third group includes the 32 remaining SSA countries, which are less likely to compete in the U.S. market for such goods.
* The seven countries in group 1 are Mauritius, South Africa, Lesotho, Kenya, Swaziland, Madagascar, and Zimbabwe. Mauritius has the most developed, export-oriented apparel industry in SSA, exporting quality apparel all over the world. U.S. sector imports from Mauritius peaked at $191 million in 1995, and then fell to $165 million in 1996. The price competitiveness of Mauritian sector goods has declined recently because of rising labor costs brought on by a tight labor market. As a result, some Mauritian sector trade has shifted to neighboring Madagascar. U.S. sector imports from Madagascar, which has a low-cost, relatively skilled workforce, rose from less than $1 million a year in the early 1990s to $11 million in 1996.
* U.S. sector imports from South Africa have grown rapidly since 1991, when the United States lifted the trade embargo imposed against South Africa under the Comprehensive Anti-Apartheid Act of 1986. Imports rose from $1.5 million in 1991 to $77 million in 1996; the pre-embargo peak was $55 million in 1985. South Africa is the largest producer of sector goods in SSA, but it exports only a small share of its production. Factors such as low productivity and the limitations initially imposed during the period of international sanctions hamper its ability to compete globally, especially with Asian sector firms. In addition, South Africa has relatively high labor costs, so the sector tends to focus on the production of higher quality or niche products for export. Nonetheless, South Africa has a developed infrastructure and an established textile and apparel sector upon which to expand production. Both Lesotho and Swaziland, which have close trading relationships with South Africa, have long-term potential to develop globally competitive textile and apparel sectors.
* The trade sanctions on South Africa encouraged firms there to shift production of sector goods for export to neighboring Lesotho and Swaziland. The resulting increase in U.S. sector imports from Lesotho, from negligible levels in the mid-1980s to $27 million in 1991 and to $52 million in 1992, led to the establishment of U.S. quotas. However, reflecting the imposition of the quotas and the lifting of the U.S. trade embargo on South Africa, sector imports from Lesotho leveled off at slightly more than $60 million during 1994 and 1995, and then rose to a high of $65 million in 1996. Sector imports from Swaziland more than doubled between 1991 and 1994 to $15 million, and then fell to about $11 million in 1995 and 1996. Both Lesotho and Swaziland, which have close trading relationships with South Africa, have long-term potential to develop globally competitive textile and apparel sectors.
* Zimbabwe's textile and apparel sector has shown the capability to export to developed country markets, which account for most of its sector exports. The 50-percent growth in Zimbabwe's sector exports during 1990-95 partly reflected efforts by apparel exporters to shift their product mix to more fashionable and higher valued goods. Zimbabwe's textile industry mainly exports low-valued cotton goods, such as yarn and unfinished fabric. For the most part, the industry is unable to competitively produce quality finished fabrics or other textiles for export to developed country markets.
* U.S. sector imports from Kenya rose about sixfold during 1991-94, to a high of $37 million, before decreasing to just under $28 million in 1996. Although these imports fell following the establishment of U.S. quotas on Kenya's shipments of certain shirts and pillowcases in 1994 and the difficulty that the Government of Kenya and sector producers had in allocating the quotas, Kenya's textile and apparel sector has the capacity and capability to regain a share of the U.S. market.
* The nine countries in group 2 that are considered to have the potential to expand exports of sector goods to the United States are Botswana, Cameroon, C"te d'Ivoire, Ghana, Malawi, Mozambique, Nigeria, Tanzania, and Zambia. With the proper amount of investment and the opportunity to export to the United States with quota-free and duty-free status, these countries would likely develop a textile and apparel sector capable of competing in the U.S. market.
Views of Interested Parties
The Commission received written submissions from representatives of five SSA countries, which support the proposed legislation. The Ambassador of the Republic of Kenya underscored the importance of removing quotas on imports from his country, asserting that the U.S. decision to impose quotas in 1994 has had a negative impact on the apparel sector of Kenya's economy. The Mauritian Ambassador noted that imports of sector goods from 46 of the 48 countries in SSA currently enter free of quota and that sector imports from these nations do not negatively affect the U.S. industry. ...
Representatives of the U.S. textile and apparel industry opposed the opening of the U.S. market to sector goods from low-wage countries in SSA. They expressed concern about transshipments from Asian firms, which have quotas and therefore would be the unintended beneficiaries of U.S. efforts to assist SSA countries. Other interested parties, including African textile and apparel trade associations and U.S. importers of apparel, expressed support for the proposed legislation as a means to increase the competitiveness of the SSA textile and apparel sector and encourage overall economic development in SSA countries. U.S. importers also supported the measure as a means to obtain low-cost goods for sale in the domestic market, thereby lowering the overall cost of apparel in the United States.
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From: apic@igc.org Message-Id: <199709260139.SAA23059@igc3.igc.apc.org> Date: Thu, 25 Sep 1997 21:38:51 -0500 Subject: Africa: US Textile Imports
Editor: Ali B. Ali-Dinar
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