Inside Rwanda's Strange Trade Battle With the U.S. Over Used T-shirts
A bizarre but major trade struggle is developing between Rwanda and the U.S., according to The Washington Post, and it could impact U.S. apparel companies and have other long-term affects. The strange part? It revolves around secondhand T-shirts and other apparel.
Rwanda recently introduced tariffs on used clothing in order to boost its own domestic apparel industry. According to the BBC, secondhand clothing is one factor that contributed to the near-collapse of sub-Saharan Africa's garment industry. Many African nations were once the centers of a thriving textile industry, but thanks to mismanagement, instability and global competition, there has been a major drop in textile and clothing production. This, in turn, led to a dip in textile and clothing jobs. In 1977, there were 25,000 clothing and textile jobs in Ghana. In 2000, that number dropped to 5,000.
But why is secondhand clothing to blame? It seems that U.S. second-hand items were so much cheaper than local clothing options that Rwandan clothing companies could not compete. A study by the U.S. Agency for International Development (USAID) found that in 2015, the East African Community (EAC) made up 13 percent of global imports of used clothing, which accounted for $274 million.
The U.S is threatening Rwanda with withdrawal of its AGOA benefits if Rwanda does not reduce tariffs on imported used clothing.
In July 2016 Rwanda hiked tariffs on imported second-hand garments, fearing that cheap clothes from abroad were threatening domestic manufacturing. pic.twitter.com/cGiqCkPL00
— Thakhani Ramufhufhi (@Thakhani_R) May 30, 2018
In response, the countries in the EAC announced in 2015 that secondhand apparel would be banned from markets in 2019. Rwanda increased tariffs on used clothes with the eventual aim of phasing out all used clothing imports.
The U.S. did not react well to the news of these tariffs. In response, a U.S. trade group filed a complaint and said that the new tariffs violate the African Growth and Opportunity Act, which says participating countries must reduce trade barriers for U.S. goods. (We talked a bit about Africa as a trade market and emerging manufacturing hub toward the end of a recent podcast.)
The Washington Post pointed out that, while the administration has every right to react this way, it is the U.S. that will likely suffer. Targeting Rwanda in this way plays like a major snub to Africa. There are more than 100 countries that benefit from the U.S. trade program that do not return the favor. Countries like India and Brazil ship a lot more than Rwanda, yet have significant barriers to U.S. trade, but the U.S. hasn't taken action against these countries.
It also seems the U.S. administration is overstating the significance of this industry on U.S. jobs. The U.S. is claiming the apparel ban would affect 40,000 U.S. jobs, but the Washington Post reported that this is unsubstantiated.
With Africa becoming a huge emerging trade and manufacturing market, this seems like a strange move on the part of the U.S. If the U.S. continues to pick fights over small issues like this one, it could lead to difficulties and uneasiness with other trade partners down the line, and risks alienating the many emerging manufacturing markets and trade partners Africa has on offer.